Equipment reserve used for ‘supply chain’ costs

ECA Review/File
Written by Stu Salkeld

Kneehill County council approved drawing $55,000 from the capital equipment reserve after quotes for two trailers came in tens of thousands of dollars higher than budgeted. The decision was made at the Sept. 13 regular meeting of council.

Councillors heard a report from Mike Ziehr, director of infrastructure, who stated that two brand new trailers the municipality was interested in are priced much higher than anticipated.

“Kneehill County council had approved the replacement purchase of one end dump trailer and the new purchase of a ‘Super B’ gravel trailer in the 2022 capital equipment plan budget,” stated Ziehr in his report to council.

“Quotes have been received that exceed the original amount budgeted.

“The end dump trailer was budgeted for $79,000 and the ‘Super B’ trailer was budgeted for $125,000. The quoted prices came in at $95,418 for the end dump trailer and $161,530 for the ‘Super B’ trailer.

“The unstable nature of the current vehicle and equipment purchasing environment has led to increased pricing on all aspects of the operations department, including the replacement of equipment and materials. Pricing increases of this magnitude were not expected and as such, not budgeted for.

“The additional funds required will be allocated from the capital equipment plan reserve. There are sufficient funds in this reserve to cover this additional $55,000 expenditure, which is slightly increased to ensure any unforeseen add ons are funded.”

During discussion Ziehr stated that original prices included in the budget were estimates. He warned councillors it doesn’t appear the “supply chain” cost increases will be gone any time soon.

“It’s kind of a trend we’re seeing this year…with increases in steel pricing,” said Ziehr. “We truthfully don’t see much of a decline in the future coming.”

Coun. Wade Christie asked if this would be the third ‘B’ train trailer Ziehr’s department would have. Ziehr responded yes, but the department still has five end dumps while the department is also looking to replace all belly dump trailers. He added that this will hopefully reduce gravel stockpiles.

Coun. Christie said larger loads of gravel are a good idea. “Every time you dump and load gravel it costs money,” said Christie.
Ziehr noted Kneehill County did perform a cost analysis around the idea of increasing gravel load sizes.

Reeve Jerry Wittstock asked if second hand equipment being sold by Kneehill County is also increasing in value just as quotes for brand new equipment are.

Ziehr responded Kneehill County did sell some equipment at auction this spring and he feels the county got some very good dollar value for that equipment. Ziehr added that used equipment prices are definitely higher than in years past.

He further explained the municipality uses multiple auction houses to sell different equipment all in an effort to get the best return.

Reeve Wittstock observed that even though the county is paying more for new equipment, that’s somewhat offset as Kneehill is getting more for the older equipment it sells.

Ziehr told council that he’s expecting a spring or summer 2023 delivery for the new equipment and the old equipment will remain in use until then.

Coun. Ken King asked how staff are taking into account supply chain problems and inflation when looking into the future, as this is the second time this year council has approved dipping into reserves because of unexpectedly high prices.

Staff noted they’re in the process of re-evaluating the capital equipment plan and looking at contributions to reserves with a likely recommendation coming that reserve contributions be increased for long term sustainability.

Councillors unanimously passed a resolution allowing staff to draw $55,000 from the capital equipment replacement reserve to fund capital equipment plan purchases for which the quotes were higher than originally budgeted.

Stu Salkeld
Local Journalism Initiative reporter
ECA Review

About the author

Stu Salkeld

Stu Salkeld, who has upwards of 28 years of experience in the Alberta community newspaper industry, is now covering councils and other news in the Stettler region and has experience working in the area as well.

He has joined the ECA Review as a Local Journalism Initiative Journalist.

Stu earned his two-year diploma in print journalism from SAIT in Calgary from 1993 to ’95 and was raised in Oyen, Alta., one of the communities within the ECA Review’s coverage area.