The Effect of Time on Saved Money

I’m going to keep this short, but I think it’s powerful. It’s about what happens to your saved money over time.

I was recently contacted by a fire district that I had undertaken a development impact fee calculation study for back in November, 2006. They were considering the need for an update.

What first caught my eye was that our cost calculations were based upon a basic Type I Engine at, get this, $350,000. I have recently heard such response vehicles now cost in the range of $725,000 to $850,000 per rig, depending upon the “modifications” required by the users. This is at least a 100% increase in costs over this 15 year period. The CPI for the same period was a modest 35% increase. Most likely a good portion of the Type I engine cost increase is due to the many OSHA and other improvements required for fire fighter safety and operational innovations for fire suppression/rescue effectiveness. Regardless, the real-world cost of a Type I engine outpaced the national CPI by a factor of three.

The next major cost I looked for in the old calculation report was the net-net-net construction cost of building a new fire station. The 2007 Report used about $530 per square foot to construct a fire station, admittedly a modest station even then. I have seen recent cost figures of up to $1,250 per square foot. This real-world cost increase of 135% again crushed the Engineering News Record – Construction Cost index of 47% for the same time period.

Now keep in mind also that this fire district has been putting away impact fee revenues that have remained unchanged over time to acquire said station and the Type I Engine, but I assure you the interest rates they are experiencing during this time did not keep pace with either of the two previously mentioned cost index increases or the real-world increases.

You just might ignore the popular cost price indexes and move on to the actual unit prices used on whatever infrastructure(s) you collect impact fees for. And “consider” an update.