|Financing Cities for Sustainable Development (HABITAT - UNDESA, 67 p.)|
This section highlights the main findings of the study, paying special attention to common characteristics and problems among the studied cities. Possible future directions with respect to each of are also suggested, wherever possible. It should be noted that the latter suggestions are principally for the purpose of initiating debate on possible solutions.
Main Findings and Conclusions
1. The property rating systems in Kenya, the United Republic of Tanzania and Uganda are broadly similar. Property rates are, in all countries, generally an important source of local government revenue, although its percentage composition varies significantly from city to city. In Nairobi, property rates account for more than 60 per cent of the city's total revenue, and for the other cities the figures are as follows: slightly over 40 per cent in Mombasa, 21.5 per cent and sixth most important source out of a total of 56 revenue sources in Dar Es Salaam, 5 per cent in Mwanza, 6 per cent in Kampala and 43 per cent in Jinja.
2. Valuation rolls are often incomplete and out of date. In Mombasa, for example, the Municipality used 1959 valuation rolls until 1981. In Dar es Salaam, only 30 per cent of the properties have so far been valued, while in Mwanza valuation has been completed in planned areas only. On the whole, Tanzanian cities have, until recently (1995/96), been using valuation rolls prepared in the early 1970s. This renders property taxation, as a source of income, highly inelastic, depriving urban local authorities of much potential income. Among the most important reasons underlying this situation is the shortage of qualified land/property valuers, combined with the insistence of existing regulations on the use of fully-qualified personnel. As a result, mounting a complete city-wide valuation exercise, and following this up every 5 or ten years, is a completely or near-impossible task for most urban local authorities in East Africa. Even if there were sufficient valuers, the periodicity of revaluation is too long (at ten years in Kenya) and therefore not sensitive enough to track and pick-up changing property quantities and values. In addition, government procedures for rating, especially the review of tariffs, are unnecessarily bureaucratic. As expected, governments have to take account of the political sensitivity of rate increases for fear of offending powerful property-owners, many of whom they depend on for political support. In many situations, the government leaders themselves, both political and administrative, are the property-owners, giving rise to a serious conflict of interest.
3. There are additional collection problems arising out of inefficient legal-administrative procedures. In Kenya, there is a cumbersome and lengthy procedure for following up defaulters through use of the civil procedure code. This system is also prone to abuse, as private sector lawyers hired by the city councils have been known to keep proceeds collected from defaulters for inordinately long periods, thus depriving local authorities of much needed funds. In the United Republic of Tanzania, before valuation of properties for rating purposes can take place, the area concerned has first to be declared a rating area by the responsible minister, which sometimes takes very long. The Rating Tribunal is centralized, resulting in long periods of delay in the resolution of disputes, during which the levying of rates is suspended.
4. In the United Republic of Tanzania and, to an extent in the informal parts of Kenyan and Ugandan cities, the absence of open market property transactions makes initial valuation of properties very difficult. In Dar es Salaam, for example, 70 per cent all properties are in unplanned areas. In such areas, legal ownership is not properly documented, as existing properties change hands outside the formal property registration system and new properties are put up without planning permission. In Uganda, this situation is exacerbated by the constitutional recognition of customary tenure within urban centres, including Kampala.
5. In most countries, central governments, which own many properties and use the services within the jurisdiction of urban local authorities, are supposed to either pay rates in full or, more often, provide grants to local authorities in lieu of rates. In Nairobi and Mombasa, this study found out that central government, including parastatal organizations, is among the largest property owners. While legally not bound to pay rates, it would usually be expected to make some payments in lieu of rates, but currently does not, thus depriving the municipal government of substantial revenue. In Dar es Salaam, the United Republic of Tanzania, the situation is the same. This is a serious problem which should be jointly addressed by both central and local governments. A satisfactory solution to the problem will go a long way in alleviating the financial problems of many cities in the region.
6. A potentially serious problem in all the cities studied is the growing feeling, among city residents, that the money paid for rates and other local taxes is being poured into a bottomless pit, as it seems to have no impact at all in improving the quality of physical infrastructure and services. In parts of Nairobi, there have been suggestions that residents should suspend payment of rates and the service charge until such a time as roads, water and sanitation begin to improve. It is likely that, increasingly, residents will demand to see results from the rates that they pay. This trend is likely to be encouraged by the political openness and democratic governance which is increasingly characterising East African countries.
Tax on income
1. Income tax, as a source of local revenue, currently exists only in Uganda and the United Republic of Tanzania. In Kenya, a graduated personal tax (GPT) was introduced soon after independence, but was abolished in the late 1970s. In Uganda, income tax at the local level is also known as graduated personal tax, while in the United Republic of Tanzania it is known as the development levy. In Dar es Salaam and Mwanza, the development levy accounted for 19.5 per cent and 8.9 per cent, respectively, of the total local government revenue in 1996. However, the annual variation in percentage composition has been quite marked, ranging from a low of 2.3 per cent (1995) to a high of 19.5 per cent (1996) in Dar es Salaam and a low of 5 per cent (1995) to a high of 21.5 per cent in Mwanza (1996). In spite of this variation, it is clear that revenue from the development levy constitutes a significant component of the annual budgets of both Dar es Salaam and Mwanza. More importantly, the development levy has enormous potential, as only 17.6 per cent of the potential yield from this source was collected in 1996, and this was by far the highest ever collected in recent years. In Uganda, the graduated personal tax is the most reliable source of revenue for local authorities and it is the tax that people are most familiar with. [In Kenya, there are plans for sharing income tax paid to central government with effect from the 1998/99 fiscal year, with local authorities getting 5 per cent of the total.]
2. In all three countries, this form of tax has its origins in the oldest form of taxation in colonial East Africa, the "hut tax" or "poll tax", through which indigenous East Africans were initially coerced into formally organized labour and into the monetary exchange system. Because of this historical origin, this form of tax continues to remind some people of a detested period of oppression in the political history of their countries. This latent resentment has been exacerbated, in both the United Republic of Tanzania and Uganda, by the use of crude methods of collection and enforcement, such as apprehending defaulters on the street. In Uganda, 'graduated tax riots' resulted in the setting-up of a Commission of Inquiry in 1995/6.
3. In both the United Republic of Tanzanian and Ugandan cities, there are poor records of both employees (potential payers) and employers (responsible for collecting the tax), even in the formal sector. There is also a lot of cheating by employers, who collect the tax but fail to remit the same to the local authority. This situation is exacerbated by the fact that many employing small organizations are not registered, making it next to impossible to net them. Many potential payers are self-employed, do not keep records of income and do not declare any and, since they are not registered anywhere, they simply do not pay.
4. Partly because of the poor record-keeping pointed out above, local authorities resort to charging flat rates for self-employed persons, thus introducing a significant element of inequity: some people who should pay more pay less and others who should pay less actually pay more than they can afford.
5. In both the United Republic of Tanzania and Kenya there have been some controversy about the status of women with regard to this tax. Because of its colonial history, the modern version of the tax has continued to been seen by some as essentially a "hut tax", paid by the male heads of households, rather than as a "personal" or individual tax. In the United Republic of Tanzania, the exemption of adult women without income from paying the development levy has been resented by some women as being sexist.
6. In Uganda, both Kampala and Jinja have to deal with the problem of 'mobile residents'. Frequent changes of place of residence make assessment difficult. In addition, some urban residents often cheat by paying the tax at their rural homes, where the rates are lower, instead of paying the higher income-based rates at their urban homes.
Charging for services
1. All three countries have used national parastatal organizations for the supply of some major services, especially electricity and water. In all three countries, electricity is not a local authority responsibility. In Kenya, Nairobi supplies water to its residents, while Mombasa does not. In Dar Es Salaam, water is supplied by the Dar es Salaam Water and Sewerage Authority (DAWASA), which is under the Ministry of Water. In both Kampala and Jinja (and five other large towns), water is supplied by the National Water and Sewerage Corporation, although small towns operate their own supplies. There seems to be a feeling in the region that local authorities are not competent enough to handle the provision of major urban services, partly because of the complexity of those services, and also because of the high level of capital investment involved. In all cities examined, income from charges for services generally does not meet the cost of the services, for example Nairobi City has had an average annual deficit of 14 per cent. In spite of this, the service charge in Nairobi and Mombasa has been quite important, accounting for 5 per cent of Nairobi's monthly revenue from services. In Mombasa, the service charge is currently the second most important source after rates. Unfortunately, the service charge in Kenya has been abolished with effect from the 1998/99 fiscal year due to collection problems.
2. A general problem affecting a number of services provided by local authorities in all three countries is under-charging. The solid waste removal service is generally provided inefficiently by urban local authorities in all three countries. In the United Republic of Tanzania and Uganda there is no direct charging for the service, while In Kenyan cities the charges are too low. All of the cities studied own a limited stock of rental housing, but the rents currently charged are historical and very low compared with what the same housing could fetch in the private market. Although rental housing is financially profitable in the local authorities examined, especially in Kenya, such profitability is inflated because very little funds are spent on repairs and maintenance. Some of Kampala's housing stock, for example, has been declared as unfit for human habitation. Tenant resistance to rent increases is also a significant problem in all three countries.
3. In all three countries, local authorities are responsible for some aspects of primary and nursery education, with central government meeting the cost of teachers' salaries. To enable local authorities discharge their responsibilities, cost-sharing between the authorities and parents has been introduced. Under this system, local authorities are allowed to collect minimum charges for expansion of physical facilities, although, in theory, primary education is supposed to be free in all three countries. The charges collected are generally too low and inadequate for the effective provision of education. This under-funding is reflected in deteriorating standards, including overcrowding, physical deterioration of buildings, shortages of essential supplies such as books and chalk, and poor morale among teachers.
4. Cost-sharing has also been introduced in the health sector, but the revenues raised are not adequate for operating the services. In Nairobi, for example, income earned can hardly meet 35 per cent of the cost of providing the service. The result, as in the education sector, is deterioration of standards, including buildings, shortages of essential equipment, shortages of drugs and low morale among health workers.
5. Charge rates are infrequently revised, rendering charging for services, as a source of local income, inelastic. This is exacerbated by inefficient billing in some cities, for example Nairobi, where water billing is often behind. In the United Republic of Tanzania (Dar es Salaam and Mwanza), the lack of administrative capacity is reflected in inconsistent annual estimations and collections.
6. Some serious misgivings about privatization of social services are emerging. There is evidence suggesting that many urban poor people are unable to pay even the minimal charges required for basic education and health services.
7. In all three countries, two types of privatization of urban services have emerged over the last decade. The first type is what might be called "spontaneous privatization". This has arisen in an attempt to fill-in the increasing gaps left by local governments. Because of the deterioration of existing services and the lack of expansion to cater for increasing urban populations, private providers of services have emerged without any initial prompting from either central or local governments. This has been particularly so in the case of water supply, mainly in the form of private water kiosks in many low-income areas. This has also extended to solid waste removal in high income areas, for example in some suburbs of Nairobi, where a private sector company is currently doing what appears to be good business. The second type of privatization of urban services is more formal and organized. For example, solid waste removal in Nairobi's CBD has been contracted out to a private company, and there are plans to do the same in other cities, including Mombasa.
Tax on provision of goods and services (licence fees)
1. Tax on provision of goods and services, which is generally in the form of trade licences and fees, is an important source in Kenyan and Tanzanian towns. In Mombasa, for example, income from this source is only surpassed by rates and the service charge. Because of sustained expansion of business in the three countries, this source of revenue is elastic and has a high potential of raising resources of increasing magnitude. Income from licence fees in Mombasa, for example, rose from about KShs. 8 million in 1982 to KShs 28 million in 1996. The city service levy in Dar es Salaam (a levy imposed on all business enterprises operating within the city) alone amounted to 11.7 per cent of the city's total revenue in 1996, while business licences contributed 15.9 per cent (14.7 per cent in Mwanza in 1995).
2. In the United Republic of Tanzania, in particular, businesses are licensed by both central government and the local authorities, resulting in confusion and non-compliance among business people, and poor collection efforts on the part of both local authorities and central government.
3. The large numbers of informal, unregistered businesses, including pirate taxis, combined with the absence of adequate data/information bases in both Kenyan and Tanzanian towns, deprives local government authorities of a lot of potential income.
4. In some instances, increasing levels of licence fees has proved to be very difficult and politically sensitive. In the United Republic of Tanzania, for example, large numbers of informal traders have existed for a long time paying nothing or very little for business licences, so that one attempt to increase the fee level for businesses dealing in meat resulted in a city-wide stoppage of business and shortage of meat. Licensing of hawkers in Kenyan towns has also proved to be politically sensitive.
1. Income-generating enterprises is not a significant source of local government revenues in East Africa and appears to be getting less and less popular with the increasing preference for privatization. However, Dar es Salaam and Mombasa are still involved in a few income-generating enterprises. Dar es Salaam has interests in a brewery which produces traditional beer (Kibuku), as well as in a corporation which operates social halls and related entertainment activities. Mombasa owns commercial properties for letting, including supermarket buildings.
2. In general terms, managerial capacity appears to be lacking. In the United Republic of Tanzania, there have been complaints to the effect that such enterprises are sometimes run as a social service and very often the objective of making profit is forgotten. Even where such enterprises are profitable, as in Dar es Salaam's brewery enterprise, the enterprises tend to be run as fiefdoms, with little connection to the parent city councils. This implies that the real benefit from such enterprises is the creation of employment, rather than the augmentation of municipal revenues.
3. As indicated above, privatization is taking root. Both Mombasa and Nairobi, for example, used to be involved in public transportation through ownership of shares in bus companies operating within their jurisdictions but, with privatisation and restructuring, have since sold all of their shares. In Dar es Salaam, the pressure for privatization of enterprises owned by the City council is also mounting.
1. Borrowing by local authorities is more developed in Kenya than in the United Republic of Tanzania and Uganda. In both Kenya and the United Republic of Tanzania, there are statutory local authority loan organizations created by the two central governments for the specific purpose of mobilizing financial resources and creating revolving funds for lending to local governments. In Kenya, local authorities can also borrow short-term funds from commercial banks, largely in the form of overdrafts, with authorization from the central government. A number of international organizations, especially the World Bank, have also proved to be useful sources of long-term loan funds for investment in infrastructure development.
2. Unfortunately, in both Kenya and the United Republic of Tanzania, the local authority loan organizations are, to all intents and purposes, currently defunct and have been so for some time. The organizations have collapsed partly because of the failure by the central government to provide the necessary grants (even though these were an essential component when the organizations were originally set up), and also because of the failure by local authorities to both deposit their excess funds with the organizations and to pay back borrowed moneys.
3. Nairobi and Mombasa have now reached a stage where servicing loans, both domestic and international, is proving to be very difficult, and it has also become correspondingly difficult for them to secure new loans. In both Kenya and Uganda, central government has been paying back money borrowed internationally on behalf of local authorities, with little hope of recovering this from the latter.
4. In both Nairobi and Mombasa, over-draft facilities have sometimes been over-extended beyond the authorized limits. It also appears that overdraft facilities have sometimes been used to finance investments for which longer-term loan sources would have been more appropriate. This has added to their mounting and unsustainable debt levels.
1. Direct central government allocations are a very important source of local government revenue in Tanzanian and Ugandan cities, but are almost non-existent in the case of Kenyan ones (although before their abolition in the mid-1980s grants accounted for an average of 37.5 per cent of Kenya's total local authority revenues). In Dar es Salaam, they constitute an average of 60 per cent of the city's total revenue, sometimes reaching significantly higher levels than this, as in 1995 when they peaked to 81.8 per cent.
2. Sharing of taxes between central and local governments is most visible in the United Republic of Tanzania, where a number of significant taxes, including the fuel levy, are shared. Uganda's constitution provides for sharing of national taxes collected by local authorities on behalf of the central government, although this provision has never been implemented. In Kenya, sharing of national taxes will be introduced for the first time during the 1998/99 fiscal year: local authorities will be entitled to 5 per cent of the annual income tax collection and 20 per cent of the road maintenance levy.
3. A major problem in the United Republic of Tanzania is the uncertainty characterizing central government allocations. Local authorities are never certain about when they are going to receive their allocations from central government, or about how much they are going to get. This is made worse by the fact that the central government's fiscal year (which runs from July to June) is different from that of local authorities (which runs from January to December). To resolve this latter problem, the financial years of the central and local governments of Uganda have just been harmonised with effect from 1997/98.
4. A problem common between Kenya and the United Republic of Tanzania, as noted earlier, is that grants in lieu of rates which the central governments should have been paying to local authorities have not materialised. This is particularly unfair to capital cities, where the majority of government-owned properties are concentrated.
5. Another problem, which at present is more manifest in Uganda but latent in both Kenya and the United Republic of Tanzania, is central government's distrust of the competence of local authorities. In Uganda, senior government officials have publicly expressed doubts about the ability of councils to handle large amounts of money. In Kenya, Nairobi's elected City Council was abolished in 1983 and replaced by an appointed City Commission, but was reinstated in 1992 with the adoption of a multi-party national political framework. In the United Republic of Tanzania, all local authorities were abolished in 1973, but were reinstated again in 1978.
This study has shown that urban local government revenues in East Africa are generally not enough to develop and supply adequate urban services to the region's fast growing urban population. This is reflected in the poor physical state and operational inefficiencies characterising many of the services, especially water and sanitation, waste management, roads, education and health, as well as in the low levels of access to these basic services. Although this study has looked only at the revenue, rather the expenditure, side of municipal finance, it is certain that an inordinately large proportion of the studied local authorities's collected revenue goes into payment of salaries. In the case of Nairobi, for example, the amount paid out in salaries has been increasing rapidly in recent years and actually doubled in 1993. In the case of Jinja, 60 per cent of the collected revenues goes into meeting the annual wage bill. It is also clear that all of the local authorities examined suffer from chronic budget deficits. In the case of Mombasa, for example, the 1996/1997 expenditure exceeded revenue collected, leading to a situation whereby the Council could not meet its mandatory obligations, including remittances to staff deductions such as the National Social Security Fund (NSSF), Pay-As-You-Earn (PAYE), cooperative shares and other similar deductions.
The study has also shown that, while there is a need for greater sharing of revenue sources between central and local government, the yield potential of sources currently available to local authorities is far from being fully exploited. Thus, significant results could be achieved through improvements in collection from currently available revenue sources, especially property rates, business licences and service charges. An imperative towards the attainment of this is the improvement of data on revenue sources and payers, especially with respect to the ubiquitous informal sector.
The study has further revealed some positive and interesting developments in the region, including privatization of revenue collection, which is currently taking place in the United Republic of Tanzania and Uganda. Another interesting development revealed is the sharing of national taxes. This is currently happening in the United Republic of Tanzania, is provided for in Uganda's national constitution and is to be introduced in the 1998/99 fiscal year in Kenya.
Looking towards the future, this study has identified many problems that need to be addressed. Some suggestions on how to begin to address these problems are given below. Most of these suggestions were presented at the Regional Workshop (Naivasha, 27-29 April 1998) referred to earlier, where slight modifications were made and a few more suggestions added (UNCHS, 1998, pp. 35-39).
1. To ensure elasticity, there is a need to reduce the time between revaluations of city properties and preparation of new valuation rolls. This is absolutely necessary if the full potential of property taxation (which is very high) is to be exploited. The revaluation frequency adopted will be determined by local economic and personnel circumstances: increased frequency will only be feasible if cheaper valuation alternatives are adopted (see recommendation 3 below) and the problems of personnel shortage addressed (see recommendation 2 below).
2. The problem of shortage of qualified property valuers needs to be addressed, perhaps through specially prepared crash training programmes, upgrading of technicians or use of private companies/consultants.
3. Ways have to be found of reducing the cost of revaluation and preparation of city-wide valuation rolls, perhaps through the adoption of cost-effective methods which are more appropriate for the economic circumstances of East African countries. For example, local authorities could consider moving away from individual land parcel valuation to area valuation as a way of both speeding-up and reducing the cost of property valuation. This is being experimented on in Kenya under the Local Government Reform Programme.
4. There is a need for improving systems for following-up rate defaulters in order to ensure speedy collection of arrears as well as reduce the length of related legal processes.
5. There is also a need for simplifying administrative procedures, especially those relating to the institution of rating in new areas and also to the resolution of disputes through often centralized rating tribunals.
6. The issue of central government contributions towards or in lieu of rates should be resolved. With the resolution of this problem, there is likely to be a significant improvement in the financial position of local authorities.
7. In order to realize the full potential of property tax as a source of revenue, local authorities should seriously consider moving away from the use of unimproved site value rating towards the use of improved site value rating.
8. It is necessary to explore in more detail the reasons for low yield in property tax collection within individual cities and towns, that is, whether it is due to patchy property registers, lack of updated valuation rolls, and so on.
9. In order to pay proper attention to all the problems surrounding the collection of property taxes, it is necessary to ensure that each council has a specific department dealing with property valuation and that the department has sufficient authority and capacity to carry out its work.
10. Property rates should be reviewed annually, for example using inflation rates, cost of living indices, etc. This may, to an extent, enable local authorities to benefit in a more timely way from the increasing values of properties within their jurisdictions.
11. It is necessary for councils to provide incentives to property owners, for example, by visibly improving infrastructure in their areas, in order to encourage timely payment of property rates and enhance willingness to pay.
12. In order to clear the valuation backlogs which characterize all cities in East Africa, councils should be encouraged to allow valuation to be done by private valuers. Kampala Municipality is, in fact, already moving in that direction as part of its overall process of privatization. The short-term costs of doing this are, in the long-term, likely to be off-set by higher yields from property rates.
Tax on income
13. The access of local authorities to a larger share of national taxes, including income tax, could be improved. This is very successful in a number of countries outside Africa and there are signs of potential success in East Africa as well.
14. Crude methods of collection of development levies and graduated personal tax (the most common types of tax on income) which remind citizens of repressive colonial era 'hut and poll tax' experiences should be done away with and better methods found.
15. There is a need to improve city-wide business enterprise and employee (including place of residence) data bases in order to ensure that enterprises remit to government all contributions collected from their employees and that all eligible employees pay. Ways also have to be found of ensuring payment by informal sector employees and enterprises.
16. In order to ensure equity, flat rates of taxation, where these are used, should be gradually done away with in favour of graduated rates.
17. The issue of the status of women in relation to payment of graduated personal taxes and development levies has to be resolved in ways that reflect changing cultural and social patterns in the region, especially with regard to gender sensitivity.
18. In order to avoid confusion among tax-payers, the 'service charge', currently an important revenue source in Kenyan local authorities, should be categorized and explained to urban residents as a 'tax on income' rather than as a charge for services rendered.
User charges (for urban services)
19. Clear systems of charging for all services provided by urban local authorities should be put in place to ensure adequate provision, operation and maintenance of the services. Such systems must be clear on key issues such as cost-recovery (full or partial) and subsidization of poor communities.
20. In order to overcome a growing feeling of despondency and resistance against paying municipal taxes and charges, local authorities should strive to ensure that the services for which their citizens pay are adequately provided, efficiently operated and effectively maintained. Ways have to be found of dramatically improving the service delivery capacity of urban local authorities.
21. Market rents should be charged for houses owned by local authorities, not only to raise more revenue from this source, but also to remove a discriminatory system within which a small proportion of citizens (some of them undeserving) are subsidized by the rest, including by citizens poorer than themselves.
22. Clearer and equitable policies on cost-sharing in the areas of education and health should be worked out, ensuring improvement of quality in the provision of these services and guaranteeing universal access.
23. Privatization efforts should be intensified in order to improve efficiency in the provision of services, yet at the same time ensuring that the poor are not excluded in terms of access to those services.
24. In all cases of cost-sharing, elaborate national guidelines are necessary. This is particularly so in the education sector.
25. Privatization of markets should be encouraged, as it has been identified as a promising source of income for municipalities in East Africa. An good example of this is the privatization of markets in Mwanza, where a private company maintains city-owned markets, collects charges from users, which are passed on to the city council after retaining an agreed percentage.
26. The common practice of sub-letting of council properties should be discouraged, as this has led to tariffs/charges remaining low. For example, house and market stall rents have remained extremely low, while the official tenants sub-let them at exorbitant prices. It is common for these properties to be owned by councillors, hence the lack of political will to make necessary rent increases.
27. Councils should expand/increase markets and bus stands in order to cope with demand and also to discourage the spontaneous emergence of unplanned facilities from which the local authorities derive no revenue.
Tax on provision of goods and services (business licence fees)
28. As a source with a lot of potential (due to its high level of elasticity), greater effort should be put into thinking about ways of maximizing the yield from this revenue source, including clearer and fairer sharing of the source between central and local governments.
29. Ways must be found of ensuring compliance by the many numbers of business enterprises operating in the informal sector, including more vigilant but pro-active and tolerant inspection and follow-up procedures.
30. Since evidence from the region suggests that not much benefit is currently being derived from this source, privatization efforts should be intensified to sell all income-generating enterprises owned by local authorities and the proceeds from this should be ploughed into expansion and improvement of urban infrastructure and services.
31. Governments should consider resuscitating local authority loan bodies, taking into account past experiences regarding defaulting and subsidization. If it is so decided, central governments must then commit themselves to playing their part in sustaining these bodies, while serious effort must be made to staff them with competent professionals.
32. Public-private sector partnership avenues could also be explored in order to identify and put in place more sustainable local authority loan sources.
33. Where borrowing is considered necessary as a source of revenue, specific provisions should be tailor-made for individual cities and these must be based on their level of credit worthiness.
34. Workable formulae on the settlement of mutual indebtedness between central and local governments should be worked out.
35. Clear and consistent systems of central allocations to local authorities should be put in place, with transparent allocation formulae and timely disbursement.
36. Sharing of a wide range of taxes is another avenue through which resources accruing to the central government could be allocated to local authorities. This should be encouraged.
Other, general recommendations on municipal finance
37. There is a need to develop, on city-by-city basis, realistic and workable plans of action based on the findings of the studies presented above. Each plan of action should clearly identify what needs to be done, who will do it, how it should be done and by when.
38. There is need to differentiate improvements that can be undertaken under existing laws (short-term improvements) from those that have to await the amendment of relevant laws (long-term improvements).
39. In all the three East African countries, development of data management systems would greatly improve the level of revenue collection. The development of such data management systems should be given serious consideration by all local authorities, individually or in collaboration with other local authorities.
40. In order to improve levels of revenue collection, local authorities should consider the idea of establishing independent bodies to collect revenue on their behalf, such as those created at the central government level.
41. There is a need for local authorities to educate/sensitize residents on the importance of paying local taxes, fees and service charges.
42. As part of on-going reforms within individual local authorities, serious thought should be given to reducing the personnel emolument proportion of their expenditures.