With the passage of the Fiscal Transfers Bill 2012 last evening, municipal and neighbourhood councils will be able to raise money in various ways and a formula has now been set out for the sharing of revenues between central and local government.
The bill which intends to make municipal and neighbourhood councils more financially secure is a crucial step in local government reform and will become law when assented to by President Donald Ramotar.
Several amendments have been made to the bill tabled by the government since the opposition had expressed concern that provisions in the original bill allowed for considerable discretion by the Local Government Minister. It has been argued that without a formula for the fair sharing of revenues between central government and local government the administration exerts undue influence in local government matters and prevents a flowering of democracy at the grass roots.
In Georgetown, Mayor Hamilton Green has complained frequently that central government has thwarted the council’s efforts at raising its own finances and this is one of the reasons why the needs of the capital have not been adequately taken care of.
The bill which was passed with the unanimous approval of the House last evening, seeks to provide for the allocation of resources to local authorities, thereby giving effect to Article 77(A) of the constitution. The constitution states that Parliament “shall provide for the formulation and implementation of objective criteria for the purpose of the allocation of resources to, and garnering of resources by local democratic organs.”
In this context, Clause 6 of the bill sets out that the formula for fiscal transfers from central government to local authorities shall be based primarily on “a set of conditions and stipulated performance indicators so as form an aggregate sum” as set out in the Schedule.
According to the bill, “sets of conditions” means “the criteria used to determine the sum of money appropriated by Parliament annually to local authorities and of which fifty percent is allocated equally among those local authorities with the remaining fifty percent being allocated to the local authorities in accordance to variables, such as population size, geographical area or stipulated performance indicators which may be changed by the Minister by regulations.” The Bill says that “stipulated performance indicators” means “the rate of collection of taxes by each local authority.”
Essentially, half of the money allocated to local authorities in the National Budget will be equally divided among the three categories of local authorities (Georgetown, municipalities and neighbourhood democratic councils). The remaining 50% of the allocation will be divided among the local authorities within each category based on a formula that takes into account the size of the area, population, and percentage of revenue collected by the local authority for the preceding year.
The bill also sets out proposals to ensure the ability of local authorities to sustain themselves financially. In addition to the authorised imposition of rates on immovable property within their boundaries, Clause 3 of the bill provides for each authority to increase revenues through various measures. Clause 3(2) (a) proposes that with the prior written approval of the Minister responsible for Local Government, a local authority could approach donor agencies for financial and other resources in the form of grants, which may be used to fund projects or employment costs. It specifies that such approval must not be unreasonably withheld and this approval or disapproval be given within 35 days.
Additionally, it is also proposed that local authorities could negotiate with central government for specific revenue sharing contracts; establish vehicular meters to charge for parking, establish and charge for vehicle parking facilities; embark on revenue earning economic projects; or undertake any other measure agreed to by the Minister.
The Bill also provides for a local authority to enhance its revenue by a fiscal transfer to it from another local authority taking into account the mutual benefits to the local authorities.
Unless otherwise directed by the Minister, the bill says additional revenues shall be paid into the general revenue account of the local authority, from which account disbursements may be made in keeping with financial regulations governing such funds.
The Bill also sets out conditions that have to be met in order for local authorities to be eligible for fiscal transfers. It requires that each local authority submit its budget estimates for the following year by November 15 of the current year, including previous as well as projected expenditure and revenue data as well as all relevant financial statements required by law.
Clause 5 provides for the Minister to establish grants to any local authority.
The bill is part of a raft of reform legislation expected to lay the groundwork for long overdue local government elections. The government and opposition parties had previously agreed on the enactment of reforms prior to the holding of local government elections, which have been due since 1997. A bi-partisan Task Force on Local Government Reform, made up of representatives of the PPP/C and the PNCR, had worked for eight years on completing the reform legislation.
However, in 2009 the government abandoned the process in favour of the parliamentary review. All four bills were tabled in that same year and sent to select committee for a review, however, the process stalled after the opposition parties withdrew their participation, saying that the government was “inflexible” on proposed amendments.
The four bills were later re-tabled last year and were sent to a special select committee but faced hiccups upon their return to the House as the government twice deferred their presentation as they attempted to wring approval from the opposition on the Amaila Falls Hydropower project.