HomeMy WebLinkAbout2016 03-14 Low gas prices boosting government budgets PIONEER PRESS 3/14/2016 A:Main
Low gas prices boosting government budgets
> Gas prices
50 entities will continue savings with locked-in fuel rate
By Tory Cooney
vcoonel pioneerl2ress.com
Gasoline prices have begun rising again after a year of low costs, but 50 Minnesota cities, counties and
schools expect to save big in 2016 after locking down low fuel prices.
The group, which contracts for a fixed fuel cost through the state Department of Administration, will pay
as little as $1.59 per gallon (before tax) through this year, meaning savings of tens of thousands of dollars
for some government entities.
That's the lowest price for diesel the group has locked in since it formed in 2009, and the second lowest
price for regular.
The fixed price will hold for however many gallons the entities contract for—usually 50 percent to 70
percent of their total projected fuel use.
The rest is bought at retail prices, said Curt Yoakum, the department's assistant commissioner of
communications and planning.
"Most people have a car. In their pocketbook, they've seen the same savings that are happening," said
Washington County public works director Don Theisen. "But these are big numbers, because it's a lot of
gallons."
POWER IN NUMBERS
By negotiating together, the group has more bargaining power. For governments and agencies that use
large and somewhat predictable
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Scott Sippel fills his truck's gas tank earlier this month at the Minnesota Department of Transportation
fueling station in St. Paul before heading out to do a job. PIONEER PRESS: SCOTT TAKUSHI
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amounts of gas, gambling on low prices is risky and makes budgeting difficult.
"You see what it's like at the gas pump. Imagine filling a tanker," said Dakota County fleet manager
Kevin Schlangen. "This is a lot easier to budget. You know where you are."
During years with high gas prices, contracting for a set price has saved Dakota County up to 50 cents per
gallon, Schlangen said.
On average, Washington County saves about 15 cents per gallon a year by participating, county deputy
admin-istrator Kevin Corbid said.
Last year's low prices will lead to additional savings in 2016. When negotiations took place in
December, low prices at the pump allowed the Department of Administration to negotiate a price of
$1.59 per gallon for diesel and regular.
In 2015, the group locked in at $2.62 for regular and $2.82 for diesel. Those costs held, even when
average gas prices dipped to their lowest point since 2009: $2.40 per gallon.
AAA auto club estimates drivers saved about $550 each in fuel costs during 2015, adding up to about
$115 billion nationwide.
Members of the fuel consortium were also able to save because of stable prices and some at-the-pump
purchases.
Last year, Washington County was below its budget for fuel for the first time since 2010, Corbid said.
And that was after budgeting for lower fuel costs than in 2014.
The county bought 247,200 gallons for $718,624 through the contract and another 12,928 gallons at
market prices.
In 2016, the county contracted for the same number of gallons: 247,200 for $397,458, almost $221,000
less, Theisen said. Washington County expects to buy an additional 14,800 gallons at the pump.
"We manage very diligently to bring our costs in below budget,but whenever we get help by falling
prices like this, it's very helpful," Corbid said.
CITIES SAVE, TOO
On a smaller scale, in 2015, the city of Inver Grove Heights bought 78,800 gallons, costing $214,096,
and 8,100 gallons at the market price for about $12,835.
In 2016, the city has contracted for 82,800 gallons at $152,292 and expects to purchase an additional
4,100 gallons at market price. The city is buying more fuel at the contracted price than usual because of
the low prices. Despite buying more, it's paying less.
The city's contracted prices are slightly higher than the fixed amount because its deliveries come in
smaller loads, Yoakum said.
The North St. Paul-Maplewood- Oakdale school district uses about 35,000 gallons of regular and
140,000 gallons of diesel each year to power its fleet of 85 yellow buses and 12 white vans.
Because fuel use is so consistent, the district contracts for all its fuel at the set price. During the 2014-15
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school year, it paid $584,976 and expects to spend $475,000 by the end of this school year.
The nearly $110,000 reduction comes from low 2016 prices, which will also be in effect for the first part
of the 2016-17 calendar year.
"You don't get a lot of savings because (the cost) is built in when you order," fleet manager Kyle
Johnson said. "We know what the price is, so it keeps us right on budget."
Counties and cities with more inconsistent fuel use could come in even further under budget in 2016 with
the lower prices. The severity of the winter and the county's fuel use will determine that, he said.
It doesn't always work for a community to participate in the consortium. Because organizations must
contract for a certain amount of fuel, they need an idea of what they'll use, said Chris Petree, who serves
as public works director of Lakeville, which participates in the program. He is also vice president of the
American Public Works Association's Minnesota chapter.
THE WEATHER FACTOR
Some communities' fuel use depends on weather conditions so much, they might not be able to
accurately predict how much they need. Others might not have access to a centralized distribution
facility, Petree said.
"Every community has a little bit of a different philosophy," he said. "But all government agencies are
built on creating budgets that are sustainable and predictable."
Some groups buy fuel at low prices from larger participating entities. Dakota and Washington counties
sub-sell fuel to groups with a small administrative markup that covers fuel station maintenance and
billing costs.
"Instead of managing fuel stations at so many locations, we just partner up and share one to keep costs
down," Schlangen said. Dakota County provides fixed-priced fuel to Hastings, Farmington, state
Department of Transportation trucks stationed in Hastings and the conservation district. Washington
County provides fuel to four city police departments.
On the whole, in 2016, the consortium is contracting for nearly 9.4 million gallons of fuel from Georgia-
based Mansfield Oil. The contract was negotiated in December and took effect in February, Yoakum
said.
"When we have a light winter, that can have more of an impact on our savings than any price
differences," Theisen said. "At the end of the year, whatever we haven't used certainly goes to county
fund balance. ... These things tend to wash out."
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