That is a good idea as local people are more accountable to their community as well.
The only problem is that while firemen are usually called upon in rare contingencies. The role of the police also includes deterrence which makes it fundamentally different from that of firefighters.
Since no one will do a full time job voluntarily without pay, a system with salary, benefits etc has to be in place. If the town is doing that they may as well just have a regular cop.
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