Stretching Municipal Infrastructure Budgets Funding Source
Stormwater User Fees
Transfer stormwater management funding from property tax base to a user fee program. This funding model would allow a municipality to dedicate funds to a typically underfunded area.
Parking Enforcement Enterprise
Transform a municipal parking division into a for-profit enterprise. This would see parking become a user-pay system. The cost of service is directed towards those using the system which ultimately removes parking costs away from property taxes.
Some municipalities can use hydro dividend revenue to fund capital related works. As the revenues are not a guaranteed revenue source, money may be better spent on capital rather than operations.
There may be an opportunity to transition debt repayments when they retire to capital contributions as the “spending room” is already incorporated in the municipal budget.
Although development charges (DCs) fund initial growth-related capital investments, there are opportunities to leverage the use of DC monies when the project coincides with the upgrading or expansion of existing infrastructure. This is particularly relevant with linear infrastructure such as roads.
Table 1. Areas to create new service categories, or support capital related activities. This prioritization matrix can help a municipality tailor its long-term capital plan to specifically address capital works and consider the following: consequences of asset failure; future cashflow implications; effect on service levels; and, any advantages/efficiencies by undertaking a project at a specific time. Once the municipality has scored potential projects, the prioritized capital project list could prove to be a valuable piece of information when making capital investment decisions. The adoption of a capital prioritization model will provide a formal and consistent approach which municipal staff and council can use. By applying the prioritization model, a municipality can easily decipher which projects can be funded under the current budget and which can be deferred for consideration at a later date.
reduce the service level that an asset can deliver. It may also increase the cost of replacement, repair and maintenance over the long term, as the quality of the asset deteriorates. Planned debt can be a good way of spreading the costs of a project over the useful life of an asset. It also promotes intergenerational equity in which ratepayers who benefit from the asset would share the cost. Debt should be taken on in a responsible manner with reference to: the term of the debt relative to the asset’s useful life; a practical repayment strategy; and, the overall community benefits received for undertaking the project. Given the current economic climate, municipalities may capitalize on the favourable borrowing environment as Canada’s key benchmark interest rate is amongst the lowest since the late 1970s.
Planned debt is a viable financing tool Often, the strategic use of long-term debt is overlooked as a viable financing tool to carry out municipal infrastructure projects. Delaying the response to infrastructure needs in order to pursue council-directed “no debt” policies, or efforts to minimize the use of debt, can further exacerbate the existing municipal infrastructure deficit. This can also
Have all funding sources been explored? Shifting services from the property tax base to other user/rate supported areas can create funding room to support capital related activities at a higher level. Municipalities have the opportunity to define and create new service categories to generate additional revenue to support existing services, which may currently be funded through the proper-
ty tax base. Furthermore, existing revenues and expenditures may be directed to capital related spending on a going forward basis. Table 1 provides a brief snapshot of a few key areas in which a municipality can create a new service category, or utilize their existing revenues and expenses as a means to support capital related activities at a higher level. Recognizing that their funding sources are constrained, municipalities must take a proactive approach to asset management by introducing innovative methods to facilitate the repair and replacement of existing infrastructure within the current environment. Implementing transparent policies and practices, such as the capital prioritization model, will allow unbiased decisions to be made – replacing short-term objectives and solutions with responsible long-term financial and strategic planning objectives. The three approaches outlined can be used by municipalities, together with existing practices, and as part of the annual budget process, to prioritize and maximize investments in municipal infrastructure. Craig Binning and Andrew Mirabella are with Hemson Consulting Ltd. Email: firstname.lastname@example.org April 2016 | 31
Published on Apr 6, 2016
Environmental Science & Engineering Magazine's April 2016 issue. Featuring a special section on stretching municipal infrastructure budgets....