Feasibility Study of Residential
Fire Sprinkler Systems in the
Matanuska Susitna Borough
Olga Narino
University of Alaska Anchorage
4/6/2010
Final Draft—April 6, 2010
Feasibility Study of Residential Fire Sprinkler Systems
In the Matanuska-Susitna Borough
Capstone Project
Prepared for:
Department of Emergency Services
Matanuska-Susitna Borough
Prepared by:
Olga Narino
Graduate Student Master of Public Administration
University of Alaska Anchorage
April 6, 2010
Table of Contents
Acknowledgements ......................................................................................................................... 4
Executive Summary ........................................................................................................................ 5
1.
2.
3.
4.
Problem Statement .................................................................................................................. 7
1.1.
Research Questions and Purpose of the Study ................................................................. 8
1.2.
Background and Significance......................................................................................... 10
1.2.1.
The study area ......................................................................................................... 10
1.2.2.
Generalities about the Mat-Su Borough Fire Department ...................................... 11
1.2.3.
Mat-Su Borough Fire Statistics ............................................................................... 11
1.2.4.
Response Time ........................................................................................................ 14
1.2.5.
Mat-Su Borough Fire Department Expenses .......................................................... 17
Literature Review.................................................................................................................. 18
2.1.
Relevance to Public Administration............................................................................... 18
2.2.
Fire Problem at the Residential Level and Approaches from Some Communities ........ 20
2.3.
Tax Incentives for Fire Sprinklers .................................................................................. 23
Methodology ......................................................................................................................... 26
3.1.
Introduction to Cost-Benefit Analysis............................................................................ 26
3.2.
Cost-Benefit Model ........................................................................................................ 26
3.3.
Data Analysis ................................................................................................................. 28
3.3.1.
Data Sources ........................................................................................................... 28
3.3.2.
Estimation Cost-Benefit Model .............................................................................. 29
3.3.3.
Findings................................................................................................................... 29
Summary, Conclusions and Recommendations .................................................................... 35
References ..................................................................................................................................... 38
Appendix A. Calculation Worksheet of Tax Credit in Montgomery County ............................... 41
Appendix B. Response Time, Fire Growth and Temperature Curve ............................................ 42
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Acknowledgements
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Executive Summary
The incidence of the fire problem in the residential sector has increased in the last years
in the state of Alaska. At the state level, fire statistics show the alarming increment of fire events
and the negative outcomes (deaths, injuries and millions of property losses) from those fires in
one- and two-family homes. This study evaluates the extent of the fire problem at the residential
level of one- and two-family homes in the Matanuska Susitna Borough (MSB) and performs a
Cost-Benefit Analysis (CBA) in order to know if there are net benefits for homeowners from the
installation of fire sprinklers.
Through this study, the Department of Emergency Services wants to elucidate the
feasibility of a tax incentive by giving a property tax reduction for homeowners who install fire
sprinklers in single and two-family homes. The rationale of the tax incentive is to encourage the
voluntary installation of built-in fire protection in order to promote a more proactive fire policy
and help the fire department to be more cost-effective in the provision of fire services to the
community.
For the mentioned purpose, this study analyzes the trends of fire statistics compared with
the capabilities of the MSB Fire Department to establish the degree of the need of a more
proactive fire protection through the promotion of fire sprinklers. The analysis of the fire
statistics such fire rates, average losses, response times and fire department expenditures leads to
the conclusion that the fire problem is highly significant at the residential level of one- and twofamily homes and that there is a case towards the adoption of a more proactive fire protection
policy.
The CBA follows the methodology developed by Butry et al (2007), who implement a
CBA at the residential level of one- and two-family homes nationally. The results from the CBA
do not find evidence to promote the voluntary installation of fire sprinklers. The expected present
value of the costs exceeds the expected net present value of the benefits on a 30-year study
period. The main reason for this finding is the extremely high up-front and installation costs of
the fire sprinklers. This study recommends to direct the attention toward the sprinkler industry in
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the local area to identify the primary reasons behind the high cost of fire sprinklers in the MSB in
comparison to the cost in other communities. It is probable that addressing the high cost of the
fire sprinklers can lead to a better results in the future because only the present value of the
benefits were consistent and close to the national estimates. In addition, a final recommendation
is to increment the awareness of the fire problem at the residential level in order to start building
partnerships and mobilizing stakeholders toward a more proactive fire protection policy, which
embraces new, proven technology and built-in protection like the sprinkler systems.
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1. Problem Statement
The incidence of the fire problem in the residential sector has increased in the last years
in Alaska. Fire safety is a pressing issue at the level of one- and two-family homes where the
statistics show a high occurrence of fires. On average, at the state level, fires in residential
properties account for 74% of the total fires in structures, and more than two-thirds of the fires in
residential properties occur in one- and two-family homes where the percentage of fire events is
increasing (see Figure 1).
The critical issue when studying the fire problem is the loss of lives and money. On
Figure 2 can be seen that most of the civilian fire deaths occur in one- and two-family homes.
According to the 2008 Fire in Alaska Report, these fires caused an estimated direct loss of $18
million, which is the biggest dollar loss among different types of residential occupancy. In
consequence, the statistics show that the state suffers many fatalities and millions of dollar loss
because of residential structure fires, with the statistics increasing each year.
Figure 1.
Percentage of Fires in Residential
Structures in Alaska
Figure 2.
Number of Fires Deaths in
Residential Structures in Alaska
Total civilian fire deaths
% Fire in residential properties
Total civilian fire deaths in residential structures
% Fire in 1 & 2 family homes
73.62
69.45
2005
74.64
70.94
2006
72.40
Fire Deaths in 1 & 2 family homes
75.65
20 17
75.10
12
21 20 20
24 21 21
2006
2007
19 16
13
67.74
2007
2005
2008
Source: State of Alaska fire statistics.
2008
Source: State of Alaska fire statistics.
Because of the high incidence of the fire problem in residential structures of one- and
two-family homes, the Department of Emergency Services in the Matanuska-Susitna Borough
wants to implement a preventive approach. Since the Alaska House Concurrent Resolution No. 1
of the 26th Legislature (2009-2010) encourages the voluntary installation of fire sprinkler
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Final Draft—April 6, 2010
systems in residences, this study—as requested for the Mat-Su Borough—intends to evaluate if a
tax incentive to homeowners for the installation of fire sprinkler systems is viable in newly
constructed one- and two-family homes.
For that purpose, this study attempts to demonstrate whether or not an individual
homeowner may receive net benefits from the installation of a fire sprinkler system. The findings
of this study would help to promote a proactive fire protection rather than a reactive fire
protection to decrease the incidence of fire problem at the level of one- and two-family homes.
Reactive fire protection refers to the traditional fire service where the fire department has to
suppress the fire event by beating the clock and arriving soon enough to have a positive impact
on the emergency incident. Proactive fire protection is an approach that embraces new, proven
technology and built-in protection like the sprinkler systems combined with public education
programs (City of Scottsdale Study, 1997).
1.1. Research Questions and Purpose of the Study
At the national level, the relevance of a proactive approach has been proved through
economic feasibility studies that compare communities with and without fire sprinkler systems
and estimate the cost and benefits of such measure (Scottsdale’s 10-year study, 1997;
Weatherby, 2009; National Fire Protection Association [NFPA], 2008; Butry et al, 2007).
Specifically, this study addresses the following research questions:

Would the Mat-Su Borough community be better served with a more proactive fire
protection rather than relying in a more reactive fire protection?

What are the cost and benefits of fire sprinkler systems at the residential level of one- and
two-family homes for an individual homeowner?
In order to establish the need of fire sprinkler systems at the level of one- and two-family
homes in the Mat-Su Borough, this study, first, will identify the current capabilities of the fire
department in comparison with the fire protection needs of the Matsu Borough community. As
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the community grows, fire stations and firefighters must be added to provide this service as the
need increases. However, the true outcome of these increases in reactive fire protection has to be
analyzed with a review of the fire fatalities, injuries, dollar loss, and the response time to
evaluate the performance of the Mat-Su fire department.
Second, once the installation cost of a residential fire sprinkler system for new
construction is estimated, this study also will estimate the expected savings (benefits) for an
individual homeowner with this proactive fire protection policy. For this purpose, the analysis
must consider the tax incentives for the homeowner1, amount of reduction of the home insurance
with a sprinkler system, the value of the direct and indirect property losses averted, and the
monetary value of the deaths and injuries prevented.
It is very important to mention that the adoption of a tax incentive to promote sprinkler
systems will not change the role or function of the fire department in the Mat-Su Borough
community, but it will enhance the department’s ability to effectively and safely perform. In
addition to climatic, geographic, and topographic considerations that may support the need for
built-in fire protection, the National Fire Sprinkler Association [NFSA] lists some of the positive
impacts of a proactive fire safety policy on fire department in a community:

Acceptable increases in fire response times

Better and safer utilization of staffing and equipment

Reduced out-of-service time while on scene at fire calls

Reduced worker’s compensation and injury expenses

More flexible station locations, based in medical emergency needs
According to NFSA’s report, a logical case can be made for property tax incentives for homeowners that install
sprinklers. If the homeowner is going to bear some of the burden of fire protection, and thereby reduce demands on
community fire protection services, he or she should be given a corresponding reduction in the financial support
they are being asked to contribute to the community effort (p. 30).
1
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1.2. Background and Significance
1.2.1. The study area
The Mat-Su Borough lies in the heart of south central Alaska, encompassing more than
25,000 square miles of rolling low lands, mountains, lakes, rivers and streams. There are three
incorporated cities within the Borough: Houston, Palmer, and Wasilla. Additionally, there are
several unincorporated communities and twenty-five recognized community councils (2003 Fact
Book).
According to Alaska Department of Labor and Workforce Development, Research and
Analysis Section (January, 2010), the estimated Mat-Su population for the year 2009 is 84,314.
This estimate represents a 3.8% average annual increase in the population growth rate between
the years 2000 and 2009. The population growth of 24,992 between 2000 and 2009 is bigger than
the population growth of 19,639 between 1990 and 2000. However, the rate at which the
population is growing is decreasing steadily since 2005 (see Figure 3). According to Ray (2002)
and other studies from NFSA, as population grows fire departments try to maintain their current
level of quality response and fire safety, which in turn brings fire protection challenges for the
need of additional apparatus, facilities, staffing, and building and fire codes to keep a certain
level of quality.
Figure 3.
Mat-Su Borough Population Growth
2001-2009
Percent Change
6
5
4
5.19
4.95
4.28
4.11
4.21
4.33
3
3.32 3.21
2.29
2
1
Source: Alaska Department of Labor and Workforce Development.
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1.2.2. Generalities about the Mat-Su Borough Fire Department
The Mat-Su Borough (MSB) Fire Department provides fire protection services through
ten fire service areas: Caswell Lakes, West Lakes, Butte, Sutton, Talkeetna, Big Lake, Meadow
Lakes, Willow, Wasilla-Lakes, and Greater Palmer. These fire service areas cover all but the
most sparsely populated communities at the northern and eastern fringes of the Borough. The
Wasilla-Lakes is the biggest fire service area, which is also known as the Central Mat-Su Fire
Department (CMSFD)2 and encompasses 160 square miles of area within the core area of the
Mat-Su Borough.
The MSB Fire Department operations depend on voluntary personnel to effectively
function during emergency and non-emergency situations. Hence, fire protection services are
provided by a network of paid-on-call trained responders managed by the Borough’s Department
of Emergency Services. Most of the revenue sources come from appropriations of property taxes.
The size, population, and taxable mill rate of the fire service areas vary from community to
community. Fire apparatus are housed in stations throughout the Borough to enable rapid
response to emergencies (2003 Fact Book).
1.2.3. Mat-Su Borough Fire Statistics
In 2008, the MSB Fire Department responded to a total of 253 fires, according to the
estimates from the National Fire Protection Association (NFPA) report for the Mat-Su Borough
(1999-2008). This represents an increase of 0.4% in the total number of fires between 2007 and
2008. Fires in residential structures of one and two family homes represent 27% (68 fires) of all
reported fires incidents in the Borough. Figure 4 shows a breakdown of fires by major property
class in 2008. In that figure can be seen that fires in residential structures account for almost one
third among all fires incidents and that fires in one and two family homes basically explain the
significance of the fire problem at the residential level.
2
This department operates from seven fire station/public safety facilities and protects approximately 38,000 full
time residents, or approximately 48% of the borough population. This number increases by at least 5000 to 6000
during the summer tourist season (Matanuska Susitna Borough Website, MSB Fire Department History).
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Figure 4.
Figure 5.
Reported Fire incidents by Major
Property Class 2008
Percentage of Fires in Residential
Structures in the Mat-Su Borough
% Fires in 1 & 2 family homes
Fires 1 & 2 family
homes
27%
% Fires in all residential structures
Other residential
fires
Non-residential
structure fires
57%
13%
92.86
98.08
80.39
77.78
2003
2004
91.46
87.04
92.31
88.31
72.22
80.60
73.03
70.64
2005
2006
2007
Non-structure fires
3%
Source: NFPA Report for Mat-Su Borough (1999-2008)
2008
Source: NFPA Report for Mat-Su Borough (1999-2008)
For the 2003-2008 period, the number of fires in one and two family homes as percentage
of fires in all residential structures were at their peak in 2005 (98.08%) (see Figure 5). Overall, at
the residential level, the fire problem is concentrated in one and two family homes. Similarly, the
number of fires in residential structures dominates the fire problem among different structures.
On average, fires in residential structures account for approximately 75% of all structure fires
and that percentage has remained approximately at the same level between 2003 and 2008. Fire
incident rates per ten thousand population at the level of one and two family homes were
examined for the 2003-2008 period (see Figure 6). As the community grows, the rate decreases
until 2006 when the increase in the number of fires explains the increase in the rates.
Figure 6.
Fire Rates in 1 & 2 Family Homes per Ten
Thousand Population 2003-2008
Fire Rates
12.00
10.00
8.00
6.00
4.00
2003
2004
2005
2006
2007
Source: NFPA Report for Mat-Su Borough (1999-2008)
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Final Draft—April 6, 2010
Property losses are significantly high for one and two family homes. Table 1 exhibits fire
loss by major property class. Although Figure 4 shows that 27% of all fires occur in one and two
family homes, they account for the majority of losses. The last column in Table 1 shows this
finding: fires in one and two family homes account for more than two-thirds of the fire losses.
Table 2 shows that the average property loss in one and two family homes for the period
2003-2008 is $32,554. When property loss is adjusted to 2005 dollars, the average loss is
$32,097. There is no a clear trend in the evolution of the average loss during the period in
analysis. According to NFPA, it should be kept in mind that property loss totals can change
dramatically from year to year because of the impact of occasional large loss fires. All reported
fires in the last decade in one and two family structures caused one fatality in the year 2003 and
caused five injuries (three injuries in 2003, one in 2004, and one in 2008).
Table 1. Direct Property Loss in Mat-Su Borough (2003-2008)
Fire Losses by Major Property Class
Year
1&2
Family
Homes
Other
residential
structures
Nonresidential
structures
Fire Loss in 1 & 2 Family Homes
Nonstructure
fire
As Percentage
of Losses in All
Residential
Structures
99.74
98.16
100.00
80.64
100.00
98.92
2003
1,716,625
4,500
500
203,275
2004
3,198,900
60,000
274,500
99,500
2005
1,504,900
0
356,250
119,200
2006
1,924,600
462,000
187,700
20,825
2007
2,410,800
0
40,500*
26,000
2008
1,413,376
15,500
1,726,500
151,350
Source: NFPA Report for Mat-Su Borough (1999-2008)
* Does not include a fire loss of $13,299,100 from a fire in school and college.
As Percentage
of Losses in All
Type of
Structures
99.71
90.53
80.86
74.76
98.35
44.79
As Percentage
of Losses in All
Fire Incidents
Table 2. Average Property Loss in 1 & 2 Family Homes (2003-2008)
Year
Average Loss Damage in
Current Dollars
Average Loss Damage in
2005 Constant Dollars
2003
22,888
2004
41,012
2005
29,508
2006
40,949
40,180
2007
2008
20,785
Average for
32,554
the period
Source: NFPA Report for Mat-Su Borough (1999-2008)
13
24,198
42,266
29,508
39,679
38,088
18,844
32,097
89.18
88.05
75.99
74.16
97.32
42.74
Final Draft—April 6, 2010
1.2.4. Response Time
Response time is an indicator that helps evaluate the performance of fire departments and
allows comparison with the accepted standards. In the case of fire departments when facing an
emergency situation, prompt response is the most critical factor that determines success or failure
in the service delivery. Routley (n.d.) explains the different ways to measure response time and
affirms that in the past, most agencies reported average response time as the basic index of
performance. More recently, most agencies have adopted fractile response time reporting as a
more appropriate performance measurement system.
A fractile measure refers to how often a particular objective or benchmark is achieved.
The benchmark is set at the upper limit of acceptable performance. “If the benchmark is set, for
example, at “7 minutes or less”, any response that takes 420 seconds (7 min:00 sec) or less is
classified as a “pass” and any response that takes 421 seconds (7 min:01 sec) or more is
classified as a “fail”. The measure is commonly expressed as “X” percent within 7 minutes or
less. A system that achieves 80 percent within 7 minutes or less is clearly performing better than
a system that achieves 60 percent within 7 minutes or less” (Routley, “Fractile Response Times”,
n.d.).
All of the nationally accepted performance standards have adopted fractile measurement
systems. The national standards have been defined by the NFPA for both career and volunteer
fire departments. The staffing systems used by the fire service in the United States principally
include career, paid-on-call, and volunteer personnel. Any given fire department may be staffed
in one manner or in a combination. The NFPA treats volunteer and career departments
differently when it comes to response time standards. For those departments that are substantially
(>80%) career there is NFPA 1710. For departments that are substantially (>80) volunteer there
is NFPA 1720 (Hensler, 2008).
Since the Mat-Su Borough (MSB) Fire Department is a volunteer fire department with
about 95.6% of volunteer personnel, the standards that would apply are NFPA 1720: “Standard
of Fire Suppression Operations, Emergency Medical Operations, and Special Operations to the
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Public by Volunteer Fire Departments, 2010 Edition. The first edition of this benchmark
standard was issued in 2001. It provides an organized approach to defining levels of service,
deployment capabilities, and staffing levels for volunteer fire departments.
NFPA 1720 strongly emphasizes pre-planning and establishing pre-determined response
procedures and standard response assignments for dispatch and response. Some specifics of
NFPA 1720 regarding the staffing and response times include:

Urban Zones with >1000 people/sq. mi. call for 15 staff to assemble an attack in 9
minutes, 90% of the time.

Suburban Zones with 500-1000 people/sq. mi. call for 10 staff to assemble an attack in
10 minutes, 80% of the time.

Rural Zones with <500 people/sq. mi. call for 6 staff to assemble an attack in 14
minutes, 80% of the time.

Remote Zones with a travel distance ≥ 8 mi. call for 4 staff, once on scene, to assemble
an attack in 2 minutes, 90% of the time.
As of 2009 (Alaska Dept. of Labor), there were 84,314 people residing in the Mat-Su
Borough, which encompasses an area of approximately 25,260 square miles. Thus, the
population density is about 3 people per square mile. However, about half of the borough
population is located in the “core area” which encompasses approximately 100 square miles
between and around the cities of Palmer and Wasilla (2003 Fact Book). This means that the
current population density is about 500 people per square mile in the core area, but future
development may increase the population density to 500 to 1000 people per square mile in this
area. Therefore, the MSB Fire Department falls under the standards defined for suburban and
rural zones.
Figure 7 shows the average response times and the fractile response time of the MSB Fire
Department. The response time data do not discriminate the response time by type of fire
incident or type of structure (residential or commercial), so the data reflect the overall response
of the department to any fire in the MSB. On average response time has increased throughout the
last eight years from 10 minutes to 12 minutes and 30 seconds approximately. This increase
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suggests that response times are getting longer, and hence, the effectiveness in the response to
any fire incident has decreased. According to Routley (n.d.), the problem with the average
response time is that reduces a range of information to a single number and does not provide an
adequate indication of performance for most situations.
When using the fractile response time, the overall picture of the response time of the
MSB Fire Department gets worse. The response time in 80% of the calls ranges from 13 minutes
to 19 minutes throughout the period 2000-2008 (see Figure 7). As in the case of the average
response, the rising and increasing trend in the response time in 80% of the cases means that
performance is worsen. In 2008, the MSB Fire Department fractile response at 80% was 19
minutes and at 90% was 24 minutes. These results do not meet the national standards presented
in NFPA 1720. Note the big gap between current 80% fractile response time and the standard of
10 minutes, 80% of the time. Figure 8 shows that at 10 minutes, less than 60% of the calls are
responded. It would be necessary to determine whether this shift has resulted from heavier traffic
that is slowing down response speeds or from a rising number of calls in the more remote places
of the coverage area.
Figure 7.
Figure 8.
Mat-Su Borough Fire Department
Fractile 10 Minutes or Less
(2000-2008)
Mat-Su Borough Fire Department (MSFD)
Response Time (2000-2008)
20.0
Minutes
17.5
MSFD Fractile (10 Minutes or less)
15.0
64.4
56.2 54.6 56.8
51.8 53.3 52.5
12.5
10.0
48.3 48.7
7.5
MSFD at 80% Fractile Response Time
MSFD Average Response Time
Standard
Source: Mast-Su National Fire Incident Reporting System
(NFIRS) Response Times.
Source: Mast-Su National Fire Incident Reporting System
(NFIRS) Response Times.
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In conclusion, time is a critical element when analyzing the performance of fire
departments. Fire growth can expand at a rate of many times its volume per minute (see
Appendix B for the illustration of fire growth over time and the sequence of events that may
occur from ignition to suppression). Time is the critical factor for the rescue of occupants and the
application of extinguishing agents to minimize loss. The time segment between fire ignition and
the start of fire suppression has a direct relationship to fire loss.
1.2.5. Mat-Su Borough Fire Department Expenses
Historical administrative information of the MSB Fire Department allows the
development of a picture of financial performance of the department. Usually the budgeted
revenue covers the department expenditures. Thus, indicators of the expenditure side will help
assess the level of resources consumed for service provision. Although the department
expenditures cannot be specified by sector served (residential or commercial), the trend of the
Figure 9.
Figure 10.
MSB Fire Department Expenditure
(2005 Constant Dollars)
MSB Fire Department Expenditures
Per Capita (2005 Constant Dollars)
$8
$7
$6
$5
$4
$3
$2
$1
$0
$60
$50
Dollars
Millions Dollars
expenditures is an indicator for monitoring the department’s capabilities in service provision.
$40
$30
$20
$10
$0
Operating Expenses
Source: MSB Fire Dept, Administrative Information.
Capital Expenses
Source: MSB Fire Dept, Administrative Information.
Figure 9 shows the evolution of the department expenditures in 2005 constant dollars.
Note that during almost the first half of the current decade, the total expenditures remain more or
less constant or stable at a level of $3.5 million on average. However, after 2004, the total
expenditure has a constant increase until 2007, when the expenditure changes its trend. Although
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Final Draft—April 6, 2010
it is very difficult to establish the causality of this trend or to know what sector served is
demanding more fire service, this indicator shows that there has been an extraordinary increase
in the allocation of resources to provide fire services. As population grows, it is expected to have
more expenses for fire protection, but Figure 3 shows that Mat-Su population is growing at a
slower pace in the last years. Hence, the increase in the expenditures must be associated with the
increasing number of fires in the last years.
Figure 10 shows the fire department expenses by function on per capita basis. This figure
shows that operating expenditures (personnel plus non-capital expenses) remain constant until
2004 when there is an abrupt increase from $35 to $50 approximately. Since 2005, the operating
expenses have remained more or less constant at a higher level of $50 per individual resident.
The capital expenditures per capita have also increased in the last years. From the fire statistics
in previous sections and the trends found in this section, it is possible to conclude that the MatSu Fire Department expenditures is increasing but the outcome from the services is not
improving. For example, there has been an increase in the response time, which implies that the
department is taking more time to arrive to the fire scene. At 10 minutes or less, the number of
fire calls responded out of the total calls is decreasing in the last years from 56.8% to 48.7% (see
Figure 8).
2. Literature Review
2.1.
Relevance to Public Administration
The advance of a fire safety policy such as the promotion of a built-in protection through
fire sprinkler systems is an issue that falls within the field of public policymaking in which there
is a constant debate about the lines between public and private issues. Different interests demand
that government “get in” or “stay out” of an issue, depending upon the values of the competing
groups or interests and the extent to which they benefit or suffer from such action.
The majority of fire deaths in the country and millions of dollars in loss attributed to the
direct and indirect costs associated with residential fires make the case for state and local
governments to seek the solutions to this national tragedy. However, since public policies often
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Final Draft—April 6, 2010
change the status quo by given benefits to some or taking away benefits from others, public
policymaking reflects the commitments of public assets. As stated by Gerston (2002), when a
policy is put into motion, some people will be happy about the decision, while others may
attempt to get the policymakers to change their minds (and decisions).
For that reason, implementing a proactive fire safety policy involves both building
partnerships and mobilizing stakeholders in the process. Taking these actions will help to ensure
the outcome focuses on the citizen and the quality of life of the community. According to the
National Fire Sprinkler Association [NFSA]’s report Residential Fire Sprinklers: A step-by-step
approach for communities, it is important to involve as many stakeholders in the process as
possible and to ensure they engage in dialogue. The report recommends examining each
stakeholder and evaluating the role that each plays in the process. Fire department, public policy
leaders, building officials, home builders, fire sprinkler contractors, insurance agents, and
citizens will have to work together from beginning to end to be successful.
Bringing together as many stakeholders as possible is one consideration of Gerston
(2002), who affirms that to advocate a public policy is necessary not only to survey and size up a
political landscape but also to figure out who the key policy-change agents are and identify
potential allies and opponents. Advocacy starts trying to persuade others to take a course of
action: “selling that policy in the political arena”. However, in other instances, policymaking is
done through taking advantage of what is called policy windows in the public administration
jargon. Kingdon (2003) defines this concept as the opportunities for action on given initiatives
that stay open for only short periods.
One example of the policy window concept that concerns to the proactive fire safety
policy is offered by Rubin (2010), who mentions that “in South Carolina in 2008, not long after a
fire in a Sofa Superstore that killed nine firefighters, the legislature proposed a generous tax
break for businesses and homeowners who put in sprinkler systems. State and local tax breaks
would pay for up to 50 percent of the cost. The governor vetoed the measure, arguing that if 50
percent of the cost was paid by the public, the costs would be inflated, but the legislature
overrode his objection and passed the tax break” (p. 56). In consequence, an open window
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Final Draft—April 6, 2010
affects the types of governmental agenda, that is, the list of subjects to which people in and
around government are paying serious attention at any given point in time.
Despite policy windows rarity, the major changes in public policy result from appearance
of these opportunities. In the case of South Carolina’s tax break for fire sprinkler systems, the
catastrophic fire in the Sofa Superstore opened a window for advocates of greater measures over
fire safety policy. That fire event provided legislature with a wonderful excuse to expand the fire
safety measures.
In conclusion, taking a preventive approach as a fire safety policy requires either
advocacy or opportunities that open policy windows. Currently, the alarming fire statistics in the
residential sector may be considered a strategy for winning others to the cause for fire sprinklers.
Many times, some of the most effective advocates are those who have been directly affected by
fire. In addition, it is also important to mention the policy values that underline this fire safety
policy. As mentioned by NFSA, with a proactive approach, growth can actually provide the
opportunity for community leaders to enhance quality of life and build fire safe communities. As
community growth occurs, fire protection must be accepted as one of the essential services of
government. The most important thing is to make sure that stakeholders understand what
happens if no action is taken.
2.2.
Fire Problem at the Residential Level and Approaches from Some
Communities
Several studies highlight the incidence of the fire problem in the country as well as the
advantages of having a proactive instead of a reactive approach to the problem. Hall (2009)
estimates $317 billion as the total cost of fire in the United States for the year 2006. Economic
loss (property damage) represents $13.6 billion of this total. The author’s definition of the cost
includes: i) a combination of losses caused by fire (direct loss such as property damage and
indirect loss such as the cost of temporary housing, missed work, and lost business); ii) cost of
prevention and suppression of fire; iii) the net cost of fire insurance which is the difference
between the premium money taken in by fire insurers and the money paid out for claims; and iv)
the building costs for fire protections.
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Final Draft—April 6, 2010
Likewise, Ahrens (2008) identifies trends and patterns of the U.S. fire losses. The author
finds that home fires dominate the structure fire problem. Even more important is the finding that
57% of all reported structure fires occurred in one- and two-family homes, which in turn
accounts for 69% of the civilian deaths by major property class. These trends at the residential
level either have remained relatively high or have increased when compared to statistics from
two decades ago. For instance, the report American Burning Revisited (1987) shows that
although the residential structure fires constituted only 25% of all fires, yet resulted in 74% of
deaths, 62% of injuries and 43% of loss (1985 data). In absolute terms, there are more fire deaths
in one- and two-family dwellings and apartments.
These alarming statistics confirm why some communities around the country have taken
a different approach to the fire problem in the residential sector. For example, in the study
“Saving lives, saving money. Automatic sprinklers: A 10 year study” of the City of Scottsdale
(1997), the effectiveness of the proactive policy to the fire problem has been proved. Scottsdale
has a sprinkler ordinance that has been implemented since January 1, 1986. Since then, the local
government promotes the use of built-in protection to replace some of traditional resources
commonly used by the fire service.
The Scottsdale’s study outlines all the steps that were taken to move forward the
proactive policy for fire service. It mentions how the local government and fire department had
to face the strong opposition of the residential building sector. The ordinance was developed
once the community realized that despite the best efforts, large fire incidents often exceed the
capacity of the local fire service.
To reduce the opposition from builders there was a design freedom concept in the
construction code with the focus on identifying which of the passive developments could be
changed or modified to help reduce the initial cost of required sprinkler protection. Other factors
that help to advance the ordinance were the analysis of the insurance cost for sprinklered and
unsprinklered homes, the consistent reduction in the installation price of the sprinkler systems
given the increased competition among sprinkler contractors, the expected reduction in
operational and capital cost from the elimination of at least three fire stations. All of these factors
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Final Draft—April 6, 2010
were compared with the changes in the number of deaths per fire event and the average reduction
of the property loss.
Other successful community that has benefited of residential fire sprinklers is Prince
George’s County, Maryland. In the report prepared by Steve Weatherby (2009) are mentioned all
the benefits after 15-year history (from 1992 to 2007) under the single-family residential
dwelling fire sprinkler ordinance. With statistical comparisons the author demonstrates the
effectiveness of sprinkler systems.
The most obvious benefit is the direct impact in saving lives and reducing fire related
injuries. Property protection is another important benefit; for example, the average loss per event
in a non-sprinklered home was $9,983 per incident and $49,503 per incident when there was a
fatality. The average loss for a sprinklered home was $4,883 per event and no fire deaths
occurred in sprinklered-structure fires during the period studied. Weatherby (2009) shows that
the per square foot cost to install the sprinkler system as in the City of Scottsdale3 has decreased
over the years to under $2 per square foot, which is consistent with the average cost nationally.
The NFSA attributes this reduction in the cost to new technology, combine with the development
of an efficient industry and labor force to address the demand. In other words, competition forces
drive the price down.
Since the installation cost of residential fire sprinklers remains as a point of uncertainty
and a potential barrier to broader adoption, the National Fire Protection Association [NFPA]
(2008) performs a cost assessment of home fire sprinklers nationally (considering ten case study
communities) and finds that the cost of sprinkler system to the homebuilder, in dollar per
sprinklered square foot, ranged from $0.38 to $3.66 with the average cost being $1.61 per
sprinklered square foot. Important variables that explain the differences in the installation cost
are the extensive use of copper piping (instead of CPVC or PEX), an on-site water supply
(instead of municipal water), local requirements to sprinkler additional areas like garages, and
“The City of Scottsdale, Arizona, which have had a comprehensive sprinkler ordinance in place for single family
dwellings, reported in 1997 that the average cost of system installation had been reduced from $1.14 per square foot
in 1987 to $0.59 per square foot in 1997” (NFSA report).
3
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Final Draft—April 6, 2010
higher local sprinkler permit fees. Complementary data to the cost analysis was the discounts of
insurance premiums for sprinklered homes. The average premium discount is 7%.
Butry et al (2007) focus not only on the cost part of the sprinkler systems at the
residential level but also on their benefits. The authors present a cost-benefit analysis of fire
sprinkler systems to measure the expected economic performance of those systems in newly
constructed, single-family homes in the U.S. Butry et al (2007) apply the quantitative method of
cost-benefit analysis, which uses the present value of net benefits equation for comparing
benefits and costs attributed to the installation of a sprinkler system to a home with only smoke
alarms.
The benefits defined in this study include all the reductions in the risk of civilian fatalities
and injuries, in homeowner insurance premiums, in uninsured direct property losses, and in
uninsured indirect costs. The cost components are represented by the initial purchase and
installation of the sprinkler system. Butry et al (2007) find evidence of the cost-effectiveness of
the fire sprinkler systems that controverts the findings of the former study A Benefit-Cost Model
of Residential Fire Sprinkler Systems, published in 1984. To reinforce their findings, Butry et al
(2007) perform a sensitivity analysis which examines the influence of assumptions and input
statistics. The sensitivity analysis confirms again the conclusions about the cost effectiveness of
the fire sprinklers in single-family homes.
Overall, all studies reflect that, on the one hand, the statistics of the fire problem at the
residential level of one- and two-family homes are alarming, and on the other hand, the benefits
of built-in protection surpass its costs. The requirement of installed fire sprinkler system
improves life safety in the community regardless the role and operations associated with the fire
suppression side of the fire departments.
2.3.
Tax Incentives for Fire Sprinklers
“Reduction in all forms of government spending, resulting from public pressure to reduce
property taxes, is a prime factor in the future growth of the residential sprinkler concept. Many
fire departments are forced to protect larger areas and more subdivisions with the same number
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Final Draft—April 6, 2010
of, or even fewer people, in several communities since financial restrictions hamper a fire
department’s ability to grow with the community. As a result, alternates to traditional firefighting techniques must be found. One of them is the use of residential sprinklers”
(Madrzykowski and Fleming, 2002, p. 14). The use of fire sprinklers may be promoted by law or
by tax incentives. This section illustrates some examples of communities that have implemented
tax credits to increase the adoption of fire sprinkler systems.
To promote the adoption of a more proactive fire safety policy, some local governments
have approved property tax incentives for the installation of fire sprinklers at the residential
level. Montgomery County, Maryland has been a precedent in the provision of a tax incentive for
fire sprinklers. “Current law mandates that a home builder must offer residential fire sprinklers
as an option and must sprinkler the model homes. This legislation provides a significant property
tax benefit to families who choose this option” (NFSA, n.d., p. 30).
The rationale for the tax incentive is to compensate the homeowners who install the
sprinkler system given the burden that they would have to bear for fire protection, and thereby
the expected reduced demand on community fire protection services, not to mention the external
benefit (or positive externality) that neighbors receive in terms of reduced risk of fire close to
their property. Thus, the tax incentive represents the corresponding reduction in the financial
support homeowners are being asked to contribute to the community effort.
Effective since September 18, 2000 residents of Montgomery are eligible for a one-time
tax credit of up to 50 percent of their county property tax on dwellings (see Appendix A for the
calculation of the tax credit). Thus, Montgomery County was the first county in the United States
to offer this type of tax break. According to this law, the credit applies to owners of detached
single-family houses and of any unit of a multifamily in which a fire sprinkler system is not
required by law. Of course, the tax break cannot exceed the cost of the system (Freestone, 2000).
Although Freestone (2000) affirms that Montgomery was the first county that introduced
a tax credit for fire sprinklers, Madrzykowski and Fleming (2002) states that since 1981, the
State of Alaska enacted into law a significant piece of legislation that has allowed tax incentives
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Final Draft—April 6, 2010
for residential fire sprinklers. According to these authors, the law provides a property tax
exemption of 2 percent of the assessed value of any structure if the structure is protected with a
fire protection system. “The word “structure” is significant in the law, since it also applies to
homes. In effect, if a home were assessed at $100,000 for purposes of taxation, the assessed
value would be computed at $98,000, provided that it contained a fire protection system”
(Madrzykowski and Fleming, 2002, p. 14).
When looking at which Alaskan cities have implemented the mentioned tax exemption,
Anchorage seems to be the only city that currently has the tax exemption for fire sprinklers.
According to the Municipality of Anchorage’s official website, the tax exemption is available for
a structure containing an approved fire protection system that is in working condition and
incorporated as a fixture or part of the structure. The exemption is limited to an amount equal to
2% of the value of the area covered by the sprinkler.
The state of South Caroline has also implemented a tax incentive for the installation of
fire sprinklers at the commercial and residential levels. The law became effective on June 26,
2008. According to Entwistle (2008), participants who put sprinklers in residential or
commercial buildings (where they are not required by law) are eligible for a 25% tax break in
income tax from the local government and eligible to get 25% property tax credit of the cost of
the system back from the state of South Carolina. Therefore, residents can save 50% on a
sprinkler system.
The previous examples show different approaches that local and state governments have
adopted toward a more proactive fire safety policy. Each of these approaches will be considered
in the estimation of the cost-benefit analysis (CBA) presented in the next section. CBA is an
economic model that will help evaluate the benefits and costs of the adoption of sprinkler
systems in the Mat-Su Borough.
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Final Draft—April 6, 2010
3. Methodology
3.1.
Introduction to Cost-Benefit Analysis
The economic impacts of a public policy related to fire safety protection through the
voluntary installation of fire sprinkler systems can be measured with the quantitative method of
cost-benefit analysis. This method helps to judge whether a particular program or policy is worth
its cost, which is a constant problem in public policy choice. Cost-benefit analysis (CBA)
provides a method for categorizing and quantifying the costs and benefits that occur over time of
a policy (Steinemann et al, 2005). The analysis estimates whether the gain to society (benefit)
from the policy is greater than the social sacrifice (cost) required to produce the policy. If so, the
policy is worthwhile (Mikesell, 2007). In economic terminology, worthwhile policies improve
economic conditions because they direct resources where their use provides a greater return than
would alternative uses.
3.2.
Cost-Benefit Model
In order to perform a CBA, the benefits and costs need to be expressed in monetary
terms. This requirement may be difficult to accomplish in the evaluation of public policies
because public sector goals are often broader and many services has no clear market prices. Even
if costs and benefits can be quantified, as stated by Steinemann et al (2005), public decisions
often require considering more than monetary effects. For the purpose of this study, variables
that can be easily quantified in monetary terms will be included as proxy of the costs and
benefits. Information on variables that have not a clear market price or are difficult to quantify in
monetary terms will be taken from national studies and statistics. The CBA proposed in this
study follows the methodology developed by Butry et al (2007), who prove the economic
benefits of fire sprinklers at the residential level of one and two family homes using national fire
statistics.
CBA applies a decision criterion to the discounted cost and return flows to summarize the
economic case for the policy. Two criteria are often used: the benefit-cost ratio (BCR) which is
the present value of benefits divided by the present value of costs, and the net present value
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Final Draft—April 6, 2010
(NPV) which is the present value of benefits less the present value of costs. The equations (1)
and (2) represent these two criteria, respectively:
𝐵𝑡
(1 + 𝑟)𝑡
𝐵𝐶𝑅 =
𝐶𝑡
∑𝑇𝑡=1
(1 + 𝑟)𝑡
∑𝑇𝑡=1
(1)
𝑇
(2)
𝑁𝑃𝑉 = ∑
𝑡=1
(𝐵𝑡 − 𝐶𝑡 )
(1 + 𝑟)𝑡
Where:
Bt
is the dollar value of benefits in period t
Ct
is the dollar value of costs in period t
T
is the number of discounting time periods in the study period
r
is the discount rate per time period
For economic efficiency, BCR has to be greater than 1 or NPV has to be greater than 0.
Thus, the present value of benefits can be expressed as:
𝑇
𝑇
𝑡=1
𝑡=1
𝐵𝑡
𝐷𝐹𝑆 + 𝐷𝐴𝑉 + 𝑇𝐵 + 𝐷𝐼 + 𝐼𝑃 + 𝐷𝐶 + 𝐼𝐶
(3) 𝑁𝑃𝑉𝐵 = ∑
=∑
𝑡
(1 + 𝑟)
(1 + 𝑟)𝑡
Where:
DFS
is the value of the annual benefit from the discounted fire service fee in the property tax
for the installation of fire sprinklers in one- and two-family homes
DAV
is the value of the one-time 2% discount of the assess value in the property tax for the
installation of fire sprinklers in one- and two-family homes
TB
is the value of the one-time 50% discount in property tax
DI
is the value of death and injury averted due to sprinkler use
IP
is the value of the reduced homeowner insurance premium due to fire sprinkler protection
DC
is the value of uninsured direct cost averted (direct property loss)
IC
is the value of uninsured indirect cost averted (e.g., costs of temporary shelter, missed
work, extra food cost, and medical expenses)
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Final Draft—April 6, 2010
The present value of the costs can be expressed as:
(4)
𝑇
𝑇
𝑡=1
𝑡=1
𝐶𝑡
𝑆𝑆
𝑁𝑃𝑉𝐶 = ∑
=
∑
(1 + 𝑟)𝑡
(1 + 𝑟)𝑡
Where:
SS
is the purchase and installation cost of a sprinkler system (includes materials and labor)
3.3.
Data Analysis
3.3.1. Data Sources
This section presents the data sources and the way of how some local fire statistics such
as probability of fire, number of fire fatalities per fire and average fire loss are used to generate
the analysis of this study. There are four main sources of data.
The first source is the information from the Mat-Su Department of Emergency Services
which collects local fire statistics (e.g., number of fires, number of fire deaths, number of fire
injuries, and amount of property loss). The department derives these statistics from the National
Fire Protection Association (NFPA) Analysis Report for the MS Borough for the period 20032008. This period is chosen given the relatively completeness and consistency of the data. Before
2003, the data show drastic changes (a significant decrease of cases reported) that may affect the
estimates for the analysis.
The second source is the information from the Mat-Su Borough Division of Assessment
which lists and appraises all real and personal property in MS Borough. Assess values, mill levy
rates, fire service area fees for fire protection is used to calculate the average tax break that an
individual homeowner would receive with the installation of a fire sprinkler system. Also,
information about the number of one and two-family homes in the MS Borough for the period
1999-2008 is used in conjunction with the NFPA Analysis Report to estimate the annual
probability of fire occurrence in the residential level of one and two-family homes. Because the
MS Borough does not have statistics of homes with sprinkler systems, this study considers the
national estimates for homes with sprinkler systems to compare the MS Borough’s homes.
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Final Draft—April 6, 2010
The third source is the information from Home insurance companies which provides data
regarding discounts in the home insurance premium for residential fire sprinkler systems.
Unfortunately, primary data about value of actual fire loss, amount of claim paid, and indirect
costs of fire was not collected from this source because of proprietary issues. In consequence,
some these variables are estimated taking the information from NFPA Analysis Report and
national averages as well. The last source of information comes from local contractors of fire
sprinkler systems which provide information about the installation cost of residential fire
sprinklers.
3.3.2. Estimation Cost-Benefit Model
This section presents the estimates for the present value of the net benefits that an
individual homeowner of a single or a two family home may get with the installation of fire
sprinklers. The model is estimated for a single home of 4,336 sq. ft. with garage and for a twofamily home of 3891 sq. ft. with garage. In the Mat-Su Borough, homes rely on different water
supply sources (either city water or well water); hence, estimations of the benefit-cost model are
performed having into account this distinction to reflect the reality of the Mat-Su community.
Also, this distinction implies a difference in the cost of the fire sprinklers. Usually, homes that
rely on well water have a higher installation cost of fire sprinklers.
The interest rate used for discounting, the discount rate, represents the minimum
acceptable rate of return on investment. This rate can be chosen by looking at the current real
interest rate, which an individual would be willing to accept as an alternative minimum
acceptable return on investment. For this purpose, the Treasury Real Yield rate—commonly
referred to as “Real Constant Maturity Treasury rate” for 30 year maturity is used as the discount
rate of this study (2.22% as of April 2, 2010).
3.3.3. Findings
On average, throughout the 2003 to 2008 period, 35 out of 10,000 single-family and twohomes caught fire each year in the Mat-Su Borough (see Table 3). This is equivalent to 63 home
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Final Draft—April 6, 2010
fires each year, leading to millions of dollar losses. Direct property loss averaged $2,008,014
each year, which is equivalent to $32,097 dollar loss per fire, both amounts in 2005 constant
dollars (see Table 4).
Table 3. Mat-Su Borough Estimates of Fires and
Probability of Ignition Occurrence in One- and Two-Family Dwellings
Year
Fires
Homes
Ignition Probability
2003
2004
2005
2006
2007
2008
75
78
51
47
60
68
15,399
16,506
17,814
19,071
19,947
20,628
0.0049
0.0047
0.0029
0.0025
0.0030
0.0033
Mean
63
18,228
0.0035
Source: NFPA Report for Mat-Su Borough (1999-2008) and MSB Division of Assessment.
Table 4. Mat-Su Borough Estimates of One- and Two-Family Homes
Civilian Fatality and Injury Rate and Average Direct Property Loss
Year
Civilian
Fatality Rate
Civilian
Injury Rate
Total Direct
Property Loss
(2005 constant $)
Average Direct
Property Loss
Per Fire
(2005 Constant $)
2003
2004
2005
2006
2007
2008
0.0133
0.0000
0.0000
0.0000
0.0000
0.0000
0.0400
0.0128
0.0000
0.0000
0.0000
0.0147
1,814,869
3,296,767
1,504,900
1,864,897
2,285,270
1,281,382
24,198
42,266
29,508
39,679
38,088
18,844
Mean
0.0022
0.0113
2,008,014
32,097
Source: NFPA Report for Mat-Su Borough (1999-2008)
Table 5 exhibits the input parameters for the estimation of the potential benefits of the
installation of fire sprinklers. The reduced risk of civilian fatalities and injuries as well as the
reduced expectation of uninsured direct property loss and indirect costs were adopted from Butry
et al (2007) study because there is no existing information of sprinklered homes in the Mat-Su
Borough to calculate the probability of those variables and compare it with non-sprinklered
homes. Some other annotations need to be discussed.
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Final Draft—April 6, 2010
First, the dollar value of the statistical life or injury adverted were also considered from
Butry et al (2007). These authors approach the value of a life saved taking the median value of a
statistical life reported by Viscusi and Aldy (2003), who estimated to be about $7 million in 2000
dollars. Butry et al (2007) adjusted this value to 2005 dollars, which represents $7.94 million,
and this is the value adopted in this study as well. Regarding the value of an injury averted,
similarly, Butry et al (2007) adopted the middle value reported in two studies from the U.S.
Consumer Safety Commission (CPSC), which found estimates of $150,000 (in 2005 dollars) per
injury from fires involving mattresses and $187,000 (in 2004 dollars) per injury involving
upholstered furniture (Zamula, 2005, as cited by Butry et al, 2007). Hence, the value used for
injury averted is $171,620. Second, three kinds of tax incentives for the estimation of the benefits
are considered:

i.
One time 50% exemption in the property tax suggested by Montgomery case.
ii.
One time 2% exemption in the assess value of a property suggested by
Anchorage case.
iii.
The combination of a one-time 2% exemption in the assess value plus a 25%
discount in the fire service fee included in the property as suggested for the MatSu Department of Emergency Services.
Fatalities Averted: With a 100% reduction in the fatality rate between unsprinklered and
sprinklered homes, the expected present value benefit is $1,328.74.

Injuries Averted: Assuming 57% reduction in injuries between unsprinklered and
sprinklered homes, this yields an expected present value benefit of $83.78.

Direct uninsured costs averted: The average property damage was estimated to be $32,097
per fire for unsprinklered homes in the Mat-Su. According to Butry et al (2007), insurance
companies assume about 80% of the property loss (Ruegg and Fuller, 1994, as cited by Butry et
al, 2007). Therefore, 20% would be the uninsured portion of the direct property loss that is not
covered by the home insurance, which for the MS Borough would be equivalent to $6,419.40.
Assuming 57% reduction in direct property damages, the present value benefit of $154.60. It is
important to mention that more accurate estimates of property loss can be obtained from
insurance companies. Unfortunately, for this study there was no cooperation from local insurance
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Final Draft—April 6, 2010
companies, which were unwilling to provide information because of proprietary issues. The
information from insurance companies would have helped have a precise figure of the costs as
well as the estimate of the costs to insurance companies of claims for fire damage. The direct
property loss used in this report comes from NFPA report, which collects guess estimates of this
variable.
Table 5. Calculation Present Value Benefits
Input Parameters
Probability
of Fire
Fatalities
Averted
Injuries
Averted
Direct losses
Averted
0.0035
0.0035
0.0035
Given a Fire,
Reduction in the
Annual Probability of
Per fire, Expected
Number of
Statistical
Value of
Fatality1
Fatalities
Life
1.000
0.0022
7,940,000
Injury2
Injuries
Injury
0.5679
0.0113
171,620
Direct Uninsured
property loss3
Direct Uninsured
property loss
0.3166
Indirect Uninsured
Indirect cost
Averted
Insurance
Credit
50% Property
Tax Discount
2% Discount
Assess Value
0.0035
Annual
Premium5
861
Calculated Outputs
6,419.40
cost4
0.3166
Annual or
One Time
Benefits ($)
Present
Value
Benefits ($)
61.14
1,328.74
3.85
83.78
7.11
154.60
0.14
3.09
86.10
1,871.26
980.80
1,171.13
980.80
1,171.13
34.90
41.51
34.90
41.51
Indirect Uninsured
cost
1,284
Reduction in Annual
Homeowner Insurance
0.10
One time Reduction
Single home: $980.80
Duplex: $1,171.13
One time Reduction
Single home: $34.90
Duplex: $41.51
Annual reduction
Single home: $54.24
Duplex: $66.70
25% Discount
54.24
Fire Service Fee
66.70
Source: Format adopted from Butry et al (2007).
Note: Present value benefits are based on a 30-year study period.
1-4
Estimates are taken from Butry et al (2007), who calculated these probabilities at the national level.
5
Average national home insurance premium as of 2007 (Insurance Information Institute, 2007).

1,178.83
1,449.63
Indirect uninsured costs averted: Munson and Ohls (1980, as cited by Butry et al, 2007)
suggest to use 10% of the direct property loss as an estimate of the indirect costs. Since the
average property loss estimates for the MS Borough is $32,097, the estimated indirect cost per
fire is $3,209.70. According to Butry et al (2007) part of the indirect costs of fires are covered by
insurances, which on average recognize 60% of the indirect costs. In consequence, 40% is the
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Final Draft—April 6, 2010
uninsured portion of the indirect costs of fire, which for this study are $1284. Then, the present
value benefit, assuming 32% reduction in indirect property damages, is $3.09.

Insurance premium credit: The Alaska average insurance premium was estimated to be
$861. According to information provided by State Farm, the discount for complete sprinklered
homes (attics, garages, small bathrooms, closets etc.) is about 10%. Thus, the expected annual
benefit is $86.10, and the present value benefit over 30-year period is $1871.76.
Tables 6, 7, and 8 summarize the results of the CBA model for each of the three tax
incentives options. The price per square foot of the fire sprinklers for the four home styles ranges
from $3.53 to $4.22. Unfortunately, it was only possible to get the quotes from one contractor.
Perhaps, having more quotes would have allowed getting more competitive prices. Overall, the
quoted prices are very high in comparison with the costs from other studies at the national level
(Butry et al, 2007; NFPA, 2008; Weatherby, 2009).
Table 6. Tax Incentive Option #1 as Montgomery case
One-time 50% exemption in property tax
Benefits
Fatalities averted
Injuries averted
Direct property losses averted
Indirect cost averted
Insurance credit
50% discount property tax (one time)
Benefit subtotal
Cost
Purchase and installation cost
Price per sq. ft.
Cost Subtotal
Net Present Value (NPV)
Benefit-Cost Ratio (BCR)
Single home
with garage on
city water
Single home
with garage on
well water
Duplex with
garage on
city water
Duplex with
garage on
well water
1,328.74
83.78
154.60
3.09
1,871.26
980.80
4,422.27
1,328.74
83.78
154.60
3.09
1,871.26
980.80
4,422.27
1,328.74
83.78
154.60
3.09
1,871.26
1,171.13
4,612.60
1,328.74
83.78
154.60
3.09
1,871.26
1,171.13
4,612.60
15,286.00
3.53
15,286.00
-10,863.73
0.29
18,286.00
4.22
18,286.00
-13,863.73
0.24
13,420.00
3.45
13,420.00
-8,807.40
0.34
16,422.00
4.22
16,422.00
-11,809.40
0.28
From Tables 6 to 8 can be concluded that the installation of a sprinkler system in a new
single home and two-family home is not very economical (costs outweigh the benefits). The
comparison among the three tax incentive options leads to the conclusion that the option
suggested by the MSB Department of Emergency Services yields to the smallest net loss for all
33
Final Draft—April 6, 2010
the home types. Consequently, the benefit-cost ratio of this option is also the biggest. The onetime 50% exemption in property tax is the second option with the smallest net loss. The results of
this study, contrary to Butry et al (2007) findings, do not find strong evidence to demonstrate net
benefits for an individual homeowner from the installation of a fire sprinkler system.
Unfortunately, the installation costs in the local area exceed the national average costs.
Table 7. Tax Incentive Option #2 as Anchorage case
One-time 2% exemption in the assess value
Benefits
Fatalities averted
Injuries averted
Direct property losses averted
Indirect cost averted
Insurance credit
2% discount assess value (one time)
Benefit subtotal
Cost
Purchase and installation cost
Cost Subtotal
Net Present Value (NPV)
Benefit-Cost Ratio (BCR)
Single home
with garage on
city water
Single home
with garage on
well water
Duplex with
garage on
city water
Duplex with
garage on
well water
1,328.74
83.78
154.60
3.09
1,871.26
34.90
3,476.37
1,328.74
83.78
154.60
3.09
1,871.26
34.90
3,476.37
1,328.74
83.78
154.60
3.09
1,871.26
41.51
3,482.98
1,328.74
83.78
154.60
3.09
1,871.26
41.51
3,482.98
15,286.00
15,286.00
-11,809.63
0.23
18,286.00
18,286.00
-14,809.63
0.19
13,420.00
13,420.00
-9,937.02
0.26
16,422.00
16,422.00
-12,939.02
0.21
Table 8. Tax Incentive Option #3 as suggested by Mat-Su Borough
One-time 2% exemption in the assess value plus 25% annual discount in fire service fee
Benefits
Fatalities averted
Injuries averted
Direct property losses averted
Indirect cost averted
Insurance credit
2% discount assess value (one time)
25% annual discount fire service fee
Benefit subtotal
Purchase and installation cost
Cost Subtotal
Net Present Value (NPV)
Benefit-Cost Ratio (BCR)
Single home
with garage on
city water
Single home
with garage on
well water
Duplex with
garage on
city water
Duplex with
garage on
well water
1,328.74
83.78
154.60
3.09
1,871.26
34.90
1,178.83
4,655.20
1,328.74
83.78
154.60
3.09
1,871.26
34.90
1,178.83
4,655.20
1,328.74
83.78
154.60
3.09
1,871.26
41.51
1,449.63
4,932.61
1,328.74
83.78
154.60
3.09
1,871.26
41.51
1,449.63
4,932.61
15,286.00
15,286.00
-10,630.80
0.30
18,286.00
18,286.00
-13,630.80
0.25
13,420.00
13,420.00
-8,487.39
0.37
16,422.00
16,422.00
-11,489.39
0.30
34
Final Draft—April 6, 2010
4. Summary, Conclusions, and Recommendations
This study examined the feasibility of the fire sprinkler systems at the residential level of
one- and two-family homes in the Matanuska Susitna Borough (MSB). Since the voluntary
installation of fire sprinkler systems is encouraged by the State of the Alaska, the MSB wants to
evaluate if a tax incentive to homeowners would persuade them to install fire sprinklers. For this
purpose, the study sought to answer two questions:

Would the Mat-Su Borough community be better served with a more proactive fire
protection rather than relying in a more reactive fire protection?

What are the cost and benefits for an individual homeowner from the installation of fire
sprinkler systems at the residential level of one- and two-family homes?
To answer the first question, the study established the need for a more proactive fire
protection by analyzing the trends of fire statistics compared with the capabilities of the MSB
Fire Department. The fire protection in the MSB community is based primarily on a reactive
approach, meaning that fire department follows the traditional fire service where the department
has to suppress the fire event by arriving soon enough to have a positive impact on the fire
incident.
Overall, the analysis of the fire statistics led to the conclusion that the fire problem is
highly significant at the residential level of one- and two-family homes. In 2008, fires in oneand two-family homes represented 27% of all reported fires incidents in the Borough. This is a
very alarming finding along with the finding that on average 95% of fires in residential structures
occur in one- and two-family homes. Even worse is the fact that losses in one- and two-family
homes represent about 77% of the losses among all fire incidents. Hence, the residential level of
one- and two-family homes dominates the fire problem in the MSB.
When looking at the current capabilities of the Mat-Su Fire Department, the statistics are
not good either. The response time, one of the most important performance indicators of fire
departments, is increasing measured either with the average response time or with the fractile
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Final Draft—April 6, 2010
response time. This indicator has worsened since the year 2006 when the 80% of the calls are
responded between 17.5 minutes and 19 minutes. This response time does not meet the national
standards established for volunteer fire departments, that is, to respond at 10 minutes or less in
80% of the time. In addition, a review of the MSB Fire Department total expenditures shows an
increase after 2004 as well as the operating expenditures per capita, but these increases seems not
to be related with the improvement of the outcomes in the fire service.
In consequence, the analysis of statistics suggested that there is a case towards the
adoption of a more proactive fire protection policy, which embraces new, proven technology and
built-in protection like the sprinkler systems combined with public education programs. Fire
sprinklers in one- and two-family homes would allow acceptable increases in fire response times,
especially in cases like the MSB where the fire service is offered to sparsely populated
communities. In order to answer the second research question, the second part of the study
consisted in measuring the costs and benefits of the installation of fire sprinklers for an
individual homeowner. Because the MSB wanted to know the extent to which a tax incentive
would encourage a homeowner to install fire sprinkler, a cost benefit analysis (CBA) was
performed to facilitate to have an economic criterion for such decision.
For the CBA, three tax incentive options were examined: one-time 50% discount in
property taxes, one-time 2% discount in the assess value, and one-time 2% discount in the assess
value plus 25% annual discount in the fire service fee. Four types of homes were considered for
comparison: a single family home with garage on city water and on well water (4336 sq. ft.), and
a duplex with garage on city water and on well water (3891 sq. ft.). Only one cost was
considered in the analysis: the purchase and installation cost of a fire sprinkler system. It was not
possible to find quotes for maintenance, repairs, and replacement costs.
The results of the CBA do not find net benefits (benefits less costs) or a benefit-cost ratio
greater than 1. For all the tax incentives options, the expected net present value (NPV) is
negative, which means that the options do not appear to be economically feasible. The one-time
2% discount in the assess value plus 25% annual discount in the fire service fee is the option that
exhibits the smallest net loss.
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Final Draft—April 6, 2010
Although the CBA does not find evidence to persuade homeowners to install fire
sprinklers, it is important to mention that the high costs of the sprinklers in the local area is the
main reason that explains why sprinkler systems were not cost-effective. National studies have
shown that residences with sprinkler systems suffered fewer deaths, injuries, and property
damages than those without (City of Scottsdale Study, 1997; Weatherby, 2009).
In fact, the NPV of the benefits calculated for an individual homeowner in the MSB are
consistent with the NPV of the benefits estimated at the national level for Butry et al (2007). For
the tax incentive option suggested by the MSB (one-time 2% discount in the assess value plus
25% annual discount in the fire service fee), the NPV ranges from $4,655.20 to 4,932.61, which
is close to the NPV of benefits estimated by Butry et al (2007), i.e., $4,994.29.
This observation suggest that one recommendation is to direct the attention toward the
sprinkler industry or contractors in the local area. If the costs of fire sprinklers can be adjusted to
the national averages, it is very probable to find net benefits for an individual homeowner.
Discussions with members of the sprinkler industry would help identify the primary reasons
behind the high cost of fire sprinklers in the MSB in comparison to the cost in other
communities, which have a substantial reduced up-front purchase and installation cost. Perhaps,
the local authorities would have to consider some regulations to allow an increased competition
within this industry in the local area. As mentioned by the City of Scottsdale Study (1997), in
order to expect a positive impact on the associated costs of fire sprinklers, what is important is
the ability of the sprinkler industry to become more innovative, productive and cost effective
when the market conditions allow open competition for the installation of these systems.
Finally, other recommendation is to start building partnerships and mobilizing
stakeholders. One point of start is to educate the community toward knowing the different
outcomes from a fire incident between sprinklered and unsprinklered homes. When the
unfortunate event of fire occurs, at that point only early warning from smoke alarms, escape
planning, and quick emergency response are factors that all together minimize the negative
outcomes of a fire event. However, having early suppression through fire sprinklers would
minimize the losses and help the fire department to combat the fire more effectively.
37
Final Draft—April 6, 2010
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Final Draft—April 6, 2010
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40
Appendix A. Calculation Worksheet of Tax Credit in Montgomery County
Source: Montgomery County Website: http://www.montgomerycountymd.gov/
41
Appendix B. Response Time, Fire Growth and Temperature Curve
This diagram illustrates fire growth over time and the sequence of events that may occur from
ignition to suppression. Depending on the size of the room, contents of the room, and available
oxygen, flashover can occur in less than 2 or more than 10 minutes. Flashover occurs most
frequently between 4 and 10 minutes (Source: ESRI, 2007).
42