Municipal Decentralization in Ethiopia: A Rapid...

Draft for discussion and comments

Municipal Decentralization in Ethiopia: A Rapid Assessment

July 17, 2001

AFTU1

ET-Municipality_Study-July01 2

Table of Contents Municipal Decentralization in Ethiopia: A Rapid Assessment .....................................................3 1. Sub-National Restructuring Processes...................................................................................4

1.1 The Emerging Role of Municipalities .................................................................................4 1.2 Steps Towards Municipal Reform in Ethiopia ...................................................................5

2. Overview of Municipal Status, Legal and Institutional Framework .........................................6

2.1. Urbanization and Municipal Status.....................................................................................6 2.2 Legal Basis of Municipalities ..............................................................................................7 2.3. Municipal Institutional Framework ....................................................................................8

3. Municipal Functions and Current Performance: Insights from Four Case Studies ................10

3.1 Municipal Functions and Management..............................................................................10 3.2 Municipal Revenue Sources and Management..................................................................13 3.3 Municipal Expenditures.....................................................................................................19 3.4 Municipal Budgeting Process ............................................................................................21 3.5 Staffing, Human Resource Capacity and Salary Levels ....................................................22 3.6 Governance Issues .............................................................................................................24

4. Moving Forward: A Process for Strengthening Municipalities...............................................26

This report was prepared by a team comprising of Sumila Gulyani (Task Leader), David De Groot, Yitbarek Tessema, Meheret Ayenew and Genevieve Connors. The field work, led by Meheret Ayenew, was conducted during February-May 2001.


Municipal Decentralization in Ethiopia: A Rapid Assessment The 1995 Constitution of Ethiopia instituted radical reform of governance structures, including devolution of significant resources and responsibilities from central agencies to nine regional administrations. An explicit goal of the new constitution is to bring government closer to the people through a process of decentralization intended to increase public participation and responsiveness to local needs. A corollary goal is to ensure that Ethiopia’s hundreds of identified ethnic groups are formally represented in the country’s political and resource allocation processes. GOE faces an enormous task in dismantling the highly centralized, unrepresentative structures created over 20 years by the Derg regime and replacing them with new, responsive structures that provide adequate political voice for all stakeholders and promote growth through the provision of necessary public goods. In many respects, Ethiopia’s decentralization process faces a unique set of challenges, balancing reform, representation and growth goals within a framework of national reconstruction. The inherent complexity and importance of the country’s decentralization process led GOE and the World Bank, in mid-2000, to reassess the Bank’s support in the provision of sustainable local infrastructure and services required for growth. In particular, the reemergence of municipal administrations within the sub-national governance system of the country requires that GOE and the Bank rethink their partnership to establish clear priorities for assistance. In this light, the Bank commissioned consultants to prepare a rapid assessment of the status of decentralization particularly at the sub-national level and focused upon the potential role of municipalities as effective growth facilitators. That research, presented in four papers: (a) provides direct evidence of the growing need for municipal capacity building in Ethiopia, and (b) identifies specific areas requiring assistance. The purpose of this paper is to summarize the results of this assessment, relate it to other analytical work, and outline a revised strategic approach to assistance at the sub-national/municipal level. This paper builds on the general understanding of municipalities presented in the Ethiopia Regionalization Study (1999) and takes a closer look at the ways in which municipalities in Ethiopia are actually functioning. Using case studies of four towns in four different regions – Bahir Dar in Amhara, Awassa in the Southern region, Gambella town in Gambella region and Dire Dawa city – it highlights some of the key issues and opportunities for improving municipal capacity and performance in Ethiopia.1 The paper is structured as follows. Section 1 provides an overview of the sub-national restructuring process, the emerging role of the municipalities, and the steps that have been taken 1 The rationale for the selection of these regions was to include: (i) two strong regions (Amhara because of advanced efforts in municipal reform, and the Southern region because of its special nature as a region having nearly fifty ethnic groups); (ii) two weak regions (Gambella and Benshangul Gumuz because these regions were not included in the woreda decentralization study); (iii) Dire Dawa – the second biggest city, after Addis Ababa – which is treated as one special region/city. Background papers are available on each of these municipalities. (This report relies on case studies of four municipalities and does not discuss Benshangul Gumuz’s Assosa municipality because the background report and data came in later).


towards municipal reform. Section 2 briefly summarizes the historical and current legal and institutional framework for municipalities. Section 3 analyses the functions and fiscal performance of municipalities, using data from four towns. Specifically, it examines the functions, revenues and expenditures in the four towns in detail, to identify some of the issues in improving the fiscal and service delivery performance of municipalities more generally. It also discusses the budgeting process, human resource capacity and salary levels, and governance issues in these four municipalities, to provide a better understanding of some of the institutional and governance issues mentioned earlier in Section 2. Section 4 outlines a phased strategy of assistance for discussion with GOE. 1. Sub-National Restructuring Processes 1.1 The Emerging Role of Municipalities Since the enactment of the 1995 Constitution, GOE has focused its decentralization efforts mainly on devolution of responsibilities and resources to the nine regions. Each region has been empowered to establish systems of deconcentrated sub-regional structures including zones, woredas and kebeles. Given the high degree of centralization under the previous regime, the regional reform processes have understandably taken time and effort, especially in light of the capacity constraints that typify the Ethiopian public sector. By 2000, it was becoming increasingly clear to a number of regional administrations that establishment of only deconcentrated regional structures would not be adequate to serve the needs of rapidly growing urban centers and the rural hinterlands these centers must support. Therefore, several regions have now turned their attention to reviving municipal administrations (see discussion of previous municipal status below) that would assume major responsibilities for raising own-source revenues to provide and maintain basic services. A key objective of this municipal revival is to mobilize additional own-source revenue and capacity to address the needs of cities and towns, thus freeing regional resources to focus on rural development priorities. However, to achieve this objective each region must: (a) reform the legislative and intergovernmental fiscal systems through which municipalities will function, and (b) rebuild all aspects of municipal capacity to carry out local authority mandates. The emerging role of municipalities in Ethiopia’s comprehensive development framework is potentially enormous. GOE’s strategy is focused on the Agricultural Development Led Industrialization (ADLI) initiative. Briefly, this initiative seeks to improve the productivity of rural areas through key investments in critical infrastructure linkages. International experience has shown that initiatives such as ADLI will have a greater degree of impact if rural investments are linked to cities and towns that provide market access, services and private investment opportunities. In addition to improving rural-urban linkages, the revival of municipal administrations in Ethiopia is required to meet the demands resulting from a very rapid rate of rural to urban migration and an overall urbanization rate estimated at almost 6% per annum (see below). As in the rest of the Sub-Saharan region, rapid urbanization can be expected to continue in Ethiopia for


the foreseeable future, as will the rapid growth of diverse and increasingly complex human settlements.2 One effect of the long-lasting marginalization of municipal governments is that, unlike other countries in the region, there are very few experienced city managers in Ethiopia, and there is understandably little experience among local and political leaders with the principles and policies required for success in this regard. Therefore, as borne out by the results of the study summarized below, rebuilding capacity to effectively manage the nearly 900 cities and towns in Ethiopia will be a critical precursor to linkages required for growth. 1.2 Steps Towards Municipal Reform in Ethiopia The government’s growing commitment towards strengthening municipalities is evident from the following developments. First, in its second five plan, the current government has emphasized the importance of urban development and recognized the critical role that municipalities can play in this process. Specifically, the Plan for Development, Peace and Democracy states that:

“The goals of our program with regard to urban development are to increase and strengthen the contribution of urban areas towards the overall economic and social development of our country and to improve the living standards of the urban population. … Efforts shall be made to alleviate financial problems which have become the main hindrance to our project of urban development. Laws shall be promulgated to fix municipal taxes with the view to improving the financial standing of urban centers, on the basis of which also the centers shall be encouraged to mobilize their inhabitants and enhance their capacity to collect taxes and use the revenue thus generated for their development.”

Second, the Federal Ministry of Works and Urban Development (MWUD) has prepared draft legislation for strengthening the status of municipalities and building their capacity. This proposed legislation has been sent to the regional governments for review, and it will be revised and submitted to the Parliament for approval. Third, and more importantly, the regions have been moving ahead with the task of legally recognizing and formalizing municipalities as autonomous authorities. Several regions have initiated preparatory studies as a first step towards drafting state legislation that will redefine municipal roles and status. Some regions are working on specific tasks such as the development of municipal classification systems and revision of municipal tax bases and rates. This work is at different stages of progress in the four large regions. Oromia and Amhara are the furthest ahead – they issued proclamations (legal notices) establishing and redefining the powers and duties of their municipalities in 1999 and 2000, respectively. In the Southern region, the preparatory studies have been completed and the proclamation is under preparation. The Tigray region has started preparatory work with assistance from UDSS/GTZ.

2 The UN estimates that the number of cities with more than 20,000 inhabitants will increase by 289% to almost 3000 by 2020. See J.L. Venard, Urban Planning and Environment in Sub-Saharan Africa, UNCED Paper no. 5 (AFTES), 1995.


Fourth, the MWUD has been delivering important and useful assistance through its Urban Development Support Services (UDSS) unit to enhance the financial and managerial capacity of municipalities through system development and on-the-job training. Both the World Bank and GTZ have provided substantial support for this essential work. This support is expected to increase significantly, in particular in the area of local government capacity building, and other donors may get involved as well. The development of regulations in some states and the research supporting them can provide lessons and examples for other states on regularizing the status of municipalities and providing them with a structure and procedures more conducive to good performance. Major reforms, however, do not happen overnight, especially where municipal capacity is weak, expectations of municipalities are low, and local resources are limited. A strategy for moving forward in Ethiopia is outlined in the last section of this paper. Before that, we turn to a more detailed analysis of the history, current status and fiscal performance of Ethiopian municipalities. 2. Overview of Municipal Status, Legal and Institutional Framework This section provides an overview of the nature and size of municipalities in country and the legal and institutional framework within which they work. It shows that the key issue to be resolved in the process of enacting new municipal legislation and the guidelines for their implementation is to clarify the position of municipalities in the general framework of decentralized governance – that is, the legal, functional and financial relationship of the municipalities to the woreda, zonal and regional governments. 2.1. Urbanization and Municipal Status3 According to the 1994 Census, there are 855 urban centers4 in the country, accounting for 13.7 percent (8.2 million of 54.9 million) of Ethiopia’s population.5 The majority of the urban centers are concentrated in four regions, Oromiya (373), Amhara (208), SNNP (149) and Tigray (74), while the most urbanized regions (in terms of population) are Addis Ababa (98%), Dire Dawa (66%), Harari (58%), and Tigray, Oromiya, and Gambella (each with 15%). Addis Ababa counts as only one urban center, but its population exceeds two million and it has special status as a city government.6 Among the four regions with the largest number of urban centers, 372 of the 804 urban centers are classified as townships and, of these, 250 are officially recognized as municipalities. Only 41 municipalities have a population greater than 20,000, and in just two cases (Bahir Dar in Amhara Region, which has been given special zonal status, and

3 Sections 2.1, 2.2 and 2.3 – on the municipal status, legal basis, and institutional framework – draw significantly from the Ethiopia Regionalization Study, Report No. 18898-ET, World Bank, June 15, 2000. 4 An urban center is defined by the Central Statistical Authority as a settlement with: (a) a minimum population of 1000, at least 50 percent of whom are engaged in non-agricultural activities; (b) existing urban dwellers associations (UDAs), grassroots organizations defined by Proclamation No. 104 of 1976; and (c) status as a seat of government administration at least at the woreda level. 5 The total figure does not include the Somali Region. 6This status was granted by Proclamation No. 87 of 1997 of the Federal Democratic Republic of Ethiopia.


Nazreth in Oromiya Region) does the population exceed 100,000. Outside the four regions containing the majority of urban centers, only Dire Dawa, a special administrative region, has an urban population greater than 100,000. Thus, most of Ethiopia’s urban centers support small but rapidly growing urban populations, and they often serve as service and market centers for rural areas, especially for farming communities. Ethiopia is among the most rapidly urbanizing countries in Africa and, perhaps, in the developing world as a whole.7 For example, the growth rate of its urban population in the period between 1960-1991 was 4.8 per cent per annum. This figure increased to 5.8 per cent per annum between 1991-2000. According to the 1994 Population and Housing Census, the growth has been much higher for some intermediate towns – Asayaita (6.5%), Assossa 9.9%), Gambella (15%), and Jijiga (9.1%). The rapid growth of the urban population has placed tremendous pressure on the management capacity of municipalities for service delivery and local economic development. The major contributing factors for urban growth in the cities are found to be the relatively higher natural growth of population in the centres and the increasing rural to urban migration 2.2 Legal Basis of Municipalities8 Under the highly centralized Derg regime, Ethiopia’s municipalities were marginalized and did not function as independent local authorities. As a result, GOE’s current efforts to revive the countries municipalities involves a two-step process – legislative reenactment followed by extensive capacity building and reform. The major laws pertaining to municipalities are delineated below. Most of the major legislation governing municipalities dates back to the Imperial Administration. A 1932 decree assigned a few basic services to Addis Ababa and provided for the taxation of urban land. Decree No. 1 of 1942 allowed for the creation of municipalities with appointed councils under the control of the Ministry of the Interior, and it also defined some basic municipal functions and revenue sources. Further elaboration of municipal functions and central control mechanisms was provided in Proclamation No. 74 of 1945. Legal notices pursuant to this proclamation were issued in 1971 to refine and update regulations on municipal taxes, fees and dues. In many municipalities, the 1971 regulations continue to be used as the principal basis for municipal revenue generation. The Derg issued three major proclamations that affected the organization and management of municipalities. Proclamation No. 47 of 1975 nationalized urban land, and Proclamation No. 4 of 1976 provided for the creation of various levels of urban dwellers associations that supported the Derg’s philosophy of governance. Proclamation No. 206 of 1981 essentially turned over the administration of municipalities and urban centers to the urban dwellers associations, but this was done in the context of heavy centralized regulation and control.

7 African Development Indicators, 1996. 8 More detail is provided in: Sisay Ashenafi (1996),“Legal and Institutional Aspects of Municipal Administration in Ethiopia,” prepared for Urban Development Support Services, Ministry of Works and Urban Development, Addis Ababa.


After the fall of the Derg in 1991, the Transitional Government of Ethiopia embarked on a wide-ranging process of decentralization. The government structure framed in the 1995 Constitution focuses on the development of regional governments and woredas. There is no mention of the municipalities in the Constitution or in the main Government proclamations defining the structure and responsibilities of decentralized entities.9 The present Government has issued three proclamations directly relevant to municipalities and urban areas. Proclamations No. 41 of 1991 and No. 4 of 1995 gave the Ministry of Works and Urban Development broad powers and duties for urban development and assigned key responsibilities for municipalities to regional governments. Proclamation No. 87 of 1997 chartered Addis Ababa as a city government and defined in detail its organization and functions. Much of the recent legislation and preparatory action pertaining to municipalities has been at the regional level. Oromia and Amhara are two regions that have legally established their municipalities. Specifically, Oromia has issued regional proclamation no. 26/1999 providing for the establishment of urban administrations. Amhara has issued regional proclamation no. 43/2000 to provide for the establishment, reorganization and definition of powers and duties of the municipalities in its jurisdiction. 2.3. Municipal Institutional Framework10 The institutional framework in which municipalities currently function is complex, ambiguously defined at all levels of government, and inconsistent across regions. As might be expected from the legal framework summarized above, the role of municipalities in the decentralization efforts is particularly unclear. Even the Regional Affairs Department in the Office of the Prime Minister, which has substantial overall responsibility for the decentralization process, has no formal link to municipalities. The Federal Ministry of Works and Urban Development (MWUD) formerly had substantial responsibilities for municipalities, but new regulations assign them only a few major related tasks. MWUD is expected to undertake studies related to broad urbanization patterns, to provide an environment conducive to urban development (including the development of appropriate training), and to define standards for the classification of urban centers. The National Urban Planning Institute (NUPI), which is under MWUD, has been heavily involved in preparing urban physical development plans, and they are likely to continue to play some role in this area because of poor local and regional capacity.

9 Proclamation No. 7 of 1992 To Provide for the Establishment of National/Regional Self-Governments; Proclamation No. 33 of 1992 To Define the Sharing of Revenue Between the Central Government and the National/Regional Self-Governments; Proclamation No. 41 of 1993 To Define the Powers and Duties of Central and Regional Executive Organs of the Transitional Government of Ethiopia. 10More detail is provided in Ashenafi (1996), and in Gebhard von Katte, Sisay Ashenafi and Shewaye Tesfaye (1996), “Report of the Reconnaissance Mission on the Approaches to and Problems of Urban Management and on the Legal and Institutional Framework of Municipalities,” Urban Development Support Services, Ministry of Works and Urban Development, Addis Ababa.


The Urban Development Support Services unit of MWUD is a key institution in the area of municipal development and capacity building. With support from the World Bank (Market Towns Development Project) and GTZ (Urban Management and Capacity Enhancing Project), UDSS has been developing on-site training in general and financial management in selected municipalities. In addition, it has been assisting with preparatory studies in a number of regions (e.g. Amhara, Oromiya, Tigray) to help clarify the status of municipalities and to undertake specific technical assistance tasks designed to improve municipal performance. For example, UDSS/GTZ are currently assisting the regions in implementing pilot cadastral projects in selected municipalities and facilitating implementation of the municipal proclamations where issued. It is also preparing to help in the development of Municipal Management Systems (MMS) for selected municipalities. As a federal focal institute in the country for municipal development, it has prepared a national seminar on Municipal Management Capacity that covers all regions. It has played a key role in the development of the National Urban Management Capacity Building proposal, which has been submitted to the Prime Minister’s office for inclusion in the broader National Capacity Building Program. More substantial responsibility for municipalities rests with the regional governments and almost all of the action has been taking place at this level. There are two key players at this level. First and most important are the regional councils, which have administrative responsibility for all government entities within their jurisdiction, including the municipalities. In practice, municipalities may be required to report to lower levels within the regional administration, that is, the zone or the woreda, rather than to the regional council. The second major actor at the regional level is the Bureau of Works and Urban Development (BWUD), which is directly responsible to the regional council and is intended to have subsidiary departments organized at the level of zone administration. These agencies are formally in charge of technical matters related to urban development, including in non-chartered municipalities. Although their technical and supervisory mandate is broad, covering preparation and implementation of physical plans, budget administration, revenue collection and personnel administration, in practice they have focused primarily on activities related to project design and implementation. In addition, not all of the regions have zonal departments, and in a few cases, the regional BWUD have additional responsibilities for the mining and energy sectors. At the local level there are four critical institutional and governance issues that need to be addressed. First, many urban centers are not designated as municipalities, depriving them of municipal responsibilities and sources of revenue. Although there have been some standards for categorizing municipalities since MWUD issued them under the Derg in 1988, their application to ensure consistent treatment of municipalities in terms of responsibilities, structure and staffing has been inconsistent. Second, substantial variations in lines of upward accountability hinder the development of an integrated system of government. Some municipalities report primarily to the regional BWUD, a technical agency, while others report to zonal or regional councils. Third, there is a lack of clarity in the relationship between elected municipal representatives and appointed members of the municipal staff. This can lead to disagreements and misunderstandings that slow down and/or damage municipal performance. Fourth, there is, at least in some cases, substantial interference in municipal affairs by the regional BWUD and/or higher levels of administration. This can occur in the form of payment authorizations,


restrictions on the use of legally allowable municipal revenue sources, appropriation of municipal responsibilities and/or property, etc.11 Such interference not only undermines local autonomy, but also constrains the development of municipal capacity. (For a more empirical discussion see section 3.6). 3. Municipal Functions and Current Performance: Insights from Four Case Studies This section uses detailed data from four municipalities – Bahir Dar, Awassa, Gambella and Dire Dawa – to examine the following issues: the appropriateness of the functions and revenue sources assigned to municipalities, municipal performance on the revenue side (total collections, collection efficiency and arrears), and key issues on the expenditure side (expenditure levels and constraints, capital versus recurrent expenditures, and the wage bill). The later part of the section briefly discusses some of the institutional and governance arrangements in these four municipalities to identify issues that affect municipal performance and autonomy more generally. 3.1 Municipal Functions and Management The major responsibilities of municipalities were defined in Proclamation No. 74 of 1945 and Proclamation No. 206 of 1981, discussed above. More recently, regional governments have been reviewing municipal roles and introducing new legislation on the functions of municipalities in their jurisdictions. Allowable municipal functions (subject to appropriate regional approval) include:

• Preparation of budget proposals • Assessment and collection of allowable municipal revenues • Preparation and implementation of development plans • Provision of internal roads and bridges • Provision of markets, slaughter houses, terminals, public gardens, recreational areas,

and other public facilities • Regulation of cleanliness and provision of solid waste, water, sewerage and drainage

services • Delivery of miscellaneous services, including fire protection, libraries, public toilets,

street lighting, nursery schools, ambulance services, etc. Noticeably absent from this list are services that involve major interjurisdictional externalities or those that have important distributional implications, such as health, education, major roads, etc. The list also excludes electricity, telecommunications and postal services – these are provided by central government agencies.

11 Shewaye Tesfaye and Tigist Negash (1995), “An Assessment of Municipal Financial Management in Southern Region,” Financial Management Support Services, Urban Development Support Services, Ministry of Works and Urban Development, Addis Ababa.


The assignment of functions to municipalities in Ethiopia appears to be generally appropriate both conceptually and relative to common international practice. In reality, however, Ethiopian municipalities rarely cover this full range of functions or adequately deliver those services for which they do take responsibility.12 For example, water supply is often categorized as a municipal function but is usually provided by zonal authorities. Table 1 shows the services provided by the municipality in four sample towns. Service provision at the municipal level is limited – both the coverage and level of service provided are low. The municipality takes responsibility for a wider range of services and functions in the larger towns (Bahir Dar and Dire Dawa) as compared to the smaller ones (Gambella and Awassa). In some cases, services that are not provided by the municipality are provided by other levels of government (e.g. the zone or the woreda). Often, however, lack of delivery of services by the municipality simply means that there is no provision of certain critical services. In Gambella, for example, there is no provision (public or private) of urban transport – no buses, no taxis, and no other alternatives.

Table 1. Municipal Functions and Service Provision in Four Towns Type of service Bahir Dar Awassa Gambella Dire Dawa

Urban land management & services

Central markets and shops

Abattoirs

Waste removal/ garbage collection

Urban hygiene and sanitation

Cemeteries

Urban/city transportation

Recreation/parks

Street lighting

Fire protection

Road construction

Issuance of marriage & birth certificates

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

No

Limited

No

No

Limited

Limited

Limited

Limited

Limited

No

No

Limited

Limited

Limited

No

No

No

No

No

No

No

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Limited

Note: Status as of June 2001. These functions are likely to change as the various regions move forward with their programs to strengthen municipalities. For example, in Gambella town a new draft law (2001) makes the municipality responsible for provision many of the services that it is currently not providing, including street lighting, issuance of marriage and birth certificates, fire protection etc.

12 Shewaye Tesfaye (1997), “Performance and Financial Capacities of Municipalities in Ethiopia,” prepared for a Workshop on Urban Management and Local Economic Development, Institute of Housing and Urban Development Studies, Rotterdam, pp. 10-14 and pp. 21-22.


Table 2. Municipal Revenue in Four Towns: Average Annual Revenue Collected (1997/98-1999/00)

Bahir Dar Gambella Awassa Dire Dawa

000s Birr % Own 000s Birr % Own 000s Birr % Own 000s Birr % Own Own Source Revenue A. Property Tax 6,014 62% 29 10% 2,615 56% 1,170 16% B. Business Tax 530 5% 71 25% 486 10% 510 7% C. Other Local Taxes 216 2% 108 38% 256 5% 2,936 40% D. Service Charges 768 8% 64 23% 984 21% 932 13% E. Rent/Sales of Municipal Property 629 7% 4 2% 38 1% 465 6% F.Commercial activities & other sources 1,481 15% 7 3% 61 1% 1,403 19% G. From AAHR 8 0% - - 257 5% - Total Own Source 9,646 100% 284 100% 4,697 100% 7,414 100%

External Finance Sources Regional Govt 473 11% 112 47% 14 1% - - ESRDF (Matching Grant) 8 0% 119 51% 289 10% - - Loan form Health Bureau - - 5 2% - - - - Federal Grants (Road Fund) 1,178 26% - - 423 15% 677 100% Other Federal Grants - - - - - - - - IDA through UDSS 2,834 63% - - 2,043 74% - - Total External Revenue 4,493 100% 236 100% 2,769 100% 677 100%

Summary Total Revenue (000s Birr) 14,139 520 7,466 8,090 Own Source as % Total 68% 55% 63% 92% External as % of Total 32% 45% 37% 8% Population (1999) 175,910 23,337 112,031 287,254 Per Capita Own Source Rev Birr (USD) 55 (7) 12 (2) 42 (5) 26 (3) Per Capita Total Revenue Birr (USD) 80 (10) 22 (3) 67 (8) 28 (4) Note: For data disaggregated by year, see Annex 2.


3.2 Municipal Revenue Sources and Management The basic revenue sources of municipalities, defined primarily in Proclamation No. 74 of 1945, include:

• Property taxes collected in the form of land rents, lease income and building taxes • Business income taxes • Market fees (for stalls and use of markets) • Fees for municipal services, including: sanitary services, slaughter houses, fire

brigade services, mortuary and burial services, registration of births and marriages, building plan approval, property registration and surveying, and use of municipal equipment, transport or employees

As in the case of assignment of functions, these are generally appropriate sources of revenue for municipalities, and some municipalities have received permission to levy various other types of local fees as well, such as goods entry taxes (similar to the Indian octroi) and vehicle loading or unloading fees. Again, however, the reality falls short of the model – revenue generation at the municipal level is limited and plagued by several problems. The sub-sections below examine the key factors that determine the revenue generation potential of a municipality – that is, the tax base, the tax rates, collection efficiency, enforcement, and the capacity of staff working on revenue administration. The discussion shows that there is considerable room for improvement in each of these areas. Main revenue sources and total collections An examination of the actual revenues of four municipalities over the three-year period 1997/98 to 1999/00, presented in Table 2, reveals the following. First, the absolute level of own-source revenues is extremely low. On average, the annual per capita revenue collected is US$2 in Gambella municipality, US$ 3 in Dire Dawa, US$5 in Awassa and US$7 in Bahir Dar. Even when external sources are included, municipal revenues per capita in these four towns is only US$3-10. These figures are significantly lower than the average per capita revenues of African municipalities (US$15 per capita) and dramatically lower than those in the Asia Pacific region (US$ 248 per capita) and the Latin America region (US$252 per capita). (Table 3 presents a comparison). Second, taxes on property and businesses are usually the two most important sources of municipal revenue, followed by service charges (Table 2). However, there is significant variation in the relative importance of these revenue sources across municipalities and it seems to be unrelated to differences in their relative resource bases. For example, property taxes are the most important sources of revenue in Bahir Dar and Awassa, accounting for 62% and 56% of the own-source revenues of the two towns respectively. By contrast, property taxes account for a mere 10% of the own-source revenues of Gambella municipality. The reason is that Bahir Dar and Awassa have revised their property tax rates at least once since 1995, while Gambella is relying on land and building tax rates established in 1979. Further, although the cadastral systems and records are extremely poor and outdated in almost all municipalities in Ethiopia, records in smaller towns such as Gambella are far worse than those in towns such Bahir Dar and Awassa, and this is reflected in the total collections from property taxes.


Revenues from business taxes – often the second most important revenue source after property taxes – also vary widely across municipalities. In absolute terms, the revenue generated from business taxes is roughly similar in Bahir Dar and Awassa, but they account for 5% and 10% of the own-source revenues of these two towns, respectively. In Gambella, business taxes generate a fraction of the amount that they do in Bahir Dar and Awassa, but account for 25% of its small and undiversified revenue base. The contribution of services charges towards own-revenues ranges is about 8% in Bahir Dar, 13% on Dire Dawa, 21% in Awassa and 23% in Gambella. As the next section indicates, there appears to be significant potential for increasing the revenues generated from service charges by adjusting the user fees to reflect current costs and incomes and/or instituting changes, such as reducing the range of fees for a particular service, to make administration of the charges easier.

Table 3. Municipal Per Capita Income and Expenditure in Various Towns and Regions (US$ per capita per year)

Description Average per capita income (US$)

Average per capita expenditure (US$)

Bahir Dar 7 7 Awassa 5 3 Gambella 2 2 Dire-Dawa 3 2 Africa 15 10 Arab States 1,682 32 Asia Pacific 249 234 Industrialized 2,763 1,133 LAC * 252 100 Transitional * 237 77 All 649 245

Source: Urban indicators (1998 and 2001), Habitat Coordination Office, MWUD; Dire - Dawa Finance Office (2001) Note: Average 1993 US $ persons/year; LAC: Latin American Countries; Transitional: Countries in transition

Tariffs and fees for services Many municipalities in Ethiopia collect taxes and service charges based on rates and tariffs established in the 1970s. This means that the user charges and fees that are set in Birr are totally obsolete, have no relation to current incomes and costs, and generate little or no revenue (see Annex 1 for tariff levels in three municipalities). Since 1995, some municipalities have started the process of revising certain tax rates and tariffs but have rarely reviewed and rationalized all of them systematically. This is evident from the following examples. In Awassa, with exception of a change in the property tax regulation and rates in 1995, most of the tariffs date back to 1975. The story in Dire Dawa is somewhat similar – most tariffs are based on a 1971 regulation, but the city has introduced some new taxes, adopted a new urban land leasehold policy in 1995, and issued new urban land lease regulations in January 2000.


In Gambella town, the municipality modified its tariff rates in 1995, but the focus was on increasing the rate for trade licenses rather than on diversification through introduction of new sources. Further, the land and building tax regulation has remained unchanged since the issuance of legal notice no. 64 of 1979. The situation in Bahir Dar is different and somewhat better than in other towns. The municipality revised its property taxes in 1995 and most service tariffs in 1999. In 2000, municipal proclamation no. 43/2000 gave the municipality the authority to introduce new taxes and change existing tariffs (subject to regional approval). Apart from being outdated, the tariffs are often difficult to administer and/or inappropriate. For example, Gambella has several taxes and tariffs that generate little revenue, and there are others that have never been implemented because they proved difficult to administer. In Bahir Dar, the business license fee ranges from Birr 500-10,000, depending on the business. However, the actual collections average only about Birr 317 per registered business and default rates are very high.13 In such a situation, it would make sense to reduce the number of rates to make the tax administratively simpler, lower the average rate to reduce the incentive to default, and focus on improving compliance; together these measures are more likely to improve total revenues generated from the business license fee than an approach that involves raising taxes and tariffs further. Collection rates, arrears and enforcement One indicator of collection efficiency is the collection rate, that is, the actual collections compared to the “billings” or estimated collections. Data from four municipalities, presented in Table 4, indicates that the average collection rates are often low and they vary by municipality. Gambella collects, on average, only about 59% of its planned or estimated revenues. In Awassa and Bahir Dar the collection rates are somewhat better, averaging about 64% and 72%, respectively. With an average collection rate of 95%, Dire Dawa appears to be a stellar performer. A further analysis reveals, however, that its “good performance” is mostly due to a large increase in collections in 1999/00 which, in turn, is attributable to an increase in the “chat” tax14 rate (from Birr 0.20/kg to Birr 1.0/kg) implemented that year. In the four-year period preceding the increase in the chat tax, Dire Dawa’s average collection rate was 61%. In other words, there is considerable scope for improving the collection efficiency in Dire Dawa and in the other municipalities in the country. There is also considerable variation in the collection rate from year to year. Table 5 shows that the collection rate in Gambella has been declining over the last 2-3years – it has fallen from 73% in 1997/98 to 51% in 1999/00. By contrast, the collection rate in Awassa shows an encouraging trend – collections have improved from a level of 59% to 75% over the same period. In Bahir Dar and Dire Dawa the collection rates tend to fluctuate from year to year. These differences in

13 Put in the calculation and source here. 14 Chat is a narcotic green leaf. It is consumed widely in the region and is exported to Somalia, Djibouti and Yemen. The Chat tax is collected from businesses involved in its trade.


performance across municipalities and especially the annual variation within a municipality are worth exploring, in follow-up work, to improve our understanding some of the variables affecting revenue performance.

Table 4. Average Collection Rates over 1997/98-1999/00

Own Revenue

Planned

(a) Actual

(b) Collection rate

(a/b) Bahir Dar 13,369 9,646 72% Awassa 7,297 4,697 64% Gambella 480 284 59% Dire Dawa 7,843 7,414 95%

Table 5. Annual Variation in Collection Rates (1997/98-1999/00)

1997/98 1998/99 1999/00 Average Bahir Dar 86% 55% 76% 72% Awassa 59% 60% 75% 64% Gambella 73% 59% 51% 59% Dire Dawa 78% 57% 175% 95%

Default rates and size of arrears The costs of weak collection performance become more evident in examining the arrears, that is, the gap between the amount of tax estimated or billed by the government and the amount paid by the taxpayers. Table 6 presents the arrears associated with two major revenue sources – property taxes and trade license fees – in Bahir Dar and Awassa. It shows that the default rates are high: 50-63% of the taxpayers in Bahir Dar and 27%-45% of the taxpayers in Awassa are in default. This suggests widespread tax evasion (as opposed to a situation where a few large taxpayers default and account for a significant proportion of the arrears), and indicates that the situation is worse in Bahir Dar as compared to Awassa. In Bahir Dar, the number of people with arrears exceeds the number that pay their taxes. In Awassa, more people are paying their taxes but the average arrear per defaulter is large, especially in the case of property taxes. Apart from revealing a tendency for tax evasion, Table 6 also shows that the level of arrears is high in absolute terms and that the cumulative arrears are higher for the property tax as compared to the business license fees. Property tax arrears amount to Birr 1.7 million in Bahir Dar, that is, about three times it annual property tax base. The situation in Awassa is worse: property-related arrears amount Birr 2.0 million, equivalent to about four years of property tax revenues and just under half of its average annual own-source revenue. The above discussion suggests that administration is weaker (and/or harder) in the case of property taxes as compared to trade license fees – both the default rates and the cumulative


arrears related to property taxes are significantly higher.15 This indicates that efforts to improve property tax administration should be accorded priority and are likely to create significant revenue gains for the municipalities.

Table 6. Tax Base and Arrears in Bahir Dar and Awassa in 1999/00

Bahir Dar Awassa

Land Rent & Building

tax (1)

Trade License fees

(2)

Total

(1+2)

Land Rent & Building

tax (3)

Trade License fees

(4)

Total

(3+4) No. of payers (a) 4,100 820 4,920 5,281 2,259 7,540 No. of defaulters (b) 6,965 1,272 8,237 4,259 845 5,104 Total no. of taxpayers (c) 11,065 2,567 13,632 9,540 3,095 12,635 Default rate (b/c) 63% 50% 60% 45% 27% 40% Cummulative arrears, '000 Birr (d) 5,547 953 6,500 8,394 732 9,126 Revenue base 1999/00 for specified tax, '000 Birr (e)

1,671 645 2,316 2,000 544 2,544

Arrears as % of base (d/e) 332% 148% 281% 420% 135% 359% Average arrear per defaulter, in Birr (d/b)

796 749 789 1,971 866 1,788

Enforcement problems The fact that municipalities have very weak legal mechanisms to support enforcement of revenue collection helps explain, at least in part, the high default rates and arrears. In Gambella, for example, the municipality has no legal authority to take action against a business that has tax arrears. Its attempts to take defaulters to court have not worked due to reasons that include delays in the system, frequent reversals of court decisions, and inability to enforce court decisions. Where possible, the municipality has chosen to deny service to defaulters and to try and make them clear their outstanding debt before they are provided any municipal services that they require or request; this strategy has helped only marginally. There is clearly a need to develop legal and administrative mechanisms that can help municipalities improve enforcement. Payment procedures Local experts note that the high default rates can be attributed, at least in part, to the fact that the collection system and procedures are outdated, slow and inconvenient for taxpayers. These experts suggest that simplifying the payment procedures can help improve compliance and reduce the size of arrears. Experience in other countries lends support to such an approach. For example, the success of a property tax reform program in Indonesia was attributed largely to the introduction of simplified payment procedures and the collection incentives offered to a new intermediary or collection agency, that is, the local development bank. 15 It may be worthwhile to conduct additional research to identify the causes of differential performance between the two municipalities (eg. why property-tax arrears are higher in Awassa) and between the two types of taxes within a given municipality.


Capacity constraints One of the reasons for the poor performance in revenue collection is the weak human resource capacity of the municipalities and the poor incentives structure. These problems are particularly acute in the departments that are responsible for tax and revenue administration. Specifically, these departments have limited number of personnel, their salaries are extremely low, and their education level is on average lower than that of municipal staff taken as a whole. In the four municipalities covered in this study, about 87% to 100% of the revenue administration staff have an education level of 12th grade or lower. The number of revenue staff who have received education up to 12th grade or less is as follows: 20 of the 22 (91%) in Awassa, all 5 (100%) of those in Gambella, 24 of the 30 (80%) in Bahir Dar, and 35 of the 36 (97%) in Dire Dawa. (See also Table 9 in Section 7). Summarizing the problems with revenue generation Overall, revenue generation efforts are plagued by six major problems. First, the tax base for important sources, such as the property tax and the business tax, is artificially small. This is because the municipalities have not been updating their records and also because informal business and properties are not included in the base. Second, the fees and tax rates tend to be obsolete and are, at times, difficult to administer. Third, collection rates are poor in many municipalities and they vary significantly from year to year. As a corollary, the default rates and cumulative arrears are high, and the problem appears to be worse in the case of property taxes. Fourth, the payment procedures are slow and inconvenient for tax payers. Fifth, the enforcement mechanisms are poor and the legal basis to support enforcement is very weak. This further encourages default and adversely affects efforts to settle arrears. Finally, the above problems in the system of tax administration are exacerbated by the weak human resource capacity of revenue staff and poor incentives for enhancing performance. External source of finance: grants, transfers and loans Financial flows from higher levels of government and other external sources to municipalities are, at times, significant. The problems, however, are that funds flows from external source are highly unpredictable, are generally targeted towards specific capital projects, and tend to be distributed on an ad hoc basis according to arbitrary and inconsistent criteria.16 Municipalities do not receive regular financial support from higher levels of government because there is no tax sharing program, and the system of transfers that directs flows from the central government to regional governments does not reach or benefit municipalities. In addition, municipalities tend not to have access to credit from domestic financial institutions. Table 2 shows that on average external financing as a percent of the total financial resources or revenues was the highest in Gambella (45%), followed by Awassa (37%), Bahir Dar (32%) and Dire Dawa (8%). Gambella is the only town that receives regular and significant support from the regional government – this accounts for 47% of its external financing and about 22% of its

16Tesfaye (1997), p. 19.


total revenues. The high proportion of external financing in Awassa and Bahir Dar is mostly due to a large loan from IDA (channeled thorough UDSS). 3.3 Municipal Expenditures First, municipal expenditure envelopes or levels appear to be determined, almost entirely, by actual revenues. For the period 1997/98-1999/00, average annual expenditures were less than average total annual revenues (i.e. own-source plus external flows) in all four municipalities (Table 7). In fact, three of the four municipalities managed to keep their expenditure levels either below or just over their own-source revenue. On average, expenditures as a percent of own-source revenue were lowest in Awassa (66%) and Dire Dawa (70%), followed by Bahir Dar (103%) and Gambella (152%). Gambella was the only municipality that relied heavily on external funds to finance its expenditures. This can be explained by the fact the that Gambella’s own source revenues are miniscule and the region has established a system of making regular, somewhat predictable, transfers to the municipality to allow for certain basic expenditures. Overall, the municipalities appear to be very disciplined on the expenditure side. However, the low expenditure levels may well be due, at least in part, to capacity constraints (i.e. an inability to spend or manage expenditures); this issue needs to be examined further. Second, the proportion of funds allocated to capital versus recurrent expenditures varies dramatically across the municipalities (Table 8). Of the four, Bahir Dar is the only municipality where capital expenditures exceeded recurrent expenditures over the period 1997/98-1999/00. The percentage share of capital to recurrent expenditures, on average for the three year period, was 60:40 in Bahir Dar, 48:52 in Dire Dawa, 25:75 in Gambella and 15:85 in Awassa. In other words, the two larger towns (Bahir Dar and Dire Dawa) were able to direct about half or more of their budget towards capital projects, whereas the smaller towns (Gambella and Awassa) spent most of their budget on recurrent expenditures. Third, the proportion of expenditures accounted for by the wage bill – that is, salaries plus pension benefits – varies by municipality but is significant in all four (Table 8). On average, the wage bill as a percent of recurrent expenditures was 22-23% in Awassa and Bahir Dar, 37% in Dire Dawa and 59% in Gambella. Disaggregated expenditure data show that in three of the four towns, the wage bill increased dramatically between 1997/98 and 1999/00 – 41% in Bahir Dar, 96% in Awassa, and 137% in Dire Dawa (see Table 9 and Annex 4 for details). Fourth, an examination of expenditure data disaggregated by year, for the period 1997/98-1999/00, shows that both total and capital expenditures fell in Dire Dawa and Gambella, perhaps, to compensate for the sharp increase in the wage bill in the former and an increase in non-wage recurrent expenditures in Gambella (Table 9 and Annex 4). In Bahir Dar and Awassa, the total, capital and wage expenditures increased over the same period; these appear to have been financed almost entirely by an increase in external finance rather than an increase in own-source revenues.

Table 7. The Relationship between Expenditures and Revenues in Four Towns Average annual figures over 1997/8-1999/00


Bahir Dar Awassa Gambella Dire Dawa

Expenditure 9,900 3,100 431 5,165 Own-Revenue 9,646 4,697 284 7,414 Total revenue (own+external) 14,139 7,466 520 8,090 Expenditure/Own Revenue (%) 103% 66% 152% 70% Expenditure/Total Revenue (%) 70% 42% 83% 64%

Table 8. Expenditure Patterns: Recurrent Versus Capital Costs and the Wage Bill

Bahir Dar Awassa Gambella Dire DawaCapital expenditure (a) 5,962 463 112 2,472 Recurrent expenditure (b) 3,938 2,637 319 2,692 -Wages & 6% pension contributions 886 581 188 991 Total (a+b) 9,900 3,100 431 5,165 % share (capital: recurrent) 60:40 15:85 25:75 48:52

Own-revenue 9,646 4,697 284 7,414

Wages as % recurrent expenditure 23% 22% 59% 37% Wages as % total expenditure 9% 19% 44% 19% Wages as % of own-revenue 9% 12% 66% 13%

Total Population 175,910 112,031 23,337 287,254 Expenditure Per Capita (Birr) 56 28 18 18 Expenditure Per Capita (USD) 7 3 2 2

Table 9. Changes in Types of Expenditure by Municipality over 1997/8-1999/00

Bahir Dar Awassa Gambella Dire DawaPercent change in Wage 41% 96% 6% 137% Percent change in other Recurrent -25% 30% 39% -11% Percent change in Capital 43% 89% -96% -44% Percent change in Total Expend. 17% 51% -38% -13%

Fifth, analysis of data disaggregated by category reveals that roads and transport account for the bulk of the capital expenditure – about 30% of the average total capital outlays in Bahir Dar and Awassa and 86% in Gambella (Annex 5). Bahir Dar and Gambella allocated about 8% of their capital expenditures towards housing, while Awassa allocated a much higher proportion (52%). In absolute terms, however, the combined annual investments in transport, housing and other infrastructure averaged only about Birr 109,000 in Gambella and Birr 372,000 in Awassa. Only Bahir Dar has been able to invest significantly in these categories, averaging Birr 3.5 million per year over the three-year period.


Among non-wage recurrent expenditures, office expenses (e.g. equipment, per diems, stationary) are usually the most important (15-40%), followed by vehicle maintenance and operating costs (12-41%) and expenses for maintaining public spaces (8-32%). In summary, the expenditure level is constrained or limited by total revenues, and expenditures are low in absolute terms. The wage bill appears to be rising in several municipalities; as a next step, we need to confirm whether this is due to much needed salary adjustments or due to other reason such as an increase in staff. Given the budget constraint, however, an increase in the wage bill (even if it is desirable in itself) appears to come at the expense of crucial capital expenditures. In Awassa and Bahir Dar, external financing has allowed an increase in capital expenditures and there is a need to examine whether and how other municipalities can gain access to external sources. The obvious and more sustainable financing option, however, is to help municipalities better exploit their existing sources and enhance own-source revenues. 3.4 Municipal Budgeting Process Although basic responsibilities for budget preparation clearly lie with municipalities, the system under which budgets are prepared and reviewed differs widely in practice. As noted in the previous section, the final budget envelope appears to be limited by the revenue base. The budgeting process, however, can begin either with a determination of expected revenue or with estimated expenditure. Each department then prepares a budget request that is submitted to the planning office, but the review processes differ considerably. The case studies outlined below show that the main variations in the budgeting process relate to: (a) the role of the municipality and its units relative to the sector units at the zonal and regional level; (b) the degree of public disclosure and consultation; and (c) the final authority that approves the budget. In Gambella, the budget is generally prepared by the finance section head together with the head of administration and is reviewed by the management committee of the municipality. For this task, the municipality receives technical assistance from the Regional Bureau of Works and Urban Development. The budget is sent to the Regional Council for approval (and/or amendments). Although budgets should be approved prior to the start of the fiscal year, for the last 8 years the yearly budget proposal was neither approved on time nor sent to the municipality. As a result, the municipality performs its functions without a duly approved budget. The budgetary process in Awassa leaves a lot to be desired. In fact, there appears to be little awareness among the municipal staff working on finance and budget regarding the role of the budget and its importance as a tool for effective financial management and control. The process starts with a determination of expected available revenues. Each municipal department prepares the draft budget independently. These proposals are discussed in a management meeting of department heads. The budget proposal is again discussed with the Zonal Works and Urban Development Department and after final amendments the budget is submitted to the Bureau of Works and Urban Development of the regional government for approval. Municipal projects are prepared with little participation by the community. In 1999/2000 this began to change and the municipality began to publicize proposed projects and to involve the community in the identification of projects. Because Awassa municipality does not have sufficient staff working


on budget preparation and implementation, the zonal administration and the Regional Bureau of Works and Urban Development provide assistance in planning. In Bahir Dar special zone, the preparation of an annual budget is common practice although there are no formal guidelines for budget preparation and approval. The budgeting process starts with a determination of expected available revenues. Each department then prepares a budget request independently. These requests are discussed in a large management meeting of department heads and the special zone executive members. After final amendments the budget proposal is submitted to the special zone administration council for approval. The process does not involve any community review. In addition, there are no criteria as to what proportion of expenditure should be allocated for remuneration, services outlays, and basic infrastructure development. As the total revenue is low, investments on big development projects are difficult and are made only once over a period of years after accumulating adequate funds. In Dire Dawa, the reorganization of the administrative council in 1998 resulted in the assignment of the various municipal functions to different sectoral offices or bureaus. By the same token, responsibility for expenditure management was also transferred to different sectoral offices. As a result, each sectoral office or bureau is asked to prepare a separate annual municipal budget, which is subject to approval by the Dire-Dawa Administration City Council. At present, the Works and Urban Development Office is responsible for the execution, coordination and management of urban development projects. However, as indicated above, all sectoral offices are more or less involved in executing specific sectoral functions. 3.5 Staffing, Human Resource Capacity and Salary Levels

This study, as well as consultations with the central and local governments, highlights two major constraints to enhancing municipal service delivery and improving financial management – weak human resource capacity and poor incentives. One indicator of capacity is the level of education and technical training of the staff. Table 10 shows that in Awassa and Gambella 90-100% of the municipal staff have an education level of 12th grade or less. This means that they have not received any formal technical training. The situation is a little better in Bahir Dar and Dire Dawa where 35-42% of the staff have attended college and have a diploma or a degree. Municipal staff salaries are based on civil service salaries and they are extremely low. Table 11 shows that 71-88% of the staff in all four municipalities earn less that Birr 500 (US$60) per month. Local experts note that these salaries are not sufficient to support even one person, let alone a family, and that this is a key reason why technically trained and qualified people do not work for municipalities. The personnel situation is far more difficult in small and remote towns. For example, Gambella municipality has 20 vacant positions which it been unable to fill, despite repeated advertisements. Its remote location combined with the low salaries make it exceptionally difficult to attract competent and/or technically trained staff. The result is that Gambella municipality has no town planners, economists, engineers or other staff with technical expertise.


Indeed, all of its municipal staff and its five managers (i.e. executive committee members) are at most school graduates.

Table 10. Level of Education of Municipal Staff

Bahir Dar Awassa Gambella Dire Dawa

No. % No. % No. % No. %Below 12th grade 64 37% 82 83% 29 97% 1131 45%12th grade complete 49 28% 7 7% 1 3% 318 13%College Diploma 47 27% 6 6% 0 - 787 32%College Degree 15 9% 4 4% 0 - 254 10%Total 175 100% 99 100% 30 100% 2490 100%

Staff with 12th grade or less 113 65% 89 90% 30 100% 1449 58%Revenue staff with same 24 80% 20 91% 5 100% 36 97%

Table 11. Salary Levels of Municipal Staff (Birr per month)

Bahir Dar Awassa Gambella Total No. % No. % No. % No. %

105-299 64 37% 62 65% 15 50% 141 47%300-499 58 34% 22 23% 10 33% 90 30%500-799 41 24% 10 10% 3 10% 54 18%800-and above 10 6% 2 2% 2 7% 14 5%Total 173 100% 96 100% 30 100% 299 100%Staff earning less than 500Birr (US$60) p.month 123 71% 84 88% 25 83% 230 77%


3.6 Governance Issues Three issues are critical to the effective performance of municipalities and they involve (a) accountability to higher levels of government, and (b) accountability to municipal residents. Table 12 presents an overview of the key governance and the administration arrangements in the four municipalities; the main issues are summarized below. First, the lines of upward accountability – that is, the level of government to which the municipalities report – differ in the four towns. Awassa reports to the zonal government. Both Bahir Dar, which is treated as a special zone, and Gambella town report to their regional governments. Dire Dawa, which is considered a special region, reports to the Prime Minister’s Office (more specifically, to its Regional Affairs Bureau). Second, the municipalities are managed by executive committees or teams of 2-7 members that are usually appointed by a higher level of government. At times these committees are supported by an elected municipal council. For example, in Bahir Dar, the seven member executive committee is supported by an elected municipal council of 100 members. As they move toward creating autonomous municipalities, the Southern and Gambella regions are planning to follow the same approach, that is, Awassa and Gambella town are also likely to have elected municipal councils in the near future. The issue here is that the roles and responsibilities of the appointed committees versus those of the newly established elected councils need to be examined and defined carefully. Third, within these towns there are two other levels of deconcentrated regional government, that is, the woredas and kebeles. However, the linkages and/or hierarchy between the municipality and the woredas and kebeles vary significantly among the towns and are usually unclear. In Gambella town, the kebeles report to the woreda and the municipality has limited authority over them. In Awassa, it is unclear as to whether the kebeles report to the woreda or municipality or zone. It important to sort out these linkages because the kebeles are the lowest level of government and its elected members can help improve the downward accountability of the municipalities and, thereby, contribute towards improved performance.


Table 12. Summary of Key Governance & Administrative Arrangements in Four Municipalities

Regions Amhara Southern Gambella Dire Dawa City (Special Region)

No of zones and woredas Zones—7, Nationality Zones—3, Woredas—108, Special Zone—1 (Bahir Dar)

Zones—13 (4 newly converted), Woredas—100, Special Woredas—8 (3 newly converted)

Zones—9, Woredas—9 Kefetenas (woredas)—4, Urban Kebeles—25, Rural Kebeles—20

No of towns with population of 2000 or more (deemed municipalities)

59 90 3 1

Town used as case study Bahir Dar Regional capital

Awassa Regional capital

Gambella town Regional capital

Dire Dawa City

Population of town in 1999 (1998 for Dire Dawa) 175,910 112,031 23,337 287,254

Current status of municipality Autonomous legal entity, designated a Special Zone

No separate legal existence as yet, but process has started.

No separate legal existence as yet, but process has started.

The city is designated as a Special Region

Relevant legislation Law 43/2000 gives municipality autonomous status and the right to impose new taxes and change existing tariffs. Allows municipality to borrow.

The process of drafting municipal legislation has started along with important preliminary studies to reorganize and strengthen municipal management in the region.

A new draft law No. 20/2001 provides for establishment of town administrations to be run by elected municipal councils, in all areas with more than one urban woreda.

1998 and 1999 directives from PMO to reorganize Dire Dawa's administrative council. All municipal functions assigned to different bureaus and offices to be supervised by 3-person council.

Upward accountability (i.e. reports to:)

Regional Govt. Zonal Govt. Regional Govt. (Economics Bureau)

Prime Minister's Office (PMO)

Executive committee 7 member executive committee elected by and from the 100-member elected council and subject to regional approval.

2 member team (town officer and deputy) appointed by Zonal council. Unpredictable terms; 9 mayors in 10 years.

3 member exceutive council (town office, deputy and secretary) appointed by Regional council. 3 year term but can be terminated by Regional council

3 member administrative council appointed by PMO

Municipal council Elected municipal council of 100 members.

No elected municipal council No elected municipal council No elected municipal council

Planned changes in municipal management and administration

Plan to separate technical/service delivery functions from administrative functions and law and order responsibility

Municipal council to be elected Municipal council to be elected, but will need regional approval

Although municipal functions and services were assigned to different bureaus in 1998/99, the BWUD continues to play a major role.

Sub-governments/levels 2 woredas, 17 kebeles 1 woreda, 14 kebeles 1 woreda, 2 urban kebeles 4 woredas, 25 urban and 20 rural kebeles

Kebele Staffing Each kebele has 3-5 permanent staff

Kebele officers are elected but work on a volunteer basis and part-time (2 afternoons/week).

Kebele officers are elected but work on a volunteer basis and part-time.

Elected members of kebeles work part-time (3 afternoons/week), but woredas are starting to have some full-time & salaried staff.

Relationship of Kebeles to Municipality

Kebeles report to regional/zonal govt. for administrative functions and to the municipality for service delivery and development functions.

Not clear whether kebeles are accountable to municipality, woreda or zone.

Accountable to woredas. Municipalities have limited authority over them.

Kebeles work under the supervision and authority of the Special Zone Administrative Council and its various offices.


4. Moving Forward: A Process for Strengthening Municipalities It is clear from the forgoing that GOE and a growing number of regional administrations are aware of and desire to encourage the emergence of municipalities as providers of sustained basic services. To achieve this objective an interrelated set of actions are required:

1. Legislative and policy reform- each region must design and enact the basic legislation and policies required for municipalities to function effectively.

2. Municipal restructuring- all revived municipalities must be restructured to effectively meet expenditure and delivery responsibilities.

3. Capacity building- restructured municipalities must have access to training, technical assistance, systems, and hard and software necessary to raise own source revenues required to carry out their basic functions.

4. Investment capital and intergovernmental fiscal resources- once basic capacity has been built, municipalities will require access to capital and transfers to expand service provision, both to meet basic needs with municipal jurisdictions and to serve rural hinterlands.

The breadth of these tasks suggests that a phased approach should be adopted in provision of support. International experience has demonstrated that attempting to take on such an ambitious reform, capacity building, and investment agenda all at once is seldom successful. In the case of Ethiopia, the fact that municipalities are only beginning to reemerge from their long period of marginalization argues even more strongly for a flexible, phased support strategy. Broadly, this strategy may be seen as having three phases. Phase 1: detailed analyses of the status of municipalities in each region. This process, which has already been initiated by UDSS, will require detailed consultations with all regional administrations, key central agencies, and a selection of reestablished municipalities. Over the next year, these consultations will provide the information required to design and arrange financing for a wide-ranging capacity building effort. Phase 2: implementation of a capacity building program. One alternative is to develop a program that can be implemented over a 2-3 year period beginning in mid-2002 and it could, potentially, include three main elements:

1. Assistance for national agencies and regional administrations to design and implement clear policies supportive of decentralization. This element of the credit could include technical assistance and training and would emphasize international best practices in intergovernmental policy formation, implementation and monitoring and evaluation. This element of the credit could include assistance to MWUD to support reorientation of UDSS, complementary support for the Civil Service Reform program, assistance to other agencies seeking to clarify intergovernmental relations, and assistance to any regions that are beginning to deal with the municipal reestablishment process. The scope and scale of this element of the credit will be determined during the preparation process based on demand from national and regional entities.

2. Assistance for newly reestablished municipalities to restructure and establish effective


operating capacity. This element of the credit could be made available to those regions and their constituent municipalities that are entering into the municipal reestablishment process. Assistance could focus on bringing international best practices to bear in the drafting of regional legislation, formulation of regional intergovernmental fiscal and financial relationships, reorganization of municipal structures to improve efficiency and attract qualified staff, etc. Again, the scope and scale of this element of the credit will be more precisely determined during project preparation.

3. Assistance for municipalities that are already reestablished and are seeking to directly improve their capacity. This element would build upon the good work carried out to date by UDSS and would probably be limited to not more than five municipalities. It could support a wide range of activities such as: Financial management, including revenue mobilization, expenditure efficiency, and

management systems. Fiscal sustainability analyses, focusing through selected case studies on the degree of

congruence of expenditure assignments and own resource bases at the municipal level, and the implications for intergovernmental fiscal transfer systems.

Municipal management, including on-the-job training for key executives, training for newly elected councils, and approaches to effective public participation.

Service delivery, including capacity to address community based and poverty related issues, contract management, operations and maintenance systems, and other technical skills.

Land information and management, including support for expanded cadastral surveys, parceling and registration systems, pricing, and linkages to city planning.

Project management, including capital planning systems, project appraisal methods, and implementation and procurement skills.

Limited capital funding for priority pilot implementation activities. Engineering design work for priority capital investments. Regional and zonal capacity building to support municipal strengthening, including

definition of roles and responsibilities, regulatory processes, information management and monitoring, procurement management support systems, project appraisal, policy formation, and training of trainers.

Through the second phase work, it will be possible to design Phase 3 in which support would broaden beyond capacity building to provide the more capable municipalities with access to capital for sustainable investments. The means by which this access will occur remain to be defined, but in any case must be based on clear local capacity to operate and maintain all investments. The World Bank is currently well positioned to support conclusion of Phase 1 work leading to Phase 2 in 2002. During Phase 1 design work could focus on key linkages between municipal capacity building and (a) the national public sector reform program, (b) the ADLI initiative, and (c) the Poverty Reduction Strategic Plan (PRSP) now being drafted by GOE. A more thorough analysis of these linkages will bring increased clarity to the municipal capacity building agenda and its role in Ethiopia’s overall national development plan.


Annex 1. Tariff Rates

Bahir Dar Gambella Awassa Dire Dawa Most recent tariff revision 1999 1995 1975 1971 Most recent property tax regulation 1995 1979 1995 1995

Type of tax or service charge

1 Annual license fee for business, professional and vocational services

500 to 10,000 60 to 2,500 10 to 2,000

2 Establish new business or trade: - For Ethiopians: 130 20 to 500 - For Foreigners: 450 3 Renewal of Permit: - For Ethiopians 215 10 to 100 - For Foreigners 420 4 Monthly market stall fee 1 to 15 5 to 20 0.5 to 2 5 Load/Unloading fee

(per quintal or % value) 0.5 to 1 0.01% to 2% 1-2%

6 Monthly vehicle registration & service fee 10 to 50 5 to 50 7 Monthly vehicle parking lot fee 1.5 to 10 8 Livestock market fee 0.5 to 3 1.5 to 6 0.25 to 2 9 Fee for slaughter service per cattle 4 to 40 10 to 15

10 Management and Control of Stray Animals/Overnight Storage

1 to 2 0.25 to 2 1 to 2

11 Public Registration Fees: 5 to 40 1 to 15

- Birth Day 30

- Marriage/Divorce 40

- Death Free 12 Unsanitary Conditions in the envmt. penalty:

- Individual 5 - Dwelling Units 10 - Organization 50

13 Refuse disposal fees per year: - For business establishments 5 to 40 1.8 to 60 - For Dwelling Units 5 1.8 to 24

14 Property Tax (on the basis of rental land value)

0.05% to 2%

15 Fee for electric light & power (per kilo watt) 0.02 16 Fee for the posting of public notice 10 to 250 40 17 Telecommunication and EELPCO from their

revenues 0.25%

18 Leaser and Lessee Service Tax 2.0% Notes: All rates are in Birr, unless indicated otherwise.


Annex 2-1. Bahir Dar Revenue Table

1997/98 1998/99 1999/2000 Avg for

3 yr period% share

own sourceOwn Source Revenue

A Local Taxes 8,646 5,081 6,554 6,760 70.1% 1 Business taxes 581 390 619 530 5.5% 2 Live stock trade tax 26 21 42 30 0.3% 3 Market Place tax 19 31 10 20 0.2% 4 Urban land rent 975 819 1,120 971 10.1% 5 Urban building tax - - - - - 6 Vehicles road tax 57 39 64 53 0.6% 7 Lease Income 6,832 3,669 4,628 5,043 52.3% 8 Other miscellaneous tax 156 112 71 113 1.2% B Service Charges 739 767 797 768 8.0% 9 Registration of Agreements - - - - -

10 Sanitation Service fee 37 31 27 32 0.3% 11 Technical Service fee 403 436 383 407 4.2% 12 Abattoir Service fee 79 96 128 101 1.0% 13 Marriage and birth certificate 16 18 15 16 0.2% 14 Others 204 186 244 211 2.2% C Rent/Sales of Municipal Property 366 616 905 629 6.5% 15 Sales of Property - 42 86 43 0.4% 16 House Rent 355 548 729 544 5.6% 17 Market Place rent 11 26 90 42 0.4% D Other 1,974 1,136 1,332 1,481 15.4% 18 Rental from Vehicles and equip. 488 370 684 514 5.3% 19 Gravel Sales 378 256 228 287 3.0% 20 Hole-block and hard core sales 331 142 169 214 2.2% 21 Misc. Other 777 368 251 465 4.8% E From AAHR 11 - 14 8 0.1% Total Own Source Revenue 11,736 7,600 9,602 9,646 100% As % of Total 96% 94% 79% 68%

External Finance Sources 22 Regional Govt - - - 473 11% 23 ESRDF (Matching Grant) - - - 7.7 0% 24 Loan form Health Bureau - - - - - 25 Federal Grants (Road Fund) 500 500 2,534 1178 26% 26 Other Federal Grants - - - - - 27 IDA through UDSS - - - 2,834 63%

Total External Revenue 500 500 2,534 4,493 100% As % of Total 4% 6% 21% 32%

TOTAL REVENUE (000s Birr) 12,236 8,100 12,136 14,139 In US Dollars (000s) 1,530 1,013 1,517 1,767


Annex 2-2. Gambella Revenue Table

1997/98 1998/99 1999/2000 Avg for

3 yr period % share


A Local Taxes 181 247 197 208 73.3% 1 Business taxes 31 108 74 71 25.0% 2 Live stock trade tax 46 51 45 47 16.6% 3 Market Place tax - - - - - 4 Urban land rent 21 22 26 23 8.1% 5 Urban building tax 5 7 7 6 2.2% 6 Vehicles road tax 78 59 45 61 21.3% 7 Lease Income - - - - - 8 Other miscellaneous tax - - - - - B Service Charges 63 55 75 64 22.6% 9 Registration of Agreements 27 21 37 28 10.0%

10 Sanitation Service fee - - - - - 11 Technical Service fee 17 12 10 13 4.6% 12 Abattoir Service fee 19 22 28 23 8.1% 13 Marriage and birth certificate - - - - - 14 Others - - - - - C Rent/Sales of Municipal Property 9 3 1 4 1.5% 15 Sales of Property - - - - - 16 House Rent - - - - - 17 Market Place rent 9 3 1 4 1.5% D Other 9 8 5 7 2.6% 18 Rental from Vehicles and equip. - - - - - 19 Gravel Sales - - - - - 20 Hole-block and hard core sales - - - - - 21 Misc. Other 9 8 5 7 2.6% E From AAHR - - - - - Total Own Source Revenue 262 313 278 284 100% As % of Total 35% 71% 76% 55%

External Finance Sources 22 Regional Govt. 200 80 55 112 47.3% 23 ESRDF (Matching Grant) 293 33 32 119 50.6% 24 Loan form Health Bureau - 15 - 5 2.1% 25 Federal Grants (Road Fund) - - - - - 26 Other Federal Grants - - - - - 27 IDA through UDSS - - - - -

Total External Revenue 493 128 87 236 100% As % of Total 65% 29% 24% 45%

TOTAL REVENUE (000s Birr) 755 441 365 520 In US Dollars (000s) 94 55 46 65


Annex 2-3. Awassa Revenue Table

1997/98 1998/99 1999/2000 Avg for

3 yr period % share


A Local Taxes 4,512 2,328 3,231 3,357 71.5% 1 Business taxes 417 522 518 486 10.3% 2 Live stock trade tax 15 18 20 18 0.4% 3 Market Place tax 24 35 78 46 1.0% 4 Urban land rent 1,224 1,328 1841 1,464 31.2% 5 Urban building tax 129 137 122 129 2.8% 6 Vehicles road tax 351 13 1 122 2.6% 7 Lease Income 2,290 186 589 1,022 21.8% 8 Other miscellaneous tax 62 89 62 71 1.5% B Service Charges 424 926 1,603 984 21.0% 9 Registration of Agreements - - - - -

10 Sanitation Service fee 9 4 3 5 0.1% 11 Technical Service fee - 52 56 36 0.8% 12 Abattoir Service fee 85 97 108 97 2.1% 13 Marriage and birth certificate - - - - - 14 Others 330 773 1,436 846 18.0% C Rent/Sales of Municipal Property 43 36 34 38 0.8% 15 Sales of Property 8 2 4 5 0.1% 16 House Rent 35 34 30 33 0.7% 17 Market Place rent - - - - - D Other 29 124 29 61 1% 18 Rental from Vehicles and equip. - 53 25 26 0.6% 19 Gravel Sales - - - - - 20 Hole-block and hard core sales 23 24 4 17 0.4% 21 Misc. Other 6 47 - 18 0.4% E From AAHR 78 329 363 257 5.5% Total Own Source Revenue 5,086 3,743 5,260 4,697 100% As % of Total 100% 100% 100% 63%

External Finance Sources 22 Regional Govt. - 42 - 14 1% 23 ESRDF (Matching Grant) - 866 - 289 10% 24 Loan form Health Bureau - - - - - 25 Federal Grants (Road Fund) 600 - 670 423 15% 26 Other Federal Grants - - - - - 27 IDA through UDSS 2,043 2,043 2,043 2,043 74%

Total External Revenue 0 0 0 2,769 100% As % of Total 0% 0% 0% 37%

TOTAL REVENUE (000s Birr) 5,086 3,743 5,260 7,466 In US Dollars (000s) 636 468 658 933


Annex 2-4. Dire Dawa Revenue Table

1997/98 1998/99 1999/2000 Avg for

3 yr period % share


A Local Taxes 3,250 3,356 7,162 4,589 61.9% 1 Business taxes 470 536 523 510 6.9% 2 Live stock trade tax 33 47 105 62 0.8% 3 Market Place tax 141 133 127 134 1.8% 4 Urban land rent 1,017 446 545 669 9.0% 5 Urban building tax 807 320 297 474 6.4% 6 Vehicles road tax 44 58 98 67 0.9% 7 Cart License Tax 23 25 10 13 0.2% 8 Loading & Unloading Tax 509 512 402 474 6.4% 9 Chat Tax 227 1,282 5,055 2,188 29.5% B Service Charges 1,237 825 733 932 12.6% 10 Property Registration 88 67 - 52 0.7% 11 Sanitation Service fee 203 201 290 231 3.1% 12 Technical Service fee 796 371 320 496 6.7% 13 Abattoir Service fee 134 136 123 131 1.8% 14 Marriage and birth certificate - - - 0 0.0% 15 Censuses & Notification 16 50 - 22 0.3% C Rent/Sales of Muni. Property 277 423 933 544 7.3% 16 Sales of Property 15 30 - 15 0.2% 17 Rent from vehicles & equipment 46 57 - 35 0% 18 House Rent 138 297 914 450 6.1% 19 Market Place rent 78 39 19 45 0.6% D Other 1,616 775 1,655 1,349 18% 20 Rental from Vehicles and equip. - - 0 0.0% 0.0% 21 Gravel Sales - - - 0 0.0% 22 Hole-block and hard core sales - - 0 0.0% 0.0% 23 Misc. Other 1,616 775 1,655 1,349 18.2% E From AAHR - - - - - Total Own Source Revenue 6,380 5,378 10,483 7,414 100% As % of Total 100% 100% 100% 92%

External Finance Sources 24 Regional Govt - - - - - 25 ESRDF (Matching Grant) - - - - - 26 Loan form Health Bureau - - - - - 27 Federal Grants (Road Fund) - - - 677 100% 28 Other Federal Grants - - - - - 29 IDA through UDSS - - - -

Total External Revenue 0 0 0 676 1 As % of Total 8%

TOTAL REVENUE (000s Birr) 6,380 5,378 10,483 8,090 In US Dollars (000s) 798 672 1,310 1,011


Annex 3. Comparison of Estimated & Actual Revenue

Summary- Annual average for 1997/8-1999/00

Own Revenue Planned Actual Collection rate Bahir Dar 13,369 9,646 72% Awassa 7,297 4,697 64% Gambella 480 284 59% Dire Dawa 7,843 7,414 95% Bahir Dar Own Revenue Planned Actual Collection rate 1997/98 13,670 11,736 86% 1998/9 13,834 7,600 55% 1999/00 12,603 9,602 76% AVG 13,369 9,646 72% Awassa Own Revenue Planned Actual Collection rate 1997/98 8,640 5,086 59% 1998/9 6,250 3,743 60% 1999/00 7,000 5,260 75% AVG 7,297 4,697 64% Gambella Own Revenue Planned Actual Collection rate 1997/98 357 262 73% 1998/9 534 313 59% 1999/00 548 278 51% AVG 480 284 59% Dire Dawa Own Revenue Planned Actual Collection rate 1997/98 8,167 6,380 78% 1998/9 9,362 5,378 57% 1999/00 6,000 10,483 175% AVG 7,843 7,414 95%


Annex 4. Expenditure by Municipality -- Summary of Municipal Expenditures over 1997/8 to 1999/00 in 000s Birr Bahir Dar Awassa Gambella Dire Dawa

1997/98 1998/99 1999/2000 1997/98 1998/99 1999/2000 1997/98 1998/99 1999/2000 1997/98 1998/99 1999/2000

Wages & Salary (incl pension) 739 879 1,041 421 497 826 179 197 189 691 644 1,638 Other Recurrent expenditure 3,993 2,164 2,997 1,551 2,600 2,016 111 124 154 1,558 2,153 1,393 Capital expenditure 5,875 3,598 8,412 340 407 641 284 39 12 3,465 1,995 1,958 Total Expenditure 10,607 6,641 12,450 2,312 3,504 3,483 574 360 355 5,714 4,791 4,988 Total Revenue 12,236 8,100 12,136 5,086 3,743 5,260 755 441 365 6,380 5,378 10,483 Expenditure/ Total Revenue 87% 82% 103% 45% 94% 66% 76% 82% 97% 90% 89% 48%

Bahir Dar 1997/98 1998/99 1999/2000 3 yr avg Exp Amt % of Exp. Exp Amt % of Exp. Exp Amt % of Exp. Avg exp Avg % Wages & Salary (incl pension) 739 7% 879 13% 1,041 8% 886 9% Other Recurrent expenditure 3,993 38% 2,164 33% 2,997 24% 3,051 31% Capital expenditure 5,875 55% 3,598 54% 8,412 68% 5,962 60% Total Expenditure 10,607 100% 6,641 100% 12,450 100% 9,899 100% Total Revenue 12,236 8,100 12,136 14,138 Expenditure/ Total Revenue 87% 82% 103% 70%

Awassa 1997/98 1998/99 1999/2000 3 yr avg Exp Amt % of Exp. Exp Amt % of Exp. Exp Amt % of Exp. Avg exp Avg % Wages & Salary (incl pension) 421 18% 497 14% 826 24% 581 19% Other Recurrent expenditure 1,551 67% 2,600 74% 2,016 58% 2,056 66% Capital expenditure 340 15% 407 12% 641 18% 463 15% Total Expenditure 2,312 100% 3,504 100% 3,483 100% 3,100 100% Total Revenue 5,086 3,743 5,260 7,466 Expenditure/ Total Revenue 45% 94% 66% 42%

Gambella 1997/98 1998/99 1999/2000 3 yr avg Exp Amt % of Exp. Exp Amt % of Exp. Exp Amt % of Exp. Avg exp Avg % Wages & Salary (incl pension) 179 31% 197 55% 189 53% 188 44% Other Recurrent expenditure 111 19% 124 34% 154 43% 130 30% Capital expenditure 284 49% 39 11% 12 3% 112 26% Total Expenditure 574 100% 360 100% 355 100% 430 100% Total Revenue 755 441 365 520 Expenditure/ Total Revenue 76% 82% 97% 83%

Dire Dawa 1997/98 1998/99 1999/2000 3 yr avg Exp Amt % of Exp. Exp Amt % of Exp. Exp Amt % of Exp. Avg exp Avg % Wages & Salary (incl pension) 691 12% 643 13% 1,637 33% 991 19% Other Recurrent expenditure 1,557 27% 2,152 45% 1,393 28% 1,701 33% Capital expenditure 3,465 61% 1,994 42% 1,957 39% 2,472 48% Total Expenditure 5,714 100% 4,791 100% 4,988 100% 5,165 100% Total Revenue 6,380 5,378 10,483 8,090 Expenditure/ Total Revenue 90% 89% 48% 64%


Annex 5. Summary of Expenditure by Municipality for Average Year 1997/8-1999/00 in 000s Birr Bahir Dar Gambella Awassa Types of Expenditure Avg.

Expend. %age Share

Avg. Expend.

%age Share

Avg. Expend.

%age Share

A Salary & Pension 886 9% 188 44% 581 19% B Operating Costs 3,052 31% 131 30% 2,056 66% Office equipment 230 2% 11 3% 113 4% Office Personnel 73 1% 20 5% 145 5% Office Operations & Utilities 361 4% 22 5% 58 2% Vehicle Costs 545 6% 54 13% 252 8% Maintenance of Public Spaces 541 5% 11 3% 653 21% Charity & Donations 54 1% 5 1% 34 1% Other 1,248 13% 8 2% 801 26% C Capital Expenditure 5,962 60% 112 26% 463 15% Capital expenses for Municipality 574 5% 2 1% 90 3% Debt Repayment 1,588 16% 0 0% 0 0% Transport 1,739 18% 96 22% 132 4% Housing 475 5% 9 2% 240 8% Infrastructure 1,322 13% 4 1% 0 0% Planning Studies 264 3% 0 0% 0 0% TOTAL 9,900 100% 431 100% 3,100 100%

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