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Financing for Environmental Compliance

Planning Process Step Seven: Select Financial Options - Municipal Authority

Below is a brief explanation of several ways a community can raise capital. Please refer to the Guidebook of Financial Tools for a detailed description of 340 financial tools available to raise capital or generate revenue.

Tax

This tool usually generates significant revenue because it is imposed on a large population.

General – This tax often requires legislative approval and funds may be lost unless directly placed in a reserve account for specific environmental projects. Examples include income taxes and property taxes. 

Selective – This is a tax on a specific class of products. Funds may be lost unless directly placed in a reserve account for specific environmental projects. This tool generally raises less revenue than a general tax unless the tax rate is significantly higher. Examples include a tax on motor fuels, fertilizer, or marine fuel or vehicles.

Fee

This revenue stream is created by charging for governmental services including administrative, activity, or utility fees. The type of tool generally raises less revenue than taxes (excepting utility fees) because it is imposed on a smaller population and are periodic in nature. Full-cost pricing may help set utility rates to allow recovery of all associated costs. Examples include laboratory services, connection fees, permitting fees, tolls, and waste disposal.

Special Charge

These fees are assessed based on polluting behavior. The revenue stream can be significant and stable depending on the taxed entity. Examples include effluent discharge fees and direct water use charges. 

Fine or Penalty

This revenue stream is unpredictable but directed payments could aid in payment of capital costs.

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