Transcript Deepening Workshop on “Public Procurement”/EuroMed Market

International Conference on
Financing Municipalities &
Sub-National Governments
Washington D.C.
Sept. 30 - Oct. 1, 2004
Municipal Finance
in
JORDAN
Presented By: Yousef Batshon
Ministry of Planning and International Cooperation
The Hashemite Kingdom of Jordan
Financial Capabilities of
The Municipalities
• Main Source of Income is the Central
Government,
– 6% of collected taxes on petrol products and road
transport duties & building and land property taxes.
– Municipal share are transferred to their account at the
CVDB.
• Self-generated income is very low, except
for the Greater Amman Municipality,
• Municipalities are granted long term Loans
from CVDB to cover costs of urban services
to meet the basic needs of growing
population.
Government’s Efforts to
Financially Support Municipalities
 In 1951 The Economic Development Fund was
established
for
the
purpose
of
financing
municipalities' projects.
 In 1955 The Municipalities Credit Fund was
established for providing loans for municipalities,
and in 1966 it became an independent corporation.
 In 1979 the Cities and Villages Development Bank
(CVDB) was established to provide Financing for the
Municipalities and gradually took on the role of
providing assistance to Municipalities in the
technical, administrative and financial fields in
addition to the provision of loans to finance
Infrastructure & Productive Projects.
The Cities and Villages
Development Bank (CVDB)
Objectives
• Provide Financing for Local Government to
carry out infrastructure Projects & self
generating productive projects.
• Assist Local Government in defining the
priority of its productive Projects according
to its Feasibility.
• Provide Training for the Municipality
personnel.
• Authorized only to deal with Municipalities.
Development of CVDB
Capital
Year
Institution
Capital
JD’000
1951
The Economic Development Fund
1955
The Municipal Credit Fund
1500
1966
The Municipal Credit Fund (independent)
2100
1972
The Cities and Villages Development
5800
68
Bank
1982
The Cities and Villages Development
Bank
12000
1996
The Cities and Villages Development
Bank
25000
2002
The Cities and Villages Development
Bank
50000
Sources of Funds
JD’ Million
• Capital and Reserves
• Foreign Loans
• Deposits and
other accounts
• Total
JD 58
JD 2
JD 19
JD 79
The Banks Capital was recently raised from
JD 25 Million to JD 50 Million in order to
cater for the Municipalities needs especially
after the Merger of Municipalities.
Types of Projects Financed
By CVDB
Infrastructure
Roads / Side Walks..
Public parks and sport
centers
Electricity and lighting
Civil works equipment
Solid waste equipment
Land acquisition
Productive
Commercial Markets and
Vegetable Markets
Slaughterhouses and Cold
Stores
Industrial and Handicraft
Areas
Cemeteries
Office Buildings
Municipality buildings and
libraries
Parking Lots
CVDB Credit Strategy
Infrastructure
Projects
Productive Projects
•Interest at 5.0 % p.a., with •Interest at 6% p.a., with a
a maturity period of 12
maturity of 12 years and
years including 2 years
including 2 years grace
grace
Since 1979, CVDB, has awarded Loans To
municipalities &local councils Totaling to JD
201 Million distributed as follows:
JD 173.4 Million as Infrastructure or Service
Projects (86%)
• JD 27.6 Million as Productive Projects (14%)
CVDB Efforts in Financing
Productive Projects
The Bank encouraged Productive Loans to provide a
stream of self generated income for the
Municipalities.
The results of the majority of these Productive
Projects Loans were actually disappointing due to
the following Reasons:
• Lack of efficient management
• Lack of proper studies
• Projections provided by municipalities did not fully
materialize.
• Weak control and supervision during construction.
• Problems in collecting the revenues (rents..etc.)
from tenants due to social limitations.
Bank’s Goals
• Finance, supervise, and follow-up on
infrastructure,
social
housing,
and
revenue
generating
projects
of
municipalities and joint service Councils.
• Receive and manage deposits of local
councils and other public institutions.
• Provide local councils with technical
assistance and training.
• Administer and guarantee loans to local
councils.
• Provide equity participation in local
revenue generating projects.
• Undertake economic, financial, and
technical evaluation of projects financed
by the bank.
Training activities
The Bank's Law requires the Bank to provide
necessary technical assistance to local councils and
municipalities including training of their personnel.
Actions performed by the Bank in this regard:
• A committee was established including members from
CVDB and the Ministry of Municipal Affairs (MoMA)
to coordinate and plan training requirements,
• Three training centers were established, one in each of
the North, Center, and the South regions,
• Training was carried out to Council members and
municipal employees,
• In 2003 and in order to facilitate the training efforts in
the south region, three centers were opened one in
each of Karak, Tafileh and Maan,
Reasons that caused the deterioration
in the financial status of municipalities
• High indebtedness since total loans reached JD 65.0
Million (US $ 93.0 Million),
• Inadequate collection of municipal fees which are due
(JD 28 Million or about US $ 35 Million end of 1999),
• Drop in the revenues from productive projects (self
generating projects) due to weak management,
• Unnecessary expansion in zoned areas resulting in
excessive cost needed for land acquisition for services
mainly roads ( about JD 15 Million or about US $ 35.o
Million),
• Increase in administration costs mostly due to over
employment (salaries exceeding 50% of total).
• Rescheduling of loans resulted in an increase in loan
service cost and this produced the opposite result.
• The large number of municipalities resulted in high
operating costs.
Municipal Revenues
Year
Funds from
Central
Government
Total own
Revenues
Borrowings
from CVDB
Total
Revenues
1998
1999
2000
2001
2002
2003
2004
24,863
24,858
31,553
30,858
39,401
36,930
46,300
20,175
23,127
24,054
31,648
32,765
35,526
36,601
12,140
1,380
1,900
7,900
13,500
7,300
7,300
45,038
47,985
55,607
62,506
72,166
79,756
90,201
Table 1: Municipal Finance Tables
Year
Wages & General Interest & Capital
Total
Total
Salaries Expenses Principal Expenses Revenues Expenses
1998
1999
2000
2001
2002
2003
2004
23,220
25,994
27,739
31,552
36,937
40,617
44,070
6,787
7,763
6,846
10,101
15,023
13,830
13,963
8,595
10,286
11,556
7,648
7,831
10,910
15,901
10,869
10,250
4,949
14,313
23,929
27,153
28,864
45,038
47,985
55,607
62,506
72,166
79,756
90,201
49,471
63,818
51,090
63,614
83,720
92,510
102,798
Actions Taken by Government to
improve the financial Situation
• Merging of several municipalities into one
large municipality, hence , reducing the
number from 327 to 99 municipality,
• Restructuring of municipalities,
• Training of staff,
• Raising the share of municipalities in the
fuel tax to 6%,
• Allocating
JD
8.5
Million
for
restructuring,
• Improving Budgeting procedures,
• Stopping unneeded new appointments.
CVDB Role in Restructuring
• Reduction of the interests on loans.
• Study the financial situation of the
municipalities and prepare remedy
plans,
• Opening new branches,
• Introducing an MIS system,
• Training of municipalities staff,
• Providing credit needed (JD 6 Million),
• Transforming all overdrawn amounts
to loans.
Results of the
Restructuring Process
• Improvement of the revenues
from fuel tax by about 100 %
from 2000 to 2003,
• Increase in collection of internal
revenues by 40%,
• Increase in Capital Budget,
• Reduction of the Salaries share
to the total expenditure,
• Improve solvency.
Government Support to the
Municipalities
Several Programs were provided to
upgrade Municipal Infrastructure;
PROGRAM
Amount
(JD’ Million)
Community Infrastructure Project
30.7
Social and Economic Productivity
2.7
Program
Social and Economic Enhancement
Program
Total Government Support
2.9
36.0
PRESENT STATUS
Many Municipalities still face
Financial difficulties,
Few Municipalities could be
considered insolvent,
Need for reform in Municipal
Finance,
Need for reform in the CVDB
Role.
Proposed Regional and
Municipal Development Project
• The World Bank is now in the
process of identifying a project to
support the Municipalities through
identifying development projects to
be financed from a Bank Loan and
grants from other donors.
• A PHRD grant was obtained through
the World Bank to carry out the
studies needed for this purpose.
Thank You
The Actual Financial Statement for
the year’s end (1995-2002)
(in thousand JD)
Year
1995
1996
1997
1998
1999
2000 2002**
Government. withdrawals
9,353 16,813 16,295 19,624 18,066 15,128
Real estate Tax
3,877 4,256 4,798 5,663 6,788 7,577
Trade License
1,546 1,662 1,704 1,756 1,821 1,800
Construction
3,059 5,601 5,209 4,052 3,794 3,978
License
Solid Waste
2,570 2,576 2,705 2,711 3,178 3,245
collection fees
General Fees
3,065 3,066 3,257 3,443 3,126 3,423
Revenues
1,057 1,247 1,119 1,308 1,141 1,160
Productive projects 2,155 2,359 2,714 2,939 2,942 3,225
revenues
Interest &
2,201 2,158 3,227 2,657 2,329 2,190
Contributions
miscellaneous
2,520 3,001 4,248 4,056 4,975 4,998
Loans
6,546 9,558 8,824 14,079 10,765 2,891
Total of Revenues
34,957 51,858 54,030 60,869 55,196 57,931
31,455
7,894
1,950
4,265
3,831
3,550
2,114
4,102
4,442
7,035
10,599
81,237
Wages & Salaries
General
Expedite
General
Expenses
Health,
Social
Maintenance
Capital
Projects
Expenditures financed by
Municipality
Fund
Interest on
Loans
Financed
Projects
Loans from
Bank
Miscellaneous Expenses
Total Expenditure
16,135 18,912 21,496 23,541 25,831 27,698
36,396
2,795
2,823
3,786
3,346
4,107
3,604
5,780
1,564
1,662
2,029
1,880
1,941
1,335
964
1,679
8,990
1,620
9,490
1,722 1,731
12,158 11,042
1,651
7,008
1,888
4,895
3,415
20,225
7,164
7,235
5,212
5,824
6,855
9,408
6,310
2,443
2,224
2,442
2,752
3,317
4,060
3,495
3,600
9,127
8,913
13,350
8,413
3,592
0
252
634
0
8
1
44,371 53,345 58,392 63,467 59,130 54,513
332
76,917
Year
No of visit to projects funded
from (Bank, Enhance
Productivity Program,)
1995
1996
1997
1998
1999
2000
2001
2002
2003
Until 30/6/2004
228
395
1030
949
820
1070
1056
924
1088
479