June, 2008

The Cost of a Fire Department

In the world of government the fire service is sometimes looked on as the equivalent of a pleasure boat. Owners of large boats have probably heard the expression that a boat is just a hole in the water into which you pour money. Some individuals feel the same way about the fire service. In this day and age where taxes are considered evil and the philosophy that we should “cut the fat” out of government is the rallying cry for many, the fire department is frequently the target for cuts. After all, the fire department has the largest budget in the General Fund and doesn’t collect revenue as some of the other Township departments.

I am going to limit this review strictly to a cost versus return standpoint and not debate the value of the fire department’s response or programs. Let’s look at the statement that; “The fire department doesn’t pay for itself.” Ostensibly, this statement has some validity. The water department is an enterprise fund (it recovers operational cost thru fees), the clerk’s office collects fees for licenses and permits, the building and planning departments work closely with contractors and developers who purchase building and mechanical permits, and the parks department budget is partially offset by the entrance fees for one of the many parks in the Township.

What does the fire department do to raise revenue? The easy answer to the question is that we charge non-residents for services such as auto accidents and occasionally charge a resident for an illegal act. This amounts to less than 2% of our budget. The fire department’s contribution to the Township does not show up in the revenue side of the budget. The real benefit derived from having a fire department is the cost savings on homeowners and business insurance.

Many people do not understand or appreciate the savings that a well equipped, well trained, and appropriately staffed fire department creates. All fire departments are rated according to a national standard developed by the Insurance Services Office (ISO). This agency reviews the coverage, response and capabilities of a fire department and will rate them on a scale 10-1 (1 being the best rating). The Plainfield Fire Department meets the standards for the ISO rating of 5. This department was the first in the state, with 50% of the community that was not covered by hydrants, to receive this rating. The insurance premiums paid by each homeowner or business are directly related to the ISO rating of the department that services them.

Currently, the average annual insurance premium for residents with a home valued at $100,000 in Plainfield Township is $642. (This is based on information supplied by a local insurance agent and reflects the rate of one company.) Using this company’s estimates for comparison, the premiums paid, Township-wide, for homeowners would total $6,095,020.

• If the department was rated at ISO 7, the premium would be $686, totaling $6,512, 747 for the Township (a difference of $417,727).
• If the department was rated at ISO 8, the premium would be $724, totaling $6,873,511 for the Township (a difference of $778,491).
• If the department was rated at ISO 9, the premium would be $885, totaling $8,402,013 for the Township (a difference of $2,307, 997).
• If the department was rated at ISO 10, the premium would be $895, totaling $8,496, 951 for the Township (a difference of $2,401,931).

The substantial savings for homeowners would be similar for business and industry since the ISO rating affects all insurance costs. The value of business and industry property combined is $207,300,800. The premiums for the businesses in Plainfield Township total $1,330,871. The premiums for businesses if the fire department rating were ISO 10 would total $1,855,342 (a difference of $540,571). Businesses and residents of Plainfield Township easily save over 2.9 million dollars due to the foresight of the elected officials in providing adequate support to allow the department to receive this rating. The numbers used to develop this article are based on one company’s rates. The rates do vary so individual homeowners may actually be paying more or less for their property.

The fire department’s current budget is 2.6 million dollars. Essentially, the cost of operating the fire department is completely offset by the savings to Township property owners through insurance premium savings. Occasionally, the obvious answer isn’t always the correct answer.