1

Overview of The Rate Setting Process

Project the arrival date of new vehicles and the sale date of old vehicles for depreciation purposes.

Project the miles for each class in each fleet.

Project chargeable rental days for the rental fleet.

Project fuel usage in gallons for each class in each fleet

•Project the fuel cost per gallon

•Project the fuel cost per mileDevelop the administrative budget

Calculate shop rate

Project maintenance costs

Project Insurance Charges

2

Overview of The Rate Setting Process

• Two Pieces of the Rate:– Fixed Costs (Costs that stay the same no

matter how much the vehicle is used)

• Depreciation, Insurance, Admin, Interest,

– Variable Costs (Costs that change as the vehicle is used)

• Fuel, Maintenance

3

Project the arrival date of new vehicles and the sale date of old vehicles for depreciation purposes

Average Total Monthly Depreciation / Average Fleet Size = 2815.76/17.3 = $162.76/Month/Vehicle

Class Equip # Mo. Depr. Sale Date Count 7/1/2006 Count 8/1/2006 Count 9/1/2006 Count 10/1/2006 Count 11/1/2006 Count 5/1/2007MS Sedan 9610146 6.70 4/22/2006 0 0 0 0 0 0 0 0 0 0 0 0MS Sedan 9610168 66.50 6/3/2006 0 0 0 0 0 0 0 0 0 0 0 0MS Sedan 9808744 70.19 1 70.19 1 70.19 1 70.19 1 70.19 1 70.19 1 70.19MS Sedan 0110007 111.13 1 111.13 1 111.13 1 111.13 1 111.13 1 111.13 1 111.13MS Sedan 0208524 231.04 4/22/2006 0 0 0 0 0 0 0 0 0 0 0 0MS Sedan 0208617 231.04 4/22/2006 0 0 0 0 0 0 0 0 0 0 0 0MS Sedan 0208444 288.78 6/3/2006 0 0 0 0 0 0 0 0 0 0 0 0MS Sedan 0208519 231.04 6/3/2006 0 0 0 0 0 0 0 0 0 0 0 0MS Sedan 0208527 231.04 6/3/2006 0 0 0 0 0 0 0 0 0 0 0 0MS Sedan 0208616 231.04 10/28/2006 1 231.04 1 231.04 1 231.04 0 0 0 0 0 0MS Sedan 0310258 108.07 1 108.07 1 108.07 1 108.07 1 108.07 1 108.07 1 108.07MS Sedan 0310407 143.37 1 143.37 1 143.37 1 143.37 1 143.37 1 143.37 1 143.37MS Sedan 0409949 138.81 1 138.81 1 138.81 1 138.81 1 138.81 1 138.81 1 138.81MS Sedan 0410100 122.55 1 122.55 1 122.55 1 122.55 1 122.55 1 122.55 1 122.55MS Sedan 0410580 134.48 1 134.48 1 134.48 1 134.48 1 134.48 1 134.48 1 134.48MS Sedan 0508482 122.86 1 122.86 1 122.86 1 122.86 1 122.86 1 122.86 1 122.86MS Sedan 0508503 150.09 1 150.09 1 150.09 1 150.09 1 150.09 1 150.09 1 150.09MS Sedan 0609190 228.85 1 228.85 1 228.85 1 228.85 1 228.85 1 228.85 1 228.85MS Sedan 0609211 228.85 1 228.85 1 228.85 1 228.85 1 228.85 1 228.85 1 228.85MS Sedan 0609187 228.85 1 228.85 1 228.85 1 228.85 1 228.85 1 228.85 1 228.85MS Sedan 0609909 228.86 1 228.86 1 228.86 1 228.86 1 228.86 1 228.86 1 228.86MS Sedan 0609903 228.85 1 228.85 1 228.85 1 228.85 1 228.85 1 228.85 1 228.85MS Sedan 0609186 228.85 1 228.85 1 228.85 1 228.85 1 228.85 1 228.85 1 228.85MS Sedan 0609923 141.67 1 141.67 1 141.67 1 141.67 1 141.67 1 141.67 1 141.67MS Sedan 0609925 141.67 1 141.67 1 141.67 1 141.67 1 141.67 1 141.67 1 141.67

Total 18 2989.04 18 2989.04 18 2989.04 17 2758 17 2758 17 2758

4

Project Chargeable Rental Days by Class for Rental Fleet

MS Sedans Rental Days Jul Aug Jan Feb Mar Apr May Jun

FY 03 380 400 310 310 280 280 250 280FY 04 370 410 320 297 275 295 245 275FY 05 395 405 315 310 275 280 245 270FY 06 452 447

Cumulative Rental DaysJul Aug Jan Feb Mar Apr May Jun

FY 03 380 780 2330 2640 2920 3200 3450 3730FY 04 370 780 2340 2637 2912 3207 3452 3727FY 05 395 800 2355 2665 2940 3220 3465 3735FY 06 452 899 2139 2139 2139 2139 2139 2139

Predictive ValueJul Aug Jan Feb Mar Apr May Jun

FY 03 9.82 4.78 1.60 1.41 1.28 1.17 1.08 1.00FY 04 10.07 4.78 1.59 1.41 1.28 1.16 1.08 1.00FY 05 9.46 4.67 1.59 1.40 1.27 1.16 1.08 1.00FY 06 4.73 2.38 1.00 1.00 1.00 1.00 1.00 1.00

8.52 4.15 1.44 1.31 1.21 1.12 1.06 1.00Projected Rental Days

Jul Aug Jan Feb Mar Apr May JunFY 03 3237.29 3238.62 3366.61 3450.30 3524.21 3590.17 3655.92 3730.00FY 04 3152.10 3238.62 3381.05 3446.38 3514.55 3598.02 3658.04 3727.00FY 05 3365.08 3321.66 3402.73 3482.97 3548.35 3612.61 3671.81 3735.00FY 06 3850.67 3732.72 3090.63 2795.53 2581.60 2399.80 2266.67 2139.00

Projected Rental Days for FY 06 are 3733

5

Calculate Chargeable Days per Month per Vehicle

• From depreciation table we know average fleet size of 17.3

• From Chargeable Days table we projected 2481.39 chargeable days for the year

• Now we calculate Chargeable Days/Vehicle/Month

• 3733/12/17.3 = 17.98

6

Project the miles for each class in each fleetFY 06 Rental Mileage Projection for MS Sedans

MS Sedan Monthly Mileage by FY July December January February March April May JuneFY 02 41,989 57,831 31,558 72,853 77,600 96,929 90,832 81,513 FY 03 51,051 54,787 44,743 68,886 75,406 116,902 82,079 70,712 FY 04 40,028 81,336 34,097 65,937 82,379 101,434 92,004 98,749 FY 05 50,708 67,732 36,429 104,161 91,047.0 114,765.0 90,596.0 95,845.0 FY 06 52,607 44,541

MS Sedan YTD Mileage by FY July December January February March April May JuneFY 02 41,989 552,710 584,268 657,121 734,721 831,650 922,482 1,003,995 FY 03 51,051 519,698 564,441 633,327 708,733 825,635 907,714 978,426 FY 04 40,028 523,730 557,827 623,764 706,143 807,577 899,581 998,330 FY 05 50,708 517,816 554,245 658,406 749,453 864,218 954,814 1,050,659 FY 06 52,607 531,239 531,239 531,239 531,239 531,239 531,239 531,239

MS Sedan Mileage Multiplier July December January February March April May JuneFY 02 23.91 1.82 1.72 1.53 1.37 1.21 1.09 1.00 FY 03 19.17 1.88 1.73 1.54 1.38 1.19 1.08 1.00 FY 04 24.94 1.91 1.79 1.60 1.41 1.24 1.11 1.00 FY 05 20.72 2.03 1.90 1.60 1.40 1.22 1.10 1.00 All Years Average 21.937 1.9070472 1.783 1.567 1.391 1.211 1.094 1.000

Miles Projection Using All Years Average July December January February March April May JuneFY 02 921,093 1,054,044 1,041,863 1,029,739 1,021,701 1,007,102 1,009,312 1,003,995 FY 03 1,119,882 991,089 1,006,508 992,452 985,562 999,818 993,154 978,426 FY 04 878,076 998,778 994,713 977,467 981,960 977,950 984,256 998,330 FY 05 1,112,358 987,500 988,326 1,031,752 1,042,187 1,046,541 1,044,688 1,050,659 FY 06 1,154,016 1,013,098 947,302 832,476 738,739 643,314 581,243 531,239

% Difference from Actual Value July December January February March April May JuneFY 02 92% 105% 104% 103% 102% 100% 101% 100%FY 03 114% 101% 103% 101% 101% 102% 102% 100%FY 04 88% 100% 100% 98% 98% 98% 99% 100%FY 05 111% 99% 99% 103% 104% 105% 105% 105%

Current Mileage Projection for Current Fiscal Year 1,013,098

7

Project Fuel Usage in Gallons for Each Class in Rental Fleet

MPG/Miles = Gallons of Projected Fuel Use

But is that the end?

NO !!

The components of each type fuel must be projected.

#1

Diesel #2 Diesel

Bio-

diesel Flow Improver

Credit

Card

Fuel

Ethanol

8

To Project Cost of Diesel Fuel For Diesel Project the Cost per gallon of # 1, #2, Flow

Improver, and Bio-diesel Diesel Fuel Price per Gallon

Blend

#2/#1/Biodiesel 95/0/5 95/0/5 80/15/5 75/20/5 70/25/5 60/35/5 60/35/5 60/35/5 80/15/5 95/0/5 95/0/5 95/0/5July August September October November December January February March April May June

#2 Diesel 1.831125 1.831125 1.542 1.445625 1.34925 1.1565 1.1565 1.1565 1.542 1.831125 1.831125 1.831125#1 Diesel 0 0 0.29775 0.397 0.49625 0.69475 0.69475 0.69475 0.29775 0 0 0Bio Diesel (5% Blend) 0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089 0.089Flow Improver 0 0 0 0.015 0.015 0.015 0.015 0.015 0 0 0 0

Total 1.9201 1.9201 1.9288 1.9466 1.9495 1.9553 1.9553 1.9553 1.9288 1.9201 1.9201 1.9201Average

price 1.935

DNR Forecast

U of I Forecast (incl markup)

#2 Price per Gallon* 1.650$ 1.9275#1 Price per Gallon** 1.700$ 1.985Bio Diesel Price per Gallon 2.000$ 1.78Flow Improver Price per Gallon 0.015$ 0.015

9

Rental Fleet Fuel Cost Per Mile Projection

ClassProjected Rental Miles MPG*

Gallons of Fuel

% Voyager

Voyager Gallons % E-10

E-10 Gallons % E-85

E-85 Gallons % Diesel

Diesel Gallons Cost Cost/Mile

Truck I 3,797 7.6 500 34% 170 66% 330 0% - 0% - 898.34 0.237$ MS Sedan 1,039,233 22.6 45,984 39% 17,934 16% 7,357 45% 20,693 0% - 85,180.32 0.082$ 1/2 Ton PU 3,191 6.9 462 25% 116 75% 347 0% - 0% - 812.20 0.255$ Cargo Van 26,920 14.7 1,831 35% 641 65% 1,190 0% - 0% - 3,301.36 0.123$ Minivan 223,611 17.5 12,778 35% 4,472 25% 3,194 40% 5,111 0% - 23,387.79 0.105$ Carry All 178,848 14.4 12,420 48% 5,962 17% 2,111 35% 4,347 0% - 23,440.89 0.131$ Maxivan 175,155 14.3 12,249 45% 5,512 55% 6,737 0% - 0% - 22,650.73 0.129$ Cruiser Bus 1868 4.0 467 0% - 0% - 0% - 100% 467 905.05$ 0.485$

1,652,623 86,690 33% 34,806 40% 21,267 15% 30,151 467 160,576.68$

Fuel TypeProjected $/Gal.

E-10 1.64E-85 1.709Diesel 1.938Voyager 2.105

Project the Cost/Mile of Fuel in Rental Fleet

10

Develop and Allocate Administrative BudgetMotor Pool Administration - 00010

General Expense Projected6025 = Travel in state6026 = Travel out of state6070 = Office expense 1,7006075 = Periodicals 1,4006080 = Software purchase 5006085 = Equip purchase < $2,000 7506100 = Custodial supplies 1006110 = Uniforms 7506135 = Food stuffs6145 = Fuel6199 = Parts + Supplies 2,8006200 = Professional services 5006205 = Medical + Dental Services 06210 = Printing costs 1,1006212 = Copy charges 7506215 = Computing Services (ITS) 5,5006218 = UI Provided Services 4,500

6225 = Laundry/Cleaning 1,0006235 = Outside Univ. Services 6006245 = Freight 1006250 = Postage 1506260 = Repair bldg/fixed equip 6,585

6265 = Repair moveable equip 5006400 = Insurance 8006405 = Registration, training 7,5306475 = Admin. costs 10,2446730 = Annual Depreciation/Capital 15,0467555 = Fiscal year Beginning Balance7595 = 00250 Overhead 8,000

70,905

ProjectedUTILITIES

6270 = Telephone fixed 3,5256275 = Telephone variable 2006280 = Utilities 16,530

20,255

ProjectedLEASE/RENTALS

6058 = Vehicle rental 06430 = Equip Rentals 2006432 = Facility Lease/Rental 0

200

Total 91,359.82$ Salaries 400,571.00$

Total Administrative Budget 491,930.82$

Allocation to Rental/Lease Fleet

• 38.3% to Rental Fleet ($188,410)

• 61.7% to Lease Fleet ($303,521)

Customer Cost

• Total Cost/Total Fleet Size/12 months/Rental Days per Month

•$188,410/59.2/12/17.98= $14.75/day (For MS Sedan)

11

Projected MP Shop Costs 454,298$ Number of Mechanics 4

Projected Chargeable Hrs. Ave. Per Mech. 4 MechsTot. Possible Hrs. 2,080 8,320

Less non-chargeable hoursAve. Est. Vacation 176 704

Ave. Est. Sick & other leave. 144 576Paid Holidays(10) 80 320

Comp. Time taken off 0 0Training 24 96

Breaks+non-chargeable shop time 303 1,212Subtotal non-chargeable hrs. 727 2,908

Projected Non MP Shop Hrs. 35 140

Overtime+ Comp. Hrs. 0 0Total Chargeable MP Hrs. 1,318 5,272

Calculated Break Even Shop Rate 86.17

Approved Shop Rate 86.00Total Revenue from MP Shop Hrs. 453,392

Net (Tot. Rev. less Projected Shop costs) (906)

Calculate Shop RateDivide Shop Admin Budget by Chargeable

Hours

12

Project Maintenance CostsShop Labor Hours, Shop Parts, Sublets by Class

FY 02 257 281 688 1,061 1,332 1,681 2,407 4,447 4,447 FY 03 407 775 933 3,237 4,146 4,370 5,523 5,597 6,013 FY 04 255 575 2,634 3,390 4,301 4,730 5,067 5,625 7,056 FY 05 550 1,195 1,359 1,617 2,263 2,802 5,157 5,456 6,406 FY 06 251 599 3,417 6,744 7,392 7,553 8,424 8,424 8,424

MS Sedan Sublet Multiplier July August September October November December January February MarchFY 02 23.61 21.59 8.83 5.72 4.56 3.61 2.52 1.37 1.37 FY 03 17.49 9.18 7.63 2.20 1.72 1.63 1.29 1.27 1.18 FY 04 32.80 14.52 3.17 2.46 1.94 1.76 1.65 1.48 1.18 FY 05 12.72 5.85 5.15 4.33 3.09 2.50 1.36 1.28 1.09 All Years Average 23.450 13.201 5.062 2.801 2.202 1.998 1.657 1.375 1.229

Sublet Projection Using All Years Average July August September October November December January February MarchFY 02 6,030 3,713 3,482 2,973 2,932 3,358 3,988 6,113 5,468 FY 03 9,538 10,233 4,722 9,067 9,131 8,730 9,152 7,693 7,394 FY 04 5,968 7,590 13,333 9,497 9,473 9,449 8,396 7,731 8,675 FY 05 12,893 15,778 6,879 4,529 4,984 5,597 8,545 7,499 7,876 FY 06 5,876 7,906 17,298 18,892 16,278 15,088 13,958 11,579 10,357

% Difference from Actual Value July August September October November December January February MarchFY 02 99% 61% 57% 49% 48% 55% 66% 101% 90%FY 03 134% 144% 66% 127% 128% 123% 129% 108% 104%FY 04 71% 91% 160% 114% 113% 113% 101% 93% 104%FY 05 184% 226% 98% 65% 71% 80% 122% 107% 113%Current Sublet Projection Expense 13,958

13

Maintenance Cost to Customer

For MS Sedan:Sublet Costs: $13,958Shop Hours * Shop Rate: 519 Hours * $86/hr = $44,634Parts Cost: $18,381 Total Maintenance Cost =

$76,973

Cost/Mile = $76,973 / 1,039,233 miles = $0.074/mile for maint.

14

Project Insurance Costs

Monthly Insurance Rate at UI is $39

Deductible is $500/accident ($6/Month)Don’t you hate it when one fleet

vehicle hits another? 2 Deductibles!!

$41/17.97 Chargeable days /Month = $2.28/day

15

Putting it All Together for a Rental Rate

Fixed Cost Portion of Rate:•Average Depreciation ($162.76/17.97) = $9.06 + •Administrative Cost = $14.75 + •Insurance Cost = $2.28Variable Cost Portion of the

Rate:•Maintenance Expense ($0.074/mile) + •Fuel Expense ($0.082/mile)

= $26.09/da

y

= $0.16/mile

16