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Supporting Small Communities: Doubling the Small Community Grant Program

Supporting Small Communities: Doubling the Small Community Grant Program. Overview of the new grant allocation formula. Grant Program Principles. The new grant program seeks to balance: Stability and responsiveness Consistent, reliable funding model Ability to project future year funding

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Supporting Small Communities: Doubling the Small Community Grant Program

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

  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 Supporting Small Communities

  3. 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 Supporting Small Communities

  4. 2005 Allocation Distribution Supporting Small Communities

  5. Design Goals • Deliver on program principles • Overall doubling of program • Minimize negative outcomes Supporting Small Communities

  6. 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 Supporting Small Communities

  7. 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 Supporting Small Communities

  8. 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 Supporting Small Communities

  9. 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 Supporting Small Communities

  10. 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 Supporting Small Communities

  11. 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 Supporting Small Communities

  12. 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 Supporting Small Communities

  13. Proposed Allocation Distribution Supporting Small Communities

  14. 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 Supporting Small Communities

  15. 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 Supporting Small Communities

  16. 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 Supporting Small Communities

  17. 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 Supporting Small Communities

  18. Comparison of Current to Proposed Supporting Small Communities

  19. Change from Current to Proposed Supporting Small Communities

  20. 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% Supporting Small Communities

  21. 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 Supporting Small Communities

  22. 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 Supporting Small Communities

  23. 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 Supporting Small Communities

  24. For more information • Media Contact: • David Crebo, Communications Manager • Phone: (250) 356-6334 • Email: david.crebo@gov.bc.ca • Municipal Staff Contact: • Contact your Financial Analyst • www.mcaws.gov.bc.ca/lgd/infra/munrdist.htm Supporting Small Communities

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