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- Urban Sanitation Finance - From Macro to Micro Level (June/July 2015, Thematic Discussion 2)
- Theme 1 of TD 2: Public Finance
- Local taxation? What a crap idea!
Local taxation? What a crap idea!
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Re: Local taxation? What a crap idea!
Dear Guy,
Thank you and thanks to Katrin for your excellent conclusions, and sorry for my late response. And good to hear that nothing too bad has happened to you and your relatives!
Unfortunately, the projects in Adjumani have not been as successful as they could and should have been, as should have become clear from my explanations. I think I should be adding that much of the sanitation activities, in particular the composting related ones, have been seen as pilot projects, and that explains the relatively high level of donor funding (GIZ, in particular). Overall, I have concluded that the more activities have been small in scale and locally funded, i.e. relying on people's own initiatives, the more they have been successful. And those activities with higher funding from outside have been least successful. Hence my skepticism. Even though there have also been cases of locally funded toilets that have failed, and that was usually due to bad construction (like leaking covers, lack of aeration, etc.).
Another danger of making a lot of money available for sanitation is that it may be spent, apart from the corruption part, on 'Mercedeses' where bicycles could do and would even have been better. Things like traditional gravity sewers rather than ecological sanitation.
The money that has been invested into trainings has, however, generally been well invested (to the point that masons from Adjumani have started constructing UDDTs across the border in South Sudan) and that is something that can be taken up by central government within the framework of countrywide programs. And it's certainly something that donors would wish to get involved in. For the actual activities, in case private funds are not available, I like the approaches of small loans and cost recovery that have been presented in the other fora.
Concerning the sanitation levy we were raising on the water tariff, it was redistributive because the parts used for UDDTs were available to all residents whether they had a water connection or not. But I think, for most, it was more a question of convenience and motivation rather than a question of money since Adjumani is a very remote place, certainly viewed from Kampala, and buying these parts in bulk from Kampala was ensuring a constant supply and was avoiding overcharging by traders. But for some, it has certainly also helped money wise.
And concerning your case studies, I'll contact you when I'm more free.
Thanks again and regards,
H-A
Thank you and thanks to Katrin for your excellent conclusions, and sorry for my late response. And good to hear that nothing too bad has happened to you and your relatives!
Unfortunately, the projects in Adjumani have not been as successful as they could and should have been, as should have become clear from my explanations. I think I should be adding that much of the sanitation activities, in particular the composting related ones, have been seen as pilot projects, and that explains the relatively high level of donor funding (GIZ, in particular). Overall, I have concluded that the more activities have been small in scale and locally funded, i.e. relying on people's own initiatives, the more they have been successful. And those activities with higher funding from outside have been least successful. Hence my skepticism. Even though there have also been cases of locally funded toilets that have failed, and that was usually due to bad construction (like leaking covers, lack of aeration, etc.).
Another danger of making a lot of money available for sanitation is that it may be spent, apart from the corruption part, on 'Mercedeses' where bicycles could do and would even have been better. Things like traditional gravity sewers rather than ecological sanitation.
The money that has been invested into trainings has, however, generally been well invested (to the point that masons from Adjumani have started constructing UDDTs across the border in South Sudan) and that is something that can be taken up by central government within the framework of countrywide programs. And it's certainly something that donors would wish to get involved in. For the actual activities, in case private funds are not available, I like the approaches of small loans and cost recovery that have been presented in the other fora.
Concerning the sanitation levy we were raising on the water tariff, it was redistributive because the parts used for UDDTs were available to all residents whether they had a water connection or not. But I think, for most, it was more a question of convenience and motivation rather than a question of money since Adjumani is a very remote place, certainly viewed from Kampala, and buying these parts in bulk from Kampala was ensuring a constant supply and was avoiding overcharging by traders. But for some, it has certainly also helped money wise.
And concerning your case studies, I'll contact you when I'm more free.
Thanks again and regards,
H-A
Hanns-Andre Pitot
M.Eng. Environmental Pollution Control
presently in Seesen, Germany
M.Eng. Environmental Pollution Control
presently in Seesen, Germany
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Re: Summary: Local taxation? What a crap idea!
Dear all,
Thank you for contributing to our topic and raising so many important issues with regard to local taxation for sanitation!
The summary is now available here .
Thank you,
Katrin
Thank you for contributing to our topic and raising so many important issues with regard to local taxation for sanitation!
The summary is now available here .
Thank you,
Katrin
Dr. Katrin Dauenhauer
SuSanA Thematic Discussion Series Coordinator
Bonn, Germany
SuSanA Thematic Discussion Series Coordinator
Bonn, Germany
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Re: Local taxation? What a crap idea!
First off, I want to apologise for dramatically disappearing from this thread. A family member was unfortunately hit by a car in India: I had to fly out to deal with things. Long story short: the injuries have turned out to be relatively minor, and recovery is progressing well, all good. Phew!
So: back to business. While I’ve been dealing with medical emergencies, you guys have practically written a book: wow! I’m impressed! In what follows, I’ll try to respond to some of the points raised.
But let me start by humanely killing "Joe": he was an interesting person to briefly be, but frankly he was talking crap. In my view (Guy’s view), local taxation is in many contexts a key element of sanitation financing, and we – that is, people who work in development agencies – should look very carefully at ways we can support its growth (as part of complex solutions involving donor money, central government money and consumer money, of course).
1) Big cities or small towns? Jonathan suggests that the possibility of local taxation to part-finance sanitation is more likely to be relevant for large cities than for small towns, and I tend to agree with this (though I certainly wouldn’t rule out local taxation in small towns with a significant tax base). This ties to Cecile’s very interesting remarks about intermunicipal management of sanitation in France: I’d like to know more about this Cecile, thanks for the pointer... I guess you’re primarily referring to towns and rural municipalities, not big cities? Towns clubbing together is an interesting solution in various respects: I guess this might improve bargaining power to access central government finance. But certainly, much of what I will say here relates primarily to big cities.
2) Local or central taxation? Florian and others make the very good point that the relevance of local taxation will vary depending on each country’s degree of decentralisation. Of course this is absolutely correct, and as Joe (RIP) pointed out at the outset, we can’t reasonably aspire to bring about constitutional change, and need to work within each country’s existing institutional financing model. But I’d like to nuance this. First, in some African countries centralisation of public revenue management is so extreme and unconsidered that it should be viewed as a flawed model which needs to evolve, rather than a valid governance choice… we may have limited power to change this, but that doesn’t mean we should uncritically accept it… even in a relatively centralised system, some degree of local control of tax revenues is essential for effective city management. Second, there are work-arounds: an example here is the pro-poor sanitation tax raised on water bills in Lusaka… this is not publicly described as a tax (if it were, central government would demand it go to central coffers)… but it is a tax nonetheless. So even in centralised contexts, development agencies can certainly aspire to work with local partners to develop redistributive tax-like generation and disbursement models, notably redistributive components (i.e. tax-like components) within tariff systems.
3) What should local revenues be spent on? The previous point ties to Jonathan’s suggestion that, as a general rule, central government finance (and donor money) should be used for large capital investment, while locally raised money should be used for recurrent costs. This is perhaps a simplification, but I agree with this. With rare exceptions, local taxation in developing contexts is unlikely to raise revenues comparable to those that central government can provide. But local taxation models have key benefits over and above the actual amount of money raised. They can help build the social contract between local government and citizens; as Sowmya has eruditely and eloquently discussed, they can provide a source of revenue to help bridge the service-delivery gaps left between big lumpy capital investments by central government and donors, on the one hand, and what-poor-citizens-can-reasonably-pay, on the other hand. And local revenue generation can build a municipality’s credibility for accessing donor funding: I’d certainly be happier to invest donor money in a city which shows itself to be serious about its own responsibilities. A city which is currently selling itself in this way is Juba in South Sudan: with USAID support they’ve been developing a local revenue generation model based on licensing fees and tipping fees charged to desludging trucks, and they’re seeking donor funding with this model as testimony to their seriousness… it’ll be interesting to see how this develops.
4) Case studies? I’d really like to know more about Hanns-André’s fascinating experience in Adjumani. This seems to have been a very interesting and successful combination of market finance, public finance and donor finance, though I’m not entirely clear to what extent the sanitation levy you refer to can be considered a redistributive tax (if at all), and to what extent (if at all) the municipality are sustaining this after the donors left… I’d really like to find out more. (If anyone in this discussion would like to help us write a short case-study publication for www.publicfinanceforwash.com, please do get in touch!)
I could continue and respond to many more of the fascinating comments raised in this discussion, but that would make my post far too long. I know I haven't responded to all the excellent points raised (by others including Giacomo)... and I think Katrin will soon be posting a very useful summary of this thread. I want to finish by saying that we (in development agencies) should certainly be striving to increase redistributive government finance for urban sanitation, be it from central or local government (or more likely from both)… donor finance is not a sustainable solution, market finance alone isn’t going to resolve the sanitation problems of dense urban habitats (sorry Hanns-André), and frankly if we don’t face up to the difficult challenges of supporting public finance solutions, we’re just going to contribute to continuing failure. (By the way, if you're interested in the "how" of this, we (the Public Finance for WASH initiative) are running a consultation event at the UNC Water & Health Conference in October, entitled "Primary research around public finance for WASH: ways forward"... if you're going to be at this conference, please come along.)
Finally finally, let me quote Marjin: “I am not convinced that people would refuse a local tax in order to have a decent waste management system and shit free rivers. I think the problem is more that they would not trust the political leadership and civil service to actually give them value for money”. Spot on, dead right! But we work in organisations spending millions of dollars of rich-country money, and if we do this right, we can use some of that money to help combat that vicious circle of mistrust, and help create a virtuous circle of good service delivery and therefore willingness to pay (and therefore better service delivery, und so weiter). It’s a chicken and egg situation, as several contributors have pointed out… and that means that neither chicken nor egg come first, it’s a circle. So please let’s not waste time thinking about which should come first...
Thanks for this great discussion!
So: back to business. While I’ve been dealing with medical emergencies, you guys have practically written a book: wow! I’m impressed! In what follows, I’ll try to respond to some of the points raised.
But let me start by humanely killing "Joe": he was an interesting person to briefly be, but frankly he was talking crap. In my view (Guy’s view), local taxation is in many contexts a key element of sanitation financing, and we – that is, people who work in development agencies – should look very carefully at ways we can support its growth (as part of complex solutions involving donor money, central government money and consumer money, of course).
1) Big cities or small towns? Jonathan suggests that the possibility of local taxation to part-finance sanitation is more likely to be relevant for large cities than for small towns, and I tend to agree with this (though I certainly wouldn’t rule out local taxation in small towns with a significant tax base). This ties to Cecile’s very interesting remarks about intermunicipal management of sanitation in France: I’d like to know more about this Cecile, thanks for the pointer... I guess you’re primarily referring to towns and rural municipalities, not big cities? Towns clubbing together is an interesting solution in various respects: I guess this might improve bargaining power to access central government finance. But certainly, much of what I will say here relates primarily to big cities.
2) Local or central taxation? Florian and others make the very good point that the relevance of local taxation will vary depending on each country’s degree of decentralisation. Of course this is absolutely correct, and as Joe (RIP) pointed out at the outset, we can’t reasonably aspire to bring about constitutional change, and need to work within each country’s existing institutional financing model. But I’d like to nuance this. First, in some African countries centralisation of public revenue management is so extreme and unconsidered that it should be viewed as a flawed model which needs to evolve, rather than a valid governance choice… we may have limited power to change this, but that doesn’t mean we should uncritically accept it… even in a relatively centralised system, some degree of local control of tax revenues is essential for effective city management. Second, there are work-arounds: an example here is the pro-poor sanitation tax raised on water bills in Lusaka… this is not publicly described as a tax (if it were, central government would demand it go to central coffers)… but it is a tax nonetheless. So even in centralised contexts, development agencies can certainly aspire to work with local partners to develop redistributive tax-like generation and disbursement models, notably redistributive components (i.e. tax-like components) within tariff systems.
3) What should local revenues be spent on? The previous point ties to Jonathan’s suggestion that, as a general rule, central government finance (and donor money) should be used for large capital investment, while locally raised money should be used for recurrent costs. This is perhaps a simplification, but I agree with this. With rare exceptions, local taxation in developing contexts is unlikely to raise revenues comparable to those that central government can provide. But local taxation models have key benefits over and above the actual amount of money raised. They can help build the social contract between local government and citizens; as Sowmya has eruditely and eloquently discussed, they can provide a source of revenue to help bridge the service-delivery gaps left between big lumpy capital investments by central government and donors, on the one hand, and what-poor-citizens-can-reasonably-pay, on the other hand. And local revenue generation can build a municipality’s credibility for accessing donor funding: I’d certainly be happier to invest donor money in a city which shows itself to be serious about its own responsibilities. A city which is currently selling itself in this way is Juba in South Sudan: with USAID support they’ve been developing a local revenue generation model based on licensing fees and tipping fees charged to desludging trucks, and they’re seeking donor funding with this model as testimony to their seriousness… it’ll be interesting to see how this develops.
4) Case studies? I’d really like to know more about Hanns-André’s fascinating experience in Adjumani. This seems to have been a very interesting and successful combination of market finance, public finance and donor finance, though I’m not entirely clear to what extent the sanitation levy you refer to can be considered a redistributive tax (if at all), and to what extent (if at all) the municipality are sustaining this after the donors left… I’d really like to find out more. (If anyone in this discussion would like to help us write a short case-study publication for www.publicfinanceforwash.com, please do get in touch!)
I could continue and respond to many more of the fascinating comments raised in this discussion, but that would make my post far too long. I know I haven't responded to all the excellent points raised (by others including Giacomo)... and I think Katrin will soon be posting a very useful summary of this thread. I want to finish by saying that we (in development agencies) should certainly be striving to increase redistributive government finance for urban sanitation, be it from central or local government (or more likely from both)… donor finance is not a sustainable solution, market finance alone isn’t going to resolve the sanitation problems of dense urban habitats (sorry Hanns-André), and frankly if we don’t face up to the difficult challenges of supporting public finance solutions, we’re just going to contribute to continuing failure. (By the way, if you're interested in the "how" of this, we (the Public Finance for WASH initiative) are running a consultation event at the UNC Water & Health Conference in October, entitled "Primary research around public finance for WASH: ways forward"... if you're going to be at this conference, please come along.)
Finally finally, let me quote Marjin: “I am not convinced that people would refuse a local tax in order to have a decent waste management system and shit free rivers. I think the problem is more that they would not trust the political leadership and civil service to actually give them value for money”. Spot on, dead right! But we work in organisations spending millions of dollars of rich-country money, and if we do this right, we can use some of that money to help combat that vicious circle of mistrust, and help create a virtuous circle of good service delivery and therefore willingness to pay (and therefore better service delivery, und so weiter). It’s a chicken and egg situation, as several contributors have pointed out… and that means that neither chicken nor egg come first, it’s a circle. So please let’s not waste time thinking about which should come first...
Thanks for this great discussion!
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Generally, in the Sindh province of Pakistan, the provincial grants are used for meeting the capital costs of the projects. The tax collected from each house funds the O&M costs of the projects. In urban areas, people pay the sewerage bills, but then the non-transparency casts a dark shadow, as a result, the sanitation projects become unsustainable.
In case of rural areas, collection of tax, for the sanitation service rendered, is a difficult task. Not many people pay sanitation bills. Restricted funds collected are insufficient to pay for the O&M costs in rural sanitation projects.
F H Mughal
In case of rural areas, collection of tax, for the sanitation service rendered, is a difficult task. Not many people pay sanitation bills. Restricted funds collected are insufficient to pay for the O&M costs in rural sanitation projects.
F H Mughal
F H Mughal (Mr.)
Karachi, Pakistan
Karachi, Pakistan
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- As part of the Engineering team, my role at IMC is to lead on the delivery of projects requiring specific expertise on urban sanitation (including excreta/waste/wastewater/stormwater management) focusing on technical, institutional and financial aspects in project design and implementation.
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Re: Local taxation? What a crap idea!
Hi,
Just a couple of quick points here as this is the first time I've connected to the discussion for a few days.. the first of which is implicitly stated above, this is the fact that there needs to be an authority (municipality) with the jurisdiction to collected taxes. Am I correct in assuming therefor that the proposed use of local taxes is only going to be possible in larger cities ?
It is mentioned in Sowmya posting (who gets the prize for the level of input to this discussion) that "local taxation is not a good model for urban sanitation, which requires some sort of cross-subsidy to meet the needs of the poor. Transfers from central government are more suited to this sort of redistributive social goal."
I would have thought that the grants from central government would be appropriate for infrastructure development but local taxes are appropriate for paying for the ongoing O+M and asset management costs for treatment facilities.
I think there are strong merits in this particularly as it means that the owner of the property is obliged to pay for the costs of treatment of waste arising from the property, rather than adding it to the service charges associated with desludging or a surcharge on the water bill.
best regards,
Jonathan
Just a couple of quick points here as this is the first time I've connected to the discussion for a few days.. the first of which is implicitly stated above, this is the fact that there needs to be an authority (municipality) with the jurisdiction to collected taxes. Am I correct in assuming therefor that the proposed use of local taxes is only going to be possible in larger cities ?
It is mentioned in Sowmya posting (who gets the prize for the level of input to this discussion) that "local taxation is not a good model for urban sanitation, which requires some sort of cross-subsidy to meet the needs of the poor. Transfers from central government are more suited to this sort of redistributive social goal."
I would have thought that the grants from central government would be appropriate for infrastructure development but local taxes are appropriate for paying for the ongoing O+M and asset management costs for treatment facilities.
I think there are strong merits in this particularly as it means that the owner of the property is obliged to pay for the costs of treatment of waste arising from the property, rather than adding it to the service charges associated with desludging or a surcharge on the water bill.
best regards,
Jonathan
Dr. Jonathan Parkinson
Principal Consultant – Water and Sanitation
IMC Worldwide Ltd, Redhill, United Kingdom
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Skype : jonathanparkinson1
Principal Consultant – Water and Sanitation
IMC Worldwide Ltd, Redhill, United Kingdom
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Skype : jonathanparkinson1
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Re: Local taxation? What a crap idea!
Dear Forum Members,
Due to unexpected changes in the availability of one of our experts who was scheduled to provide further insight into the topic on local taxation, this thread will remain open for the time being.
I will update you next week on further proceedings.
In the meantime, please continue the conversation by sharing your experiences from your respective countries and by raising questions that our expert could address at a later point.
Finally, also make sure to check out our current discussion on Microfinance here .
Thank you,
Katrin
Due to unexpected changes in the availability of one of our experts who was scheduled to provide further insight into the topic on local taxation, this thread will remain open for the time being.
I will update you next week on further proceedings.
In the meantime, please continue the conversation by sharing your experiences from your respective countries and by raising questions that our expert could address at a later point.
Finally, also make sure to check out our current discussion on Microfinance here .
Thank you,
Katrin
Dr. Katrin Dauenhauer
SuSanA Thematic Discussion Series Coordinator
Bonn, Germany
SuSanA Thematic Discussion Series Coordinator
Bonn, Germany
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Sorry, I meant to say: caterpillar tracks! A small bulldozer with caterpillar tracks would certainly impress that town engineer, but it would also put him out of work if everybody were driving something like that!
H-A
H-A
Hanns-Andre Pitot
M.Eng. Environmental Pollution Control
presently in Seesen, Germany
M.Eng. Environmental Pollution Control
presently in Seesen, Germany
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An intriguing solution Sowmya! Even me as an engineer, I didn't think of it. But I can at least give you the name: these are called crawler tracks, as far as I know. Since they are made of steel, they would need a strong engine, similar to bulldozers. Certainly, these would handle that road (and other ones, too) ! I think, there also are small vehicles with crawler tracks that could work. The terrain is actually what I would call slightly hilly, with river Nile at a distance about 200 m below. - I think you are in India, right? I know that in India, you call hills what we call high mountains, so, let's say plains...
We have been using hand operated carts with strong bicycle wheels (India or China made), which were later replaced by motorcycle wheels, because the wheels kept breaking down, and that's what it should be now. Roadwise, the problem is that the area is swampy during the rainy season, and it's at an intersection where there should have been a culvert, but a drain where pushcarts can get through could also have worked. But the engineer in charge (cousin to both the town clerk and the CFO) prefers to get drunk instead of working on such issues...
Cheers, H-A
We have been using hand operated carts with strong bicycle wheels (India or China made), which were later replaced by motorcycle wheels, because the wheels kept breaking down, and that's what it should be now. Roadwise, the problem is that the area is swampy during the rainy season, and it's at an intersection where there should have been a culvert, but a drain where pushcarts can get through could also have worked. But the engineer in charge (cousin to both the town clerk and the CFO) prefers to get drunk instead of working on such issues...
Cheers, H-A
Hanns-Andre Pitot
M.Eng. Environmental Pollution Control
presently in Seesen, Germany
M.Eng. Environmental Pollution Control
presently in Seesen, Germany
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Dear Hanns-Andre,
I know you love non-sewer based solutions! Saw that on your profile status. Is Adjumani plains or hilly area? Obviously, a composting facility operator cannot be expected to incur the cost of maintaining a road! Were they using hand pushcarts? Is it possible to tinker with the wheels of the pushcart? I am not sure if I have the term right but army tanks (used in the battlefield) have a conveyor belt over multiple wheels on each side to make them all-terrain. We can either extend the wheels from under the chassis and put the conveyor belt (but this would extend the width of the vehicle, not sure if the road is wide enough) or raise the chassis and keep both set of wheels underneath. Will that conveyor belt mechanism (similar to army tanker) work and be cost-effective? Also, it should be possible to procure the spare parts locally so that it is a sustainable solution. Not sure if it would be easy to operate over steep terrain though. Hence the plains or hills question.
I think a technical solution could be the best solution in this case. You could also contact Engineers Without Borders and see if there is a tech quick-fix. I am just suggesting this because we also need to see the number of people affected by a problem. A 20-30 m stretch of road with potholes on a busy arterial road would cause much public outcry and probably easier to advocate for municipal action than a stretch in a 'low-importance' area going only to a landfill / compost storage area. Whatever works quickest so that sanitation services are not disrupted.
Thanks and warm regards,
Sowmya
I know you love non-sewer based solutions! Saw that on your profile status. Is Adjumani plains or hilly area? Obviously, a composting facility operator cannot be expected to incur the cost of maintaining a road! Were they using hand pushcarts? Is it possible to tinker with the wheels of the pushcart? I am not sure if I have the term right but army tanks (used in the battlefield) have a conveyor belt over multiple wheels on each side to make them all-terrain. We can either extend the wheels from under the chassis and put the conveyor belt (but this would extend the width of the vehicle, not sure if the road is wide enough) or raise the chassis and keep both set of wheels underneath. Will that conveyor belt mechanism (similar to army tanker) work and be cost-effective? Also, it should be possible to procure the spare parts locally so that it is a sustainable solution. Not sure if it would be easy to operate over steep terrain though. Hence the plains or hills question.
I think a technical solution could be the best solution in this case. You could also contact Engineers Without Borders and see if there is a tech quick-fix. I am just suggesting this because we also need to see the number of people affected by a problem. A 20-30 m stretch of road with potholes on a busy arterial road would cause much public outcry and probably easier to advocate for municipal action than a stretch in a 'low-importance' area going only to a landfill / compost storage area. Whatever works quickest so that sanitation services are not disrupted.
Thanks and warm regards,
Sowmya
Sowmya Rajasekaran
Director
Verity SmartLife Solutions
www.veritysmartlife.com
Director
Verity SmartLife Solutions
www.veritysmartlife.com
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Dear Sowmya,
thanks very much for your interesting comments. I wasn't at all trying to defend sewage systems, in fact I am quite a staunch opponent. The most that I would advocate are small bore systems where a first treatment is on site, thereby reducing the load on the treatment facility, reducing the size of the sewers, etc... But even those are expensive for slum dwellers, even assuming that dry toilets (UDDTs) are being used.
So, if you assume no sewage lines are used for cost reasons, access roads need some minimum standards, at least enough for push carts to get through. In Adjumani, Uganda, we actually had that problem. About 20 - 30 m of roads to the composting facility that was supposed to take municipal organic waste and residues from ecosan toilets were left to deteriorate so badly that even push carts couldn't get through. And other alternative routes were equally bad. Even going on foot was difficult. And the feasibility of the composing project was such that it was cost covering, but the local operator could not invest into upgrading that road (not to speak of the fact that the municipality had signed to maintain that access road). What would have been your solution for such a situation?
In case of Adjumani, I am sure the municipality could have invested that small money to maintain the road - as I was saying, they were earning some money via property taxes, hotel taxes, licenses, etc... But I think the key administrators (town clerk, CFO) didn't consider the project as 'their' project and were possibly waiting for new donors to come in. But I was also hearing local councilors discussing the problem.
Warm regards to you,
H-A
thanks very much for your interesting comments. I wasn't at all trying to defend sewage systems, in fact I am quite a staunch opponent. The most that I would advocate are small bore systems where a first treatment is on site, thereby reducing the load on the treatment facility, reducing the size of the sewers, etc... But even those are expensive for slum dwellers, even assuming that dry toilets (UDDTs) are being used.
So, if you assume no sewage lines are used for cost reasons, access roads need some minimum standards, at least enough for push carts to get through. In Adjumani, Uganda, we actually had that problem. About 20 - 30 m of roads to the composting facility that was supposed to take municipal organic waste and residues from ecosan toilets were left to deteriorate so badly that even push carts couldn't get through. And other alternative routes were equally bad. Even going on foot was difficult. And the feasibility of the composing project was such that it was cost covering, but the local operator could not invest into upgrading that road (not to speak of the fact that the municipality had signed to maintain that access road). What would have been your solution for such a situation?
In case of Adjumani, I am sure the municipality could have invested that small money to maintain the road - as I was saying, they were earning some money via property taxes, hotel taxes, licenses, etc... But I think the key administrators (town clerk, CFO) didn't consider the project as 'their' project and were possibly waiting for new donors to come in. But I was also hearing local councilors discussing the problem.
Warm regards to you,
H-A
Hanns-Andre Pitot
M.Eng. Environmental Pollution Control
presently in Seesen, Germany
M.Eng. Environmental Pollution Control
presently in Seesen, Germany
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You need to login to replyRe: Local taxation? What a crap idea!
Dear Cecile,
Relating to your post #13949 dated 30 Jun 2015, I am curious to see if your idea of intermunicipal taxation / collaboration could be used to create a portfolio of projects that result in a better risk pool and be used to raise from a hitherto unexplored funding source / lower financing costs.
Revenues are required for meeting recurring expenditure and repaying loan and/or paying dividends. A large-scale project with a high gestation and/or cost recovery period represents significant project and financial risks. This, in turn, could result in difficulties in raising funds and/or higher financing costs. If it is possible to put existing (brownfield) and new (greenfield) projects into a portfolio, the resultant portfolio has certain quantum of stable cashflows that can help cover the financial / cashflow risks of greenfield projects. However, in this case, because the existing and new projects would relate to different municipalities, the municipalities with existing projects (no cashflow risks to lenders) might have to be compensated in some way for taking on the additional risks.
Further, if new sanitation projects of several municipalities are clubbed, it creates a larger funding requirement and project risks could be higher as the authority & responsibility for project implementation would rest with different municipalities and there might be different levels of implementation ability. Or, a common corporation could handle all the activities on behalf of all the concerned municipalities.
How did it work out in France? As in, could you share more specifics about how the transaction & operations was structured?
And, my apologies to everyone to be posting these messages when the official time for this topic is about to get over.
Warm regards,
Sowmya
Relating to your post #13949 dated 30 Jun 2015, I am curious to see if your idea of intermunicipal taxation / collaboration could be used to create a portfolio of projects that result in a better risk pool and be used to raise from a hitherto unexplored funding source / lower financing costs.
Revenues are required for meeting recurring expenditure and repaying loan and/or paying dividends. A large-scale project with a high gestation and/or cost recovery period represents significant project and financial risks. This, in turn, could result in difficulties in raising funds and/or higher financing costs. If it is possible to put existing (brownfield) and new (greenfield) projects into a portfolio, the resultant portfolio has certain quantum of stable cashflows that can help cover the financial / cashflow risks of greenfield projects. However, in this case, because the existing and new projects would relate to different municipalities, the municipalities with existing projects (no cashflow risks to lenders) might have to be compensated in some way for taking on the additional risks.
Further, if new sanitation projects of several municipalities are clubbed, it creates a larger funding requirement and project risks could be higher as the authority & responsibility for project implementation would rest with different municipalities and there might be different levels of implementation ability. Or, a common corporation could handle all the activities on behalf of all the concerned municipalities.
How did it work out in France? As in, could you share more specifics about how the transaction & operations was structured?
And, my apologies to everyone to be posting these messages when the official time for this topic is about to get over.
Warm regards,
Sowmya
Sowmya Rajasekaran
Director
Verity SmartLife Solutions
www.veritysmartlife.com
Director
Verity SmartLife Solutions
www.veritysmartlife.com
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You need to login to replyRe: Local taxation? What a crap idea!
Dear Hanns-André,
Some thoughts in continuation of my previous post:
Another point to consider with capital-intensive, centralized systems is the problem of cost recovery in the face of changing user preferences of sanitation technology. A sewer system, for instance, has significant investment requirement, both gestation period (time required to construct the sewer system) and cost recovery period are quite long.
A tax is a compulsory payment collected by the government. However, sewer systems may be owned / operated by municipal corporations. In this case, apart from the upfront payment received from the user at the time of connection, there is no real assurance that the user may not switch to another sanitation technology. There are no term contracts with households, therefore the municipal corporation can only demand payment of overdues but not for the future services. If the household decides to switch to another technology, there is no way to recover the cost from the household (because the user tariff is payment for services and not a statutorily mandated compulsory payment like tax). A large-scale shift to another technology could then significantly impair cost recovery for the municipal corporation. If a sewer system takes 10 years for construction + cost recovery, there should be no good enough alternatives being developed and deployed for a decade from when the sewer project is launched. A project appraisal of centralized sanitation systems would have to take this into consideration with increased awareness and proliferation of alternate technologies.
Reduce the requirement for pipes / wires running through cities: In city planning, the lesser requirement we have for pipes / wires running through the city, the more the city can expand in geographical area at lower cost thus keeping the land cost low making housing and commercial real estate more affordable. The pipes / wires includes sewer pipes, optic fibre cables (OFC) for internet, telephone lines and electricity cables. The more we require these interconnected pipes and wires, expanding even large-scale residential projects in peri-urban areas will always have to wait for capital-intensive infrastructure development before they can be on par with the central business district (CBD) and premium residential areas within the city (and hence, not able to leverage the possibility of making larger land area available to residents). Decentralized technologies, on the other hand, enable smooth and accelerated expansion of the city's metropolitan area (offering the same advantages of inner city areas but without the congestion problems!).
Warm regards,
Sowmya
Some thoughts in continuation of my previous post:
Another point to consider with capital-intensive, centralized systems is the problem of cost recovery in the face of changing user preferences of sanitation technology. A sewer system, for instance, has significant investment requirement, both gestation period (time required to construct the sewer system) and cost recovery period are quite long.
A tax is a compulsory payment collected by the government. However, sewer systems may be owned / operated by municipal corporations. In this case, apart from the upfront payment received from the user at the time of connection, there is no real assurance that the user may not switch to another sanitation technology. There are no term contracts with households, therefore the municipal corporation can only demand payment of overdues but not for the future services. If the household decides to switch to another technology, there is no way to recover the cost from the household (because the user tariff is payment for services and not a statutorily mandated compulsory payment like tax). A large-scale shift to another technology could then significantly impair cost recovery for the municipal corporation. If a sewer system takes 10 years for construction + cost recovery, there should be no good enough alternatives being developed and deployed for a decade from when the sewer project is launched. A project appraisal of centralized sanitation systems would have to take this into consideration with increased awareness and proliferation of alternate technologies.
Reduce the requirement for pipes / wires running through cities: In city planning, the lesser requirement we have for pipes / wires running through the city, the more the city can expand in geographical area at lower cost thus keeping the land cost low making housing and commercial real estate more affordable. The pipes / wires includes sewer pipes, optic fibre cables (OFC) for internet, telephone lines and electricity cables. The more we require these interconnected pipes and wires, expanding even large-scale residential projects in peri-urban areas will always have to wait for capital-intensive infrastructure development before they can be on par with the central business district (CBD) and premium residential areas within the city (and hence, not able to leverage the possibility of making larger land area available to residents). Decentralized technologies, on the other hand, enable smooth and accelerated expansion of the city's metropolitan area (offering the same advantages of inner city areas but without the congestion problems!).
Warm regards,
Sowmya
Sowmya Rajasekaran
Director
Verity SmartLife Solutions
www.veritysmartlife.com
Director
Verity SmartLife Solutions
www.veritysmartlife.com
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- Urban Sanitation Finance - From Macro to Micro Level (June/July 2015, Thematic Discussion 2)
- Theme 1 of TD 2: Public Finance
- Local taxation? What a crap idea!
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