Municipal reform is particularly urgent

Five years into the Syrian crisis during which more than 1 million refugees have flowed into Lebanon, two things are apparent. First, the Lebanese central government has been largely inept at dealing with the refugee crisis, as its policies have ranged from denial and indifference in the early phases of the crisis to forming a ministerial committee that has yet to develop a strategy to confront the problem head-on. Beside closing the borders and imposing legal restrictions on the refugees, the government’s ineptness is largely due to bickering among political parties that has led, like other issues facing the country, to paralysis.

Second, as a consequence of the first issue, the refugees have become, de facto, a local problem. This has left many municipalities with the tremendous challenge of not only governing for local Lebanese residents but also for refugees.

Some government officials have welcomed the larger role of municipalities in the crisis, saying that municipalities are now “tools of development.” As much as this ought to be the case, the question is whether the municipalities are able to handle the refugee crisis, especially in areas where their numbers considerably exceed those of Lebanese. More precisely, do they have the administrative capacities and fiscal resources to address these challenges?

Municipalities’ ability to handle the refugee crisis is largely constrained by two factors: weak administrative bodies that are unable to provide adequate services, as well as low municipal revenues. These two constraints feed into each other, with weak administrations constraining local revenue collection and poor financial resources hindering the establishment of sound administrative bodies.

Before dwelling on these problems, it is essential to highlight that municipalities suffer from a structural problem: There are too many small municipalities with a weak tax base to be able to perform their responsibilities as stated by law and be fiscally independent, two key elements of decentralization. Lebanon has more than a thousand municipalities, which is 25 times more than Cyprus (which has 40 municipalities), a country with nearly the same surface area as Lebanon, and more than twice the number as Croatia, which is five times larger than Lebanon.

At the same time, 70 percent of these municipalities have a registered population of less than 4,000 people. Effectively, these municipalities have almost no tax base to be able to generate their own revenues. After all, 90 percent of the revenues for such small municipalities come from the Independent Municipal Fund. With such a low revenue stream, the municipalities are not capable of building administrations and hiring the personnel needed to perform their duties, even if they wished to.

Looking more closely at existing municipal administrations, one can deduce that many municipalities cannot provide developmental services either because they have weak administrations or suffer from a bloated bureaucracy. Those with weak administrations have a small number of full-time employees – averaging four. Furthermore, many municipalities suffer from vacancies: 400 municipalities have only one employee and 87 percent of municipalities have up to six employees. In other words, only 13 percent of municipalities – which is around 130 – have more than six employees, a number considered standard for carrying out the duties of a municipal administration. Also, only half of the municipalities have bothered to generate a reliable cadre of employees. Based on a relatively new survey, 70 percent of municipalities are in need of new employees.

In brief, municipalities have too weak an administrative structure to be able to handle the excessive number of refugees that are on municipal doorsteps, let alone deal with their own constituencies. Furthermore, many municipalities rely on part-time workers, which exacerbates the pressure on the administrative and institutional capabilities of municipalities. The share of temporary workers to the total number of employees is about 50 percent compared to 28 percent for full-time employees.

While many municipalities are unable to provide services due to weak administrations, others face the same fate for a different reason: They suffer from having an excessive number of employees, who end up consuming a large portion of their budget, hence hampering their ability to undertake development.

This is the case in the municipalities of Tyre, Burj Hammoud and Dikwaneh, whose total number of employees – both full-time and temporary – exceed 100, far above the national average. The average share of administrative to total expenses of these municipalities is about 60 percent compared to 20 percent in the other understaffed municipalities.

Having a weak administration is a function of low revenues. In Lebanon the figure hovers around 6 percent of central government revenues, fare below the average of more than 25 percent in other countries. To boost municipal revenues, most of the talk concerning revenue rests on the IMF and whether the government has distributed money from it or not. However, the focus should be elsewhere. For one, even though the focus on the distribution of the IMF is important, one must also highlight the size of the fund, in other words how much money has gone into the fund in the first place, which remains a state secret.

Also, there is a need to discuss the distribution criteria of the IMF, which is currently based on the registered population and revenues collected in the last two years. The current criteria favor municipalities with a large registered population and correspondingly larger revenues collected directly. Since the latter is highly dependent on real estate – rental value fees on residential and commercial units – this means that the criteria favor urban rather than rural areas.

Boosting local revenues should also be a local affair. The municipalities must exert efforts to directly collect their own fees. Municipalities rely on 36 direct fees, of which three make up 85 percent of total collected revenues. The weak collection of direct revenues faces its own sets of challenges that include valuation of real estate, collection of the fees and managing accounts. For instance, most municipalities are unable to revalue properties – both residential and commercial – to revise rental value fees, which is an important source of revenue. Municipalities should have the ability to count the number of both residential and commercial units, develop valuation criteria, and revise the values of properties every three to five years. None of this is happening in most, if not all, municipalities in Lebanon.

The problem is not limited to revenue but also budget preparation and execution, as municipalities are unable to separate the different functions of administrative and executive jobs to ensure there is not an obvious conflict of interest.

For municipalities to play a developmental role, there is a need to undertake major reform on various levels. Municipalities must be able to raise enough revenue to build a capable and efficient administrative body. But they need an administrative body to be able to raise revenue. Hence, there is a need to enlist the help of the central government, where it can lead to serious reforms that can improve municipal revenues through timely and better distribution of the IMF, as well as remove constraints in hiring municipal staff. If the central government has finally seen the light and considers municipalities to be tools for development, it ought to take the next step and empower them so they can effectively shoulder the burden of development.

Sami Atallah is executive director of the Lebanese Center for Policy Studies in Beirut. He wrote this commentary for THE DAILY STAR.

A version of this article appeared in the print edition of The Daily Star on March 08, 2016, on page 7.




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