Schools, cities: Fuel cheaper by the tanker

KYNDELL HARKNESS, Star Tribune

Minneapolis school bus driver Woodrow Shaw filled up his tank at the end of the day. His is one of about 160 buses in the district.

Squeezed by fluctuating fuel costs, cities and school districts are banding together to buy in bulk at locked-in prices.

By SARAH LEMAGIE, Star Tribune

Last update: October 1, 2008 - 11:40 PM

A few bracing words for Minnesota drivers who have come to fear the gas pump's racing meter: At least you don't have to fill up 160 school buses.

Gas prices are squeezing schools and cities, too. In response, some of the transportation gurus who buy fuel for Minnesota's buses, police cars and plow trucks are trying an age-old approach to cost-cutting: They're banding together to shop in bulk.

In Minneapolis, the school district and city joined forces to lock in fuel prices with a supply contract that could save $1.5 million this year, according to Denny Coughlin, the district's supervisor of transportation equipment.

Officials from dozens of other communities met in July to talk about ways to team up. And state officials are probing a possible solution: a fixed-price contract that could buy 5 million gallons of fuel for state agencies, schools and cities across Minnesota.

The savings can add up fast. The Minneapolis school district, for instance, goes through a tanker of gas a week to fuel about 160 buses, and each tanker contains about 7,500 gallons.

"This spring, when the price was extremely high, we were saving tremendous amounts of money with every delivery we had," Coughlin said.

Because the price of fuel also could drop below the fixed price, there would be no guarantee of savings. But the contract would allow cities and schools to plan ahead and avoid the shock of sudden spikes, said Jim Schwartz, a spokesman for the Minnesota Department of Administration.

Many local governments already use state contracts to buy everything from gas to toilet paper to trucks, Schwartz said. But the new statewide contract could get cities and schools even lower fuel prices because it would spell out a solid commitment to buy a large, specified volume for a per-gallon price that wouldn't fluctuate with the market, he said.

And locking in a price would make it easier to plan budgets, considering that public officials often have to predict prices more than a year in advance. In Rosemount, for example, the city set aside $7,000 less for fuel in its 2008 budget than it ended up spending in 2007.

Still, some buyers are wary of a long-term rate at times when it looks as though the price of fuel may drop. "We hesitate to lock in on a higher price," said Randy Dukek, transportation coordinator in the Rosemount-Apple Valley-Eagan school district, which decided not to continue a fuel-buying partnership with Bloomington schools.

The state program, which Schwartz said could be set up in a month or two, would be open to state agencies as well as the 590 Minnesota counties, school districts and other public entities that already pay membership fees to take advantage of state purchasing contracts.

Buyers would have to be able to store a tanker of fuel at a time, so some small cities and school districts, especially those that hire contractors to run their buses, wouldn't be able to participate. But the program would also include an option to buy fuel at fluctuating wholesale prices. That alternative would still have the benefit of bulk pricing, and it would give small buyers a way to buy less fuel and allow large ones to jump in if the price drops below the fixed-price rate.

Sarah Lemagie • 952-882-901

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