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Page 2 of 3 ensuring compliance with California's ACF regulations while maintaining service continuity across all City departments. DISCUSSION Through the purchase order with Enterprise FM Trust, the City has 46 leased vehicles. Of these, 23 leased vehicles are assigned to Administration, Engineering, Inspection, Planning, Maintenance, and Operations, 21 leased vehicles are Police Department vehicles, and 2 leased vehicles are Fire Department vehicles. Some City-owned vehicles have high maintenance costs and are due for replacement. As the City has not had sufficient dedicated funds to support replacing the City’s fleet and to meet the CARB compliance regulation and the City’s operational needs, the City previously pivoted to leasing vehicles to supplement the City’s vehicle needs. Over the past several years, leasing costs have increased due to factors such as inflation, supply chain disruptions, and the higher costs associated with electric and hybrid vehicles. Additionally, previous vehicle leases initiated between 2015-2018 were based on significantly lower rates, whereas current leases are subject to increased pricing from 2021-2025 market conditions. While the City has proactively sought hybrid and ZEV models whenever available, not all vehicles in the lease agreement are ZEVs as some operational needs require conventional fuel vehicle options. The requested $75,000 increase to the purchase order is needed to address: • Rising lease costs: The leasing market has changed significantly, with the cost of leasing hybrid and electric vehicles increasing by 30-40 percent since 2018. This increase reflects higher vehicle manufacturing costs, limited availability, and enhanced technology requirements. • Fleet reliability and operational efficiency: The funding increase will allow the City to maintain a fully operational fleet, avoiding service disruptions in departments that rely on leased vehicles for daily operations. • Cost-effective transition strategy: Leasing ZEVs and hybrids allows the City to transition gradually, minimizing financial strain while ensuring fleet modernization aligns with Climate Action Plan 2.0 goals. • Compliance with California's ZEV mandates: Ensuring the City meets regulatory requirements by incorporating zero-emission vehicles into the fleet. Staff continues working with Enterprise FM Trust to limit future cost escalations, while concurrently evaluating the number of leased vehicles needed to efficiently meet the City's operational needs. EQUITY AND SUSTAINABILITY This request supports the City's Climate Action Plan (CAP 2.0) and aligns with State environmental goals by facilitating the transition to an energy-efficient, low-emission fleet. OUTREACH No outreach was conducted, as this item is a routine matter of City business. Page 193 of 348