Alternative financing mechanisms
Public infrastructure is the backbone of our economy and quality of life, but after decades of under investment, Canada is only just beginning to confront its infrastructure deficit, a backlog of delayed repairs and construction that hurts every Canadian family and business. FCM has estimated that the Canadian municipal infrastructure deficit has reached approximately $123 billion and that 79 per cent of the service life of the country's public infrastructure has been used up.
Municipal governments are working to overcome these challenges by advancing new forms of development through Integrated Community Sustainability Plans, Community Energy Plans, Climate Change Action Plans and more. New thinking is often constrained, however, by traditional funding arrangements; and municipalities need access to additional funding mechanisms to move from plans to on-the-ground realities.
These mechanisms can take many forms — from standard financial tools, such as development charges and user fees, to more innovative types of financing such as commuter taxes, incremental financing or tax-base sharing. These best practices can assist in fulfilling unmet needs, better allocate costs, increase accountability by clear allocation of funds, and increase flexibility of service levels through contractual arrangements or partnerships.
No single financial mechanism will work in all communities — each has its pros and cons and not all are applicable to every type of infrastructure. This sampling of alternative financial mechanisms aims to provide information on developing new sources of funding, financing and revenues, or use existing tools to greater advantage.
Some international examples are shared here for information purposes only; while others apply only to certain provinces. The focus is on existing mechanisms that can be used in most, if not all, Canadian municipalities without having to amend existing federal, provincial or territorial legislation:
- Bonds and bond financing
- Carbon funds and carbon taxing
- Development cost charges
- Fuel tax transfers
- High occupancy toll lanes
- Land value taxation
- Public‒private partnerships
- Renewable energy credits
- Revolving funds
- Special district financing and special levies
- Standard offer contract
- Tax increment financing