Top Benefits of Examining Non-tax Revenues

1. De-stress the budget process.

Finance staff often balance municipal budgets within Council-approved tax targets by accepting the challenge on the expense side. And it’s worked, but past effectiveness makes the task seem manageable the next year, while the law of diminishing returns suggests it is less and less the case. Meanwhile, it’s harder to get warning signals to register politically each year staff handle a gap through cost control and the pressure on staff to pull it off again heightens.

Eventually, staff-led cost-control won’t be enough. At that point, the budget challenge returns to Council for a political decision: Higher taxes, service changes or more non-tax revenues.

Accepting that there are limits on staff’s ability to shrink expense to fit a tax target that no number of evenings and weekends pouring over spreadsheets can overcome is setting a healthy boundary, one that’s badly needed in Finance during budget season.

2. You’re richer than you think.

It’s no secret politicians like announcing new money and prefer staff lead on revenue.

It works out differently for municipalities than for other governments though: To paraphrase Wayne Gretzky, when staff mirror modest political interest in revenue, municipalities ‘miss 100% of the money they aren’t looking for.’ Asked about how much time her municipality spends examining non-tax revenue options in the lead-up to budget launch, one Treasurer reported, “About 5%.”

In budget deliberations, the combination of peak workload for staff and a somewhat passive revenue posture on Council that’s reflected in management can imply that ‘there aren’t real alternatives to what we do now.’

But by not looking, municipalities can’t know how much they’re leaving on the table.

If you’re planning to take a different approach to revenue this cycle, facilitating a discussion resulting in Council support for criteria staff should use to determine the kinds of revenue proposals that make it into the proposed budget is a useful step. It confirms Council readiness to make a decision and narrows the workload, eliminating any time spent on options that there is no political will to implement. Common criteria include potential yield, time and cost to implement and whether opportunities present one-time or recurring revenue streams. Incidence and connection to Council priorities are others we recommend.