Alternative Financing Of Metropolitan And Municipal Assemblies Service Delivery In Ghana

Financing at the local level is about the revenue and expenditure decisions of Metropolitan and Municipal Assemblies. It covers the sources of revenue that are used by them such as property rate, user fees, intergovernmental transfers, borrowing with limitation and public-private partnerships to provide services to the residents. Municipal financing in this regard plays a key role in local service delivery, particularly in the context of decentralization, and sustainable development. It also assists policymakers with some basic framework for analyzing public finance issues and evaluating different ways of financing both operating and capital expenditures at the local level.

However, one of the challenges of the Assemblies in Ghana is how to keep their communities economically relevant by providing some services and, at the same time, keeping local taxes reasonably low so as not to discourage individuals and businesses from relocating to other adjourning districts or collapsing. These challenges over the years have put stress on their ability to meet their objectives, due to the growth in urban population.

The growth in urban population has created and continue to create serious challenges in terms of air and water pollution, transportation gridlock, shortage of affordable housing, inadequate waste collection, deteriorating infrastructure, mounting violence and crime which in many cases, are already over-stretched coupled with limited funding. The result is an infrastructure deficit that is large and growing within these Assemblies.

From the public financial management perspective, the features of large cities in these Assemblies are reflected in the extent and complexity of the expenditures that are required to be made in financing their services and the ability of the local residence to pay for such services. They are assumed to have greater fiscal capacity both in terms of greater responsibility for local services and greater ability to levy their taxes and collect their revenues. Despite this, rarely are they treated differently, in terms of their taxing authority or the intergovernmental transfers they receive.

To address the above challenges faced by these Assemblies, a benefits-received model in financial management can be adopted to address the demands for accountability and transparency at the local level given the role as providers of goods and services. The model requires that revenue be paid for, based on the benefits of services received from the Assemblies by the residents. The extent to which these Assemblies will be able to apply this model, however, depends on the nature and characteristics of the services they provide.

For instance, services with private good features such as water, sewers, garbage collection and disposal, transit, and recreation, user fees are appropriate financing options to fund at least some portion of the costs. For the user fees concept to work well in a fragile environment like the Metropolitan and Municipal assemblies that lack scientific data, there should be a clear relationship between the fees charged and the benefits received. and the ratepayer should be able to know the extent to which he or she uses the service. The fee should be charged at a reasonable rate and equity issues should be addressed by lowering or waiving fees for low-income users. This strategy can play an important role in financing their expenditure if they do what the residents want and are willing to pay for.

In furtherance, services with public good features for example, police and fire protection, local streets, and street lighting have collective benefits that are enjoyed by residents, but which cannot easily be assigned to individual beneficiaries. These services are more difficult to charge for and require some form of local benefit-based taxation such as property tax. The property tax allows individuals to express their demand for services where benefits are consumed collectively. In this respect, the property tax can be a generalized, or nonspecific, user charge.

In conclusion, the rapid increase in urban population is expected to continue and population outside of these Metropolitan and Municipalities will continue to use services in these cities that are not available in the periphery with resulting impacts on water pollution, traffic, crowding of hospitals and public schools, and crime rates. However, recent trends in municipal financing revealed that Metropolitan and Municipal Assemblies need to find ways to pay for the expenditures they need to incur to meet the residence demands for services and infrastructure. Since the amount of funding available to them is an important determinant of the quantity and quality of services that they will be able to provide to attract private investors and businesses into their area. Finally, central government transfers should be stable, predictable and designed to be transparent and assemblies should be permitted to borrow to finance the increasing demand of services by their residence.

HAMDU ABDUL HAMID (Ph.D)
[email protected]
INSTITUTE OF LOCAL GOVERNMENT STUDIES (ILGS)

ACCRA-GHANA