How we fund capital projects

The City's capital projects are funded by operating revenues, development contributions, and partner contributions using a balanced mix of payment methods, such as capital reserves, pay-as-you-go, and debt.

Like most major Canadian cities and other levels of government, the City uses debt in its mix of payment methods, allowing for capital projects to be paid over time.

We take a very careful approach the use of debt, repaying our debt over ten years while always ensuring a balanced operating budget. Our strong credit ratings and favourable borrowing rates reflect this careful approach.

Who pays for capital projects

The 2015-2018 Capital Plan is funded by the three sources.

Property tax and user fees

Property tax, user fees, and other operating revenue, such as utility fees (water and sewer fees) and parking revenue, fund a majority of capital projects.

Contributions from development

Contributions from development, including development cost levies (DCLs), community amenity contributions (CACs), and connection charges, partially fund new and expanded amenities and infrastructure needed for growth, which is consistent with the City’s Financing Growth Policy adopted in 2004.

Contributions from other partners

The City receives contributions from other partners, including the provincial and federal governments, and non-profit agencies, foundations, and philanthropists in the area of childcare and affordable housing.

How we pay for capital projects

There are three payment methods we use to fund a variety of large and small capital projects.

Capital reserves (pay in advance )

About 40% of all of the City's capital projects are paid using capital reserves. 

Capital reserves are savings accounts used to accumulate funds from revenue or other sources over time for future projects.

This type of payment method helps fund a project when other partners are involved, and we wish to make clear our commitment is protected. In other cases, the commitment is made as part of a community planning process and funded through development fees, but the timing of the project may not occur for a significant period of time. 

Pay-as-you-go

Pay-as-you-go provides funds for capital projects using current revenue and/or fees or other sources. It is used for some of the City’s utility renewal – something that all taxpayers benefit from – such as water infrastructure.

Pay-as-you-go helps residents and businesses contribute on an ongoing basis to projects that are fundamental to the health of the city, and it ensures our borrowing capacity is preserved for important projects that are not appropriate or too costly when using pay-as-you-go.

Debt

Just over a third of the City’s capital projects are funded by debt. Careful borrowing allows payment over a longer timeframe and ensures that more residents and businesses that benefit from the project actually participate in paying for it.

When used strategically, paid back within a short timeframe (10 years), and within best practices for responsible borrowing, capital debt allows us to continue to renew our infrastructure on a regular basis and add to it when necessary to accommodate growth while maintaining our fiscal health.

Types of capital projects and how we fund them

Projects funded by property tax and user fees

  • Future equipment purchases (funded by operating revenue set aside in capital reserves)
  • Replacement of water infrastructure (funded by water fees as a pay-as-you-go payment method)
  • Repayment of debt used to finance replacement of facilities (funded by property tax and user fees)

Projects funded by contributions from development

  • The City’s future acquisition and construction of a new park space (funded by developer contributions through DCLs or cash CACs, which are set aside in capital reserves)
  • New water infrastructure during a redevelopment project (funded by developers on a pay-as-you-go basis through connection charges )

Projects funded by contributions from other partners

  • Construction projects on the Major Road Network (MRN) (funded by Translink to the City on pay-as-you-go basis)
  • A seniors facility (funded by the federal and provincial governments, matched by funding in a City capital reserve)

We want to hear from you

capitalplan@vancouver.ca