Institutional Models for Governance of Urban Services Volume 1 – Synthesis Report December 2021 Author Matthew Glasser Consultant, The World Bank @ 2021 The International Bank for Reconstruction and Development/The World Bank 1818 H Street NW Washington DC 20433, USA Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved This volume is the product of the staff of the International Bank for Reconstruction and Development/The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the Governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. Design and Print: Macro Graphics Pvt Ltd. | www.macrographics.com Acknowledgements This study was made possible by the generous funding from the Foreign Commonwealth & Development Office (FCDO), Government of United Kingdom and the South Asia Urban Development Global Practice of The World Bank. The authors especially thank Raghu Kesavan (Sr. Infrastructure Specialist & Task Team Lead) and Yarissa Lyngdoh Sommer (Sr. Urban Specialist & Co-Task Team Lead) of this report, for their guidance on methodological and substantive matters and management of this study, including interactions with partner cities. The team also benefited immensely from the technical quality reviews and insights provided by Roland White (Global Lead-City Management and Finance) and from the overall strategic guidance provided by Catalina Marulanda (Practice Manager, Urban Development, South Asia Region) and Junaid Kamal Ahmad (Country Director India). Valuable contributions were made by the peer reviewers, Manoj Jain (Lead Governance Specialist-South Asia Region), Madhu Raghunath (Sector Leader-East Asia Pacific), David T. J. Savage (Senior Consultant-Urban Governance Specialist) and Rajesh Balasubramanian (Senior Water Supply and Sanitation Specialist-MNA) who provided insightful comments and advice. In addition, administrative support from Binny Varma (Program Assistant) is greatly appreciated. A special recognition to the collaboration between the World Bank and the Ministry of Housing and Urban Affairs, Government of India, Joint Secretary Mr. Kunal Kumar’s Office for this analytical work. On the India study, the team acknowledges valuable inputs received from Mr. R. K. Mehta (Deputy Municipal Commissioner, Ahmedabad Municipal Corporation), Mr. Pranav Kumar, Chief Officer, Nadiad Nagar Palika on the findings and recommendations for the study and the team also appreciate support of Mr. Bhavin Solanki (Medical Officer of Health, Ahmedabad Municipal Corporation). The team is grateful to the officials of Ahmedabad Municipal Corporation, Nadiad Nagar Palika Municipal, officials of the Municipal Corporation of Amritsar for their continuous support during data collection and validation phase on various aspects of the data during the course of the study. We also acknowledge the support provided by Mr. Yash Badpaga (Manager, Punjab Municipal Infrastructure Development Corporation) and Mr. Harpalsingh Zala (Chief City Engineer, Ahmedabad Municipal Corporation) for facilitating data collection. The team is thankful for the valuable inputs received from Mr. Ajoy Sharma (Secretary, Department of Local Government & Chief Executive Officer, Punjab Municipal Infrastructure Development Corporation), Mr. V. P. Singh (General Manager, PMIDC), Mrs. Komal Mittal, IAS (Ex-Municipal Commissioner, Municipal Corporation of Amritsar), Mrs. Poonamdeep Kaur IAS, (Municipal Commissioner, Municipal Corporation of Patiala) and Ms. Divyadharshini, IAS, (Joint Commissioner, Greater Chennai Corporation), Mr. Sandeep Rishi (Additional Commissioner, Municipal Corporation of Amritsar) and Dr. Jagadeesan (Chief Health Officer, Greater Chennai Corporation) for collating and providing the required information on COVID-19 study amidst on-going pandemic. Acknowledgements iii For the United States study, we would also like to thank Mr. John Parker (Manager of Dayton Solid Waste Management) and Mr. Brandon Policicchio (Chief Customer and Business Development Officer, Greater Dayton Regional Transit Authority) for providing exceptionally helpful information regarding the structure, finances, accountability structures, quality control, and public engagement practices related to those two important public services. For the South Africa Study, a very special thanks is extended to the following City of Mbombela officials for arranging and supporting the interviews as well as sourcing documentation: Mr. Vusi Sibiya (Senior Manager, Policy, By-laws & Research) and Ms. Annah Chiloane (Manager, Policy, By-laws & Research) for her very generous support. The study relied on valuable inputs from the following City of Mbombela officials: Mr. Sphetho Mhlongo (Deputy Municipal Manager, Institutional Development), Mr. Patrick Msibi (Deputy Municipal Manager, Service Delivery), Mr. Henk Schoeman (Manager, Integrated Development Planning), Ms. Momotho Thumbathi (General Manager, Community Services), Mr. Lesiba Maluleke (Senior Manager, Solid Waste Management), Ms. Bertha Seloane (Senior Manager, Water & Sanitation), Ms. Pinkie Hermanus (Senior Manager, Water Concession Compliance Monitoring) and Mr. Joseph Ngala (Manager, Customer Care). Deep gratitude is expressed to the following independent experts for their valuable inputs and historical insights: Mr. Roland Hunter (Former Chief Financial Officer, City of Johannesburg), Dr. Sean Phillips (Former CEO, Johannesburg Roads Agency), Mr. Ian Davies (Former Manager for Reporting, Johannesburg Roads Agency), Ms. Fatima Rawat (Associate and Researcher, Ethics Institute of SA), Dr. Rolfe Eberhard (Independent Water Sector Specialist), Mr. Ian Palmer (Water Sector & Institutional Specialist) and Ms. Nazreen Kola (Institutional Governance Specialist). iv Institutional Models for Governance of Urban Services: Volume 1 Table of Contents Abbreviations vii Executive Summary ix Introduction 1 Institutional Typologies 5 Municipal Departments 5 Municipal Enterprises 12 Special Districts 14 Concession 16 Analysis 19 Institutional Coherence 19 Accountability 22 Autonomy 30 Accounting and Financial Reporting 31 Analytical Conclusions 32 Policy Options for Consideration 35 Deep Change Options 37 Significant Change Options 38 Incremental Change Options 41 Appendix A: Descriptive Details 47 Municipal Departments 47 Municipal Enterprises 71 Special Districts 81 Concession: Mbombela/Dolphin Coast Water and Sewer Concession 86 Appendix B: King IV Principles of Municipal Governance 93 Table of Contents v Abbreviations AJL Ahmedabad Janmarg Limited AMC Ahmedabad Municipal Corporation AMRUT Atal Mission for Rejuvenation and Urban Transformation AMTS Ahmedabad Municipal Transport Services AMTS Ahmedabad Municipal Transport Services AUIT Amritsar Urban Improvement Trust BRTS Bus Rapid Transit System CAFR Comprehensive Annual Financial Reports CEO Chief Executive Officer CFO Chief Financial Officer CMA Commissionerate Of Municipal Administration CMU Contract Management Unit CPI Consumer Price Index CPL Community Participation Law CSOs Combined Sewer Overflows DWM Department of  Water Management GAAP Generally Accepted Accounting Principles GRAP Generally Recognized Accounting Practice GST Goods and Services Tax GUDC Gujarat Urban Development Company GUDM Gujarat Urban Development Mission IAS Indian Administrative Service IDP Integrated Development Plan Abbreviations vii IMF International Monetary Fund INR Indian Rupee JNNURM Jawaharlal Nehru National Urban Renewal Mission JRA Johannesburg Road Agency KCCA Kampala Capital City Authority LGES Local Government Equitable Share MCA Municipal Corporation of Amritsar MIG Municipal Infrastructure Grant MM Municipal Manager MMC Member of the Mayoral Committee MWRD Metropolitan Water Reclamation District NADA Nadiad Area Development Authority O&M Operation and Maintenance PIDB Punjab Infrastructure Development Board PMIDC Punjab Municipal Infrastructure Development Company PPP Public Private Partnership PUPDA Punjab Urban Planning & Development Authority PWSSB Punjab Water Supply and Sewerage Board RBIG Regional Bulk Infrastructure Grant RTA Regional Transit Authority SDA Service Delivery Agreement SDBIP Service Delivery and Budget Implementation Plan SHU Shareholder Unit SOE State Owned Enterprise SWD Solid Waste Department SWM Solid Waste Management ULB Urban Local Body WDR World Development Report WSA Water Services Authority WSCM Water Service Compliance Monitoring WSIG Water Services Infrastructure Grant ZAR South African Currency viii Institutional Models for Governance of Urban Services: Volume 1 Executive Summary This report compares institutional arrangements for urban services in a small sample of cities in three countries. We assess institutions in two American cities; two South African cities; and four Indian cities, in the states of Gujarat and Punjab. This synthesis report is based on four underlying analyzes. Institutional analyzes were undertaken for each country by a consultant based in that country. A fourth analysis examined the COVID-19 pandemic response in three Indian cities. Reports covering these four analyzes are contained in Volume 2. Appendix A to this Volume 1 contains important descriptive details about each city’s institutions and the services they provide. Institutional Models covered in this Report Municipal departments Municipal enterprises ƒƒ Chicago Water; ƒƒ Johannesburg Water; ƒƒ Dayton Solid Waste; ƒƒ Johannesburg Roads; and ƒƒ Mbombela Solid Waste; ƒƒ Ahmedabad Transport. ƒƒ Ahmedabad Water and Sewer; Special districts ƒƒ Ahmedabad Solid Waste; ƒƒ Chicago Metro Sewer; and ƒƒ Nadiad Water and Sewer; ƒƒ Greater Dayton Regional Transit. ƒƒ Nadiad Solid Waste; Concession ƒƒ Amritsar Solid Waste; ƒƒ Mbombela Water. ƒƒ Amritsar Water and Sewer; ƒƒ Patiala Solid Waste; and ƒƒ Patiala Water and Sewer. The COVID-19 study focuses on the Urban Local Body (ULB) response in the cities of Ahmedabad, Chennai, and Amritsar. The report illustrates how the city planning function in India is primarily focused on controlling land use, rather than serving as a strategic guide for urban development. Master plans do not integrate disaster management planning as a strategic priority, and so when ULBs are called on to provide front-line response to health crises, they must do so in an ad hoc manner, not having prepared for epidemics and other disasters. The first section of this report briefly describes each institution and the service it provides. These summaries also identify the executive authority, the governing body, and the operational and capital funding Executive Summary ix models. These summaries are supplemented by the details contained in Appendix A. Based on the information in this synthesis report and in the consultant reports, we provide subjective, summary judgements as to the quality of services provided, as follows: Chicago water Chicago wastewater Dayton solid waste Dayton transport Model: city department special district city department transit authority  Quality: very good very good excellent very good Johannesburg water Johannesburg roads Mbombela water and Mbombela solid waste city Model: municipal enterprise municipal enterprise sewer concession department Quality: fair poor good fair Amritsar water and Amritsar solid waste Patiala water and Patiala solid waste Model: sewer city department city department sewer city department city department Quality: fair good fair good Nadiad water Nadiad solid Ahmedabad water and Ahmedabad transport Ahmedabad solid Model: and sewer city waste city sewer city department municipal enterprise waste city department department department BRT good Quality: fair good poor fair regular buses fair The second section compares the models from four perspectives: institutional coherence, accountability, autonomy, and accounting. We conclude that the Indian models are more fragmented, both horizontally and vertically, compared to their American and South African counterparts. In terms of accountability, a significant accountability gap in the Indian institutional model was identified where ULB Commissioner reports not to the elected council, but to the state government. As to autonomy, the US and South African municipalities have considerably more responsibility and autonomy than do Indian ULBs. Finally, most of the US and the South African institutions are financially ring-fenced, with financial reporting that is separable from the municipalities they serve. Our conclusion from these analyzes is that organizational and institutional structure alone do not explain success or failure. This implies that the solution to India’s service delivery challenges is not as simple as shifting to a different institutional form. Rather, for any given institutional form, it is important to understand how coherence can be achieved, how long and short form accountability can be strengthened, how autonomy can be paired with accountability, and how separate accounting can strengthen financial management and efficiency. We believe that principles-based governance, focusing on behavior and values, is a useful complement to any institutional structure. In the third section, we present a number of policy options for consideration. These options are presented at a high level, and if there is interest in pursuing any of these options, a detailed reform program would be appropriate, once the direction of reforms is agreed. We have broken the options into three groups, based on x Institutional Models for Governance of Urban Services: Volume 1 our perception of their difficulty; however, in some cases, reforms that we have considered more difficult may well be achievable. Some of these options are alternatives to one another, while others can be done in tandem. For example, almost any institutional reform can and probably should be combined with institutionalized citizen participation in capital and budget planning; with accounting reforms, and with financing reforms. These options are shown in the following table: Deep Change Options Significant Change Options Incremental Change Options 1. Change national constitution 1. Consider special districts for one 1. Strengthen authority of elected to give ULBs autonomy; and or more urban services; body; 2. Change state laws to give ULBs 2. Consolidate urban management 2. Corporatize a service, autonomy. responsibilities; and with strong governance 3. Consider a city charter, granting arrangements; full powers to ULBs in primate 3. Strengthen citizen participation city. in capital/budget planning; 4. Implement accounting reforms; and 5. Financial reforms. Executive Summary xi Introduction The comparative research described in this report is meant to support the development of options for more effective urban service delivery in India. The primary audience for this work will be found in state and ULB governments in India, though the topic also may be of interest in academic, media, and civil society circles. In this report, we compare institutional models for managing specific services in two American cities, two South African cities, and four Indian cities. The going in hypothesis was that some institutional forms may be more effective in ensuring efficient and sustainable service delivery. We have not found clear evidence to support that hypothesis. Rather, the conclusion that comes through from our work is that a variety of institutional forms can be effective at delivering high quality services, provided there is a reasonable degree of institutional coherence, accountability and autonomy. Unfortunately, it is also true that a similar variety of institutional forms can deliver substandard services when there are problems of fragmentation, accountability gaps and limited autonomy. WHAT DO WE MEAN BY “INSTITUTIONS?” We use the terms “institution” and “institutional” to include government at all levels; ministries, departments, and agencies; urban local bodies; regulators; boards and commissions; courts; legislatures; civil society and non- governmental organizations; business enterprises; professions and professional associations. Rules, especially in the form of laws and regulations, are also part of the institutional structure; as are professional and technical norms and standards. By contrast, we have not considered organizational or societal culture as part of this institutional comparison. Because culture can breathe life into institutions, or defeat them, our understanding must be regarded as incomplete. We believe that the effectiveness of institutions is strongly affected by culture: i.e., the attitudes, expectations and values of people in these institutions and in the societies they serve. Comparative research on organizational and societal culture associated with these institutions could be a useful complement to the comparisons in this report. Institutional forms can be changed with the stroke of a ministerial pen, whereas culture change is a more subtle and prolonged process, and may well be more effective than formal change. It would be wrong to take the few cities in this study as representative of their countries. In many respects, they are typical, but in all three countries, and especially in the US, there is a great deal of variety in urban institutions. The cities and services considered in this report are as follows: Chicago, Illinois: ƒƒ Water supply, provided by through a department of the city; ƒƒ Wastewater treatment, provided through the Metropolitan Water Reclamation District (MWRD) of Greater Chicago; Introduction 1 Dayton, Ohio ƒƒ Solid waste collection, provided through a department of the city; and ƒƒ Urban transportation, provided through the Greater Dayton Regional Transit Authority (RTA). Johannesburg, Gauteng ƒƒ Water and wastewater services, provided through a municipally-owned enterprise; and ƒƒ Roads and road maintenance, provided through a municipally-owned enterprise. Mbombela, Mpumalanga ƒƒ Water supply and wastewater services, provided partly through a concession arrangement, and partly through a department of the city; and ƒƒ The Mbombela Solid Waste Department (SWD), provided through a department of the city, with some external contractors. Ahmedabad, Gujarat ƒƒ Water supply and wastewater services, provided through a department of the city; ƒƒ Solid Waste Management (SWM) also provided through a department of the city; and ƒƒ Transport services, provided through an undertaking of the city, Ahmedabad Municipal Transport Services (AMTS) and through a wholly owned subsidiary, Ahmedabad Janmarg Ltd (AJL). Nadiad, Gujarat ƒƒ Water supply and wastewater services, provided through a department of the city; and ƒƒ SWM, provided through a department of the city. Amritsar, Punjab ƒƒ Water supply and wastewater services, provided through a department of the city; and ƒƒ SWM, provided by city, with an external contractor in part of the city. Patiala, Punjab ƒƒ Water supply and wastewater services, provided through a department of the city; and ƒƒ SWM, provided through a department of the city, with help of three private firms. This document draws heavily on country reports prepared by consultants from each country.1 Some passages in this consolidated report have been copied directly, or with minor edits, from those separate reports. Additional details concerning the cities and their services are included in those separate reports, which should be read together with this overall report. For each service described in this overall report, Appendix A includes more substantial descriptive information, and some key performance statistics, along with a simple rating characterizing the service delivery performance as excellent, very good, good, fair, or poor. Such simple ratings are inadequate to capture the nuances and parameters of performance. To understand the strengths and weaknesses of each service, in its city context, the reader should refer to the separate country reports. Caution is warranted in comparing examples from countries with dramatic contrasts in size, wealth, and structure. India has the largest population, with over 1.3 billion people. This is four times the population 1 Don Elliott for US cities, Nishendra Moodley for South African cities, and Brijgopal Ladda for Indian cities. 2 Institutional Models for Governance of Urban Services: Volume 1 of the US, and more than twenty times the population of South Africa. The US is a high-income country, with a per capita GDP of US$ 62,641; South Africa is a middle-income country, with a per capita GDP of US$ 6,374; and India is a lower middle-income country, with a per capita GDP of US$ 2,016. India and the US are federal countries, in which the powers of local government depend on state laws. By contrast, South Africa is a unitary country, albeit with significant decentralization in the local sphere. These differences inevitably impact the quality of services. It is difficult to disaggregate the influence of formal structures from that of the countries’ different histories, legal frameworks, politics, economies, and cultures.2 Indian cities seem stuck at a fork in the road: most states have not been able or willing to entrust comprehensive powers over urban planning, services, and revenue-raising to ULBs, but neither have they forthrightly rejected the principle of decentralization embodied in the 74th Amendment. Other researchers have written extensively on the abiding problems with the intergovernmental structure in India. It is common cause that the ambitions of the 74th Amendment remain largely unrealized, and that the financial resources available to ULBs are insufficient to perform the functions of a modern city. We do not need to re- visit those arguments, which have been rehashed for nearly 30 years. Rather, the purpose of this paper is to take a fresh look at the institutional arrangements for urban services in India, guided by a few international reference points, and stimulate debate about where to go from here. Going forward, we can imagine that urban reform might take at least three different directions. First, some states might yet be convinced to give their ULBs more complete autonomy and accountability for planning and managing their cities, along with the finances and/or financial powers fulfill their mandates. Second, one or more states might decide to consolidate urban management responsibilities, at least over their larger cities. Globally, there are many countries where big cities of great political and economic importance are treated differently to smaller cities. Although most states are not prepared to fully devolve authority to ULBs, consolidation of management authority for any given city would reduce vertical and horizontal fragmentation, and is likely to improve the overall performance of India’s large cities. Finally, until they discover a more effective model, many states are likely to continue relying on a patchwork of approaches to service delivery and accountability. 2 The historical evolution of the political economies in the three countries is beyond the scope of our investigation, but it is obvious that there are fundamental differences. The US grew up as a decentralized country. Though it has been moving toward greater centralism over time, the American paradigm remains fundamentally decentralist and citizen-driven. By contrast, the 20th century histories of India and South Africa, have been characterized by strong centralized power. The empowerment of the local sphere in South Africa’s 1996 Constitution changed that paradigm, though citizens still look to national parties and leaders for solutions. The attempt to decentralize states’ powers and functions in India’s 1992 constitutional amendments has not changed the basic paradigm, which relies on powerful, central, administrative service. Introduction 3 Institutional Typologies In this section, we present a few stylized facts about each service delivery agency covered by this report. Substantial further information can be found in Appendix A, and in the separate country reports prepared in connection with this research. The most common model covered by our study is that of a municipal department. The second most common model is a company owned by the municipality: we have two examples from South Africa and one from India. The third model represented in the study is the “special district” model, which is common in the US, but may be unfamiliar to the intended audience for this report. Such districts, also sometimes referred to as limited purpose local governments, are separate from the municipalities whose citizens they serve and often focus on a particular service: waste-water and public transport in the examples we have included here. Finally, the study includes a 30-year water system concession from South Africa. Here is a list of the service delivery agencies covered by this report: Municipal departments Municipal enterprises ƒƒ Chicago Department of Water Management; ƒƒ Johannesburg Water SOC Ltd; ƒƒ Dayton Division of Waste Collection; ƒƒ Johannesburg Roads Agency Pty Ltd; and ƒƒ Mbombela Solid Waste Department; ƒƒ Ahmedabad Municipal Transport Services ƒƒ Ahmedabad Water and Sewerage Department; and Ahmedabad Janmarg Ltd. ƒƒ Ahmedabad Solid Waste Management Department; Special districts ƒƒ Nadiad Water and Sewerage Department; ƒƒ Metro Water Reclamation District of Greater ƒƒ Nadiad Solid Waste (Sanitary and Engineering Departments); Chicago; and ƒƒ Amritsar Solid Waste (Health Department); ƒƒ Greater Dayton Regional Transit Authority. ƒƒ Amritsar Water Supply and Sewerage Department; Concession ƒƒ Patiala Solid Waste (Health Department); and ƒƒ Mbombela/Silulumanzi RF Pty Ltd. ƒƒ Patiala Water and Sewerage (Operations & Maintenance, and Water Supply and Sewerage Departments). Municipal Departments Globally, and in this study, the most common model covered by our study for delivery of urban services is through a department of a local government unit.3  The local government may use its own employees, and/or it may hire contractors to perform specific services. Within any local government, there are typically departments responsible for various services. In our sample, this municipal department model 3 Local governments include entities such as cities, towns, municipalities, and municipal corporations. Institutional Typologies 5 is used in Chicago for water,4 and in Dayton and Mbombela for solid waste services. In India, all four cities use the departmental model for both water and sewer services, and for solid waste services. In some cases, these cities also make use of external contractors as part of their service delivery model. Chicago Department of Water Management Departmental responsibility: The City of Chicago provides water through its Bureau of Water Supply, in the Department of Water Management (DWM). That Department is headed by a Commissioner of Water Management, appointed by Chicago’s Mayor and approved by the City Council. Executive responsibility: The Mayor of Chicago is the Chief Executive Officer (CEO) of the city. Chicago’s Mayor is elected by vote of Chicago residents every 4 years, along with the City Clerk and the City Treasurer. These three city-wide elected officials are directly accountable to all the citizens of Chicago, and each of the City’s departments is unambiguously accountable to one of them. Governing body: The City Council of Chicago is the governing body. Each of 50 Alderman is elected by citizens of their legislative district (ward), also every 4 years. Aldermen “often are considered the mini- mayors of their ward. When something goes wrong in a neighborhood, or when someone wants to get something done that requires city approval, the first step is often a call or an email to the Alderman’s office.”5 Operational funding: Water services are financed through the City’s Water Fund. This is a separate fund within the city’s budget. It is a ring-fenced “enterprise fund” used specifically and exclusively for water services. The vast majority of annual Water Fund revenues (US$ 722 million) are generated from water rates billed to consumers in Chicago and in the 126 other local governments that purchase treated water from Chicago. Capital funding: The Department receives the vast majority of its capital funding through the City’s issuance of municipal bonds. This is reflected in the relatively low annual budget for capital expenses (approximately US$ 5 million) and the relatively high figure for debt service (US$ 217 million). Water charges are often pledged to ensure repayment of municipal bonds issued for water projects. Dayton Division of Waste Collection Departmental responsibility: Dayton provides residential waste collection and other solid waste services through a division of waste collection, in the Department of Public Works. The Public Works Director reports to the City Manager. Executive responsibility: The City Manager is the CEO of the city, and is appointed by the City Commission. The City Manager oversees all staff and is accountable to the City Commission for the city’s planning, budgeting, and human resources, for the police and fire departments; for public works and services; for treatment and distribution of water; for recreational facilities and youth services; and many other areas. Governing body: The Dayton City Commission is the governing body. This is equivalent to a city council, and is made up of a Mayor and 4 Commissioners, all of whom are elected at-large (not by ward) on a non-partisan basis. They serve overlapping terms of 4 years each. 4 In Chicago, water and sewer services are separate – the city of Chicago provides water within and beyond the city limits, while a regional body provides sewer services to substantially the same area. 5 What is a Chicago alderman and what do they do? Ben Meyerson, Chicago Tribune, February 22, 2019, retrieved April 11, 2021 at https://www.chicagotribune.com/ct-ben-meyerson-20180202-staff.html. 6 Institutional Models for Governance of Urban Services: Volume 1 Operational funding: The budget for solid waste collection is part of the city’s general fund, and is not formally “ring-fenced.” However, the Division is subject to an informal ring-fence, in that its fees are calculated and set at a level intended to offset operating costs. Dayton charges all property owners a waste collection fee to offset the costs of its services. The amount of the waste collection fee is determined by a city ordinance (local legislation) adopted by the City Commission. Pursuant to the ordinance, the Public Works Director is to adjust the fee each year to reflect changes in the Consumer Price Index (CPI).6 Capital funding: The Division’s major capital expenditure is the purchase of specialized waste collection vehicles. Each year, the Division’s request to purchase and replace equipment is included in the capital budget request of the Public Works Department, which is then included in the City’s capital improve­ ments planning process. The City Manager is responsible for coordinating the capital requests of each department, but the final decision on what is funded, as with all other budget matters, rests with the elected City Commission. Because of budget constraints, each department usually receives only a portion of its request. Mbombela Solid Waste Department Departmental responsibility: Mbombela provides waste services, including collection and transfer, disposal facilities, and other urban solid waste services through its SWD. The Department also operates 3 landfills, whose management is outsourced to 3 separate contractors. Executive responsibility: Formally, the Municipal Manager (MM) is the CEO of the city, and is appointed by the Council on a performance-based contract. However, the Mayor, also chosen by Council, is an Executive Mayor in terms of South African legislation, and members of the Mayoral Committee may have as much to do with day-to-day oversight of the city’s departments as the MM does. Governing body: The governing body is the Municipal Council. Members of Council serve 5-year terms. There are 90 members in the Municipal Council, 45 of whom are constituency representatives (ward councilors), while the remaining 45 are chosen from party lists so that party representation is proportional to the votes each party received. Operational funding: Waste collection services are funded by a combination of customer tariffs and a dedicated portion of Mbombela’s Equitable Share transfer from national government. Together, these two sources cover direct costs, such as staffing, contractors and operating costs, but do not cover indirect and overhead costs. There is no ring-fencing of revenues, and neither are there any charges to the Department for services provided by other municipal departments, such as human resources, finance, and legal services. Capital funding: Solid waste-related infrastructure such as landfills and transfer stations have been financed with national transfers and local reserves. A Municipal Infrastructure Grant is provided by national government, and a portion is allocated to support waste management in poor areas of Mbombela. The city’s own reserves are used to fund fleet and other capital expenditures. Ahmedabad Water and Sanitary Sewer Departmental responsibility: Water and sanitary sewer services are provided through Ahmedabad’s Department of Water Projects, Water Operations and Drainage, which is headed by the City Engineer, who reports to the Municipal Commissioner. 6 Sec. 51.13 – Waste Disposal Fee, Dayton, Ohio Revised Municipal Code, retrieved July 18, 2021 at https://library.municode.com/oh/ dayton/codes/code_of_ordinances?nodeId=TITIGEPR. Institutional Typologies 7 Executive responsibility: The Municipal Commissioner of Ahmedabad is the CEO, and formally reports to Gujarat’s Department of Urban Development and Urban Housing. In practice the Commissioner works closely with the city’s elected representatives. All city staff report to the Commissioner. The city’s organizational structure is proposed by the Ahmedabad Municipal Corporation (AMC) and approved by the state government. Once approved, the AMC can recruit staff without any intervention from state government. Governing body: Ahmedabad’s governing body is referred to as the Ahmedabad Municipal Corporation. Members are elected for 5-year terms and are referred to as Corporators or Councilors. They appoint a Standing Committee, Mayor and a Deputy Mayor from among their number. Most matters related to local service delivery are decided by the AMC, which is not required to secure the state’s approval. Gujarat’s ULBs can implement capital works based on Standing Committee approval, if the project is being funded from its own sources. State or central government approval is necessary for projects launched under a state or central scheme. In an emergency, the Municipal Commissioner or delegate can sanction projects up to a limit of INR 5,000. The State’s approval is required for the city’s organizational structure, for borrowings, and for approval of land use plans. The Mayor and AMC have no formal control over the Commissioner or executive wing, though in practice there is close coordination. Operational funding: Ahmedabad does not levy user charges for water or sewerage. Instead, it sets water tax rates that are collected along with the property tax. Currently, an additional 30% over and above the property tax is collected as water tax and another 30% is collected towards conservancy tax. Cost recovery in FY 2019-20 was reported at 58% for water services, and 32% for sanitary sewerage. AMC has the power to set and revise taxes, tariffs, and fees without approval from the state government. However, faced with low cost recovery by ULBs, the state has initiated a process to fix minimum user charges to cover Operation and Maintenance (O&M) costs. There is no ring-fencing of revenues for water supply and sewerage operations. Capital funding: Capital projects are funded with the city’s own funds (budgetary allocation), and by state and central projects (e.g., Swachh Bharat Mission, AMRUT, Smart Cities, etc.). Urban infrastructure projects are identified, designed and implemented by AMC staff. State agencies, i.e., Gujarat Urban Development Company (GUDC) and Gujarat Urban Development Mission (GUDM) may be required to approve and/or coordinate projects that are funded under state or central schemes for which they are the designated administrative agency. Ahmedabad Solid Waste Management Department Departmental responsibility: SWM services are provided through Ahmedabad’s Solid Waste Management Department, headed by a Director. The Director reports to the Municipal Commissioner. Executive responsibility: see above. Governing body: see above. Operational funding: Ahmedabad levies user charges for door-to-door collection of SWM. These rates are decided by the AMC’s Standing Committee. AMC reports O&M cost recovery of 31%. The balance is funded from the city’s general fund. The Department and its revenues are not ring-fenced. As with water services, the State government has initiated a process to fix minimum rates to be charged by all ULBs, to cover O&M costs. Capital funding: see above. 8 Institutional Models for Governance of Urban Services: Volume 1 Nadiad Water and Sewer Departmental responsibility: Nadiad provides water and sanitary sewer service through its Water and Sewer Department, which reports to the Chief Officer of Nadiad. Executive responsibility: Nadiad’s Chief Executive is the Chief Officer, who reports to the Commissionerate of Municipal Administration (CMA), under Gujarat’s Urban Development Department. In addition to the CMA, three other state agencies play important roles in Nadiad’s urban development. The GUDC and GUDM are responsible for design and implementation of urban infrastructure projects that are funded under state and central schemes. The Nadiad Area Development Authority (NADA) is responsible for urban planning within Nadiad. Governing body: The governing body of Nadiad is the elected Municipal Council. Interestingly, the President of the Council in a municipality has, on paper at least, more executive power than the mayor of a Municipal Corporation, such as Ahmedabad. The President of Nadiad’s Council is authorized to monitor financial and executive administration of the municipality and to perform certain executive functions. The President can also supervise Nadiad’s executive staff and can set aside or modify any order of the Chief Officer. Operational funding: Nadiad levies a water tax and a drainage tax to help pay for the cost of water and sewer operations. The water tax is an annual flat rate and varies with consumer categories. The drainage tax is based on a property’s area and the use of structures. Approval from the State’s Commissioner of Municipalities is mandatory for any revision to the water tax or drainage tax. These rates were last revised in 2008. The city has been able to achieve 53% O&M cost recovery in water supply and 32% O&M cost recovery in sewerage services. The balance of the cost is funded from the general fund. Neither of the departments are financially ring-fenced. Capital funding: same arrangements as Ahmedabad, above. Nadiad Solid Waste Departmental responsibility: Nadiad provides SWM services through its Sanitary Department, which is headed by the Chief Sanitary Inspector. Treatment and processing of wastes is managed separately, and those are the responsibility of the Engineering Department, headed by the Chief Engineer. Both departments report to the Chief Officer of Nadiad. Executive responsibility: see above. Governing body: see above. Operational funding: Nadiad has a flat rate sanitation tax, collected annually from each property owner. This covers a reported 10% of O&M costs. The remaining expenditure is funded from the municipality’s general fund. The department is not financially ring-fenced. The municipality could raise the tax, with the approval of the Commissioner of Municipalities. Capital funding: see above. Amritsar Solid Waste Departmental responsibility: Amritsar provides solid waste collection for residents and businesses through its Health Department, which is headed by a Medical Officer. The Municipal Corporation has entered into a Institutional Typologies 9 contract with an external contractor for integrated services of door-to-door collection, waste transportation, treatment, and disposal, except in the old and congested walled city, where the city itself provides these services. Contract documents were prepared by Punjab Municipal Infrastructure Development Company (PMIDC), and the contractor’s work is monitored by the city. Executive responsibility: Amritsar’s CEO is the Municipal Commissioner, who is appointed by the state government. The municipal staff reports to the Commissioner. The Mayor may give directions to the Commissioner from time to time, but this is discretionary. The Mayor has no other authority over the city’s executive officials and staff. Several state-level agencies are active in Amritsar. These include the PMIDC, the Punjab Infrastructure Development Board (PIDB) for bus rapid transport service (BRTS), the Amritsar Urban Improvement Trust (AUIT) for urban expansion and renewal, and the Punjab Urban Planning and Development Agency (PUPDA) for urban planning. Governing body: Amritsar’s governing body is an elected Council, whose members serve 5-year terms. The councilors appoint a mayor, a senior deputy mayor, and a Deputy Mayor from among themselves. All resolutions passed by the Council need to be approved at the state government level by the Department of Local Government. Thus, the elected Council does not have the authority to take final decisions on local matters. And the Council does not have any authority over state-level agencies operating in Amritsar. Operational funding: Solid waste user charges are levied on residential and commercial properties. Under state legislation, an annual increase of 5% is allowed. This charge is payable by all users in the area where the private contractor collects waste; individuals have no option to make their own arrangements. As a result of these user charges, the Department recovers 5% of its O&M costs (these include the tipping fee payable to the private contractor, expenditure towards staff establishment and O&M related to door-to-door collection in walled city area). The remaining operating expenditure is funded through Amritsar’s general fund. There is no ring-fencing of revenues for the Health Department or for SWM. Capital funding: Amritsar has funded its capital investments in SWM through grants from national and state sources, and from its own reserves. Amritsar Water and Sewer Departmental responsibility: Amritsar provides water and sewer services through its Water Supply and Sewerage Department, which reports to the Municipal Commissioner. Executive responsibility: see above. Governing body: see above. Operational funding: Property tax rates are determined and revised by the state government. This applies equally to the water tax, which is levied as a part of the property tax. Exemptions to the water tax are also decided by the state government. During FY 2019, the Department recovered only 20% of the O&M cost for water supply and 15% of the O&M cost for sewerage. This is due to low tariffs and poor collection performance. There is no separate account for water supply and sewerage operations and the department’s revenues are not ring-fenced. Capital funding: Amritsar has funded its capital investments in water and sanitary sewer services through grants from national and state sources, and from its own reserves. 10 Institutional Models for Governance of Urban Services: Volume 1 Patiala Solid Waste Departmental responsibility: Patiala provides solid waste collection services for residents and businesses. There are three private contractors: 1) for the integrated services of door-to-door collection, waste transportation, treatment and disposal, wherein the operator directly collects solid waste charges from the users and is also provided with a tipping fee by the City; 2) a contract for processing and disposal of waste collected by the City from public places and street sweeping, paid by the city per tonnage of waste collected; and 3) for processing and disposal of bio-medical waste collected by the City from public places and for street sweeping; also paid per tonnage of waste. These contracts are managed by Patiala’s Health Department, headed by the Chief Sanitary inspector, who reports to the Joint Commissioner. The Joint Commissioner reports to the Municipal Commissioner. Executive responsibility: The CEO is the Municipal Commissioner, appointed by the state government. Municipal staff reports to the Commissioner. The Mayor may give directions to the Commissioner from time to time – but ultimately the Mayor has no authority over the city’s executive officials and staff. The same state-level agencies operate in Patiala as in Amritsar, and coordination is through the State of Punjab’s Department of Housing Urban Development. Governing body: Patiala’s elected Council has a 5-year term. The Councilors appoint a mayor, a senior deputy mayor, and a Deputy Mayor from among themselves. However, the Council’s powers are under tight control - all resolutions passed by the Council must be approved at the state government level by the Department of Local Government. Thus, the elected wing does not have autonomy to take final decisions on local policy matters. Anything of significance must be approved by the State, and City staff ultimately are accountable at the state level, not to the Council elected by the citizens of Patiala. Operational funding: User charges for solid waste are collected by the private operator and no portion of these charges is shared with the city. The department has reported 77% O&M cost recovery, but this cost recovery data has not been validated. The balance of operating expenditure is covered from the City’s general fund. There is no ring-fencing of solid waste revenues or expenditures, except to the extent that the contractor collects fees directly from customers. Capital funding: Patiala has funded its capital investments in SWM services through grants from national and state sources, and from its own reserves. Patiala Water and Sewer Departmental responsibility: Patiala provides water and sanitary sewer services through the O&M Department of its Engineering Division. The Department is headed by a Supervising Engineer who reports to the Municipal Commissioner. Billing and collection for these services rests with the Water Supply and Sewerage Department. That Department is headed by a Superintendent who also reports to the Commissioner. Executive responsibility: see above. Governing body: see above. Operational funding: The Council can decide on consumption-based water tariffs without state approval. However, since only 13% of water connections are metered, the remaining 87% of users are charged a water tax, which is linked to the property tax, and is subject to state government approval. In FY 2019, the department reported 53% and 86% of O&M cost recovery for water supply and sewerage, respectively. There is no separate fund for water supply and sewerage, and these operations are not ring-fenced. Institutional Typologies 11 Capital funding: Patiala has funded its capital investments in water and sanitary sewer services through grants from national and state sources, and from its own reserves. Municipal Enterprises Johannesburg Water SOC Ltd (Joburg Water) Responsible entity: Johannesburg provides water and sanitary sewer services through a wholly owned company, Johannesburg Water SOC Ltd. (Joburg Water). This is reflected in a 30-year lease of the plant and equipment, which began on 1 January 2001. In addition, there is an annual Service Delivery Agreement (SDA) and a Shareholder Compact. The latter two documents reflect the city’s status as both customer and shareholder of the company. Executive responsibility: A management contract with a private sector joint venture was in place for the company’s first 5 years (2001-2006), with the specific objectives of turning around the system’s financial performance, and of developing capacity within Joburg Water to successfully manage the company going forward.7 This turnaround strategy was widely regarded as very successful. Since the end of this 5-year management contract, executive responsibility has rested with the company’s Managing Director, who is appointed by the Joburg Water Board of Directors and reports to the Board Chairperson. Governing bodies: The governing body of the City of Johannesburg is the Municipal Council. Members of the Municipal Council serve 5-year terms.  There are 270 members in the Municipal Council, 135 of whom are constituency representatives (Ward Councilors), with the remaining 135 chosen from party lists so that the number of party representatives is proportional to the number of votes each party received. The governing body of Joburg Water is a Board of Directors consisting of not more than 11 Directors, of whom 2 are Executive Directors. There are currently 9 Non-Executive Directors and 1 Executive Director, for total of 10. Operational funding: Operating revenues are primarily from consumer tariffs for water. These are set by the Municipal Council as part of its annual budget process. These revenues are complemented by a portion of the national government’s equitable share grant (a formula-driven transfer), which supports delivery of essential services to indigent residents. The company has realized an operating profit, more than covering its O&M expenditure, for at least the past 5 years. Capital funding: The City does not allow Joburg Water to borrow or raise debt in its own name. Borrowing for infrastructure is done centrally by the City for all departments and entities. The approved capital budget, including investments in water and sewer systems, is funded from a combination of borrowing, infrastructure grants, and developer contributions. Funding priorities tend to be new connections in underserved areas, rehabilitation of aging mains and lines, and wastewater treatment infrastructure. Johannesburg Roads Agency (Pty) Ltd Responsible entity: Johannesburg manages the planning, design, construction, operation, control, rehabilitation and maintenance of the roads and storm water infrastructure in the City through a wholly 7 Details can be found in the separate report prepared by Nishendra Moodley as part of this project. 12 Institutional Models for Governance of Urban Services: Volume 1 owned company, Johannesburg Roads Agency (Pty) Ltd (JRA). There is a SDA and a separate shareholder compact, reflecting the city’s status as both customer and shareholder of the company. Executive responsibility: JRA is led by a Managing Director appointed on a contract, who is meant to have executive powers to lead the agency under the governance of the Board. The executive management team includes many positions that are not currently filled, with various staff in “acting” roles. There has been significant volatility in the executive management of the JRA. Road construction is a lucrative and tempting target for favoritism in awarding and honoring contracts. The Board is reported to regularly intrude into supply chain management and contractor payment processes. Executive management authority in this model is designed to be delegated to the Managing Director. However, this is not always understood, nor is professional management in the interest of political parties and Board members who are part of a corrupt patronage system. Governing bodies: The governing body of the City of Johannesburg is the Municipal Council, as described above. The governing body of the JRA is Board of Directors consisting of 8 Non-Executive Directors. However, former staff have indicated that powerful members of the Board are not interested in service delivery performance and improvement plans, but only in tenders and to whom they are awarded. While there are credible people on the Board, with good intentions and appropriate expertise, they are no longer the norm. Operational funding: The JRA has no operating revenues, and is funded entirely from the city’s general fund, which includes revenue from property taxes and equitable share transfer from national government. Formerly, JRA was able to raise revenue from roadside advertising, but this has been centralised to the city itself. Capital funding: The JRA is allocated a capital budget by the City as part of its annual budget process. Specific projects are described in its SDA. The capital budget is funded by revenues from national government’s Urban Settlements Development Grant, by Johannesburg’s own source revenues, and by development charges. Ahmedabad Municipal Transport Entities Responsible entities: Ahmedabad Municipal Corporation (AMC), provides two types of public transport: ƒƒ Normal city bus services through Ahmedabad Municipal Transport Services (AMTS);8 and ƒƒ Bus Rapid Transit (BRT) service through a 100%-owned subsidiary, Ahmedabad Janmarg limited (AJL).9 Executive responsibilities: The CEO of AMTS is the Transport Manager, who is appointed by the AMC with prior approval of the state government. Currently, the Deputy Commissioner of AMC looking after administration of AMTS and AJL serves as Transport Manager. The Chairman of AJL is the Municipal Commissioner and the CEO of AJL is the Executive Director, who is of the rank of Deputy Municipal Commissioner and appointed by Municipal Commissioner and no prior approval is required from the state government. Governing bodies: Ahmedabad’s governing body is the AMC, which has been described above. 8 AMTS is a “transport undertaking” in terms of Chapter XX of the Gujarat Municipal Corporations Act, 1949 and is “subject to the superintendence of the Transport Committee and of the Corporation,” pursuant to Section 342 of that Act. 9 AJL is a special purpose vehicle, registered in terms of the Companies Act, 1956. Institutional Typologies 13 AMTS is managed through a nine-member Transport Committee. The Chair of AMC’s Standing committee is an ex officio member of the Transport Committee. The other members of the Transport Committee may be Councilors or persons having experience in administration, transport, engineering, industrial, commercial, financial or labor; and are appointed by the Commissioner. The Municipal Commissioner is the Chair of AJL. The Board of Directors includes the Chair, the Director (i.e., Mayor), the Chair of AMC’s Standing Committee, an opposition party leader, the Joint Commissioner of the traffic police, a special invitee from CEPT University as a technical consultant, and the Executive Director. The board is empowered to recruit staff, to decide fares and to approve the budget. Operational funding: AMC adopts a tariff policy, pursuant to which AMTS sets tariffs. A ring-fenced Transport Fund has been created for paying salaries as well as capital costs. The Transport Fund consists of fare box revenues, advertising revenues, and funding from AMC’s general fund. However, AMTS routinely operates at a loss, and recently indicated cost recovery of only 28% of O&M cost. Annual deficits are allowed to accumulate. The accumulated deficit is accounted for as loans from AMC to AMTS. There is a total INR 29 billion (US$ 412 million) of such loans outstanding, and there is no credible expectation that these loans will be repaid. The Board of AJL sets and revises fares. AJL is registered as a Company and accordingly its finances are completely ring-fenced. AJL routinely operates at a loss, and recently achieved cost recovery of 55%. Currently, INR 3 billion (US$ 43 million) is carried as a loan outstanding from AMC. As with AMTS, there does not appear to be any expectation that these “loans” will be repaid. In the case of both entities, fare increases are limited by a formula approved by state government about a decade ago: linked to labor cost, inflation and fuel price, a maximum percentage increase is fixed. Each entity can increase up to that limit without additional state approval. Both entities receive viability gap funding to support operations. Currently this is set at INR 12.50 per kilometer for regular bus operations and INR 25 per kilometer for electric buses. Capital funding: Previously, AMTS capital expenditure was funded by grants from national government or contributions from AMC, while AJL capital expenditure was funded by grants from national government or loans from AMC. Both entities have now determined to stop direct capital expenditure, and instead procure buses on gross cost contracts, under which the operator is paid a specified sum to provide service. This is treated as an operating expenditure. Special Districts A notable feature of local service delivery in the US is the role of special districts. There are many types, and they go by various names, as determined by state law in each of the 50 states. These laws vary significantly. These entities may also be referred to as special-purpose local governments. There are single- function and multiple-function districts, authorities, commissions, boards, and other entities. These have varying degrees of autonomy, and depending on state law, can be created by intergovernmental agreement between municipalities, by petition of landowners in the proposed district, or directly by state law. Single function districts may provide fire and emergency services, transit services, water and sewer services, or any other service that is authorized by state law. Multiple-function districts in some states have many of the powers and functions of a municipality. A special district may be in an unincorporated area (where there is no municipality), or it may overlap the territory of one or more municipalities. According to the US Census Bureau, there are more special districts than there are general-purpose local governments in the US. 14 Institutional Models for Governance of Urban Services: Volume 1 Most special districts levy property taxes, and some can levy other taxes and fees, e.g., sales tax. Multi- function districts, such as Colorado’s metropolitan districts, can provide most of the same services that a local government provides, and are often used by developers as a way to finance the installation of infrastructure prior to annexation to a municipality. The property tax levy imposed by a special district survives municipal annexation, so property owners in a municipality may pay general property taxes to the municipality in addition to one or several property taxes to special districts. These are generally collected together by a state or county official, and then distributed to the various local governments and districts that have imposed taxes. Most special districts can issue bonds or otherwise borrow for infrastructure. When statistics about US municipal bonds are cited, these generally include special district bonds. Our research on US cities included two examples of special districts. The MWRD of Greater Chicago treats sanitary sewer and storm sewer flows from Chicago and 128 other communities in Cook County, Illinois. The Greater Dayton RTA provides bus and trolley services to Dayton, Ohio, and surrounding communities. Metropolitan Water Reclamation District of Greater Chicago Responsible entity: The MWRD of Greater Chicago is completely separate from the City of Chicago. It treats sanitary sewer and storm water flows from the City of Chicago and 128 other communities, but it is separately organized, governed, and financed. The MWRD is a special purpose district created by an Act of the Illinois State Legislature. Executive responsibilities: The Board of Commissioners appoints an Executive Director to manage operations, and a Chief Financial Officer (CFO)/Treasurer. Both report to the Board. The Executive Director appoints another 8 department heads who report directly to him or her. Governing body: The governing body of the MWRD is a 9-member Board of Commissioners. Each Commissioner is elected at large and serves a 6-year term. Every 2 years, 3 members of the Board are elected, so that terms overlap. Following each election cycle, the Board elects its President, Vice-President, and the Chairman of its Committee on Finance. Board members receive a part-time salary for their service. A key function of the Board is to oversee the finances of the organization. Operational funding: Residents of Chicago and other communities within MWRD boundaries pay additional property taxes to the MWRD to fund its services. As an independent district, the MWRD has a budget which is inherently ‘ring-fenced’ from other funds in the communities that it serves. The revenues collected may only be used in support of its services and are not available for other purposes or for use by any of the local governments it serves. Approximately 71% of MWRD’s operating budget comes from these property taxes. In addition, MWRD receives income from user charges (8%); a personal property replacement tax (to replace personal property taxes previously received by MWRD but eliminated by state legislative action (7%); land rentals (5%); grants (4%); and miscellaneous other income. Capital funding: Unlike many governmental entities, the MWRD spends more each year on capital investments than on operations. In part this is because of the extremely high costs incurred by the district as it continues to construct its extraordinary Tunnels and Reservoirs Project (TARP), which began in the 1970s. The project involves drilling 4 very large tunnels (some as more than 300 feet below the surface) and building 3 very large surface reservoirs to handle stormwater from extreme storm events that would otherwise result in combined sewer overflows (CSOs), which would cause flooding and potentially contaminate Lake Michigan. Most infrastructure investment capital is borrowed through the State of Illinois Revolving Loan Fund. The district’s own bond issues, direct loans and grant funds play a smaller role. Institutional Typologies 15 Greater Dayton Regional Transit Authority Responsible entity: Bus and trolley services are provided in Dayton and surrounding areas by the Greater Dayton RTA, a public transit agency created under Section 306 of the Ohio Revised Code. Executive responsibilities: The executive management team is led by a CEO, who is appointed by, and reports to the Board of Trustees. The CEO has the authority to recruit and manage the members of the executive management team. Governing body: The governing body of the RTA is a Board of Trustees consisting of nine individuals – seven appointed by the Montgomery County Commission and one each appointed by the cities of Dayton and Kettering. The Board primarily serves as an oversight body involved in reviewing and approving strategic plans, while almost all aspects of service provision and day-to-day operations are left to the executive leadership team, with one exception: Expenditures over US$ 100,000 must be approved by the Board. Operational funding: The budget of the RTA is largely ‘ring-fenced’ in that it maintains an independent budget (approved by the Board of Trustees) and the revenues reflected in that budget cannot be used by any other entity for any other purpose than the provision of urban transportation services. Some major sources of operating and capital funding are also limited for use only on these services by state or federal law. The RTA budget is prepared annually by the executive management team and approved by the Board of Trustees. Capital funding: The RTA’s main source of capital funding is the federal government, which in 2019 provided over 99% of the RTA’s capital budget. In some years, the State of Ohio provides ‘pass-through’ funds when the state receives a federal capital grant and passes some funds on to agencies and authorities. The largest item in the capital budget – replacement of buses and trolleys – fluctuates widely from year to year, because the federal grants used to purchase buses require that they not be replaced before the end of their stated economic life, usually 10-12 years. In years when many older buses reach that threshold, capital expenses to replace them are high. In years when fewer buses reach the end of their stated lives, unexpended capital funds are rolled over to the next year. The annual budget estimates capital expenses 5 years into the future in order to plan for these fluctuations in replacement costs. Concession The term “public private partnership” (PPP) covers a wide range of arrangements. In some PPPs, a city may essentially turn a public service system over to a private party, who may invest and manage the system for a term. In other cases, a city may hire a private firm to provide specified and limited services, while the city itself retains overall responsibility for the system. Several of the Indian cities do hire external contractors to perform some of their functions, but the financial risk (and reward) remains with the city. In this section, we describe a water concession in the City of Mbombela, which unlocked significant investment capital and management experience from the private sector. Silulumanzi (RF) (Pty) Ltd. This section focuses on the Silulumanzi concession which provides water and sewer services to portions of the City of Mbombela. We also make reference to the municipality’s own water and sewer operations in other areas of the city. 16 Institutional Models for Governance of Urban Services: Volume 1 Responsible entity: Silulumanzi (RF) (Pty) Ltd. is a private South African company that manages water and sewer services in most of the City of Mbombela, pursuant to a 30-year concession contract. International water companies (Sembcorp, Cascal and BiWater) formerly held controlling shares. Operationally, Silulumanzi coordinates regularly with the municipal water department which provides services outside the concession area. Executive responsibilities: As noted above, in the discussion of solid waste operations, the City of Mbombela has both an Executive Mayor and a MM. Silulumanzi is led by a Managing Director (currently acting), and senior managers for technical services, governance and risk, corporate relations, commercial services, and human resources. Silulumanzi runs all aspects of the water business in the concession area, including water treatment and distribution, billing, and customer management. Governing bodies: The governing body of Mbombela is the Municipal Council, described in the section on solid waste services, above. In addition to the concession contract with Silulumanzi, the parties negotiate a 5-yearly supplementary Service Agreement, which is reviewed annually. The City’s Water Service Compliance Monitoring (WSCM) unit acts as a Contracts Management Unit (CMU). The governing body of Silulumanzi is a 9-member Board of Directors appointed by its shareholders. Silulumanzi’s Managing Director and Finance Director are Executive Directors, and there are 7 Non-Executive Directors. Operational funding: Most operating revenues are derived from water tariffs and a portion of the national government’s equitable share transfer to Mbombela. As the Water Service Authority (WSA), the municipality has the legal power to set water and sanitation tariffs, and this cannot be delegated to the concessionaire. A contractual mechanism was developed to address this: ƒƒ The concessionaire annually determines the “charges” required to operate sustainably; ƒƒ The municipality then determines the “tariffs” to be charged, by the concessionaire, to consumers; and ƒƒ If the municipality sets tariffs at a lower level than the charges, the difference in revenue must be paid by the municipality to the concessionaire. Capital funding: Infrastructure investment in the concession area was significant in the early years of the concession. Since then, Silulumanzi has failed to invest sufficiently in new infrastructure and the renewal of existing infrastructure. Despite the level of investment agreed to by both parties, actual investment has been inadequate. Details are found in Appendix A and in the consultant report prepared in connection with this project. Institutional Typologies 17 Analysis We compare the institutional models from four perspectives. The first perspective is coherence, by which we mean the degree to which functions related to urban service delivery are integrated into one institution, as opposed to being fragmented across institutions. The second perspective is accountability, which can be upward, e.g., to another tier of government; downward to the public or customer base; or, most typically, it can be some mix of these. The third perspective is autonomy, by which we mean the degree to which the legal and regulatory framework allows the local government or other agency to take its own decisions, without review or approval by other agencies or bodies. The fourth and final perspective is essentially an accounting perspective – to what degree are the revenues and expenditures associated with a particular service segregated and thus protected from being used for unrelated purposes. Institutional Coherence Institutional coherence refers to the degree to which related functions are integrated in one institution. Its opposite is fragmentation, which refers to a condition where related functions are scattered between institutions. When we look at how cities and urban services are organized, we can look at vertical integration, and horizontal integration. Vertical integration (or fragmentation) involves the kind of functions shown in the left column below. For any given urban service, we can ask, is the institution that identifies needs the same as the one that is responsible for planning and designing projects to meet those needs? Is this institution also responsible for financing infrastructure investment, for building and rebuilding the necessary infrastructure? Is it then responsible for operating and maintaining the infrastructure, setting the appropriate tariffs and/or taxes, and for collecting revenues? If one institution is responsible for all of these things, then we would say that particular service is vertically integrated. Horizontal integration (or fragmentation) involves the array of urban services that make any given city function for its residents, businesses, and visitors. Here, we can ask, is the institution that is responsible for urban planning also responsible for land use control? Does it also provide water, sewer and SWM services? Does it install, maintain, and clean the streets, sidewalks and parks? Is it responsible for public housing and transportation? If the local government is responsible for all of these things, then we would say that urban services are horizontally integrated. Analysis 19 Vertical integration? Horizontal integration? ƒƒ Forecasting infrastructure needs; ƒƒ Urban planning; ƒƒ Planning capital projects; ƒƒ Land use control; ƒƒ Financing infrastructure investment; ƒƒ Water and sewer services; ƒƒ Construction and rehab of works; ƒƒ Solid waste management; ƒƒ Operation and maintenance; ƒƒ Streets, sidewalks and parks; ƒƒ Tariff/tax setting; and ƒƒ Public housing; and ƒƒ Billing/collection. ƒƒ Public transit. In general, integration permits efficiency and synergy, while fragmentation entails various kinds of costs. Of course, it is also possible for a single institution to be fragmented and have internal silos that add costs and create inefficiencies. And in principle, it is possible for a number of separate institutions to coordinate and communicate so smoothly that transactional costs between institutions are limited and synergies are realized. However, as a practical matter, separate institutions often have divergent objectives, incentives, cultures, and personalities. It is easier to be efficient, flexible, and responsive when functions are integrated under a common institution, a common leadership, and a common vision. Services in the US and South African cities we studied are vertically integrated. Their elected councils (or equivalent) have full authority over each urban service provided. They adopt their own budgets, taxes and tariffs, and have both capital and operating responsibility for their infrastructure. All four of these cities hire and fire their staff without external approvals. Councilors and officials are generally accessible to citizens, and there are multiple avenues of accountability to citizens. There can still be problems with corruption and there can be internal gridlock when disputes arise between political parties, or between elected and appointed officials, but each of the four cities is fundamentally coherent and integrated. There is some sensible horizontal fragmentation in both Chicago and Dayton. Almost all urban services are provided by the cities themselves – but the Chicago wastewater district and the Dayton transit authority do represent a degree of horizontal fragmentation. Each of these external agencies is itself vertically integrated, but each is horizontally separate from the cities they serve. This makes sense, because their service delivery areas do not correspond to city boundaries – they are driven by catchment basins – literally in the case of wastewater, and metaphorically in the case of public transit. In the case of wastewater, natural drainage flows would all end up in Lake Michigan, which supplies drinking water for the greater Chicago area. Rather than allowing human and industrial waste flow into this drinking water supply, all these cities and towns benefit from a collective solution to divert wastewater away from the lake, and toward the Mississippi River drainage basin. This is not something that can be done separately by each of 120 local government units. Somewhat similarly, public transport needs do not respect city boundaries. People live in one city and work in another; cultural and sports events attract people from across the area; and so do the metropolitan area’s universities, hospitals, and retail outlets. Separate institutions can be sensible, when they are geographically aligned with natural service areas. Note that these special districts are not state level authorities, nor are they accountable to their respective state governments. There is also some horizontal fragmentation in both Johannesburg and Mbombela. This is intentional, but it is not complete, since the cities remain in overall control of the services provided. In the case of Johannesburg, the city created separate companies to manage its water system and its roads. These are wholly owned by the city, but have significant autonomy in terms of day-to-day operations. Their budgets are still approved by the Municipal Council, including capital expenditure, and tariffs in the case of Joburg Water. Borrowing for capital expenditure is done centrally by the city, rather than by each company 20 Institutional Models for Governance of Urban Services: Volume 1 individually. Joburg Water’s corporatization was initially correlated with (but not necessarily caused by) improved management. In the case of the JRA, corporatization has been accompanied by cronyism and corruption, as well as poor services. 10 In the case of Mbombela, the horizontal fragmentation, if it is fair to call it that, took the form of a concession, and that fragmentation has been increased by the consolidation of another municipality into Mbombela, resulting in different parts of the consolidated municipality being served through two different institutional models. In Punjab, urban functions are both vertically and horizontally fragmented. One aspect of vertical fragmentation has to do with finances: any expenditure over INR 10 million (US$ 142,000) must be approved by the Department of Local Government; property tax rates are set by state government; budgets, borrowing and tariffs must be approved by the state government. Another aspect of vertical fragmentation is administrative: staffing structure must be approved by the state government and additional approval is required for any new post; staff can only be transferred within their respective cadre; ULBs can only recruit on their own below the rank of junior engineer. In the case of water and sewer in Amritsar both the capital works and operations are the responsibility of the ULBs, but in Patiala major capital works are undertaken by the Punjab Water Supply and Sewerage Board (PWSSB). In terms of horizontal fragmentation, the critical urban function of town planning is undertaken by the state’s Department of Housing and Urban Development, and significant infrastructure construction, if funded through state and national schemes, is the responsibility of the agencies under the same state department. In Gujarat, although urban local bodies are somewhat more integrated, there is still significant fragmentation. In terms of finances, ULBs are empowered to revise taxes, tariffs, and fees without securing approval from the state government; and there is no upper limit on capital expenditure, provided the ULBs’ finances permit it. However, projects funded under central schemes are implemented by GUDC and GUDM. In Nadiad, the ULBs undertakes only minor projects, with GUDC and GUDM taking on all large capital works. In both cities, planning is a state function.11 Gujarat’s ULBs can recruit their own staff, but only in terms of an organizational structure approved by the state. HORIZONTAL INTEGRATION AND ULBs PERFORMANCE IN INDIA A World Bank team carried out a rapid analysis to test the hypotheses that more integration of urban functions leads to better ULB performance in key national indices. A sample of 50 cities was analyzed to establish their responsibilities for (a) urban planning; (b) area development; (c) urban transport; (d) capital investment for water sewage; and (e) service delivery for water and sewage. The results indicate a weak positive correlation between urban functions, municipal revenue, and performance of the ULBs. The correlation may be weak for the following reasons: ƒƒ First, a ULB with integrated functions (horizontal integration) may still lack meaningful autonomy. Cities are often constrained by varying levels of control exercised by a state government, especially with regard to policies and staffing (vertical fragmentation); and ƒƒ Second, the national performance indices include several performance areas that are beyond the influence of ULBs; and the number of indicators dilutes the weight of key urban services such as planning, spatial development, transport, and basic services. Source: Ramanujan, SR and Riddhiman Saha, Analytical Note, 2021. 10 See Nishendra Moodley’s report prepared in connection with this research. 11 For details on planning in Ahmedabad, see Bharti, M. and Mehrotra, S., Metropolitan Ahmedabad: Scaling Up with Contiguous Replication of Town Planning Schemes. Volume II of Greater Than Parts: A Metropolitan Opportunity, edited by S. Mehrotra, L. Lewis, M. Orloff, and B. Olberding. Washington, DC: World Bank 2020. Analysis 21 The Indian cities in our study are significantly more fragmented, both horizontally and vertically, compared to their US and South African counterparts. This fragmentation is typical of Indian cities: many city water utilities (e.g., Delhi Jal Board, Chennai Metropolitan Water Supply and Sewerage Board, Hyderabad Metropolitan Water Supply and Sewerage Board, Bangalore Water Supply and Sewerage Board) report to a Minister at the state level, but must also coordinate with ULB officials on a host of local issues, including something as simple as digging up roads to allow water and sewer pipelines. Although the corporate structures in Johannesburg and the concession in Mbombela may represent some degree of fragmentation; in none of the US or South African cities is there anything like the level of state or provincial involvement in local matters that we see in the four Indian cities. The division of responsibility for urban services in Indian cities creates many actors with specific rather than plenary authority, and this increases the likelihood of incoherence in terms of day-to-day operations, as well as longer term issues surrounding spatial development, infrastructure development, and financing. The COVID-19 study12 illustrates how fragmentation of urban institutions posed a challenge to an effective response in a crisis situation. To respond effectively in a crisis, Chennai needed to restructure its field teams to break departmental silos. In Ahmedabad, a key role in coordinating the health sector response and building capacity for pandemic management was played by the Epidemic Control Cell of AMC’s health department. These two cases underline the importance of an organizational structure which reflects the need for inter-departmental co-ordination. It becomes obvious in a crisis that a fragmented institution cannot act coherently. That is no less true in day-to-day operations, when there is no urgency to reveal the incoherence of fragmentation. Institutional coherence is no guarantee of success. Services in the four US cases are considered very good or excellent, while the South African and Indian cases range from poor to good. South African cities are significantly more integrated than Indian cities, both horizontally and vertically, and yet the range of outcomes is similar. Given the dramatic differences in terms of GDP per capita, one obvious hypothesis is that cities in a rich country can afford to provide better services than cities in poor countries. Although the Indian cities may be burdened with fragmented institutions, it is wise to remember that the per capita GDP in the US is thirty times that in India. In that context, attributing differences in service delivery outcomes primarily to institutional coherence would be a stretch. Institutional coherence may potentiate good performance, but success likely depends on other factors as well. Accountability Our analysis focuses on the question of who is accountable to whom. Accountability presupposes that if the accountable party does not perform, the party to whom they are accountable can impose appropriate consequences. Downward accountability in local government occurs when elected officials are accountable to citizens. If they do not deliver, they risk losing the next election. In the case of upward accountability, an official who does not perform can be disciplined or terminated by a superior. Accountability is essentially a governance concept – in the political context, it asks whether citizens have the ability to reward or sanction elected representatives. In an organizational context, it asks how officials are held responsible for proper execution of the tasks entrusted to them. South Africa’s King Committee on Corporate Governance has been at the forefront of thinking about accountability in the context of corporate governance. Mervyn King, the Chairman of the King Committee, advised South Africa’s National Treasury during the drafting of the Municipal Finance Management Act, 12 Assessing COVID-19 pandemic response by local governments in India: Case of three cities, CRISIL, 2021; included in Volume 2 of this report. 22 Institutional Models for Governance of Urban Services: Volume 1 specifically on what principles of governance should apply to municipally owned enterprises. The 2016 Report on Corporate Governance (known as King IV) included a supplement explaining how to apply the Code to municipalities and municipal entities. The key principles, as reformulated for municipalities, are set forth in Appendix B to this report. These principles rest on analogies to corporate governance, with the council playing a role similar to a board of directors, a MM playing a role similar to that of a corporate CEO, and all of them acting in the best interests of the stakeholders, i.e., the citizens of the municipality. King IV stresses that the communities being served are the most important stakeholders, and they must be actively involved and engaged in the development of strategies and objectives. The King IV principles of municipal governance cast the elected municipal council in the central role. Each of the principles is focused on what the municipal council should do. In terms of ethics, transparency, governance, stakeholder-inclusion – in every case the principles point to the council’s responsibilities – not just for service delivery, but for establishment of an ethical corporate culture, promotion of independent judgement, role clarity, integrity of information, and compliance with applicable laws, rules, codes and standards. The authors make the point that “the principles of good governance are equally applicable, and equally essential, in both public and private entities.”13 Principles-based governance focuses on outcomes. Rules-based governance has its place: ULBs must comply with a specified set of procedural requirements – laws and regulations that describe what they must do and must not do. Principles-based governance, such as that developed in King IV, guides a local government to focus on end results. Specifically, the governance outcomes that King IV seeks to promote are: ethical culture, good performance, effective control, and legitimacy. As articulated by King IV, the governing body for a ULB would be responsible for steering and setting strategic direction; approving policy and planning; overseeing and monitoring; and ensuring accountability. The Sector Supplement on municipalities14 in King IV has specific reference to South African legislation, but the principles themselves can be usefully applied to any local government that aspires to be accountable to its citizens. One principle from the King IV report is shown in the box below, to illustrate how the principle is articulated and expanded, and linked to the relevant South African legislation. King IV Example Principle 1: The council should lead ethically and effectively Ethical and effective leadership is exemplified by integrity, competence, responsibility, accountability, fairness and transparency. Members of the council should individually and collectively cultivate these characteristics and exhibit them in their conduct, as set out in the practices under Principle 1. This is congruent with Section 195 of the Constitution, in terms of which public administration must be governed by democratic values and principles enshrined in the Constitution, including that a high standard of professional ethics must be promoted and maintained. Section 50 of the Municipal Systems Act echoes this and a Code of Conduct for Councilors is included in Schedule 1 of that Act. Schedule 5 of the Municipal Structures Act similarly includes a Code of Conduct for Councilors. The practices associated with Principle 1 should be considered to supplement and provide substance to these legal provisions. The World Bank’s 2004 World Development Report (WDR) emphasized the importance of accountability.15 It noted a wide variety of methods for delivering public services. It said that both successes 13 King IV Report on Corporate Governance for South Africa 2016, Institute of Directors in Southern Africa, Johannesburg, p. 6. 14 Id., p. 79. 15 World Bank. 2003. World Development Report 2004: Making Services Work for Poor People. World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/5986 License: CC BY 3.0 IGO. Analysis 23 and failures in service delivery have pointed to Figure 1  DR 2004 Framework of W “the need to strengthen accountability in three key Accountability Relationships relationships in the service delivery chain: between poor people and providers, between poor people and policymakers, and between policymakers and providers.” The WDR referred to the accountability Policymakers of policy makers to citizens, together with the accountability of service providers to policy makers, as the “long route” of accountability. This route can fail when either of the two links does not function properly, i.e., when citizens cannot effectively influence policymakers, or when policymakers cannot influence providers. Providers Poor people The long-route of accountability for Chicago’s water service is direct, relatively short, and effective. See Figure 2 below. The citizens of Chicago elect a Mayor, who acts as the Chief Executive of the city – all department heads report directly to the Mayor. Because citizens can and do influence the Mayor,16 and the Mayor can direct the Water Department, the long route of accountability functions properly. Chicago’s water service is first rate, with the exception of a legacy problem with lead pipes. Moreover, Chicago citizens need not rely solely on their Mayor. They can also exercise influence through their Aldermen, for whom they have also voted directly. Figure 2 Long Route Accountability, Chicago Water Mayor, Department Citizens Aldermen Heads The long route of accountability is slightly longer in the case of Dayton’s solid waste services. One more link is added in the chain of accountability – see Figure 3 below. In Dayton, voters elect and have influence (periodically through elections and continuously through constituent contacts during the council term) over their City Commission. The Commission has ultimate influence over the City Manager. The City Manager hires and directs the department heads. Although the chain is one link longer than in Chicago, so long as all three links are strong, long-route accountability seems to be effective. Figure 3 Long Route Accountability, Dayton Solid Waste Citizens Commission City Manager Department Head 16 In a dramatic example of accountability in Chicago, a mayor famously lost an election because of the city’s poor response to a major blizzard. See “Snowpocalypse Then: How the Blizzard of 1979 Cost the Election for Michael Bilandic,” Chicago Magazine, February 2, 2011, retrieved July 17, 2021 at https://www.chicagomag.com/city-life/february-2011/snowpocalypse-then-how-the- blizzard-of-1979-cost-the-election-for-michael-bilandic/. 24 Institutional Models for Governance of Urban Services: Volume 1 The MWRD of Greater Chicago has a directly elected Board of Commissioners. The MWRD’s long route of accountability has an additional link, compared to the City’s water services, and thus the same number of links as Dayton’s solid waste services. In this case, however, the Board is elected not only by Chicago citizens, but also by the citizens of the other 128 local governments served by the district. Chicago’s Mayor and Aldermen have no role in the governance of the MWRD. Although the chain is one link longer than in the case of water services, all three links are clear and direct, providing effective long-route accountability to metro area citizens. Figure 4 Long route accountability, MWRD Chicago Board of Citizens CEO, CFO Department Heads Commissioners The Greater Dayton RTA has still one more link in the chain of accountability. Citizens vote for City and County Commissioners. The County Commission appoints seven Trustees to RTA’s Board of Trustees, and the City Commissions of Dayton and Kettering each appoint one. The Board of Trustees appoints a CEO, who reports to the Board; and the CEO appoints an executive leadership team. The chain of accountability is less direct than in the case of Dayton’s waste services or Chicago’s sanitary sewer services, because citizens do not choose the Board of Trustees directly. Nevertheless, the Board is accountable to the local governments and their citizens. Figure 5 Long route accountability, Greater Dayton RTA County Executive Citizens Board of Trustees CEO and Cities Leadership In South African cities, long route accountability is less clearcut. See Figure 6 below. A challenge to effective accountability arises because of the dominant role of political parties in local elections. This is a sharp contrast with Chicago and Dayton, where local elections are non-partisan. In South Africa, half of a municipal council consists of directly elected ward representatives. The remaining councilors are selected by political parties, in proportion to each party’s percentage of the vote. Proportional representation councilors owe primary allegiance to their party, not to citizens. Moreover, both ward representatives and proportional representation councilors are expected to follow their party’s line on important votes. Thus, a political party (or a coalition of parties sufficient to form a majority) decides who will be Mayor and Manager. For important municipalities, these positions are negotiated at the national level. This means that the Mayor and Manager are accountable to external party processes and personalities more than to citizens. Councilors’ tenure and careers depend on service to their party, including the party’s national agenda. There is also ambiguity in the final link: the division of executive power between the Mayor and the MM is often unclear. Even though in a Figure 6 Long Route Accountability, Mbombela Solid Waste Municipal Mayor, Department Citizens Council Manager Heads Analysis 25 legal sense the Manager is the Accounting Officer of the municipality; in practice department heads are not accountable exclusively to the Manager. Mayors and council committees play an active management role in South African cities. Johannesburg’s municipal enterprises have an especially long chain of accountability. Formally, department heads report to the Managing Director of the enterprise, who reports to the Board of Directors, and through the Mayor or Manager to the elected Council.17 The formal structure of accountability is rather long, but there are also “short-cuts” or parallel routes, which have changed somewhat over time.18 Originally, a Contract Management Unit (CMU) and a Shareholder Unit (SHU) were established, to provide accountability through a Council portfolio committee, chaired by a Member of the Mayoral Committee (MMC) responsible for the function. The SHU also reported to a shareholder sub-committee chaired by the Mayor, including all the relevant MMCs. More recently, the CMU and SHU have been combined. On paper, Joburg Water and the JRA are similar, but in practice the Managing Director’s authority to manage JRA is limited, and the Board has become directly involved in procurement and payment decisions. The consultant’s report says: Executive management authority in this model is clearly designed to be delegated to the Managing Director. However, this is not always fully understood by all parties, nor is it in the interest of political parties and board members who are part of a corrupt patronage system. Like the board decision to create a PMU, against the advice and knowledge of the MD, corrupt leaders have sought to undermine executive management authority.19 Figure 7 Long route accountability, Joburg Water Municipal Mayor, Board of JOWAM, Department Citizens Council Manager Directors MD Heads In Indian cities, the long route of accountability is disrupted. In Figure 8 below, we see two separate accountability routes: the top route links citizens to elected councilors, and councilors to the Mayor, Standing Committee, and Special Committees. To this point, the chain of accountability seems direct and clear. However, the Mayor and committees have little say as to who will manage the city – the Commissioner or Chief Officer is appointed by the State. Though Councilors have some influence (arguably more in Gujarat than in Punjab), their lack of real authority limits the degree to which they can hold officials accountable. They cannot impose meaningful consequences on the Commissioner. Figure 8 Long Route Accountability in Gujarat/Ahmedabad Municipal Mayor, accountability gap ULB Citizens Corporation Committees Chief Minister, Political Cabinet, State Citizens Party Commissioner City Staff Legislature 17 Earlier, a private contractor, known as Johannesburg Water Management (JOWAM), was responsible to the day-to-day functioning of Joburg Water, and also for building management capacity and culture within the enterprise. 18 See Nishendra Moodley’s report prepared in connection with this research. 19 ibid. 26 Institutional Models for Governance of Urban Services: Volume 1 The Commissioner’s accountability leads back to state citizens, rather than ULB citizens specifically. In Ahmedabad, for example, the Commissioner is accountable to Gujarat’s Principal Secretary for Urban Housing and Urban Development. In turn, the Principal Secretary is accountable to the Minister of State for Urban Development; and the Minister is accountable to the Chief Minister. The Chief Minister and Council of Ministers are collectively responsible to the legislative assembly, elected by citizens from across Gujarat on a party list basis. Accordingly, the Chief Minister and Council of Ministers are accountable to the party or parties that form a majority in the assembly. The majority of Gujarat is rural. Ahmedabad’s particular needs do not determine state priorities. The Commissioner’s incentives and career path as part of the Indian Administrative Service (IAS) are determined by state and national forces, not by Ahmedabad citizens. Accountability is divided, and neither the Municipal Corporation nor the State can be held effectively accountable for success or failure. Because downward accountability is divided, neither the ULBs nor the state can be held fully accountable for success or failure. Indian states’ extensive involvement inherently limits accountability to urban citizens. An individual with a service delivery concern may contact a councilor, and the councilor may advocate for the citizen, but ultimately elected officials have limited authority. Except in the case of exceptionally well-connected individuals, an urban citizen’s concerns are unlikely to be heard. At best, the State is accountable to all of its citizens, across all urban and rural areas – a vast population. A state bureaucracy cannot be accountable or responsive to citizens in the way that a Chicago alderman can be. Ahmedabad’s bus rapid transit system evidences hybrid long route accountability. The Board of Directors of AJL includes the Commissioner appointed by the State, the Mayor, the Chair of the Standing Committee of the AMC, the opposition party leader of the AMC, the Joint Commissioner of the traffic police, a special invitee from Centre for Environmental Planning and Technology (CEPT) University, and the Executive Director of AJL. Because of the direct participation of the Mayor, the Chair of the Standing Committee, and the opposition leader, the AMC has a strong voice in the management of the enterprise, strengthening accountability, as compared to an ordinary city department, which reports only to the Commissioner. This AJL board structure reveals one way that long-route accountability to ULB citizens can be strengthened within the general framework of urban governance that exists in India. Figure 9 Long route accountability, Ahmedabad Janmarg Ltd. Municipal Board of Executive ULB Citizens Mayor Corporation Directors Director Chief Minister, Political State Citizens Cabinet, Commissioner Party Legislature The 2004 WDR also looked at “short route” relationship between citizens and the service provider. The WDR suggested that short route accountability can help address weaknesses in long-route accountability. The short route focuses on the direct relationship between citizens/clients and service providers. A classic example is a school voucher program, under which a government provides financial resources, but a parent chooses their child’s school, based on the parent’s judgments as to curriculum, quality, convenience, etc. Such voucher schemes use the purchasing power of public funding to create market competition among providers. Direct competition between providers is not possible in the case of natural monopolies, such as treated water systems. However, it can work, and does work in some countries, in the case of public transport and solid Analysis 27 waste collection: a local government can license and regulate independent providers, rather that operating the service itself. This empowers customers to choose the service provider that seems most responsive to their needs, in terms of quality, price, and other factors. Citizen inputs can strengthen short route accountability. For example, the City of Chicago conducts a variety of surveys to evaluate citizen satisfaction with its services. Chicago’s MWRD convenes public comment meetings prior to the issuance of Watershed Management permits. The City of Dayton has several Boards, Commissions, and Committees to obtain citizen opinions on various aspects of City government, and Dayton conducts periodic surveys to gather citizen feedback. Dayton’s RTA has organized a Customer Advocacy Group as a formal vehicle for citizens to advocate for their urban transportation interests. Joburg Water has a Stakeholder Relations Department, and a stakeholder development strategy focused on reaching out to communities and councilors. Regular forums are held with stakeholders, such as large water users, top 100 customers, prepaid water vendors and faith-based organizations. Public meetings are held to inform community members of upcoming projects in their areas. Annual stakeholder audits and customer satisfaction surveys are conducted. The JRA has a customer unit with stakeholder and public participation capacity, engaging key customers and ratepayer organizations, and recently started ‘adopt a road’ and ‘adopt a traffic-light’ programs encouraging citizens to take ownership of infrastructure in their neighborhoods and inform the city of infrastructure problems. In Mbombela, ward committees and councillor-convened community meetings provide inputs on community needs, and municipal water ambassadors engage with communities. In Indian cities, short route accountability could strengthened. Direct citizen-provider accountability has the potential to mitigate shortcomings in long-route accountability. In India, many cities have used citizen report card systems to develop systematic feedback from users of public services. The data gathered can empower citizens and civil society to engage with service providers, and competition between ULBs seems to help in improving service delivery. All 4 cities have various complaint systems that are useful in surfacing and resolving citizen complaints. However, these complaint systems are not geared to systemic accountability on issues such as infrastructure planning and development. More active involvement of citizens in planning, budgeting, tax and tariff setting, and other decision processes could strengthen accountability by ensuring that operational and planning decisions take the grass-roots opinions of citizens and customers on board, and could give citizens and customers an oversight role in monitoring delivery of urban services. The best service delivery models seem to be suffused with systemic accountability. Systemic accountability implies shared expectations and multiple channels of accountability, both long and short. In terms of expectations, this implies that citizens see local government as capable and responsible, and that they expect reliable services as a matter of routine. It implies that elected leaders see themselves as conscientious stewards of the powers that their constituents have entrusted to them. It implies that managers and officials appointed by these leaders are diligent in developing and maintaining systems that deliver value for money. In terms of accountability, this means that citizens know how to participate if they have views about the city’s future development, and about infrastructure and service delivery needs. Citizens living in well-governed cities often have multiple channels to seek action: they can participate in budget and planning committees; they can call their council member or ward committee member. They can write to the mayor or the newspaper. Importantly, accountability implies that any of these actions will result in a response from the council or management, that their inputs will be taken seriously, and that appropriate action will be taken on requests and complaints. The pervasive social expectation is that public servants will be accountable to their citizens and customers. How do such expectations and accountabilities come into being? The issue involves both attention to internal organizational culture, as we saw in the case of Joburg Water, and understanding the broader 28 Institutional Models for Governance of Urban Services: Volume 1 political and societal culture. In both cases, we are using the term “culture” to refer to a set of shared beliefs and values that largely develop organically from experience. If a customer calls the water company and this results in a problem being resolved, they are likely to call again next time they have a problem. They may tell their neighbor about the experience. They may volunteer to serve on the city’s advisory committees, and see their ideas taken on board. Through an accumulation of reinforcing experiences, people come to believe that they have a voice, and can get results. Alternatively, if they repeatedly get no results, they will come to believe that there is no point in participating. Internally, an organization can change its culture through leadership efforts: when leaders establish a set of expectations and values, then communicate and reinforce these, they ultimately shape employees’ perceptions, behaviors and understanding. Culture is pervasive, and successful efforts to change it must be broad-based and persistent. Changing the larger social culture to one that trusts its public servants to act in the public interest is beyond the scope of this paper, but such change is possible. In the US in the late 1800s and early 1900s, many large cities were dominated by corruption and cronyism, and Chicago was among the worst in this regard. But a variety of political groups arose, under the general theme of “good government,” and worked to reform these urban local governments. They fielded candidates who would fight for reform, and eventually progressive candidates won out over the political machines in most large cities. To change the current paradigm in Indian cities would require effort at the level of leadership and political culture. The introduction of specific legal and financial reforms would be useful, but legal and financial reforms by themselves are unlikely to change expectations and accountability. In recent years, the international development industry has been enthralled by performance indicators and Indicators incentives as mechanisms for improving accountability. The understandable Policy priorities attraction of indicators and incentives lies in the promise of distilling the attributes of a desirable system into a few key measures. Budgets However, the core difficulty with incentivizing reforms through such measures is captured by Goodhart’s Law: when an otherwise valid indicator (e.g., of service quality, reliability or efficiency) is picked as a target, then it ceases to function as a useful indicator because people in the relevant systems start to game it.20 This has been an obvious and recurrent problem with Indian central schemes in the urban sector. The specific indicators called for may be achieved, at least in a formal sense, because that is the only way to access funding, but the systemic performance or reforms that the indicators were intended to reflect are often not achieved. This does not mean that performance indicators are bad per se – they can be useful in monitoring how things are going – consider, for example, the Joburg Water Customer Standards reflected in their SDA with the City of Johannesburg.21 These standards appropriately reflect the priorities that the City is trying to achieve in terms of water and sewer services, and they can be changed and adjusted over the years as policy priorities change. These indicators can provide useful feedback so long as they do not become goals in themselves. It is sensible to think of Council’s policy priorities informing both the choice of indicators and what programs are to funded in the budget. But if we seek lasting and systemic change, then it is perhaps too simplistic, and ultimately distorting, to make fiscal arrangements depend on specific metrics.22 20 The “law” is named for the British economist Charles Goodhart, who first proposed the idea in regard to monetary policy. A general formulation comes from anthropologist Marilyn Strathern: “when a measure becomes a target, it ceases to be a good measure.” 21 See Table 1 on page 16 of Nishendra Moodley’s report prepared in connection with this research. 22 See Muller, Jerry Z., The Tyranny of Metrics. Princeton University Press, 2018. JSTOR, www.jstor.org/stable/j.ctvc77h85. Accessed 18 Apr. 2021. Analysis 29 The best performing cities in our study do not use performance incentives. If we look at Chicago and Dayton, there is no “performance compact” nor any budgetary or financial reward for good performance. In Johannesburg and Mbombela, there are performance indicators in the cities’ IDP plans, and in the employment contracts of managers and heads of department, but whether targets are achieved or not has no direct financial implications. One notable exception was during the first 5 years of Joburg Water’s operation, when an external contractor was paid both a fixed fee and performance incentive based inter alia on human resource development, decreased wastewater spillages and overflows, improved customer service, implementation of an annual capital investment program, and improved facilities maintenance. As previously mentioned, a key contribution of the contractor during this period was to act as a change agent, instilling values based on efficiency and customer service, empowering line managers, coaching them in better operational practices, and holding them to account for results. Autonomy When we ask whether a local government unit is autonomous, we are asking whether it is self- governing. We want to understand whether the legal and regulatory environment allows local government substantial discretion in setting and implementing policies and plans, without undue constraint from higher levels of government, and whether the local government has the means to do what it determines. Evaluating autonomy is thus primarily a legal analysis. Autonomous local government is not an arm of state or national government. A classic formulation refers to the “three Fs” –functions, finances, and functionaries.23 To be effectively autonomous, a local government must have clarity about its functions – what it is meant to do, as distinguished from other tiers of government. It must have adequate fiscal resources, through own-source revenues, predictable transfers, or a combination thereof. And it must have capable staff, and the ability to oversee staff performance. The US cities examined in this research are both “home rule” cities, with extensive powers. As in India, local governments in the US are “creatures of the state.” The US Constitution does not mention local government at all, and the Indian Constitution did not do so until 1992. However, the two countries have dealt with this omission differently. In the US, especially as cities developed in the Western US, state governments granted extensive powers of local government to cities, often in the form of a “city charter,” a device existing since the middle ages in Europe. In the US, a city charter typically specifies the type of governing body, the number of political office-holders and how they are to be elected, a management structure, and financial powers including taxing and borrowing powers. Chicago’s first Charter was granted by the State of Illinois in 1837, and Dayton’s was granted by the State of Ohio in 1913. Chicago and Dayton can deal with almost all local matters without any intervention or supervision of their respective states. Both Chicago and Dayton have clarity about their functions, adequate finances, and the ability to hire capable staff to implement council policies. South African municipalities also have considerable responsibility and autonomy. In South Africa, this autonomy derives from the Constitution itself. The 257 municipalities have extensive, constitutionally specified powers and functions, are responsible for local land use regulation, and are largely responsible for planning, constructing, operating, and maintaining local infrastructure. Although they operate within a system of cooperative governance, municipalities’ powers do not depend on provincial legislation or fiscal transfers. South Africa’s largest cities have strong economies and own-source revenue bases. Municipalities’ legally 23 See e.g., Devarajan, S., Khemani, S. and Shah, S. "The politics of partial decentralization."  Does decentralization enhance service delivery and poverty reduction? Edward Elgar Publishing, 2009; Bahl, R. W., & Linn, J. F. (2014). Governing and financing cities in the developing world. Cambridge, MA: Lincoln Institute of Land Policy. 30 Institutional Models for Governance of Urban Services: Volume 1 authorized revenue instruments (primarily property taxes and tariffs on water and electricity), together with “equitable share” transfers from national government, are broadly adequate to the functional responsibilities of municipalities, and in principle provide a solid basis for long-term borrowing to finance infrastructure investment. Both Johannesburg and Mbombela meet the “three F” test – their functions are clearly delineated in the Constitution and legislation; they have adequate own source revenues, supplemented by national transfers; and they can hire and fire their own staff. Indian ULBs have limited autonomy. Throughout India, ULBs are seen as subordinate to their states. Third tier issues were first addressed, incompletely, in the 74th Amendment Act in 1992. This Amendment was an attempt at “putting on a firmer footing the relationship between the State Government and the Urban Local Bodies.” However, the Amendment left it to each state to enact enabling legislation. It is up to each state to determine the powers, functions, and revenues of ULBs. Most Indian states have failed to devolve significant authority and revenues to these bodies. Although Gujarat has gone further in devolving authority than Punjab (and further than most Indian states), the subordinate nature of local government remains firmly entrenched in law in both Punjab and Gujarat. The “three Fs” are lacking – responsibility for functions is fragmented and can be unclear, finances are not adequate, and the states have ultimate control over key functionaries. Amritsar’s autonomy is low, in comparison to Ahmedabad. The Amritsar ULBs involvement in COVID-19 response was significantly less than the ULBs in the other two cities covered by the COVID-19 report (see Volume 2). Although the Punjab Municipal Act, 1976 identifies provision of healthcare services as a municipal responsibility, the Amritsar Municipal Corporation does not manage any hospitals or healthcare centers. During the COVID-19 crisis, the Amritsar ULBs contribution was largely limited to enforcement of home quarantine, disinfection, and distribution of essentials, all under the guidance of the district administration. By contrast, in Ahmedabad and Chennai, the ULBs took the lead in overall coordination, surveillance and testing, delineation of containment zones, primary healthcare, and other matters. This difference reflects a generally-recognized difference between the relatively greater autonomy of Ahmedabad’s and Chennai’s ULBs, and the lesser autonomy of Amritsar’s ULBs. Accounting and Financial Reporting The use of “enterprise funds” to ring-fence finances is sensible for several reasons. Enterprise fund accounting is an accounting and financial reporting technique that can help support accountability and autonomy, and as a way of reducing fragmentation. Enterprise fund accounting can promote and maintain long-term financial sustainability for any municipal activity for which a fee is charged, or a dedicated revenue source is provided. A city’s water utility is a typical example. Financial statements for an enterprise fund are prepared separately from all other local government activities, though they may subsequently be consolidated with other funds to give an accurate overall picture of the city’s financial condition. Ideally, both direct costs (salaries, operating expenditure, capital expenditure) and indirect costs (a pro rata share of accounting, treasury, human resources, and general overhead and administrative costs) are included in enterprise fund accounts. Enterprise fund accounting and reporting makes the balance or imbalance between revenues and expenditures clear. This makes subsidies transparent. For some services, such as public transport, subsidies are inevitable, and probably desirable. Ring fencing does not imply that a service is completely self-financing, but it does imply a hard budget constraint and encourages clarity about where the funding comes from. These factors tend to make managers accountable for financial efficiency, and where there is the possibility of own-source revenues, ring-fencing creates a systemic incentive to optimize those revenues, since Managers know that they will be entitled to keep and use the funds they raise. Analysis 31 Ring fencing does not require creation of a separate entity. We see a mix of approaches in our overseas comparators: Chicago offers us an example of a ring-fenced enterprise fund that is managed by a city department for the development, O&M of its water fund. Chicago also offers an example of a ring-fenced enterprise that is a separate entity – the MWRD of Greater Chicago, which is funded by a property tax imposed by the elected Board of Commissioners. Dayton’s budget for waste collection is not formally ring- fenced (though other enterprises in the city are) it is subject to an informal ring-fence, and subsidies from the City’s general fund are made transparent. As a separate entity, the Dayton RTA is completely ring-fenced (though not self-supporting). Joburg Water and the JRA are both separate entities, and prepare separate financial reports, even though both receive funding from national grants to support their service delivery. In Mbombela, the concessionaire represents the most arms-length arrangements of any of our cities, with its own management and finances, and thus complete ring-fencing, while the Mbombela solid waste services have no ring-fencing at all. Accounting standards, audits and transparency are important. In the US and South African cities, both the municipalities and their service providers are required to follow standardized, generally accepted accounting and financial reporting practices. Their accounts are audited, both internally and by independent external auditors, so that the financial statements have a reasonably high degree of reliability and credibility. These financial statements are also available to the general public, supporting accountability to their citizens and taxpayers, and helping researchers, journalists, rating agencies and others to obtain and analyze meaningful data on local government finances. India has yet to adopt a standard chart of accounts for local government, and financial data is often difficult to come by. Although various proposals have been made, India still has no comprehensive public finance management act, no public finance management legislation dealing with state-owned or municipally owned enterprises, and no public finance management legislation dealing with financial accounting practices. Analytical Conclusions One lesson emerging from this study is that organizational and institutional structure does not, in itself, determine success or failure. A flawed institutional design can be a barrier to effectiveness, but a “good” design is no guarantee that all will be well.  Thus, while we can identify barriers or bottlenecks that impact on effective service delivery, we cannot be sure that removing one or more of those barriers will automatically unlock good performance. While the Indian cities in our study are significantly more fragmented, both horizontally and vertically, compared to their US and South African counterparts, institutional coherence alone is no guarantee of success. Unfortunately, the solution to India’s service delivery challenges is not as simple as shifting institutional forms. Similar organizational approaches can yield either success or failure. Based on our small sample of cities, the team believes that the economic, political and social contexts are likely to be bigger factors than the specific institutional form. In other words, institutional and organizational structures seem to be secondary; many different structures work well in US cities, while similar structures work less well in South Africa, and still less well in India. Consider Joburg Water and the JRA. Both of these entities were similarly conceived and designed, and use essentially the same institutional model. However, the outcomes have been very different: generally speaking, Joburg Water has been successful, while the JRA is far from it.24 Perhaps this can be attributed to differences in leadership at critical periods, or perhaps roads contracts are more lucrative targets for cronyism and corruption than water and wastewater contracts. One key difference is that Joburg Water started off with a 5-year professional management contract, under which experienced international water system managers were brought in, and charged not simply with improving the physical 24 Please see Nishendra Moodley’s report, pages 22 et seq. for details of JRA’s dysfunctional management. 32 Institutional Models for Governance of Urban Services: Volume 1 system, but also with mentoring and training a professional staff. This created an organizational culture infused with values of efficiency and customer service. No such organizational development technique was used with the JRA. Robust management capacity is required, whether the institutional structure involves a department, an entity, or a concession. In Mbombela, a significant capacity problem impairs the city’s ability to manage the Silulumanzi concession. While initially the city’s CMU was well staffed and had access to external accounting and engineering expertise to assist it, this is no longer the case. A 20-year review of the concession found that over the period 2009 to 2018, the contract monitoring ability of the city declined as key staff left and the appointment of external advisors to monitor financial and technical performance was terminated. Since then, the CMU has remained in place, but lacks the necessary expertise and impetus. There remains a concern that the municipality is not currently monitoring and managing the contract in the manner that it should and thus not ensuring that it receives the optimum possible benefits from this contract. Accountability matters. The 2004 WDR spoke about the long and short routes of accountability. One point we can add to the observations of that report is that sometimes, the long route of accountability is too long. If we look at Figure 2 through 9 above, we see a progression from quite short and direct chain of accountability to an ever longer chain, and eventually a disrupted chain in the case of the Indian cities. Ahmedabad’s Janmarg Ltd. has made an attempt to weld the broken chain back together by including several locally elected representatives in the Board of the municipal entity, which improves downward accountability to citizens. While Johannesburg’s enterprises have a theoretically intact chain of accountability, the political considerations affecting both council elections and board appointments have significantly weakened downward accountability. We are reminded of Peter Drucker’s maxim: culture eats strategy for breakfast.  One good predictor of successful service delivery may be the organizational culture of the department, agency, or company, and the city it serves.  We have not focused on organizational culture in this study, but it does emerge in some of the narratives. When there is a culture of professionalism and service in the agency, and when customers expect high quality services and are willing to pay for them, it does not seem to matter much what institutional form is used.  Conversely, when there is a culture of cronyism, corruption and favoritism, it also does not matter what institutional form is used. The King IV principles, set forth in Appendix B to this report, can be applied to any institutional form. These principles focus on behaviors and values, and are a useful complement to rules-based governance. Rules-based governance alone encourages tick-box compliance with what is states, whereas principles- based governance requires an understanding of the context and desired outcomes. In the King IV municipal supplement, each principle is followed by a discussion of how that principle applies in the context of South African local government legislation. It would be an interesting and useful exercise to consider how these principles could be made to apply in the context of Indian local government legislation (which varies from state to state). Analysis 33 Policy Options for Consideration It is useful to keep in mind that Institutions are, and are part of, a system. A systems approach focuses on the city as an evolving set of inter-related parts. Each of the institutions that we have looked at is both a system in itself, and a part of a larger city system that includes e.g., the people that live or work in the city, the small and large businesses that operate in the city, the different public and private institutions that operate in the city, the built environment of the city, and many other components. Systems are complex: if we try to change any part of the system, it affects other parts, and other parts of the system affect our ability to make the changes that we want. There is no reform whose effects we can predict with confidence. And any idea, technique or structure that we might want to import from one of the cities in this study would need to be thoughtfully adapted to fit into the system where it is to be tried. Simple cutting and pasting from different social, economic, political and cultural contexts is seldom successful. The quality of services delivered does not seem to be correlated with, or dependent on, institutional form: ƒƒ The best service of the US cities we considered was Dayton’s SWM, delivered by a department of the city; ƒƒ The best service in the South African cities was delivered by Mbombela’s water and sewer concession, essentially the opposite of a city department; ƒƒ The best services in the Indian cities were in Amritsar’s, Patiala’s and Ahmedabad’s SWM (all city departments) and Ahmedabad’s BRTS, a municipal enterprise; and ƒƒ The worst examples of service delivery were in Johannesburg’s road company and Nadiad’s water and sewer department. Three factors may explain the higher quality of service delivery in the US cities. ƒƒ First, there is an enormous economic difference between the US and the other two countries, seen in the radically different per capita GDP figures mentioned in the Introduction; ƒƒ Second, there are problems of vertical and horizontal fragmentation in Indian cities, which do not exist in the US cities; ƒƒ Third, the US cities are characterized by strong accountability of elected representatives to their citizens, and the strong accountability of city management to these elected representatives. In South Africa, the linkage between the citizens and their elected representatives is compromised by the strong role of political parties, and the linkage between elected representatives and city officials is complicated by the overlapping oversight roles of mayors, mayoral and council committees, and MMs. In India, accountability of a Commissioner and other officials to elected representatives is Policy Options for Consideration 35 weakened by the fact that a Municipal Commissioner is an IAS official, appointed by and ultimately responsible to, state government; and ƒƒ It does not appear that autonomy is per se an differentiating factor, because the South African cities have considerable autonomy, but on average only fair service delivery outcomes. On the other hand, the COVID-19 crisis revealed that in Amritsar, where the ULB is seen as having even less autonomy than the ULBs in Chennai and Ahmedabad, the case mortality rate was higher – nearly 5 times higher in Amritsar, as compared to Ahmedabad. This is intriguing, but we are reluctant to attribute that outcome to differences in autonomy per se, since there are many other differentiating factors as between the cities. It follows that the most promising reform options would involve improving accountability and reducing fragmentation. Since, in the short run, nothing can be done to reduce the GDP gap, we must focus on the challenges of fragmentation and accountability. Most reforms depend on state action. Like the US, India is a federal country. Each state has the power to delegate such powers and functions as it deems appropriate to ULBs. At the national level, the 74th Constitutional Amendment authorized state legislatures to endow municipalities “with such powers and authority as may be necessary to enable them to function as institutions of self-government…”. The amendment goes on to refer to the Twelfth Schedule and its list of specific services. However, the fact is that states’ power to devolve powers and functions to ULBs is not limited to the Twelfth Schedule. Since local government has always been a state subject, a state legislature can delegate as much or as little power as it deems appropriate. Of the ten reform options mentioned below, only the first one would require action at the national level. The aim of the reforms set forth below is to reduce fragmentation and improve accountability to citizens. The options listed here are by no means the only possibilities – there are certainly others. And these options are intentionally presented at a high level, so that implementation details do not distract from the main thrust. If there is interest in pursuing any of these options, then a more detailed reform program would be appropriate, developed with specific application to the state and cities in question. We have attempted to group the options according to our judgements of how difficult they might be, recognizing however that policy makers in each state will be in the best position to judge what is possible. We have judged deep changes to the national constitution or general state law on ULBs to be unlikely. A middle group includes some institutional forms that are unfamiliar in the Indian context. These emerge directly from our comparative research. Finally, there is a group of incremental reforms that seem most feasible in the near term, and less controversial than those in the first two groups. The three groups of options are summarized in the following table, and then explained more fully. Deep Change Options Significant Change Options Incremental Change Options 1. Change national constitution 1. Consider special districts for one 1. Strengthen authority of elected to give ULBs autonomy; and or more urban services; body; 2. Change state laws to give ULBs 2. Consolidate urban management 2. Corporatize a service, autonomy. responsibilities; and with strong governance 3. Consider a city charter, granting arrangements; full powers to ULBs in primate 3. Strengthen citizen participation city. in capital/budget planning; 4. Implement accounting reforms; and 5. Financial reforms. 36 Institutional Models for Governance of Urban Services: Volume 1 The socio-political barriers to meaningful reform are varied and substantial. In any given state, things are as they are for a set of reasons. To take one example, the practical steps needed to improve property taxes and other own source revenues are not unknown; but taking these steps would disrupt the existing paradigm and require wealthy and middle-class citizens to pay a greater share of the costs of public goods than they now do. Without a state’s conceptual buy-in to such politically difficult reforms, change is likely to be incremental, at best. Deep Change Options Constitutional change An ambitious and long-term reform project might seek changes to the Constitution, moving in the general direction of the South African model by specifying the powers and functions of local government in the basic law of the land. This is an alternative to the current paradigm under which each state decides whether and how to delegate powers to ULBs. Although this option does not seem politically realistic for the foreseeable future, the idea has been raised by some commentators. In contrast to the Indian and US Constitutions, the South African Constitution firmly establishes local government as one of three spheres of government, which are “distinctive, interdependent and interrelated.” Municipalities in South Africa constitute a sphere of government in their own right – unlike India and the US, municipalities in South Africa are not creatures of national or provincial government. India previously amended its Constitution in the name of decentralization. However, the 74th Amendment did not result in the “vibrant democratic units of self-government” to which it rhetorically aspired. The South African model of dealing with the powers and functions of local government in the national constitution would represent a fundamental shift. The chief difficulty with this approach is that the political dynamics in existence 25 years ago have not shifted significantly – or if they have, they have probably shifted in the direction of greater centralization. Most states would likely oppose such a move, and there are few leaders that seem likely to organize a meaningful national effort. Although unlikely, an ambitious constitutional amendment could both reduce fragmentation and increase accountability. If the South African model of a largely autonomous sphere of government were pursued, there would be clear and far-reaching competencies assigned to local government, along with financial resources or instruments sufficient to fulfill these obligations. This could reduce horizontal fragmentation, because it would be only the ULBs, and not the state governments, working on local matters such as planning and land use, infrastructure development and operation, and other matters as seems appropriate. It could also reduce vertical fragmentation by eliminating the approvals now required by state governments, including organizational structure, borrowing, and other matters. A constitutional amendment could improve accountability of city officials to elected bodies by empowering the council to hire its own Chief Executive, and accountability of elected bodies to the people by making such elections non-partisan and directly accountable to the people. Fundamental change in state legislation Profound change at the state level is also unlikely in the foreseeable future. However, because national consensus is not required, ambitious changes to the laws governing ULBs would be an order of magnitude less difficult than changing the national constitution. Out of India’s 29 states, it is not impossible that one would be interested in endowing its ULBs with full self-government. Any state has the power to delegate functions and fiscal instruments wholly to its ULBs. A state could contribute to sustainable financing of ULBs through predictable transfers, perhaps including a dedicated share of the GST. Policy Options for Consideration 37 As with a constitutional amendment, ambitious reforms to state laws could reduce fragmentation and increase accountability. We have seen that, in the US and in South Africa, state and provincial governments are not involved in the day-to-day operations of municipalities. Municipalities in those two countries are vertically integrated, and largely horizontally integrated. Any Indian state could undertake a comprehensive revision of its laws regarding ULBs, to establish the legal and regulatory framework for autonomous local government, and to disentangle the complex involvement of state agencies in Indian cities. ULBs could be made responsible for most or all aspects of urban planning, urban infrastructure, and urban service delivery, and directly accountable to urban voters. State legislation could provide for a MM to be appointed by, and be accountable to, the elected body. This would be similar to the approach used in Dayton and many other US cities.25 Significant Change Options Each of these options represents a significant paradigm shift, though a less dramatic shift than those just discussed. Although the options presented here are unfamiliar in the Indian context, they have proven workable in other countries, and the necessary changes to the legal framework appear to be within the legislative competence of a state legislature. Special district model Special districts, or special purpose local governments, are a long-standing model of service delivery in the US. In our research, we considered two examples – the regional wastewater district in the Chicago area, and the regional transport district in the Dayton area. Each of these is endowed with full authority over all aspects of the service it delivers, including planning, designing, financing, and construction of infrastructure; hiring, firing and compensation of staff; O&M; setting the necessary fees and charges to ensure sustainability; and coordinating with general purpose local governments in their region. The special district is wholly and exclusively responsible for all aspects connected with the service it delivers. Adapting this model for particular services in India could reduce fragmentation and improve accountability for the pertinent services. Services that seem best suited to this model are those whose natural service areas cross ULB boundaries, e.g., water, sanitary sewerage, storm drainage, and urban transport.26 We have shown this as a “significant change” option because it would require authorizing legislation at the state level, and could require transitional arrangements as assets and responsibilities are shifted to a new entity. A special district would need a dedicated source of revenue, e.g., user charges, a tax, or a share of GST revenues. A special district could have a board elected by voters within the area it serves. This service area would likely cut across existing ULB boundaries; and perhaps even state boundaries, with the support of the states involved. One way to think about authorizing such a new entity, in terms of legal status, would be as a special purpose local government, on the Chicago wastewater model. In terms of management, we can draw lessons from the City Manager form of government. In Dayton, the City Manager is accountable to the elected council. 25 If this approach were taken, a state might want to provide for emergency intervention by the state should a ULB become unable to provide basic services or sustain itself financially. See section 139 of the South African Constitution for one possible model. 26 In India, the question of how to provide relevant services, e.g., SWM services, across ULB boundaries requires inter-ULB cooperation, and attempts to cluster smaller ULBs have met with challenges because the cluster finances depend on ULB finances, including poor and poorly managed ULBs. The weakest link renders the service unsustainable. A separate special district, governed by an elected body, and responsible for its own revenues may offer a desirable model of autonomy paired with accountability. 38 Institutional Models for Governance of Urban Services: Volume 1 In Dayton, the City Manager is accountable to the elected council and is hired by the council and the council is directly accountable to citizens. If this model were adapted for India, the elected board of the special district could hire a manager to supervise operations, while the Board focuses on policy issues. Clear accountability of the Manager to the elected Board, and of that Board to citizens, would eliminate the accountability gap discussed above, reduce fragmentation as to the particular service in question, and might be less threatening to state authorities than a comprehensively autonomous ULB.27 Consolidated urban management responsibility Consolidating all powers and functions related to a city within a single entity would eliminate both horizontal and vertical fragmentation. Most Indian cities are characterized by significant fragmentation of both types. There are state-sponsored agencies working in the cities, alongside the ULB itself. Gujarat has five state-level entities, in addition to the ULBs, and Punjab has seven (though, in the case of Gujarat, these entities do not generally function within the boundary of the Municipal Corporations). This institutional fragmentation, particularly as it relates to urban planning and infrastructure development, inevitably restricts the free flow of information, creates conflicting incentives, and reduces operational efficiency. With overlapping actors and responsibilities, the rational deployment of resources across sectors remains elusive, because each entity tends to operate in its own silo, with its own objectives and priorities. The two consolidation models described in this section both preserve state powers. These are unusual options, given the global embrace of decentralization and subsidiarity, but they may be worth consideration given Indian states’ resistance to devolving full authority to ULBs. There are at least two possible approaches to consolidation. In the end, they serve the same objective, i.e., a more strategic and integrated approach to urban service delivery, planning, and infrastructure investment. The first approach to consolidation would involve strengthening the authority and upward accountability of the existing office of Municipal Commissioner. Municipal Commissioners already act as the CEOs of ULBs and report to the state government department responsible for urban development. Commissioners necessarily work closely with elected councilors, but are ultimately accountable to the state government. Given this, it would not be unreasonable to give the Commissioner full responsibility and accountability for coordinating all urban management functions, including spatial and infrastructure planning, municipal finances and infrastructure financing, infrastructure construction, and O&M. The Commissioner would be mandated to ensure that all of these activities are coordinated for the more efficient development and management of the city. All capital investment, whether funds are sourced from the city’s own resources, from municipal borrowing operations, or from state and central schemes, would be managed by the Municipal Commissioner and ULB staff. Urban development authorities and similar entities could be transformed into city departments, or they could retain their current corporate and organizational identities, subject to the oversight and coordination of the Municipal Commissioner. To defeat the inefficiencies of horizontal and vertical fragmentation, the responsibility and mandate for coordination of all urban sectors would be coordinated through a single point of upward accountability. There would be no doubt about where the buck stops. Elected municipal councilors would continue to represent the interests of their constituents. This model does nothing to close the downward (citizen) accountability gap described above, but that could be addressed by strengthening citizen participation in capital/budget planning and other policy matters, as discussed under the incremental change options, below. 27 In many countries, mayors rise to become governors, senators, or parliamentarians. The political threat to established politicians is clear. However, in no case that we are aware of has the chairman of a water or sewer board made such a leap to prominence. Policy Options for Consideration 39 This model focuses on enhancing vertical and horizontal integration to create a more coherent form of city management, and providing greater autonomy to the administration (headed by the Commissioner) to realize the advantages of greater coherence, while preserving the core elements of state oversight of urban local government which are cardinal to intergovernmental relations in India and do not seem to be pervious to change. In essence, it would involve deepening the sort of urban management arrangements that have emerged in cities such as Ahmedabad, Surat and Pune and replicating these, to the degree possible, in other Indian states. The second approach would involve consolidation of management and accountability at the state level. This approach would bring all of the state agencies working in a given city together into a single unit. There would no longer be separate urban development authorities, water authorities, or planning authorities. Rather, there might be a State Ministry of Ahmedabad in the Gujarat state government, or a State Ministry of Amritsar in the Punjab state government. The experience of Kampala, Uganda offers a potential model. The Kampala Capital City Authority (KCCA), an agency of Uganda’s central government28 governs and administers Kampala on behalf of the central government. Ten years ago, in 2011, all the affairs of the city of Kampala were brought under the direct supervision of Uganda’s central government, and the KCCA was created to replace the former Kampala City Council. This has given the KCCA plenary control over all city functions, from planning and finances through infrastructure construction, O&M. This direct governance model deserves to be considered in light of the reality that many states have been reluctant to assign substantial powers and revenues to ULBs, and have instead created problems of coordination and fragmentation through various state-level entities, state-owned enterprises, SPVs, and development authorities that operate in parallel with ULBs. This state-level consolidation model risks further lessening of downward accountability to city residents. If this direct governance model were considered by one of India’s states, it would be essential to also consider parallel strengthening of citizen oversight and participation; accounting reforms; and financing reforms. City charter model Chicago and Dayton are “home rule” cities, though not all cities in their states are. Those that are not home rule cities are governed by the ordinary municipal code in the state. In the US, each state decides what powers and functions local governments should have, and within each state, different cities may be subject to different rules. States have found that asymmetrical approaches are sometimes desirable, and in the Indian states we are discussing here, an asymmetrical approach that granted expanded powers to some ULBs only could be less risky than wholesale changes to the overall legal framework. Emulating the Chicago and Dayton models to some extent, it would be possible to envision the negotiation of a home rule charter between representatives of a large city (e.g., Ahmedabad or Amritsar) and representatives of their state government. As an experiment, such a charter could allow the ULB to more fully take control of its own destiny, including its own planning, infrastructure, staff, finances, and organizational structure. Such a charter could assign comprehensive responsibility, powers and functions for key urban services, including both infrastructure investments and operations, to the pertinent ULB, ideally conditioned on accountability and transparency in planning, budgeting, procurement, and implementation of capital investment programs and projects. While this would be a big change, it is significantly less dramatic in scope and impact than the fundamental changes of the first reform group. 28 One evaluation of the KCCA’s performance can be found in Matte, Rogers. "Bureaucratic structures and organizational performance: A comparative study of KCCA and national planning authority." Journal of Public Administration and Policy Research 9.1 (2017): 1-16. 40 Institutional Models for Governance of Urban Services: Volume 1 There are two possible approaches to city charters. In the first, a charter is established directly by state legislation.29 This approach can be traced back to Magdeburg Laws, which were a grant of self-governance privileges and freedoms by the monarch. Under the second model, citizens themselves vote on a charter, within the framework of enabling legislation. The difference lies in whether the charter is given by a higher power, or adopted by the voluntary act of the citizens. Either possibility could work in India, although the granting of a charter by a state legislature seems more consonant with Indian legal traditions. A city charter under either model could consolidate all powers and functions related to the city in question, and exclude the possibility of state interference or overlap. As such, it would eliminate all vertical and horizontal fragmentation in the case of the specific city or cities which are granted a charter.30 Incremental Change Options Strengthen authority of elected representatives Strengthening the authority of elected representatives over the Commissioner could reduce the accountability gap and mitigate the effects of fragmentation. The fact that City Commissioners and Chief Officers report to State government, rather than to local elected officials, weakens the chain of accountability to ULB citizens. ULBs themselves are seen as subordinate to state departments – they are usually seen as upwardly accountable to officials of the state, more than downwardly accountable to citizens. In a City Manager form of government, such as we see in Dayton, the City is endowed with full authority over all aspects of the service it delivers, including planning, designing, financing, and construction of infrastructure; hiring, firing and compensation of staff; O&M; setting the necessary fees and charges to ensure sustainability. It is up to the City Council31 to approve local legislation, policies, and budgets, and it is up to the City Manager to implement these. The City Manager is directly accountable to the elected Council, and this avoids the accountability gap that we see in Indian ULBs. Without real authority over the Commissioner, and through the Commissioner, over the rest of the city’s officials, an elected Council cannot be effectively accountable to citizens. Recognizing that most states are unlikely to completely give up their power to appoint and control Commissioners, a range of intermediate steps are possible. Some possibilities include: ƒƒ A ULB could be empowered to participate in the selection of its Commissioner or Chief Officer, perhaps by interviewing candidates and selecting from a list of 3 to 5 qualified candidates, proposed by the State; ƒƒ The performance of Commissioners and Chief Officers could be reviewed annually by the elected body, across several key areas of performance, as agreed between the State and the ULB. The review process could include official and citizen input, including testimony, written submissions, and surveys. Any Commissioner or Chief officer receiving an unsatisfactory performance review could be required to show cause why they should not be removed. Unless they can show that their performance review was unsupported by evidence or otherwise in bad faith, they would be removed from office; ƒƒ A Municipal Corporation could be authorized to recruit its own Commissioner, subject to a “no objection” from the State. Any objection by the state would be supported by specific findings as 29 See, e.g. An Act to Grant a New Charter to the City of Bangor: March 24, 1915, Maine Legislature, retrieved July 17, 2021 at https://digicom.bpl.lib.me.us/cgi/viewcontent.cgi?article=1211&context=books_pubs. 30 As with the fundamental change option, a state might want to provide for emergency intervention should a ULB become unable to provide basic services or sustain itself financially. 31 The city council in Dayton is actually called the City Commission, but we avoid that term here because of the Indian meaning of “Commissioner.” Policy Options for Consideration 41 to why the candidate is not suitable, which findings would be reviewable by the High Court. Any termination of the Commissioner would similarly need to be supported by specific findings by the Municipal Corporation, and such findings would also be reviewable by the High Court; and ƒƒ In a state prepared to devolve management authority fully to the ULBs, the Commissioner could be recruited and hired directly by the elected body, and would serve and would provide services accordingly. This would be essentially the City Manager model that we see in Dayton and many other US cities. Corporatization of urban services Corporatization of services within ULBs could be useful, but there are accountability risks, fiscal risks, and coordination risks.32 Consider the three examples of corporatized service delivery in our study: (1) In the case of Joburg Water, corporatization was accompanied by strong external support for the company’s first 5 years (2001-2006). A conscious effort was made to transform the organizational culture of service delivery and instill professionalism. That effort brought significant improvements to the delivery of water and wastewater services in Johannesburg, but after another 15 years and political changes in the Council, some deterioration seems to have set in; (2) In the case of the JRA, the external support was not provided. Although governance arrangements have generally been the same as for Joburg Water, a deeply embedded culture of corruption and cronyism has taken root. It is at least possible that the extended chain of accountability implied in a separate enterprise is partly to blame. The Board of Directors is part of the problem, rather than providing effective oversight; and (3) In the case of AJL, service delivery has been good so far (better than with the two Johannesburg examples), though the extent of BRTS service in Ahmedabad is limited. One positive aspect of governance in this case is the direct participation in the AJL Board of the elected Mayor, the Chair of AMC’s Standing Committee, and the AMC’s opposition leader. This brings greater accountability than in the case of an ordinary city department in Ahmedabad. While a corporate form may offer more autonomy, it can provide less long-route accountability to the citizens it is intended to serve. To mitigate this accountability risk, it would be important for corporatization to be paired with a strong set of governance principles, along the lines of those recommended by South Africa’s King Committee on Corporate Governance (see Appendix B). These include governance focused on ethical leadership, attitude, mindset and behavior; a focus on transparency and disclosure; a balanced board of directors, to ensure that no one individual, or group of individuals yield unfettered power; independent non-executive directors; a requirement that directors apply independent and objective judgment, and always act in the best interests of the company (which can only be achieved if directors set aside their personal interests). To mitigate accountability risks, specific mechanisms for public participation in planning, budgeting, and policy-setting should be developed, and full transparency should be required for decision making and financial matters. ULB-owned enterprises can bring new fiscal risks. Such enterprises are analogous to state-owned enterprises. The IMF’s recent working paper on “Managing Fiscal Risks from State-Owned Enterprises” is highly relevant in terms of describing the types of fiscal risks posed by these structures, and the need for transparency and monitoring, and for management and mitigation of these risks. As the IMF points out, many governments struggle to monitor and contain the risks associated with these companies.33 The Ahmedabad 32 Note that we are speaking here of corporatization, not privatization. Corporatization involves simply forming a separate legal entity, with the ULB retaining ownership of that entity. 33 Baum, Anja, et al. "Managing Fiscal Risks from State-Owned Enterprises." (2020), downloadable at https://www.imf.org/en/ Publications/WP/Issues/2020/09/25/Managing-Fiscal-Risks-from-State-Owned-Enterprises-49773. 42 Institutional Models for Governance of Urban Services: Volume 1 transport entities, which carry large and unrepayable “loans” from the municipal corporation on their books, seem to reflect unmanaged fiscal risks. A systemic fiscal responsibility constraint is essential, so that a ULB-owned enterprise cannot spend beyond its means. In Johannesburg, coordination between corporate entities is weak. The ability to integrate common programmes across services provided by the City has emerged as a shortcoming of the entities model. For example, Joburg Water has significant interdependencies in service delivery with the JRA, but Joburg Water experiences significant delays in the resealing of roads after it accesses pipes and infrastructure, with reputational damage for Joburg Water and the City itself. Another example concerns Johannesburg’s longstanding billing system problems, inherited from separate administrations. The City required all entities to use SAP as a provider, but as each entity manages its own relationship with SAP it has become almost impossible to reconcile data. One informed observer reports that “the city systems have become so fragmented over time that it is impossible to produce a coherent, multidisciplinary response to a problem.” More management and financial autonomy may be desirable, but safeguards are essential to avoid disconnected planning and operations. For corporatization to succeed, it must be accompanied by other reforms. These include reforms related to accountability, strengthened citizen participation in capital/budget planning; accounting; and financing. The King IV principles and requirements for citizen oversight could be built into agreements between the ULBs and the corporate entity. Both corporatization and privatization may place more emphasis on short-route accountability. In some Indian cities, privatization of electricity services, and outsourcing of O&M for water services to private firms, have resulted in dramatic improvements in service delivery and customer service, almost always accompanied by a steep increase in charges for the service. This may improve service delivery and short-route accountability for customers with the ability to pay these increased charges. However, it is not clear what the implications would be for the indigent, who would be challenged to pay the higher charges, and would therefore have relatively less market power than those who are able to consume and pay for larger quantities. Institutionalize strong citizen participation in capital and budget planning The “short route” of accountability rests on a strong relationship between citizens and service providers. There are two possible short route reforms to consider: ƒƒ In cases where there is not a “natural monopoly,” market competition can support short route accountability. Services such as public transport and SWM arguably fall into this category. To give effect to consumer choice-based solutions, state law could authorize ULBs to license a number of private operators, who would be required to meet specified minimum equipment and operational standards. If desired, the ULB or state could also provide a portable subsidy or voucher so that even poor customers have resources to attract the attention of operators. Clients could then decide which bus they want to take, or which company they want to collect solid waste. The potential inefficiency, and wear and tear on city streets, from having several competing operators would have to be weighed against the potential efficiency gains from consumer choice; and ƒƒ Where there is a natural monopoly, as in the case of city water or city streets, mechanisms such as citizen oversight committees, service delivery report cards and participatory budgeting can add some degree of accountability to city services, provided that the responsible agency, whether at the state or ULB level, has the power and motivation to take action based on the results of such input. Policy Options for Consideration 43 Greater transparency in accounting, planning and budgeting, can play an important role in downward accountability. Transparency helps CSOs, citizens, and the press access information about services, reliability, efficiency, and cost. An informed an aware citizenry is more able to participate effectively and knowledgeably in processes that lead to service delivery outcomes. The next step is to provide permanent mechanisms for citizens to participate on a sustained basis. One key to the success of the institutions examined in the two US cities is that these institutions provide many opportunities for citizen participation and feedback, and the institutions are accountable to citizens, through elected officials, in a fairly direct line of accountability. These opportunities include advisory committees on long range planning, budgeting, land-use, and a myriad of other citizen-local government connections. In these cities, citizens expect to participate meaningfully in articulating their needs; and they expect institutions to give prompt attention to their concerns. Municipal and special district managers count on this active participation to know what the community needs, and these managers are held accountable by elected representatives. There are ongoing experiments in increased participation in some Indian cities – Bengaluru is one – and it could be useful to investigate and document those experiences. Active involvement of citizens in capital planning and budgeting is almost certain to result in some improvement to service delivery. Broad-based citizen committees to advise councils and managers on budgeting and capital improvements have two benefits: they provide a direct way for policy makers and administrators to hear about the user experience, and improve services in ways that they may not even have considered, and it can turn the members of citizen committees into citizen advocates for adequate tariffs and taxes. Moreover, having participated in the planning and budgeting processes, citizens are empowered to oversee the implementation of what has been agreed, and ensure that implementation is consistent with their expectations. Such committees, if they are given substantive roles, can be important ways of establishing and maintaining the social compact between the citizens and their local government. This does not mean occasional consultation on specific projects. It means giving a broad spectrum of citizens and institutional space to engage with all of the city’s budget choices, and/or all of the capital improvements budget – rich and poor people, business people and NGOs. To be effective, these committees would need to have access to all relevant information and studies, and would periodically make formal recommendations to the elected governing body. Accounting reforms A standard chart of accounts for all ULBs would be helpful, with or without any of the above reforms. Since the 11th Central Finance Commission, each Finance Commission has stressed the need to improve the data available on ULB finances. The adoption of a consistent national accounting system by all ULBs is not yet a reality, and financial statements do not seem to be widely available online. The 15th Finance Commission has recommended a comprehensive framework for public financial management, mostly with a view to national and state accounts, and this could easily be expanded to local government. Laws and regulations relating to ULB financial management, accounting, and reporting are probably best promulgated at a national level. Reliable, transparent information about ULB finances is essential to support good financial management and participatory decision making. Transparency and accountability can reassure citizens and taxpayers, and encourage national and state governments to entrust municipalities with discretionary revenue instruments. Sound and sustainable management of municipal fiscal and financial affairs can be supported by enforcing norms and standards for transparency and accountability. 44 Institutional Models for Governance of Urban Services: Volume 1 For major ULB service delivery departments, enterprise fund accounting would be useful. An enterprise fund is a separate accounting and financial reporting mechanism for which revenues and expenditures are segregated into a fund with financial statements separate from other local government activities. It is a way of ring-fencing the revenues and expenditures e.g., associated with the provision of water and sewer services, so that these are managed separately from other municipal funds, and any citizen, businessperson, NGO, etc. can see exactly what goes into providing water services – where the revenues come from, and where the expenditures go. It can be thought of as one step short of corporatization. Enterprise fund accounting does not require a separate entity. If a ULB creates a separate entity, it is important to prepare separate financial statements that give an accurate picture of the financial condition of the entity itself. Even without a separate legal entity, enterprise fund accounting can be useful for major infrastructure systems (e.g., water, sewer, SWM), especially if these services generate revenues in the form of user charges or earmarked taxes. Enterprise fund accounting focuses attention on long term financial stability by identifying the total direct and indirect costs of providing a service, and the sources and amounts of revenues that support that service. Chicago’s water enterprise fund is a good example. In addition to direct costs such as staff and other operation expenditures, a share of the general and overhead costs of the City are allocated to the enterprise fund. Examples of these indirect costs include administrative services such as building maintenance, fleet maintenance, legal services, and human resources. Enterprise fund accounting is a more powerful management tool than simple budgeting. Financing reforms For ULBs that rely on funding from state and national governments, transfers should be stable and predictable over the long term. ULBs will almost always welcome more funding from higher levels of government, regardless of the form it takes. Nevertheless, from a strategic perspective, conditional transfers such as centrally sponsored schemes may not be best choice of funding instruments, despite the emphasis that such schemes get in each successive Finance Commission. The conditions and incentives that come with conditional transfers carry serious limitations and can cause unintended distortions. Effective cities need not only financial resources, but also fiscal autonomy. ULBs seeking to better address the needs and preferences of their citizens are generally best served by: (1) stable and unconditional transfers and/or tax sharing, allocated in inverse proportion to own-source revenue capacity; and (2) more authority over productive and buoyant revenue instruments, such as property taxes. Greater reliance on own source revenues would enable a meaningful social compact with citizens. The cities of Chicago, Dayton, Johannesburg and Mbombela, as well as the MWRD of Greater Chicago, all support their services with property taxes as well as substantial user charges, and the Dayton RTA is supported by a sales tax, as well as user charges. India does not have a sales tax, but a predictable and certain share of the GST would accomplish much the same thing as a sales tax. And as to property tax, the tax authority of Indian ULBs is limited and uncertain. Property tax revenues are very low by global standards, despite many efforts to improve property records, expand coverage, reduce exemptions, and streamline assessment methodology, tax administration and collection efficiency. This undermines long term financial planning and impacts negatively on ULBs’ ability to plan effectively and to leverage the property tax revenue stream through borrowing. Policy Options for Consideration 45 Separating capital investment and operations is problematic. In terms of service delivery outcomes and long-term sustainability, global experience has shown that capital expenditure, operating expenditure, and infrastructure planning for any given service should ideally all be the responsibility of a single entity which is fully accountable for outcomes. Such a principle ensures that operating considerations and costs are a key element of infrastructure design, and that the entity will have an incentive to operate and maintain infrastructure so as to maximize its useful life and minimize the need for premature replacement or rehabilitation. Optimizing the life-cycle cost of infrastructure is facilitated when a single entity makes investment and operational decisions and bears the costs of both types of decisions. It is therefore recommended that responsibility for capital and operating expenditure be consolidated in a single institution, whether it is the ULB, a consolidated state-level agency, a municipal enterprise, or some other institutional form. 46 Institutional Models for Governance of Urban Services: Volume 1 Appendix A: Descriptive Details Municipal Departments Chicago Department of Water Management Chicago’s water treatment and distribution system is the biggest and most complex of the services examined in our research. Chicagoans are proud of their water system, although there are chronic issues with lead pipes in older sections of the distribution system. The source of the city’s water is Lake Michigan, Figure 10 Chicago departmental structure Chicago Residents City Council Mayor City Clerk City Treasurer Council Office of Committees the Mayor Finance and Legislative and City Community Infrastructure Public Safety Regulatory Administration Elections Development Services Services Office of Budget Department of Chicago Police Board Department of Board of Election Office of the and Management Planning and Department Streets Commissioners Inspector General Development of Public Health Civilian Office and Sanitation Department of Department of of Police Chicago Commission on Department of Finance Cultural Affairs Accountability Department Human Relations Buildings Department of and of Transportation Special Events Chicago Police Department of Administrative Mayor’s Office for Department Department of Business Affairs Hearings Department of People with Water and Consumer Housing Disabilities Office of Management Department Protection Emergency of Law Department of Chicago Management and Chicago Animal Family and Department Department of Communications Care and Control Support Services of Aviation Human Resources Chicago Fire Chicago Department License Appeal Department of Public Library Commission Procurement Office of Public Services Safety Board of Ethics Department of Administration Asset and Information Management Appendix A: Descriptive Details 47 which means that no raw water storage reservoirs are needed. The city operates 2 large water treatment plants and 12 pumping stations. Water is provided throughout Chicago and suburban communities. Organization Notwithstanding the size of Chicago’s water supply operations, the institutional aspects are straightforward. The City provides water through its Bureau of Water Supply, which is one of four bureaus in the DWM.34 That Department is headed by a Commissioner of Water Management,35 appointed by the Mayor and approved by the City Council. The Commissioner is supported by an array of Deputy Commissioners, one of whom is in charge of the Bureau of Water supply. The Mayor of Chicago is the CEO of the city. Chicago’s Mayor is elected by popular vote of Chicago residents every 4 years, along with the City Clerk and the City Treasurer.36 These three city-wide elected officials are directly accountable to all the citizens of Chicago, and each of the City’s departments are accountable to one of them. There is no confusion or ambiguity about who is in charge. The City Council of Chicago, made up of 50 Aldermen, is the governing Body. Each Alderman is elected by the citizens of their legislative district (ward), also every 4 years. As the legislative body, the Council must vote on ordinances (by-laws), proposed loans, grants, bond issues, land acquisitions and sales, and other financial matters. Moreover, Aldermen “often are considered the mini-mayors of their ward. When something goes wrong in a neighborhood, or when someone wants to get something done that requires city approval, the first step is often a call or an email to the Alderman’s office.”37 The DWM coordinates with other City services through the ‘chain-of-command’ shown in the organizational chart above. Deputy Commissioners coordinate with Commissioners, who then coordinate with Commissioners of other City departments. Coordination between the various services, including all aspects relating to infrastructure, planning, finance, and other matters is internal to the city and its management structure. There are no external approvals or permissions required. Finances The Bureau of Water Supply is financed through the City’s Water Fund. This is a separate fund within the city’s budget. It is a ring-fenced ‘Enterprise Fund’ used specifically for water services. The Water Fund does not draw on the general fund or other portions of the budget. The vast majority of Water Fund revenues – US$ 722 million – are generated from water rates billed to consumers in Chicago and in the 126 other local governments that purchase water from Chicago. Other significant revenues include US$ 10 million in transfers from other city funds and US$ 18.5 million in miscellaneous revenues. In 2019, the revenues for the Water Fund were approximately US$ 761 million. By ordinance of the Council, financial statements of the Water Fund must be audited by independent certified accountants each year. Water Fund expenditures include direct costs and an allocated share of indirect costs. In 2019, these expenditures included US$ 500 million for operations, US$ 5 million for capital outlays, US$ 217 million for 34 The other three bureaus are Administrative Support, Engineering, and Operations and Distribution. 35 “Commissioner” is the term used in Chicago for appointed Heads of Departments. 36 The Treasurer and Clerk are independent from the Mayor and the Council. Each has the powers and functions described in the Chicago Municipal Code. The Treasurer is the banker, custodian and investor of the city’s funds. See https://www.chicagocitytreasurer.com and Chapter 2-32 of the Chicago Municipal Code at https://codelibrary.amlegal.com/codes/chicago/latest/chicago_il/0-0-0-2441302. The City Clerk is in charge of record-keeping. See Chapter 2-12 of the Chicago Municipal Code at https://codelibrary.amlegal.com/codes/ chicago/latest/chicago_il/0-0-0-2440329#JD_Ch.2-12. 37 “What is a Chicago alderman and what do they do?” Ben Meyerson, Chicago Tribune, February 22, 2019, retrieved April 11, 2021 at https://www.chicagotribune.com/ct-ben-meyerson-20180202-staff.html. 48 Institutional Models for Governance of Urban Services: Volume 1 debt service, and US$ 40 million for pensions. Of the operational expenses, US$ 215 million represented direct expenditures by the DWM itself. Of that number, US$ 89 million was for the Bureau of Water Supply (obtaining, treating, and testing the water), and another US$ 91 million went to the Bureau of Operations and Distribution (transporting the water to customers and effluent to the MWRD sanitary sewer mains). US$ 31 million went to the Fleet and Facility Maintenance Department to maintain the vehicles, equipment, and installations used by the Department. The largest amount of Water Fund expenditures – US$ 493 million – were an allocated share of the city’s general and administrative expenses (e.g., information technology, human resources, treasury, accounting, legal and inspector general). Each enterprise fund in the city’s budget makes such a contribution to this diverse category of expenses. The Department receives the vast majority of its capital funding through the City’s issuance of municipal bonds. This is reflected in the relatively low annual budget for capital expenses (approximately US$ 5 million) and the relatively high figure for debt service (US$ 217 million). Water charges are often pledged to ensure repayment of municipal bonds issued for water projects. In addition, the Water Fund annually receives about US$ 10 million for capital expenses (smaller items that are not included in municipal bond issues). Transparency, Participation and Accountability Neither the Department nor the Bureau have a ‘Performance Compact’ with the Mayor or the citizens of Chicago (or any of the other 126 communities to which they provide drinking water). Budgets are not linked to performance targets or indicators. Community satisfaction is based almost solely on the continued, predictable supply of water that meets federal and state safety standards. Since the Bureau consistently meets that standard (and has for decades) it would be difficult to calibrate different levels of ‘better’ or ‘worse’ performance to which budget impacts could be linked. External governance is limited to compliance with water quality and financial norms. The City is required to meet federal and state water quality standards, and to produce annual financial statements. Because the safety of the drinking water is a primary indicator of the quality of that governmental service, the DWM prepares a Water Quality Report on an annual basis. This report documents continued compliance with federal and state water standards, and identifies specific contaminants discovered in the water supply during that fiscal year. The State of Illinois requires all local governments to comply with Generally Accepted Accounting Principles (GAAP), and the federal government requires compliance with those standards (as well as additional grant- or formula-specific accounting standards) when federal funds are involved. The City’s Department of Finance prepares independent financial statements for each of the Enterprise Funds. In addition, it produces a Comprehensive Annual Financial Report for the DWM. While additional information is posted periodically on the City’s website, it does not appear that the Department regularly prepares other reports on operations, investments, or achievements. The City maintains a website related to the performance of municipal bonds issued for water system improvements. That website indicates that the City’s senior lien water revenue bonds (to be repaid, if necessary, with first priority payments from water rates) maintain an A+ Standard and Poor’s rating and an AA Fitch rating. Second lien revenue bonds have an A rating from Standard and Poor’s, an AA-rating from Fitch, and an AA rating from Kroll. These relatively high bond ratings indicate that the rating agencies believe Chicago’s water bonds to be safe investments. The ratings also indirectly indicate that investors are comfortable that the City’s program of capital improvements is adequate to maintain the reliable operation of the system, so that water revenues will remain stable and that bond defaults are unlikely. Appendix A: Descriptive Details 49 Service delivery performance Chicago’s water supply meets federal and state safety standards, though there are problems with lead service lines. Potable drinking water meeting standards for both quality and pressure is available throughout the city and its suburbs 24 hours a day. However, Chicago has some 400,000 lead service lines, which can contaminate the otherwise healthy drinking water. Some 80% of Chicago homes are still connected to water mains through these lead service lines.38 Although Chicago’s lead problems are among the worst in the nation, many cities have similar problems, and the Biden administration’s “American Jobs Plan” aims to replace all lead water pipes in coming years.39 The City of Chicago conducts a variety of surveys to evaluate citizen satisfaction with its services. Its 2021 Budget Survey asked citizens to rank 10 city services in terms of importance. Water supply was included in a broad category titled ‘Infrastructure Services’, which the public ranked as third in importance after ‘Community Services’ and ‘Public Health’. Although the City does not conduct citizen satisfaction surveys related specifically to water supply or organize an advisory group related to that service, it does operate an automated website with 55 different forms to report or comment on city services. Six of those forms enable citizens to file reports regarding water services, including: low water pressure, open or damaged water hydrant, standing water, water leak, water in basement, and water in the streets. Overall, our subjective rating for the service delivery performance of Chicago’s water supply is very good. If not for the lead service lines, our rating would have been excellent. Dayton Division of Waste Collection In Dayton, Ohio, solid waste services are delivered by and financed through its Division of Waste Collection. This is a unit within the Department of Public Works. Services provided by the department include: ƒƒ Providing waste containers to over 67,000 homes; ƒƒ Repairing and replacing those waste containers; ƒƒ Weekly collection of non-recyclable waste from 67,000 homes; ƒƒ Bi-weekly collection of recyclable waste from those homes using a “single stream” collection system; ƒƒ Collection of special/heavy materials, metal items, and tires on fixed schedule; ƒƒ Performing neighborhood cleanups upon request; ƒƒ Cleaning up illegal dump sites; ƒƒ Operating a green debris landfill for yard, tree, and similar waste; ƒƒ Participation in the Montgomery County Solid Waste District (described below); and ƒƒ Contracting to collect solid waste from two nearby local jurisdictions on a contract basis. Organization The governing body for the City and all of its departments is the Dayton City Commission. This is equivalent to a City Council in other cities. The Commission is made up of a Mayor and 4 Commissioners elected at-large (not by geographic district) on a non-partisan basis. They serve overlapping terms of 38 “Here's Mayor Lori Lightfoot's Plan to Remove Chicago's Lead Pipes,” NPR/WBEZ September 11, 2020, retrieved May 14, 2021 at https://www.npr.org/local/309/2020/09/11/911903152/here-s-mayor-lori-lightfoot-s-plan-to-remove-chicago-s-lead-pipes 39 “Biden Takes Moonshot Approach to Replacing Lead Water Pipes,” Bloomberg Law, March 31, 2021, retrieved May 14, 2021 at https://news.bloomberglaw.com/environment-and-energy/biden-takes-moonshot-approach-to-replacing-u-s-lead-water-pipes 50 Institutional Models for Governance of Urban Services: Volume 1 4 years each. This ensures continuity over time, since the maximum number of new Commissioners at any point time is two of the four. Dayton was the first large American city to adopt a City Manager form of municipal government, in 1913. In this form of government, an elected City Council appoints a City Manager to serve as the CEO of the City. The Manager, directly or through deputies, then employs the rest of the City’s staff. In Dayton, the agreed job qualifications for their City Manager include: ƒƒ Graduation from a 4-year college; ƒƒ Advanced degree in public administration (desired); ƒƒ 5 years of progressive public administration work; ƒƒ Working knowledge of city departmental functions; ƒƒ Skills in budgeting and administering budgets; ƒƒ Skills in preparing and analyzing comprehensive reports; ƒƒ Ability to hire, fire, and supervise staff; and ƒƒ Effective oral and written communications skills. The City Manager is responsible for all aspects of city management and oversees a city budget of over US$ 600 million and a workforce of nearly 2,000 employees. These staff members are responsible for development and implementation of the City’s comprehensive plan; the appropriate use of the City’s fiscal, human and other resources; the City’s police and fire departments; all of City’s public works and services; treatment and distribution of water, management; recreational facilities and youth services; and many other areas. The City Manager and City staff, under the policy direction and oversight of the Dayton City Commission, have comprehensive responsibility for managing virtually all aspects of life in the City. The County and State are responsible for public health, a school board is responsible for public schools, and a District (discussed below) is responsible for wastewater, but with these exceptions and few others, responsibility for the institutional and organizational structure of public services rests with the City Manager and her staff. The City Manager is responsible for coordinating these activities internally and with external agencies. One important external operating relationship is with the Montgomery County Solid Waste District, which was formed by the County to stabilize relationships between 15 local government entities and private operators of landfills. The District is governed by a 15-member board, with each participating local government having one representative. The City has a 5-year (renewable) contract with the District setting forth the terms under which the District will accept solid waste and residential recyclable materials. The District operates a transfer station that accepts waste from participating local governments. It has contracts with 5 private landfills to accept and manage waste in compliance with environmental regulations. The District was created in part to prevent landfills from overcharging individual local governments who did not have alternative ways to dispose of solid waste, and it is working well. External connections relate to outsourcing of commercial recycling, and waste collection contracts with other local governments. Because the Solid Waste District only accepts household recycling products, the City has a contract with an external recycling contractor to accept and process other recycled waste. The City also contracts with other jurisdictions to collect solid waste and household recyclables in return for a fee. Dayton sets the fee higher than the actual costs for two reasons. First, Dayton does not want to put its equipment and staff to work for non-residents unless there is a clear benefit to its citizens. Selling services at a profit ensures that Dayton is receiving more money than is needed to offset the use of its staff and equipment. Those extra revenues can offset financial losses on other City services (and indirectly reduce tax rates for Dayton citizens). Second, the City is prohibited by state law from subsidizing public entities outside the city. Appendix A: Descriptive Details 51 Finance The budget for waste collection in Dayton is part of the City’s general fund and is not ‘ring-fenced’. While the Division generates revenues by charging fees for its services, it is not legally required to conduct operations within the limits of those collected revenues. It sometimes receives annual subsidies from the Dayton general fund. The City has three ring-fenced ‘Enterprise Funds’ for the operations of its airports, its water operations, and its golf courses, but does not have one for solid waste collection. However, the Division of SWM is subject to an informal ring-fence, in that its revenues are calculated and set (and adjusted annually based on the CPI) at a level intended to offset its operating costs. Each year, the City hopes there will be no need to allocate general fund revenues to the Division. However, in most years the collected revenues do not cover operating expenses due to unexpected equipment failures or other reasons, and the general fund does ‘make up the difference’ between collected funds and actual Division expenses. The City’s annual budget estimates revenues and authorizes expenditures for each department. The 2020 full year budget was US$ 10,890,700. As of September 2020, the Division of Waste Management had generated revenues of US$ 6,774,219 and expenses of US$ 7,459,667. Any deficit is covered through grants from other governmental entities for specific projects or services, or by transfers from the City’s general fund. Dayton charges all property owners a ‘waste collection fee’ to offset the costs of its services. On a quarterly basis, the bills for those services are included with bills for City water services, to reduce mailing and distribution costs. Waste collection fees are set by the City Commission and are annually adjusted to reflect changes in the CPI. The two main uses of operating revenues are for employee costs (salaries and benefits), and for maintenance of waste collection vehicles and equipment. A third major expenditure item is payments to the Montgomery County Solid Waste District for acceptance of waste and recycling. The major capital expenditure is the regular purchase of expensive waste collection vehicles. Each year, the Division’s request to purchase and replace equipment is included in the capital budget request of the Public Works Division, which is then included in the City Capital Improvements Planning process. Because of budget constraints, each department usually receives only a portion of its request. This year, the Division submitted a request for US$ 700,000 (enough to replace two trucks) even though their replacement schedule suggested that four should be replaced. Each year the Division must defend the cost-effectiveness of its capital request – this means explaining why the cost of buying a new vehicle is actually lower than the cumulative cost of increasingly expensive repairs over several years. Transparency, Participation and Accountability There is no written performance compact or similar document, either between the Division and city, or between the city and its citizens. Based on decades of experience, residents simply expect their waste and recycling to be picked up regularly, and it is only if there are problems or disruptions in the system that the performance of the Division would come under scrutiny. The State of Ohio requires that all local governments comply with GAAP. The Ohio Auditor of State provides assistance to the State’s 5,900 local governmental agencies, entities, and organizations in performing individual audits. The City’s Division of Tax and Accounting Administration supervises the accounts, collects revenues, makes payments, administers payroll, and audits the accounts of all City departments, including the Public Works Department. That Division also manages all external financial reporting of the City to state and other authorities. 52 Institutional Models for Governance of Urban Services: Volume 1 The City of Dayton appoints several boards, commissions, and citizen committees. Among these are the Environmental Advisory Board, whose duties are “to identify, advise and review environmental matters concerning the City, the quality of the environment be protected, maintained and improved, and to assure its operations are not harmful to the environment.” The Board is made up of 9 members, appointed by the City Commission, who must possess a “high level of interest, expertise, educational background, or work experience in environmental protection”. Service delivery performance The city collects waste each week from city-provided containers at over 67,000 residences; collects single stream recyclables every other week from those same residences; provides pre-scheduled services like bulk waste pick-up, metal and tire collection; removes litter, debris, waste and bulk from illegal dump sites; manages a green debris landfill for city and public use; provides recycling education through student tours and informational brochures; repairs and replaces waste containers as needed; and provides resources for neighborhood clean-up scheduling. In order to obtain general feedback regarding public services, Dayton operates a website called ‘Dayton Delivers’. Part of the website is titled ‘Dayton Collects’, which provides address- and area-specific information about waste collection schedules. An additional ‘Feedback’ section – generalized for all city services – allows citizens to make specific comments on city performance. The City conducts periodic surveys to gather citizen feedback on services. The most recent survey found that the 4 most important services were Fire and Emergency Medical, Water and Wastewater, Police, and Neighborhood Conditions. The city received high ratings on the first 3, with lower scores on the fourth. After these 4, citizens ranked waste collection and recycling as next in importance - 21% of citizens were ‘very satisfied’, 50% ‘satisfied’, and only 9% ‘dissatisfied’ with the quality of those services. The survey also allows open-ended comments, and in the latest survey, only 7 comments (out of several hundred) were about waste management services. Overall, our subjective rating for the service delivery performance of Dayton’s SWM is excellent. Mbombela Solid Waste Department Mbombela provides general municipal waste services, including waste collection and transfer, waste disposal facilities, and litter removal and street sweeping on main roads, the central business district, and public spaces. In the urban parts of the city (70% of the population), bagged waste is collected door-to- door on a weekly basis from residential customers, and more frequently from commercial customers. Within townships (20% of the population), this collection is done by community-based contractors, while in the bulk of the city, collection is done by the city’s SWD. The Department also operates 3 landfills, whose management is outsourced to 3 separate contractors. Organization The governing body is the Municipal Council. Members of Council serve 5-year terms. In Mbombela, there are 90 members of Council, 45 of whom are constituency representatives (ward councilors), while the remaining 45 are chosen from party lists so that the number of party representatives is proportional to the votes each party received. The Council must approve an annual budget, including rates for property taxes and tariffs for services, as well as any long-term borrowing, bond issues, or contracts with long-term financial implications. Appendix A: Descriptive Details 53 54 Figure 11 City of Mbombela Organizational Chart HEAD OFFICE (1-25) CENTRAL REGION (26-30) EASTERN REGION (31-35) NORTHERN REGION (36-40) SOUTHERN REGION (41-45) COUNCIL OFFICE OF THE SPEAKER OFFICE OF THE EXECUTIVE MAYOR OFFICE OF THE CHIEF WHIP 1 X Speaker 1 x Executive Mayor 1 x Chief Whip 10 x Full time Councilors (MMC) MPAC 1 x MPAC Chairperson MUNICIPAL MANAGER (Support sta report to GM O ce of Council) Institutional Models for Governance of Urban Services: Volume 1 OFFICE OF THE DEPUTY OFFICE OF THE DEPUTY MUNICIPAL MANAGER: MUNICIPAL MANAGER: INSTITUTIONAL SERVICE DELIVERY DEVELOPMENT Department: Department: Department: Department: Department: Department: Department: Department: Department: Department: Department: Department: O ce Of Regional Corporate Strategic Legal Community Public Safety Water And Energy Financial City Planning Public Council Centre Services Management Services Services Sanitation Management and Works, Roads Coordination Services Development and Transport Mbombela has both an Executive Mayor and a MM. Pursuant to Section 48 of South Africa’s Municipal Structures Act, the Mayor is chosen by the Council, from among its members, and has executive powers as delegated by the Council.40 The MM is appointed by the Council on a performance-based contract. South Africa’s Municipal Systems Act requires that the municipality assign clear responsibilities to management, with the MM accountable for overall performance of the municipality. In principle, this imposes a duty on the Executive Mayor and MM to ensure clear and accountable relationships, but in practice disputes between mayors and managers are not uncommon in South Africa. In some cities, though not in Mbombela, these conflicts have led to gridlock and crisis. Although the Council (not the Mayor) ultimately appoints the MM, there is a strong element of an employee-employer relationship between the MM and the Executive Mayor. The MM is the CEO of the municipality. A Deputy MM for Service Delivery reports to the MM, and a General Manager for the Department of Community Services reports to the MM. Finally, a Senior Manager for Solid Waste reports to the General Manager, and that official is effectively in charge of day-to-day solid waste operations. There can be ambiguity in the accountability of top managers to the MM and to political leaders. The MM and top management are appointed by the Council. In principle these officials report to the MM, not to the Mayor or Mayoral Committee member responsible for their portfolio. In practice however, Mayoral Committee members often mirror administrative functions and encourage direct and operational accountability. This was evidenced in all four services reviewed in the South African cities covered by our research. In Mbombela, the SWD reports informally to the MMC for Community Services on a daily basis, with more formal reporting to the MMC on a monthly basis. In practice, this daily reporting may provide closer oversight than through the MM. The Ehlanzeni District Municipality41 provides support to and monitors the solid waste function within Mbombela. As part of its support role, the District Municipality assists its local municipalities collectively by developing an Integrated Waste Management Plan (IWMP) for the District. The Mpumalanga provincial government also plays a support, monitoring and regulatory role over the solid waste function and licenses landfills. The national Department of Environmental Affairs develops national norms and standards and manages the waste information system. The regulation of hazardous and medical waste is also a national competence. Finances Mbombela’s solid waste collection services are funded by a combination of customer tariffs and a dedicated portion of the municipality’s Equitable Share transfer from national government. These two sources of funding cover direct operating costs, such as staffing, contractors and operating costs, but do not cover the municipality’s indirect and overhead costs attributable to solid waste services. There is no ring- fencing of revenues, and neither are there any charges to the SWD for enabling services provided by other departments of the City, such as human resources, finance, and legal services. The City’s direct expenditure on O&M comes to approximately US$ 10 million per year. The following data on operating expenditure is drawn from a 2017 report of the Ehlanzeni District Municipality, of which Mbombela forms a part: 40 Formally, a mayor is elected by the municipal council. Given that South Africa’s political parties instruct members how to vote, even on local matters, decisions about mayors are usually made at the national party level, especially for larger cities. This undermines both councilors’ and mayors’ accountability to local citizens. 41 A district municipality is a larger unit of local government, which includes several local municipalities. Appendix A: Descriptive Details 55 Budget items  ZAR Total waste budget  125,077,280  Fleet and equipment including maintenance and fuel  12,230,390  Waste personnel salaries  82,610,157  Outsourced services  – Waste collection  7,588,854  Landfill management  11,141,819  Solid waste-related infrastructure such as landfills and transfer stations have been financed with national transfers and local reserves. A Municipal Infrastructure Grant (MIG) is provided by national government, and a portion is allocated to support SWM in poor areas of the City. The City’s own reserves are used to fund fleet and other capital expenditures. Transparency, Participation and Accountability Formal reports are produced quarterly for the Municipal Council and are submitted through reporting lines to the MM, thence to the Mayor and Mayoral Committee, and to the Council and its committees. Quarterly reporting is done in terms of a key performance indicator (KPI) from the Service Delivery and Budget Implementation Plan (SDBIP) that the Council adopts annually with the budget. This indicator is rather weak (number of new additional formalized households with access to weekly waste removal services) and does not speak of the ongoing service delivery. Quarterly reports are aggregated into an annual report, and annual and quarterly reporting is also consolidated with other local municipalities in the District for reporting to the Provincial Department of Cooperative Governance. South African municipalities are required to follow national standards of Generally Recognized Accounting Practice (GRAP) in their financial accounting. Internal financial and performance auditing is conducted quarterly, with the results submitted to the municipality’s Audit Committee.42 The Annual Report and Annual Financial Statements are also externally audited by an independent auditor, on behalf of the Auditor General of South Africa. Citizens participate in planning through the municipality’s Integrated Development Plan (IDP) process and through ward committees. Ward committees and councilor-convened community meetings provide inputs on community needs that are considered in the IDP prioritization process. Annual reporting on the IDP is published on the municipality’s website. The IDP office has four regions with 2 IDP co-ordinators in each. These individuals live in their respective regions and are integrated in the community. As part of the IDP office, their main responsibility is community-based planning, but many play a role engaging with municipal departments to flag and resolve service delivery problems. Mbombela has a new customer care department that was inherited from the municipality’s merger with the former municipality of Umjindi. This department is still extending its work across the Mbombela boundaries. For solid waste services, the municipality will rely on this new customer care department for picking up citizen complaints. 42 Municipal councils are required by Section 166 of South Africa’s Municipal Finance Management Act (2003) to constitute an Audit Committee as an independent advisory body to advise council and management on internal financial control and internal audits; risk management; accounting policies; the adequacy, reliability and accuracy of financial reporting and information; performance management; governance; compliance with legislation; performance evaluation; and other issues. 56 Institutional Models for Governance of Urban Services: Volume 1 Customers also call the municipal administration directly. In many communities, people find it easiest to contact their ward councilors. In addition, there are ward facilitators employed in each of the municipality’s 45 wards, which report to the Office of the Speaker, and these may play some role in resolving service delivery problems. The SWD considers the public participation unit in the Speaker’s Office to be responsible for receiving petitions and referrals from the presidential hotline, and for dealing with NGOs and CBOs. The central role of this unit is to co-ordinate ward-based community involvement, consolidate community input and share this with management. Service delivery performance Our South African research observed that “a defining feature …is the lack of strategic documentation and systematic collection and collation of performance information.”43 In urban areas, the City conducts weekly door-to-door bagged collection in formal areas, accounting for 46,528 residential households. It also collects waste from 2,162 commercial establishments 3 times per week, or more by special arrangement. In rural areas (70% of the City’s population) 183 skips are provided on the main road for collections. The City is investigating whether to undertake bagged or bin collections in rural areas. The District’s Integrated Waste Management Plan laments the poor capabilities of, and availability of performance data for solid waste in Mbombela and much of the rest of the District. The IWMP points to the following performance issues: ƒƒ Only urban households receive weekly solid waste service; ƒƒ In 2017, one of the three landfills managed by Mbombela, in Hazyview, was not licensed and was found burning waste, which is prohibited; ƒƒ The IWMP states that “current landfill operations across the municipalities are without doubt marked with no or low level of regulatory compliance to any legislative provisions, licence conditions and minimum requirements”; and ƒƒ It found that the lines of accountability were blurred between municipal officials and contractors and that municipal officials had ‘abdicated’ their responsibility for the management of landfills. Overall, our subjective rating for the service delivery performance of Mbombela’s SWM is fair. Ahmedabad Water and Sewer Organization At the outset, it is useful to mention that there are two kinds of ULBs in Gujarat. Nadiad is a “Nagar Palika” (sometimes translated as municipality, historically a fortress town) while Ahmedabad is a “municipal corporation.” The schematic below illustrates the organization of the two types of ULBs.44 Both types of ULBs are subordinated to Gujarat’s Principal Secretary for Urban Development. This is a marked contrast with the US and South African examples discussed above. Chicago and Dayton are both “home rule” cities operating under a City Charter, and thus can deal with almost all municipal matters without the intervention or oversight of their respective States. Mbombela is a municipality, which under South Africa’s 43 See page 48 of Nishendra Moodley’s report prepared in connection with this research. 44 Sourced from 2008 Audit Report of the Controller & Auditor General on the performance of PRIs and ULBs in India, retrieved at https://cag.gov.in/webroot/uploads/download_audit_report/2008/Gujarat_ULB_PRI_2008.pdf. Appendix A: Descriptive Details 57 constitution is part of the local “sphere” of government, different from both national and provincial spheres in its powers and functions and has significant autonomy in local government matters. The governing body is referred to as the Ahmedabad Municipal Corporation (AMC). Members are elected for 5-year terms and are referred to as Corporators or Councilors. They appoint a Mayor and a Deputy Mayor from among their number. Local policy matters are decided by the Corporation, which is not required to secure the state’s approval for policy decisions. The State’s approval is required for certain matters such as in defining the institutional structure, undertaking borrowings, and approval of land use plans. The Municipal Commissioner of Ahmedabad is the CEO, and reports to Gujarat’s Department of Urban Development and Urban Housing, and in turn AMC staff report to the Commissioner. The organizational structure is proposed by the Municipal Corporation and approved by the state government. Once approved, the Municipal Corporation can recruit the staff without any intervention from the state government. As staff is recruited by AMC, they are not transferrable to other ULBs, but there may be transfers within AMC departments. For any promotions, 60% of the vacant posts are to be filled by internal staff, while the remaining 40% are open for external candidates. Figure 12 Organogram for Gujarat ULBs Principal Secretary, Urban Housing & Urban Development Department Municipal Corporation Nagarpalikas Chief Engineer Chief Executive Officer Executive Officer Jr. Engineer Revenue Health Municipal Tax Health Officer Officer Engineer Officer Officer ELECTED BODIES Municipal Corporation Nagarpalika Mayor President Various Committees Various Committees The AMC is wholly responsible for providing water supply and sewerage services. The city engineer heads the Department of Water Projects, Water Operations and Drainage. Finance Water and sewerage charges are collected as part of property tax. AMC does not levy user charges for water or sewerage. The Corporation is empowered to decide the water tax rates that are levied as part of the property tax. Currently, an additional amount of 30% is collected as water tax and another 30% is collected towards conservancy tax. Cost recovery in FY 2019-20, presumably only for operational expenditure, is reported at 58% on the water side, and 32% for sanitary sewerage. There is no ring-fencing of revenues for water supply and sewerage operations. 58 Institutional Models for Governance of Urban Services: Volume 1 Cost recovery in the future is likely to be lower. Currently, AMC draws 850 million liters per day of water from Narmada Canal. Pursuant to a Gujarat state government order, AMC must pay for raw water and the rate is to be increased annually by 10%. This is likely to negatively impact future cost recovery as the property tax is not revised annually. The property tax rate was last revised in 2005, so the deficit is growing and is being funded from AMC’s general fund. The Corporation is empowered to revise taxes, tariffs, and fees without securing approval from the state government. Municipal corporations in Gujarat have the power to undertake any work without any limit on the total amount, provided the ULB’s finances permit it. The State government has initiated a process to fix a minimum rate for user charges, to be charged by all ULBs, for various urban services, to cover O&M cost. AMC does not have a separate account for water supply and sewerage operations and hence the department’s revenues are not ring-fenced. Transparency, Participation and Accountability The elected Municipal Corporation cannot be said to be driving ULB administration, given that all departments report to the state-appointed Commissioner. The elected wing can only perform a legislative role of approval, and final decisions rest with the state government. By and large, no inputs are taken from citizens while formulating tariff or tax policy. For revisions of taxes, fees or charges, citizens’ views are not sought. Sometimes these are increased and then are protested by citizens, in which cases the charges might be revised downwards to pacify the protesting citizens. The Mayor may conduct citizen meetings, wherein complaints of citizens are noted. This is not a legal requirement but is sometimes done for political gains. Similarly, ward members may also visit localities and resident welfare associations (RWA) to learn about problems faced by citizens/residents. A water works committee has been established but is mostly ceremonial in nature. The Water Works Committee must be kept informed about water works activities. However, citizens are not part of the Water Committee. AMC maintains a Comprehensive Complaint Redressal System (CCRS), a web-based system to enhance citizen satisfaction. CCRS automates the complaint process, from registration to closure. It ensures that a complaint gets attention within a specified time, or it is escalated to higher authorities for attention and intervention. Citizens can lodge complaints through a call centre, website, or ward office. Once a complaint is registered, it is assigned to an area officer. The system sends an SMS to the officer alerting them to take action. The officer calls the complainant, if necessary, to seek details. The officer is expected to resolve the complaint within a specified period. Once resolved, the officer marks the complaint as closed. The citizen receives an SMS confirming resolution of the complaint. If not satisfied, they can re-open the complaint, which is then escalated to a higher authority. On repeated failures to resolve the problem, it is escalated to the Deputy Commissioner. The advantages of CCRS are: ƒƒ Citizens need not go to ward offices to register their complaints; ƒƒ The system is available round the clock - call centre, website, SMS, email, interactive voice response, ward offices and mobile applications; ƒƒ Improved communication by way of SMS/Email alerts; and ƒƒ CCRS provides data on frequent complaints and average turnaround time for each kind of problem – this helps the ULBs to focus on improving services. Appendix A: Descriptive Details 59 Service delivery performance Ahmedabad’s service level benchmarking indicates the following for water and sewer services: Water ƒƒ Population covered by direct supply: 98% ƒƒ Per capita supply: 142 LPCD ƒƒ Extent of metering: 0% ƒƒ Non-revenue water: 22% ƒƒ Quality of water supplied: 97% ƒƒ Daily hours of supply: 2.5 ƒƒ Cost recovery: 58% ƒƒ Efficiency of collection of charges: 67% Sewer ƒƒ Coverage of toilets: 100% ƒƒ Coverage of wastewater network: 93% ƒƒ Collection efficiency of WW network: 94% ƒƒ Adequacy of WW treatment capacity: 95% ƒƒ Quality of wastewater treatment: 90% ƒƒ Extent of reuse and recycling of WW: 12% ƒƒ Efficiency in redressing complaints: 93% ƒƒ Cost recovery: 32% ƒƒ Efficiency in collection of charges: 67% These indicators are broadly in line with the other Indian cities covered in this study. Ahmedabad does better than most others in terms of population covered by direct supply of water, and quantity per capita. However, Ahmedabad is the lowest of the 4 cities in terms of hours per day of water service and has the lowest water charge collection efficiency of the 4 cities. Unlike the 2 Punjabi cities, there is no metering of water usage in Ahmedabad. Despite the very few hours of daily service and low cost of recovery, our subjective rating for Ahmedabad’s water and sewer services is good, considering the spatial coverage of water and sewer, the water quality, and the per capita water quantity. Ahmedabad solid waste management Organization SWM is the responsibility of the Solid Waste Management Department, headed by a Director. The Director is assisted by sanitary inspectors and other technical staff, and reports to the Municipal Commissioner. The AMC is empowered to recruit staff without state government approval, although the staffing structure needs to be approved by the state. For a general discussion of Ahmedabad’s organizational and institutional structure, please see the preceding discussion of Ahmedabad’s water and sewer services. 60 Institutional Models for Governance of Urban Services: Volume 1 Finance AMC levies user charges for door-to-door collection of SWM. Currently, AMC charges INR 30 per month and INR 60 per month for domestic and non-domestic properties respectively, to meet the costs of primary collections. These rates are decided by AMC’s Standing Committee. AMC reports O&M cost recovery of 31%. The balance is funded from the City’s general fund. The department and its revenues are not ring-fenced. State government has initiated a process to fix a minimum rate for user charge to be charged by all ULBs for various urban services, to cover O&M costs. The AMC is empowered to revise taxes, tariffs, and fees without securing approval from the state government. In case of environmental services, Gujarat’s ULBs can frame by-laws to levy or raise user charges. Changes to the by-laws must be by resolution of the Municipal Corporation and should get prior approval from the state. No by-law or cancellation of by-laws can be affected without approval of the state government. For capital expenditure, the Municipal Commissioner can sanction projects up to a limit of INR 5,000. The Commissioner can delegate this authority to other staff per the provisions of the Bombay Provincial Municipal Corporation Act, 1949 (hereinafter referred to as the BPMC Act). Approval from the Standing Committee and General Board is necessary for implementation of any project. Gujarat ULBs can implement a project based on this approval, if the project is being funded from its own sources. Further, state or central government approval is necessary for projects launched under a state or central scheme. AMC has the power to undertake capital works without any limit on the total amount, provided its finances permit it. Transparency, Participation and Accountability The discussion of these issues above, with regard to Ahmedabad’s water and sewer services, applies equally to waste management services. Service delivery performance Ahmedabad’s service level benchmarking indicates the following for SWM: ƒƒ Household level coverage of SWM: 100% ƒƒ Efficiency of collection of municipal solid waste: 100% ƒƒ Extent of segregation of solid waste: 14% ƒƒ Extent of municipal solid waste recovered: 26% ƒƒ Extent of scientific disposal of municipal SW: 10% ƒƒ Efficiency in redressing complaints: 100% ƒƒ Cost recovery: 31% ƒƒ Collection efficiency: 100% Ahmedabad is tied with Nadiad for the top rank in SWM coverage and is alone in claiming 100% efficiency in collection. Among the 4 Indian cities, it reports the highest percentage of solid waste recovered. On the downside, Ahmedabad’s “scientific disposal” of municipal solid waste is far behind the 2 Punjab cities. Ahmedabad’s cost recovery, at 31%, is better than Amritsar and Nadiad, but well behind Patiala (at 77%). Overall, our subjective rating for the service delivery performance of Ahmedabad’s SWM is good. Appendix A: Descriptive Details 61 Nadiad Water and Sewer Organization Nadiad’s Chief Officer is appointed by the State of Gujarat, and the operational departments of the municipality, including the Water and Sewer Department, report to the Chief Officer. The CMA, under Gujarat’s Urban Development Department, oversees the municipality and the Chief Officer of Nadiad reports to the Commissionerate. This creates problems in terms of the municipality’s accountability to its citizens. Citizens elect a Council, but the Council does not control how the city is managed. This is a very different paradigm from the Chicago and Dayton examples. Even with Mbombela’s ambiguity about executive power, it is clear that power rests at the local level, and not at the provincial level. The governing body of Nadiad is the elected Council. Interestingly, the President of the Council in a municipality such as Nadiad seems to have more executive power than the Mayor of a Municipal Corporation, such as Ahmedabad. The President of Nadiad’s Council is authorized to monitor financial and executive administration of the municipality and to perform certain executive functions. The President can also exercise supervision and control over the Nadiad’s executive staff and can set aside or modify any order of the Chief Officer. By contrast, the Mayor of a Municipal Corporation has no defined control over the executive wing. Of course, if there are conflicts between the Council and the Chief Officer, the State would ultimately decide, as is clear from Figure 3 above. The state controls important aspects of Nadiad’s development. In addition to the CMA, 3 other state agencies also play important roles in Nadiad’s urban development. The GUDC and GUDM are responsible for design and implementation of urban infrastructure projects in Nadiad that are funded under centrally sponsored schemes. The NADA is responsible for urban planning within Nadiad. These aspects also differentiate Nadiad from the Chicago, Dayton and Mbombela examples, where local planning and infrastructure rest entirely with the city, not another sphere or tier of government. Finance In Nadiad, the Municipal Corporation is empowered to levy both water tax and drainage tax. The water tax levied is an annual flat rate and varies with consumer categories. The drainage tax is calculated based on area of property and building use. Approval from the Commissioner of Municipalities is mandatory for any revision to the water tax or drainage tax. These tax rates were last revised in 2008. The city has been able to achieve 53% O&M cost recovery in water supply and 32% O&M cost recovery in sewerage services. The balance of the cost is funded from the general fund. Neither of the departments is financially ring-fenced. Transparency, Participation and Accountability The World Bank has said that “Gujarat has developed a horizontally integrated, autonomous and locally accountable urban governance and institutional framework for its main cities, one of the most innovative and robust urban management institutional arrangements in India.”45 It is not clear how this plays out in practice, in Nadiad or elsewhere. The 74th Amendment mandated the formation of ward committees under municipalities, in an effort to decentralize power to more local levels. The Community Participation Law (CPL) introduced the concept of area sabhas, which are linked to ward committees and comprise all registered voters. Despite these constitutional provisions for devolution of 45 World Bank, Gujarat Resilient Cities Project (P175728), Project Information Document, Concept Stage, February 2021, Report No: PIDC30805. 62 Institutional Models for Governance of Urban Services: Volume 1 power, implementation on the ground has remained a distant dream. No city in India has functioning ward committees or area sabhas city-wide. There are no mechanisms to define clear performance targets. However, service levels are reported per the service-level benchmarking framework, primarily to comply with conditions necessary for the city to receive Central Finance Commission grants. Service delivery performance Nadiad’s service level benchmarking indicates the following for water and sewer services: Water ƒƒ Population covered by direct supply: 100% ƒƒ Per capita supply: 95 LPCD ƒƒ Extent of metering: 0% ƒƒ Non-revenue water: 11% ƒƒ Quality of water supplied: 100% ƒƒ Daily hours of supply: 3 ƒƒ Cost recovery: 53% ƒƒ Efficiency of collection of charges: 77% Sewer ƒƒ Coverage of toilets: 100% ƒƒ Coverage of wastewater network: 67% ƒƒ Collection efficiency of WW network: 69% ƒƒ Adequacy of WW treatment capacity: 90% ƒƒ Quality of wastewater treatment: 100% ƒƒ Extent of reuse and recycling of WW: 0% ƒƒ Efficiency in redressing complaints: 99% ƒƒ Cost recovery: 32% ƒƒ Efficiency in collection of charges: 91% These figures are broadly in line with the other Indian cities. Nadiad is the best of the 4 cities in terms of population covered by direct supply of water but is the lowest of the four when it comes to quantity of water per capita. Nadiad does slightly better than Ahmedabad in terms of hours per day of water service, although both of the Gujarat cities are significantly underperforming on this critical metric in comparison to their Punjab counterparts. Overall, our subjective rating for the performance of Nadiad’s water and sewer services is fair. Appendix A: Descriptive Details 63 Nadiad Solid Waste Organization In Nadiad, the main responsibility for SWM rests with the Sanitary Department. This responsibility extends to collection, segregation, transport and disposal. The Sanitary Department is headed by the Chief Sanitary Inspector. Treating and processing of wastes is separate, and those are the responsibility of the Engineering Department, headed by the Chief Engineer. Finances Nadiad has a flat rate sanitation tax, collected annually from each property owner. This covers a reported 10% of O&M costs. The remaining expenditure is funded from the municipality’s general fund. Annual expenditure is estimated at INR 66.5 million (approximately US$ 900,000). Solid waste revenues in Nadiad are not ring-fenced. The department is not financially ring-fenced. Nadiad could increase the financial sustainability of its solid waste operations. The municipality could, for instance, raise the solid waste tax, if it wanted to make the service more self-funded. The tax rate must be approved by the Commissioner of Municipalities. No council ever likes to increase taxes and fees, and since Nadiad receives significant funding in the form of grants, there seems to be little incentive to increase own source revenues. Transparency, Participation and Accountability See the discussion above regarding water and sewer service. Service delivery performance Nadiad’s service level benchmarking indicates the following for SWM: ƒƒ Household level coverage of SWM: 100% ƒƒ Efficiency of collection of municipal solid waste: 92% ƒƒ Extent of segregation of solid waste: 11% ƒƒ Extent of municipal solid waste recovered: 10% ƒƒ Extent of scientific disposal of municipal SW: 0% ƒƒ Efficiency in redressing complaints: 100% ƒƒ Cost recovery: 10% ƒƒ Collection efficiency: 100% Nadiad reports 100% coverage of households, which means it is tied with Ahmedabad for the top rank among the four Indian cities, but it reports only 92% efficiency in collection of waste, which puts it behind the other three cities. And of the four Indian cities, Nadiad is the only one that does not report any “scientific disposal” of municipal solid waste. On the other hand, Nadiad is the only city to report 100% efficiency in collection of fees and charges for solid waste services. Overall, our subjective rating for the service delivery performance of Nadiad’s SWM is fair. 64 Institutional Models for Governance of Urban Services: Volume 1 Amritsar solid waste Amritsar provides solid waste collection for residents and businesses through its Health Department, which is headed by a Medical Officer. The municipal corporation has entered into a contract for providing integrated services of door-to-door collection, waste transportation, treatment, and disposal; except in the old and congested walled city, where the city itself provides these services. The contract documents were prepared by PMIDC, and the contractor’s work is monitored by MCA. Organization Amritsar’s elected Council has a 5-year term. The councilors appoint a mayor, a senior deputy mayor, and a Deputy Mayor from among themselves. All resolutions passed by the Council need to be approved at the state government level by the Department of Local Government. Thus, the elected wing does not have autonomy to take final decisions on local policy matters. Amritsar’s CEO is the Municipal Commissioner, who is appointed by the state government. The municipal staff reports to the commissioner. The Mayor may give directions to the Commissioner from time to time, and this role of the mayor is not obligatory but discretionary. The Mayor has no authority over the city’s executive officials and staff. Several state-level agencies are active in Amritsar. These include the PMIDC, the Punjab Infrastructure Development Board (PIDB) for bus rapid transport service, the AUIT for urban expansion and renewal, and the PUPDA for urban planning. Finance Solid waste user charges are levied on residential and commercial properties. As per the state’s SWM by-laws, an annual increase of 5% is allowed. This charge is payable by all users in the defined area where the private operator collects waste; individuals have no option to make their own arrangements. The private operator is paid a tipping fee from Amritsar’s general fund and can collect In Amritsar. There is no ring-fencing of revenues for the Health Department or for SWM. As a result of these user charges, the Department recovers 5% of its O&M costs (these costs include the tipping fee payable to private operator, expenditure towards staff establishment and O&M for door-to-door collection in walled city area). The remaining operating expenditure is funded through Amritsar’s general fund. Transparency, Participation and Accountability As noted, Amritsar’s Health Department oversees the private contractor. The health department is accountable to the Municipal Commissioner, who reports to the state-level Department of Local Government. Amritsar’s autonomy is limited, in that its staffing structure cannot be decided by the municipal corporation, and state government approval is required to create a new post. All resolutions passed by the Council need to be approved at the state government level by the Department of Local Government. Thus, the elected wing does not enjoy autonomy to take final decisions on local policy matters. Appendix A: Descriptive Details 65 There are no specific performance targets applicable to SWM, except for service level benchmarking indicators which are collected and reported for use in calculating Central Finance Commission grants. Service delivery performance Amritsar’s service level benchmarking indicates the following for SWM: ƒƒ Household level coverage of SWM: 88% ƒƒ Efficiency of collection of municipal solid waste: 95% ƒƒ Extent of segregation of solid waste: 10% ƒƒ Extent of municipal solid waste recovered: 15% ƒƒ Extent of scientific disposal of municipal SW: 80% ƒƒ Efficiency in redressing complaints: 95% ƒƒ Cost recovery: 5% ƒƒ Collection efficiency: 90% Amritsar’s 88% coverage of households is the lowest of the four Indian cities, and it reports 95% efficiency in collection of waste from these households. Amritsar ranks lowest of the four Indian cities when it comes to segregation of solid waste. It does quite well at “scientific disposal” of municipal solid waste but ranks lowest of the four Indian cities in terms of cost recovery. Overall, our subjective rating for the service delivery performance of Amritsar’s SWM is good, considering the high efficiency of collection and the high percentage of scientific solid waste disposal. Amritsar Water and Sewer Organization The elected wing consists of councilors elected to a 5-year term. The councilors appoint a Mayor, a senior Deputy Mayor, and a Deputy Mayor from among themselves. All resolutions passed by the Corporation need to be approved at the state government level by the Department of Local Government. Thus, the councilors do not have autonomy to take final decisions on local policy matters. The executive wing, comprising officers and other staff members, is headed by a Municipal Commissioner appointed by the state government. As per the Punjab Municipal Corporation Act, the Mayor may give directions to the commissioner from time to time. The role of the Mayor is not obligatory but discretionary in municipal administration. Municipal staff reports to the Commissioner and not to the Mayor. The Mayor, along with the elected officials, does not have any control over the functioning of municipal officials Amritsar’s Water Supply and Sewerage Department is responsible for providing both services. The engineering staff of the department is recruited from state cadres; any recruitments of the rank of junior engineer and above need to be approved the Department of Local Government. The ULBs can only recruit staff below the rank of junior engineer. ULB staff may be transferred from one city to another within their respective cadres as per the decision of the state government. Thus, the department within the local body does not have control over its own staffing. 66 Institutional Models for Governance of Urban Services: Volume 1 Finance During FY 2019, the Department recovered only 20% and 15% of the O&M cost of water supply and sewerage respectively. This is due to low tariffs and poor collection performance. MCA does not have a separate account for water supply and sewerage operations and the department’s revenues are not ring-fenced. The Corporation has little control over its finances. Property tax rates are determined and revised by the state government and corporations require the approval of the state government for undertaking any borrowing. Rates for water tax, which is levied as a part of property tax, are also decided by the state government. Similarly, exemptions in both water tax and water charges linked to consumption are decided by the state government Expenditure above INR 10 million must be approved by the Department of Local Government. While the Corporation can vet proposals up to INR 5 million, approval power still rests with the Department of Local Government. The annual budget must be submitted to the Department of Local Government for approval. Any tariff proposal or revision needs approval from the Department of Local Government. Transparency, Participation and Accountability Amritsar’s Mayor is the ceremonial head of the City, but for all practical purposes, the minister in charge of the department or the state legislature is empowered to take policy decisions. Informal accountability is effective. In Amritsar, as in most cities in India, if there is inordinate delay in attending to a service issue, if an influential person or the president of a resident welfare associations makes a call to an elected ward council member, action is taken immediately. However, in case of capital works, it takes some time. Elected representatives are able to influence the appropriate people to expedite action. Citizen or community participation in planning and implementation of works is rare. Legally, in the case of land use master plans, authorities call for objections and suggestions from citizens before finalizing the plans, though it is not mandatory to incorporate the citizens’ views. In recent years, for projects sponsored by the national government as part of urban sector programs such as JNNURM, Smart Cities and AMRUT, community and citizen inputs were sought during project preparation through online suggestions, focussed group discussions, and expert opinions. Otherwise, citizen involvement is limited. Service delivery performance Amritsar’s service level benchmarking indicates the following for water and sewer services: Water ƒƒ Population covered by direct supply: 80% ƒƒ Per capita supply: 135 LPCD ƒƒ Extent of metering: 20% ƒƒ Non-revenue water: 25% ƒƒ Quality of water supplied: 100% ƒƒ Daily hours of supply: 13 ƒƒ Cost recovery: 20% ƒƒ Efficiency of collection of charges: 70% Appendix A: Descriptive Details 67 Sewer ƒƒ Coverage of toilets: 70% ƒƒ Coverage of wastewater network: 80% ƒƒ Collection efficiency of WW network: 60% ƒƒ Adequacy of WW treatment capacity: 60% ƒƒ Quality of wastewater treatment: 100% ƒƒ Extent of reuse and recycling of WW: 0% ƒƒ Efficiency in redressing complaints: 100% ƒƒ Cost recovery: 15% ƒƒ Efficiency in collection of charges: 60% These figures are broadly in line with the other Indian cities. Neither of the two Punjab cities do as well as their Gujarat counterparts in terms of waste service coverage. However, Amritsar has the highest percentage of metered customers (20%), among the four Indian cities, and it has the greatest number of hours per day of supply. Unfortunately, Amritsar’s cost recovery for water services (20%) is the lowest of the four cities. On the wastewater side, Amritsar has the lowest coverage of toilets (70%) and rates lowest in terms of adequacy of wastewater treatment capacity; even though it reports 100% quality of wastewater treatment. It is the only Indian city to report 100% efficiency in redressing customer complaints. It reports the lowest cost recovery (15%) for wastewater services of the four cities, as well as the lowest collection efficiency for wastewater charges (60%). Overall, our subjective rating for the service delivery performance of Amritsar’s water and sewer systems is fair, taking into account the relatively high figures for metering and water delivered per capita, and the 100% quality ratings for both water and wastewater. Patiala solid waste Patiala provides solid waste collection for residents and businesses. There are three private contractors: 1) for the integrated services of door-to-door collection, waste transportation, treatment and disposal, wherein the operator directly collects SWM charges from the users and is also provided with a tipping fee by the City; 2) a contract for processing and disposal of waste collected by the City from public places and street sweeping, paid by the city per tonnage of waste collected; and 3) for processing and disposal of bio-medical waste collected by the City from public places and for street sweeping; also paid per tonnage of waste. These contracts are managed by Patiala’s Health Department, headed by the Chief Sanitary inspector, who reports to the Joint Commissioner. Organization Patiala’s elected Council has a 5-year term. The councilors appoint a mayor, a senior deputy mayor, and a Deputy Mayor from among themselves. However, the Council’s powers are under tight control - all resolutions passed by the Council need to be approved at the state government level by the Department of Local Government. Thus, the elected wing does not have autonomy to take final decisions on local policy matters. The CEO is the Municipal Commissioner, appointed by the state government.  Municipal staff reports to the commissioner. The Mayor may give directions to the Commissioner from time to time – but ultimately the 68 Institutional Models for Governance of Urban Services: Volume 1 Mayor has no authority over the city’s executive officials and staff. Sanitary inspectors are recruited from state cadres and can be transferred to other municipal corporations by the state government.  The same state-level agencies operate in Patiala as in Amritsar, and coordination is through the State of Punjab’s Department of Housing Urban Development. Patiala has limited ability to take independent and coherent action. Anything of significance must be approved by the State, and City staff ultimately are accountable at the state level, not to the Council elected by the citizens of Patiala. Finance In Patiala, user charges for SWM are collected by the private operator and no portion of these charges is shared with the city. The department has reported 77% O&M cost recovery, but this cost recovery data has not been validated. The balance of operating expenditures is covered from the City’s general fund. There is no ring-fencing of solid waste revenues or expenditures, except to the extent that the contractor collects fees directly from customers. Solid waste services are in the nature of a public good, and it is appropriate that a general fund revenue source, such as the property tax, should pay for the net costs of the service. Ring fencing of accounts in such a situation would not make the service self-supporting, but it would clarify how much revenue is collected, and by comparison with the costs, would make the extent of subsidies more transparent. Transparency, Participation and Accountability As in Amritsar, autonomy is limited, in that state government approval is required to create new posts, and all resolutions passed by the council need to be approved at the state government level by the Department of Local Government. Thus, the elected wing does not enjoy autonomy to take final decisions on local policy matters. The department does not have annual performance targets to be reported except for the service- level benchmarking indicators reported for availing of the Central Finance Commission grants. Service delivery performance Patiala’s service level benchmarking indicates the following for SWM: ƒƒ Household level coverage of SWM: 98% ƒƒ Efficiency of collection of municipal solid waste: 95% ƒƒ Extent of segregation of solid waste: 18% ƒƒ Extent of municipal solid waste recovered: 2% ƒƒ Extent of scientific disposal of municipal SW: 92% ƒƒ Efficiency in redressing complaints: 40% ƒƒ Cost recovery: 77% ƒƒ Collection efficiency: 3% Patiala’s 98% coverage of households is significantly better than Amritsar, but not quite up to the 100% coverage claimed by the Gujarat cities, and it reports 95% efficiency in collection of waste from these households. The extent of the solid waste recovered, at 2%, is the lowest of the four cities, but when it comes to “scientific disposal” of municipal solid waste, it ranks highest of the four cities, at 92%. Patiala stands out as exceptionally bad at redressing customer complaints (only 40% are addressed) and also ranks lowest by far (at 3%) in terms of collection efficiency. Surprisingly though, it ranks highest of the four cities in terms of cost recovery. Appendix A: Descriptive Details 69 Overall, our subjective rating for the service delivery performance of Patiala’s SWM is good, taking into account its high rankings for household level coverage, efficiency of waste collection, and extent of scientific disposal. Patiala Water and Sewer Organization In Patiala, the O&M Department of the Engineering Division is responsible for technical aspects of water and sanitary sewer services. A Superintending Engineer heads the Department and reports to the Municipal Commissioner. Billing and collection for these services rests with the Water Supply and Sewerage Department. That Department is headed by a Superintendent who reports to the Joint Commissioner. Finance In FY 2019, the department reported 53% and 86% of O&M cost recovery for water supply and sewerage, respectively. There is no separate fund for water supply and sewerage, and these operations are not financially ring-fenced. The Municipal Corporation can decide on consumption-based water tariffs without state approval. However, since only 13% of water connections are metered, the remaining 87% of users are charged a water tax, which is linked to the property tax, and is subject to state government approval. Patiala’s latest tariff schedule is as follows: Patiala water & sewerage tariff (1 sq. yd = 0.83 m2) Area of the property Water tariff-domestic - INR/month Sewer tariff-domestic - INR/month Up to 12 sq. yds 100 70 12-24 sq. yds 105 105 24-48 sq. yds 140 140 >48 sq. yds Only metered @ INR 3.80 KL 100% of water tariff Non-domestic Double the domestic tariff Double the domestic tariff Transparency, Participation and Accountability As noted above, local government autonomy is quite limited. The approval of the State government is required for new posts, and for all resolutions passed by the local council. As in other Indian cities, the Commissioner is appointed by, and reports to, the State government. In Punjab, the Local bodies do not have power to recruit any staff. As in other Indian cities, citizen and community participation in planning and implementation of works is rare. In recent years, projects sponsored by the national government as part of urban sector programs like JNNURM, Smart Cities and AMRUT, have provided for citizen and community input during project preparation, through online suggestions, focus group discussions, and expert opinions. 70 Institutional Models for Governance of Urban Services: Volume 1 Service delivery performance Patiala’s service level benchmarking indicates the following for water and sewer services: Water ƒƒ Population covered by direct supply: 80% ƒƒ Per capita supply: 130 LPCD ƒƒ Extent of metering: 13% ƒƒ Non-revenue water: 30% ƒƒ Quality of water supplied: 100% ƒƒ Daily hours of supply: 12 ƒƒ Cost recovery: 100% ƒƒ Efficiency of collection of charges: 85% Sewer ƒƒ Coverage of toilets: 80% ƒƒ Coverage of wastewater network: 98% ƒƒ Collection efficiency of WW network: 49% ƒƒ Adequacy of WW treatment capacity: 80% ƒƒ Quality of wastewater treatment: 95% ƒƒ Extent of reuse and recycling of WW: 20% ƒƒ Efficiency in redressing complaints: 80% ƒƒ Cost recovery: 100% ƒƒ Efficiency in collection of charges: 80% Patiala’s non-revenue water (30%) is the highest reported among the four Indian cities. The hours of daily service compare with Amritsar’s, and both of these are dramatically better than in the Gujarat cities. Surprisingly, Patiala reports 100% cost recovery for both its water and sewerage operations. Patiala reports the highest level of coverage of its wastewater network, at 98% of the city, while it also reports the lowest collection efficiency of that network, at only 49%. Patiala also reports the highest level of wastewater reuse (20%) among the four Indian cities. Overall, our subjective rating for the service delivery performance of Patiala’s water and sewer services is fair. Municipal Enterprises Two of the municipal enterprises covered by our research for this project operate in the City of Johannesburg, South Africa. They have a common genesis. After the end of apartheid, Johannesburg found itself in serious financial trouble. Provincial and national appointed a committee of specialists to assist the city in regaining its financial health. This committee developed a plan to reorganize service delivery around “service delivery companies”, wholly owned by the city. The thinking was that these companies would function like commercial companies; they would improve and extend services, bill for services provided, collect their own revenues, assume debt for capital projects, and undertake capital investments. They would be governed by boards. A distinction was made between the council as the “client” and the companies as “service providers”. The figure below shows the governance framework that was designed. Appendix A: Descriptive Details 71 Figure 13 2002 Governance Framework for Johannesburg Entities Council City Manager Contract Management Unit Shareholder Unit Utilities Agencies Companies Water: Johannesburg Water Parks: City Parks Theatre Electricity: City Power Roads: Johannesburg Roads Agency Zoo Refuse collection: Pikitup Johannesburg: Development Agency Bus services Johannesburg Property Company Johannesburg Fresh Produce At the outset, Johannesburg identified a dual relationship with its entities. On the one hand, as the shareholder, it had an interest in protecting the assets and financial viability of its companies. On the other hand, as a contract purchaser of services, it had an interest in getting the best possible services and the lowest possible prices. Because the tension between these objectives was recognized, two units were formed to manage the two relationships. The CMU would regulate service delivery performance, and a SHU would look after the city’s interest as a shareholder. Later, under a different city administration, these two units were combined. However, the tension identified between these objectives remains in every public service department or company. A third example included in this section is AJL. We discuss that in this section of the paper together with AMTS, which is not actually a separate enterprise, though it does have a separate financial accounting structure. Johannesburg Water SOC Ltd (Joburg Water) Joburg Water provides water and wastewater services to customers throughout the City of Johannesburg. It has responsibility for potable water distribution; wastewater collection and treatment; planning for water distribution and wastewater services and infrastructure; construction, O&M of infrastructure, some aspects of customer care and for a time, part of the metering, billing and revenue collection functions. Joburg Water obtains its bulk water supply from Rand Water, a public entity governed by the Department of Water Affairs. The company supplies 1.6 billion liters of potable water per day through its water distribution network, and treats 926 million liters per day of sewage at its six waste-water treatment works, including two biogas-to-energy plants, where methane gas is converted to energy. Joburg Water’s infrastructure assets in support of its business comprise: ƒƒ 127 reservoirs and water towers; ƒƒ 10 network depots; ƒƒ Four laboratories; ƒƒ 12,288 km of water distribution networks; 72 Institutional Models for Governance of Urban Services: Volume 1 ƒƒ 11,710 km of wastewater networks; ƒƒ 37 water pump stations; ƒƒ 38 sewage pump stations; ƒƒ 11,576 km of sewer collector network; and ƒƒ Six wastewater treatment works. Organization Joburg Water was formed in November 2000 and started operations on 1 January 2001. It entered into two contracts with the City of Johannesburg: ƒƒ A Sale of Business Agreement in which the Council transferred its water and sanitation assets and over 2,500 employees to Joburg Water. The company paid the City ZAR 1.5 billion (approximately US$ 200 million at the time) for its water and sanitation assets; and ƒƒ A 30-year SDA which provided that initially 60% of the City’s customers would be transferred to Joburg Water to carry out meter reading and some billing functions. The City originally created three entities to support good governance. First, a Board of Directors is appointed by the City for Joburg Water - Board members are ordinarily external sector specialists bringing expert oversight and strategic advice to the functioning of the service. Second, for all of its entities collectively, the City set up a CMU in the office of the City Manager to provide a regulatory oversight function. Third, again for all entities, a SHU was set up alongside the CMU, to be responsible for corporate governance and financial viability. After the Democratic Alliance took control of the city in 2016, the CMU and SHU were combined into a single governance unit. The executive management of Joburg Water is central and can be understood in two distinct phases. A management contract with a private joint venture was in place for the utility’s first 5 years (2001-2006), with the specific objectives of turning around the system’s financial performance, and of developing capacity within Joburg Water to successfully manage the company going forward.46 This turnaround strategy was widely regarded as very successful. Figure 14 Joburg Water’s executive structure in 2018/19 Managing Director HR and Corporate Services Operations Executive Manager: HR and Corporate Services Chief Operations O cer Stakeholder Relations and Communications Internal Audit Executive Manager: Stakeholder Relations and Chief Audit Executive Communications Finance and Administration Risk and Compliance Management: Financial Director Executive Manager: Risk and Compliance Governance and Legal Services Strategy, Monitoring and Evaluation Executive: Manager Governance and Legal Services General Manager: Strategy, Monitoring and Evaluation Source: Joburg Water, 2020. 46 Details can be found in the separate report prepared by Nishendra Moodley as part of this project. Appendix A: Descriptive Details 73 There is significant consensus on the success of the 5-year management and capacity building contract. Perhaps the most important element was the organizational culture change that was created over the initial 5 years. In 2009, Philippe Marin, a World Bank Water and Sanitation Specialist, wrote as follows: “Beyond improving technical performance, the private operator played an essential role as a change agent, something which is often undervalued or misunderstood. It instilled in Johannesburg Water new corporate values based on efficiency and customer service, transforming the way civil servants think and act. The new culture emphasized the empowerment of line managers, coached them in better operational practices, and held them to account for results. In this new environment, a dynamic was created in which the utility’s staff and the private operator truly worked together to turn the utility around”. Since the end of the 5-year management contract, executive responsibility has rested with the company’s Managing Director, who is appointed by the Board and reports to the Board Chairperson. It should be noted that the Johannesburg Council now requires all of its staff and those of its corporate entities to be on the same employee performance management system. Finance Despite its status as a separate entity, Joburg Water’s budgeting is significantly managed by the City’s CFO. Much of the consolidated capital budget for Johannesburg is centrally held and prioritized, though utilities are given more autonomy in developing operating budgets for final alignment and approval by the City. The Joburg Water CFO meets all utility CFOs monthly and budgeting is done through this forum. Operating revenues are primarily from consumer tariffs for water, complemented by the equitable share (a formula-driven transfer from national government) which supports delivery of essential services to indigent residents. The following table shows the income, expenditures, and outcome for three recent years: 2017 (R’000) 2018 (R’000) 2019 (R’000) 2019 budget (R’000) Revenue 8,501,222 10,088,096 11,718,323 11,585,560 Bulk purchases 4,259,064 4,799,538 5,593,972 5,624,094 Gross margin 4,242,158 5,288,558 6,124,351 5,961,466 Other income 418,584 534,305 483,588 203,704 Operating cost and interest 4,477,704 4,454,781 4,854,214 4,913,690 Net profit 183,038 1,368,082 1,753,725 1,251,480 Operating Performance (source: Joburg Water, 2020). For the 2020-21 fiscal year Joburg Water has budgeted revenue of R14.1 billion and expenditure of R12.1 billion. Johannesburg Water is not allowed by the City to borrow or raise debt in its own name. Borrowing for infrastructure is done centrally by the City. The City develops a capital budget for prioritized projects proposed by all departments and entities. The approved capital budget, including investments in the water and sewer systems, is funded from a combination of borrowing, infrastructure grants, and developer contributions. The capital budget prioritizes the funding of infrastructure projects aligned with the City’s plans. The funded priorities tend to be new connections in underserved areas, rehabilitation of aging mains and lines, and waste-water treatment infrastructure. 74 Institutional Models for Governance of Urban Services: Volume 1 Transparency, Participation and Accountability All of Johannesburg’s municipal entities must comply with the Municipal Systems Act, the Municipal Finance Management Act and the Companies Act. This includes quarterly reports for the City’s Governance Unit, and Joburg Water’s Board. These are aggregated into an Annual Report for Joburg Water in terms of the Companies Act and contribute to the reporting by the Council to the public in its Annual Reports. The Departments of Corporate Strategy and Corporate Planning undertake the strategy development planning for the City. This is reflected in the City’s IDP. Joburg Water participates in these discussions and is expected to align its planning accordingly. An annual SDA between the Company and the City gives effect to this planning. Additionally, a corporate scorecard aligned to the budget is agreed with the City’s governance unit. These form the basis for quarterly and annual reporting. Joburg Water has a Stakeholder Relations Department, and a stakeholder development strategy focused on reaching out to communities and councilors. Water users can report concerns about service delivery by phoning a Customer Service Call Centre or completing service cards at Joburg Water’s regional offices. These are generally used by those with addresses, formal billing arrangements and access to communication infrastructure. It is unclear whether interaction with ward councilors with regards to service delivery challenges has proved useful. Joburg Water’s Annual Report states that regular forums were held with targeted stakeholders, such as large water users, top 100 customers, prepaid water vendors and faith-based organizations. More than 80 public meetings were held to inform community members of upcoming projects in their areas. In addition, more than 70 visible service delivery meetings were attended (Joburg Water, 2020). Early community research studies, as well as customer surveys conducted, indicate that communities feel left out or uninvolved in decisions about water and sanitation despite efforts made by Joburg Water to run public education and awareness campaigns. From the documentation available it appears that Joburg must do more to ensure the establishment and functionality of Water User Forums. In addition, the City, in its capacity as a regulator, could do more to ensure that Joburg Water complies with this aspect of the SDA, so that communities are involved in and feel part of the process of how services are delivered. Service delivery performance Joburg Water provides 24/7 water and sewer service to all formal dwellings in the municipality. In terms of service for informal households, Joburg Water indicated that at the end of the 2018/9 financial year: ƒƒ 87.18% had a Level 1 service (access to standpipe within 200m of dwelling) from a baseline of 82.86% at the start of the year; and ƒƒ 41.61% had a minimum of Level 1 sanitation (ventilated improved pit latrine) from a baseline of 30.06% at the start of the year. For that same year: ƒƒ Compliance with drinking water quality standard on E. Coli (SANS 241) was 99.7%; ƒƒ Capital budget spent was 99.7%; and ƒƒ Final effluent compliance in all waste-water treatment works was 78%, against a target of 92%, and a baseline at the start of the year of 72%. Appendix A: Descriptive Details 75 The consultant’s report contains significantly more performance information, for those who are interested in the details. Overall, our subjective rating for the service delivery performance of Joburg Water is fair. Johannesburg Roads Agency (Pty) Ltd The JRA manages the planning, design, construction, operation, control, rehabilitation and maintenance of the roads and storm water infrastructure in the City. Its responsibilities include the construction and maintenance of bridges, culverts, traffic signals, traffic signal systems, footways, road signage and road markings. It is responsible for: ƒƒ Traffic regulation infrastructure ƒƒ 2,121 signalized traffic intersections ƒƒ 1,848 on municipal roads and managed by JRA; and ƒƒ 273 on provincial roads. ƒƒ 2078 intersections; and ƒƒ 43 planned intersections for commissioning. ƒƒ Roads infrastructure ƒƒ 13,599 km road network ƒƒ 12,430,47 km of surfaced roads; and ƒƒ 1,168,53 km of gravel roads. ƒƒ A new asphalt plant ƒƒ Stormwater infrastructure ƒƒ 3,943 km of closed storm water and an extensive open drainage system. Organization JRA is a not-for-profit company in terms of South Africa’s Companies Act. It is governed by a Board of Directors in terms of the Act, constituted by a shareholder agreement, with the City of Johannesburg as the sole shareholder. JRA commenced operations on 1 January 2001 as part of the same corporatization reforms that spawned Joburg Water, described above. The Board (8 Non-Executive Directors) is accountable for the performance and affairs of the company. The JRA’s sole shareholder, the City of Johannesburg, reviews the term of office for non-executive directors every year at the annual general meeting. Accountability to the city is enabled through a SDA and shareholder compact, concluded in accordance with the provisions of the Municipal Systems Act. However, in media reports the recently installed (December 2019) ANC Executive Mayor Geoff Makhubo is quoted as saying that his biggest ‘headache’ is JRA and potholes. He has promised an irate public, in an election year, that he intends to turn the situation around, even if he has to move his office into the JRA, a clear statement of his views on autonomy. JRA is led by a Managing Director appointed on a contract, who is meant to have executive powers to lead the agency under the governance of the Board. The executive management team includes many positions that are not currently filled, with various staff in “acting” roles. There has been significant volatility in the executive management of the JRA. As in many countries, road construction is a lucrative and tempting target for favoritism in awarding and honoring contracts. The Board is reported to regularly intrude into supply chain management and contractor payment processes.47 Executive management authority in this 47 More details can be found in the separate report prepared by Nishendra Moodley as part of this project. 76 Institutional Models for Governance of Urban Services: Volume 1 model is designed to be delegated to the Managing Director. However, this is not always understood, nor is professional management in the interest of political parties and Board members who are part of a corrupt patronage system. It appears that coordination with other City services is weak. The ability to integrate common programmes across services provided by the City of Johannesburg has emerged as a shortcoming of the entities model. For example, Joburg Water has significant interdependencies in service delivery with the JRA, but Joburg Water experiences significant delays in the resealing of roads after it accesses pipes and infrastructure, with reputational damage for Joburg Water and the City of Johannesburg. Another example concerns Johannesburg’s longstanding billing system problems, inherited from separate administrations. The City required all entities to use SAP as a provider, but as each entity manages its own relationship with SAP it has become almost impossible to reconcile data. One informed observer reports that “the city systems have become so fragmented over time that it is impossible to produce a coherent, multidisciplinary response to a problem.” The City of Johannesburg and its municipal entities are required to comply with the Systems Act, the Municipal Finance Management Act and the Companies Act. These requirements generate a great deal of reporting. JRA also produces quarterly reports for the city’s Governance Unit, and for meetings with their MMC and their Board. These reports are aggregated into an annual report for the JRA in terms of the Companies Act, and they report to the Council and the public through the annual reporting requirements. Not all of this reporting is reliable – one former staffer was asked to change reports to reflect good performance and instructed by the Board Chairperson and Acting Managing Director to ‘doctor’ performance reporting. He refused to do this and resigned. Strategic direction across Johannesburg’s services is established in the IDP process that relies on public participation and is convened by the City’s corporate strategy office. Agencies such as the JRA also undertake their own internal strategic planning and participate in corporate planning and can also align their strategies with the outcome and priorities in the IDP. In addition to a shareholder’s agreement, the JRA, like other companies in the City’s portfolio, has an annual SDA that specifies strategic and operational performance indicators including customer standards. The strategic elements form part of a company scorecard and are contracted in principle between the Board and executive management. This SDA is negotiated in line with the capital and operating budget. However, former staff have indicated that powerful members of the Board are not interested in service delivery performance and improvement plans, but only in tenders and to whom they are awarded. While there are many credible people on these boards, with good intentions and appropriate expertise, they are no longer the norm. Finance As with Joburg Water, budgeting is significantly managed by the CFO for the City of Johannesburg. At this point, The JRA has no revenue sources of its own, so the City provides all of the funding from its general fund, which includes revenue from property rates, from the national equitable share transfer, and various smaller sources. The operating budget of the JRA is ZAR 1,484 billion (approximately US$ 100 million) for FY 2020-21, according to the annual budget approved by the Municipal Council. This allocation is from the city’s general fund, which includes revenue from property taxes and equitable share transfer from national government. Formerly, JRA was able to raise revenue from roadside advertising, but this has been centralised to the city itself. Appendix A: Descriptive Details 77 The capital budget of the JRA for FY 2020-21 is ZAR 1,131 billion (approximately US$ 76 million). The JRA is allocated a capital budget by the City for specified projects including those described in its SDA. The capital budget is funded by revenues from national government’s Urban Settlements Development Grant, by Johannesburg’s own source revenues, and by development charges. The City does not allow JRA to borrow on its own behalf. Transparency, Participation and Accountability South African municipalities and municipal entities are required to use GRAP, a set of accounting guidelines laid down by the Accounting Standards Board meant to ensure that the public sector agencies record their financial activities accurately and consistently. Financial and performance auditing is first conducted by an internal Auditor, who reports to the Audit Committee set up for the entity. The Annual Report and annual financial statements are also audited by an independent external Auditor acting on behalf of South Africa’s Auditor-General. The public is mostly engaged through the City’s IDP planning process, which includes community meetings, ward committees, stakeholder forums at regional level and sector meetings at city level. There is a new group function in the City that focuses on urban management and citizen relationships, and its role and effectiveness must be better understood. Within JRA, a customer unit was set up to engage key customers and ratepayer organizations. This is in addition to the regional administrations that took responsibility for monitoring and customer complaints, referring them to JRA. The JRA also used a mobile app called “Find and Fix” to mobilise the public to report road problems like potholes. While the app was sound, the work of the back-office road repair team created a significant disjuncture between reporting, detection, updates to citizens and actual repairs. This may have been due to regionalisation of JRA staff who did not report to the person responsible for road repairs at head office, but to regional ‘chieftains’ instead. JRA has more recently started ‘adopt a road’ and ‘adopt a traffic-light’ programmes, encouraging citizens to take ownership of infrastructure in neighborhoods and inform the City of problems. Citizens have been frustrated by the lack of JRA responsiveness, and in some cases ratepayer organizations have fundraised, procured asphalt and fixed potholes in neighborhoods. Service delivery performance Johannesburg’s roads are deteriorating. The Agency undertook a visual condition assessment of its roads in 2017. In comparison to the 2013 results, the study indicated that very good and good surfaced roads have decreased from 52% to 45%. Poor and very poor roads have increased from 27% to 32%. 72% of gravel roads are in a poor or very poor condition. The study identifies and categorizes roads for maintenance, gravel road upgrades, reconstruction and resurfacing across the city’s 13,599 km road network. The current state of Johannesburg’s roads is that 32% of surfaced roads, which make up 3,968 km, require reconstruction; 45% of surfaced roads, which make up 5,581 km are in very good and good condition and may require ad hoc maintenance; and 23% of surfaced roads, which make up 2,852 km, require resurfacing. Of the 1,168 km of gravel roads, 72% require reshaping and re-gravelling. The consultant’s report provides some additional details, and concludes that, “the JRA provides a stark example of how UAC boards might be an attractive asset in distributing patronage opportunities to hold unprincipled coalitions together.”48 Overall, our subjective rating for the service delivery performance of the JRA is poor. 48 See page 28 of Nishendra Moodley’s report prepared in connection with this research. 78 Institutional Models for Governance of Urban Services: Volume 1 Ahmedabad Municipal Transport The two types of municipalities in Gujarat have already been described (see page 13, above), as well as the various state agencies and entities operating within Gujarat ULBs. Among the four Indian cities covered by this report, Ahmedabad is perhaps the best performing. It is also the only city of the four which currently operates public transportation systems. The AMC provides two types of public transport services: ƒƒ Normal city bus services through AMTS;49 and ƒƒ BRT service through a 100% owned subsidiary, AJL.50 Organization Ahmedabad’s governing body is the AMC. Its members are elected for 5-year terms and are referred to as Corporators or Councilors. They appoint a Mayor and a Deputy Mayor from among their number. Local policy matters are decided by the Municipal Corporation, which is not required to secure the state government’s approval for policy decisions. The State’s approval is required for certain matters such as in defining the institutional structure, undertaking borrowings, and approval of land use plans. The Municipal Commissioner of Ahmedabad is the CEO, and reports to Gujarat’s Department of Urban Development and Urban Housing. In turn, AMC staff report to the Municipal Commissioner. AMTS has been providing city bus services since 1946. AMTS is a “transport undertaking” of the AMC in accordance with the Gujarat Municipal Corporations Act. AMTS is managed through a 9-member Transport Committee of the Corporation. The Chair of AMC’s Standing Committee is an ex officio member of the Transport Committee. The other members of the Transport Committee may be Councilors or persons having experience in administration, transport, engineering, industrial, commercial, financial or labor; and are appointed by the Commissioner. The CEO of AMTS is the Transport Manager, who is appointed by the AMC with prior approval of the state government. Currently, the Deputy Commissioner of AMC looking after administration of AMTS and AJL serves as Transport Manager. The Transport Manager is empowered to approve expenditure up to INR 50,000 (US$ 710). For any expenditure over this limit, the Transport Committee’s approval is required, and AMC’s approval is required if an expenditure exceeds INR 500,000 (US$ 7,100). Ahmedabad Janmarg Ltd (AJL) a 100% subsidiary of AMC. It was created to provide BRT services along a 101 km corridor in the city. The Ahmedabad Municipal Commissioner is the Chair of AJL. The Board of Directors includes the Chair (i.e., Municipal Commissioner), Director (i.e., Mayor), Chair of the Standing Committee of the AMC, opposition party leader in the AMC, Joint Commissioner of the traffic police, a special invitee from CEPT university as a technical consultant, and the Executive Director. The Executive Director is the executive head of the company and is supported by the General Manager and other technical staff. The board of AJL is empowered to recruit staff, to decide fares and to approve the budget. 49 AMTS is a “transport undertaking” in terms of Chapter XX of the Gujarat Municipal Corporations Act, 1949 and is “subject to the superintendence of the Transport Committee and of the Corporation,” pursuant to Section 342 of that Act. 50 AJL is a special purpose vehicle, registered in terms of the Companies Act, 1956. Appendix A: Descriptive Details 79 Finance For the regular bus service, AMC adopts a tariff policy, pursuant to which AMTS sets tariffs. A ring- fenced Transport Fund has been created for paying salaries of the Transport Committee, Transport Manager and other staff members as well as for the cost towards construction, purchase, organization, maintenance and management of public conveyance. The Transport Fund consists of fare box revenues (64% of revenues in 2019-20), advertising revenues, and deficit funding from AMC’s general fund. The Transport Fund cannot be used for any activity except for those required for the AMTS. In 2019, AMTS incurred a loss of INR  3,070 million (US$ 44,000), indicating a cost recovery of only 28% of O&M cost. AMTS routinely operates at a loss, and annual deficits are allowed to accumulate. The accumulated deficit is accounted for as loans from AMC to AMTS. There is a total INR 29 billion (US$ 412 million) of such loans outstanding, and there is no credible expectation that these loans will be repaid. For the BRT service, AJL’s Board of Directors is empowered to recruit staff, decide fares and approve budgets. However, since AJL is a fully owned subsidiary of AMC, final decisions rest with AMC and the state government, as in the case of other services delivered by AMC. AJL incurred a loss of INR 560 million (US$ 8,000) in 2019 and achieved a cost recovery of 55%. Currently, INR 3 billion (US$ 43 million) is carried as a loan outstanding from AMC. As with AMTS, there does not appear to be any expectation that these “loans” will be repaid. Transparency, Participation and Accountability For transport, multiple options are available to a consumer, e.g., scooters, motorcycles, auto taxis, Uber, Ola and private cars. In last 2 years, citizens’ usage of services like Ola and Uber, and auto-rickshaws, has increased. Consumers can vote with their feet and choose not to use public transport services if they are inconvenient or overpriced. There is no information available regarding Ahmedabad citizen participation in policy, planning, route decisions, fare decisions, service-levels issues, etc. Hence, transparency and citizen participation in transport service has not been discussed. Service delivery performance Regular bus service in Ahmedabad is well below established norms. The Ministry of Housing and Urban Affairs (MoHUA) has set a norm for acceptable service at 40 buses per 100,000 people. Ahmedabad has only 18. Public transport has not registered any modal shift in last 5 years, although the usage of private cabs like Ola and Uber and auto-rickshaws has increased. The BRTS service in Ahmedabad is of a high standard. The BRT service, known as Janmarg, is accessible for all sections of society: special provisions like wheelchairs and suitable ramps at stations are provided to help physically challenged persons. Track tiles and linear tracks are provided for visually handicapped people. The system design reflects social inclusiveness and social realities. The UN has chosen Ahmedabad’s BRTS as a showcase project to highlight that addressing climate change is not a burden, but an opportunity to improve the lives of people. The Ahmedabad BRT service, which began as a pilot project in July 2009, has emerged as an example of how a planned commuting system can help reduce emissions and improve air quality, as well as positively impact urban development.51 On the other hand, the geographic coverage of the BRT system is quite limited. Overall, our subjective rating for the service delivery performance for the AMTS bus service is fair, and for the AJL BRT service is good. 51 This is taken from Brijgopal Ladda’s report prepared in support of this research project. See that report for more details and a listing of the many awards the BRT system has collected. 80 Institutional Models for Governance of Urban Services: Volume 1 Special Districts A notable feature of local service delivery in the US is the role of special districts. There are many types, and they go by various names, as determined by state law in each of the 50 states. These laws vary significantly. There are single-function and multiple-function districts, authorities, commissions, boards, and other entities. These have varying degrees of autonomy, and depending on state law, can be created by intergovernmental agreement between municipalities, by petition of landowners in the proposed district, or directly by state law. Single function districts may provide fire and emergency services, transit services, water and sewer services, or any other service that is authorized by state law. Multiple-function districts in some states have many of the powers and functions of a municipality. A special district may be in an unincorporated area (where there is no municipality), or it may overlap the territory of one or more municipalities. According to the US Census Bureau, there are more special districts than there are general- purpose local governments in the US. Most special districts can issue bonds or otherwise borrow for infrastructure. When statistics about US municipal bonds are cited, these generally include special district bonds. Most special districts levy property taxes, and some can levy other taxes and fees, e.g. sales tax. Multi-function districts, such as Colorado’s Metropolitan Districts, can provide most of the same services that a local government provides, and are often used by developers as a way to finance the installation of infrastructure prior to annexation to a municipality. The property tax levy imposed by a special district survives municipal annexation, so property owners in a municipality may pay general property taxes to the municipality in addition to one or several property taxes to special districts. These are generally collected together by a state or county official, and then distributed to the various local governments and districts that have imposed taxes. Our research on US cities included two examples of special districts. The MWRD of Greater Chicago treats sanitary sewer and storm sewer flows from Chicago and 128 other communities in Cook County, Illinois. The Greater Dayton RTA provides bus and trolley services to Dayton, Ohio, and surrounding communities. Metropolitan Water Reclamation District of Greater Chicago The MWRD of Greater Chicago is completely separate from the City of Chicago. It treats sanitary sewer and storm water flows from 129 communities, including the City of Chicago, but it is separately organized, governed, and financed. The MWRD is a special purpose district created by an Act of the Illinois State Legislature. Its current service area covers over 880 square miles and it serves 5.24 million residents and an additional 5.1 million non-resident users of sewer and storm water services. Services provided by the MWRD include: ƒƒ Treatment of sanitary sewer and storm water flows from Chicago and 128 other communities; ƒƒ Operating seven water reclamation plants, 560 miles of sanitary and storm sewer interceptors and mains, 34 storm sewer reservoirs, and 23 pumping stations; ƒƒ Ensuring that sanitary sewer and storm water flows do not contaminate Lake Michigan, which is the drinking water source for almost all these communities; ƒƒ Managing 76 miles of waterways to drain water away from Lake Michigan; ƒƒ Recovering heat energy from wastewater and storm water; ƒƒ Recovering potentially valuable materials such as nitrogen, phosphorus, biosolids, algae, and potentially reusable water from wastewater and storm water; ƒƒ Performing over 550,000 laboratory analyzes per year to ensure compliance with federal and state regulations; and ƒƒ Constructing deep tunnels and surface reservoirs to avoid combining sewer overflows and storm related floodwaters. Appendix A: Descriptive Details 81 Organization The governing body of the MWRD is a 9-member Board of Commissioners, each of whom is elected at large and serves a 6-year term. Every 2 years, 3 members of the Board are elected, so that terms overlap. Following each election cycle, the Board elects its President, Vice-President, and the Chairman of its Committee on Finance. Board members receive a part-time salary for their service. A key function of the Board is to oversee the finances of the organization. The Board of Commissioners recruits and hires an Executive Director to manage operations. The Board also appoints a CFO/Treasurer, who reports to the Board. The Executive Director appoints another eight department heads in charge of: Engineering, O&M, Monitoring and Research, Human Resources, Information Technology, Procurement and Materials Management, Law, and Finance. Additional management services that do not have department level status but report directly to the Executive Director include Management and Budget; Public Affairs, Diversity/Affirmative Action; and Administrative Services (which are grouped together in a General Administration section of the organization). A 5-year strategic Plan is developed jointly by the Board of Commissioners and executive management team. The 2015-2021 plan is near expiration, and a follow-on strategic plan is currently being developed. Finance Residents of Chicago and other communities within MWRD boundaries pay additional property taxes to the MWRD to fund its services. As an independent district, the MWRD has a budget which is inherently ‘ring-fenced’ from other funds in any of the communities that it serves. The revenues collected may only be used in support of its services and are not available for other purposes or for use by any of the local governments it serves. Approximately 71% of the District’s operating budget comes from real property taxes levied on all residents of Cook County, with specific property tax levies required to be used for wastewater treatment and related purposes. In addition to this major source of revenue, the District receives income from user charges (8%); a personal property replacement tax (to replace personal property taxes previously received by the District but eliminated by state legislative action (7%); land rentals (5%); grants (4%); and miscellaneous and other income. The large size of the District budget (US$ 1.2 billion annually) creates some complex challenges. The size and complexity of the budget makes it very difficult for non-experts to understand or monitor. The overall US$ 1.2 billion budget represents the combined budgets of several funds maintained by the District. Those seven funds are: Corporate (General) Fund; Capital Improvements Bond Fund; Construction Fund; Stormwater Management Fund; Retirement Fund; Bond Redemption and Interest Fund; Reserve Claims Fund. Most of these funds receive property taxes from specific sources, while others are designed to hold bond issuance revenues or bond repayment monies. Operating expenditures include water treatment plant O&M (34%); staff salaries and benefits (21%); stormwater management operations (18%); retirement pensions (16%); paying claims and judgments against the District (6%); and water quality monitoring and research (5%). Unlike many governmental entities, the MWRD spends more each year on capital investments than on operations. In part this is because of the extremely high costs incurred by the District as it continues to construct its Tunnels and Reservoirs Project (TARP), which began in the 1970s. The project involves drilling four very large tunnels (some as more than 300 feet below the surface) and building three very large surface reservoirs at strategic locations in Chicago to handle stormwater from extreme storm events that would 82 Institutional Models for Governance of Urban Services: Volume 1 otherwise result in CSOs. Because of these and other capital expenses, the largest source of capital revenue is the State of Illinois Revolving Loan Fund, which raises capital from revenue bond issues and general obligation bond sales. The District’s own bond issues, direct loans and grant funds play a smaller role. The District’s extensive capital projects mean that a variety of grants are received and a variety of borrowing and repayment events take place each year. These grants and loans may come from the state government, federal government, or private investors – so capital budget account figures change frequently. Nevertheless, the MWRD has maintained an AAA bond rating from Fitch, and an AA+ bond rating from Standard and Poor’s. Transparency, Participation and Accountability The primary financial reporting of the District is found in its Comprehensive Annual Financial Reports (CAFR). The CAFR is designed to meet US government accounting standards. Annual reports required by the State of Illinois document inflows, outflows, and balances for each District fund. They also document total payments to each vendor doing business with the District and payroll data for the year. In addition, the MWRD issues and makes available to the public performance reports. These monthly or annual reports cover the performance of its water reclamation plants and the types and levels of pollutants treated by those plants. The reports also document the quality of water released from those plants and compliance with state and federal water quality regulations. The MWRD does not have a ‘performance compact’ by which its budget or any financial incentives may be adjusted upward or downward based on performance metrics. The nature of the services provided by the District is such that its performance is primarily evaluated based on compliance with federal and state water quality standards for effluent released into the Chicago river and other waterways. There are numerous performance metrics related to compliance with those laws, and the District publishes numerous reports documenting compliance. Service delivery performance The primary performance indicator relevant to the MWRD is compliance with the federal Clean Water Act and state water quality control regulations. The District regularly monitors and reports compliance with those standards (as well as occasional violations). However, the MWRD has faced at least one lawsuit from the state and federal governments for violations of those standards. A 2011 Consent Decree from the US District Court for Northern Illinois reveals that the District, while not admitting liability for violations of CSO prevention standards occurring during the construction of the Tunnel and Reservoir Project (TARP), did pay civil fines to the state and federal governments and agreed to certain actions to remain in compliance with those CSO prevention standards in the future. Overall, our subjective rating of MWRD’s service delivery performance is very good. Greater Dayton Regional Transit Authority The Greater Dayton RTA was created in 1972 by the combined efforts of the City of Dayton and Montgomery County, as authorized by Ohio state laws. This action consolidated and replaced earlier entities created by Dayton and/or surrounding communities, the earliest of which was created in the 1850s. The system now provides over 11 million rides annually and is the fourth largest public transportation system in the State of Ohio. Services provided by the RTA include: Appendix A: Descriptive Details 83 ƒƒ Bus and trolley service on 32 bus routes inside and outside the City of Dayton, the City of Kettering, and 22 other communities in Montgomery and Greene Counties; ƒƒ Maintenance of over 3,000 bus stops; ƒƒ O&M of a fleet of 152 buses and 54 trolleys; ƒƒ Construction and operation of five transit centers with heated and cooled waiting areas, public restrooms, telephones, and security monitoring; and ƒƒ Maintenance (or shared maintenance) and operation of 25 park-n-ride lots. Organization The governing body of the RTA is a Board of Trustees consisting of nine individuals – seven appointed by the Montgomery County Commission and one each appointed by the cities of Dayton and Kettering. The Board primarily serves as an oversight body involved in reviewing and approving strategic plans, while almost all aspects of service provision and day-to-day operations are left to the executive leadership team, with one exception: Expenditures over US$ 100,000 must be approved by the Board. The Board of Trustees recruits and hires a CEO, who then has authority to hire the remainder of the executive leadership team. That team includes a Chief Operating Officer, Chief Customer and Business Development Officer, Chief Capital Officer, CFO, Chief Information Officer, Controller, Director of Transportation, Director of Maintenance, Director of Procurement, Director of Labor Relations, Director of Human Resources, and Director of Training, Safety, and Risk. Transit bus operators and maintenance personnel are recruited, hired, and managed through the Human Resources and Labor Relations Departments. The executive management team maintains relationships with the local governments and school districts in which it operates. These include the city governments of Dayton and Kettering, the county governments of Montgomery and Greene Counties, and 19 other communities served. The RTA also has service provision contracts with some public-school districts to provide transportation services that would otherwise have to be provided using school buses. In addition, RTA contracts with human service departments in Dayton, Kettering, and Montgomery County to provide transportation services for the elderly, disabled, or ill. Primary lines of communication are directly with those entities rather than through the Board of Trustees. The Greater Dayton RTA 2020 Strategic Plan was intended to guide the operations of the Authority through 2020 and has now expired. That plan was developed internally by RTA staff under the direction of the Executive Director, and its replacement is now being prepared by RTA staff. The Board of Trustees approves each strategic plan and uses it as a benchmark to provide annual performance evaluations of the CEO. Finance The budget of the RTA is largely ‘ring-fenced’ in that it maintains an independent budget (approved by the Board of Trustees) and the revenues reflected in that budget cannot be used by any other entity for any other purpose than the provision of urban transportation services. Some major sources of operating and capital funding are also limited for use only on these services by state or federal law. The RTA budget is prepared annually by the executive management team and approved by the Board of Trustees. In 2019, the RTA’s budget was US$ 68.9 million. The RTA’s main source of operating revenues is the one-half cent sales tax added to all taxable goods sold in Montgomery County. That source accounts for 58% of revenues, while another 23% comes from 84 Institutional Models for Governance of Urban Services: Volume 1 operating grants received from the federal government. Fares collected from riders generate only 14% of revenues. The State of Ohio contributed only 3% of revenues, a number that fluctuates from year because state revenues are generally only received for specific purposes or pursuant to a state initiative – there is no regular source of funding from the state. Investment and miscellaneous income accounted for the remaining 2% of revenues. The RTA’s main source of capital funding is the federal government, which in 2019 provided over 99% of the RTA’s US$ 31.5 million capital budget. In that year, the State of Ohio provided no capital funds, but in some years, it provides ‘pass-through’ funds when the state receives a federal capital grant and passes some funds on to agencies and authorities. The major uses of capital funds are for replacement of buses and trolleys (67%), electric system infrastructure for the trolley system (12.5%), transit hubs and facilities (11%), and other equipment (9.5%). The largest item – replacement of buses and trolleys – fluctuates widely from year to year, because the federal grants used to purchase buses require that they not be replaced before the end of their stated economic life, usually 10-12 years. In years when many older buses reach that threshold, capital expenses to replace them are high. In years when fewer buses reach the end of their stated lives, unexpended capital funds are rolled over to the next year. The annual budget estimates capital expenses 5 years into the future in order to plan for these fluctuations in replacement costs Transparency, Participation and Accountability RTA does not produce an Annual Report, but information on ridership, routes, finances, and other matters are available on its website. Because significant funding is obtained from the federal government, there are numerous compliance reports that are periodically produced by the Authority to confirm compliance with the terms of federal funding and compliance with other federal Acts, such as the Americans with Disabilities Act. RTA does not have a performance compact or other arrangement by which it commits to achieving specific service delivery targets as a condition of funding, or by which its funding may be adjusted upward or downward based on achievement (or non-achievement) of performance targets. One small exception is the ‘On-Time Service Promise’, which states that if a bus or trolley is more than 30 minutes late, a customer can request a full refund of the bus fare if they file a claim within 10 days. In addition, RTA publishes a Customer Service Guarantee, which includes “Your right to safe service; your right to courteous, clean, accessible, and dependable service; your right to on-time service; your right to be notified of service delays; and your right to be heard.” In practice, however, these promises are enforced through a fairly standard complaint system, including a link to ‘Write to the Top’ which apparently sends a customer complaint or issue directly to the CEO. As with other local government entities, RTA is required to comply with GAAP. Its financial reports are reviewed by the Board of Trustees on a periodic basis. In addition, RTA must comply with accounting requirements related to federal operating and capital grants it receives. Most significantly, it must satisfactorily complete a Triannual Review by the federal government to confirm compliance with federal conditions on capital funds granted to RTA for the purchase of buses and equipment. As an Authority created pursuant to state law, the State of Ohio requires that the RTA be audited annually by the Ohio Auditor of State. The RTA has organized a Customer Advocacy Group as a formal vehicle for citizens to advocate for their urban transportation interests. The stated purposes of the advocacy group are to: promote RTA responsiveness to riders; advise RTA staff on ways to resolve issues with riders in order to improve the bus system; and recommend possible solutions to RTA staff, based on public input. The RTA is not actively Appendix A: Descriptive Details 85 involved in management of the group. The Advocacy Group largely organizes itself, elects its own officers, and conducts its own meetings every two months. Minutes of its meetings are posted for public review. The Authority provides meeting space for a meeting with the group on a quarterly basis. In addition, the RTA uses informal mechanisms to connect with its ridership and client base. It meets upon request with elected and appointed officials from Dayton, Kettering, Montgomery County, Green County, the University of Dayton, Wright-Patterson Air Force Base, and other consumers of RTA services to answer questions, resolve issues, and consider operational improvements. The RTA website also contains a Customer Support page advising the public of their rights – including rights to accessible vehicles and non-discrimination – under Title VI of the Civil Right Act and explaining the On-Time Service Guarantee. Another link leads the public to the Customer Advocacy Group described above. Finally, conditions attached to federal operating grants require that the Authority conduct public outreach meetings when changes to bus fares are considered, or where any change in operations would affect rights protected by federal Civil Rights legislation, including the Americans with Disabilities Act. Service delivery performance The RTA does not develop or maintain its own service delivery indicators. However, the Authority is a member of the American Bus Benchmarking Group, a non-profit organization created in 2011 to allow transit agencies for mid-sized US cities to compare information on service delivery and to learn from each other. The group develops and maintains ‘benchmarks’ – informal standards about what ‘normal’ or ‘good’ levels of service for specific services would be. Members of the group agree to measure their performance in various ways, and the organization provides a confidential forum in which members can compare their measured performance to others, and discuss the possible reasons behind low performance, without opening themselves up to allegations of failure to provide acceptable levels of service. The group is associated with a similar organization in the United Kingdom, and its website lists eight additional unrelated organizations involved in measuring urban transportation performance. Specific benchmarks for performance are only available to members of the group. Overall, our subjective rating of the Dayton RTA’s service delivery is very good. Concession: Mbombela/Dolphin Coast Water and Sewer Concession The term “Public Private Partnership” (PPP) covers a wide range of arrangements. In some cases, a city may essentially turn a public service system over to a private party, who may invest and manage the system for a term. In other cases, a city may hire a private firm to provide specified and limited services, while the city itself retains overall responsibility for the system. Several of the Indian cities do hire external contractors to perform some of their functions, but the financial risk (and reward) remains with the City. In this section, we describe a water concession in the City of Mbombela, which unlocked significant investment capital and management experience from the private sector. Silulumanzi (RF) (Pty) Ltd This study focuses on the Silulumanzi concession which provides water and sewer services to portions of the City of Mbombela. We also make reference to the municipality’s own water and sewer operations in some areas. An independent 20-year review (City of Mbombela, 2020) was conducted for the concession, upon which much of this assessment relies. 86 Institutional Models for Governance of Urban Services: Volume 1 The concessionaire provides water and sanitation services and is responsible for servicing 27,408 customers, of which 1,759 are businesses and the remainder residential. Only 60% of the customers metered are paying customers. In the concession area there are approximately 57,000 unbilled, unmetered households who have some access to water, either through formal yard connections, water from tanker deliveries or using JoJo tanks. Approximately 80% of the unbilled, unmetered households which are connected to the main concessionaire system have intermittent supply (City of Mbombela, 2020). The concessionaire maintains and operates: ƒƒ 1,200 km of water pipelines; ƒƒ 700 km of sewers; ƒƒ 3 wastewater treatment plants; ƒƒ 99 reservoirs; ƒƒ 44 water pump stationsp; and ƒƒ 30 sewage pump stations. Organization Mbombela has both an Executive Mayor and a MM. As noted above, in the discussion of Mbombela’s solid waste operations, this division of executive authority could create ambiguity and tension, although the dominant role of the ANC tends to keep these tensions under control. The City of Mbombela is the Water Services Authority (WSA) for its municipal area. There is a split Water Service Provider arrangement, with the concessionaire, Silulumanzi, responsible for the provision of water services inside a geographic area known as the ‘concession area’ accounting for about 54% of the population. The municipality is responsible for the water services outside of the concession area. There is no Water Board currently serving the City of Mbombela with the municipality and concessionaire responsible for their own bulk water supply. Until recently Rand Water provided bulk water to the municipality for 2 years until their contract expired. In 1999, the Town Council for Nelspruit (the previous name of Mbombela) signed a 30-year concession agreement with the Greater Nelspruit Utility Company (the previous name of Silulumanzi RF Pty Ltd). As part of the post-apartheid amalgamation processes for town councils, Nelspruit had by then already expanded from serving 25,000 people to almost 250,000. Many of the new areas had never received water and sanitation services, and the newly incorporated groups were expecting an immediate improvement in services. The concession agreement was intended to inject capital and management resources into the town’s water and sanitation operations, to meet the new service delivery obligations effectively and efficiently. In 2000, South Africa’s new system of local government created Mbombela Local Municipality with expanded boundaries, which again more than doubled the population of the municipality. In 2016, the amalgamation with Umjindi Local Municipality resulted in the further expansion of the municipal area, now named the City of Mbombela Municipality, and serving a total population of 695,000 people in 206,000 households. Silulumanzi RF Pty Ltd (Silulumanzi) is a private South African company and is governed by a board of directors appointed by its shareholders. It is the successor to the Greater Nelspruit Utility Company, in which international shareholders (Sembcorp, Cascal and BiWater) formerly held controlling shares. Silulumanzi Appendix A: Descriptive Details 87 is led by a Managing Director (currently acting), and senior managers for Technical Services, Governance and Risk, Corporate Relations, Commercial Services, and Human Resources. As a private company, Silulumanzi is a fully ring-fenced operation. It runs all aspects of the water business in the concession area, including billing, customer management and is able to use equity to raise debt. Operationally, Silulumanzi coordinates regularly with the municipal water department which provides services outside the concession area. It also co-ordinates with the City’s by-law enforcement division regarding illegal water connections. There is an attempt within the City of Mbombela to clearly delineate its responsibilities of the WSA and those of Silulumanzi as the Water Service Provider. According to municipal officials, Silulumanzi does not engage with other spheres of government or agencies. This is done by the City as the WSA. The City of Mbombela negotiates and signs a 5-yearly Supplementary Service Agreement with Silulumanzi, which is reviewed annually. The City has a WSCM unit, formerly in the water department but now elevated to the office of the Deputy MM for Institutional Development. This unit acts as a CMU and is intended to embody the WSA. Silulumanzi reports monthly to the WSCM unit and submits a final monthly report against performance areas defined by the Service Agreement. The WSCM unit reports on the performance of the concession to the MM, Mayor, and Mayoral Committee. The Mayor in turn reports quarterly to the Municipal Council. As part of Council reporting, the Council Committee for Water engages officials on the performance. Together with the District Municipality, the City reports quarterly to the provincial department of Cooperative Governance. The municipality prepares an annual performance report with audited financial statements that are also shared with the provincial government. The concession has been significantly affected by contracts management capacity. While initially the CMU was well staffed and had access to external accounting and engineering expertise to assist it, this is no longer the case. A 20-year review of the concession found that over the period 2009 to 2018, the contract monitoring ability of the City declined as key staff left and the appointment of external advisors to monitor financial and technical performance was terminated. Since then, the CMU has remained in place, but lacks the necessary expertise and impetus. There remains a concern that the municipality is not currently monitoring and managing the contract in the manner that it should and thus not ensuring that it receives the optimum possible benefits from this contract. Silulumanzi pays a concession fee annually, set at the cost of contracts monitoring and management. This was recently more than ZAR 3 million (approximately US$ 200,000) annually. While Silulumanzi argues that the concession management plan is not being implemented, it continues to pay this fee. The contract provides for sanctions on the concessionaire for non-performance. Penalties range from ZAR 10,000 for minor offences, such as an unforeseen cut in the water supply exceeding the maximum specified period allowed for it to be attended to, or repeated incorrect invoicing where there had already been two customer complaints; and up to ZAR 500,000 for not meeting any of the requirements set for any 5-year period. Thus far, no sanctions have been applied. The City of Mbombela develops strategy through the 5-year IDP process, which informs its plans for the water function. In theory this informs the supplementary 5-year agreements with Silulumanzi. The planning unit in the water department undertakes a Water Services Development Plan that feeds into the IDP process. 88 Institutional Models for Governance of Urban Services: Volume 1 Finance Most operating revenues are derived from water tariffs and the national government’s equitable share transfer to Mbombela. As the WSA, the municipality has the legal power to set water and sanitation tariffs, and this cannot be delegated to the concessionaire. A contractual mechanism was developed to address this: ƒƒ The concessionaire annually determines the “charges” required to operate sustainably; ƒƒ The municipality can then determine the “tariffs” to be charged by the concessionaire, to the consumers; and ƒƒ If the municipality sets tariffs at a lower level than the charges, the difference in revenue must be paid by the municipality to the concessionaire. The concession contract provides for the concessionaire to receive part of the local government equitable share (LGES) funding received by the municipality from the national fiscus. While the water and sanitation proportion based on the LGES formula is ZAR 310 million for the concession areas, the latest agreement only provides for ZAR 30 million to be provided to the concessionaire, and even this was not fully disbursed. The operating account history shows that the concession nevertheless generates a healthy profit for the concessionaire. Figure 15 Operating account history of Silulumanzi Operating account history 350,0 300,0 250,0 R millions (nominal) 200,0 150,0 100,0 50,0 0 -50,0 2000 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Revenue Operating expenses Earnings before tax and interest Pro t Source: City of Mbombela, 2020. Infrastructure investment in the concession area is limited. The 20-year review notes that for a financially sound service provider with infrastructure investment responsibilities, finance should be a blend of: ƒƒ Grants: typically, Municipal Infrastructure Grant (MIG); the Water Services Infrastructure Grant (WSIG); and the Regional Bulk Infrastructure Grant (RBIG); ƒƒ Equity: own funds provided by shareholders or accumulated reserves; ƒƒ Debt: borrowing from development finance institutions or private finance institutions; and ƒƒ Development charges (service contributions): payments by property developers for bulk and connector infrastructure. This may be provided as a payment to the municipality or provided by a developer ‘in kind’ through the construction of an element of bulk or connector infrastructure. Appendix A: Descriptive Details 89 The review notes that none of these sources of finance are being provided sufficiently in the concession area. Other than the original DBSA loan taken at the start of the concession, the concessionaire has not borrowed. Given their analysis of the funding requirements, the review found that: ƒƒ The concessionaire has substantially under-invested in infrastructure when compared to requirements; ƒƒ Previous supplementary agreements have been lenient and did not require significant capital investment; ƒƒ The primary purpose of the concession contract was to provide capital to expand and renew the water services infrastructure in the concession area; and ƒƒ The review also undertook a financial viability assessment and found the concessionaire was well able to take on debt over the past 10 years. The concessionaire has actually provided funding in three forms: ƒƒ Shareholder equity: approximately ZAR 26.5 million over the period of 2000-2003; ƒƒ A DBSA loan of ZAR 70 million utilized over the period 2001-2007, evidently fully drawn down and now fully repaid; and ƒƒ Silulumanzi own capex (from retained earnings): approximately ZAR 250m utilized over the full 20-year period. Capital grants from national government have not had significant impact in the concession area. The MIG is partially based on water and sanitation needs (per the MIG formula). The water and sanitation portion for Mbombela was ZAR 170 million in 2018, while only an estimated ZAR 7 million on average, over the period of 2005-2015, was allocated to the concession area. The WSIG is understood to be ZAR 40 million for Mbombela in 2018 and the RBIG allocation to Mbombela in 2018 was also ZAR 40 million. It appears that little or none of this was allocated to the concession area. While noting that grants are intended to provide poor households with access to services, regardless of the service provider, the 20-year review notes there is a substantial under-commitment of grant funding to the concession area by the City of Mbombela. There are significant fiscal risks from not investing sufficiently in infrastructure in the concession area. Transparency, Participation and Accountability All municipalities and companies are required to use the South African standards of GRAP in their financial reporting. Financial and performance auditing is conducted by internal audit first. Since Silulumanzi is a private company, internal auditors report to its internal audit committee. Silulumanzi’s annual report and annual financial statements are additionally audited by an independent external auditor before these are presented as part of an annual report. Citizen participation in Mbombela happens primarily through the IDP process and ward committees. Ward committees and councillor-convened community meetings provide inputs on community needs that are considered in the IDP prioritization process. Annual reporting is published on the municipality’s website. The IDP office has four regions with two IDP co-ordinators in each. Each coordinator lives in their work region and is integrated into the community. Their role is significantly about community-based planning however, many play a service-monitoring and problem-resolution role engaging with city departments to flag and resolve service delivery problems. There are ward facilitators for each of the 45 wards and structurally located in the office of the Speaker. It is unclear what their role and effectiveness is in resolving service delivery problems. In the water sector, municipal water ambassadors engage with communities. 90 Institutional Models for Governance of Urban Services: Volume 1 Mbombela has a new customer care department inherited from the merger with Umjindi. This department is new and still extending its work across the Mbombela boundaries. Service delivery performance Overall, Mbombela’s water concession has remained successful. A recent 20-year review indicated that the partnership between municipality and service provider was less successful in rural and peri-urban areas where operations take place in difficult circumstances including challenges with bulk water supply, consistent illegal connections, civil unrest and general opposition to paying for water services. The following factors emerge from the 20-year review:52 ƒƒ Silulumanzi failed to invest sufficiently in new infrastructure and the renewal of existing infrastructure. Despite the level of investment agreed to by both parties in individual supplementary agreements, actual investment has been inadequate and a reflection on the partnership; ƒƒ Silulumanzi has not met targets to improve the continuity of water supply in terms of days for which households have access to water and hours per day; ƒƒ Silulumanzi has had too little success with water demand management and revenue collection in rural and peri-urban areas and as the concessionaire is accountable for this despite interdependencies with the Mbombela municipality; ƒƒ The municipality has not fulfilled its part in paying agreed amounts and allocating grant funds to the concessionaire as required in the supplementary agreements; ƒƒ The municipality needs to support the concessionaire and implement arrangements to enforce by-law compliance, with the necessary political backing; and ƒƒ The municipality needs to invest in contract monitoring and management and access the appropriate technical skills necessary. This is a critical enabler to the above. The review also makes the important point that the functioning of the concession would benefit significantly from better support by national government. Silulumanzi conducts periodic customer satisfaction surveys, which the 20-year review found to be well executed. They include three groups of consumers (1) account holders, who typically have a water and a sanitary sewer connection; (2) businesses; and (3) rural and peri-urban households. Most urban account holders and businesses are satisfied with the services performed by Silulumanzi. In some rural and peri-urban areas, the level of dissatisfaction is significant.53 Overall, our subjective rating of the Mbombela PPP’s service delivery is good. 52 From the report prepared in connection with this project by the South African consultant, Nishendra Moodley. 53 Please see Nishendra Moodley’s report, at pages 40-41 for more detail on these surveys. Appendix A: Descriptive Details 91 Appendix B: King IV Principles of Municipal Governance The full text of the King IV Report, including the supplement relating to municipalities, can be accessed at https://www.iodsa.co.za/page/DownloadKingIVapp The headline principles, as they apply to municipalities, are as follows: Principle 1 The Council should lead ethically and effectively. Principle The Council should govern the ethics of the municipality in a way that support the establishment 2 of an ethical culture. Principle 3 The Council should see that the municipality is and is seen to be a responsible corporate citizen. Principle The Council should appreciate that the municipality’s core purpose, its risks and opportunities, 4 strategy, business model, performance, and sustainable development are all inseparable elements of the value creation process. Principle The council should ensure that reports issued by the municipality enable stakeholders to make 5 informed assessments of the municipality’s performance, and its short, medium, and long-term prospects. Principle The council should serve as the focal point and custodian of corporate governance in the 6 municipality. Principle The council should comprise the appropriate balance of knowledge, skills, experience, diversity 7 and independence for it to discharge its governance role and responsibilities objectively and effectively. Principle The council should ensure that its arrangements for delegation within its own structures promote 8 independent judgement, and assist with balance of power and the effective discharge of its duties. Principle The council should ensure that the evaluation of its own performance and that of its committees, 9 its speaker, and its individual councilors, support continued improvement in its performance and effectiveness. Appendix B: King IV Principles of Municipal Governance 93 Principle The council should ensure that the appointment of, and delegation to, management contribute to 10 role clarity and the effective exercise of authority and responsibilities. Principle The council should govern risk in a way that supports the municipality in setting and achieving its 11 strategic objectives. Principle The council should govern technology and information in a way that supports the municipality 12 setting and achieving its strategic objectives. Principle The council should govern compliance with applicable laws and adopted, non-binding rules, 13 codes and standards in a way that supports the municipality being ethical and a good corporate citizen. Principle The council should ensure that the municipality remunerates fairly, responsibly and transparently, 14 so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term. Principle The council should assure that assurance services and functions enable an effective control 15 environment, and that these support the integrity of information for internal decision-making and the municipality’s external reports. Principle In the execution of its governance role and responsibilities, the council should adopt a 16 stakeholder-inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the municipality over time. 94 Institutional Models for Governance of Urban Services: Volume 1