Cash-strapped City Council of Nairobi is pushing for amendments of the law to enable it generate money from its rich asset base.
The council is targeting for laws that bar the council from leasing or selling its assets to generate income despite the serious cashflow problems that have often rendered it unable to meet its financial obligations.
“People think City Hall is broke but this is not the case. We only have a problem with cashflow,” said Town Clerk Philip Kisia.
Local authorities are by law barred from leasing or selling property without permission from the Treasury and the Ministry for Local Government.
Finance PS Joseph Kinyua, who presided over the return of the mayor’s official residence to City Hall, last week, did not directly respond to Mr Kisia’s request.
When he was appointed the Town Clerk three years ago, Mr Kisia pledged to clean City Hall’s payroll and reduce the debts to improve its external appeal.
But that has not happened leaving City Hall in frequent liquidity crises, including failure to pay monthly salaries.
Mr Kisia said persistent cashflow problems had forced the council to rely on short term loans from the Treasury to meet its financial obligations on time, including the settling of its monthly wage bill of Sh580 million. City Hall’s mountain of debt, which stood at Sh30 billion in 2005, remains a spectacular eyesore in its books at Sh26 billion and a major contributor to its perennial liquidity problem.
“You can only lease ideal assets within the provisions of the law,” Mr Kisia, who has since announced his intention to resign and join the race for Nairobi governorship in the next General Election, said of his current dilemma. The parent ministry usually drafts amendment to Local Authority laws for Parliament to debate and pass.
City Hall’s latest bid to change the laws and dispose of key assets is expected to raise eyebrows coming shortly before the National Transition Authority takes control of national assets, including those held by councils, for redistribution to the central and 47 county governments ahead of the next General Election.
Civil society groups opposed any amendment to the law that would allow disposal of local authority assets during the transition period.
The Institute for Social Accountability national co-ordinator Wanjiru Gikonyo said the move would open a huge window for theft and illegal transfer of public assets whose complete register is not available to the public.
“Citizens are somewhat helpless in this matter because public entities have never conducted a national audit of their assets to guide this kind of debate,” she said adding that there is need to compile the list of assets including those that were allocated irregularly before any law is amended to allow their disposal.
City Hall argues that amending the law will eliminate the lengthy bureaucracy at the Treasury in search of approval to dispose of or lease any asset – allowing it to address its liquidity problems.
Yesterday, City Hall appeared to be winning support from key people at the Ministry of Local Government.
Local Government administration secretary Phillip Owade said that allowing civic authorities to lease or dispose of their assets has served countries like Malaysia well besides helping fight corruption.
“We have so many idle assets all over the country that can be leased to the private sector in the presence of a right legal framework clearly defining a revenue sharing formula,” he said.
In Malaysia, land belongs to the government and private sector firms that opt to invest in it understand from the onset that they have only leased the property.
But past misuse and irregular transfer of public assets to individuals is expected to undermine this campaign, especially in the run-up to the General Election.
There is concern that politicians will take advantage of any new laws allowing the sale of local authority assets to illegally acquire them. Ethics and Anti-corruption Commission acting CEO Jane Muthaura said last week that a key challenge remains in the fact that the public service has remnants of corruption agents who irregularly allocate assets immediately they are back in the public hands.
City Hall says it would raise Sh10.6 billion of its Sh14.8 billion 2011/2012 budget from local resources and get the remaining Sh4.2 billion from the Treasury.
The budget indicates that land rates, parking fees and business permits are the main sources of revenue for City Hall, contributing Sh3.5 billion, Sh1.63 billion and Sh1.6 billion respectively.
Mr Kisia said that the council has now cleared pension dues that had been pending since 2005 after paying Sh300 million adding that the recently launched fuel card would save City Hall about Sh100 million annually.
Last week, Mr Kisia said that revenue collection could double if the Treasury provides the money that City Hall has been asking for to help automate its services and reduce manual work in its processes.
“E-payment will, for instance, mean less staff but double the current revenue levels,” Mr Kisia said, citing positive changes that the web-based approval of construction permits have brought.
The system launched last September has thrust the country to top position in sub-Saharan Africa for efficiency in approving construction, according to the World Bank and IFC’s Doing Business 2012 Report.
The volume of cash that local authorities could raise from idle assets has come to light lately after City Hall lodged a legal battle against the Department of Defence (DoD) over use of its Sh57 billion plot located in Embakasi, Nairobi.
The council wants the court to compel DoD to pay it Sh40 million annual rent for the plot or face eviction.
The contested plot is now part of the army barracks, having been fitted with military installation but City Hall maintains it stopped its proposed sale to DoD after the latter breached 1997 contract that sought to dispose of it.
