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Appendix F: Funding Technique Pros and Cons <br />Technique <br />Pros <br />Cons <br />Franchise Fees <br />Everyone, including tax exempt <br />organizations, pay for the roads <br />Considered regressive because everyone <br />pays the same amount, regardless of income <br />Stable and sustainable revenue source <br />Political feasibility can be difficult given the <br />political makeup of the council and <br />community <br />Because of the large tax base (renters, <br />homeowners, nonprofits, schools, etc.), the <br />franchise fee is often adequate to cover road <br />costs <br />The fee is predictable and can be kept low <br />for residents <br />Special <br />Assessment <br />Benefitting properties pay for larger share of <br />road costs <br />Hard change to the special assessment <br />formula from one year to the next because <br />people feel like it is not fair <br />Expensive for those assessed <br />Incurs interest debt <br />Burden placed on the city to prove that the <br />benefits of the project outweigh the costs; <br />leads to a costly legal process for cities <br />Property Tax <br />Reliable, major revenue source <br />Tax amount bears little to no correlation to <br />road usage <br />Taxes can be levied at people's ability to <br />pay, creating an equitable tax (equity <br />defined as those with higher income pay <br />more and vice versa) <br />Property tax flows to general fund and <br />general fund used to pay for roads; if <br />property tax is inadequate, other general <br />fund money is needed <br />Property tax rate can shift dramatically over <br />a short period, making it unreliable <br />Bonds <br />Secure investments, easy to sell <br />Lower rate of return as there is less risk <br />involved in the bond defaulting <br />Money earmarked for specific projects <br />Bonds must be paid back with interest <br />Most government bonds are tax exempt, <br />saving you a good portion of money on the <br />project you are trying to accomplish <br />Periods of recession could cause defaulting <br />of bonds due to slumping tax revenues <br />Other Sources <br />MSAS funds allows cities to access funds <br />from the state gasoline tax to supplement <br />local funding streams <br />Other than MSAS, substantial funds <br />generated from other sources are rare and <br />unreliable <br />24 <br />