DEPARTMENT: Parks, Facilities, and Fleet Management
FILE TYPE: Consent Action
TITLE
title
Authorization To Purchase Fuel From State Of Minnesota Fuel Consortium Program
end
PURPOSE/ACTION REQUESTED
Authorize the purchase of 70 percent of the County’s anticipated unleaded and diesel fuel needs for the period of February 1, 2025, to January 31, 2026, on a fixed price basis from the State of Minnesota Fuel Consortium Program (Consortium) with the remainder being purchased under the State or local spot pricing purchasing programs.
SUMMARY
In 2024, Dakota County Fleet Management participated in the 16th year of the Consortium, which provides an option to purchase fuels at a fixed price. Prior to 2009, all County unleaded and diesel fuel needs were met through purchases on the spot price market. For 2024, participation in this State program enabled the County to lock in a fixed price of $2.59 a gallon for 70 percent of its unleaded fuel needs and a fixed price of $3.23 a gallon for 70 percent 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 helped ensure accurate County budget planning as well as 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 2024, 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 over purchasing individually.
In 2025, the Consortium will provide CPV members with the opportunities 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, 2025. The new program will run for 12 months, from February 1, 2025, to January 31, 2026. Solicitation for CPV members is taking place in November so they can react quickly to market conditions that would affect fuel prices for 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 $932,898 when comparing the State contract price per gallon to the average annual open market rates, not including the savings in staff time due to the use of the State contract (Attachment: Fuel Cost Comparison).
Current State mandates require all unleaded fuel sold in Minnesota to contain 10 percent ethanol and all diesel fuel purchased from April to September to contain 20 percent biofuel, with all diesel fuel purchased from October to March to contain a five percent biofuel blend.
RECOMMENDATION
recommendation
Given the volatility of the fuel markets and the uncertainty regarding fuel pricing in 2025, staff recommends that the County reduce the potential variability of County fuel expenses in 2025 by again participating in the State fixed price Fuel Consortium Program. More specifically, Fleet Management staff, and Budget staff recommend that Dakota County purchase 70 percent of its estimated unleaded gas supplies and diesel fuel supplies through the Consortium. Based on the 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 $791,475 of an estimated $1,180,679 fuel budget for 2025 on the fixed price program, with the remaining fuel purchases completed on the spot price market.
end
EXPLANATION OF FISCAL/FTE IMPACTS
The proposed 2025 Fleet fuel budget for unleaded and diesel fuel is $1,180,679. Purchasing a fixed percentage of the Dakota County fuel needs on a fixed price basis will better position the County to maintain total fuel expenditures within the 2025 County Manager’s recommended budget for this line item.
☐ None ☒ Current budget ☐ Other
☐ Amendment Requested ☐ New FTE(s) requested
RESOLUTION
body
WHEREAS, Dakota County has experienced significant variability in spot market fuel 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 of February 1, 2025, to January 31, 2026; and
WHEREAS, the fixed prices available under the Consortium program 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 Physical Development Director to purchase 70 percent (127,000 gallons) of the County’s estimated unleaded fuel need and 70 percent (102,000 gallons) of the County’s estimated diesel fuel needs for the period of February 1, 2025, to January 31, 2026, through the State 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 Physical Development Director to purchase the remaining amount of fuel necessary for County operations from the State Spot Price Program or through local spot price vendors.
end
PREVIOUS BOARD ACTION
23-508, 11/14/23
ATTACHMENTS
Attachment: Fuel Cost Comparison
BOARD GOALS
☐ A Great Place to Live ☐ A Healthy Environment
☐ A Successful Place for Business and Jobs ☒ Excellence in Public Service
CONTACT
Department Head: Georg Fischer
Author: Kevin Schlangen