Do You Value, or Cost Your Life?
We’ve been training our children to know the three magic numbers for decades now: 9–1–1. We’ve been so successful at it that as soon as you see the number you know exactly what it’s for: Help.
There’s an inherent sense of social comfort provided to everyone with the knowledge that help is just a phone call away, that someone will come immediately if you can just get to a phone. That knowledge is subtly reinforced everywhere you turn: You see fire trucks and police cars every day, you hear sirens while out in your yard, and your cell phone will connect to 911 even if you don’t pay your bill. You know the network is all around you in case you need it.
An emergency response network has become an essential building block of communities; so much so that there are virtually no places in the United States where calling 911 will not connect you to some form of mobile, deliverable emergency service. Would you even consider living in a community that opted not to have emergency services? As a taxpayer you might grumble a little when your property tax bill arrives, or frown when an EMS levy is on your ballot, but for the most part you don’t think about 911 service in any greater depth than your small individual cost.
If you happen to be a classically trained CPA then you know the private sector measures return on investment (ROI) as a function of revenue and cost, which is a great tool if you are in the business of generating revenue. But what if you are a public service enterprise, like a fire department or police department? In these cases there are easily calculable costs but virtually no revenue. How can a community measure their return on investment?
For decades the fire service has relied on the creation of community comfort described above to justify its expenses; but as we move deeper into this new millennium and public funding falls under ever-increasing scrutiny it’s essential we find a different way to justify our costs. I submit that method is to better illustrate community value.
Today’s fire service leadership is employed by elected governance that demands cost accountability. It’s a reasonable expectation. Operating a fire department is expensive, and if you are in the business of balancing municipal books the fire department represents a large portion of your budget, with no measurable ROI except that sense of community comfort. If you’re facing deficits it is tempting to reduce services to reduce expenses because you know that as long as you don’t disrupt the community sense of well-being, the reduction will not likely draw much attention. For this reason it is essential that the fire service learn to report their operations not just in terms of losses, or costs, but also retained value.
When a building burns, its value is reported as a fire loss and fire departments everywhere sum their fire losses annually as a way to illustrate the need for their services. This method has merit, but fails to draw the complete picture. When a fire department stops a fire, there is often neighboring buildings that would have burned had the fire department not been present. The act of suppressing a fire in one building, even if it results in a complete loss, still preserves the economic value of the neighboring buildings. In most cases even buildings deemed a total loss contain valued items that can be recovered by owners or occupants. The economic impact of saving neighboring structures is never reported.
What is the value added to a community through effective emergency medical services? EMS systems everywhere save lives of all ages, and while you and I see our family members lives as priceless, there must be some way to calculate a value for those lives saved. Numerous government agencies and private businesses must assign value to human lives for policy purposes. The Value of a Statistical Life (VSL) varies slightly from one reference to another, but on average a healthy productive year of life is valued at $50,000 by tools like the Affordable Care Act. The FDA, EPA, and DOT all have need to assign value to life and they estimate one full VSL to range from $8M to $9M. When an EMS system intervenes in a potentially life-ending medical crisis, it is entitled to claim an actuarially reduced portion of the VSL for every year of productive life it saves.
Arizona State University’s W.P. Carey School of Business has been studying the economic impact of the Phoenix Fire Department on the City, County and State economies. For one quarter in 2012 (June 1 to August 31) ASU studied the economic impact of eight fire incidents that threatened 13 businesses. Their conclusions:
- 2,173 private sector jobs saved for 12 months
- 495 Maricopa County government jobs saved
- 2012 Gross State Product saved $196M
- 2012 State tax revenue saved $10.6M
In Everett, Washington a 2015 New Year’s Eve apartment fire cost one citizen his life and injured many others. The fire in this unsprinklered apartment building moved so quickly that families were forced to drop their children from third story windows to escape. The fire department effected numerous rescues and contained the fire to one building, which was a total loss. Currently we will report that incident as a single fatality and million dollar property loss, but using the ASU methodologies we could report it very differently:
- Value of Lives Saved
- Value of Jobs Saved
- Value of Property Saved (Adjacent buildings)
- Value of City, County, and State revenue saved
Public safety agencies need to begin to understand and report the economic impacts of their services. Not so much to impress the average citizen who just wants to feel secure, but to create understanding in those who work behind the curtain with us, and are forced to make tough choices about what does and does not get public funding.
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