Infrastructure funded by user fees is less problematic than infrastructure funded through the tax base because user fees are attached or earmarked for specific services. This is one reason why municipal utilities are typically in better condition than other forms of infrastructure (Vander Ploeg 2003). Since it is much easier to finance infrastructure improvements in areas that can be funded through user fees, an obvious innovation is to expand the amount of services and infrastructure to which fees are attached.
■ Create new self-financing utilities out of tax-based services: Undertaking an inventory of existing services currently financed by taxes and conducting feasibility studies to see which services can be converted into self-financing utilities through user fees can free up room within the tax base for reinvestment elsewhere. Cities across western Canada are now beginning to explore this option quite vigorously. For example, Vancouver converted its sewer operations into a utility in fiscal 2000. In that year, only 22% of the costs were derived from user fees with the rest covered by general property taxes. By 2001, the utility expected to be financed 45% by user fees. Unlike many other cities, Vancouver also runs its solid waste operations as a completely self-financing utility. In 2003, the City of Edmonton converted its storm water drainage services into a new utility operation.
Winnipeg has been the most aggressive city when it comes to this approach. In the late 1990s, the City undertook a review of some 195 municipal services to identify which ones could be delivered through user fees and even serve as possible candidates for delivery outside of government (City of Winnipeg 2000). To date, three "special operating agencies" (SOEs) have been created including animal services (2000), the materials services branch of the public works department (2001), and golf services (2002). All of these are now operated as separate business units.
■ Consider charging differential fees for non-citizens: Given that outsiders often use a number of city services but pay taxes elsewhere, a strong case can be made for charging differential fees to non-residents. The approach may only be practical for those services where users can be easily identified (e.g., recreation facilities). Driver's licenses or a "civic citizenship card" could be used to separate those who should pay less and those who should pay a premium for accessing certain services. Calgary follows this approach with its library fees - non-residents pay higher user fees for library services than citizens of Calgary.