Commonwealth Local Government Forum

Local government finance

Resourcing local government remains a central challenge to effective decentralisation. This section has content relating to different models of fiscal decentralisation, options for identifying new sources of local revenue, such as local property tax; and strategies for improving collection and deployment of own-source revenue. It also offers information about improving the borrowing potential of local government, innovative financing models such as municipal bonds, shared services, and public private partnerships.

Sub-topics:

  • Fiscal decentralisation
  • Financial management
  • Innovative financing models
  • Local/own-source revenue generation
  • Financing infrastructure
  • Public private partnership
  • Green finance
  • Property tax

Featured

Governance lessons from public-private partnerships: examining two cases in the Greater Ottawa Region

Commonwealth Journal of Local Governance, Issue 15/16, June 2015 This paper is concerned with studying the administrative and democratic effects of PPP procurement involved in the realisation of two PPP projects in the Greater Ottawa region: Gatineau’s Robert-Guertin Arena and Ottawa’s Lansdowne Park. First, the paper reviews the theory regarding PPPs and democratic municipal governance. Second, it proposes a normative framework of good governance in the municipal sector, tailor-made to infrastructure matters. Third, it analyses the decision-making process and contractual agreements of both projects in order to identify key issues regarding infrastructure PPPs in municipalities. It concludes by drawing lessons from the analysis of the two projects and discussing the potential implications of our findings.

Author: Joshua Jebuntie Zaato, Pierre-André Hudon Publisher: CLGF/University of Technology, Sydney Publication year: 2015


Local government finance: challenges in revenue-raising at the Municipal Corporation of Delhi

Commonwealth Journal of Local Governance, Issue 15/16, June 2015 The main objective of this paper is to examine the extent to which the capital city of Delhi has gained financial autonomy over the years. In order to better understand its progress, the paper compares the periods before and after the submission of the Third State Finance Commission Report of Delhi. The main findings suggest there have been some efforts to reduce reliance on transfers from upper tiers of government and to strengthen ‘own revenues’ at the Municipal Corporation of Delhi (MCD). A greater diversification of tax and non-tax revenue sources is responsible for this improvement. In the second period, other tax sources such as corporation tax and electricity tax gained in importance. Non-tax revenues were also strengthened by higher collection of certain components such as conversion charges. However, own revenues have been inadequate to meet growing expenditure requirements, resulting in high revenue expenditure gaps. Further, the growth in Gross State Domestic Product (GSDP has not led to a rise in own revenues for MCD. Rather, the paper finds that higher GSDP and its tertiary sector components are associated with higher expenditures in MCD. As far as local revenues are concerned, higher GSDP is associated with higher transfers, but has no discernible impact on own revenues.

Author: Simanti Bandyopadhyay Publisher: CLGF/University of Technology, Sydney Publication year: 2015


Determinants of property rate default: evidence from the Ashanti Region, Ghana

This study seeks to assess the determinants of property rates default in the Ashanti Region of Ghana. A multi-stage sampling technique was used to study 540 respondents from one municipal and five district assemblies within the region. A structured questionnaire collected data from the sampled respondents. Descriptive statistics (means, frequency distribution and percentages) and the probit regression model were then used to analyse the data with the help of SPSS and STATA respectively. The study found that most respondents who default are not aware of their obligation to pay property rates, and those who are aware fail to pay because they don’t know where to go to pay, or think the rate is too high. The study also revealed that a demographic characteristic such as income level, property value and property location influences rates of default. The study recommends raising awareness about the need to pay property rates and the penalty for any default.

Author: Dadson Awunyo-Vitor, Eric Oduro Osae, Sterling Donani Publisher: CLGF/University of Technology, Sydney Publication year: 2015


Property rating potentials and hurdles: what can be done to boost property rating in Ghana?

Population growth in many of Africa’s towns and cities has outpaced local authority capacity to provide efficient management, infrastructure and financing. There is already debate over the capability and capacity of urban local governments to provide basic services to a growing population, due to budget constraints and inability to raise the required local-level revenue. This paper looks at how the potential of property rating can be harnessed to generate the bulk of revenue needed for local-level development, despite the huge default rates across Ghana. Focusing on Wa Municipality as a case study, the study finds that the major hurdles to property rating are poor property data systems, political interference, non-enforcement of the law, low budget deficit in financing revaluation, insufficient staffing, and insufficient technical capacity of the few staff available at the municipal valuation and rating divisions. Despite these constraints, however, field data still indicates that property rating in Ghana, and especially in Wa Municipality, can generate up to 30% of local government revenue needed. This is conditional on streamlining current challenges and improving resources for the rating and valuation units. There is extensive non-payment of property rates in Wa Municipality due to lack of awareness of the purpose of this tax, of how to pay and of the penalties for defaulting payees.

Author: Elias Danyi Kuusaana Publisher: CLGF/University of Technology, Sydney Publication year: 2015


Mobilising sustainable local government revenue in Ghana: modelling property rates and business taxes

Property rates and business operating license fees constitute the major revenue sources for local government authorities. Accurate assessment of these revenues enhances the revenue base and effectiveness of their generation. Assessment of property rates and business operating license fees have been identified as one of the limiting factors that inhibit the revenue potential of local government authorities. Assessment must obey the principles of taxation such as efficiency, equity and fairness, adequacy, administrative feasibility and political acceptability. Over the years, the Sekondi-Takoradi Metropolitan Assembly (STMA) acknowledges that, it has had problems in ensuring equity and fairness in the assessment of property rates and business operating license fees. The paper reports on a computer modelling study carried out to introduce measure to ensure equity and fairness in assessing tax objects. A computer application has been developed with quantitative measures to evaluate and assess equity in tax assessment. A test run of the system has been successful and a pilot test is currently being implemented by STMA.

Author: Samuel B Biitir, John K Assiamah Publisher: CLGF/University of Technology, Sydney


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