Municipal Infrastructure Financing

Presents an overview of the municipal finances and the extent of private sector involvement in the delivery of municipal services in selected Commonwealth developing countries. This title examines four cities: Dar es Salaam in Tanzania, Kampala in Uganda, Dhaka in Bangladesh, and Karachi in Pakistan.

This paper looks at some of the issues surrounding municipal infrastructure finance, including the importance of quality urban infrastructure, the perceived expenditure gap in existing facilities, estimated investment requirements, and the efficiency of current municipal development patterns. Alternative financing mechanisms are defined, discussed in terms of the circumstances for which they are best suited, and assessed in relation to six criteria: efficiency, equity, effectiveness, environmental sensitivity, innovation, and impact on the housing sector. These mechanisms include development charges, special district financing, user fees, bond financing, trust funds, privatization, and contracting.

The world?s urban population doubled between 1970 and 2008, growing from 1.5 billion to 3 billion people. Future world population growth will be concentrated in developing countries?the majority in medium-size and smaller cities and towns. International institutions and governments alike face the challenge of efficiently financing the massive investment in infrastructure required to support this urban growth. The Urban Infrastructure Fund (UIF) is a tool designed to meet this need. Responsibility for subproject oversight, credit assessment, financial management reform, and other critical tasks.

Politicians and citizens universally agree that Canada’s urban infrastructure urgently needs work. Roads and bridges are overdue for repair, aging water systems should be replaced, sewage must be adequately treated, urban transit needs to be updated and extended, and it is necessary that public housing as well as schools, health centres, and government offices are brought up to current standards. But few cities have room to raise additional revenue, and the federal and provincial governments to which they turn for financial support are already in deficit, so who is going to pay for all of this? Bringing together perspectives and case studies from across Canada, the US, and Europe, Financing Infrastructure argues that the answer to the question “Who should pay?” should always be “users.” Headed by two of Canada’s foremost experts on municipal finance, this book provides a closer look at why charging user fees makes sense, how much users should pay, how to charge fees well and where present processes can be improved, and how to convince the politicians and the public of the importance of pricing infrastructure correctly. Across the disciplines of public policy, urban studies, and economics, almost no one is looking at the extent to which users should play a role in infrastructure planning. Financing Infrastructure contends that the users, not federal and provincial taxpayers, should start paying directly for their cities’ repairs and expansions. Contributors include Richard M. Bird (University of Toronto), Bernard Dafflon (University of Fribourg, Switzerland), Robert D. Ebel (Local Governance Innovation and Development), Harry Kitchen (Trent University), Jean-Philippe Meloche (Université de Montréal), Matti Siemiatycki (University of Toronto), Enid Slack (University of Toronto), Almos T. Tassonyi (University of Calgary), Lindsay M. Tedds (University of Victoria), François Vaillancourt (Université de Montréal), and Yameng Wang (World Bank).

Abstract: Since South Africa held its first democratic elections in 1994, it has given significant attention to building an effective system of decentralization including provincial and local government. While provincial governments are responsible mainly for the implementation of social services such as health and education, the provision of much of the urban infrastructure is the responsibility of local government. Although many challenges remain, the country has made significant progress over the past decade in addressing urban service backlogs in poor areas. At the same time, it has greatly improved macroeconomic fundamentals. The system of financing local government seeks to place accountability firmly at the local level, with most revenues in the larger urban centers raised locally through a combination of local taxes and fees for services, while poorer regions are predominantly grant funded. The objective has been to encourage the financing of capital infrastructure through local borrowing based on sustainable, transparent local finances rather than national repayment guarantees, which are outlawed. There is some indirect subsidization of loans through the state-owned Development Bank of Southern Africa. But the emphasis is on achieving redistribution through transparent, formula-based grants paid directly from national to local governments. While further bedding down of the system is needed, the approach is proving largely successful. The paper concludes by recommending that the existing division between provinces as providers of social services and local governments as the key locus of responsibility for services related to the built environment should be strengthened, particularly through the devolution of more urban transport related functions. A number of key risks are also highlighted, including issues related to the reform of local business taxes.