Funding LED strategies is often very difficult; one of the reasons for this is that local authorities often do not have a statutory responsibility to deliver LED services. So when it comes to budget making time LED is competing for scarce resources with departments such as housing, health and education. Sometimes, it is difficult for elected officials to justify spending scarce resources on LED efforts because short time horizon responses (such as improving access to piped water) are often perceived as more important than the LED initiatives that often have longer time horizon, and whose benefits may not be immediately apparent.
When developing the LED strategy, the local authority and the stakeholders should ensure that they take into account their respective skills and competencies when deciding whether to provide services directly or to enable others to provide them on their behalf. Good practice clearly indicates that specialist advice to businesses should not be provided by the public sector, nor should micro and small business grants and loans. The public sector has a strategic role to play in these areas, but they should encourage the provision of these services rather than provide them directly.
It is incumbent on Mayors, elected members and municipal managers to ensure the LED agenda and the likely medium and longer term benefits for all in the community are recognised. This is further justification for stakeholder participation in the LED strategy making process.
All LED strategies should have a budget attached to them. Costs of all initiatives need to be factored into these budgets. In selecting particular programmes and projects, care needs to be taken to ensure that funds are available for the entire length of each project as they are likely to span several financial years. This adds further to the complexity of budgeting. Forward or exit strategies should always be in place.
There are normally several sources of funding for LED initiatives:
- Local authority revenue raised from usual sources including property taxes and user fees,
- Sale or renting of local authority owned industrial or commercial buildings and land,
- National and state government intergovernmental transfers,
- International donor grants and loans,
- Private sector funding such as corporate donations,
- Foundations, especially for environmental improvements, human resource initiatives and poverty alleviation.