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Kenwood fire department revisits reserve fund needs

Current funds healthy, but planning can stave off future shortfalls
Kenwood fire department revisits reserve fund needs
Two of Kenwood Fire Department’s five big trucks. The five trucks represent over 70 percent of the districts replaceable assets.Photo by Melissa Dowling

By Jay Gamel

The Kenwood Fire Protection District’s newest board member, Jack Atkin, has wasted no time getting to work on the district’s financial outlook for the next decade or so. Atkin joined with longtime Fire Captain Tony Ghisla to inventory and analyze the district’s reserve funding, looking ahead to very practical replacement needs as equipment wears out, breaks, or becomes otherwise sidelined.

Ghisla and Atkin took on the project in early October 2021 and submitted their report at the board’s Jan. 11 monthly meeting.

“It’s the first time we ever had a report like this,” Chief Daren Bellach said. “It’s clear and easy to read, and it saved the district thousands of dollars from having a consultant do it for us.”

Atkin has a long history of financial involvement, having worked professionally in banking, finance, investments, and real estate.

“At the time of this study, the estimated current replacement cost of these assets was approximately $3.3 million. These assets require major maintenance or replacement at predictable intervals, and the cost of such replacement can place a heavy burden on operating budgets if prudent financial preparations are not made,” the report opens.

The study develops suggestions for how much to put aside to ensure adequate replacement money is on hand when needed and examines the adequacy of the current reserves and reserve policies.

The good news is that the district’s existing $2.3 million reserves cover 97 percent of anticipated needs, though they may fall short by $66,000 by June 1 if projected expenses are accurate.

An annual donation of $222,000 from the operating fund should maintain a “fully funded reserve,” the study suggests. That amount, however, is a best estimate to cover future events and is subject to change.

The figures are based on current assets and projected deterioration and replacement times. The department’s five big trucks represent over 70 percent of the district’s replaceable assets, and any change in their status could have a big effect on projected financial requirements, the report notes.

Engines that have already reached their “end of life” are not included in the replacement figures, assuming their replacement has already been funded. When they are replaced, the contribution can jump significantly, as much as $90,000 for one example cited.

The report also notes the district might find better interest rates on the replacement reserves. Current returns are not keeping up with inflation.

The report recommends making regular annual contributions and suggests the replacement fund study be updated at least every three years or sooner, if necessary (for example, if a new engine is put in service).

Currently, the district maintains a “reserve fund.” The report suggests non-recurring revenue (from donations or grants) should not be used for this fund, but should be moved to a separate contingency fund.

The inventory paints a picture of the costs of operating a modern fire company.

Replacing fire engines ranges from a low of $115,000 to replace the utility/rescue truck to $800,000 for each of the two pumpers, and $475,000 for the water tender and wildland fire-equipped engine. The total fleet replacement cost range is $2 to $2.7 million.

The vehicles have a useful life of 12–20 years, depending on many factors, and annual contributions could range from $129,000 to $289,000, depending on actual longevity.

Other expensive equipment includes a big air compressor; auto defibrillators for every vehicle; radios and pagers; another air compressor for the scuba tanks worn in intense fire situations; the helmets and breathers used with that gear; thermal imaging cameras; firefighting suits, called “turnouts,” both for regular and wildland use; and tires and batteries.

Other equipment includes a fuel tank, a huge generator to keep the firehouse running in emergencies, HVAC and extra heaters, kitchen equipment, a 40-foot storage container, flooring, paving and roof materials, batteries and rescue equipment, computer and peripherals for the office, and tables, chairs, and awnings.

Replacing pavement at the firehouse may run $90,000 when it is needed.

Some equipment is jointly owned with other districts, including a burn trailer, a turnout washer, and dryer extractors — heavy-duty units that remove toxic particles and smoke from the safety suits.

The report is included in the 2022 board agendas and minutes package for Jan. 2022 at kenwoodfire.com/kenwood-fire-meetings.html?bpid=10266.

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