This paper aims to inform future policy by providing a critical analysis of grassroots finance models. It argues for more locally centred and driven sustainable development but also considers the limitations: What are the critical challenges of participation, scale and the translation of savings into development resources? By concentrating on activities with a high degree of community leadership, this paper looks at the challenges of shaping localised arrangements to fit with structured development programming.

On the afternoon and evening of July 8, 2013, heavy rains flooded parts of Mississauga, disrupting the lives of residents and damaging public and private property. The stormwater management system in the city proved inadequate to meet the levels of runoff experienced on that day. Mississauga is not the only city in this situation. In 2007, the Federation of Canadian Municipalities estimated that the stormwater management infrastructure deficit across Canada stood at approximately $31 billion. The Ontario Ministry of Public Infrastructure Renewal (now the Ministry of Economic Development, Employment and Infrastructure) estimated in 2005 that between 2005 and 2020, water infrastructure needs in the province would require investments of $28 billion for capital renewals, $12.4 billion to reduce asset and project backlogs, and $10.1 billion for growth. Stormwater management infrastructure controls the quality and quantity of stormwater that reaches water bodies and protects the health, safety, and sustainability of public and natural environments. The July 8 storm highlighted the need to direct significant amounts of financial and political capital towards municipal infrastructure management. This paper evaluates the financial tools available to fund stormwater infrastructure (property taxes, development charges or cash-in-lieu payments, grants, borrowing, and user charges), and proposes user charges as the most appropriate. User charges are fees earmarked to specific projects or services. They are based on a benefits-received principle, and are considered a fair form of revenue, because the beneficiaries of a service are directly charged for their consumption of that service. Further, user charges are a dedicated and stable funding source based on clear objectives related to the city’s stormwater infrastructure needs. None of the alternative funding tools offers the same combination of stable and predictable revenues and fair pricing. The paper also describes how the City of Mississauga is currently implementing a user charge dedicated to stormwater management, with billing introduced in early 2016.

The multi-faceted problem of local government finance has attracted increasing attention in the new millennium. The reasons for the renewed interest in this thorny question are comparatively straightforward. In the first place, for the past two decades all public sector institutions have been profoundly affected by the twin revolutions simultaneously sweeping the world – the globalization of the international economy and the information revolution wrought by the computer age – and local government is no exception. Not only have these inexorable forces had dramatic implications for the structure of government as a whole, and relationships between the different tiers of government, but also for service provision and public finance, including local public finance. Secondly, substantially heightened demands on local government, together with limited access to adequate funding, have seen the genesis of a deepening crisis in the financial sustainability of local government entities.

A striking feature of local government reform in many Commonwealth countries has been a heavy reliance on structural reform, often in the form of forced local council amalgamation. This paper argues that the long-run success of structural change in local government hinges on several key factors, not least that voluntary rather than compulsory council mergers have a far greater chance of success. A second key ingredient resides in a high degree of local autonomy in both the composition and operation of decentralized governmental functions. A third vital factor lies in ensuring that revenue and tax assignment is sufficient to provide local government with financial autonomy. Finally, adequate powers of taxation need to be accorded to local government and this requires careful consideration of the types of taxes most suited to local government.