BY PETER BRYAN
Thirty-seven years in local government has taught me that it is truly possible, even feasible, to reduce the infamous “fixed costs” during challenging fiscal times.
We, the public safety agencies, participate with our “brother and sister” departments in budget reductions, usually only when forced to do so, and are not necessarily the most effective at cost-benefit budgeting, fiscal analysis, and budget administration unless someone in the department comes from finance or corporate America. We need to do better fiscal management in the fire service during difficult budget times. When reduced revenues take a higher priority than keeping the other alligators off our back, then public safety will do better fiscal analysis.
What fixed costs could we reduce, and what would it take to do so? Let’s consider the following broad categories (not including salaries, intentionally):
- station operating expenses;
- apparatus maintenance;
- fuel;
- general liability, property, vehicle, and employment liability insurance;
- workers’ compensation; and
- unwanted responses.
I will briefly review each one, covering a few in greater detail. Fee generation is not considered except as a means to reduce costs.
STATION OPERATING EXPENSES
Utilities and maintenance account for the greatest portion of most station expenses. We generally have no direct control over utility rates, but we can reduce how much we pay. It may be feasible to connect to a municipal utility and receive the discounted or purchased rate. Many agencies have bundled their data and voice telephone, perhaps with cable TV, to single-source providers; data and telephone are the most likely, and changing the type of telephone service can significantly reduce local and long distance call charges.
The size of the fire station or facility water meters can affect costs, and by reducing landscape demands (e.g., using low-maintenance, reduced-water, or xeriscape landscaping using drought-tolerant plants and efficient irrigation), agencies can reduce utilities, personnel yard work time, and even outside landscape maintenance costs (for those agencies that are permitted to contract out that work). Time spent on dedicated fitness and increased training instead of on landscape maintenance can even be shown to be a cost benefit if the time is truly used effectively.
“Cost-match” shopping for cleaning supplies, office supplies (such as those numerous toner and ink cartridges), kitchen supplies, and even plain wrap copier/printer paper can produce big rewards once the learning curve is met.
Finally, it is probably past the time to post signs and implement and enforce policies reminding personnel that office supplies and the copier are to be used for official business and not personal use. This may be a change in culture or past practice. Reducing copier/printer costs can offer significant benefits.
APPARATUS MAINTENANCE
When was the last time you analyzed the cost of maintaining a piece of apparatus vs. its lifespan or replacement cost? If we begin the process when we purchase vehicles, then five, eight, 10, 15, or even 20 years later, we will know when “enough is enough.” Is it cost-efficient to replace engines/transmissions or major electrical components over and over? When total maintenance costs (generally not including expendables such as fluids, tires, and even brakes) exceed a predetermined percentage of the purchase/replacement cost, it is time to stop throwing good money after bad. As a suggestion, when an individual apparatus’s accumulated repair expenditures approach 50 percent of its cost, including personnel cost but not including expendables, consider the unit for replacement. This takes ongoing analysis and long-range planning.
Shopping for services, possibly even outsourcing “light preventive maintenance” can be significantly more beneficial. Changing fluids and tires can often be more cost-efficient with “less costly services.” This, too, might be a change in culture, past practice, and certainly memorandums of understanding and contracts.
FUEL, FUEL, AND MORE FUEL
If utilities cost containment ever challenges us, the fuel certainly does, too. Like utilities, controlling the rate is very difficult. Owning our own underground tanks or even the more popular aboveground ones can increase the true cost of fuel, even when we purchase it at a lower per-gallon rate. It’s worth considering: Do all stations need fuel tanks?
Can we reduce or consolidate nonemergency vehicle trips to a minimum and demonstrate better stewardship to our citizens? For years we harped on our kids not to drive the car for just a single trip or purpose. With fuel in the $3- to $5-per- gallon range, analyzing this expense truly makes sense.
INSURANCE
Personally, I dislike paying insurance premiums for something I seldom or never use. We purchase life insurance for the catastrophic event. If we do a cost-benefit analysis, we might purchase a reduced-cost term policy for the years we have a home mortgage, college costs, and so forth; we could stop those premiums when they increase beyond the predetermined level, the coverage reduces below a benefit or need, or our risk (debt) is reduced.
Fire service insurance can greatly benefit from regular cost-benefit analysis. Consider such possibilities as increasing the compensation and collision deductible, reducing coverage as vehicles age, joining shared “pooled” coverages instead of single-agency policies, or “banked” coverage in which the agency is responsible for all its own costs. Shared “pooled” coverages certainly have a risk and necessitate due diligence and analysis of the agencies involved, their experience, risk, size, and any “catch-up” (i.e., debt reduction/negative-equity) payment plans.
WORKERS’ COMPENSATION
Can an agency improve public safety wellness, reduce injuries, and reduce workers’ compensation costs all at the same time? Most fire agencies will experience some increases in firefighter injuries, workers’ compensation injuries, and the necessary expenses to treat these injuries and administer the program. So, is it really feasible to improve firefighter wellness and reduce the injury rate and the costs at the same time? Can the fire service improve the treatment of employee injuries in the same way it strives to improve the treatment of injured and ill patients?
Implementing a regular/constant case review and update procedure, which involves weekly or biweekly conference calls with risk managers and any third-party administrator, will keep the case fresh and updated. Too many injuries involve delays, which increase costs. The purpose is to review the current status of active employee injury cases and ensure that the treatment is moving along at a pace as rapidly as feasible and that the case does not become inactive because of delays resulting from waiting for reports, medical appointments, medical reviews, and so forth.
Similar to general liability insurance, participating with other fire and local government agencies in a joint powers authority to share the administrative costs can produce cost benefits. There are “banking” systems where each agency is responsible for its costs; there are also “pooled” systems, which share costs over several years and thus reduce an individual agency’s costs.
Other methods to reduce costs are discussed in “A Model for Reducing Injuries and Their Costs,” Fire Engineering, February 2010.
REDUCING UNWANTED RESPONSES
For many fire service agencies, the service demands are rapidly exceeding the available resources. The fire service is concerned with having the correct resources available when an incident occurs. Industry is concerned with occupants responding appropriately to alarm signals and in building their confidence in fire alarm signals. A public-private partnership can support both the industry’s and fire department’s needs.
The fire protection community, in conjunction with the local fire service, must determine that it needs to reduce the number of unnecessary responses to alarm system-initiated incidents to deliver the needed resources to the rapidly increasing “actual” emergency demands. You can secure a public/private partnership by issuing permits to the alarm company.
Developing a fee for unnecessary alarms with a zero tolerance can quickly reduce unwanted responses. When the system malfunctions, the alarm company is held responsible; contractors are held responsible when their actions result in an unnecessary alarm, and the occupants are held responsible when their actions cause the alarm. Appropriate cost recovery fees are billed for fire apparatus and personnel. You can base a permit fee on the number of accounts the company has, since the number of systems seems to be proportional to the number of false alarms. The permit and fees are not to be used as a revenue stream; they are designed to reduce response costs.
One might think that an annual or periodic audit of the fiscal policies, practices, and the “books” would produce a valid and reliable cost-benefit analysis of a fire service agency’s fiscal plan. To the contrary, audits confirm generally acceptable accounting practices and principles but do little to nothing to analyze how well we spend the public’s money. It is not that we do not want to do effective cost-benefit analysis to be more cost-efficient; we generally don’t have or take the time and effort.
PETER BRYAN, a retired chief and a fire protection consultant, is a 37-year veteran of the fire and emergency services. He served as chief for the Norco, Monrovia, Rancho Cucamonga, and Wheatland (CA) Fire Departments. He is experienced in fiscal management; revenues and fees; and wellness, fitness, and workers’ compensation programs.
