SNV egroup discussion Topic 2: Can public funding (taxes and transfers) in sanitation contribute to greater equity?

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  • Elisabeth
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Re: SNV egroup discussion Topic 2: Can public funding (taxes and transfers) in sanitation contribute to greater equity?

Note by moderator: The following contribution came from Yerri Noer Kartiko in Indonesia:
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Metro Municipality Government runs desludging service in our city. The service is provided still under “on call” response or when a household was having a problem with the toilet and/or septic tank. The Government receives a certain amount of money after this service has been performed, after the people get a service. People pay retribution. On the other hand however, we do not have updated data regarding the condition of each toilet and septic tank in the entire area of the city. For the lond run, the tariff is perhaps not recovered with the cost of services given.

This is not a good condition. The Metro Government shall invest a lot of money for sanitation development. On the other hand and at the same time, The Government has a very limited resources, particularly in budget allocation for sanitation sector. Thus, The Government shall focus to public empowerment, public engagement and participation in development program.

The Government shall be careful to determine the tariff of retribution and applying public financing. The Government can invite public for open discussion to deal with this issue.

We can implement the principle of “polluter pays”. Every person shall be responsible to manage their waste themselves. When they cannot do this management, they shall give the responsible to a competent agency, by paying a certain cost as a compensation.

1. We calculate the total cost for financing of all componentss of our urban sanitation, such as: a. workforce cost; b. operational and intermittent maintenance cost for machines, vehicles and installation unit; c. management cost; d. ecological safety and security cost as well.

2. We calculate the total number of people who live in our city area.

3. The result of number 1 divided by the result of number 2. We have basic sanitation cost for each people.

4. We arrange the categorization customer, such as: private and government, kind of livelihood of people, level of daily or monthly income. Based on this categorization, we arrange the rule for subsidy system.

5 Metro Government issues the local rules related to sanitation, routine desludging system, and so on.

Yerri

Yerri Noer Kartiko
Environment Division in Metro City Local Government, Lampung Provinces, Indonesia.
Secretary of Environment Division

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Dr. Elisabeth von Muench
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  • Elisabeth
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Re: SNV egroup discussion Topic 2: Can public funding (taxes and transfers) in sanitation contribute to greater equity?

Note by moderator: This contribution is from Emily in Zambia:
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Good morning, my name is Emily Banda, SNV, Business Development Advisor, Zambia. My contribution to the Following Questions is as follows:
1) Do you consider that the current use of taxes and transfers in sanitation (in your city or country) is contributing to reducing inequality in sanitation services? Why/ Why not?
Yes the current use of taxes and transfers in Sanitation in Zambia is contributing to reducing inequality in sanitation services: The mandate to supply Sanitation services to the cities is held by Commercial Utilities (CU) and thus customers of the CU who have a sewer connection pay a sewerage charge for services but, on top of this, all CU customers also pay a sanitation levy (redistributive taxation) that is ring-fenced for expenditure on sanitation improvements in low-income communities. Also, we have NGOs through Sanitation projects working hand-in- hand with various stakeholders to ensure that the poor have safely managed sanitation services. For instance, The Lusaka sanitation levy was introduced following a period of substantial sector reforms, in response to demands from the regulator NWASCO that Lusaka Water and Sewerage Company (LWSC) should start providing sanitation services to low-income communities.

2) Do you think that this is even a realistic and/or desirable expectation?
Yes this is realistic for instance in Lusaka, since 2012 expenditures form the Sanitation Levy to date have included subsidized construction of about 200 onsite sanitation facilities in three low-income peri-urban areas lying outside the direct area of responsibility of LWSC (Kanyama, Chaisa and Chipata), and ongoing part-financing of construction of a condominial sewer system in Kalingalinga peri-urban area

3) In your view, what would be required to ensure the use of taxes and transfers contributes to reducing inequalities in sanitation services? (or said otherwise: “how?”)
Strong Regulation and transparent accounting is critical: Sanitation taxes and transfers can only be effectively ring-fenced for pro-poor use if there are transparent rules defining how it can be spent, and transparent reporting of how it has been spent.

Emily
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Dr. Elisabeth von Muench
Freelance consultant on environmental and climate projects
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Re: SNV egroup discussion Topic 2: Can public funding (taxes and transfers) in sanitation contribute to greater equity?

Note by moderator: This contribution is from Chola in Zambia:
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Dear All

My name is Chola Mbilima. I work for NWASCO the water supply and sanitation regulator in Zambia. My answers to the discussion questions are as follows:

Question 1:
Yes the taxes and transfers do contribute to reducing inequalities. Projects that have been funded using transfers and taxes have targeted the provision of sanitation facilities for the low income communities. The challenge in ensuring that sanitation services are provided across the entire sanitation service chain has been that containment facilities that are in existence which compromise safe managed sanitation.
This is coupled with a mechanism to allow beneficiaries to pay for their containment facilities over a period of time through the sanitation bills which brings in an aspect of ownership and responsibility for the facilities provided using taxes and /or transfers.

Question 2:
Yes. If we are to achieve the SDGs. As the situation is now, sanitation is not prioritized by households hence less appreciated. However, the implications of not having safely managed sanitation are far reaching. In order to ensure protection of the environment and safety of communities there is need to invest in sanitation and also activities that will assist is raising its agenda at household level.

Question 3:
Clear Policy and Legal framework that set standards for and expectations of sanitation services. This should be coupled with a clear financing mechanism that takes into consideration subsidies for low income communities and how these will be targeted. A well structured tariff setting system will also be inevitable to ensure that once facilities are provided they will be paid for, to guarantee sustainability.

Regards
Chola
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Dr. Elisabeth von Muench
Freelance consultant on environmental and climate projects
Located in Ulm, Germany
This email address is being protected from spambots. You need JavaScript enabled to view it.
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Re: SNV egroup discussion Topic 2: Can public funding (taxes and transfers) in sanitation contribute to greater equity?

Very happy to be reading all of the exchange on the two discussion topics around equity and sustainability of urban services. Very critical and timely discussions to be having, so many thanks to SNV for organizing and everyone who has contributed already. I'm sharing a few thoughts below on the current set of questions... they are generalized rather than tied to specific city cases, but partners should be publishing supporting data soon.

• Do you consider that the current use of taxes and transfers in sanitation (in your city or country) is contributing to reducing inequality in sanitation services? Why/ Why not?

Referring to several of the cities where we are making significant grants, I tend to see increasing conversations about equability in use of public finance which is fantastic. In practice however, publicly-financed transfers and concessional lending to urban sanitation authorities tend to be overwhelmingly regressive.
- There tends to be inequity across cities in a country, with some receiving the overwhelming majority of finance and others receiving none.
- In nearly all our partner cities, there is inequity within cities, with networked communities receiving several-fold the amount of funding relative to LICs or non-networked communities even when the networked portions of the city are a small portion of the city and network expansion targets are limited. Most neglected might be the low income urban communities that fall outside of a utility service area boundary or city boundary and would technically be covered by a rural-facing department entirely unequipped and unresourced to address urbanized communities' planning and investment needs. It is worth clarifying that not all cities have both sewered and non-sewered systems and that LIC/non-LIC categories are not universally synonymous with non-sewered/sewered infrastructure.
- There are inequitable assumptions about how finance can be used in cases of networks vs non-networked hardware. For example, networked sanitation loans are subsidized and paid back after long grace periods over the course of infrastructure lifetime (or transferred to the public outright if the utility is not able to service debt from a ministry loan). In too many low-income country cases in our grantee geographies, these tax-subsidized investments target small areas of the city; the actual achievements fall far short of the planned investments but loans must be repaid irrespective of the actual resulting benefits or lack thereof. For on-site households--often the lowest income ones--are expected to invest in public good components of hardware (like containment that supports city safety goals) using HH private cash, often with some level of interest rates, a significant down payment, no grace period and a repayment period that is rarely longer than 12-18 months.
- In one city a series of three sewer-related investments (a mix of grants and loans) have barely nudged the city forward on networked coverage rates but amount to upwards of $0.5B, where as $30m was earmarked for services in the ~75-80% of the city not even in the plans to get upgrades
- There is an opportunity to revisit financing norms in urban sanitation to avoid repeating some longstanding patterns in urban water, captured well this summer by the WB report summarized here: blogs.worldbank.org/water/smarter-subsid...water-and-sanitation

• Do you think that this is even a realistic and/or desirable expectation? We cannot make meaningful progress toward the SDGs or inclusivity unless the sector is able to flip regressive norms and incentivize investment and service delivery in low income urban communities.
• Concerns about undermining market incentives or user incentives to sell/use toilets respectively are simply a function of investment and subsidy design not its existence.
• With good design of financing packages, cities can improving equity and affordability w/ public finance w/o undermining market forces or constructive user engagement. In fact, well designed subsidies and publicly financed incentives should spur growth of private sector and change user behaviors for the better. Formalized affordable markets can enable private sector growth and investment. Furthermore, concerns about perverse incentives tend to be raised with respect to transfers to low income communities more often than with respect to the hundreds of millions dollars invested in networked systems that repeatedly fail before or soon after they are commissioned.
• What is exciting is that there is the prospect of aligning more equitable and efficient investments with improved utility or city authority financial viability outcomes. Good public coordination and investment in market structures that can turn a city's 70-100% of urban households into large numbers of paying customers - this is makes subsidizing connections or decent containment an investment in generating revenue. There are several cases where customer fees would not only generate revenue but would result in lower costs to low income households (who pay high costs to private sector providers for substandard services) and would give them a better shot at receiving safe and sanitary formalized services. This of course varies significantly by each city scenario. The foundation is supporting economic regulators and utilities to map out for their respective service areas and explore how different investments and service models could be used to optimize revenues and progress toward SDGs. Earliest outputs from that analysis should be ready by the end of 2019; a shareable tool should be ready at some point in 2020.

• In your view, what would be required to ensure the use of taxes and transfers contributes to reducing inequalities in sanitation services? (or said otherwise: “how?”)
- Nothing sustained can be achieved without investing directly in building capacity of public authorities--those with a clear and inclusive mandate to deliver urban sanitation services--especially their staff technical and problem solving capacity, and authorities' management information systems for financial, service, and asset management to inform investments and decisions.
- Nothing sustained will be achieved without accountability systems--that also must be built on MIS systems linked to authorities' systems--to help inform and guide authorities' investments and hold them to count for using revenues to expand and improve delivery of mandated services with inclusivity, efficiency and proper resource planning and management

Alyse
Water, Sanitation & Hygiene
Bill & Melinda Gates Foundation
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  • Antoinette
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SNV egroup discussion Topic 2: Can public funding (taxes and transfers) in sanitation contribute to greater equity?

Note by moderator: the text below is from the e-mail to the egroup - note the dates given below are not strictly applied here on the forum. You can post in this thread at any time.

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“SUSTAINABLE COST RECOVERY AND EQUITY IN URBAN SANITATION”


TOPIC 2: CAN PUBLIC FUNDING (TAXES AND TRANSFERS) IN SANITATION CONTRIBUTE TO GREATER EQUITY?
7th -13th of November

Dear colleagues,

Welcome to the second topic of our discussion on “Sustainable cost recovery and equity in urban sanitation”. The second topic asks whether public funding in sanitation can contribute to greater equity. The topic runs from today, 7th of November till next Wednesday 13th of November.

Over the past week, we received 14 contributions from 13 people from 9 countries, with two of these coming in just now when I’m typing this. Thank you all for your contributions. I hope to get the summary of the first topic to you over the weekend.

In the first topic we discussed what you see as sustainable cost recovery in city wide sanitation services, that is for all parts of the city, along the sanitation value chain and considering the costs of investments, operation and maintenance, repairs and renewal of assets. Most of you indicated that tariffs should cover costs of day-to-day operations and intermittent maintenance, while in most cases you expect upfront infrastructure investments and asset renewal to come from taxes or transfers. You also spoke about affordability in relation to tariffs and about some countries having a low tax base.

It is clear that affordability challenges are not uniform across the entire population, nor are the costs of services the same in all contexts. It is also clear that tax money is always limited with many competing demands, not only from sanitation. Hence there are trade-offs in the decisions about where to use money coming from taxes or transfers. While larger infrastructure investments are often paid from loans, these loans are ultimately paid back from tax money. It maybe though that this is national tax money -paid by everybody in the country- for infrastructure that only benefits a certain group of people in certain cities.
In the latest JMP reports, there was a focus on rates of change and service gaps between the richer and poorer groups in a country. It was clear that these gaps exist in all countries. The SDGs are of course all about inclusion and reducing inequality. However, when we look at the sanitation investments paid by taxes and transfers, these are not always directed towards the poorest groups. For example, investments in sewer networks for the central business district, can be assumed to increase service levels for the better off people in a city.

The discussion questions are:
1. Do you consider that the current use of taxes and transfers in sanitation (in your city or country) is contributing to reducing inequality in sanitation services? Why/ Why not?
2. Do you think that this is even a realistic and/or desirable expectation?
3. In your view, what would be required to ensure the use of taxes and transfers contributes to reducing inequalities in sanitation services? (or said otherwise: “how?”)


Again, I realise that these are not the easiest questions to answer, so feel free to discuss the topic more broadly. Either way, I am really looking forward to hear from you.
As for the previous topic, you can contribute by replying to this email and please mention your name, organisation and country in your reply. This will help others to understand your message better.

Best,
Ant.
Antoinette Kome
Global Sector Coordinator WASH

SNV Netherlands Development Organisation
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