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The Third Way

Municipalities search for alternative ways to fund programs and save money
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Whistler faces an end to development growth that has fuelled our economy for 20-plus years and now confronts the stark choice of continuous, unsustainable tax increases or an expansion beyond our current 61,750 bed unit cap which would undermine our journey toward sustainability. This would also significantly compromise the resort experience that makes Whistler unique.

Navigating between Scylla and Charybdis isn't so difficult if there are other revenue streams that can truly make Whistler economically sustainable. While not a panacea, the prospect of this "Third Way" certainly presents an opening in the straits; and the ability to choose the Argonauts' route through the safer but potentially more turbulent waters of Whistler's Third Way.

To give it its proper acknowledgement, "third way" is a term coined by Anthony Giddens, author of the recently published The Politics of Climate Change, and a professor at the London School of Economics - and espoused by Tony Blair and Bill Clinton as a centre-leftish political philosophy. Giddens' book suggests the difficulty of reconciling environmentalism with development demands a new political approach. New political approaches need not be the confusing, vexing odyssey one might expect if we understand the context of policy currently in place, and research and understand policy alternatives that are worth pursuing. Here's the context:

Death and Taxes

The good news is that if the trends of the last few years continue "Tax Freedom Day" will fall sometime in the middle of June. The bad news is your municipal taxes are due July second.

According to the Fraser Institute Tax Freedom Day is when the average Canadian family has earned enough money to pay the taxes imposed on it by the federal, provincial, and local Government. As Benjamin Franklin noted; "In this world nothing is certain but death and taxes." Here's how the Resort Municipality of Whistler (RMOW) tax system works:

Whistler receives around $6 million per year via the Resort Municipality Tax Transfer Program. Also known as our "financial tools," this program transfers four per cent of the eight per cent Provincial Hotel Room Tax (HRT) generated within the Resort, to the RMOW. The goal is to finance new or improved resort infrastructure and services that support the tourist economy. This tax pays for things like The Village Shuttle, Village i-Host program and events support. A little known fact is that former RMOW Chief Administrative Officer, and current Executive Director for the 2010 Winter Games office in Whistler, Jim Godfrey was instrumental in bringing about this legislation, and all municipalities that receive this tax were required to attend a session on Whistler 2020 hosted by the RMOW.

Whistler also receives around $3 million via the Hotel Room Tax Act which allows local governments to have the provincial government levy on their behalf an additional room tax of up to 2 per cent on accommodation revenues in Whistler. This tax is intended to assist in funding tourism activities, and pays for things like Tourism Whistler funding and the 2010 Games office.

Around $29.5 million a year comes via The Hercules of Municipal Taxes: Property Tax, which pays for everything else; from the Mayor and councillors' salary to keeping the lights on at the ball diamonds. It's considered a stable tax as it does not ebb and flow based on tourism visits like the two per cent tax. In a nutshell, putting "Heads in Beds" will keep fuelling the tourism engine but property taxes are what keep municipal politicians "eating their liver".

After the tax increase of 2008, Municipal Council was reminded of its own mortality and the need for a revision of the 1999 Long Term Financial Plan (LTFP) so it assembled the sagacious group that would comprise the Long Term Financial Plan Steering Committee. A body that included some of British Columbia's finest financial experts, including local experts from the private sector, government and the banking industry, with representation from Council and senior staff representatives. The Committee recognized that Whistler is limited by the community charter in how it raises revenue, but did acknowledge opportunities for revenue development that fall outside the realm of taxation: "RMOW will develop innovative approaches to service provision and revenue generation in order to meet its future financial challenges.

"RMOW has a proven track record of innovative resort governance and service provision... In the coming years, as Whistler faces new financial challenges and increased competition, this spirit of innovation will be more important than ever. RMOW will need to apply its creativity to develop new approaches to service and infrastructure provision, and to secure new sources of municipal revenue. RMOW will also expand other potential revenue opportunities for which it already has authority. Direct involvement, for example, in the development and management of commercial land in Whistler Village may represent a new, ongoing source of revenue to the municipality."

Providing municipalities with new approaches to service and infrastructure provision are the expertise of Bruce Hollands, president of Innovative Service Solutions. Hollands is a government relations and business development specialist with extensive experience in the municipal sector. He served as vice president at the Federation of Canadian Municipalities and acted as senior advisor to Ottawa Mayor Bob Chiarelli and the Canadian Water and Wastewater Association. He provided some insightful advice to Whistler to "take advantage of the economic climate by focusing on core services, contracting out as much as possible, and become catalysts for change in local economies".

Hollands went further by explaining his philosophy on infrastructure development: "I can think of two good sources of savings: greater use of design-build in capital procurement because it produces more value for money; and have the private sector deliver as much municipal services as possible - if it's in the yellow pages government shouldn't be doing it."

The first part of his comments jive well with another recommendation in the LTFP: "On a case-by-case basis, RMOW will consider public-private partnerships in place of conventional debt financing."

In fact, that's not just the opinion of Mr. Hollands, it's also provincial policy; as a condition of financing, the province insists that Public Private Partnerships (P3s) be researched on infrastructure projects over $20 million. Projects under that threshold need not investigate P3s but it would be hubristic not to, as long as appropriate metrics are in place to determine whether they are a good idea or not. What Whistler really needs to consider is adapting its development approaches to local conditions, and both the right and the left need to move from their one-size-fits-all ideological approaches.

The final part of Hollands' comment however would appear contrary to the entrepreneurial governance model Whistler has adopted.

Entrepreneurial Government

By now, "Entrepreneurial Government" should be a familiar term for Whistlerites. In October 2004, Municipal council adopted a policy to set parameters for P3s. In fact, Whistler has been on the leading edge of Entrepreneurial Government since its framework was laid out in the Vision 2002 Document. Unfortunately however, few people have a firm grasp of exactly what it means.

The concept comes from the 1994 book by David Osborne and Ted Gaebler, Reinventing Government: How The Entrepreneurial Spirit Is Transforming The Public Sector. The premise is this - people are angry at governments that spend more but deliver less, frustrated with bureaucracies that give them no control, and tired of politicians who raise taxes and cut services but fail to solve the problems we face. The book is a guide to those who want to build something better. It shows that there is a third way; that our systems of governance can be fundamentally reframed; that government can still function as efficiently and productively as the best-run businesses. They also argue that government can and must compete with for-profit business, non-profit agencies and other units of government. Reinventing Government is not a partisan book. It focuses not on what government should do, but on how government should work. As such, it has been embraced by both Liberals and Conservatives.

Hollands has read the book and concludes that "Governments must maintain the free market but establish the rules. This involves contracting out as much as possible."

As former New York State Governor Mario Cuomo pointed out: "It is not governments' responsibility to deliver services but to ensure they are delivered." While Whistler does manage to contract out some things, like concessions at our parks, and we have P3s like the Bottle Depot at Nesters, big projects are what's needed if we are to offset the burden of our property tax.

As the LTFP suggests, the best opportunity may be the development of commercial land in the village. While fraught with controversy, the concept has been used in other jurisdictions.

Last year, for example, Port Moody leased parkland for a restaurant development which contributes $200,000 a year to municipal revenues.

While entrepreneurial government has the ability to bring consensus between right and left, the idea of the municipality getting into the commercial real-estate business could be equally anathematic to both sides. The reality is that without some kind of alternate revenue generation, we'll be doomed to ever increasing taxes. The times have also changed and the fact is that governments are indeed "in business".

In a Foreign Affairs article published in May, Ian Bremmer, co-author of The Fat Tail: The Power of Political Knowledge for Strategic Investing, points out that; " Governments, not private shareholders, already own the world's largest oil companies and control three-quarters of the world's energy reserves. Other companies owned by or aligned with the state enjoy growing market power in major economic sectors in the world's fastest-growing economies. Sovereign wealth funds, a recently coined term for state-owned investment portfolios, account for one-eighth of global investment, and that figure is rising. These trends are reshaping international politics and the global economy".

Perhaps the most recent proof of entrepreneurial government is Canada's recently acquired a $10.6 billion ownership stake in General Motors, in the form of a bailout.

A "Green" Revolution

Whistler's embrace of sustainability might also be a competitive advantage. When you adopt a sustainability strategy, in principle you get more than one advantage. Being "greenest" can also mean cheapest in terms of costs to taxpayers, and it can be a competitive advantage with other destination resorts.

Another project that the RMOW has pursued is the Whistler Center for Sustainability (WCS). Ted Battiston is the WCS's Strategic Energy & Emissions Manager and he provides insights into how the Centre and Whistler's sustainability plan can both save and earn the RMOW money.

Off the top of his head he was able to list several initiatives that have achieved savings: "the Whistler town centre parkade lighting upgrades save $6,000 per year, Meadow Park Sports Center re-lamping saves $4,000 per year and switching to LEDs for the village festive lighting achieves 90 to 95 per cent energy savings (approximately $7,000 per year) in addition to substantial labour savings - approximately 100-125 man hours per year dealing with burnt out bulbs."

Battiston also added a finer point comparing these savings versus regular interest rates, "These initiatives have an Internal Rate of Return (IRR) that averages about 20 per cent - compare that to the interest, about one to two per cent on money in savings/GIC accounts, and it's not hard to see the wisdom of these choices."

As for the business case for the WCS and its potential for profit there are two important provincial initiatives, one voluntary, one legislative. The first is the Climate Action Charter, where 174 Local governments from across British Columbia have joined with the Province and the Union of B.C. Municipalities to find ways to tackle the challenges posed by climate change, pledging to significantly cut greenhouse gas emissions by 2012.

The second is Bill 27, also known as the Green Communities Act.

Battiston noted that both could be a catalyst for increases in business: The Climate Action Charter commits the RMOW to carbon neutrality in respect to its operations by 2012. WCS can also help other communities, organizations etc. with these commitments by providing the tools, experience, business case assessments etc. to help them achieve this goal.

Said Battiston, "Bill 27 is the requirement for Municipalities to include Green House Gas targets, policies and actions within Official Community Plans by May 31, 2010. Because Whistler is out in front on these initiatives, not only do we have a head start, our expertise will be sought after - it is timely that the Whistler Centre for Sustainability is now up and running to provide this expertise to other communities wishing to learn from Whistler's best practices."

More than a few pejorative comments have been made about the WCS but the reality is that investments in projects like these have the potential to increase municipal revenues directly, and offer a competitive advantage for the resort that increases business for all.

There are a myriad of other revenue sources that the Municipality can take advantage of. The last community survey noted that 80 per cent of residents felt sponsorships were a good way to increase revenues, like advertising on buses, but Whistler needs to really embrace these entrepreneurial initiatives to remain economically sustainable.

The entrepreneurial society

Co-author of The Company: A Short History of a Revolutionary Idea, Adrian Wooldridge was recently quoted as saying, "It's immensely cool to be an Entrepreneur today. When I was in school all the cool guys pretended to be in a band, now the cool guys pretend to be entrepreneurs".

Another element that will sustain the municipality long term, is fostering an entrepreneurial climate that instils investment in local business. Entrepreneurialism promotes individual creativity in business - which would support demand for local authentic merchandise - as well as economic dynamism. Businesses pay higher taxes, and thus fostering small business development will increase tax revenues.

One item that signals the birth of an entrepreneurial climate is the Whistler 2020 Economic Taskforce's support for developing a business-enabling strategy for new businesses. Its intent is to develop an expedited process (e.g. how long does it take to get a new business license as the current system is driven by an enforcement agency and not an enabling agency).

One thing policymakers can do to cultivate this idea is to pursue the idea of Small Business Incubation. Business incubation is the missing link in Whistler's economic development model, but it is often the neglected leg of the three-legged economic development stool - the other two being attracting new businesses and retaining, sustaining, and expanding existing businesses.

An incubator is essentially a facility that houses several businesses that share common costs and equipment, and it features an organization of services combined together to help nurture early stage businesses. The combination of space and common business services help to reduce the operating costs incurred for business start-up and development.

Incubators also enable start-ups to receive technical assistance, business and financial management, and retail salesmanship training opportunities, and could go as far as negotiating or subsidizing lease rates and providing opportunities for access to capital to help sustain their respective operations. Tenants are expected to graduate from the incubator within a reasonable time frame to allow others to use the service.

The incubator recoups costs by charging reasonable lease rates and fees, and charges for the use of specialized services and equipment. Businesses starting in a business incubation facility have an 87 per cent greater survival rate after three years versus an 80 per cent failure rate for businesses starting from ground zero. 

As the new Council assumes its three-year term, it is imperative that it be guided by policies that provide a tangible framework for managing the Municipality's affairs, to give the taxpayers a real sense of assurance about how the municipality performs. And the RMOW's entrepreneurial governance model remains an indispensable policy.

Keeping the property tax juggernaut under control will require setting priorities, new approaches to service delivery, and creativity in developing alternative revenue sources. What will also be required is the political will to open the Pandora's box of ideas that will keep Whistler economically sustainable.



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