HomeMy WebLinkAboutPurchase of Boeing 520N Notar Helicopter by Police Departmen *ATY OF HUNTINGTON BEACry -
MEETING DATE: January 5, 1998 DEPARTMENT ID NUMBER: PD 98-00
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Council/Agency Meeting Held: 11619d0 &
Deferred/Continued to:
LV pproved ❑ Conditionally Approved ❑ Denied 9� City Clerk's ignature
Council Meeting Date: January 5, 1998 Department ID Number: PD 98-002
CITY OF HUNTINGTON BEACH G
REQUEST FOR COUNCIL ACTION
4P
SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
SUBMITTED BY: RAY SILVER, Acting City Administrator
PREPARED BY: RONALD E. LOWENBERG, Chief of Police
SUBJECT: Purchase of Boeing "Notar" Helicopter
Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachments
Statement of Issue:
Helicopter N502HB (502) is a 1978 Model with over 9000 hours of flying time on the
airframe. It is approaching critical component replacement times, causing high maintenance
costs to maintain an old helicopter. Like any other piece of equipment, it needs to be
replaced.
Funding Source:
Savings in maintenance and monies from the Vehicle Abatement Grant to cover the cost of
$1.2 million for the new helicopter.
Recommended Action:
Approve the purchase of the Boeing 520N Notar Helicopter from the savings in maintenance
and monies from the Vehicle Abatement Grant to cover the cost of $1.2 million for the new
helicopter.
Alternative Action(s):
Do not purchase the helicopter.
Analysis:
For the past three years, the Police Department has been researching replacement of the
city's aging helicopter fleet. In May of 1997, the Department requested replacement of the
Helicpter N502HB as a budget item. In June of 1997, a letter of Intent to Purchase was
signed by then City Administrator Michael Uberuaga and sent to then McDonnell Douglas.
HELICOP.DOC -2- 12/30/97 10:10 AM
RCQUEST FOR COUNCIL ACTIUIN
MEETING DATE: January 5, 1998 DEPARTMENT ID NUMBER: PD 98-002
That letter locked a production slot of March, 1998, for the new Boeing 520-N Notar
helicopter.
In August, 1997, the purchase was put on hold until the audit of the Police Department was
complete. Our deadline to hold our production slot at that time was October 1, 1997.
Due to a long and professional relationship with Boeing (McDonnell Douglas), they backed
up our deadline committal date to December 1997, and have offered us a $70,000 discount
on the price of the helicopter. They have, however, extended the deadline date as far as
possible. We will not be able to wait for the completion of the audit to commit to the
purchase of this helicopter. Any further delay on the purchase of this helicopter will cause
the delivery date to be postponed into the year 1999. Under this scenario, N502HB would
cost over $350,000 in maintenance over the next two years, plus the resale value which is
currently around $300,000, would most likely drop to approximately $200,000 - 250,000.
This is money that we could be applying toward the purchase of a new helicopter, rather
than wasting it on an old helicopter.
The attached helicopter replacement chart shows a detailed comparison of costs with and
without helicopter replacement. Without replacing 502, our projected maintenance for 502
over the next five years is $878,300. Replacing 502 in March, 1998, would cost a total of
$1,713,353 over the next five years. This is an additional cost to the city of$535,083 for five
years, or an average of $107,010 per year. Recent proposals offer even lower payments
than listed on this chart, which could further reduce our yearly costs. This additional cost
can be offset by monies generated from the Police Department's Abandoned Vehicle
Program, which is projected to produce approximately $200,000 a year.
Several other concerns have been raised regarding the purchase of this helicopter. One of
these concerns is why purchase this particular helicopter.
There are three available helicopter manufacturers which provide a model of light
observation type helicopters; Boeing, Bell, and Eurocopter. Other manufacturers exist, but
manufacture models too large or too small for our needs.
We chose the Boeing (McDonnell Douglas) 500 series helicopter for a number of reasons.
We selected the NOTAR (no tail rotor design) out of the 500 series options for additional
reasons.
• Safety
The Notar design has no tail rotor. Most helicopter accidents involve tail rotors.
They involve tail rotor failures, tail rotor strikes or pilot error, such as "lack of tail
rotor effectiveness." Ground personnel are much safer operating around a
helicopter that has no tail rotor, and an aircraft forced down in a metropolitan area
creates far less danger to the public without a tail rotor.
HELICOP.DOC -3- 12/30/97 10:10 AM
IkcQUEST FOR COUNCIL ACTIvN
MEETING DATE: January 5, 1998 DEPARTMENT ID NUMBER: PD 98-002
• Noise
The Notar is the quietest helicopter made. Its "noise footprint" is 1/2 of the Bell and
Eurocopter options. It is 35% quieter than the other Boeing 500 series with tail
rotors.
• Maneuverability
The 500 series out performs all other models in all maneuvers except the Bell 206
(Jet Ranger) had a slightly better autorotation speed. The Notar is so much simpler
to fly, it almost received a different pilot rating from the FAA. The 500 series turn
quicker, accelerate quicker, stop quicker, fly faster, and fly slower better than the
other models. Examples of speed and maneuverability were exemplary in Vietnam.
• Cost
The Boeing 500 series has a lower cost per hour than the other manufacturers.
Comparable aircraft would require re-tooling of our maintenance facility, re-training
and certification of our mechanics, re-training and certification of our pilots. The
Eurocopter series actually rotates opposite of American helicopters, creating a
danger in pilots flying different aircraft in day-to-day operations (opposite torque,
muscle memory and training issues).
• Reliability
Eurocopter's EC120 is comparable, but not ready for production. The A350, "A-
Star" is considerably more expensive to operate. It is powered by the Turbo-Meta
engine, which is French made and serviced. We have reliable dealers for Boeing
parts and service that we have built relationships with over the past 13 years.
• Maintenance
Notar parts and service life of parts are being extended as the aircraft continues to
gain time in service. This model has only been certified since 1991, and operating
costs continue to decrease. Boeing offers a three year warranty on the Notar
system. No Notar has ever crashed from mechanical failure.
• Re-sale
There are less Boeing (McDonnell Douglas) helicopters available, and the re-sale
value is maintained better.
• Crashworthiness
The Boeing design has a sturdy crew compartment cage. It was originally designed
to provide Vietnam pilots the best protection possible in that hazardous
environment. The design also avoids such aerodynamic problems as "dynamic
rollover" and "ground resonance," due to a lower center of gravity and fully
articulated rotor blade design.
HELICOP.DOC -4- 12/30/97 10:19 AM
fcL,�QUEST FOR COUNCIL ACTr�I
MEETING DATE: January 5, 1998 DEPARTMENT ID NUMBER: PD 98-002
Boeing offers several models in the 500 series. The 500 E, is the same as N501 HB, the
helicopter model we purchased in 1984-85, with our "quiet night" four-bladed tail rotor
package; the 500 F, a higher powered model with a tail rotor, but same size and design
helicopter (bigger engine); and the 520 N (Notar). The "E" and the "N" are very close in
price, the "F" considerably more expensive. Orange County Sheriff just bought three of the
newer, larger 600 N series, as well as one 520 N. Boeing makes an even larger 900 N
series, which is a twin engine eight passenger design.
Bell offers the Jet Ranger in this class, 206 L3 or L4, comparable in price, but lacking in
areas previously discussed. Eurocopters A350 "A-Star" is much more expensive. All
companies offer bigger, more expensive options and models. The Notar is by no means
the "top of the Line,"just the right model for our mission.
Another area of concern is contracting for a private pilot or private helicopter service. By
using all officers rated as pilots, we can constantly staff the helicopter with sworn
personnel, despite vacations, sick time, and special days off. It also provides for expert
court testimony, as well as a level of confidentiality, available only with sworn officers
necessary in surveillance and confidential assignments. Pilots have the versatility of being
instantly re-assigned to patrol duty in cases of emergency needs or being weathered out of
service. Sworn pilots also bring a high level of maturity, care for the equipment, city,
mission and understanding of the police functions.
Use of civilian pilots may provide savings but at the expense of professionalism,
productivity, safety and quality of service. This option is unacceptable to our city. This
proposal has been researched a number of times by our agency as well as other agencies
that use Airborne Law Enforcement, and is continually deemed unacceptable by all
agencies who have reviewed same.
The Aero Unit is staffed with five police officer/pilots and a flying sergeant. Two of the
officers are Certified Flight Instructors. (One new CFI position is nearly finished with
training, replacing a retired position). There are certain concerns we have using civilian
personnel as police pilots:
• Confidentiality
• Professionalism, maturity, discipline
• commitment, courage, judgment
• Insurability and cost
• Flexibility
• Legal aspects
• Safety
Confidentiality
HELICORDOC -5- 12/30/97 10:23 AM
R
QUEST FOR COUNCIL ACTIvN
MEETING DATE: January 5, 1998 DEPARTMENT ID NUMBER: PD 98-002
We are involved in narcotic surveillance, criminal surveillance, and highly sensitive
activities, such as executive protection and secret operations. Putting a civilian pilot in
these circumstances jeopardizes the confidentiality issues, and can endanger operations.
It would be tantamount to allowing civilians (without a security clearance) operational
knowledge to all police operations. (Most people are still unaware of our role in the toxic
gas attempt at Disneyland by a terrorist group.)
Professionalism, Maturity, Discipline
A civilian pilot is usually a "transient" pilot. Civilian pilots work for this outfit today, and
another outfit tomorrow, with one goal in mind; that is to build hours of pilot-in-command
time to go on to a major airline or commercial operation job, where the "big money" is. All
they will guarantee in a contract is a minimum of 500 hours flight time.
We select the best of the best for pilots. We demand unquestionable loyalty, maturity and
courage. Our pilots care about the city, the people, the equipment and the costs we incur.
They have a commitment and loyalty to the city and are not "transient" in nature.
Disciplinary matters are easy to control with our own personnel. With contracted pilots, we
have no disciplinary control over them.
Commitment, Courage and Judgment
Sworn officers provide a completely different level of commitment. They recognize that
their job is very dangerous by nature, and have the courage and judgment of how to make
decisions that can save the city exposure to hugh liability. Civilian or contract pilots will
not have these levels of commitment or courage. If they did, they would be police officers.
Insurability - Costs
Police pilots are recognized in the aviation industry as exceptionally qualified for many of
the reasons already mentioned. Helistream at Orange County Airport is offering some of
the contract services we are discussing. They have had several accidents recently, the
most notable is the fatal crash of their only turbine helicopter with a senior flight instructor
at the controls, less than a year ago. We have not had an accident in 20 years, nor any
mishandling of the equipment.
Cost for a pilot with our level of experience and training would be $50-70 per hour. We
pay our police pilots about $30 plus benefits. Our experience level. is very expensive in
private industry.
HELICOP.DOC -6- 12/30/97 10:30 AM
REQUEST FOR COUNCIL ACTION
MEETING DATE: January 5, 1998 DEPARTMENT ID NUMBER: PD 98-002
Flexibility - Scheduling
We can re-assign any pilot instantly to any other police duty. We routinely re-assign the
pilots to patrol duty when the weather is poor. By using all police pilots, we can schedule
vacations and sick replacements at a moments notice because we always have two pilots
on each shift. With contract pilots we will not have control over scheduling or even
selection of who the pilot would be. This would leave us with an unreliable schedule for air
cover for the city.
Legal Aspects
In many instances, both the pilot and the observer are involved in the police activity. The
pilot may see violations and point out the crime to the observer. With both being sworn
police officers, the court testimony for either is acceptable. A civilian pilot has no training
or expertise and court testimony is not acceptable. We could be dealing with criminal
activity or civil actions brought against the city. The expert testimony is necessary and
invaluable. Also, there are search and seizure laws and privacy issues that the police
officers are acutely aware of and sworn to observe - civilian pilots are not.
In some circumstances, the pilot as well as the observer are overwhelmed with activity. A
simple example is the attached report (Huntington Beach Police Report #97-24048),
where, during a vehicle pursuit in Huntington Harbor, the observer went to the public
address system to stop a fleeing suspect while the pilot continued broadcasting directions
to the pursuing unit. The result was the suspect gave up and ended one of our most
dangerous and libelous activities.
Safety
Our pilots need 500 hours in turbine helicopters before being certified as a Pilot-ln-
Command. We log about 500 hours per year of flight experience per pilot. We are trained
in rescue operations, long-line operations, fire-fighting, etc. Our pilots average 6000 hours
of flight time in turbine helicopters. That level of experience makes us a known quantity
and a good risk. We know who we are getting when we pick our pilots from within; we do
not know who we are getting if we get a civilian pilot.
The final area of concern deals with a possible reduction in flight hours and the
subsequent need for a third helicopter. This is a two-part concern, with the first part
dealing with a possible reduction in flight hours.
Currently, we have a helicopter crew on duty 120 hours a week. Of this 120 hours, we are
in the air 60 hours, and "on-call" on the ground the other 60 hours. On Sunday and
Monday, we only have one crew for the entire day, as compared to two crews the other five
days.
HELICOPAOC -7- 12/30/97 10:36 AM
REQUEST FOR COUNCIL ACTION
MEETING DATE: January 5, 1998 DEPARTMENT ID NUMBER: PD 98-002
Statistically, this means we have a helicopter in the air about one-third of the entire week.
The other two-thirds of the time, the helicopter crew is either on the ground or not on duty.
With the department's shortage of personnel, and increased calls for service, we need to
be increasing our flight hours, not decreasing them.
The helicopter is almost always the first unit "on scene" and is able to either cancel units
when necessary or direct the units so they are utilized more effectively. To reduce flight
hours would mean an increase in demands for the units on the street. This would result in
a longer response to calls, an increase in "Code-19" time and a reduction in safety to both
the citizens of the community and our officers.
The other area of concern is a three-helicopter operation Vs a two-helicopter operation.
All helicopters in commercial operations require a lot of maintenance. Orange County
Sheriff has run on a two-helicopter operation and averages 216 hours of down time for
maintenance per year, or the equivalent of 43 shifts. Costa Mesa did run a two-helicopter
operation, averaging 70 hours of down time for maintenance each year. Huntington Beach
had 3.6 hours of downtime for 1996, and has averaged less than 10 hours per year, dating
back to 1988. (Statistical information provided by the Orange County Sheriffs Aviation
Department from years 1988-89-90, totaling 648.6 hours/three years=216.3 hours per
year; and Costa Mesa Police Department Aviation Department from years 1990,91-92,
totaling 208.4 hours/three years=69.4 hours per year).
As a result of studying these statistics, as well as other cost saving factors yet to be
discussed, the Costa Mesa\Newport Beach and Orange County Sheriff operations have
moved toward a three-helicopter operation. Recently, the Orange County Sheriff
helicopters were unavailable in a critical missing child operation, due entirely to this
problem.
Training costs could increase significantly if we reduce to two helicopters. We use all
three helicopters as line function patrol ships with some minor exceptions. The third
helicopter is N502, a 1978 "D" Model. It is specially equipped with heavy skid shoes and
modified rotor system to provide a safer unit in which to train pilots If we purchase this
new helicopter, N501 will take the place of N502 as the training helicopter. This ship is
specifically designed to take the abuse of training. It is the least expensive of the
helicopters in the event of a training accident. If we reduced to two helicopters, we would
not want to do training in our helicopters because of the possibility of mechanical problems
creating a situation where we would have one or both of the ships down for mechanical
problems and unable to fly patrol.
HELICOP.DOC -8- 12/30/97 10:42 AM
QUEST FOR COUNCIL ACTH
MEETING DATE: January 5, 1998 DEPARTMENT ID NUMBER: PD 98-002
Training costs would increase significantly if we did not do our own in-house training
programs.
• $17,000 per year for outside training (re-current, required per manual, for full
touchdown emergency procedures.
• $21,000 per year, plus per diem and travel for annual insurance required factory re-
certification training.
• $14,000 per new pilot training, includes private helicopter license only, x 3 over the
next four years.
It is because we are able to do our own in-house training that we can avoid these costs.
Attached is a letter from °DMG" regarding the Aero Unit and the purchase of this
helicopter.
Our equipment is old and in need of replacement. This is an optimum time for this
purchase since no additional General Fund money will be needed for this purchase.
Environmental Status:
Attachment(s):
1. FIS
2. Chart
RCA Author: Captain C. Poe
HELICORDOC -9- 12/30/97 10:48 AM
City of Huntington Beach
INTER-DEPARTMENT COMMMUNICATION
HUNTINGTON BEACH
TO: RAY SILVER, Acting City Administrator
FROM: ROBERT J. FRANZ, Deputy City Administrator
SUBJECT: FIS 98-19, Helicopter Purchase
DATE: December 22, 1997
As required by Resolution 4832, a Fiscal Impact Statement has been prepared for
FIS 98-19: Helicopter Purchase.
As indicated in the attached five year cost analysis, the estimated total City costs will
increase $535,053 over the five years if Helicopter Unit 502 is replaced. The fund
balance currently estimated for the General Fund would not be affected if the revenue
from the abandoned vehicle program is used to pay the increased cost. This is revenue
not currently included in General Fund revenue estimates.
ROBERT J. NZ
Deputy City Administrator
RJF:skd
0029463.01 12/22/97 11:42 AM
Helicopter Rplacement (information)
HELICOPTER Replacement
Total Estimated Est.Value Total Est.
Hours Replacement @ Date of Replacement
Helicopter Model Mfg. Date (a) Replacement Date Replacement Cost
.............................._...........................................,..............................................................................................................
.
N502HB 500 D/369d 1978 9,000 1998 $300,000 $1,200,000
........................................................................................................................................................................................................................................
ESTIMATED MAINTENANCE COSTS1No Replacement)
97/98 98/99 99/00 00/01 01/02 Total
..............................._...........................................................................................................................................................
N502H6 $210,503 $145,000 $136,915 $124,103 $261,779 $878,300
..............................._...........................................................................................................................................................
ESTIMATED MAINTENANCE COSTS (Replacement program)
97/98 98/99 99/00 00/01 01102 Total
..............................._...........................................................................................................................................................
Replace 502 by 3/98 $0 $654 $37,667 $68,827 : $201,146 : $308,294
:............................................................................................................................................................................................
Capital Costs - Purchase
97/98 98/99 99100 00/01 01/02 Total
Replace 502 by 3/98 $1,200,000 $1,200,000
Capital Costs- Lease (5 year laese)
97198 98199 99/00 00/01 01/02 Total
Replace 502 by 3/98 $281,012 $281,012 $281,012 $281,012 $281,012 $1,405,059
Summary (Assumes 5 year L ease-Purchase)
No replacement 97/98 98/99 99/00 00/01 01/02 Total
Mainteneance $210,503 $145,000 $136,915 $124,103 $261,779 $878,300
Replacement
Maintenence $0 $654 $37,667 $68,827 $201,146 $308,294
Lease-Purchase $281,012 281 012 $281,012 $281,012 $281,012 $1,405,059
Sub-Total $281,012 $281,666 $318,679 $349,839 $482,158 $1,713,353
Estimated Cost Increase $70,509 $136,666 $181,764 $225,736 $220,379 $835,053
Less estimated proceeds of sale of Unit 502 ($300,000)
$635,053
Estimated Total Costs will increase$535,053 over the 5 years if unit 502 is replaced in 1998.
HELICOPS.XLS Replace 1 12/11/97
t. RCA &OUTING SHEET
INITIATING DEPARTMENT: POLICE DEPARTMENT
SUBJECT: Helicopter purchase
COUNCIL MEETING DATE: January 5, 1998
: ............:...:.:.:...:...............:.........................:..............:.................
........ ......... . ... A� T .V1:ENTS : �7 `U�
....
Ordinance w/exhibits & le islative draft if applicable) Not Applicable
Resolution (w/exhibits & legislative draft if applicable) Not Applicable
Tract Map, Location Map and/or other Exhibits Not Applicable
Contract/Agreement (w/exhibits if applicable)
(Signed in full by the City Attorney) Not Applicable
Subleases, Third Party Agreements, etc.
(Approved as to form by City Attome Not Applicable
Certificates of Insurance (Approved by the City Attome Not Applicable
Financial Impact Statement Unbud et, over $5,000 Attached
Bonds If applicable) Not Applicable
Staff Report If applicable) Not Applicable
Commission, Board or Committee Report If applicable) Not Applicable
Findings/Conditions for Approval and/or Denial Not Applicable
::::. ...................................................................................................:...:............:.......:.................................
:.:.:.:....
EXPLANATION:FOR III'IISSING:ATTACH.11 E TS.........
..................................................................................................................................
RETt,�R ED.........FOR DEO
............................................................................................................................................................................................................................... . ..................
Administrative Staff
Assistant City Administrator Initial
City Administrator Initial
City Clerk
EXPLAI�EATION:FOR � TURN:OF: NI:::€::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
E. . ITE
...................................................................................................................................................................................................................................................................
RCA Author:
DAVID M. GRIFFITH&ASSOCIATES, LTD.
Professional Services for the Public Sector
1633 Bays hore Highway, Suite 380
Burlingame, California 94010
650*259-1200 FAX 650*259-0546
RECEIVED FROM
D M G AND MADE A PART OFT RECORD AT THE
COUNCIL MEETING OF L-S-����
OFFICE OF THE CITY CLERK
EXECUTIVE SUMMARY CONNIE BROCKWAY,CITY CLERK
The attached memorandum provides our analysis of the proposed
purchase of the new NOTAR helicopter for the Police Department.
The analysis contained in this memo answers the following
questions posed by the members of the Council Sub-Committee for the Police
Department management audit. Questions and summary answers are as
follows:
• Are the Police Department's projections of maintenance cost
savings associated with the purchase of a new helicopter
compared to costs which are projected if a new helicopter is not
purchased valid and of the scope projected?
Our projections indicate that if a three ship operation is
maintained and a new helicopter purchased, five year
maintenance cost savings will total a projected $ 519,000,
$ 51,000 less than the $ 570,000 five year savings projected by the
Police Department.
• Are there major financial penalties associated with deferring
purchase authorization until the management audit is
completed in late February or early March?
Based on our projections, the major financial penalty
associated with deferring the decision is the increased capital
and debt service costs associated with deferring the decision.
We estimate these would increase by about $ 217,000 over the
seven year life of the lease purchase of the new helicopter.
Maintenance cost differentials would be minimal.
• Does the decision to purchase the new NOTAR at this time
reduce flexibility to adjust the scope (e.g. flight hours) or
approach (e.g. contracting for helicopter patrol) based on the
results of the program evaluation and recommendations
resulting from the management audit?
If the NOTAR purchase decision is authorized immediately,
our analysis indicates that the decision would not limit the
City's subsequent flexibility in adjusting helicopter operations
if the City continued to operate all aspects of the program.
Principal findings supporting this conclusion are as follows:
DMG
- Even if flight hours and coverage were reduced which
may be a practical option given incident composition and
frequency, a two ship fleet would still need to be
maintained.
- Maintenance cost savings over the five year period for a
two ship fleet which would include the new NOTAR
would be $ 328,000 less than a two ship operation without
acquisition of the new NOTAR and use of helicopter 500E
as the second ship. If the new ship is not purchased
now and the refurbished 500E was used as a second
ship, it would still need to be replaced toward the end of
the five year period (estimated 2001/02), and if replaced at
that time by a NOTAR, the replacement ship could be
expected to cost about $ 112,000 more than the current
price of about $ 1,200,000. Total cost of not purchasing
the new ship at this time, even if the entire operation is
reduced to two ships, would be $ 450,000 over the five year
period.
Purchase of the new helicopter is probably counter to a
subsequent decision to contract for helicopter service
because it is unlikely that a contractor would operate a
program with City owned equipment or purchase City
equipment to provide the service. However, based on
information collected to this point, it does not appear that
contracting will prove to be a cost-effective alternative for
a program of the scope likely to be supported by the
Council.
• Is the Police Department's contention that the purchase of the
new helicopter (costs above the current program) can be
covered by a combination of maintenance cost savings and
additional revenues of $ 200,000 annually projected for the
Vehicle Abatement Program and will require no additional
General Find contribution above levels already provided to the
helicopter program valid?
Once maintenance cost savings, revenues from sale of the
excess helicopter, and the Vehicle Abatement Grant revenues
are considered, savings and additional revenues will exceed
debt service costs by $ 229,000 over the five year period and an
additional general fund subsidy will not be required. The table
which follows on the next page shows this projection.
Page 2
DMG
Capital Cost: $ 1,400,000
Maintenance Cost Savings: $519,000
Vehicle Abatement Revenues: 1,000,000
Sale of Excess Helicopter: 250,000
Total Revenues and Savings: $ 1,769,000
Net General Fund Impact: +$369,000
Page 3
DAVID M. GRIFFITH&ASSOCIATES, LTD.
Professional Services forthe Public Sector
1633 Bayshore Highway, Suite 380
Burlingame,California 94010
650*259-1200 FAX 650*259-0546
DMG
January 5, 1998
TO: City Council Members
City of Huntington Beach
FROM: John Heiss and Matt Dhillon
David M. Griffith & Associates
SUBJECT: Analysis of Helicopter Program Equipment Purchase
Alternatives
As requested by the Council Sub-committee for the Police Department
Management Audit, we have reviewed the financial impact of alternatives
associated with either purchasing the new helicopter as requested by the
Police Department, or deferring a purchase decision until the helicopter
program evaluation being conducted as part of the management audit has
been completed.
COUNCIL QUESTIONS ANSWERED BY THIS MEMO
The analysis contained in this memo answers the following
questions posed by the members of the Council Sub-Committee?
• Are the Police Department's projections of maintenance cost
savings associated with the purchase of a new helicopter
compared to costs which are projected if a new helicopter is not
purchased valid and of the scope projected?
• Are there major financial penalties associated with deferring
purchase authorization until the management audit is
completed in late February or early March? As stated by the
Police Department, if the purchase is not consummated
immediately, the following will result:
The City will lose the option of purchasing the new
NOTAR under the timing, price, and financing
agreements proposed by Boeing/McDonnell Douglas.
Delivery of a new replacement NOTAR would be
deferred until at least mid- 1999.
• Does the decision to purchase the new NOTAR at this time
reduce flexibility to adjust the scope (e.g. flight hours) or
DMG
approach (e.g. contracting for helicopter patrol) based on the
results of the program evaluation and recommendations
resulting from the management audit?
• Is the Police Department's contention that the purchase of the
new helicopter (costs above the current program) can be
covered by a combination of maintenance cost savings and
additional revenues of $ 200,000 annually projected for the
Vehicle Abatement Program and will require no additional
General Fund contribution above levels already provided to the
helicopter program valid?
To answer these questions, it is first necessary to project
maintenance costs and capital/debt service costs for each of the alternative
approaches which could be impacted by the Council's decision.
The next section describes those alternatives and presents cost
projections for each.
ALTERNATIVES FOR THE HELICOPTER FLEET INCLUDING
COMPARATIVE COST PROJECTIONS.
This memorandum evaluates five different options as follows:
• Option 1: Purchase the New NOTAR As Proposed by the Police
Department and Continue to Operate the Program With
Current Flight Schedules and a Three Ship Fleet.
• Option 2: Continue the Helicopter Program with a Three Ship
Fleet and Current Flight Hours but Do Not Purchase a New
Helicopter.
• Option 3: Continue the Helicopter Program with a Three Ship
Fleet and Current Flight Hours but Defer Purchase Decision
for a New NOTAR Until the Management Audit is Completed
As noted above, this would probably defer delivery of a new
helicopter until 1999 and would probably increase the purchase
cost of a ship comparable to the one the Council is being asked
to authorize this evening. The purpose of this option is to
illustrate the cost impact of deferring the decision until the
study is completed.
• Option 4: Purchase the new NOTAR as Proposed by the Police
Department but Reduce Flight Program Scope and Fleet Size b
Two Ships. This option, when considered in conjunction with
Page 2
DMG
the next option, is presented to illustrate any adverse cost
impact of authorizing the purchase of the new ship at this time
and then subsequently deciding to reduce program scope based
on the results of the current management audit. The analysis
is intended to illustrate if a positive decision to authorize
purchase of the new ship immediately reduces the City's
flexibility down the road to adjust the program.
• Option 5: Do Not Purchase a New Helicopter and Reduce
Flight Program Scope and Fleet Size to Two Ships. Presented
for comparison with Option 4 to determine if there are negative
impacts to purchasing the new ship if the decision is
subsequently made to adjust the program based on
management audit results.
The following assumptions were employed to project costs under the
various options:
• Projected costs are limited to those that are sensitive the ship
replacement decision before the Council. As a result they
exclude staffing costs for the Aero Unit; operating costs for fuel
and miscellaneous materials (e.g. uniforms); and annual
payment to the equipment replacement fund. The latter was
excluded from the analysis and actual capital paydown and
debt service costs associated with alternative decisions
included.
• Operating costs include all costs associated with maintaining
the three ships currently in the Department's inventory, and
those estimated for the new NOTAR if it is acquired.
Operating/maintenance costs were identified in detail (by
component and/or maintenance requirement and frequency
required based on hours of operation by ship) based on
consultation with the Aero Unit's Chief Mechanic. These
estimates, which were developed by ship, type of maintenance,
and cost per item, and required frequency by flight hour
intervals, were provided under separate cover to the City
Administrator. Operating/maintenance costs for the various
options were calculated based on these components and varied
by the projected number of hours of annual operations for the
various ships involved, and the extent of warranty
maintenance for the new ship if purchased.
• Capital costs and debt service costs for the new NOTAR, if
purchased as recommended by the Police Department, are
Page 3
DMG
based on information provided by the Department and Bob
Franz. Capital costs and debt service for a deferred purchase
of the NOTAR assume that the $70,000 purchase discount
currently offered by Boeing/McDonnell Douglas would not be
available, purchase cost of the ship would increase by an
estimated 4 % annually, and comparable lease purchase
arrangements could be made at this later date.
• Disposal costs of ships no longer required under the various
scenarios were projected based on estimates made by the Police
Department and the results of telephone interviews with
several helicopter dealer/brokers. Assumptions related to each
alternative are described briefly related to each option in the
paragraphs which follow.
• All projections cover a five year period but also consider two
other factors at the end of the five year period:
The asset value of City owned helicopters at the end of
the five year period.
Additional debt/capital payments remaining related to
the various options.
Attachment A, at the end of this memorandum, shows year by year
and five year cumulative cost projections associated with each of the five
options. The tables shown on the exhibit which follows this page
summarize the more detailed schedules provided in the attachment and
show year by year, five year cumulative, and end of period net asset value
for each of the five options. The table which follows on the page following
the exhibit summarizes the information presented in the exhibit, and
estimates the net financial impact of the five options.
Page 4
Fiscal Year Dollars(000)
Cast Five Year Projected
Component 1997/98 1998/99 1999/2000 2000/01 2001/02 Cumulative Asset Value
Total
Three Ship Operation—
Purchase New NOTAR in
Option One 1997/98
............
Maintenance Estimated
Costs $379 $166 $220 $350 $432 $1,547 Disposal
Debt Service 281 281 281 281 281 1,405 Value of Ships:
Sale of $1,350
Helicopter(s) ($250) (250) Remaining
Debt:$562
Option --L-
. n Net Asset
Five Year Cost
sm, Value:
Total $2,702 $788
Three Ship Operation-No
Option Two Purchase of New NOTAR
During the Five Year Period
Maintenance Estimated
Costs $524 $391 $364 $333 $452 $2,066 Disposal
Debt Service None None None None None None Value of Ships:
Option Two $900-Net
Five Year Costrf
Asset Value
Total
No Debt
$2,066 Remaining
Page 5
Fiscal Year Dollars(000)
Cast Five Year Projected
Component 1997/98 1998/99 1999/2000 2000/01 2001/02 Cumulative Asset Value
Total
Three Ship Operation—
Deferred Purchase of New
Option Three NOTAR in 1998/1999--Assume
W,
January 1999 delivery.
............... ................
Maintenance Estimated
Costs $524 $165 $183 $316 $295 $1,483 Disposal
Debt Service None $312 $312 $312 $312 $1,M Value of Ships:
Sale of $1,500
Helicopter(s) (250) (250) Remaining
Debt:$936
Option Net Asset
Five Year
$2,481 Value:$564
Total
WRO-Wx W-YRINN"N'
Option Four Two Ship ration-Purchase
of New NOTAR in 1997/98
Maintenance Estimated
Costs $203 $78 $138 $124 $358 $901 Disposal
Debt Service 281 281 281 281 2811 1,405 Value of Ships:
Sale of
$1,150
Helicopters (550) (550) Remaining
Option Four Debt:$562
Five Year Cost Net Asset
$1,756, Value:$588
Page 6
Fiscal Year Dollars(000)
Cast Five Year Projected
Component 1997/98 1998/99 1999/2000 2000/01 2001/02 Cumulative Asset Value
Total
Two Ship Operation— No .wo,
Option Five
Purchase of New NOTAR
Maintenance Estimated
Costs $380 $165 $183 $278 $223 $1,229 Disposal
Revenue From
Sale of
Helicopters (250) (250)
Debt Service None, None None .— None . None . None Value of Ships
Option Five N and Net Asset
C I'T"ma
Cost st $979 Value: 700
Five
Total
--M
�"rt-1
Page 7
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Cost Option One- Option Two- Option Three Option Four Option Five
Component Proceed As Maintain Maintain Reduced Reduced
Police Dept. Current Current Program But Program But
Recommends Program But Program But Purchase No New Ship
Do Not Defer New Ship as Purchases
Purchase Purchase of Police Dept.
New Ship New Ship Recommends
Five Year
Maintenance
Costs $ 1,547 $2,066 $1,483 $901 $ 1,229
Five Year Debt
Service/
Capital Costs 1,405 - 1,248 $1,405
Revenues
From Sale of
Helicopters (250) - (250) (550) (250)
Net Cash
Outflow $2,702 $2,066 $2,481 $ 1,756 $979
Net Asset
Value at the
End of Five
Years (788) (900) (564) (588) (700)
Net Option
Cost-Capital
and $ 1,914 $ 1,166 $ 1,917 $ 1,168 $ 279
Operating
Review of the information presented in the table indicates that:
• Capital costs (capital paydown and debt service) make any
option involving purchase of a new helicopter more expensive
over a five year period.
• Equipment sales and maintenance cost savings will offset
some but not all capital costs.
• Net asset value at the end of the five year period includes
deductions for any remaining debt associated with those
assets.
The next section presents conclusions and answers the Council's
questions.
Page 8
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FINDINGS
The information presented in the preceding section leads to the
following conclusions:
• Validity of Cost and Savings Projection.
Our projections indicate that if a three ship operation is
maintained and a new helicopter purchased, five year
maintenance cost savings will total a projected $ 519,000
$ 51,000 less than the $ 570,000 five year savings projected by the
Police Department.
• Scope of Financial Penalties if the Decision is Deferred.
Based on our projections, the major financial penalty
associated with deferring the decision is the increased capital
and debt service costs associated with deferring the decision.
We estimate these would increase by about $ 217,000 over the
seven year life of the lease purchase of the new helicopter.
Maintenance cost differentials would be minimal.
• Impact on Subsequent Decision Malang Flexibility.
Similarly, if the NOTAR purchase decision is authorized
immediately, our analysis indicates that the decision would
not limit the City's subsequent flexibility in adjusting
helicopter operations if the City continued to operate all aspects
of the program. Principal findings supporting this conclusion
are as follows:
Even if flight hours and coverage were reduced which
may be a practical option given incident composition and
frequency, - a two ship fleet would still need to be
maintained. Thus, the new NOTAR would continue to
be used as one of the two ships in a reduced fleet.
Maintenance cost savings over the five year period for a
two ship fleet which would include the new NOTAR
would be $ 328,000 less than a two ship operation without
acquisition of the new NOTAR and use of helicopter 500E
as the second ship. If the new ship is not purchased
now and the refurbished 500E was used as a second
ship, it would still need to be replaced toward the end of
Page 9
DMG
the five year period (estimated 2001/02), and if replaced at
that time by a NOTAR, the replacement ship could be
expected to cost about $ 112,000 more than the current
price of about $ 1,200,000. Total cost of not purchasing
the new ship at this time, even if the entire operation is
reduced to to two ships, would be $ 450,000 over the five
year period.
- Purchase of the new helicopter is probably counter to a
subsequent decision to contract for helicopter service
because it is unlikely that a contractor would operate a
program with City owned equipment or purchase City
equipment to provide the service.
Based on information available to this point, it is not clear that
contracting is or will be a cost-effective alternative for
providing police helicopter service for the City. Principal
factors supporting this conclusion are that: (1) Currently
available contract services provided limited flight hour support
of smaller jurisdictions which do not have the resources to
mount a seven day per week program; (2) It is likely that even a
reduced scope program in Huntington Beach would continue
to provide helicopter support for at least five to seven days per
week; (3) At this level, a contract program would need about
the same number of helicopters and personnel as the
Huntington Beach Police Department; and (4) As a result, it is
not clear that contracting for a likely level of service would
provide significant efficiencies.
• Can the program be supported without additional General
Fund contribution?
Capital and debt service costs related to the purchase of the
new NOTAR will total $ 1.4 million for the five year period.
Our projections indicate that maintenance cost savings will
total $ 519,000 and revenues from the Vehicle Abatement
Grant, as projected by the Police Department, will generate
$ 200,000 per year for a total of$ 1,000,000. Additionally, sale of
the old 502 will probably generate at least $ 250,000. The
cost/revenue comparison is as follows:
Capital Cost: $ 1,400,000
Maintenance Cost Savings: $519,000
Vehicle Abatement Revenues: 1,000,000
Page 10
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Sale of Excess Helicopter: 250,000
Total Revenues and Savings: $ 1,769,000
Net General Fund Impact: +$369,000
Projections indicate that additional revenues and maintenance
cost savings will more than cover the capital costs associated
with purchase of a new helicopter.
The attachments which follow provide the detailed calculations
supporting the information contained in this memorandum.
Page 11
Attachment
Projected Costs by
Option
Option One
Operating and Capital Cost Projection '
With Ship Replacement during FY 97/98
5 -Year
Operations Costs: 97/98 98/99 99/00 00/01 01/02 Total
• N520 N
Scheduled: 192,795 67,181 90,824 41,829 138,958 531,587
Unscheduled: 10,000 10,000 10,000 10,000 10,000 50,000
• N501 E
Scheduled: 156,841 67,758 61,938 206,550 54,275 547,362
Unscheduled: 20,000 20,000 20,000 20,000 20,000 100,000
• New Notar Replacement N502 D
Scheduled: 0 654 37,667 68,827 201,146 308,294
Unscheduled: 0 0 0 3,000 7,500 10,500
Total Operations Costs: 379,636 165,593 220,429 350,206 431,879 1,547,743
Debt Service 281,012 281,012 281,012 281,012 281,012 1,405,060
TOTAL COSTS: 660,648 446,605 501,441 631,218 712,891 2,952,803
Option Two
Operating and Capital
Costs With No Ship Replacement
5 -Year
Operations Costs: 97/98 98/99 99/00 00/01 01/02 Total
• N520 N
Scheduled: 192,795 67,181 90,824 41,829 138,958 531,587
Unscheduled: 10,000 10,000 10,000 10,000 10,000 50,000
• N501 E
Scheduled: 156,841 67,758 61,938 206,550 54,275 547,362
Unscheduled: 20,000 20,000 20,000 20,000 20,000 100,000
• N502 D
Scheduled: 124,772 206,728 161,945 35,121 209,154 737,720
Unscheduled: 20,000 20,000 20,000 20,000 20,000 100,000
Total Operations Costs: 524,408 391,667 364,707 333,500 452,387 2,066,669
Option Three
Operating and Capital Costs
With Ship Replacement - Deferred One Year
5-Year
Operations Costs: 97/98 98/99 99/00 00/01 01/02 Total
• N520 N
Scheduled: 192,795 67,181 90,824 41,829 138,958 531,587
Unscheduled: 10,000 10,000 10,000 10,000 10,000 50,000
• N501 E
Scheduled: 156,841 67,758 61,938 206,550 54,275 547,362
Unscheduled: 20,000 20,000 20,000 20,000 20,000 100,000
• N502 D
Scheduled: 124,772 124,772
Unscheduled: 20,000 20,000
• New Notar Replacement N502 D
Scheduled: 0 654 37,667 68,827 107,148
Unscheduled: 0 0 0 3,000 3,000
Total Operations Costs: 524,408 164,939 183,416 316,046 295,060 1,483,869
Debt Service 312,000 312,000 312,000 312,000 1,248,000
TOTAL COSTS: 524,408 476,939 495,416 628,046 607,060 2,731,869
Option Four
Operating and Capital Costs
With Ship Replacement - Two Ship Operation
5 -Year
Operations Costs: 97/98 98/99 99/00 00/01 01/02 Total
• N520 N
Scheduled: 192,795 67,181 90,824 41,829 138,958 531,587
Unscheduled: 10,000 10,000 10,000 10,000 10,000 50,000
• New Notar Replacement N502 D
Scheduled: 0 654 37,667 68,827 201,146 308,294
Unscheduled: 0 0 0 3,000 7,500 10,500
Total Operations Costs: 202,795 77,835 138,491 123,656 357,604 900,381
Debt Service 281,012 281,012 281,012 281,012 281,012 1,405,060
TOTAL COSTS: 483,807 358,847 419,503 404,668 638,616 2,305,441
Option Five
Operating and Capital Costs
Without Ship Replacement - Two Ship Operation
5-Year
Operations Costs: 97/98 98/99 99/00 00/01 01/02 Total
• N520 N
Scheduled: 192,795 67,181 90,824 41,829 138,958 531,587
Unscheduled: 10,000 10,000 10,000 10,000 10,000 50,000
• N501 E
Scheduled: 156,841 67,758 61,938 206,550 54,275 547,362
Unscheduled: 20,000 20,000 20,000 20,000 20,000 100,000
Total Operations Costs: 379,636 164,939 182,762 278,379 223,233 1,228,949