Local taxation? What a crap idea!

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Re: Local taxation? What a crap idea!

Dear all,

Thank you for sharing your experiences and raising questions on this discussion thread so far.

This is just a short notice that the official part of this discussion will end tomorrow. What this means is that contributions published by tomorrow evening will be included in the summary of this discussion which will be published next week (further information to follow).

You will of course be able to continue the conversation after that point. However, if you would like your ideas and thoughts to be included in the official summary of our discussion, NOW is the time to hit the reply button! :)

- Katrin
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Re: Local taxation? What a crap idea!

Dear all,

at the risk of stating the obvious, I would like to raise a couple of points (before Katrin is closing):

Non sewered solutions are highly dependent on the road network, so some thought on how to finance and maintain access roads would directly concern sanitation (and 'street sanitation' for that matter, i.e. solid waste management). Coming back to the above mentioned example from Uganda, regulations about municipal taxation, property taxes in particular, or hotel taxes, are already in place, and I was astonished about how high property taxes are (compared to the Netherlands, where I used to stay). On paper, that is. Issues were comprehensive tax collection, and efficiency in spending of the money.

Tax collection efficiency had already been recognized as an issue and was already being worked on by the town administration. And when you talk about road construction and maintenance, of course, efficiency in spending the money and corruption become major issues, things like wasteful planing, excessive pricing, fraudulent receipts, kickbacks, etc... (not to speak of plain bribes). All things which are difficult to prove and follow up when such cases actually come up.

I think the discussion about public finance would have been incomplete without pointing out these issues.

Thanks,

H-A
Hanns-Andre Pitot
M.Eng. Environmental Pollution Control
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Re: Local taxation? What a crap idea!

Dear Hanns-André,

Regarding your post # 14021, I agree with your point about reverse logistics (taking waste to treatment sites / fertilizer to farmers) in the case of non-sewered systems. However, the choice of sanitation technologies can become limited if we link reverse logistics to roads or building toilets as part of low-cost housing projects (as a pre-condition in making the choice of sanitation technology). In both these cases, the investment requirement becomes much larger (sanitation + roads or sanitation + housing) than what is required for just completing the sanitation chain.

A sewer project (i) can take upto 5 years to construct (after conducting the technical feasibility, etc), (ii) may not be able to reach families in densely populated urban slums with very narrow, non-straight line roads, (iii) increasing population density in the future might cause overloading and consequently sewer overflow not to mention sewer overflow during monsoons when storm water drainage is inadequate, and (iv) O&M, repairs and unclogging drains using mechanized means in certain areas might be difficult depending upon the road width, etc.

In comparison, there are sustainable sanitation toilets (bio-toilets, composting toilets, container-based toilets, etc) that can help install non-sewer toilets at low cost even where houses have already been constructed and it is not feasible / planned to rebuild (with better roads, etc) in the immediate term. Irrespective of whether the end product is energy or fertilizer, as long as the excreta has been made pathogen-free adequately enough for disposal in garbage, we can have disposal in garbage as an interim measure while the roads are being built. Another solution is to use the garbage collection trucks in another shift (garbage is usually collected during day time, we could use the trucks during night time) to collect the toilet waste. In this case, the incremental cost would only be that of labour and fuel (no need to invest in additional trucks etc).

One point that must be considered is, where the waste has to be transported to another site, then the process has to be good (ie., no touching waste by users, emptying the waste at the secondary site for storage and/or treatment should not be labour-intensive / require complex machinery / capital-intensive).

Given the definite advantages of non-sewer systems (financing, environment perspectives) over sewer systems, they could be considered in areas where roads are not well-developed also.

Warm regards,

Sowmya
Sowmya Rajasekaran
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Re: 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!). :cheer:

Warm regards,

Sowmya
Sowmya Rajasekaran
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Re: 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. :oops:

Warm regards,

Sowmya
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Re: Local taxation? What a crap idea!

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
Hanns-Andre Pitot
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Re: Local taxation? What a crap idea!

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
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Re: Local taxation? What a crap idea!

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
Hanns-Andre Pitot
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Re: Local taxation? What a crap idea!

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
Hanns-Andre Pitot
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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
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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
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  • F H Mughal
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Re: Local taxation? What a crap idea!

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
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