Increasing Ancillary Revenues

Owen Sound generates only 49.5% of revenue from ancillary resources while Cobourg generates 56.1% of its revenue from non-taxation sources. Owen Sound can increase its non-taxation revenue by doing the following:

1) Ancillary Business Department
Create an Ancillary Business Department and hire a Director, with business development experience, on a five (5) year renewable contract. The initial mandate should be to increase ancillary revenues by 10% or $3.1 million over the initial contract period. This person should report directly to the City Manager and their portfolio should include the Recreation Center, the Art Gallery and the Bayshore given their potential for generating revenue.

2) Develop Profit Centers
Municipal operations are traditionally composed of a number of cost-centers that provide needed services to taxpayers. As a result the culture within city hall has traditionally been focused on providing the best services money can buy. Well-meaning city staff routinely focuses on improving services to the community and searching for opportunities to enhance the quality of services. Typically reducing the cost of service delivery is not a priority.

A surprising discovery, when examining municipal expenses, was that two of the municipalities in the study group had established Profit Centers. Surprisingly, municipal Profit Centers are not all that uncommon in Ontario. Not too far from Owen Sound, just down highway 21, is Bruce Telecom which is a public utility that is wholly owned by the Corporation of the Municipality of Kincardine. Kincardine just recently sold this Profit Center and by doing so added $32 million to its municipal coffers.

The most interesting Profit Center in the study group is Cobourg’s Industrial Complex. A number of years ago Cobourg’s Council approved an investment in Cobourg’s vacant industrial property. The annual amortization expense for this investment in 2021 was $721,875.This turned out to be a good investment given that the annual net revenue from Cobourg’s Industrial Property is $2.1 million.

Cobourg’s second Profit Center is its Marina business which is generating $53,959 in annual net revenue. Tillisonburg found an innovative way of leveraging its surplus assets by leasing them instead of selling them. For Example the Elliott Fairbairn Centre is a facility located on Earle Street in Tillsonburg. It is owned by the town and is leased to the Province of Ontario for the training needs of the Ontario Provincial Police.
Owen Sound can emulate Cobourg’s success by creating similar non tax-based revenue streams. Instead of disposing of city assets the city should invest in these assets and turn them into new revenue sources. Like Cobourg had a few years ago, Owen Sound has surplus industrial land that could be developed by the city and provide the city with a steady flow of revenue in perpetuity. Serious consideration should be given to following Cobourg’s success with its industrial park initiative by investing in city owned industrial property.

There are similar opportunities for developing profit centers in Owen Sound. For example, all surplus assets, such as an unused building, should be offered for a long term lease, instead of offering it for sale. Such action eliminates the potential business’ need for capital to purchase the building and frees up resources for investing in leasehold improvements. Leases for 15 to 25 year periods should be offered, with options to renew. This would potential leaseholders the opportunity to make sizable investments in leasehold improvements that could be amortized over the lease period. This strategy will give the city steady revenue for the life of the building in question.

3) Engage Staff and Encourage a Business Approach
In order to recognize revenue generation and cost saving opportunities staff needs to adopt a ‘business approach’ as opposed to a, ‘municipal administration approach’ when interfacing with city assets. This will require a combination of education and incentives to change the culture.

One method of encouraging an ’entrepreneurial spirit’ in a municipal environment is to establish a business-focused, Suggestion Awards Program. The program should be open to both city staff and the general public and reward successful ideas with the first two years net profits of the new business venture. In the event of cost-saving suggestions the employee or resident who made the suggestion should be awarded the net cost savings, up to a maximum amount for each successful suggestion.

If implemented such a suggestion award program will encourage staff to think differently and gradually change the culture at city hall. An example of the type of thinking that should be encouraged is the idea I put forward last year to reduce the cost of Transit. The idea involved improving ridership by increasing peak-time service and reducing costs by partnering with local school boards to reduce their student bussing costs 54 How to Fix Our Broken Transit System

I’m sure that front line staff routinely sees inefficiencies in some areas of service and have ideas on how to improve things. They just need to be encouraged to put their ideas forward and providing a monetary reward for successful ideas may be all it takes to begin the process of ‘Thinking Differently’