#1জাতন্ত্রী সরকা वापाटन का Welcome to the Presentation on Municipal Public Finance Scenario in Bangladesh Presented By 1. AKM Aftab Hossain Pramanik 2. 3. Joint Secretary, Local Government Division Ministry of Local Government, Rural Development & Cooperatives AFM Alauddin Khan Deputy Secretary, Finance Division Ministry of Finance Quazi Md Fazlul Haque Senior Planner, Urban Development Directorate Ministry of Housing & Public Works#2Presentation Outline 1. Background 2. Mandates and Functions of Municipalities 3. Legal Framework of Municipalities 4. Local Government System in Bangladesh 5. Major Income Sources of Municipalities 6. Municipal Finance Scenario in Bangladesh 7. Major Challenges of Municipalities 8. Recommendations and Way Forward#3Background ➤ Over population, 160 million people & rapid urbanization Urban population growth rate 3.4% and national average 1.7% ➤There are 12 City Corporations and 328 Paurashavas (Municipalities) in the country Paurashavas or Municipalities are classified according to their financial strength Municipality which has own revenue resources per annum at least BDT 10 million (USD 1 lac 18 thousand) or above (excluding government grants or any assistance) is treated A category ➤BDT 6 million (USD 71 thousand) or above (excluding government grants or any assistance) is called B category BDT 2 million (USD 24 thousand) minimum is called C category Municipality#4Mandates of Municipalities The responsibilities and functions of Paurashavas are specified in the Local Government (Paurashava) Act, 2009 To provide all types of urban facilities to citizens of the respective areas in accordance with The Paurashava Act, 2009 and other relevant legislation To establish coordination between paurashava administration and the government officials to undertake coordinated program ➤ To develop infrastructure, prepare and implement urban development plan including building control and To Maintain citizen's security and public discipline#5Functions of Municipalities Water Supply for residential, industrial and commercial use Water drainage and sanitation ➤ Water management Formulation and approval of development plans ➤Construction of road, footpath to develop communication system ➤ Activates under Birth and Death Registration ➤ Traffic management planning for better transport management, passenger shade, road light, parking place, bus stand and bus stop for walkers ➤ Public health and environment conservation, tree plantation and conservation ➤ Establishment and management of market and slaughter house#6Legal Framework for Municipalities ➤ Constitutional Provision Article no. 59(1) and 60; Elected bodies are empowered to impose taxes for local purposes and prepare budget Local Government (Paurashava) Act, 2009 > Local Government (City Corporation) Act, 2009 ➤ Paurashava Standard Tax Schedule, 2014 ➤ City Corporation Standard Tax Schedule, 2016 National Strategy for Paurashava Governance Improvement (NSPGI) 2016-2025#7Local Government System in Bangladesh. There are 5 types of Local Government system working now in Bangladesh: ➤Union Parishad (4571) ➤Upazila Parishad (492) >Paurashava (328) ►Zilla Parishad (61) ➤City Corporation (12)#8Sources of Municipal Public Finance The LG finance in Bangladesh has three aspects: Local resources mobilization (LRM)-Tax, Rates, Tolls, Fees National government grants (Through ADP and Special Allocation) ➤ Loans/Grants from Development Partners#9Local Resources Mobilization Perspective According to Local Government (municipality) (amendment) Ordinance 2009 there are 28 items of collecting revenue of municipalities According to Local Government (City Corporation) Act 2009 there are 26 items of collecting revenue of City Corporations#10Major Income Sources of Municipality Source Property and holding tax Shared property tax Other taxes Non-tax source Sub-components Property tax on annual value of buildings and lands Conservancy rate Water rate (except Dhaka and Chittagong) Lighting rate Surcharge on the transfer of property ownership Tax on professions, trade and callings Tax on vehicles and animals Tax on cinema, dramatic and entertainment Tolls and minor taxes (on advertisement, marriage etc.) Fees and fines Rents and profits from property Other sources#11Loans Internal, from banks, etc. International agencies & Development Partners. National Funds and Bangladesh Municipal Development Fund (BMDF), and Municipal Services Projects Project (MSP) Government grants Salary compensation grants Octroi compensation grants Normal development grants Extra ordinary grants Cont.#12Municipal Finance Scenario in Bangladesh ➤ Municipal finance is about the revenue and expenditure decisions of municipal authorities. ➤ It covers the sources of revenue that are used by municipal authorities - taxes (property, income, sales, excise taxes), user fees and tolls are paid to Paurashavas by residents where as Annual Development Program (ADP) is provided by the GOB ➤ It includes ways of financing infrastructure through the use of operating revenues and borrowing as well as charges on developers and public-private partnerships. Municipal finance also addresses issues around expenditures at the local level and the accountability for expenditure and revenue decisions, including the municipal budgetary process and financial management. > Local government organizations are rely very much on their own source revenues, especially taxes, user charges and fees. They are also heavily dependent on transfers from central government grant and fund from the development partners.#13Income & Expenditure Pattern of two Municipalities in Bangladesh Income-Expediture of Mymensingh Municipalty in Financial Year 2017-018 (in BDT) 355300000.00 BDT 355274497.00 355250000.00 355200000.00 355150000.00 355100000.00 355050000.00 BDT 355112589.00 355000000.00 Total Revenue Earned (including government grant) Total Expenditure Income & Expenditure of Mymensingh Paurashava#14BDT 60000000 Income-Expenditure Pattern 50329794 50000000 47571830 47581883 49577504 40000000 30000000 20000000 10000000 30870669 2011-12 2012-13 2013-14 Year Cont. Income Expenditure 28400432 Income-expenditure of Noahata Paurashava#15Observation on Income and expenditure pattern Mymensingh Paurashava possesses surplus budget in the financial year 2017-18. The share of government grant is only 0.12 percent of total revenue of Mymensingh Paurashava ➤ The income of Noahata Paurashava largely depends on fund for different development projects sponsored by BMDF and Important Urban Development Project. As incomes from these sources have decreased sharply in financial year 2013-14; the overall income of the Paurashava has also turned down.#16• • . . • Case Study: Mymensingh Municipality (Recently Upgraded to City Corporation) Mymensingh Town was established in 1787 after establishment of Mynmensingh district Mymensingh municipality was municipality was established in established in 1858 (as Nasirabad Municipality) According to the official records Mymensingh municipality was established in 8 April 1859 The 1st municipality in erstwhile Bengal and 2nd in the sub-continent It was renamed as Mymensingh in 1905 . It is a 1st Class municipality . Upgraded to city corporation in 20 November 2018 Table: Area, Population and Density of Population of Mymensingh Municipality Municipality Area Population Density of Population Per Acre Mymensingh 5302.03 Hectare 2145.67 Hectare 227204 106 Source: BBS, 2001 and GIS Lab, MSDP, UDD, September, 2011#17Revenue of Mymensingh Municipality (Financial Year-2017-2018) In Financial Year 2017-2018 • Total Revenue Earned (including government grant): BDT 355,274497.00 [About 355 Million] Government Grant: BDT 443826.00 [About 0.44 Million] • Government Grant as share of total revenue: 0.12% [Approximately] • Collection of Local Tax, rate and Fess: BDT 354,830671.00 [About 354.83 Million] Total Expenditure: BDT 355112589.00 [About 355.11 Million] Balance: BDT (+) 161908.00 (Surplus) [About 0.16 Million]#18• • • • Good Practice Mymensingh Strategic Development Plan (MSDP), 2011-2031 MSDP has been prepared as a pilot project for mainstreaming disaster risk reduction in to land use planning Having strong database of the project area including story-wise building database and holdings Adopted participatory planning process at all stages of plan preparation A comprehensive survey was conducted in Myemsingh for preparing structure Plan including: - - - - Detailed Physical Feature Land Use Topographic Socio-Economic - Geological - Hydrological - Traffic and Transportation • - Other related surveys Planning process adopted in MSDP is being applying in preparing land use plan for rest of the country#19The Structure Plan MSDP has comprising of been prepared Mymensingh Municipality and surrounding 10 (ten) unions of Mymensingh Municipality. The unions are: (1)Akua (2) Baera (Kewatkhali) (3)Bhabkhali (4) Char Ishwardia (5)Char Nilakshmia (6)Dapunia (7)Ghagra (8)Khagdahar (9)Sirta; and (10) Bhangnamari Draft Structure Plan Proposal, MSDP Meters 1,500 3,000 6,000 Map-19: Structure Plan of MSDP Project Area#20Detailed Physical Feature of Mymensingh Municipality N E Legend City_RailLine ! Boundary River Waterbody Structure No Information Physical Feature of Mymensingh Municipality Katcha Pucca 0 1.25 2.5 Kilometers Semi-pucca Road Urban Development Directorate (UDD) Ministry of housing & Public Works Structure Type No % Katcha 10460 22.07 Semipucca 23551 49.69 Pucca 13206 27.86 Structure with No Information Total 179 0.38 47396 100.00#21S Legend Floor RailLine Boundary River 1 2 34 5 Above 6 Storied Pucca Structure of Mymensingh Municipality Physical Feature of Mymensingh Municipality Building Floor Pucca Structure of Mymensingh Municipality 0 1.25 2.5 Kilometers Urban Development Directorate(UDD) Ministry of housing & Public Works Building Story Type Floor wise Count No data 209 1 39589 2 3368 3 1917 >4 1650 Total 46733#22R.F. 1:52,265 90 22'E 9024F Map of Holding No. in Mymensingh Municipality Legend Mymensingh_Pourashava Structure with Holding No Structure Without Holding No Rail Road Water_Body 0 0.25 0.5 1 1.5 Miles 9026 90'24E 90°22'E 028E Holdings of Mymensingh Municipality Holdings of Mymensingh Municipality Structure with Holding No 45896 Structure without Holding no. 837 Total Structure 46733 Holding Tax is the most important source of Municipal Revenue#23Major Challenges of Municipalities There is a mismatch between revenue and expenditure. ➤Lake of Coordination and Integration among the Stakeholders ➤The Paurashava elected representatives are not familiar to some extent with the provisions of acts, laws & rules pertaining to Paurashava functions ➤ Lake of awareness, motivation and training Mayors are reluctant to collect taxes for fear of loosing popularity#24Cont ➤ Insufficient collection of holding tax Insufficient and Inequitable allocation of grants from the Government ➤Ineffective formulation and execution of annual budget Paurashava's manpower is not sufficient There is not sufficient budget and gap between income and expenditure Budget may not be executed properly within Paurashavas ➤ Administrative activities may not be efficiently and effectively carried out#25Way Forward ➤Municipal budget should be formulated in more realistic way rather than ambitious one. Municipalities should try to increase their internal incomes by collecting taxes and fees properly and deduct less important expenditures. ➤ Municipalities need to make citizens understand that user fees are not a tax grab but rather an important way to improve the quantity of services that people want and are willing to pay for. Tax assessment should be conducted regularly (at 5 years interval) and search for new source of tax collection. Special attention should be made on arrear tax collection. Financial incentives (i.e. tax rebate, special award) should be offered for those who pay taxes regularly. ➤Increase capacity building, awareness, motivation and training#26Thanks