Local govt reform revisited

THE SOLUTION to the problem of inadequate and indeed inequitable funding is one of the critical areas to be addressed in any serious agenda for reform. The situation as exists at the moment is that local government bodies are almost totally dependent on central government for funds to carry out their functions.

However, the quantum for each corporation is not based on any transparent and equitable formula but on the whim and fancy of the current Ministers of Local Government and Finance. Given that some corporations are controlled by the ruling party and others by the Opposition party, the charge of discrimination in allocation based on partisan consideration remains a perennial issue.

Moreover, the timely release of funds to the corporations has also been subject to the charge of deliberate manipulation by the Minister of Finance to favour some corporations over others. There is also currently the nonsensical practice of releasing funds a week or two before the end of the financial year with the proviso that unspent balances be returned to the Treasury.

Such a practice and regulation obliges corporations to be involved in all sorts of manoeuvres to commit the monies released in order to ensure that there are no unspent balances. Clearly, these practices are untenable from the view of project planning and execution and proper accountability. How then is the issue of funding for local government bodies to be resolved in the reform exercise? The Ministry of Rural Development and Local Government merely states under the heading “Vision” and sub-heading “Security of Funding” in its pamphlet in the local government reform consultation exercise as follows: “Local government bodies will be allowed to keep certain taxes and revenues collected within their boundaries to use for their own development.” Such a proposal is clearly inadequate and can entail a great deal of inequity. An example will suffice.

The level of business activity and property values in regional corporations such as Sangre Grande, Mayaro/ Rio Claro or Penal/Debe will be insignificant when compared to municipal corporations such as Port-of- Spain, San Fernando and Arima or even regional corporations such as Diego Martin and San Juan/Laventille.

If it is proposed that both sets of corporations will retain a certain percentage of taxes internally generated, then obviously the amounts to be so retained by the Mayaro, Sangre Grande or Penal/Debe Corporations will be miniscule when compared with what can be retained by the municipal corporations and Diego Martin and San Juan/Laventille.

However, the needs of the former set of corporations may be much greater than those of the latter given the former’s large geographical areas, huge networks of secondary roads, drainage and sanitation systems and inadequate facilities such as markets, recreational grounds etc. Thus, equity demands that a large proportion of their funding requirements will have to be met by subventions from central government.

I had proposed both in the columns of December 2003 and May 2013 that a transparent formula for funding be devised and publicised which takes into account size of population, geographical area, income level of residents, state of existing infrastructure and facilities etc (with appropriate weighting).

When the formula is agreed and implemented there will be little room for the manipulation of funding by the Ministry of Finance and there will also be relative certainty of amounts to be received by the corporations which will enable them to engage in better financial and project planning. A schedule of release of funds should also be pre-determined and conveyed to the corporations in order to reduce uncertainties and extraneous considerations in the issue of such funds.

In the next column the very significant issue of accountability in its various aspects will be addressed.