"We learned that good governance is not only embedded in policy aspirations but plays out in the financial details."

Experiences from the Urban Governance and Finance course
IHS

The MSc in Urban Management and Development students worked on an infrastructure asset management assignment as a part of the Urban Governance and Finance course. The exercise was based on the infrastructure asset management approach of the Department of Economic and Social Affairs of the United Nations (UN-DESA), with whom IHS partnered to develop the course materials.

The master students had to analyse the asset management action plan co-created by UN-DESA and the participating local governments. More specifically, the goal was to examine the life-cycle costs of the asset selected by the local government and further give context-specific innovative recommendations on how the local bodies can finance these assets.

When asked about the collaboration with IHS, Daniel Platz, Senior Economic Affairs Officer of UN-DESA, highlights the invaluable contribution of IHS faculty and students to the UN's capacity development initiative on infrastructure asset management across the globe.

"We were particularly impressed with the students' work on devising financing strategies for cities' Asset Management Action Plans, a selection of which will be shared on the UN website with Member States. We look forward to building on our partnership with IHS in the years ahead!"

The IHS team coordinating the Urban Governance & Finance course consists of Carley Pennink, Somesh Sharma and Vera Safronova. Regarding the importance of the topic, Somesh mentions how inadequate maintenance of infrastructure assets in the cities, often stemming from financial constraints, creates unsafe urban spaces. 

"Addressing Infrastructure Asset Management Financing through education and training is an urgent need for ensuring the safety and sustainability of cities."

Five teams of students gave the best recommendations to the local governments, you can read more about their assignments below.

Photo of a Nepalese city, Butwal
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Assessment of the solid waste management system in Butwal, Nepal

The team looking at the solid waste management system of Butwal, Nepal, consisted of Akowuah Ababio, Ahmed Abdulazeem Mohamed Alsherbini Abdulrahman, Annabel Chepkemoi Nyole, Alara Yücel and Chukwunonyelum Chikaodili Nwosu.

To enhance the operational efficiency and overall efficacy of the Asset Management Action Plan (AMAP) for waste collection, recycling, and disposal in Butwal, the students recommended developing Public-Private Partnerships (PPPs) for income-generating assets. This step would facilitate an influx of capital to support the expansion of the system while relieving the burden on public organisations involved in the project. They also recommended the creation of a recycling initiative for revenue generation that would provide financial incentives for waste recycling companies to collect and recycle sorted waste materials, reducing the amount of waste that must be disposed of in landfills and saving the local government funds for clearing the landfill. Last but not least, students suggested operationalising user fee charges in financing local government assets to create sustainable funds for the operation and maintenance throughout the asset lifecycle and even provide asset revolving funds for other assets. These steps would attract more PPPs in financing additional assets and financing asset replacement funds and budgets. Aside from these economic benefits, people's social lives will be improved regarding asset accessibility, affordability, and quality of services. 

"Applying and user fee concepts to reality using the Butwal Sub-Metropolitan City case made it possible to suggest to local government institutions to expedite action, giving us the sense that our contribution can be valued."

Photo of a street in Belize
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Assessment of the city hall in Belize City, Belize

The first group assessing the city hall of Belize City, Belize, included Felicity Rachel Bodo, Finn Alessandro Lindstedt, Fizzo Chidakwa, Fredrick Obonyo, Sally Lin and Godfred Osei.

The students analysed the financing and maintenance of a physical infrastructure that was constructed with a capital loan; hence, it was important to review both existing capital and current financing strategies and then develop additional recommendations. The team examined capital strategies, including public-private partnerships, loans, intergovernmental transfers, government bonds, and property sales and found that current revenue strategies include various fee collections on tourism taxes, property taxes and licensing. According to the group, the most interesting recommendation concerns not only the local financial context but the legislative context as well

"We recommended that the Belize City Council have the right to property sales and long-term property leases so that they can generate land sales revenue in a decentralised manner."

The strategy was inspired by Ghana's Land Commission, which can generate revenues through land sales and rents and redistribute a percentage of the income to local governments. This recommendation emphasises the potential value of international cooperation between countries to facilitate knowledge exchange of local governance and financial practices. 

When asked about key learnings from the assignment, the group mentioned the understanding of real issues countries face and how cities play a significant role beyond simple service provision and social and economic development. However, the project came with challenges. The lack of quality information about capital and operations finances generated ad-hoc research techniques, from reading newspaper articles and meeting minutes to reviewing audited financial statements. 

"We learned that good governance is not only embedded in policy aspirations but plays out in the financial details." 

Photo of a person biking on a street in Belize City
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The other team looking at the city hall of Belize City, Belize, included Esther Oladejo, Evan Laugen, Evariste Nsabimana, Evie Limijaya and Federico Cerletti Plasencia.

The group explored a variety of funding recommendations but concluded that only property taxes are viable. Such taxes have been a major source of local income; however, considering other funding options, the exercise provided an interesting way to understand the context of the local government's powers and responsibilities. According to the students, the most interesting part of the assignment was exploring cost-saving mechanisms in addition to possible funding sources. 

"We suggested investments in solar panels to reduce long-term operating costs, and green energy grants would cover the required capital expense. Later on, the municipality can further make a cost-efficiency projection based on the solar panel installation to assess the first performance goal on their gap analysis."

Since the course looked at municipal governance structures, this exercise was a great way to understand the local governance context of Belize City. 

"We had to search for relevant information in addition to the provided case to supplement our ideas and understand how different countries or cities operate and thus enrich our knowledge and understanding."

Photo of a city in Kenya in traffic
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Assessment of the market in Isiolo, Kenya

The team examining the market of Isolo, Kenya, comprised Mandela Okumu, Mehak Bakshi, Nicole Ponce Fernandez, Nayaab Khan and Sara Alzghoul.

Given Isiolo's current heavy reliance on national government transfers and the low contribution from local revenue sources as highlighted by the OECD (2019), improved autonomy coupled with PPPs will offer a means to diversify revenue sources and develop income-generating projects that contribute to the local economy and reduce dependency on external funding. However, there is a need for capacity building to improve effective revenue generation through creating a wider tax base, proper financial management and a more effective asset management strategy. The group's recommendation focused on building efficiency and effectiveness through intergovernmental cooperation without interference with local government autonomy. This presents unique opportunities for development projects that can be capitalized through independent revenue generation, considering Isiolo's strategic position as a central point in Kenya's Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) corridor.

"The assignment gave us a great opportunity to deepen our theoretical knowledge and understand the nuances of a real project. We learned the importance of the local context in determining asset management structure while practising research skills when information is not readily available but rather included in a wider context."

Photo of buildings in Bangladesh
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Assessment of the market in Brahmanbaria, Bangladesh

The last team looked at the market of Brahmanbaria, Bangladesh, including Lisa Manya, Loise Nyaga, Maheshwaree Thakur, Ama Owusu and McKenna Pastorik.

Fiscal governance is highly centralised for Bangladesh, making Brahmanbaria highly reliant on governmental transfers and cut off from alternative revenue sources. Regarding risks, the municipality is located on a floodplain, and rapid depreciation is anticipated. Currently implemented sources, such as property taxes, are insufficient to meet capital expenditures. Given the capital income gap, the group recommended tax increment financing as it can cover the high initial capital expenditure requirement for market infrastructure. This method accounts for the property value increase in the surrounding district, utilising an already available revenue source for Brahmanbaria. Ongoing maintenance from rapid depreciation can also be effectively financed through the increment.

Beyond the financial context, the students enjoyed researching decision-making factors, political climate, and governance structures pertinent to this infrastructure asset case. All the group members worked in a different geographical context than their home countries, which led them to explore a new political climate and its effect on local government financing. 

"This collaboration led to engaging discussions amongst ourselves on how to best apply the AMAP handbook, first in our own local governments and then in Brahmanbaria. Throughout this process, we overcame the challenges of applying a standardised framework to an urban local body and a specific infrastructure asset."

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