Metropolitan Governance and Finance in São Paulo 309 DEBORAH L
Total Page：16
File Type：pdf, Size：1020Kb
Financing Metropolitan Governments Bahl Linn in Developing Countries Wetzel Edited by Roy W. Bahl, Johannes F. Linn, and Deborah L. Wetzel Financing Metropolitan Governments Governments Metropolitan Financing or the first time in human history, more people live in urban rather than rural Fareas; the number of metropolitan cities in developing countries far exceeds those in advanced economies; and the governance of megacities is of greater importance as national finances have become precarious. This book skillfully weaves together the theory and history of metropolitan finance with illustrative case studies, which offer deep insights into metropolitan financial governance in Brazil, India, and China, among in other countries. The authors address the politics of metropolitan government, the mys- Developing Countries Developing teries of the underutilized instrument of the property tax, and the question of financ- ing urban infrastructure. This is an indispensable volume for policy makers and for those who care about the future of metropolitan cities. — Rakesh Mohan Executive Director, International Monetary Fund he economic and political future of the developing world depends crucially on the Tongoing processes of urbanization. The essays in this volume, by leading scholars Financing Metropolitan intimately associated with these issues, provide a deep analysis of the critical role of metropolitan governance and financial structure in urbanization. It is the best treatment available: a wide-ranging and penetrating exploration of both theory and practice. Governments in — Wallace E. Oates Professor of Economics, Emeritus Developing Countries University of Maryland Edited by his well-written and informative book will put local governments, especially in Roy W. Bahl, Johannes F. Linn, and Deborah L. Wetzel Tmetropolitan areas, on the map of public finance, where they belong. The impor- tance of global and local public finance has grown world-wide along with national pub- lic finance, which has received most of the attention in the past. This book will surely contribute to that change. It contains a wealth of hard-to-get information on issues that range from how particular cities are financed to the complex fiscal arrangements in China. It is definitely a must-read book for public finance scholars. — Vito Tanzi Former Director of Fiscal Affairs, International Monetary Fund Cover design by Joyce Weston Cover photographs (top): iStockphoto/Celso Diniz Photography ISBN 978-1-55844-254-2 (bottom): iStockphoto/Dominique Landau Financing Metropolitan Governments in Developing Countries Edited by Roy W. Bahl Johannes F. Linn Debor ah L. Wetzel © 2013 by the Lincoln Institute of Land Policy All rights reserved. Library of Congress Cataloging- in- Publication Data Financing metropolitan governments in developing countries / edited by Roy W. Bahl, Johannes F. Linn, Deborah L. Wetzel. pages cm Includes index. ISBN 978- 1- 55844- 254- 2 (alk. paper) 1. Municipal fi nance— Developing countries. 2. Finance, Public— Developing countries. 3. Local taxation— Developing countries. 4. Municipal government— Developing countries. 5. Municipal fi nance— Developing countries— Case studies. 6. Finance, Public— Developing countries— Case studies. 7. Local taxation— Developing countries— Case studies. 8. Municipal government— Developing countries— Case studies. I. Bahl, Roy W. II. Linn, Johannes F. III. Wetzel, Deborah L. HJ9695.F663 2013 352.4'216091724—dc23 2013001063 Designed by Westchester Publishing Ser vices Composed in 10.5/13 Minion, by Westchester Publishing Ser vices in Danbury, Connecticut. Printed and bound by Puritan Press Inc., in Hollis, New Hampshire. Th e paper is Rolland Enviro100, an acid- free, 100 percent PCW recycled sheet. MANUFACTURED IN THE UNITED STATES OF AMERICA Contents List of Illustrations vii Foreword xi DOUGLAS H. KEARE 1 Governing and Financing Metropolitan Areas in the Developing World 1 ROY W. BAHL, JOHANNES F. LINN, and DEBORAH L. WETZEL 2 Metropolitan Cities: Th eir Rise, Role, and Future 31 SHAHID YUSUF 3 Metropolitan Cities in the National Fiscal and Institutional Structure 57 PAUL SMOKE 4 Th e Decentralization of Governance in Metropolitan Areas 85 ROY W. BAHL 5 Institutions and Politics of Metropolitan Management 107 INDER SUD and SERDAR YILMAZ 6 Metropolitan Public Finance: An Overview 135 RICHARD M. BIRD and ENID SLACK 7 Property Taxes in Metropolitan Cities 159 WILLIAM J. MCCLUSKEY and RIËL C. D. FRANZSEN 8 Local Nonproperty Revenues 183 JORGE MARTINEZ- VAZQUEZ 9 Grant Financing of Metropolitan Areas: A Review of Principles and Worldwide Practices 213 ANWAR M. SHAH 10 Metropolitan Public Finances: Th e Case of Mumbai 243 ABHAY PETHE 11 Paying for Urbanization in China: Challenges of Municipal Finance in the Twenty- First Century 273 CHRISTINE P. WONG vi n Contents 12 Metropolitan Governance and Finance in São Paulo 309 DEBORAH L. WETZEL 13 Metropolitan Infrastructure and Capital Finance 339 GREGORY K. INGRAM, ZHI LIU, and KARIN L. BRANDT 14 Slum Upgrading 367 MARIA E. FREIRE 15 External Assistance for Urban Finance Development: Needs, Strategies, and Implementation 393 HOMI KHARAS and JOHANNES F. LINN Contributors 421 Index 423 About the Lincoln Institute of Land Policy 431 Metropolitan Governance 12 and Finance in São Paulo DEBORAH L. WETZEL ith a population of 11.2 million residents, São Paulo is the largest city in WBrazil, the largest city in the southern hemi sphere, and the world’s sev- enth largest city by population. Th e city is anchored to the São Paulo metropoli- tan region (SPMR), which with 20 million dwellers is among the fi ve largest metropolitan areas in the world (Olinto 2011). Th e city is the capital of the state of São Paulo, the most populous Brazilian state, and exerts a strong infl uence in commerce, fi nance, the arts, and entertainment throughout Brazil and Latin America. Th e SPMR was created in 1973, though São Paulo state had previously created administrative regional bodies in the late 1960s. Th e 1973 SPMR had 37 muni- cipalities. An additional municipality was included in 1983, and another in 1991. Th us, the SPMR now comprises 39 municipalities, including the municipality of São Paulo (fi gure 12.1). As one of world’s prominent metropolitan areas, São Paulo has undergone signifi cant challenges and transformations. Th e city has experi- enced a decline in its manufacturing base, with signifi cant implications for the incomes and living conditions for the people of the metropolitan area. As the SPMR seeks to reinvent itself, it must rely on metropolitan governance structures that provide little authority and coordination and on fi scal systems that are tied to the past and, at least for São Paulo municipality, take steps to address the city’s increasing debt. Addressing key issues of eff ective planning, fi scal management, and delivery of ser vices will be critical for the future of the SPMR, as will making use of the region’s strong human resources and access to technical and research centers. Th is chapter draws on a recent study carried out by the World Bank on the City of São Paulo. Th e author would like to thank Tom Kenyon and his team. See the references for further detail. Th e author would also like to thank Georges Darido and Leonardo Padovan for their support. n 309 n 310 n Deborah L. Wetzel FIGURE 12.1 The São Paulo metropolitan region 12 30 21 13 5 4 25 1 15 14 31 18 2 24 26 17 19 6 36 11 23 29 37 3 39 38 34 7 9 22 8 27 32 16 28 33 35 10 São Paulo Municipality Greater ABC Region 20 0 5 10 Miles 0 10 20 Kilometers 1 Arujá 11 Ferraz de Vasconcelos 21 Mairiporã 31 Santana de Parnaíba 2 Barueri 12 Francisco Morato 22 Mauá 32 Santo André 3 Biritiba-Mirim 13 Franco da Rocha 23 Mogi das Cruzes 33 São Bernardo do Campo 4 Caieiras 14 Guararema 24 Osasco 34 São Caetano do Sul 5 Cajamar 15 Guarulhos 25 Pirapora do Bom Jesus 35 São Lourenço da Serra 6 Carapicuiba 16 Itapecerica da Serra 26 Mauá 36 São Paulo 7 Cotia 17 Itapevi 27 Ribeirão Pires 37 Suzano 8 Diadema 18 Itaquaquecetuba 28 Rio Grande da Serra 38 Taboão da Serra 9 Embu 19 Jandira 29 Salesópolis 39 Vargem Grande Paulista 10 Embu-Guaçu 20 Juquitiba 30 Santa Isabel source: Adapted from Arretche (forthcoming). Th is chapter looks at São Paulo’s recent past to understand how metropolitan governance and fi nance have aff ected the development of this region and contrib- uted to its challenges. Aft er some background on the SPMR, its history, and recent economic changes, the chapter considers how metropolitan areas fi t into the gover- nance structures of Brazil and the impact this has had on the SPMR. A discussion of fi scal issues and management follows, with a snapshot of the SPMR as a whole and a discussion of fi scal data and expenditure management related specifi cally to São Paulo municipality. Th en, aft er a look at some special fi nancial tools that have been created to address specifi c needs, the chapter concludes with challenges going forward and thoughts regarding how they might be addressed. Metropolitan Governance and Finance in São Paulo n 311 Transformation of Economic Activity in São Paulo and Its Implications In the early days of the Brazilian Republic in the late 1800s, São Paulo was a hub of the coff ee economy, one of Brazil’s main commodities during the period. Strategi- cally located between a main port (Santos) and the coff ee plantations, São Paulo’s location and the nature of coff ee production laid the foundations for the future. Because coff ee trees require about fi ve years to yield a fi rst crop (unlike sugar cane, which can be harvested within a year), production of coff ee required greater fi nan- cial capital over a longer period of time.