Municipal governments are facing multiple, growing, and overlapping challenges. Yet, there are tools available to address these challenges that are not being used to their full potential. Market-based policies such as well-designed user fees can help reduce traffic, cut water use, and improve solid waste management, while generating revenue that can be used to fill financial gaps.
These challenges include:
- Municipal infrastructure is aging and faces a growing investment gap;
- Municipalities have limited ability to raise revenues. Only so much can be raised from property taxes. They also often face constraints on debt financing; and
- To attract people and investment, livability is key: cities must provide job and recreational opportunities, ensure affordability, make it easy to move people and products, and protect clean air and water.
It all sounds a little daunting. Yet an under-used policy option might lie at the intersection of these challenges. Municipalities can use market-based tools to fund critical infrastructure and create incentives for individuals and businesses to make choices that improve the livability of our communities. A new course from the Ecofiscal Commission will help municipal employees, and those that work with municipalities, successfully design and implement these solutions.
Solving traffic problems with incentives
Traffic, for example, is a problem that’s increasingly stifling cities and costing Canadians billions of dollars every year. In our 2015 report, Ecofiscal laid out how congestion pricing can reduce traffic volumes, enable faster traffic flows, and lower the frequency of accidents. At the same time, it can raise revenues to finance improved public transit, more bicycle lanes, or better road infrastructure.
While the public is often skeptical at first, support grows once they see the benefits. Stockholm, for example, started out with around 30% support for a new congestion pricing policy. After a pilot project led to a 20% decrease in traffic, however, support grew to over 50%. With revenues now being used to finance tangible and visible infrastructure improvements, support is even higher.
There’s no one-size-fits-all solution for congestion. Instead, municipalities should customize approaches according to their own unique challenges and context.
Funding water infrastructure, encouraging conservation, saving money
Market-based tools can also improve management of water, wastewater and stormwater systems. Our 2017 report showed that linking water rates to service demand can reduce pressure on infrastructure and local waterways relied on for drinking water, recreation and activities important to the economy. Charging customers based on the services they use is also arguably fairer than charging everyone the same amount. In addition, reducing reliance on property taxes and grants from other levels of government can support greater financial self-sufficiency and autonomy.
In Ottawa, for example, annual 6% increases in water and wastewater fees combined with smart metering led to an 8% reduction in water use between 2011 and 2016. The small town of Okotoks, Alberta was able to cut water use almost in half between 2001 and 2013 through a combination of water rate reform, metering and a series of carefully designed complementary policies promoting water use efficiency. Victoria, British Columbia is leading the way on designing stormwater rates that encourage property owners to reduce runoff.
Pricing trash to avoid new landfills
Managing our solid waste is key to livable cities. Many Canadian municipalities, along with other cities around the world, are scrambling to respond to a crackdown by the Chinese government on imported recyclables. At the same time, there is a growing desire to limit the need for new landfills and reduce plastic and other waste that is ending up in waterways and oceans. Market-based tools can be a key piece of the puzzle in finding financially and environmentally sustainable solutions to our garbage woes. They represent an opportunity to make our waste management systems more efficient, saving municipalities and tax payers money. Stay tuned for a new report coming out this fall!
Check out the Ecofiscal Commission’s new course
Market-based municipal tools sound great in theory, but how about in practice? How can municipal officials take the next steps in moving toward implementing these tools?
Canada’s Ecofiscal Commission can help. With support from the McConnell Foundation, we’re offering a new course focused on Municipal Market-Based Tools for Sustainable Development. The course includes five live and interactive webinars led by experts and experienced practitioners as well as a series of self-directed, online exercises. It is aimed at municipal employees and federal and provincial employees that work with municipalities, but everyone is welcome.
With Ecofiscal Commissioners Chris Ragan, Nancy Olewiler, Justin Leroux, and Lindsay Tedds paired with municipal practitioners such as Mike Buda, Joe Pennachetti, Carl Yates, Enid Slack and Andrew Duffield. The course is guaranteed to provide unique insight and practical guidance on the selection, design and implementation of municipal market-based tools. Go to courses.ecofiscal.ca for more information and to register.
Online course: Municipal market-based tools for sustainable development
Sign up now for this new and unique Ecofiscal course, designed for municipal employees. Register today!