INNOVATIVE MUNICIPAL RESOURCE MOBILISATION

Indo-US FIRE Project and Indore Municipal Corporation

INNOVATIVE MUNICIPAL RESOURCE MOBILISATION

Contents : INDO-US FIRE Project Management Innovations for Municipal Resource Mobilization Case Study of Indore Municipal Corporation

FINANCIAL INSTITUTIONS REFORM & EXPANSION (FIRE) PROJECT

Goal – Sustainable Delivery of Water and Sanitation Services in India’s Cities.

FIRE started in 1994; continues through 2003.

Total of US$ 18 million in technical assistance and training resources.

US$ 55 million in loan guarantees for water and sanitation projects, with new USAID Development Credit Authority (DCA) mechanism for credit enhancement.

OBJECTIVES OF FIRE PROJECT

Development of Commercially Viable Urban Infrastructure Finance System Promotion of Private Sector Participation (PSP) through development of CVIPs, including access by the urban poor Capacity Building of local and state governments Implementation of 74 th amendment and decentralization

PARTNERS IN FIRE PROJECT

USAID GOI / Ministry of Urban Development Housing and Urban Development Corporation (HUDCO) Infrastructure Leasing and Financial Services Ltd. (IL&FS) National Institute of Urban Affairs (NIUA) TCGI-PADCO

FIRE PROJECT SUPPORT

Ahmedabad Municipal Bonds Tiruppur and Sangli Water Supply Projects Improved Municipal Accounting System in TN Kolhapur Solid Waste Disposal Project Improving Access of Services to Poor, Ludhiana Sukthankar Committee in Maharashtra Urban Training Network/Urban Information Resource Center Model Municipal Law

MANAGEMENT INNOVATIONS IN MUNICIPAL RESOURCE MOBILISATION

NEED FOR MUNICIPAL RESOURCE MOBILIZATION

Sources of revenue devolved to ULBs do not match with the wide range of functions Increasing dependence of ULBs on higher levels of government There is a mismatch between the functions devolved to ULBs and the devolution of tax and non-tax sources

TWO APPROACHES TO MUNICIPAL RESOURCE MOBILIZATION

In order to mobilize resources on their own ULBs can impose new taxes, increase tax/fee rates and introduce management innovations within the existing revenue structures. Imposing new sources of revenue or increasing tax fee rates require approvals from the elected municipal council and/or state government and are cumbersome and time-consuming.

MANAGEMENT INNOVATIONS IN MUNICIPAL RESOURCE MOBILIZATION

Various ULBs have opted for management innovations within the existing legal revenue structure, with the objective of improving efficiency and strengthening municipal revenue base.

AREAS OF INNOVATIONS

Management innovations taken up by ULBs to improve their resources in the areas of: (a) property tax administration; (b) asset management; (c) information system; (d) user charges; and (f) others.

PROPERTY TAX INNOVATIONS

Simplifications of Procedures Management Information System People-Friendly Bill Collection Enforcement Outsourcing Communication

SIMPLIFICATION OF PROCEDURES

Several ULBs introduced SAS to make property tax assessments simpler and more transparent.

This method helps taxpayers to understand the assessment process and removes the discretion of the assessors to assess the properties in an arbitrary manner.

It increases taxpayers’ involvement by allowing them to calculate their own assessment within pre established guidelines. The Municipal Corporations of Hyderabad, Banagalore, Indore and Chennai introduced SAS and increased tax collection.

MANAGEMENT INFORMATION SYSTEM

Use of Information Technology has helped ULBs to improve not only the information base but also the collection efficiency The Indore Municipal Corporation (IMC) computerized tax records thorough private operator, conducted physical survey properties, and compared data from different sources to identify non-assessed properties. MIS can help to take decisions and action. Mirzapur created property tax maps and increased the number of registered properties by 44 percent.

PEOPLE-FRIENDLY BILL COLLECTION

Decentralized cash collection counters Bill collection through banks Bill collection electronic transfer

ENFORCEMENT

Once information is available, special campaign to increase property tax revenue by forming special collection teams is necessary.

Special power to teams to disconnect water supply or drainage lines, attach the property of defaulters, and issue arrest warrants for non-payment of property taxes.

Major defaulters list published and put on web.

OUTSOURCING

Tax administration systems are labor intensive and sometimes the cost of collection exceeds the revenue collected.

Outsourcing can improve efficiency and save cost.

The Municipal Corporation of Ludhiana (MCL), for example, introduced a courier system for bill distribution.

The Indore Municipal Corporation used private firms to identify non-assessed properties and conduct physical survey.

COMMUNICATION

The various ULBs involved the public in determining the revised tax rates by consulting resident welfare associations. Tax education and publicity campaigns, including newspaper advertisements.

Communication through email. Tax information can be made available on web.

ASSET MANAGEMENT

Proper inventory of assets and its regular updation Computer database of properties Developing strategy for optimal use of assets

OPTIMAL USE OF MUNICIPAL PROPERTIES

FIRE Project provides assistance to ULBs to enhance their revenue base from non-performing real estate assets Local engineering/ Valuation firm appointed to identify various properties of ULB A Real estate consultant firm appointed to suggest optimal utilization and disposal strategies for the identified assets that will lead to revenue generation

OPTIMAL USE OF MUNICIPAL PROPERTIES

This is being conducted in four stages:

Real Estate Market Analysis

of ULB

Disposal Strategy

for the identified real estate portfolio Approach Paper to provide a

framework for such exercises

in the future for the ULB Approach Paper for

showcasing this opportunity

to other municipal corporations

Scope of Study

City divided into two distinct parts:

New City City

and

Old

City expanding along all four directions Maximum towards

and directions

growth

Northern Eastern

City Overview

Developing Areas Existing Areas Industrial Area Old City Old CBD Vijay Nagar New City Khajrana New CBD Geeta Bhavan Rajendra Nagar

USER CHARGES

Levying Sewerage Charges State Guidelines for Water Charges Pay and Park Scheme Eco Fee Charges for Collecting Solid Waste Fees for “Tatkal” Delivery of Services Advertisement Tax Cable Charges Street Tax

LESSONS LEARNED

Improved Management Information System Simplification of Billing Processes People Friendly Bill Collection Communications Local Leadership/ Champion

LESSONS LEARNED

Project Specific Contribution Outsourcing the Services Enforcement State Government Guidelines Resource Mobilization is part of overall CDS/Corporate Plan/Visions Exercise

CDS Formulation Situation Analysis Legal / Systems

Municipal Acts •Taxation Powers •Borrowing Provisions •Budgeting Systems •Accounting Practices

Finances

•Sources & Uses of funds •Base and basis of levy of major taxes and charges •Collection issues •Uses •Rate of growth •Per-capita Analysis

Services

•Current levels of services •Water supply •Sanitation •Roads •Solid Waste Management •Drainage •Lighting Strategic Plan

Project Identification & Facility Siting

• Sectoral Strategies • Integration of Line Agency Projects • Public Priorities

Capital Investment Need Capital Investment Program

•Rates of growth •Revenue revision assumptions •Collection performance •Expenditure growth Assumptions •Assumption on O&M for new investments •Lending options • - Loan grant mix • - Loan terms

Financial and Operatin g Plan Sustainable Investment City Development Strategy