March 2004 · Volume 86 · Number 2

50 (and More!) Creative Financing Tools for Local Government 

David Borak and Barry Burton 
Financially, the past year has been a difficult one for local governments. After a plunging stock market (the biggest drop since 1929–1932),[1] state and local governments saw their budgets shrivel as state budget gaps grew to nearly $200 million since fiscal year 2001.[2] As a result, local governments were forced to rely on the innovative financing tools that have always been the mainstays for local government managers.
Conference planning committee members were aware of this when they were shaping the program for ICMA’s 2003 annual conference. At the planning meeting, an often-raised topic was the numerous financial problems facing communities. While brainstorming about the type of session to have on this topic, committee members decided that, because each community and situation is unique, it would be beneficial to provide a session at which professionals could pick and choose from various financing tools that could apply to their individual situations.
Thus, the “Fifty Creative Financing Tools” session was born. Bearing in mind the success of the Marketplace of Ideas concept and the County Administrators’ Ideas Exchange, the authors—who were working as session managers—hoped to tap into the vast collection of experience of everyone in attendance and actually generate 50 tools to add to a local government manager’s repertoire. In actuality, we generated 70 ideas.
From the Beginning
When ICMA held the “Fifty Creative Financing Tools” educational session at its conference in Charlotte, although some participants came to the session looking for a handout with 50 tools listed, most liked spending an hour and a half devising the list. The session was organized as a group of roundtable discussions, with samples of creative ideas already prepared as a guide. Following a brief introduction and explanation of the format, participants were put to work brainstorming ideas at their tables and then recording them on blank forms.
Some participants were invited to share their examples with the audience. The forms were collected and posted in their raw form on ICMA’s Web site, at icma.org, for members to review and use. For this article, the ideas have been fleshed out and then grouped into various categories in order to make them easier to read. If you see an example of an innovative financing tool that may be of interest to you, contact the person listed for additional information.
This session would not have been successful without the help of “table leaders” William Keegan, Jr., town administrator, Dedham, Massachusetts; Samuel Finz, city manager, College Park, Maryland; Karl Rectanus, director of East Coast Operations, eCivis, Washington, D.C.; and Donal O’Donoghue, county manager, Galway County Council, Ireland, who worked extensively preparing for the conference and then helping to facilitate the session. And obviously, there would be no innovative financing tools without the 125 participants at the session. Their contributions are the reason we have this toolbox.
The financing tools have been grouped into these categories:
•	 Property management 
•	 Privatization 
•	 Shared/shifting responsibilities 
•	 Sponsorships 
•	 Public works 
•	 Police/fire department management 
•	 Capital finance and fees 
•	 New/matching funds 
•	 Auditing 
•	 Health care cost management 
•	 New technology 
•	 Other tools 
The authors hope the ideas that were generated and that are here summarized—in this and a following article—will help administrators to address the complex financial issues in their own communities.
Property Management
1. Although general funds were fully committed to regular operations, citizens desired a new initiative to acquire open space. Ipswich, Massachusetts, created a special revenue fund to which the newly approved taxes were dedicated. This included a room occupancy or motel use tax, current-use rollback penalty taxes, and cell-tower leasing revenues. This resulted in an accrual of $50,000 to $100,000 per year for land acquisition.
The citizens also voted $10 million in general-obligation (GO) bonds for open space and approved zoning incentives with open-space funding if opted by a developer—although there was some citizen resentment over this because it was viewed as an “elitist activity.” Contact: G. E. Howe, Town Manager, Ipswich, Massachusetts, 978/356-6609; e-mail, gehowe@town.ipswich.ma.us.
2. When counties acquire property through treasurer’s deeds, which is provided statutorily in Colorado, the property obviously becomes tax-exempt. Tax districts lose revenue, as does the county. Such property is an asset that can be sometimes overlooked. La Plata County, Colorado, recently disposed of 18 such properties that otherwise had no public benefit through a public bid process soon after acquiring the properties. The sale, which raised about $250,000, had four benefits: revenue was generated for taxing entities that had received tax payments on the properties for years; the county’s portion of the sales proceeds provided a source of revenue for its affordable housing revolving loan fund; the sale provided an opportunity for community members to purchase property at a reasonable price; and the properties were placed back on the tax rolls. Contact: Joanne Spina, Assistant to the County Manager, La Plata County, Colorado, 990/382-6211; e-mail, spinajm@co.laplata.co.us.
3. To assure future maintenance of stormwater basins and other common-area improvements in subdivisions, the village of Carpentersville, Illinois, created a special service area (SSA). The SSA covers the subdivision land area. Carpentersville enacted an SSA property tax to pay for maintenance, should the homeowners’ association not do so. The SSA is dormant until needed. As a result of its formation, basins and plants are kept mowed and clean. Contact: Craig Anderson, Village Manager, Carpentersville, Illinois; 847/551-3475; e-mail, canderson@vil.carpentersville.il.us. 
4. To prevent the loss of a top-10 sales tax–generating company—an auto dealership—the village of Northbrook, Illinois, supported land assembly and improvement costs to allow the business to expand in place. An incidental benefit was improvements to adjacent properties that were in decline. The incentive was a rebate of 50 percent of the sales-tax growth over a base year that was the highest in record. Total reimbursement is capped at the actual cost of land and improvements.
As a result, business was retained; there was significant private investment, which included raising property assessments and revenues to tax-capped school districts; and consolidation and improvement of substandard properties took place. The dealer privately claims that it will take a century to get his money back but is publicly grateful for the deal. Contact: John Novinson, Village Manager, Northbrook, Illinois; 847/272-5050, extension 220; e-mail, novinson@northbrook.il.us.
5. Milton, Massachusetts, was able to convert a landfill from a liability into a revenue source. A state-ordered closure of the landfill was estimated to cost $9 million. The town provided a long-term (50-year) lease to developers, who capped the landfill according to state regulations and built a 27-hole golf course. There was no cost to Milton, and the lease provides a percentage of golfing revenues to the town. Also, because 18 of the 27 holes are located across the town line in the city of Quincy, this was a joint cooperative strategy pursued by both local governments. Contact: David Owen, Town Administrator, Milton, Massachusetts; 617/696-5656; e-mail, dowen@townofmilton.org.
6. Lexington, Massachusetts, faced the closure of a public landfill at a significant cost (estimated at $5 million). The town requested and received permission from the Department of Environmental Protection to close the landfill through applicable hazardous waste regulations rather than solid waste regulations. This gave the town greater flexibility in tailoring an environmentally protective solution at a lower cost. This approach brought huge savings for the town: $450,000 in costs instead of the estimated $5 million. Contact: Michael Young, Budget Officer, Lexington, Massachusetts; 781/862-0500, extension 278; e-mail, myoung@ci.lexington.ma.us. 
7. The airport in Grande Prairie, Alberta, Canada, risked being shut down by the federal government if there was no local interest. For this reason, the city took ownership of the airport and appointed a commission to run it. As a result, the airport is successful, and profit is turned into improvements and into a return to the city each year. Contact: Bill Walker, Protective Services Director, Grande Prairie, Alberta, Canada; 780/538-0399; e-mail, bwalker@cityofgp.com.
8. Vineland, New Jersey, faced the challenge of adding 49 square miles of territory to the existing 29 square miles for its generating electric utility. When the surrounding utilities attempted to merge, Vineland blocked the merger in court until there could be a resolution of its legal challenge to take over the territory. The city negotiated the purchase in return for dropping the court challenge. In the end, it bought territory for $23.9 million (at 5 percent interest), which provided profit from the first day. Contact: Paul Trivellini, Business Administrator, Vineland, New Jersey; 856/794-4000; e-mail, ptrivellini@vinelandcity.org. 
Privatization 
9. Sturgeon Bay, Wisconsin, had a need to offset escalating tipping fees and diminishing landfill space, ensure the availability of a long-term waste disposal outlet, and stabilize its expenditures for solid waste disposal. The city privatized the ownership and operation of the municipal-owned solid waste transfer facility, negotiating a long-term contract for tipping fees, along with a royalty for nonlocal waste brought to the transfer station.
This move brought $1.5 million in savings over 20 years, returned property to the tax rolls, reduced tipping fees, and provided a royalty (surcharge) to the city. Contact: Jay Krauss, City Administrator, Sturgeon Bay, Wisconsin; 920/746-2903; e-mail, cityadministrator@sturgeonbaywi.org.
10. To support the ongoing operation of arenas, local governments should consider selling naming rights. That is, for a fee, a specific room within the arena and/or the facility is named. These names can last for specific time frames. Some examples in Grand Prairie include the Coca Cola Center (10-year agreement; $400,000 total income); Crystal Center–Bowies ($500,000 contributed toward contamination costs); and the Wapiti gravel soccer fields (10-year agreement; $10,000 per year). Contact: Bill Walker, Protective Services Director, Grande Prairie, Alberta, Canada; 780/538-0399; e-mail, bwalker@cityofgp.com. 
11. Facing a resource deficit in the timely provision of public utilities, Galway County, Ireland, devised a public/private partnership contract for utility provision/maintenance operation. As a result, there was fast-tracking of utility provision by use of private finance, transfer of risk from public authority, and a reduction in overhead of planning/construction staff. A negative result was the charges for use of the utility to repay private investment. Contact: Donal O’Donoghue, County Manager, Galway County Council, Ireland; 353/915-0900; e-mail, comanager@galwaycoco.ie.
Shared/Shifting Responsibilities
12. To mitigate the impact from the rising costs of insurance, accidents, and injuries, local governments can join together to form intergovernmental risk pools. These municipal risk pools are owned and governed by their members and provide a method to insulate themselves from the erratic pricing cycles of the commercial insurance industry. Pooling results in lower insurance costs, enhanced risk management policies and training opportunities, fewer injuries and accidents, and an overall lower and more stable cost of risk. Contact: Dan LeTourneau, Director of Risk Management Services, Intergovernmental Risk Management Association (IRMA); 630/458-4448; e-mail, DanL@IRMArisk.org.
13. There was a lot of overlap in job duties for various communities and entities, so Wickenburg and the state of Arizona Department of Transportation developed a work trade program. The city performs cleanup on state highways, which builds up credit with the state. Similarly, the state does reciprocal work for the city. In this way, there is no overlapping of roadwork, and work gets done without changing hands. Contact: Shane Dille, Town Manager, Wickenburg, Arizona; e-mail, sdille@ci.wickenburg.az.us.
14. Trenton, Michigan, and Grosse Township, Michigan, required a new financial management system. The cost of a system for both communities represented close to a $1 million investment. The communities made an intergovernmental agreement to jointly buy hardware and software and to share the operations and maintenance (O&M) costs. This has resulted in a 50 percent cost savings for each community, plus each community saves annually on O&M costs. Contact: David A. Mekarski, Village Administrator, Matteson, Illinois; 708/283-4916; e-mail, dmekarski@vil.matteson.il.us.
15. The SouthCom Combined Dispatch Center was formed as part of a three-community consortium to “resource” dispatch for all three government authorities. This cut the cost of dispatch into thirds, opened the door for federal and state aid, and allowed the introduction of a higher level of technology. Contact: David Mekarski, Village Administrator, Matteson, Illinois; 708/283-4916; e-mail, dmekarski@vil.matteson.il.us.
16. To deal with increasing costs for interfacility paramedic transports, Delafield, Wisconsin, entered into an agreement with a local hospital to pay for transferring patients from one hospital within its system to other regional hospitals. This action increased revenues by $130,000 net annually, added 1.5 full-time employees to paramedics staffing, and opened a dialogue with a neighboring community to consolidate fire and emergency medical services departments. Contact: Matt Carlson, City Administrator, Delafield, Wisconsin; 262/646-6220; e-mail, mcarlson@ci.delafield.wi.us. 
17. Agencies with similar needs often pay money separately to cover these needs. In an example of cooperation, Prairie Village, Kansas, and the county school district have partnered to build a school district office and to revitalize the downtown, while the county operates the juvenile intake center, which puts more officers out on the street and ends the need for multiple facilities. Contact: Doug Luther, Assistant City Administrator, Prairie Village, Kansas; 913/385-4603; e-mail, edluther@pvkansas.com. 
18. To combat revenue shortfalls, Novato, California, began in-house production of passports for the general citizenry. The city assigned department responsibilities for photo taking, forms, production, and the like, with little additional costs to the city. The program raised approximately $10,000 annually in extra revenues to cover shortfalls from other declining revenue sources. Contact: Rod Wood, City Manager, Novato, California; 415/897-4311; e-mail, rwood@ci.novato.ca.us. 
Sponsorships
19. To improve the revenue-to-cost ratio of conventional transit operations and to reduce the net cost of transit to the municipality and the taxpayers, the city of Burlington, California, implemented a comprehensive bus advertising program. The contracts for bus advertising include complete bus wraps; front, side, and rear exterior advertising; interior advertising; and shelter ads. The advertising itself must meet council-approved standards. One additional benefit of the bus advertising program is that it is an affordable alternative for local businesses that want to promote themselves. Contact: Mickey Frost, Transit Manager, Burlington Transit, Burlington, California; 905/335-7845; e-mail, frostm@burlington.ca.
20. Local governments can implement a sponsorship policy, and they often have communication tools, particularly government-access television, that could benefit from sponsorships (not advertising). Like the Public Broadcasting System, in which programs are sponsored in part by specific companies, this policy is a potential generator of revenue and an opportunity for the local business community to “advertise” at relatively low cost. Contact: Maria VanderKolk, Assistant to the City Manager, Arvada, Colorado; 720/898-7507; e-mail, maria-v@ci.arvada.co.us. 
21. Old bus shelters were in need of replacement at a significant cost. In a publicly bid concession agreement, the city of Chicago, Illinois, received, at no cost, the fabrication, installation, and ongoing maintenance of bus shelters and other street furniture, as well as $307 million over the term in exchange for advertisement on shelters. (The street furniture, designed by Robert Stern, is world-class.) This agreement has enhanced the city image and revitalization plans and provided revenue. Contact: Thomas Crothers, Deputy Chief of Staff, Office of the Mayor, Chicago, Illinois; 312/744-1803; e-mail, tcrothers@ci.chi.il.us.
Public Works
22. Tucson, Arizona, charged the wastewater fund a 3 percent franchise fee like any other private utility, which generated close to $100,000 in revenue. Contact: Mike Letcher, Deputy City Manager, Tucson, Arizona; 520/721-7101; e-mail, MLetche1@ci.tucson.az.us.
Some participants were invited to share their examples with the audience. The forms were collected and posted in their raw form on ICMA’s Web site, at icma.org, for members to review and use. For this article, the ideas have been fleshed out and then grouped into various categories in order to make them easier to read.
23. In addressing reduced revenue for the general fund plus increased general-fund costs for personnel, pensions, and health insurance, the village of Roselle, Illinois, considered adding a stormwater management fee (based on lot size) on water/sewer bills to cover costs previously paid by the general fund (e.g., street cleaning, inlet cleaning, stormwater inlets, curbs). This fee could enhance the general fund and address the increasing federal demand for treatment and filtering of stormwater. Contact: Robin Weaver, Village Administrator, Roselle, Illinois; 630/671-2810; e-mail, rweaver@roselle.il.us.
24. Fresh water being a valuable commodity in all of Florida, the city of Apopka became one of the first cities in the state to implement an impact fee for reuse water (i.e., treated wastewater that can be used for irrigation purposes). At the same time that this fee was implemented, a reduction in the impact fee for potable water was passed for those customers using both water and reuse water. The total of the two impact fees does exceed the cost of water without reuse, but the city is also installing two separate systems.
The use of reuse water for irrigation is encouraged because it helps to replenish the aquifer through natural purification. This plan allows citizens to have fewer restrictions on watering their yards and plants, reduces the amount of water that the city pumps from the aquifer, and augments the natural replenishment of the aquifer. Finally, the impact fee provides funding for the city to expand on the system. Contact: Ron Landon, Director of Human Resources/Budget Director, Apopka, Florida; 407/703-1743; e-mail, rlandon@apopka.net.
25. The village of Brown Deer, Wisconsin, needed funds to provide for stormwater management, so, instead of paying for stormwater-related expenditures with general property taxes, it founded a stormwater utility. The impacts of this move shifted the cost of providing stormwater management to properties that generate stormwater runoff and therefore became a new source of financing. Contact: Russ Van Gompel, Village Manager, Brown Deer, Wisconsin; 414/371-3050; e-mail, rvg@vil.brown-deer.wi.us.
If you see an example of an innovative financing tool that may be of interest to you, contact the person listed for additional information.
26. Dirt was affecting the storm sewer, and the city of Farmington, Utah, needed additional street sweeping. The city executed a street-sweeping fee on new development to pay a portion of the costs. The fee guaranteed one street sweeping per month, which meant clean streets and clean catch basins. Contact: Max Forbush, City Manager, Farmington, Utah; 801/451-2383; e-mail, mforbush@farmingtonut.com.
27. Smithfield, North Carolina, faced the challenge of how to meet state and federal mandates for cleaning up waterways and reducing nitrogen levels. The town plans to assess a stormwater fee based on the amount of impervious area for residential, commercial, and industrial sites. This fee would be a mechanism with which to collect a monthly fee addressing storm-drain problems, to replace tax money to pay off existing debt, and to force the capital plan to address stormwater problems. Contact: Pete Connet, Town Manager, Smithfield, North Carolina; 919/934-2116; e-mail, ptconnet@aol.com. 
Coming up: The categories of police/fire department management, capital finance and fees, new/matching funds, auditing, health care cost management, new technology, and other tools will conclude this article in the April issue of PM.
[1] David Wyss, Chief Economist, Standard & Poors, “After the Recession: The Shape of the Economy,” Presentation at ICMA’s Annual Conference, Charlotte, North Carolina, September 23, 2003. 
[2] Fiscal Storm Shows Signs of Subsiding,” National Conference of State Legislatures (NSCL) News, November 21, 2003, http://www.ncsl.org/programs/press/2003/pr031121.htm. 

David Borak is a project manager at the International City/County Management Association (ICMA), Washington, D.C., and a track manager for ICMA’s annual conference (dborak@icma.org). Barry Burton is county administrator, Lake County, Illinois, and was the facilitator of the “Fifty Creative Financing Tools” conference session.