Funding Freetown – bridging the gap between civic pride and property tax

Memuna Forna: Sierra Leone Telegraph: 01 October 2020:

For cities across the world, the mainstay of local funding is some sort of property-based tax system. It is how they pay for improvements and the services they provide. If you want to know how cities survive without a functioning property-based tax system, you just have to look at Freetown.

Freetown with its overflowing gutters, annual flooding tragedies, environmental degradation, and mountains of hazardous waste is the perfect example of a city that cannot pay for itself.

When Freetown’s Mayor, Yvonne Aki-Sawyerr and Councillors conceived the Transform Freetown development plan, revenue mobilisation was at its heart. Freetown has been flat broke for years.

Our capital – the largest city in Sierra Leone, engine of the country’s economy and home to one million plus residents, as well as our nation’s legal, business and diplomatic communities – could not fund its most basic needs, let alone future development.

In the usual course of events, Freetown survives on far less than it needs. Some funding comes from the Government. However, the only certainty about Government funding is its uncertainty. SLL received Le 7.8bn less from GOSL than promised in the 2019 budget.

The Le14.1bn which did come from GOSL, was disbursed according to the Government’s instructions. This meant it was spent primarily on certain devolved functions – secondary hospitals, peripheral health units, the District Health Management Teams and the national library, with about 15% to sanitation costs.

This year, the 2020 budget allocation from Government to FCC is Le8.7bn, but as at 28th September only 2.1bn has been disbursed, and of that amount, only Le211m is not tied and therefore available to meet FCC’s administrative costs.

In addition to intermittent Government funding, Freetown City Council (FCC) collected around Le 7bn each year in tax and 2bn in non-tax revenue (markets and licencing for example). This accounts for 85% of FCC’s own source revenue and is what the council uses to pay the salaries of its 560 plus staff (Le630m per month), cover its administrative costs, fuel and utilities, sweep the streets and markets, enforce sanitation by-laws, repair council infrastructure and invest in developing the city.

There is a perpetual funding gap, the result of which is a depressingly long list of escalating problems and unmet needs. Among the most noticeable are waste management and flood mitigation, neglected and insufficient drainage, over-crowded, unhygienic marketplaces, rubbish-strewn, overgrown cemeteries, and a lack of affordable housing for a growing population. These make our city ugly, unhealthy, dangerous, and unproductive.

Equally urgent are the ticking timebombs – population growth (some analysts predict that Freetown’s population will double by 2028), the chronic shortage of transport, energy, water and sanitation infrastructure, climate change and environmental degradation – for which solutions need to be found now.

When she took office, Aki-Sawyerr and her team developed a two-pronged approach to revenue generation. This targeted short-term funding for immediate needs, while simultaneously identifying a sustainable revenue stream capable of funding a vision of Freetown that reflects the aspirations and needs of its inhabitants.

For short-term funding, Aki-Sawyerr and her team worked with development partners. FCC’s poor planning record and lack of absorptive capacity meant that the council historically struggled to secure funding from development partners. Here, however Aki-Sawyerr’s strong planning and implementation experience, as well as her accountable, democratic, participatory governance style stood her in good stead.

With her leadership FCC has been able to access donor funds. In fact, Aki-Sawyerr has been so successful in this area, she has been able to raise sufficient funds from donors to meet 70% of FCC’s 2020 budget. Money from the EU, DFID, World Bank and Bloomberg entirely funded FCC’s COVID-19 plan. DFID is presently funding a significant proportion of Freetown’s sanitation services.

Sustainability, however, is Aki-Sawyerr’s watchword, and while donor money has provided a much-needed safety net, it was not intended to be a long-term solution. For that the team identified Freetown’s antiquated property tax.

It offered significant possibilities. It had not been reviewed for 20 years – despite LGA rules that it should be reviewed every five years. Furthermore, collection rates were among the lowest in West Africa.

The review was based on three objectives – to improve fiscal performance, social equity, and administrative cost-effectiveness. A comprehensive registration exercise was conducted which captured just about every property in Freetown, doubling the number on the tax register from 57,000 to about 110,000. It incorporated two universally established rules of property tax – those with higher value property pay more than those with lower value property.

Many residents saw their rates decrease. The top 20% of the 30,000 existing property taxpayers, saw their tax liabilities increase from an average annual payment of $41.64 to an average annual payment of $142.25.

Aki-Sawyerr has made good progress building trust among Freetown’s residents and improving service delivery. Nevertheless, it soon became apparent that the description of property tax as the tax everyone loves to hate is painfully accurate and despite her growing reputation for transparent and accountable governance, Aki-Sawyerr’s property tax reforms tapped into a number of fault lines.

Residents receiving higher property taxes seized on years of underinvestment in the city and poor municipal governance, urbanisation, and the many informal settlements and, of course, Coronavirus. In the process, they severely exacerbated existing political tensions between central government and Aki-Sawyerr.

In hindsight, mitigating the short-term disruptive effects of the reforms, could have been handled better with a phased transition from the old to the new system. On the other hand, the urgency of Freetown’s situation, including the need to deliver sanitation and flood mitigation services to prevent additional health or flood disasters in the midst of the Coronavirus pandemic, was and remains a compelling argument for boldness.

So where are we now and where do we go from here? Well, after a three-day technical retreat with the Minister of Local Government to review FCC’s property tax reforms, guidelines were drafted which FCC adopted. These are now to go before Parliament. In the meantime, property tax is in limbo, and so are the services that it funds.

Some of Freetown’s residents recognise that no one will fix Freetown if they don’t, and there has been a small but steady movement of people voluntarily paying their property rates, even though collection is technically on hold.

Freetown’s pay-your-property-tax movement is too small to make much difference to Freetown’s funding needs, but it may be the start of the civic pride and sense of self-determination that Freetown needs from its residents, if it is to realise its potential.