Basically, property insurance rates are based on the potential risk involved in the occupancy, the construction of the building, as well as how the local fire department is prepared to address the risk.  These occupancy risks and fire department capabilities are rated by ISO.  How does this affect me?

Here is the information you'll need:

• What is ISO?
• The Evaluation Process.
• How Does Texas Township Rate?
• What Does The ISO Rating Mean in Dollar Value?
• Havent We Improved the Fire Department Since 1997?
• What Can We Do to Better Our Rating?
• How Can We Accomplish This?
• What is the Bottom Line?

What is ISO?

The Insurance Services Office (ISO) is a for profit monopoly that is authorized by our state legislature or Department of Insurance in 48 states (Washington and Louisiana have their own state systems) to rate community fire defenses. ISO then sells that data to the insurance industry for the purposes of establishing insurance rates. ISO and its predecessors have been rating communities since 1916. In 1889 the National Board of Fire Underwriters (NBFU) started grading fire protection. The NBFU was merged into ISO in 1971. The goal of rating communities is to provide better insurance rate equity in recognizing public fire suppression abilities. So who uses ISO ratings? According to ISO, virtually every insurance carrier uses their data to calculate rates. The ISO audit is a totally open book test for the fire department. ISO rates communities every 10 years if their population is over 25,000 or 15 years if they are under 25,000. In addition, they send out questionnaires every 30 months.

The Evaluation Process.

The ISO completes four evaluations and awards individual grades for the following:

1) A review of the water system, fire hydrants and other water supplies such as tanker trucks.
2) A review of the fire department, including apparatus, training, and equipment maintenance.

3) A review of the communications and dispatch facilities.
4) A community wide grade combined of the three above.

The community wide grade has a 100 point score and is made up of; communications which counts for 10%, water supply score which totals 40%, and the fire department score is worth 50%. Every ten points is a 'Class'. The grade is presented in a Class 1 to 10 formats with Class 1 being the best and Class 9 being the worst grade a community can have that has a fire department.  A Class 10 indicates no creditable fire protection is available within 5 road-miles, even if the community or Township has a fire department.

Points Needed for Each Class

The ISO grading audit simply measures compliance to a few national minimum standards in the respective areas. Examples of questions asked are: Can a caller find the fire department number in the phone book? Does the water system match the needed fire water flow requirements of the buildings in the community? Is the fire department capable of addressing the possible fires in the city or Township? Are your ladders long enough to reach the buildings you protect?

A Class-1 community pays the lowest possible rates and scores 90% or better on meeting a portion of the national standards in communications, fire department and water supply. A Class-5 pays medium rates and meets 50 to 60% of the national standards. A Class-9 is the worst grade given for any form of recognized fire protection and only scores 10 to 20%. There is at least 62% swing in rates controlled by the rating.

A rating of 10 may be given to those properties that lie beyond 5 road-miles of a primary fire station and have no rated firefighting water supply, even though there is a fire department that services the area.  ISO believes that if there is no water supply and the fire station is beyond 5 road-miles, it is safe to assume the fire department will have too long of a response time and fire attack time to be able to prevent catastrophic property loss.

A poll of the Nations fire chiefs indicates the importance of ISO ratings and public fire protection. Sixty-two percent say it effects budget decisions. Seventy percent say it saves people money but more importantly 90% say it is important to saving lives and property. ISO collects data from all fire loses in the U.S. What they have found is insurance companies pay out less in claims in communities with better ISO ratings. In fact, there is 340% difference top to bottom on commercial losses and a 297% difference on residential losses. Good fire protection is an investment in saving lives and property.

How Does Texas Township Rate?

Property insurance rates are based on the potential risk.  When calculating the risk and relating it to the cost of insurance, ISO bases this on the following factors.  Texas Township was last evaluated in 1997, and that rating is noted in bold parenthesis:

1)  Water Supply:

40% (or 40 points) of the rating is based on the available water supply to the structure.  This can be calculated on hydrant availability; water supplied by tank vehicles; or properly designed, accessible and maintained static supplies.  The structures size and construction type, along with the "fire load" are used to determine the amount of water needed based on nationally recognized standards and formulas (typically National Fire Protection Association standards).  Credit for tank trucks are based on travel time, number of trucks and tank capacity, and available personnel to operate the units.

(Texas rating - 34.5 for hydrant areas, 4.0 in areas without hydrants; out of a possible 40 points)

2)  Fire Department:

50% is based on the Fire Department (including automatic aid and mutual aid from other communities), broken down into the following:

            Total for Texas Township: 16.34 of 50.

3)  Dispatch & Communications:

10% is based on dispatching and communications, such as the amount of 9-1-1 lines, adequate amount of dispatchers, backup systems for dispatching, etc. Texas Township is dispatched by the Kalamazoo Co. Sheriffs Department, this rating reflects their service.  (Texas rating: 8.4 of 10)

Total for Texas Township, 48.35 out of 100.  (A deduction of 10.54 points was taken off the total due to the water supply in the areas with hydrants was good, but the Fire Department's capabilities rating was too low to sufficiently use it.). 

The rating for the Township is a 6 in the areas within 1000 feet of a fire hydrant, and 9 in the areas beyond that but within 5 road-miles of the fire station.  We hold a rating of 10 in the fringe areas of the Township that are beyond 5 miles from our station, such as the Maplewood Farms plat and Paw Paw lake area (although some insurance companies rate this differently based on the amount of water in our tankers on first response).  In comparison, Cooper Twp. Is a 5, Oshtemo is a 4, Portage and Kalamazoo are a 3.  Putting this to a dollar value, the difference between a 10 and a 9 is -14% in premium costs; between 9 and a 6 is -41% in premium costs;  from a 6 to a 4, -12% in premium costs (these vary by company, some offer more discounts than others).  As a general rule, most insurance companies use the ISO schedule when determining property insurance premiums for a given area.  The only exception to the rule in our area is State Farm Insurance, which uses an internal rating schedule based on previous losses for a given zone.

What Does The ISO Rating Mean in Dollar Value?

Generally, the rating can be charted as shown below.  These are estimates per square foot of building area, and many insurance companies use the ISO rating differently depending on other factors.

RESIDENTIAL RATE CHART

Totals:  $3.40, or -341% from 10 to 1.                       
Average 1 year base fire rate per $1,000.00 of coverage for a wood frame home

COMMERCIAL RATE CHART

Totals:  $721, or -28.7% from 10 to 1.
Average based on a $274,000 un-sprinkled masonry wood frame 3 story restaurant.

Haven't We Improved the Fire Department Since 1997?

Yes and no.  We have been able to replace older fire apparatus since 1997, but the capabilities have not changed since then.  Basically, we have replaced older equipment, but have not added any apparatus or fire stations.  If the Fire Department was evaluated today, the point value would remain about the same, or possibly be worse!  Mainly this would be due to the community growing faster than the Fire Department has kept up with.

The issue is that the Fire Department capabilities remained static, while the community has increased in population and more areas developed farther away from our one station in Texas Corners.  Also, more demand for services results in the increased probability of having simultaneous emergency calls. Many times this requires another communitys fire department to respond to Texas Township because we do not have enough personnel or equipment to handle more than one emergency at a time.  ISO sees this as an increased delay in response time and figures this into the rating evaluation as an increased risk.  They may deduct points due to this deficiency.

What Can We Do to Better Our Rating?

When we look at the ISO evaluation requirements, we can base our potential improvements relating to adding point value, with the end goal of reducing our rating.

1)  Water Supply: since 40% of the rating is based on available water to the building, developing the public water and fire hydrant system would give us value added.  Only 40% of Texas Township is serviced by the City of Kalamazoo Water Department.  Currently, expanding the water system is driven by the property owners of a specific area, and those property owners would have to petition the Township to extend city water to your area.  The Township has only limited funds available to expand these services on our own, so most expansion is accomplished by assessments to property owners, usually at their request.

The other option is to add tanker trucks to the Fire Department fleet.  If we can prove to ISO that we can move enough water by truck during the evaluation, they credit the amount of water moved as added points. 

Currently, we have one tanker truck we use to move water to fire scenes.  At least one more would be needed to gain ISO points.  New tanker trucks are costing $190,000 to $230,000.

2) Fire Department Capabilities half of the rating is based on the Fire Department.  We can improve the fire department capabilities in many ways, including:

a)  Pumper Trucks.  ISO looks at how many pumper trucks we have and where they are located.  We have two pumper trucks at one station for our 36 square mile area.  ISO gives the best rating for pumper trucks located within 1.5 road miles of a given service area.  There are many areas in the Township that are well beyond 3 miles of our station! For a Class 1, the very best rating, this would require about 9 pumper trucks in the Township.  This would be very costly, and truthfully would not be very practical or really worth the investment in dollars saved by insurance premiums.  In reality, if we could add 3 pumper trucks, this would offset the cost of property insurance with the cost to add these trucks.  New pumper trucks are costing $320,000 and $450,000.  For comparison sake, a Metro-Transit bus costs about $400,000.

b)  Reserve Pumper Trucks.  More added point value is accumulated if we have reserve, or backup pumper trucks.  These points are awarded because ISO feels that at any time, a mechanical problem may occur on one of the primary (or required) pumper truck and that service will be reduced.  Currently, Texas Township has no reserve pumper trucks.  If we have a mechanical problem, or one of our two primary pumper trucks have to be serviced, there is no backup.  We have been caught without a pumper available to respond at times and have had to ask for one of the neighboring communities to cover us.  This works out fine on occasion, but we can be criticized by their taxpayers for having the pumper trucks they paid for not in their community when they need them because the trucks are in Texas more of the time.  For the most value added points, we would need at least one backup pumper truck. 

c)  Ladder Trucks.  ISO evaluates the need for a ladder truck on the basis of how many structures are in the Township that are 3 stories or more in height, or require advanced fire fighting tactics.  While you may think this relates only to commercial structures, it may also apply to certain residential structures.  If you drive around the township, youll notice that there are a number of homes that are 3 stories, along with our commercial and industrial buildings.  The ISO evaluation revealed the need for a ladder truck in Texas Township to acquire acceptable points. Currently we have no ladder truck so we only received one out of 5 possible points, mainly for our ability to call our neighbors for help.  Ladder trucks are costing between $750,000 and $900,000.  Ladder trucks can also be designed with a pump, thus giving credit for both a pumper and a ladder for added value.

d)  Fire Station Location.  Of course, we have to reduce the driving distance these pumper and ladder trucks have to travel to get to the fire.  Adding fire stations is the only practical way to accomplish this.  For the most ISO points at the best value, it would appear that fire stations near 9^th St. & W. O Ave.,  4^th St. & W. O Ave., W. Q Ave & 10^th St.,  W. Q Ave. & 3^rd St., and W. S Ave. & 6^th St. would be logical locations.  This is based on the Township roadway system, current developed areas, and future land use patterns.  Fire station buildings are costing about $1.10 to $1.50 per square foot of structure area.  Most small fire stations, enough for 2 or 3 vehicles, would cost about $500,000, and this does not include the cost to purchase the land.  Our current fire station cannot accommodate any more vehicles or 24-hour staffing, so this building would need to be remodeled or replaced at another location.  A new Main Fire Station with enough room for 5 or 6 fire vehicles, capacity for 24-hour staff, and training / meeting area could cost near $1.8 million.

e)  Available Firefighters.  In order to efficiently use the pumper and ladder trucks, as well as effectively suppress a fire, there must be enough firefighters and command staff available at the scene in the shortest elapsed time to gain the most ISO points.  Again, we have to look at this economically and balance the increased cost of operations against the potential insurance savings to the consumer.  Texas Township currently can only afford one person on duty at our one station from 7 a.m. until 10 p.m., Monday through Friday.  On weekends and holidays, there is no one scheduled to be at the fire station.  In addition, we have 23 on-call volunteers that could respond, depending if they are in or around the Township.  This is why we only received 1.85 points out of a possible 15.  To gain the most value added points, we would need 2 firefighters on duty 24 hours, 7 days a week at least at 2 of the proposed 5 fire stations.  This would require 12 Full-time equivalent employees, at an estimated cost of about $660,000 yearly, so it may not be practical or cost effective.

f) Firefighter Training.  Firefighting is a team effort, and as we know, very dangerous.  Firefighters must be well trained and practiced at their skills and trade.  ISO awards points for the amount and type of training the firefighters receive, as well as the type of training facility and training aids.  Texas Township conducts training with our volunteers a few hours 2 or 3 times per month, but our families and jobs take priority so we cannot take much more time for training.  In addition, the Fire Department has a small training and meeting room at the Township hall for our classes.  The Township has no fire training facility at this time.  We have allotted $8,400 to participate in the construction of a County wide training facility that will be in the City of Kalamazoo, but we would still need a daily fire training facility in the Township.  This would give us value added points towards our training evaluation.

3)  Dispatch & Communications In order to receive emergency calls and dispatch our firefighters and apparatus, we must have modern equipment and enough trained personnel to receive and relay those 9-1-1 calls.  Currently, our 9-1-1 center is operated by the Kalamazoo County Sheriffs Department. ISO evaluated the Sheriffs 9-1-1 center and awarded 8.4 points out of a possible 10.  To gain the most points, they would need to add a few more dispatchers so that there would be at least one that could devote the majority of time to fire emergencies.  At this time, the available personnel at the 9-1-1 center devote most of their time to police emergencies, and fire radio monitoring is secondary.  

How Can We Accomplish This?

Of course, this all requires some type of funding for the Fire Department.  Currently there is no dedicated fire millage or levy that supports the Texas Township Fire Department.  The average homeowner in Texas Township currently pays about $20 per year to support the Fire & Rescue Department from your property tax contribution to the General Township Operating fund.

What The Township Does Now.

The Department utilizes money allotted from the Township General Fund for our daily operations, which was about $500,000 in 2009.  Because of reduced revenues from property taxes and State shared revenue, the 2010 budget is reduced to $492,787.  This budget breaks down as follows:

 There is also a savings fund that is allotted $50,000 per year for more expensive items.  Currently we have $248,000 in this fund.

What We Can Do

We can purchase what we need through our savings fund, but at the cost of one pumper, it would take well over 4 more years to save enough money to cash-purchase one outright (saving $50,000 per year).  Not to mention the costs to build a fire truck increase almost 10% to 12% per year.

We can finance our purchases, just like most people do when they purchase a car or home.  This spreads the financial burden over a period of years, with the best point of this option being that government units like Texas Township can apply for low interest tax free loans.  These loans usually are below the average interest rate for most consumer loans.  Sometimes, we can actually SAVE money by low interest government financing, because the interest charged is LESS than the inflation cost of the vehicle and buildings over the term of the loan!

Until we look at hard numbers and actually check the interest rates at any given time, it is hard to give an exact figure of costs for improvements.  We have listed some of the improvements noted above and a best guess for the cost per year for the individual components.

What components we put together to get the best value depends on what the residents and business owners want to pay for.

If we can lower insurance premiums and you can apply your savings to additional funding for the fire department, the community would be better as a whole. Your dollars would go toward pride in ownership of a great community service versus your dollars going to the insurance companies.

By lowering the ISO rating in areas with city water and fire hydrants from the current 6 rating to a 4 rating, those property owners of a $200,000 insured building would save about $120.00 per year in insurance premiums.  If we were able to lower the rating for those property owners in areas with no fire hydrants from the current 9 rating to a 5 rating, a $200,000 insured building would result in a savings of about $390.00 per year in insurance premiums.  Again, these are rough estimates and you can check with your insurance carrier to get the actual figures for your property.

In order to accomplish lowering our ratings, we would need to do the following as soon as possible:

 How We Can Do It?

There are a few options available to provide the needed funding.  There are property assessments, voted millage, fees for service, and bond proposals.  Each can be adopted separately or they can be used in combination, with property assessments and voted millage being the most common.

Property assessments, or Special Assessments, are imposed to provide for a specific benefit.  This could include fire, emergency medical, police, sewer and water, or even street lights.  They are assessed to the properties that would benefit from the service; in this case it would be all the properties in the Township.  Special assessments are taxed to the property owners based on the needed funding for a particular year, and the dollar amount is set by the Township Board of Trustees annually during a public hearing on the specific budget.  Special assessments apply to all properties, even tax-exempt properties such as churches, non-profit organizations, etc.  Special assessments can be enacted either by a vote of the residents, or by the Board of Trustees on their own initiative (with public input).  They also can be non-expiring unless the Board of Trustees cancels the assessment, or they can be set up for a specific period of years.

Millages are similar, but typically are voted in by the residents and are for a specific duration.  Most public safety millages are for a minimum of 5 years, with 10 years being more common before they expire.  Millages must be renewed by a vote of the people after the expiration date.  Millages can be for a specific purpose, or for general operating funds depending on how they are set up.  Most of the time, a millage is set initially at a specific rate, then that rate will suffer from statutory rollbacks every year after the initial year.  This means that we cannot collect the full rate after the first year, but only a reduced rate based on inflationary factors.  It becomes hard to determine how much this rollback will affect the amount of money collected to offset our loan payments.  Millages cannot be collected on tax-exempt or non-profit properties, which are users of the fire service.

What is the Bottom Line?

The stark reality is that there is not enough funding currently alloted to the Township Fire Department to improve the rating.  The Township has no fire tax or levy to support the Department.  The Township has doubled in population and buildings in the last 20 years, but the Department hasn't grown at all.  ISO realizes that and adjusts rates higher accordingly (by the increased risk).   Basically, either the Fire Department is equipped and stations are situated close to developments, or you pay high insurance rates.

There are options, although not popular.  An example would be to enact a Special Assessment for Fire & Rescue Services at a rate comparable to 2.5 mils (equal to Oshtemo and Comstock Township), which on a $200,000 market valued home would cost the owner $250.00 per year.  This would collect $1,375,000 per year for operations and loan payments.  In comparison, Oshtemo and Comstock Townships have a special assessment for fire and rescue services at this same 2.5 mil rate. Depending on your location in the Township, you could see a savings of possibly $140.00 in areas without city water, or it may cost you only $120.00 yearly in those areas with city water, in combination with the savings in your property insurance.

Another option is to vote in a Fire Millage for 2.75 mils for 10 years.  After the first year, and every year after, this rate would be reduced by statutory mandates.  This would cost the property owner of a $200,000 property $275.00 the first year, and that would reduce by a few percent each year. The reasoning for the increased initial rate over the special assessment is due to money not able to be collected from tax-exempt and non-profit properties, plus we would have to front-load many of our payments to account for less income in subsequent years.  We would also be taking the chance that after 10 years, the millage may not be renewed by the voters.

You could get a very well equipped fire department and a reduction on your insurance rates for the cost of about 2 order-out pizzas per month! 

As an added benefit, the improvements will not only result in savings on your property insurance, but will reduce arrival times for other emergencies the Fire / Rescue Department responds to.  These include heart attacks and other medical emergencies, vehicle crashes and the like!