DEPARTMENT: Physical Development Administration
FILE TYPE: Consent Action
TITLE
title
Authorization To Purchase Fuel From State Of Minnesota Fuel Consortium Program
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RESOLUTION
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WHEREAS, Dakota County has experienced significant variability in fuel spot market prices in the past; and
WHEREAS, the State of Minnesota is offering participants in the Fuel Consortium Program (Consortium) an opportunity to purchase fuel on a fixed price basis for a period from February 1, 2027, through January 31, 2028; and
WHEREAS, the fixed prices available under the Consortium are expected to be lower than prices available through the spot market; and
WHEREAS, purchasing fuel on a fixed price basis will ensure accurate County budget planning and budget stability; and
WHEREAS, Dakota County holds a cooperative purchase agreement with the State of Minnesota that allows the County to purchase from vendors under contract with the State of Minnesota; and
WHEREAS, the use of the Consortium will reduce Dakota County administrative costs associated with the competitive bidding process and avoid duplication of activity.
NOW, THEREFORE, BE IT RESOLVED, That the Dakota County Board of Commissioners hereby authorizes the County Manager, or delegate, to purchase 70% (127,000 gallons) of the County’s estimated unleaded fuel needs and 70% (102,000 gallons) of the County’s estimated diesel fuel needs for a period from February 1, 2027, through January 31, 2028, through the State of Minnesota Fuel Consortium Program, at the rates approved by the State of Minnesota; and
BE IT FURTHER RESOLVED, That the Dakota County Board of Commissioners authorizes the County Manager, or delegate to purchase the remaining amount of fuel necessary for County operations from the State Spot Price Program or through local spot price vendors.
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BACKGROUND
In 2026, Dakota County participated in the 19th year of the State of Minnesota Fuel Consortium Program (Consortium), which provides an option to purchase fuel at a fixed price. Prior to 2009, all County unleaded and diesel fuel needs were met through purchases on the spot market. For 2026, participation in the State program enabled the County to lock in a fixed price of $2.24 a gallon for 70% of its unleaded fuel needs and a fixed price of $2.87 a gallon for 70% of its diesel fuel needs. In comparison with purchasing on the spot market, the ability to lock in the fuel purchased at competitive prices via the Consortium helps ensure accurate County budget planning and budget stability.
Due to the continuing success of the Consortium, the State will continue to offer this program to all its Cooperative Purchasing Venture (CPV) members in the nine-county metropolitan area. In 2026, this program has over 50 municipalities joining together to purchase over 15 million gallons of fuel. By joining together, these municipalities have been able to secure lower prices per gallon than they could by purchasing individually.
In 2027, the Consortium will provide CPV members with the opportunity to purchase fuel based on two pricing strategies that include fixed pricing and spot pricing. Fixed pricing is a fixed amount per gallon for an exact number of gallons to be purchased. Spot pricing is a fixed markup on the current open market retail price per gallon at the refinery. The current program pricing will expire on January 31, 2027. The new program will run for 12 months, from February 1, 2027, through January 31, 2028. Solicitations for CPV members will take place in December so the State can react quickly to market conditions that would affect fuel prices in the new program term.
While the primary intent of this program is to manage the County’s fuel costs within budget, Dakota County has, since 2009, saved over $1,246,176 when comparing the State contract price per gallon to the average annual open market rates, not including the savings in staff time due to use of the State contract (Attachment: Fuel Cost Comparison).
Current State mandates require all unleaded fuel sold in Minnesota to contain 10% ethanol and all diesel fuel purchased from April to September to contain 20% biofuel, with all diesel fuel purchased from October to March to contain a 5% biofuel blend.
RECOMMENDATION
recommendation
Staff recommends that the County reduce the potential variability of County fuel expenses in 2027 by again participating in the State fixed price Fuel Consortium Program, given the volatility of the fuel markets and the uncertainty regarding fuel pricing in 2027. More specifically, staff recommends that Dakota County purchase 70% of its estimated unleaded fuel supplies and diesel supplies through the Consortium. Based on average fuel use, staff estimates this would equate to purchasing 127,000 gallons of unleaded fuel and 102,000 gallons of diesel fuel through the program. This would require the County to commit to expending approximately $879,150 of an estimated $1,255,929 fuel budget for 2027 on the fixed price program, with the remaining fuel purchased on the spot price market.
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FINANCIAL AND STAFFING IMPACTS
The recommended 2027 Fleet fuel budget for unleaded and diesel fuel is $1,255,929. Purchasing a fixed percentage of Dakota County’s needs on a fixed price basis will better position the County to maintain total fuel expenditures within the 2027 County Manager’s Recommended Budget for this line item.
|
Funding Source |
Total Recommended 2027 Budget |
|
County State Aid Highway (CSAH) |
$395,952 |
|
Wheelage Tax |
$69,874 |
|
*JPA Revenue |
$423,027 |
|
Levy |
$367,076 |
|
Total |
$1,255,929 |
*joint powers agreement (JPA) revenue is from City of Hastings, City of Farmington, Minnesota Department of Transportation, Community Development Association, Soil and Water Conservation District. A 7% markup is applied to all gallons of fuel sold and is included in the budget numbers. The remaining budget amount is for the actual cost of the fuel.
Existing staff will administer the purchases. The recommended 2027 budget request has been adjusted to meet the estimated price increase and fuel needs for 2027.
PREVIOUS BOARD ACTION
25-469; 10/7/25
ATTACHMENTS
Attachment: Fuel Cost Comparison
CONTACTS
Department Director: Erin Stwora
Author: Kevin Schlangen