Financing, managing and sustaining the growth of our cities tomorrow

Written By: Paul Kwasi

Many countries especially developing economies are battling with addressing the infrastructure deficit of the ever increasing far-flung population in cities. This has resulted in some countries experiencing exertion in financing, managing and sustaining cities. One fundamental cause of rapid urbanisation in Ghana which generally applies to most African countries is the failure of government to implement rural development policies to better the lives of the rural folks. This has led to increase in migration of rural dwellers to the cities. The urban bias theory where the formulation and implementation of development policies are more skewed towards the urban elites than the less privileged in the hamlets, cottages and villages has contributed tremendously to rapid growth of cities. Our city planners and engineers cannot fathom out why our cities are engulfed with so much filth especially the slum and periphery areas of the cities. The persistent spreading out of cities has made financing and management in terms of infrastructure development and sustainability of economic strengths cumbersome. Sprawling cities which do not have geographical fixed location are scuffling with access to rapid, efficient and reliable infrastructure such as water and sanitation, energy, transport, education, health, housing, market, among others. Many municipal governments in the developing countries do not incorporate residents of sprawling cities in their development plans due to the difficulty associated with financing infrastructure. Sprawl in most developing countries is basically formed as a result of governments failure to adopt and implement growth control and management tools in the cities such as creation of urban growth boundaries in spatial development plans; smart growth policies such as adoption of compact development, brownfield development and in-fill development; creation of green belt; creation of urban service area; and enactment of law on urban growth and management. Some professionals of the built environment have tagged sprawling cities as “inefficient use of land economy”.


Apparently, Metropolises, Municipals and Districts (MMDAs) in Ghana are articulating aggravation for the untimely release of statutory funds to finance basic development infrastructure such as markets, CHPS Compound, basic schools, community centres, Hand Dug Wells and boreholes, sanitation facilities, rural electrification, establishment of small scale processing industries such as cassava processing industry, palm oil factory, coconut oil factory, among others. The government of Ghana still owes MMDAs statutory funds since the last quarter of 2013. One of the basic problems militating against MMDAs financing city infrastructure is due to sprawl. Slum development is as result of sprawling of cities due to failure of growth management policies. Developers in sprawling cities are not willing to pay additional tax to complement revenues by respective local governments. Meanwhile, the citizenry expect government especially at the local level to provide basic infrastructure services such as electricity, water, sanitation, health, education, roads, among others in those sprawling areas of the cities. There is public outcry in the cities of Ghana that government has failed to deliver its mandates with regards to infrastructure development in newly developed areas of the cities. The question now is: how do residents expect MMDAs to finance infrastructure at those sprawling parts of cities when they are not prepared and willing to pay additional money for the cost of the additional infrastructure that will be provided? One effective and convenient way of financing, managing and sustaining our cities for tomorrow is introduction of development impact fees.


MMDs can help finance, manage and sustain basic infrastructure in sprawling cities through the introduction of development impact fees. Development impact fees are assessed and dedicated principally for the provision of additional infrastructure such as water and sewer systems, roads, schools, libraries and parks and recreation facilities made necessary by the presence of new residents in the area. This is a new financing mechanism to raise additional revenue to finance infrastructure in newly developed areas in cities. It is one of the tools for managing urban growth and sprawl. Development impact fees work on the premise that development should pay for the cost of providing the facilities necessary to accommodate growth. To be able to manage and sustain our cities such as Accra, Kumasi, Sekondi-Takoradi, Tamale, Koforidua, Tema etc, there is the need for development impact fees to be introduced. This will reduce government burden of financing infrastructure in newly developed areas in the cities as a result of sprawl. California and Florida are some of the states in the USA that have used development impact fees to finance, manage and sustain their cities in terms of infrastructure.


The conditions that make it feasible for the introduction of development impact fees in cities of Ghana are as follows: firstly, there is a rapid population growth in the cities. When these cities are growing and its residents wish to maintain a constant level of public services, both infrastructure and current services must increase over time. These cities have to decide how to finance the cost of both. Secondly, these cities already face high property taxes. Developers would therefore be interested to pay development impact fees than property tax since the impact fees is one time charges applied to new development. Evidence from other countries that have implemented development impact fees show that communities that have devoted significant tax resources to the support of growth are most likely to adopt an impact fee scheme as an alternative way of financing development. Finally, there is large capital investment to maintain. As these cities grow larger, there is the necessity for a larger infrastructure which is more expensive to replace and maintain. These conditions necessitate for the introduction of development impact fees to complement the effort of city planners, city engineers and politicians to provide basic infrastructure services.


Since development impact fees works on the principle that city growth should pay for itself i. e. new residents should be made to pay for the cost of providing additional infrastructure that will be required to service the people such as extension of electricity, extension of piped water system, roads, etc, it would be prudent to implement such a new financial exaction. This presuppose that, if there is no growth in our cities in terms of demographic change, economic expansion and physical expansion that will warrant the need for new infrastructure, government would therefore not bear any cost. Development impact fees may trigger the following benefits if implemented meticulously : reduce the economic burden on local governments that are trying to deal with population growth within the city; reduce corruption among civil and public sector workers since the impact fees cannot be used for operation, maintenance, repair, alteration of replacement of existing capital facilities and therefore cannot just be added to the general revenue of the respective Assembly; helps reduce negative externality within growing cities; helps to check growth and sprawl; help to assist in the development of needed parks, schools, roads, sewer, water treatment, utilities, libraries, and public safety buildings to the newly developed areas of cities; reduce conditional grant and freebies released by international community and central government. However, this is not to say that MMDAs should shirk their constitutional responsibilities towards city dwellers since we have poor people living in some of these newly developed areas of the cities. MMDAs in Ghana must do their best to explore alternative ways of financing, managing and sustaining the growth of our cities. The adoption and implementation of development impact fees will go a long way to ease the problem MMDAs face in their quest to finance urban infrastructure.