Document Type

Article

Publication Date

3-1-2020

Abstract

We assess the fiscal health of KMC by estimating the gap between revenue and expenditures over a period of last 10 years. It is found that the own revenues generated by the KMC are not sufficient to meet its expenditures. Even when we account for PPP and grants from the government the expenditures exceed the revenue receipts. The revenue receipts have registered a greater fall than the fall in the revenue expenditures. This gap has been filled up by raising loans, which is not a sustainable solution in the long run. While the revenue expenditures on services already fall short of the expenditure norms and comprise of only 45.4 percent of the total revenue expenditure of the KMC, we identify a further burden on it in the form of other major yet unavoidable components like pension funds, electricity charges, and administration and support. We estimate the revenue capacity and estimate the best-case scenario using certain simulation exercises. It was found that if we raise the own revenue to GCP to 2 percent, the KMC is unable to meet the revenue expenditures. However, when we push the own revenue to GCP ratio further to 4 percent, to equate it to revenue expenditure to GCP ratio, the KMC is comfortably able to meet all its revenue expenditures. When we compare the own revenue to revenue expenditure on all the services (that is water supply, sewerage and drainage, streetlights, roads and solid waste management), we estimate that the desired own revenue to GCP ratio is 1.72 percent. The ratio is almost the same, 1.7 percent of the GCP, when we consider expenditure needs on all the services. In conclusion, we suggest to either tap better the existing revenue handles like property tax, car parking fees, road charges, etc. or develop new non-tax handles/ user charges like charges from cable operators or mobile towers. At the same time, it is important that KMC diverts most of its expenses towards providing basic services to it populace.

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To learn more about the Andrew Young School of Policy Studies and ICEPP, visit https://aysps.gsu.edu/ and https://icepp.gsu.edu.

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