City Hall targets rate payers in its Sh14.8bn budget
City Hall has embarked on an ambitious revenue collection plan and aggressive debt collection to reduce dependence on the central governement for its operations. File
The City Council of Nairobi has unveiled a Sh14.8 billion budget that will be mainly funded by land rates, signaling a tough year for rate defaulters. The council is seeking to double its land rates collection from last year’s Sh1.7 billion to Sh3.5 billion as it races to reduce its dependence on the central government and clean its books to make it attractive to private sector lenders.
City Hall said it will collect from Sh1.6 billion from parking fees up from Sh969 million, Sh1.6 billion from business permits and Sh4.2 billion or 28 per cent of its budget from the central government.
But city dwellers should expect little improvements on the upgrade of schools, health facilities, roads and garbage collection since it has allocated only 12 per cent or Sh1.9 billion for development expenditure against a target of 40 per cent.
Mr Michael Ogada, the council’s Finance chairman said that City Hall will go ahead to auction property of defaulters including top politicians and companies who owe it billions of shillings in unpaid land rates.
“The council has started to take all the necessary legal steps to collect all the outstanding rates from rates defaulters, including auctioneering of their properties,” said Mr Ogada. “We have also partnered with the credit reference bureau for information on defaulters as a way of boosting revenues to address the debt problem.”
The council will automate its operations to up revenue collection and reduce theft that has been aided by it archaic manual systems.
“In order to do this, the council during the year will implement an online application and approval for both single business permits and building plans,” said Mr Ogada.
The council has in the past failed to operate within its budget due high revenue collection targets.
Last year, for instance, it set out to collect Sh12.3 billion but only raised Sh8.3 billion a gap that has over the years left huge unpaid bills especially workers’ pension contribution and staff arrears.
This prompted Nairobi City Council to borrow Sh5 billion from Equity Bank to help it service another debt and unlock money that had been held because of failure to pay the debt.
The loan comes only a few months after Local Government minister Musalia Mudavadi warned local authorities — including City Hall — against accumulating debt they cannot repay.
The Nairobi City Council is heavily indebted to a large number of entities, including the National Social Security Fund and the National Hospital Insurance Fund that are claiming billions of shillings from the local authority in non-remitted statutory deductions.
The Equity loan is attracting interest at the rate of 10 per cent compared to penalties of about 36 per cent it was facing on its debts.
This year it has set aside Sh2.3 billion to clear its debts up from 1.8 billion in an effort to clean it debt ridden balance sheet.
This will allow it tap private financiers and raise money from the capital markets using municipal bonds.
City Hall had planned a Sh100 billion infrastructure bond to finance road building and social amenities such as medical facilities, schools and social halls, but this is unlikely to come through in the short-term as Government has asked it to clean up its balance sheet before it can underwrite the bond.
It plans to build a waste disposal plant, modern apartments and office blocks in Eastland’s.
It also plans to build multi-storey car parks in the city centre and 25 markets in residential areas City Hall has blamed insufficient basic services provision like housing and healthcare to its swelling debt, with recurrent expenditure accounting for most of its annual budget.
“Our residents have always asked us for better services yet they do not care to honour their obligations. We will ensure this time round we collect what is owed to us so that we can deliver these services,” Town Clerk Phillip Kisia said.
The high debt repayments, office running costs and salaries, which consume about Sh6 billion yearly, are making it difficult for the council to up service delivery in the city.
