■ How it works: Every city maintains a complex group of operational and capital reserve funds built up over time by saving a portion of current revenues and surpluses from previous years. As a result of increased infrastructure needs, some cities are reporting they will turn to their capital reserves more aggressively to fund infrastructure (Vander Ploeg 2003).
■ Assessing the potential: The advantage of increased use of capital reserves is clear in that it enlarges the current capital financing envelope without any increase in taxation. However, reserves are nothing more than a savings account, and thus can be used only as a stop-gap measure. It is important to understand that infrastructure deficits are a structural gap as opposed to a cyclical shortfall. As such, only measures that provide permanent revenues or permanent savings can address the issue in the long-term. Further, most capital reserves have already been dedicated to funding specific capital requirements anticipated in the future. While priorities can always be shifted to accommodate new and emerging concerns, and reserves could be redirected to fund some desperately needed large onetime infrastructure projects, this would only open a gap in other infrastructure areas. In short, capital reserves cannot be viewed as a sustainable or ongoing source of funding for regular maintenance, renewal or rehabilitation of existing assets, and redirecting the resources may negatively impact other areas.