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TRANSCRIPT
Fire Apparatus – An Industry Far from Complete
Recovery
By: Anirban BasuSage Policy Group, Inc.
February 24th, 2018
On Behalf ofFAMA
2018 Spring Meeting
Introduction: Analyzing an Industry Critical to Public Safety
FAMA tasked Sage Policy Group, Inc. (Sage) with organizing and analyzing FAMA data in order to generate insights regarding observed industry trends and likely future performance.
The report provides:• A discussion of the performance of FAMA members relative to historic norms
along key dimensions like orders/sales;• An analysis of the state of the U.S. firefighting fleet;• An identification of economic, demographic and policy factors that appear to be
shaping industry performance.
Two Primary Research Questions AddressedThere are two key questions that the analysis endeavored to answer:
1. Why has the North American firefighting fleet failed to recover in conjunction with the broader economy in terms of units booked?
2. What can the industry expect in light of broader economic forecasts and known demographics?
Part I FAMA Industry Performance
Gross Domestic Product1990Q4 through 2017Q4*
Source: U.S. Bureau of Economic Analysis*1st (Advance) Estimate
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
1990
Q4
1991
Q3
1992
Q2
1993
Q1
1993
Q4
1994
Q3
1995
Q2
1996
Q1
1996
Q4
1997
Q3
1998
Q2
1999
Q1
1999
Q4
2000
Q3
2001
Q2
2002
Q1
2002
Q4
2003
Q3
2004
Q2
2005
Q1
2005
Q4
2006
Q3
2007
Q2
2008
Q1
2008
Q4
2009
Q3
2010
Q2
2011Q
120
11Q4
2012
Q3
2013
Q2
2014
Q1
2014
Q4
2015
Q3
2016
Q2
2017
Q1
2017
Q4%
Cha
nge
from
Pre
cedi
ng P
erio
d (S
AA
R) 2017Q4: +2.6%
0
500
1,000
1,500
2,000
2,500
2003
Q1
2003
Q3
2004
Q1
2004
Q3
2005
Q1
2005
Q3
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3
2011Q
1
2011Q
3
2012
Q1
2012
Q3
2013
Q1
2013
Q3
2014
Q1
2014
Q3
2015
Q1
2015
Q3
2016
Q1
2016
Q3
2017
Q1
2017
Q3
Total Units Booked All Time Quarterly Avg.
FAMA Members: Total Units Booked by Quarter2003Q1 – 2017Q3
Source: FAMA; Sage Policy Group
Time Period Units BookedLow 2012 Quarterly Average 982
Highs 2006 Quarterly Average 1,5292008 Quarterly Average 1,507
FAMA Members: Pumpers Booked, 2003 – 2016
Source: FAMA; Sage Policy Group
44%
46%
48%
50%
52%
54%
56%
58%
60%
62%
64%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Units % of Total Units
• Pumpers represent the majority of sales, historically around 57 percent of all units booked (61.3 percent in 2016).
• Arial apparatus, rectangular and elliptical tankers, and non-walk in rescue represent the next largest sources of sales.
FAMA Members: Units Booked by Vehicle Class2015 v. 2016
Source: FAMA; Sage Policy Group
Vehicle ClassUnits Booked 2015 v. 2016
2015 2016 Net %
Pumpers 2,745 2,581 -164 -6.0%
Walk-In Rescue 86 68 -18 -20.9%
Non-Walk In Rescue 339 184 -155 -45.7%
Rectangular & Elliptical Tanker Sales 510 411 -99 -19.4%
Aerial 652 599 -53 -8.1%
Airport Rescue & Fire Fighting (ARFF) 131 161 30 22.9%
Major Refurbishment 79 62 -17 -21.5%
Brush Trucks 197 150 -47 -23.9%
Total Units Booked 4,739 4,216 -523 -11.0%
Units Booked Fail to Recover Fully in Conjunction with Economic Expansion
• The market for new fire apparatus achieved its peak during the 2006-2008 period, when more than 6,000 new apparatus were booked in North America.
• As the Great Recession began to take its toll, municipal budgets were devastated and fire departments were required to truncate their budgets and forestall capital expenditures.
• The impact was gradual and grinding as opposed to sudden. Sales did not attain a cyclical nadir until 2012.
• The market has improved since, but complete recovery remains elusive. While units booked have risen 2012, they declined 11 percent in 2016.
• Sales during Q2:2017 were more than 20 percent below the quarterly average observed over the past 14 years. Sales in Q3:2017 were still more than 5 percent below the quarterly average.
FAMA Members: Total Units Booked, By Country
Source: FAMA; Sage Policy Group
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
United States Canada Other Units Booked 2012 v. 2016
% Ch.
2015 v. 2016
2012 2015 2016 Net %United States 3,051 3,933 3,548 16.3% -385 -9.8%
Canada 414 344 296 -28.5% -48 -14.0%
Units Booked Year-to-date YTD 2016 v. 2017
2016Q3 2017Q3 Net %United States 2,413 2,708 295 12.2%
Canada 217 253 36 16.6%
Part II Industry
Performance in Context
The U.S. Fire Fleet: Fire FightersNumber of Firefighters in the U.S., 1995-2015
Source: 1. Sage; 2. National Fire Protection Association (NFPA). “U.S. Fire Department Profile-2015”. April 2017.
1.00
1.05
1.10
1.15
1.20
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
# of Firefighters (Millions)
Number of Engines in Service that are 15+ Years Old in the U.S., as of 2013-2015
Source: 1. Sage; 2. National Fire Protection Association (NFPA). “Fourth Needs Assessment of the U.S. Fire Service”. November 2016.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
15-19 Years Old 20-29 Years Old 30+ Years OldAge of Engine
12,690
18% of all
engines
12,060
(17%)
5,620
(8%)
• In 2015, approximately 43% of all fire department engines and pumpers were at least 15 years old according to NFPA estimates. A quarter of all units are at least 20 years old.
• The NFPA notes that while vehicle age alone is not sufficient to confirm the need for replacement, it is indicative of a potential need, which should be examined.
• Based on this piece of data and others, there is clearly a significant amount of potential need for replacement.
55%50%
47%
39%
26%
18%14%
10%5%
0%
10%
20%
30%
40%
50%
60%
Under 2,500 2,500 to4,999
5,000 to9,999
10,000 to24,999
25,000 to49,999
50,000 to99,999
100,000 to249,999
250,000 to499,999
500,000 ormore
Population of Community
Percent of Engines and Pumpers in Service that are 15+ Years Old by Size of Community Protected, as of 2013-2015
Source: 1. Sage; 2. National Fire Protection Association (NFPA). “Fourth Needs Assessment of the U.S. Fire Service”. November 2016.
The U.S. Fire Fleet: Has a Replacement Cycle Begun in Earnest?
Source: 1. Sage; 2. National Fire Protection Association (NFPA). “Fourth Needs Assessment of the U.S. Fire Service”. November 2016.
51%50%
46%
43%
38%
40%
42%
44%
46%
48%
50%
52%
2001 2005 2010 2015
Percent of Engines and Pumpers in Service 15+ Years over Four Survey Periods (Total U.S.)• NFPA survey responses hint that there has
been some progress in reducing the age profile of the nation’s engines and pumpers in recent years.
• Across the NFPA’s four Needs Assessment Surveys, the share of engines/pumpers in service that are at least 15 years old has declined from 51% in 2001 to 43% in 2015.
• Thus, while the number of fire apparatus has not increased as one might have anticipated over time, there is some evidence suggesting that there has been a meaningful level of turnover in operating units.
Departments with Plans for Regular Apparatus Replacement by Community Size, 2013-2015
Source: 1. Sage; 2. National Fire Protection Association (NFPA). “Fourth Needs Assessment of the U.S. Fire Service”. November 2016.
Yes (7,852 Depts)
Yes (3,216 Depts)
Yes (268 Depts)
Yes (51 Depts)
Yes (11,386 Depts)
No (13,557)
No (1,330)
No (43)
No (5)
No (14,936)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Under 10,000
10,000 to 99,999
100,000 to 499,999
500,000 or more
Total U.S.
Community Pop. Size
"Does Department Have a Plan for Apparatus Replacement on a Regular Schedule?"
Yes No
Trends in Community Fire Protection Spending
Source: 1. Sage; 2. National Fire Protection Association (NFPA). “U.S. Fire Department Profile-2015”. April 2017; 3. Urban Institute-Brookings Institution Tax Policy Center. State & Local Government Finance Data Query System. Data from U.S. Census Bureau, Annual Survey of State and Local Government Finances.
Capital Expenditure Share in Decline
• Historically, capital outlays have represented a small portion of total expenditures on fire protection, but that share has slipped even lower in recent years.
• From 1980-2015, capital expenditures represented around 7.6% of total local fire protection spending on average, but in 2015, capital expenditures represented less than 6% of total spending.
Why the Lack of Strong Recovery in Fire Equipment Spending?
• State and local governments have been shifting expenditures toward non-infrastructure categories, including Medicaid, health insurance for employees, and underfunded pensions;
• States and local governments are collectively taking on less debt to finance capital expenditures. Correspondingly, between 2005-2015, total fire protection capital outlays fell by nearly 11 percent after rising 64 percent the prior decade;
• Federal Assistance to Firefighters Grants (AFG) program funding has shrunk dramatically since FY2009. That year, grants totaled $500 million. By FY2016, grant funding was a bit more than $300 million.
• There have been sharp declines in units booked per 100,000 housing units in many parts of the American Midwest and South as many communities have lost the financial capacity to re-invest in fire safety and emergency response.
Inflation Adjusted Tax Collections in 2017Q2 Compared with Each State’s Peak (Adjusted for Inflation)
Source: 1. Sage; 2. National Fire Protection Association (NFPA). “Fourth Needs Assessment of the U.S. Fire Service”. November 2016; 3. The Pew Charitable Trusts. Fiscal 50: State Trends and Analysis. Note: figures are Pew Charitable Trusts’ analysis of data licensed by the Nelson A. Rockefeller Institute of Government, which adjusts U.S. Census Bureau’s quarterly summary of tax revenue.
• All or mostly-volunteer fire departments (which make up more than 70% of all departments in the U.S.) derive a large share of their revenues from local taxes.
• For all/mostly-volunteer fire departments the share of revenues from taxes is between 83-88% for communities of 5,000 to 49,999 people.
• Apparatus constitute the principal costs for volunteer departments, so one would expect fire apparatus sales to neatly and predictably correlate with local tax revenues.
By 2017Q2 tax receipts in 29 states had recovered from losses in the recession.
U.S. State & Local Governments’ Total Long-Term Debt Issued2005-2015
Source: 1. Sage. 2. Urban Institute-Brookings Institution Tax Policy Center. State & Local Government Finance Data Query System. Data from U.S. Census Bureau, Annual Survey of State and Local Government Finances. Notes: 1. Figures are in 2015 dollars (inflation adjusted).
$392.9 $402.0
$436.5
$411.3 $410.2
$433.7
$384.2
$350.4
$369.8
$302.4
$362.0
$250
$270
$290
$310
$330
$350
$370
$390
$410
$430
$450
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$ Billions
U.S. State & Local Government Capital Outlays, 1980-2015
Source: 1. Sage.; 2. Urban Institute-Brookings Institution Tax Policy Center. State & Local Government Finance Data Query System. Data from U.S. Census Bureau, Annual Survey of State and Local Government Finances. Notes: Figures are in 2015 dollars (inflation adjusted).
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
1980 1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
$ Billions Local State
Growth in U.S. Local Government Capital Outlays by Function1985-2015
Source: 1. Sage.; 2. Urban Institute-Brookings Institution Tax Policy Center. State & Local Government Finance Data Query System. Data from U.S. Census Bureau, Annual Survey of State and Local Government Finances. Notes: Figures are in 2015 dollars (inflation adjusted).
Period% Change
1985-1995
1995-2005
2005-2015
Total Capital Outlays 34.2% 52.5% -5.5%Construction 22.7% 71.8% -5.4%Other Capital Outlays 68.3% 11.0% -6.0%
Period% Change
1985-1995
1995-2005
2005-2015
By FunctionEducation 106.7% 73.9% -18.9%Fire Protection 27.4% 64.3% -10.5%Police Protection 48.2% 20.4% 6.7%Corrections 19.3% -17.5% -40.6%Financial Admin. & Gen Control 86.9% 51.2% -27.9%General Public Buildings 58.0% 18.5% -15.1%Health & Hospitals 4.8% 39.4% 13.9%Highways 26.4% 29.8% 13.3%Housing & Community Dev. -3.6% 35.6% -35.3%Libraries 55.7% 55.5% -28.2%Natural Resources 0.1% 56.3% -8.8%Parks & Recreation 31.4% 64.0% -16.7%Utilities 2.2% 41.5% 22.4%Sanitation 7.4% 21.6% 5.7%Other 53.4% 89.3% -13.5%
• Between 1985 and 1995, total capital outlays in the fire protection category rose more than 27%.
• During the ensuing decade, fire protection-related capital outlays expanded more than 64%.
• But between 2005 and 2015, they fell by nearly 11%.
National Nonresidential Construction Spending by Subsector December 2014 v. December 2017
Source: U.S. Census Bureau
-21.6%-20.7%
-10.6%-9.9%
-0.9%-0.7%
2.5%5.7%
7.5%8.3%
21.4%28.5%
29.9%40.8%
43.4%59.1%
-30% -20% -10% 0% 10% 20% 30% 40% 50% 60%
Sewage and waste disposalWater supply
ManufacturingReligious
Public safetyConservation and development
Highway and streetHealth care
PowerTransportation
EducationalAmusement and recreation
CommercialCommunication
OfficeLodging
3-year % Change
Total Nonresidential Construction:
+$80.9B; +12.7%
Looking for Explanatory Factors:
Federal Funding
• While funding for firefighting is predominately provided by state and local governments, there are several federal grant programs that support firefighting operations.
• For firefighting apparatus the most relevant grant program is the Assistance to Firefighters Grants (AFG) program operated by the Federal Emergency Management Agency (FEMA).
• AFG program funding targets “critically needed resources to equip and train emergency personnel to recognized standards, enhance operations efficiencies, foster interoperability, and support community resilience.”
• The amount of AFG grants distributed has shrunk dramatically since FY2009. That year, grants totaled more than $500 million. By FY2016, grant funding was a bit more than $300 million.
• Even before FY2009, there had been a decline in funding. In FY2003, which came shortly on the heels of 9/11, AFG grant funding approached $700 million.
Firefighter Assistance: FEMA AFG Grants DistributedFY2001-FY2016
Source: 1. Sage; 2. Congressional Research Service, “Assistance to Firefighters Program: Distribution of Fire Grant Funding”. Author: Lennard G. Kruger, Specialist in Science and Technology Policy. Notes: AFG: Assistance to Firefighters Grants.
$695.09
$503.80
$337.84
$248.03$307.74
$0
$100
$200
$300
$400
$500
$600
$700
$800
$ M
illio
ns
AFG Grant Funding: Vehicle Replacement
• AFG grants used for vehicle replacement are used to replace sub-standard or unsafe vehicles.
• AFG funds for vehicle replacement are in high demand.
• There were 2,585 applications submitted for AFG funds for vehicle acquisition in FY2014 alone. Of those, only 201 applications were awarded grants (7.8%).
• From FY2014-FY2016, funds for vehicles have represented around 44% of total funds requested by applicants. However, no more than 25% of available AFG grant funds may be used by recipients for the purchase of vehicles and 10% of that amount is set aside for ambulances.
• The NFPA’s Fourth Annual Needs Assessment states: “Considering AFG funding, approximately 19% of 2011-2014 funds were distributed for vehicle acquisition. While this helps hold the line on the aging of vehicles and apparatus, it is far less than the need.”
Looking for Explanatory Factors:
Demographics/Housing
• This is not merely about available revenues or confidence among those who craft budgets. The current economic expansion has been associated with surging construction of new hotels, office buildings, apartments, casinos, fulfillment and data centers.
• As construction activity expands, fire departments have a larger stock of buildings to protect, which strongly implies growing demand for both firefighters and apparatus. As the data in this report indicate, that has simply not transpired.
• In much of the U.S., units booked per 100,000 housing units has remained remarkably stable over time (ex. Northwest & Western U.S.). The implication is that in much of the nation, the number of units booked has expanded at roughly the rate of household formation.
• However, in other communities, the ratio of units booked per 100,000 housing units has fallen sharply (South; Midwest). The likely explanation is that many communities in these states no longer have the wherewithal to invest in modern fire apparatus.
Units Booked by U.S. Census Bureau Region & Division Per 100,000 Housing Units
Source: 1. Sage; 2. FAMA; 3. U.S. Census Bureau.
Region/DivisionUnits Booked Housing Units
Estimate*Units Booked Per 100,000
Housing Units2003 2016 2003 2016 2003 2016 2003 v. 2016
NORTHEAST 763 808 22,703,915 23,953,366 3.36 3.37 0.01Division I: New England 191 262 6,106,864 6,505,268 3.13 4.03 0.90Division 2: Middle Atlantic 572 546 16,597,051 17,448,098 3.45 3.13 -0.32MIDWEST 771 687 28,013,805 29,964,039 2.75 2.29 -0.46Division 3: East North Central 461 435 19,459,396 20,574,376 2.37 2.11 -0.25Division 4: West North Central 310 252 8,554,409 9,389,663 3.62 2.68 -0.94SOUTH 1,187 1,322 44,996,117 52,151,021 2.64 2.53 -0.10Division 5: South Atlantic 649 736 23,951,411 27,861,757 2.71 2.64 -0.07Division 6: East South Central 225 182 7,627,908 8,422,853 2.95 2.16 -0.79Division 7: West South Central 313 404 13,416,798 15,866,411 2.33 2.55 0.21WEST 634 731 25,811,623 29,629,500 2.46 2.47 0.01Division 8: Mountain 239 281 8,219,835 9,962,732 2.91 2.82 -0.09Division 9: Pacific 395 450 17,591,788 19,666,768 2.25 2.29 0.04
Conclusions I
• Units booked among FAMA members have not fully recovered in conjunction with a strengthening economy.
• There are four primary factors that explain the sluggish recovery in units booked since the end of the financial crisis:
1. State/local governments shifting expenditures toward non-infrastructure categories;
2. State/local governments collectively taking on less debt;
3. Shrinking Assistance to Firefighters Grants (AFG) program funding;
4. Sharp declines in units booked per 100,000 housing units in many parts of the American Midwest and South.
Conclusions II
• Many state and municipal pensions remain underfunded.
• Healthcare costs will continue to rise, at least in the U.S.
• Moreover, in the current political environment, few policymakers are willing to raise taxes to finance capital expenditures.
• There will also be a growing need for communities to pay for professional firefighters as the number of available volunteers continues to decline.
Looking Ahead:
• The most likely outcome is for units booked to stay relatively flat over the next few years with occasional strong quarters followed by weak ones.
• This is because state and local government budgets appear to have heavily tilted toward other priorities and that is unlikely to change.
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