Politics and policy
Nairobi County set to inherit Sh16bn debt from City Hall
Posted Sunday, July 1 2012 at 16:13
Nairobi County will inherit at least Sh16 billion debt from City Hall, showing the extent of financial burden facing taxpayers as a result of years of mismanagement of local authorities.
In the 2012/13 budget read by the council last week – the last one before it hands over its assets and liabilities to the county government — City Hall has allocated only Sh1.7 billion shillings for debt repayment.
The council’s outstanding debt as at the end of 2011/12 was slightly over Sh17 billion, Mr Michael Ogada, CCN’s finance committee chairman said in his budget speech. “We still consider ourselves to be in a sound financial position because just five per cent of the unremitted revenues that we are pursuing from public institutions are enough to clear all our outstanding debts,” Mr Ogada said.
Other estimates released early this month by the Council put the level of uncleared debt at Sh30 billion with officials saying they do not have complete records of early 1980s.
The financial trouble of City Hall is expected to set off alarm bells in the remaining 46 counties which will inherit more than 151 local authorities after the next general election.
The government allocated Sh200 billion to be shared among the 47 devolved units with City Council of Nairobi — the biggest recipient of state’s direct disbursement — expected to receive Sh11.7 billion.
“In this last budget, we have undertaken to lay ground for sound financial management in future using IT platform to ensure that the proposed county will not encounter revenue collection problems,” said Mr Ogada.
Each ward, he added, has been allocated money to complete projects, adding that areas like education, health, environment and infrastructure have also been given priority to give the county a headstart.
The 2012/13 estimates show that 74 per cent of the council’s Sh15.5 billion budget will go to recurrent expenses with salaries taking up the lion’s share.
The council plans to raise Sh10.25 billion from its internal resources while the remaining Sh5.25 billion is expected to come from the Treasury in the form of Local Authority Transfer Fund (LATF) (Sh4 billion), Road maintenance levy fund (RMLF) (Sh250,000) and Contribution in lieu of rates (CILOR) (Sh0.96 billion).
In its Sh14.8 billion budget for 2011/12, the local authority ended up with a collection shortfall of Sh5.6 billion after the courts stopped its plan to raise its parking fees.
This deficit led to a cash crunch that strained the council’s relations with union officials due to delay in paying salaries and terminal dues for former employees. The Sh5 billion borrowed from Equity Bank last year to ease its liquidity problems has been a source of heated debate.
“This loan which the council has committed to repay at an interest rate of 27 per cent per annum is very punitive and unacceptable,” said Mr Timothy Muriuki, the chairman of Nairobi Central Business District Association and an aspirant for the post of Nairobi Governor.
“The officials must renegotiate this loan down to acceptable levels before county government takes over their assets and liabilities,” hesaid during the budget presentation.
The figures released last week show that while the size of the budget has been increased, the council has revised down its collection expectation from land rates to Sh2.8 billion compared to Sh3.5 billion of the previous financial year.
Parking fees and business permits are also revised downwards from Sh1.6 billion each last year to Sh1.4 billion and Sh900,000 respectively in a signal that it is not ready for another round of court battles in an election year.