May 29, 2019

By Stephanie Cairns

Evidence of the value of municipal natural asset management from a growing number of Canadian municipalities provides a strong rationale to fund natural assets and their management.

The Municipal Natural Asset Initiative’s (MNAI) latest research report, Opportunities to Fund Municipal Natural Asset Management Projects, reviews six of Canada’s major infrastructure funding programs through the lens of a manager seeking to fund a municipal natural asset project. It identifies key considerations in determining project eligibility and terms of funding, alongside an easy-to-use overview of the programs.

The bottom line is that there is a growing number of substantial funding sources for natural assets. However, some eligibility requirements, such as restricting funding to tangible capital assets or minimum cost thresholds can make it more difficult to fund specific natural asset management projects than to fund engineered infrastructure.

In reviewing possible natural asset management initiatives, municipal natural asset managers will need to consider factors such as: 

• Eligible projects, including whether natural infrastructure is explicitly eligible and how defined; if the program is restricted to “tangible capital assets” as defined by the Public Sector Accounting Board; or if the program allows natural infrastructure to be considered a capital asset;
• Eligible expenditures, including if land acquisition is eligible, and if so, if the land must be converted to public lands or can remain in private ownership;
• Minimum eligible cost thresholds and maximum program contributions to eligible expenditures;
• Opportunities for project bundling and joint applications if there are minimum eligible cost thresholds; and
• Matching fund calculation and options for project stacking.

With these factors in mind, the MNAI team identified three programs with high potential to fund municipal natural asset management projects, and three where eligibility will depend more on project details.

High-potential programs

• Infrastructure Canada’s (INFC) Investing in Canada Infrastructure Program - Green Infrastructure Stream recently broadened its definition of capital assets to include natural infrastructure. This makes it a strongly viable source of funding for municipal natural asset projects. However, land acquisition is not eligible, meaning that natural assets must already be publicly owned or must be purchased through separate funding.
• The Federation of Canadian Municipalities’ (FCM) Green Municipal Fund, and the stormwater management funding stream in particular, has previously funded a variety of natural asset management projects, including restoration and rehabilitation of wetlands and forests, watershed management planning, erosion control projects, and urban natural asset planning.
• The Climate and Asset Management Network stream of the FCM’s Municipalities for Climate Innovation Program focuses on building the capacity of municipalities including locally elected officials and municipal staff, to better understand the risks and opportunities, as well as to plan and take action on climate change. It is unique in its focus on integrating climate change considerations and asset management. Natural assets clearly fall within its scope, and previous funding of a variety of natural asset management projects confirms this.

Potential funding sources where eligibility depends on details

• INFC’s Disaster Mitigation and Adaptation Fund explicitly includes natural infrastructure to provide adaptation or mitigation services to the gradual and/or sudden impacts of climate change or natural hazards, and also allows for the bundling of several sub-projects within a single watershed. However, the $20 million project threshold may present a barrier since natural infrastructure projects tend to be lower in cost than engineered projects with equivalent benefits.
• The Canada Infrastructure Bank (CIB) supports new or “greenfield” infrastructure, and large, transformative infrastructure projects with economic, social and environmental returns, and that are revenue-generating and in the public interest. Because the CIB is still establishing its specific project, economic, and investment criteria, its relevance for natural asset management is not yet determined.
• The Federal Gas Tax Fund is limited to tangible capital assets as defined by PSAB. Purchased natural assets could fit under several Eligible Project Categories, but municipalities may need to explicitly identify the ecosystem services provided by the natural asset.

To learn more, read the new Opportunities to Fund Municipal Natural Asset Management Projects report.