By Division Chief Adam Storey
It was not too long ago when a custom fire engine was manageable within a yearly budget. Whether you were planning to purchase that one engine or multiple units, you could get the order fulfilled within a calendar year. This is not the case today, as long apparatus delivery times and increasing costs have become a significant hurdle for fire departments to overcome. This new reality is forcing many departments to seek alternative funding opportunities. Let’s consider some of these options.
Apparatus funding options
Most departments are fighting for General Fund monies — revenues shared with other departments within their municipality. The problem: It is difficult to earmark the funds needed for a $1 million custom engine without raising property taxes. If your local government participates in homestead exemptions, it can restrict tax digest.
A separate Fire Fund tax allows the department to collect property tax revenues, just like a General Fund, but only for fire department use. This obviously makes it easier to budget when you are not competing with other departments.
Setting up a Capital Contingency Fund is another option. This is a funding line that allows the department to budget an annual amount of capital funds. Monies not spent from your annual budget remain in this funding line, essentially serving as a savings account. It is common for a surplus of funds to roll back into the General Fund balance or “rainy-day fund.” Your Capital Contingency Fund, on the other hand, provides the opportunity to earmark and save funds for that future apparatus purchase.
Grants are another avenue for alternative funding, although they can be challenging to obtain. The Assistance to Firefighters Grant program involves a comprehensive application process. AFG grants are highly competitive, meaning you will need to justify the need — and then be patient as you wait to hear whether you’ve secured the funding.
Sometimes a better option than grants, municipal bonds are a low-interest rate bond, with some tax advantages to the purchaser. There are three main types of municipal bonds: general obligation, general fund and revenue bonds. The general obligation bond does not specify the project. A general fund bond can cover a wide range of projects or be used for any item included in the annual budget, whereas a revenue bond is directed at a specific revenue-generating item. All three bonds must be on a ballot as referendum in an election year. Another option: Request from your board a Certificate of Obligation, as they are used for urgent needs. They are like a bond but do not require elections, only public notice.
A Special Purpose Local Option Sales Tax (SPLOST) and Penny Tax are other popular options to raise funds for a one-time capital purchase. This process is like the bond option, requiring a referendum to be voted on, but it is an additional tax on goods and does not raise property tax. SPLOST projects can include fire stations, road projects, and apparatus.
All of these are viable options to fund apparatus, but they do take time to establish and/or generate the revenue. You will need to factor in the time it takes to receive the funds, plus any possible price increases, to ensure adequate funding.
One positive about the long lead times is that it allows time to secure the funds. Most manufacturers provide multiple payment options. For example, 50/50 is a great option for payment — paying half up front while using a capital contingency fund to pay the remainder of the purchase once the apparatus is ready for delivery. This method also helps with securing the price and saving for the final payment.
Plan for the future
Whether you’re purchasing a stock, custom or a hybrid apparatus, it is essential to have a strategic plan that accounts for your funding options. Remember to consider your reserve apparatus and your replacement plan for those units. That may mean planning for reconditioning of your apparatus, multi-year budgeting or changing from a custom build to a stock build. Start planning now for your future apparatus.
ABOUT THE AUTHOR
Adam Storey is a division chief with Cobb County (Georgia) Fire and Emergency Services, where he has served since 1997. He also is the executive officer for the director of public safety. As the chief of logistics, Storey is responsible for capital improvements, facility maintenance, apparatus maintenance and support services. He holds a bachelor’s degree in human resource management and an associate degree in business administration, and is a graduate of the University of Georgia’s Carl Vinson Institute of Government’s Management Development Program.
