Supporting Small Communities: Doubling the Small Community Grant Program Overview of the new grant allocation formula.

Supporting Small Communities:

Doubling the Small Community Grant Program

Overview of the new grant allocation formula

July 12, 2006 Supporting Small Communities 2

Grant Program Principles The new grant program seeks to balance:

Stability and responsiveness Consistent, reliable funding model Ability to project future year funding

Equity and equalization Similar sized municipalities get similar grants Reflect, and offset, differences in tax base strength

Simplicity and transparency Straightforward calculation Public data sources


Current Program Deficiencies The allocation formula is complex

Adjustments are made to the public data before use

1998 grant levels are “locked in” for some, but not all, municipalities

The allocations are therefore not responsive to changes in local conditions


2005 Allocation Distribution

-

50

100

150

200

250

300

350

400

450

500

550

- 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

Population

Gra

nt

($T

ho

us

an

ds

)


Design Goals

1. Deliver on program principles

2. Overall doubling of program

3. Minimize negative outcomes


Proposed New Formula Grant is the Sum of Three Components

Basic funding Minimum guaranteed for all under 15,000

Population based funding Peaks at 5,000 residents

Assessment equalization funding Based on comparison with municipal average


Basic Funding Starting amount of $200,000

Full funding for all municipalities with less than 15,000 residents

Partial funding for municipalities with 15,000 to 23,000 residents

No base funding for municipalities with more than 23,000 residents

Results in a significant increase against the current formula: Average grant will increase from $159,897 in

2005 to (approximately) $310,508 in 2009


Population Funding Population funding peaks at 5,000

Add $50 per capita for first 5,000 residents Maximum funding at 5,000 residents, is $250,000

Subtract $25 per capita for each resident over 5,000

Reaches zero at 15,000 residents Reduces basic funding by $25 per capita over 15,000

residents

5,000 population threshold is consistent with current formula and police costs


Equalization Funding Assessment equalization funding

$50,000 multiplied by ratio of individual to average municipal per-capita assessment

2006 average municipal per-capita assessment is just over $13,000

Granisle Qualicum Beach Whistler

Per-capita assessment $ 3,000 $ 13,000 $ 116,750

Assessment ratio13,000

3,000= 4.4

13,00013,000

= 1.0_13,000116,750

= 0.1

Equalization funding $ 220,000 $ 50,000 $ 5,000


Other Elements Use three-year data averaging

Rolling three-year average used for population and assessment data

Population and assessment data still collected and “locked in” annually

Data averaging provides stability and reduces risks associated with errors


Other Elements Use the most recent and reliable third-

party public data available

Data sources: BC Statistics population estimates, as released

annually in December BC Assessment converted value of land and

improvements, as released annually in March


Other Elements Establish a minimum grant amount

Allocations less than $100,000 reduced to zero Minimum payment is equal to ½ basic funding

amount Generally limits municipalities with more than

19,000 residents from eligibility Exception where tax base is comparatively weak

Current minimum payable grant amount is $75,000


Proposed Allocation Distribution

-

50

100

150

200

250

300

350

400

450

500

550

- 5,000 10,000 15,000 20,000 25,000

Population

Gra

nt

($T

ho

us

an

ds

)


Other Variations Considered Constrained by upper spending limit of

$50 million Three components linked by maximum

spending If increasing one component, must decrease

the other two

Base Funding

Per Capita Funding

Equalization Funding

$ 23 million $ 13 million $ 12 million


Variation 1 – Raise the Basic Additional basic funding lifts and flattens

the distribution curve Requires reductions to population and

assessment components

Maximum benefit would be gained at the small and large end of the spectrum

Very small municipalities may lose independence and fiscal discipline as transfers exceed current expenditure levels


Variation 2 – Raise the Population Additional per capita funding creates a

steeper “spike” at 5,000 Requires reduction to basic and assessment

components

Population becomes dominant factor, and population change has dramatic effects

Eliminates grants to larger municipalities with comparatively poorer tax-bases


Variation 3 – Raise the Equalization Additional equalization funding creates a

wider range of allocations Requires reduction to basic and population

components

Highly targeted equalization funding as assessment becomes the dominant factor, and small assessment change has dramatic effects.

Very small municipalities may lose independence and fiscal discipline as transfers exceed current expenditure levels


Comparison of Current to Proposed

-

50

100

150

200

250

300

350

400

450

500

550

- 5,000 10,000 15,000 20,000 25,000

Population

Gra

nt

($T

ho

us

an

ds

)


Change from Current to Proposed

-50%

0%

50%

100%

150%

200%

250%

300%

- 5,000 10,000 15,000 20,000 25,000

Population

Pe

rce

nta

ge

In

cre

as

e t

o G

ran

t A

llo

ca

tio

n


Transition Plan – Getting There The Premier promised that program would

double between 2006 and 2009 $25 million in new funding by 2009

Budget 2006 provides: 2006: $6.5 million ≈ 25% 2007: $6.5 million ≈ 25% 2008: $6.5 million ≈ 25%


Transition Plan – Getting There 2006 – Everyone wins in the first year

Current allocation + 25% of the difference

Payments under the current allocation formula were made on May 12, 2006

Additional payment in July provides 25% of the difference between the current and new formula allocations


Transition Plan – Getting There 2007-2008

Additional 25% difference increases on top of current formula allocations

Current allocation + 50% of the difference in 2007 Current allocation + 75% of the difference in 2008

Any decreases at 33% of the difference each year

2009 – New allocation formula in effect


Transition Plan – Getting There New municipalities

Treated like all other municipalities Current allocation + 25% of the difference in 2006 Current allocation + 50% of the difference in 2007 Current allocation + 75% of the difference in 2008 New formula allocation in 2009

Current formula using zero as 1998 grant

Current allocations in 2006 through 2008 based on annually updated data


For more information Media Contact:

David Crebo, Communications Manager Phone: (250) 356-6334 Email: [email protected]

Municipal Staff Contact: Contact your Financial Analyst

www.mcaws.gov.bc.ca/lgd/infra/munrdist.htm

Supporting Small Communities: Doubling the Small Community Grant Program Overview of the new grant allocation formula.

Documents