Funding Strategy for Mitigation Projects

Below is a partial list of local, state and regional, federal, and non-governmental funding sources that can be leveraged to support the implementation of local mitigation activities.

Sources of Local Revenue

Local sources of revenue are funds typically generated by activities or constituents within a jurisdiction. The range of local funding sources available to communities depends on state and local context and legal environment. When determining which revenue sources to use in your community, it is important to recognize the conditions in your jurisdiction and identify if other limiting factors and/or opportunities exist. Consulting an attorney about the legality of any new funding source is recommended.

Taxing

The most common source of funding for local governments is tax revenues. These include property tax, sales and excise tax, income tax, and an assortment of other taxing structures, such as a lodging tax. Communities can choose to collect and remit their own sales tax if they are governed by a home rule charter, or work through the Colorado Department of Revenue. The Colorado Sales and Use Tax System (SUTS) is a tool to assist communities with the collection, tracking, and remittance of funds.

The type of taxes available to local governments is determined by each state’s constitution. In Colorado, the Taxpayer Bill of Rights (TABOR) severely restricts the amount of revenue a state or local government can retain and spend. TABOR restricts revenue growth by limiting how much total revenue can be retained by state and local governments each year unless the limits are waived by voter approval to levy any new taxes or increase tax rates.

Example: Taxes to Support Mitigation in Boulder County, Colorado

Sustainability Tax. 

In November 2016, voters approved the Sustainability Tax ballot initiative to allocate a portion of sales and use tax revenue to fund sustainability infrastructure and programs. Of those Sustainability Tax funds, $305,000 has specifically been set aside for sustainability-focused initiatives that will address the priority needs of local farmers and agriculture producers. Also, the tax revenue will fund Boulder County’s Sustainability Matching Grant Program. With the sales tax revenue, the county was able to raise the dollar amount on its Environmental Sustainability Grants to towns and cities, previously capped at $15,000.

Open Space Tax. Boulder County residents have approved various sales taxes to support the preservation of open space purchases, the management and conservation of native habitats, and recreational opportunities. The combined countywide open space sales and use tax is 0.6%.

Incentives

Fiscal and resource incentives such as providing permit fee waivers, expedited approvals, and tax rebates in exchange for mitigating disaster risks can be effective tools to help stimulate private investment in achieving the communities’ hazard mitigation goals and as such, act as a match to reduce the cost of investment to the local jurisdiction.

Cost Saving Strategies

Tools and techniques that can help reduce costs or stretch budgets include cost-sharing, purchasing cooperatives, strategic alliances, consolidation, and outsourcing. For example, different departments may coordinate on spending for capital projects, or neighboring cities may pool funding for large-scale mitigation projects to benefit many jurisdictions.

Development Impact and User Fees

Communities impose development impact and user fees to pay for the cost of programs or facilities that reduce the negative impacts of an activity or specific business on a community. Fees are charged to ensure that those benefiting from an activity pay their fair share of the costs related to that activity.

Fee examples include:

• An impact fee is a direct charge levied by a local government on a new or proposed development project to help offset the cost of new growth. These fees provide city funding for capital projects and public services, such as roads, schools, parks, and utilities to the development.
• A mitigation fee is charged to reimburse or compensate the community for the negative impact that development may have on the community. It is often used to help preserve a component of the local environment.
• A utility fee is a direct charge or fee imposed on individual users of services. Stormwater and transportation are common utility fees.

Borrowing

Major capital improvements are often funded through municipal bonds, loans, or a combination thereof. Municipal bonds are debt securities issued by states, cities, counties, and other governmental entities to fund day-to-day obligations and to finance capital projects such as streets, roads, bridges, sewer, and water systems.  Bonds usually carry a lower interest rate than other types of funding; therefore, it is an attractive way to pay for large infrastructure projects. In Colorado, issuing new debt is subject to voter approval, unless the recipient is an enterprise fund (see below). Loans can be acquired through banks and lending institutions or can come from state entities in the form of a revolving loan fund.

Enterprise Fund

A TABOR enterprise fund is defined as a “government-owned business authorized to issue its revenue bonds and receiving under 10% of annual revenue in grants from all Colorado state and local governments combined (Colo. Const. Art. X, § 20).” In other words, if the fund receives less than 10% of its funding from state and local tax sources, it is considered an enterprise fund for that year. Enterprise funds are not subject to TABOR revenue limits at the local level and can also issue new debt through bonds without voter approval.

TABOR: A guide to the Taxpayer’s Bill of Rights, a publication by the Colorado Municipal League, is a great resource to find the most up-to-date information on TABOR.  

Special Districts

Special districts are local governments, separate from municipalities or counties, that provide services or infrastructure to promote the health, safety, prosperity, security, and welfare of the inhabitants of the district. Examples of special districts include fire protection districts, water, and sanitation districts, and forest improvement districts. Once a special district is created, the district’s board may levy taxes, charge fees, and own property —consistent with the provisions of TABOR and other state statutes—to help pay for community improvements.

Tax Increment Financing (TIF)

Tax Increment Financing (TIF) is a public financing method used to subsidize urban redevelopment, infrastructure, and other community improvement projects. A TIF, which is authorized at the state level and administered by local governments, allows counties or municipalities to issue municipal bonds that are backed by the future anticipated increase in tax revenue generated by the project’s development over time.  Tax increment revenue is generated from property or sales tax. TIF bonds have been used to fund land acquisition, sewer and water upgrades, environmental remediation, construction of parks, and road construction among others.

Sources of State and Regional Revenue

The Colorado Department of Local Affairs (DOLA) Division of Local Government distributes state and federal money to assist local governments in capital construction and community services, including:

• Community Services Block Grants
• Community Development Block Grants
• Local Government Energy/Mineral Impact Assistance Grants
• Local Government Severance Tax Fund distributions
• Limited Gaming Impact Grants
• Conservation Trust Fund distributions

The DOLA regional manager for your region can direct you towards funding sources that would be appropriate to your project. Find the contact information for your region.

Other state and regional agencies, such as the Colorado Department of Transportation, Colorado Department of Natural Resources, Mile High Flood District, Colorado Geological Survey, and the Metropolitan Planning Organization also offer programs that fund projects related to specific hazards and mitigation activities.

Sources of Federal Revenue

Government partners at the federal level can complement local, state, and regional resources. Federal programs can provide significant funding for hazard mitigation, particularly large-scale infrastructure projects. The Federal Emergency Management Agency (FEMA) is the go-to federal agency for disaster recovery and hazard mitigation assistance. FEMA’s Hazard Mitigation Assistance grant programs provide funding opportunities for pre- and post-disaster mitigation. While the statutory origins of the programs differ, all share the common goal of reducing the risk of loss of life and property due to natural hazards.

Brief descriptions of pre-disaster Hazard Mitigation Assistance grant programs are provided below.  The best point of contact for these grants is the State Hazard Mitigation Officer.

• Building Resilient Infrastructure and Communities (BRIC) is the new FEMA pre-disaster hazard mitigation program that replaces the existing Pre-Disaster Mitigation program. The BRIC program guiding principles are supporting communities through capability- and capacity-building; encouraging and enabling innovation; promoting partnerships; enabling large projects; maintaining flexibility, and providing consistency. As an additional resource, the new Mitigation Action Portfolio (MAP) highlights a variety of mitigation efforts across the country to show stakeholders what is possible under BRIC.
• The Flood Mitigation Assistance Program (FMA) is a competitive grant program that provides funding for projects that reduce or eliminate the risk of repetitive flood damage to buildings insured by the National Flood Insurance Program.
• The National Earthquake Hazards Reduction Program Earthquake State Assistance Program (NEHRP) was created to increase and enhance the effective implementation of earthquake risk reduction at the local level. Examples of mitigation activities funded through this program include developing seismic mitigation plans; conducting seismic safety inspections of critical structures and lifelines; updating building codes, zoning codes, and ordinances to enhance seismic safety; or increasing earthquake awareness and education.
• The purpose of the Emergency Management Performance Grant (EMPG) program is to provide grants to states to assist state, local, tribal, and territorial governments in preparing for threats and hazards. The grant focuses on planning, operations, equipment acquisitions, training, exercises, and construction and renovation in enhancing and sustaining all-hazards emergency management capabilities.

In addition to FEMA, other federal agencies also offer funding or technical assistance programs for activities that complement or support mitigation objectives. Each agency is unique in its mission and the type of initiatives it backs. To ensure that you are finding the best fit, it is valuable to explore an array of agencies and assistance opportunities to find one (or several) that mostly closely meet your needs. For example, if your project has activities relevant to forest management, then the U.S. Forest Service is a good resource to review. Alternatively, a project that emphasizes rural communities may find the U.S. Department of Agriculture (USDA) to be a strong ally. List below is a selection of federal agencies and an example of an assistance program administered by each agency.

• The Federal Historic Tax Incentives Program, administered by the National Park Service (NPS) and the Internal Revenue Service (IRS), encourages private sector investment in the rehabilitation and re-use of historic buildings.  
• The Water Infrastructure Finance and Innovation Act (WIFIA) program, administered by the  Environmental Protection Agency (EPA), accelerates investment in our nation’s water infrastructure by providing long-term, low-cost supplemental loans for regionally and nationally significant projects. The program funds development and implementation activities for eligible water and wastewater infrastructure projects, including enhanced energy efficiency projects and water facilities.
• The Department of Energy offers energy efficiency and renewable energy grants for infrastructure upgrades.
• The Conservation Reserve Program is a land conservation program administered by the USDA Farm Service Agency. In exchange for a yearly rental payment, farmers enrolled in the program agree to remove environmentally sensitive land from agricultural production and plant species that will improve environmental health and quality.
• The Wetland Mitigation Banking Program is a competitive grants program administered by the USDA National Resources Conservation Service that supports the development and establishment of wetland mitigation banks to make credits available for agricultural producers.
• Through its Planning and Local Technical Assistance programs, the U.S. Economic Development Administration assists eligible recipients in developing economic development plans and studies designed to build capacity and guide the economic prosperity and resiliency of an area or region.
• The Department of Housing and Urban Development administers the Section 108 Loan Guarantee Program to provide communities with a source of financing for economic development, housing rehabilitation, public facilities, and other physical development projects, including improvements to increase their resilience against natural disasters.
• The Community Forest Program, administered by the U.S. Forest Service, is a competitive grant program that provides financial assistance to tribal entities, local governments, and qualified conservation non-profit organizations to acquire and establish community forests that provide community benefits.
• Infrastructure for Rebuilding America, administered by the U.S. Department of Transportation, is a discretionary grant program to fund transportation projects of national and regional significance that are in line with the Biden Administration’s principles for national infrastructure projects that result in good-paying jobs, improve safety, apply transformative technology, and explicitly address climate change and racial equity.
• The USDA Community Facilities Program offers direct loans, loan guarantees, and grants to develop or improve essential public services and facilities in communities across rural America. Public bodies, non-profit organizations, and federally recognized American Indian Tribes can use the funds to construct, expand or improve facilities that provide health care, education, public safety, and public services.

Although federal grants can provide significant upfront money, most also require communities to provide money as a local match, often between 25 to 30% of the total project cost. Additionally, the pre-and post-application requirements can be complicated and time-intensive to complete. It is also important to note that the Federal Disaster Mitigation Act of 2000 requires jurisdictions to develop and maintain a multi-hazard mitigation plan to remain eligible for certain federal hazard mitigation funding programs.

Information on federal grants is available at grants.gov. Applicants can narrow search results by entering keywords and applying search criteria to find opportunities that are most applicable to the initiative requiring assistance.

Sources of Non-Governmental Revenue (Private and Nonprofit)

Communities may also be able to pull in supporting revenue from private or nonprofit entities. A key opportunity for these funding sources is to identify the benefits that extend beyond hazard mitigation, as there are a limited number of private and nonprofit entities that are focused on hazard mitigation and resilience. Including additional benefits for the hazard mitigation action, such as recreation, supporting a diverse community, decreasing obesity, or improving community health increases the number to explore.

Implementing a strategy to finance hazard mitigation is critical to strategically investing and advancing the goals of a community. A strategy should be based on leveraging both new and existing funding mechanisms by identifying: 1) a sound framework of data, community priorities, and needs, 2) sustained local funding source(s) to establish a foundation for matching and maintenance, and 3) a strong position to make a larger grant request for capital investments.

Strategy Framework

Layering Funding Sources

A best practice for funding is to identify sources of revenue that can comprise a layered, or patchwork,  funding approach. Layering happens through identifying a diversity of funding sources, including local, state, federal, and non-governmental opportunities that align with the project goals, benefits, and outcomes. In the layered approach, local funding sources can provide a match for a larger grant and support ongoing program administration or project maintenance after a large project is completed. Larger-scale projects or actions will likely require state or federal-level grant sources for implementation.

Layering also applies to expanding the benefits of hazard mitigation projects, such as linking project benefits to local economic development, solving other infrastructure needs, facilitating transportation of goods and people, matching project cost timelines, to availability of funds, and lowering insurance costs. Solidifying consensus on priority projects and their benefits will tend to result in better funding opportunities. A project champion, or local advocate, could prove invaluable in these efforts to secure hazard mitigation funding.

The Bee Branch Watershed Flood Mitigation Project in the City of Dubuque, Iowa, is an excellent example of the city layering several revenue streams to help finance the $232 million infrastructure project. The City of Dubuque website describes the numerous mechanisms, including $55.5 million in federal and state contributions, $98.5 million in the form of state sales tax increment financing, $9.4 million from the Clean Water State Revolving Fund's Sponsored Projects Program, and $165,000 in private donations were raised through America’s River III campaign. Increments in the city’s stormwater utility fees are also contributing to funding additional project costs.

For additional case studies, please refer to the Where It’s Been Done section below.

Sustained Local Funding for Ongoing Strategy Implementation

To sustain funds for hazard mitigation and resilience at the local level, the community needs to identify an existing or new funding source. The general or discretionary funds in a community may be available to support mitigation and resilience efforts; however, they are often internally competitive and are not a guaranteed funding stream. Identifying or creating a revenue source that is specific to the goals of hazard mitigation or resilience ensures that emergency managers and planners can create a long-term strategy to build toward larger and more ambitious projects. These funds can be used as a match for a larger grant request or to support adding technical capacity with staff or consulting support to develop plans, designs, or programs more fully.

Implementation tools for a dedicated and sustained local funding source include:

• Embedding mitigation budgeting into the community’s fiscal planning.
• Integrating hazard mitigation into the Capital Improvement Plan. Ongoing or new civic improvements can include prioritized hazard mitigation projects, or mitigation can be included as an aspect of a larger project. For example, providing grassy swales along roadsides during routine road maintenance to improve stormwater drainage capacity or strengthening foundations during the renovation of a hospital to reduce damage from future seismic events are examples of integrated projects.
• Creating a consistent funding source through fees, taxes, or special assessments.

A consistent funding source offers predictability for the capacity to fund mitigation activities and allows communities to set up a long-term strategy to leverage those dollars for larger investments as a match for grants and by increasing community capacity with dedicated staff focused on resilience and mitigation. Programs such as ongoing wildfire mitigation programs often are sustained and require predictable, annual funding. Leveraging a tax, fee, or another local revenue source provides funds to sustain such a program.

Developing a local funding strategy is imperative to acquiring additional funds to fill revenue gaps. This tool identifies many local funding sources, such as grants and loans, taxes and fees, and debt and pay-as-you-go revenues that align with the costs for the project. Each funding method has its strengths and weaknesses, but each provides a variety of possible tools in the municipality’s funding toolbox.

External Funding for Capital Infusions for Larger Investments

Larger mitigation actions often require a layered funding approach that uses local funding and at least one larger state or federal source for implementation. A sustained, local source will act as the match and ensure that investments can be adequately maintained in the future. A large state or federal source, generally a grant, will allow for capital investment to implement a larger mitigation action. The following describes the necessary components to competitively position funds to implement larger investment strategies.

Best Practices for Scoping and Funding Projects

This section describes best practices to position a project or action to be successfully implemented through either a local or larger funding source. This includes identifying priorities, conducting relevant studies, preparing cost estimates and engineering to fully understand the project scope and benefits and identifying key partnerships and project champions.

Identify Mitigation Priorities and Potential Funding Sources

The initial step in determining what projects to pursue and fund is to identify the priorities for the community around hazard reduction, including what hazards the community will focus on mitigating, where property and lives are in harm's way and what projects and programs should be pursued in the immediate, mid-term and long-term strategy.

Proactive participation in and adoption of a FEMA-approved Multi-Hazard Mitigation Plan is a critical step for identifying the priorities and mitigation actions that a community wants to pursue. It is also critical to receiving Hazard Mitigation Assistance funds through FEMA as well as a first step to position a community for successful implementation of its priority hazard mitigation projects.  

Once a local jurisdiction identifies the priority mitigation project(s), it will be important to document each project in sufficient detail for inclusion in the hazard mitigation plan. For each project identified, it should be known who will implement the effort, how the initiative will be funded, and when the action is to be completed. The more detail that can be provided, the better position your community will be in to acquire funding and see the project through to fruition.

As part of identifying project concepts, you should also consider what potential funding sources align well with the projects. This will be beneficial for then scoping out the project and knowing the specific needs of future studies so that they align well with the requirements of the funding source.

For example, for FY2023, the BRIC program prioritizes projects that:

• Build and support public infrastructure resilience.
• Mitigate risk to one or more lifelines.
• Incorporate nature-based solutions.
• Provide funding to applicants to facilitate the adoption and enforcement of the latest published editions of building codes.

Understanding these requirements and ensuring that future studies and risk reduction activities are adequately meeting these requirements will better position a project for this funding source. The scoping effort is also designed to determine the additional planning and engineering efforts that may be required to fully position the project for successful implementation.

Conduct planning and engineering to define project requirements for funding

Identified projects often require technical experts such as planners and engineers to assist with conceptual planning and engineering to identify the scope of the project and prepare preliminary cost estimates for its full engineering and design, construction, and post-construction inspection. In addition, the analysis will help define the project’s anticipated implementation schedule and potential phasing elements. Collectively, this information provides the necessary foundation to begin identifying a comprehensive funding strategy for the project’s successful implementation.

Local governments should anticipate budgeting and allocating resources to conduct the necessary due diligence analysis. Doing so is critical to assessing the project’s feasibility, including its cost-effectiveness and positioning it for possible funding consideration under FEMA’s BRIC pre-disaster hazard mitigation program.  

Assess project cost-effectiveness using a Benefit-Cost Analysis

The due diligence analysis may be used to assess the project’s cost-effectiveness using FEMA’s Benefit-Cost Analysis (BCA) methodology. The BCA methodology determines the future risk reduction benefits of a hazard mitigation project and compares those benefits to its costs. The result is a Benefit-Cost Ratio (BCR). A project is considered cost-effective when the BCR is 1.0 or greater. If the BCA is less than 1.0, it may be advantageous to look at alternatives to increase benefits or reduce costs. Applicants for BRIC and HMA funding must use FEMA-approved methodologies and tools—such as the BCA Toolkit—to demonstrate the cost-effectiveness of their projects.

Build Local Support

Because Hazard Mitigation Plans and projects meet certain regulatory requirements, are generally widely applied, and benefit entire jurisdictions and neighborhoods,  there can be a wider range of potential funding alternatives. Interest from regional, state and federal partners in hazard mitigation enables a municipality to work towards forming partnerships and agreements with these potential external funding agencies. Private sector partners, such as nonprofit organizations, philanthropy, and other non-governmental organizations, might also express interest in hazard mitigation that furthers their organization’s mission or vision.

Build State and Federal Partner Support

Following local consensus and a local funding strategy, further buy-in is needed from agency funding partners at the state and federal levels to prepare for a grant application. Project champions at the state and federal levels that understand and can advocate for the project will help push the project along the funding pipeline. Communication materials that provide information on the project’s benefits and details, such as construction phases, are useful so that the advocates can communicate the project value. Press releases are useful to give partners and the community a quick snapshot of the project description and value. The strategy might show infographics and other visual depictions of why the project is needed in the community and what are the funding needs and benefits. Building partnerships with these agencies and other organizations will also contribute to getting to the funding finish line.

Example: Press Release for fire mitigation Boulder

Grant Administration

Once a grant or other funding mechanism such as a revolving loan is awarded/approved, the execution of the total funding strategy becomes significant. This includes grant award administration and project monitoring. Grant funding administration and project monitoring are just as important as obtaining the funds because the grantor agency will determine whether the municipality can deliver the project using the revenue as promised in the grant funding application. The grant or funding agreement contains terms and conditions, and complying with the provisions demonstrates the local jurisdiction’s ability to manage and be successful when awarded funds. Terms and conditions may include reporting, timelines for completion, and contracting and subcontracting requirements. An added benefit is setting precedent for future funding with the same funding agency and other grantors.

Examples of funding strategy development and layering include the city of Colorado Springs, Colorado and, Wildfire Mitigation and Mecklenburg, North Carolina, Voluntary Floodplain Buyout Program.

Colorado Springs Wildfire Mitigation: Wildfire Mitigation Through Education, Planning, and Stronger Building Codes

The community adopted a stronger fire-resistive building code, mapping wildfire risk, and participated in strategic community engagement. The city of Colorado Springs Fire Department collaborated with the Colorado Springs Housing and Building Association to identify ways to mitigate the impacts of wildfires on residential buildings. This information led to Ordinance No. 18-50, which amended the International Fire Code to address wildland/urban interface mitigation requirements for high-risk areas.

The innovative educational program, spurred by the adoption of enhanced building code ordinances, has resulted in web-mapping upgrades and the development of outreach and informational campaigns. These non-structural mitigation activities have been credited with saving the community over $75 million in damages and over 250 families from losing their homes in the 2012 Waldo Canyon Fire. However, even with these efforts, 346 homes were destroyed by the Waldo Canyon Fire, demonstrating the city’s continued challenges for wildfire mitigation.

• Total Cost: $1.33 million.
• Federal Funding: FEMA Pre-Disaster Mitigation Grant: $1 million.
• Non-Federal Funding: Local Share: $330,000.
• Partnerships: City of Colorado Springs Fire Department, Colorado Springs Housing and Building Association, and FEMA.

Refer to page 101 of FEMA’s Hazard Mitigation Assistance Mitigation Action Portfolio for additional project details.

Mecklenburg County, North Carolina: Voluntary Buyout Program

Mecklenburg County has a strategic plan for flood risk reduction and a dedicated funding source for a key strategy within that program: voluntary buyout. The buyout program can make strategic acquisitions in flood-prone areas when the opportunity arises, such as when an individual property owner is ready to sell. Buyouts are not necessarily connected to a larger project or flood event.

Flood risk reduction practices are described and ranked in the January 2012 Report: Flood Risk Assessment and Risk Reduction Plan. The plan provides 19 potential practices (mitigation techniques) for flood risk reduction and ranks the practices or techniques based on several factors including cost-effectiveness and potential impacts to surroundings.

Mecklenburg County’s Stormwater Services has spent $67 million to purchase more than 400 homes, apartments, and businesses since 1999. The funding is generated as a local stormwater fee as well as federal grant dollars. The local funds have at times provided a match and at other times been the sole source for buyouts. The buyouts have led to the development of 185 acres of public open space through “undevelopment” of the buyout properties. The properties have been converted to greenway trails/paths, community gardens, reforested natural areas, stream and floodplain restoration areas, stormwater wetlands and retention areas, and informal recreational areas. The buyouts are expected to ultimately provide more than $300 million in benefits by avoiding future losses to the properties that were purchased.

Learn more about Mecklenburg County’s Floodplain Buyout Program.

• Total Cost: $67 million.
• Federal Funding: FEMA Mitigation Grant Buyouts.
• Non-Federal Funding: Local stormwater fees and a Quick Buy program set up by Charlotte-Mecklenburg Storm Water Services to purchase qualifying buildings with significant flood damage.

• A consistent local funding source offers predictability for capacity to fund mitigation activities and allows communities to set up a long-term strategy to leverage those dollars for larger investments such as matching funds for a grant.
• A well-developed funding strategy will help pair projects with appropriate funding sources and ensure effective implementation.

• Federal or state assistance programs can be highly competitive, may require a lengthy application, are limited in size and scope, and are often awarded on a one-time basis.  
• The range of local funding sources available to communities depends on state and local context and legal environment. When determining which revenue sources to use in your community, it is important to be cognizant of the particular conditions in your jurisdiction and identify if other limiting factors exist.