Report No. 32253-IN INDIA Urban Finance and Governance Review Public Disclosure Authorized (In Two Volumes) Volume II: Case Study Annexes December 2004 Energy and Infrastructure Unit South Asia Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank Vol. II - Case Study Annexes CURRENCY EQUIVALENTS Currency unit: Indian Rupee (RS) US$1 = Rs. 44.66 GOVERNMENT FISCAL YEAR April 1- March 31 ABBREVIATIONS AND ACRONYMS BATF Bangalore Agenda Task Force KAS Kamataka Administrative Service BDA Bangalore Metropolitan Region K-HB Karnataka Housing Board Development Authority KMA Karnataka Municipalities Act BMC Brihan Mumbai Corporation KMAS Kamataka Municipal Administrative ("Mumbai") Service BMP Bangalore City Corporation KMCA Kamataka Municipal Corporation BWSSB Bangalore Water Supply and Act Sewerage Board KTCP Karnataka Town and Country CAA Constitution Amendment Act Planning Act CAS Country Assistance Strategy KUIDFC Kamataka Urban Infrastructure CC City Corporations (Karnataka) Development Finance Corporation CCF City Challenge Fund KUWSDB Karnataka Urban Water Supply and CMC City Municipal Councils Drainage Board (Karnataka) LG Local Government CMWSSB Chennai Metropolitan Water Supply MDF Municipal Development Fund & Sewerage Board NGO Non-Governmental Organization DA Development Authorities PWD Public Works Department DFID Department for International SCB Slum Clearance Board Development SFC StateFinanceCommissions DMA Directorate of Municipal SWM Solid Waste Management Administration TA Technical Assistance EFC Eleventh Finance Commission TAC TechMnicalAssstnc l ESW Economic Sector Work (KanMataka) GDP Gross Domestic Product TNUDF Taril Nadu Urban Development GOI Government of India Fund GOK Government of Kamataka Fund GOM Government of Maharashtra TP Town Panchayats GOTN Government of Tamil Nadu ULDD Urban Development Department HDFC Housing Development Finance LB Urban Noa Body CorporationCopoatonLt., Ltd. UNCHS UnitedSettlements Nations Centre for Human HUDCO Housing and Urban Development Settemens CorporationPrgamCoprto UNDJP United Nations Development IAS Indian Administrative Service Programme IBAD Intern AtmionaltBankvfor UDPA Urban Development IBRD Interuational Band lor Alleviation (Ministry)and Poverty Reconstruction and Development URIF Urban Reform Incentive Fund IDFC Infrastructure Development Finance USAID United States Agency for IDSMT Integrated Development of Small UWSS International Development and Medium Towns The World Bank Regional Vice President: Praful Patel Country Director: Michael Carter Sector Director: Vincent Gouarne Sector Manager: Sonia Hammam Task Team Leader: Dana Weist 11 FOREWORD This report was prepared by a team consisting of: Dana Weist, Roy Bahl (property tax reform), Somik Lall (urban economic analysis), Lars Sondergaard (economic and fiscal analysis), Ajit Karnik (Maharashtra analysis), Abhay Pethe (Maharashtra analysis), Christine Wong, and Kirida Bhaopichitr. The team is grateful to many counterparts in Kamataka, Maharashtra, and Tamil Nadu for their assistance. Helpful comments were provided by Sonia Hammam, Patricia Annez and Soraya Goga. Peer reviewers include William Dillinger, Robert Ebel, and George Peterson. - s Contents ANNEX I. BACKGROUND INFORMATION ON MUNICIPAL FINANCE AND GOVERNANCE IN KARNATAKA ................................................................ 1 Government Structure and Organization ................................................................ 1 ULB Structure and Composition ................................................................ 1 Relationship between the Council and the Chief Executive ................................................................ 1 Fiscal Decentralization ............................................................... 2 Expenditure Assignment ................................................................ 2 Revenue Mobilization ................................................................ 5 Financial Analysis ............................................................... 6 Types of ULB Spending ............................................................... 7 ULB Staffing ............................................................... 8 Revenue Mobilization ............................................................... 10 Intergovernmental Transfers ............................................................... 13 Borrowing Capacity of ULBs ............................................................... 16 Governance Aspects ............................................................... 18 Delegation of Powers ............................................................... 20 Budgeting and Financial Management ............................................................... 20 Capacity and Accountability of Council Members and ULB Staff ........................................................ 22 Monitoring and Evaluation of Public Service Delivery ............................................................... 22 Transparency of ULB Administration ............................................................... 23 ANNEX II. BACKGROUND INFORMATION ON MUNICIPAL FINANCE AND GOVERNANCE IN MAHARASHTRA .............................................................. 29 Government Structure and Organization .............................................................. 29 Political Decentralization ............................................................... 29 ULB Structure and Composition .............................................................. 30 Fiscal Decentralization ............................................................... 30 Fiscal Analysis of ULBs ............................................................... 34 Borrowing Capacity of ULBs .............................................................. 43 Budgeting and Financial Management .............................................................. 45 Administrative Decentralization .............................................................. 46 ULB Staffing ............................................................... 46 Monitoring and Evaluation of Public Service Delivery .............................................................. 46 Transparency of ULB Administration .............................................................. 46 ANNEX III. BACKGROUND INFORMATION ON MUNICIPAL FINANCE AND GOVERNANCE IN TAMIL NADU .............................................................. 52 Government Structure and Organization .............................................................. 52 Expenditure and Revenue Assignment .............................................................. 53 Financial Analysis ............................................................... 53 Revenue .............................................................. 57 Expenditures ............................................................... 63 Local Borrowing and Borrowing Capacity of ULBs .............................................................. 66 Governance Aspects ............................................................... 70 Boxes Box 1: Karanataka's First State Finance Commission Recommendations .............................................. 2 Box 2: Bangalore/GOK Memorandum of Understanding ............................................................... 21 Box 3: Indicators of Water Supply Efficiency, Selected Corporations in Maharashtra ........................ 31 Box 4: Tamil Nadu Water Charges ............................................................... 58 Box 5: Tamil Nadu Urban Development Fund ............................................................... 68 Vol. II - Case Study Annexes Tables in Text Table 1.1: Public Service Provision Arrangements in Karnataka ............................................................ 3 Table 1.2: ULB Fiscal Indicators, Per Capita (in Rupees) ....................................................................... 6 Table 1.3: Share of ULBs with Overall Deficit ......................................................................... 7 Table 1.4: Spending on Core Services and Local Public Goods (Rupees per Capita) ............................. 7 Table I.5: ULB Staffing Patterns ........................................................................ 8 Table 1.6: ULB Revenues, 1998-99 (Rupees in millions) ..................................................................... 11 Table 1.7: Revenue Composition, Mysore Corporation ........................................................................ 11 Table 1.8: ULB Grants ........................................................................ 12 Table I.9: Karnataka Urban Development Plan Schemes ...................................................................... 14 Table I.10: Kamataka SFC Grants ........................................................................ 15 Table I.11: Centrally Sponsored Schemes for Urban Dev., Annual Plan 2001-02 ................................ 16 Table 1.12: Share of ULBs with Debt Service Expenses and Share that Borrowed in 1998/99 ............ 17 Table 1.13: Borrowing Capacity Assessment ........................................................................ 18 Table I.14: Municipal Administration Institutions in Karnataka ........................................................... 19 Table I.A. 1: Karnataka Urban Development Plan Schemes .................................................................. 24 Table I.A.2: Monthly Release of SFC