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Time to Re-Privatize Fire Departments
Time to Re-Privatize Fire Departments
July 15, 2011
Originally published in The American Spectator
All across America, municipal governments are awakening to the costs of overly-generous public sector compensation. In Orange County, California, the average total pay and benefits package for a firefighter is $175,000 a year. Firefighter unions say that there can be no cuts to fire department budgets without putting the safety of the public at risk. Yet for most of the nation's history, firefighting services were reliably provided by the private sector. Today, one county in Georgia is showing how that can be done again.
The history of firefighting is instructive. After the traumas of the Great Fire of London in 1666, a fledging market for fire insurance developed there. Those insurers, seeking to lessen their payouts, organized their own fire brigades to minimize any fire damage to their insured parties' homes. However, to prevent fires spreading to insured homes, the brigades responded to every fire regardless of whether a house was insured or not, so the business also benefited free riders. By 1862, only one-third of London property was insured. After much cajoling by the insurers, the municipal government agreed to pay for universal fire services in 1866. Soon after, municipalities all over the world were providing fire services as a public good.
Free riders bankrupted London's fire insurance companies by taking advantage of their fire services, but the free rider problem is not insurmountable. Had the two services been operated separately, the insurers could have incentivized the purchase of fire company subscriptions by offering clients discounts on premiums. Meanwhile, the fire company could have averted losses by billing non-subscribers for its services. Such a system actually exists today in Chatham County, Georgia, at the Southside Fire Department (SSFD), a privately run and subscription-funded fire, EMS, and security company.
The SSFD began in 1961 with only $10,000 and a handful of entrepreneurial volunteer firemen who bought a fire truck and offered subscription-based fire protection to the residents of the then-unincorporated southern section of the county. Today, the SSFD has a budget of $10 million and provides fire prevention and suppression services to half of Chatham County at a net financial gain to subscribers, as the discount offered on the homeowner's insurance premium from purchasing a subscription outweighs the cost of the subscription itself.
SSFD has succeeded where the London Fire Brigades failed by billing for the cost of its services in the event that a non-subscriber requires them. SSFD Assistant Fire Chief Hugh Futrell says that non-subscriber money loss has not been a problem for the company. Futrell also notes that SSFD enjoys other advantages over municipal government departments, such as freedom from bureaucratic red tape (for example, not having to follow public sector procurement rules) and the ability to employ a solid core of dedicated volunteers which he describes as a "huge savings to the citizens we serve" amounting to almost six million dollars -- both thereby resulting in greater overall efficiency.
SSFD's success refutes the idea that fire services can only be provided by government. Now, as local governments across America look for ways to bring their budgets under control, true privatization of emergency fire services should be an attractive option. No doubt, empire-building politicians and public employee unions will try to scare the public into continuing on as before, stoking fears of their houses burning down. The Southside Fire Department, however, shows they are crying wolf.