City Corporate & Business Plan - Municipal

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Chapter ñ 14 Final Report: Ambur Municipality 14.7 IMPACT OF POTENTIAL IMPROVEMENTS Amburís ability to improve on its financial performance hinges primarily on its ability to sustain and improve on the revenue growth noticeable in recent years. Specific interventions with respect to revenue realization and cost management are detailed in chapter 12 of the report. On ëFull Project Investment Scenarioí basis, Amburís own revenues (comprising taxes, user charges and other income) could grow from Rs. 222 lacs in FY 2006-07 to Rs. 1290 lacs by FY 2028-29, implying an absolute growth of 24%. Ambur has vast potential for increasing its own income given the growth achieved in the last few years. Areas for revenue enhancement in own revenue include : Property Tax ñ through an enhanced revision in ARV, widening assessee base and closer scrutiny. Besides periodic increase (every 5 years) in property tax rates. Professional Tax ñ sustaining a higher assessment growth. User Charges ñ periodic increases in user charges for water connections and sewerage connections. The Municipality could generate additional Rs. 600 lacs of income per annum by FY 2028-29 by providing water connections to 80% of property tax assessments and sewerage connections to 70% of property tax assessments. Ambur also needs to explore scope for private sector participation for development of remunerative projects and city beautification projects that have been identified by Ambur. While there is potential for expenditure control in certain areas (as in the case of energy costs and leakage in water supply), the focus of cost management should be to shift expenditure from administration to better asset management and service levels. We have not factored in any cost reduction in the FOP and have assumed that any savings generated from cost reduction would go into augmenting service levels and better asset management. A comprehensive energy audit is required, given that 60% of its operations and maintenance expenditure is spent on electricity charges. Plugging leakage in the water supply network and installation of timers and energy savers on the street light network are important interventions needed in the context of Amburís high power costs. - 165 - Voyants Solutions Private Limited
Chapter ñ 14 Final Report: Ambur Municipality 14.8 SCENARIO I - ESTIMATION OF INVESTMENT CAPACITY ON AS IS WHERE BASIS We carried out the exercise of arriving at the Investment and Borrowing Capacity on as is where basis without any financial reforms being carried out and no new projects taken in to consideration. The borrowing capacity has been arrived by taking the NPV over the next 20 years on the minimum of the following : 30% of revenue projections Primary Operating Surplus (Surplus before Interest & Depreciation) The investment capacity has been arrived @ of 4 times the borrowing capacity assuming that loans constitute 25% of total investment requirement. In such a scenario, the Investment and Borrowing Capacity works out as below : Summary of Borrowing and Investment Capacity Borrowing Capacity Rs. 1024.76 lacs Investment Capacity (BC x 4 times) Rs. 4099.05 lacs 14.9 SCENARIO II ñ ESTIMATION OF BORROWING AND INVESTMENT CAPACITY WITH METUR CWSS. In Scenario II, the financial projections have been worked out for the next 30 years, by taking all projects in to consideration including Metur CWSS. It has been assumed that Metur CWSS would be funded by way of 100% Grant and executed in VI & VII years. The operation & maintenance of Metur CWSS would be fully borne by the Municipality. The financial projections for the next 20 years have been taken to arrive at the Borrowing and Investment capacity. We have arrived at the borrowing capacity of Ambur Municipality on the minimum of the following : 30% of revenue projections 50% of Primary Operating Surplus less Debt Service The overall financing mix has been arrived to include 6% Loans, 87% Grants and 7% own funds. The repayment period of loans has been taken at 5+15 years for Sewerage and Water Supply Loans and 2+8 years for other project loans. The above factors have been taken in to account for arriving at the Annuity Factor, which has been applied on the lowest of the above to arrive at the overall borrowing capacity and investment capacity. - 166 - Voyants Solutions Private Limited
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