Wednesday, July 19, 2017

Fire Engine Financing: The Payoff Early Myth

I hear it every day

"Can we pay off early?"

Fire departments choose a longer term (more years) for the lower payment and plan to pay it off early.   The goal is to save money.

Why this never gets you what you want

There are 2 reasons why this strategy never works as planned.
  1. Nobody pays off early.  Even though almost 100% ask, less than 2% of fire departments actually pay off early.  They just pay the lower payment for a longer time and pay a lot more interest.
  2. It misses how interest is calculated.  For everyone who does pays off, they pay off with only a few years left.  The problem is that most of the interest has already been paid.  This strategy forgets that the most savings occur when you pay at the beginning, not the end.  Here's a chart to show the difference:
Compare the costs of financing longer and paying off early
Comparison of financing terms and interest paid
The red bars show the interest you pay by financing the truck over 10 years and paying off after 5 years.  The green bars show the interest paid by financing over 5 years.


The strategy of financing long and paying off early as a money saving move is a myth.  Don't fall for it.
Next week, we'll show you how to avoid this myth.

Stay safe!
John R. Hill
First Bankers

Wednesday, July 12, 2017

Why your council won't buy a new fire truck

It's simple.

They believe that any alternative to buying a new truck is cheaper than buying a new truck.

But their belief is usually based on wrong math

That's only natural.  They see the price tag of a new apparatus ($500,000?!?!?) and think that HAS to be the most expensive decision.  But they're missing the costs of not buying completely.

So, you have to provide the correct economic comparison.  Which includes the TOTAL costs of buying or not buying.

The good news is that there are only 3 reasons for not buying a new fire truck so you don't have to prepare for a lot of different calculations.  You only have to find out which reason your council has and develop a fire truck justification calculation for that reason.

The double good news is that we provide a Fire Truck Justification Kit to help you do the math for each of the 3 reasons.  Simply download your Kit at:


You have to do the math for your council because they won't do it on their own.  They will see the cost of a new apparatus and decide not to decide.

Stay safe!
John R. Hill
First Bankers

Wednesday, July 5, 2017

Why there will be fewer fire departments

As I stated in last week's column, there will be fewer fire departments in the future

The question is:  Why? And how will this happen?

Why this will happen

The fire service is under 2 major economic forces that will shape it's future.

First, the cost of providing service is rising faster than the revenues to support it.  As this happens, organizations will look to eliminate inefficiencies.  That means fewer leaders to lead more people, specialized and rarely used equipment to be shared among more organizations, and goals of buying services (think insurance) cheaper.

Second, and this is the biggie, the fire service is transitioning from a volunteer labor force to a career labor force.  So, what was (nominally) free labor will now have a large cost attached to it.

How will this happen

As budgets strain under the 2 forces above, government agencies will be forced to find efficiencies to provide service for less cost.  We've already seen the first wave of this happening as we read about department mergers frequently in fire publications and newspapers.

As this trend intensifies, more communities will see the economic benefit from their neighbor of merging their department with another department.  The justification to do so will simply be in the savings realized.


There will be fewer fire departments in the future.  I can not and do not speak about the quality of the service provided in such a scenario.  I'm not qualified to do so.  But I am qualified to write about the economic reasons why this will happen.  And to help your department stay ahead of this eventuality.

Stay safe!
John R. Hill
First Bankers

Wednesday, June 28, 2017

A United States with only 3000 fire departments

Is it possible that 90% of current fire departments will be gone in the future?

It certainly is possible.  And while a final number is impossible to forecast, it is a certainty that most fire departments today will be gone sometime in the future.

A conversation I have every day

I talk with fire departments about economic, budget, and money issues every day.  It's just what my life is.

And I hear the same things with everyone I speak with:
  • Costs are rising faster than revenues and budgets. 
  • People aren't volunteering anymore so "free" labor will be replaced by paid labor
Both of these trends are what economists call leading indicators.  That means these things happen first before other things can happen.

And these two trends indicate an industry that will be ripe for consolidation.  That means fewer organizations will do the work of more orgainzations.


The trends are clear.  There will be fewer fire departments serving the U.S. in the future.  Next week, we'll dig into why this will happen in more detail.

Stay safe!
John R. Hill
First Bankers