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Federations Magazine Article
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Special Section: Cities and Their Agendas

reluctant to
fund cities
anadian municipalities are
con tinuing to press the federal
government in Ottawa
for increased funding – this
despite the fact that municipalities
in Canada fall
squarely within the jurisdiction of the
provincial governments. Economic
forces seem to be accentuating the
importance of the larger cities, which
are growing fast, while municipalities in
peripheral areas struggle with decline in
population. Financial stress is widespread
among Canadian municipalities
of all sizes. Business interests, labour
and academic allies of municipalities
have pushed what they call their “cities
agenda” in and around Parliament Hill
in Ottawa. And the federal government
has responded, especially during the
FEBRU ARY | MARCH 2008 Federations
C particularly the executive and legislative
bodies. However, most regions have
been dissatisfied with the current powersharing
and what they view as a fiscal
imbalance which favoured Java, an
island that is only one-third the size of
Papua, but contains almost 65 per cent of
the country’s 230 million people.
“Java, which has attracted the most
qualified human resources, has grown
too rapidly, while many provinces outside
the island have been lagging behind,”
said Yopie S. Batubara, a regional representative
from North Sumatra province
in a recent interview with the author.
“Unqualified human resources have been
moved to least-developed provinces
under the resettlement program,”
Batubara added.
The second house of Indonesia’s legislature,
the Regional Representatives
Council, has demanded a revision of the
1945 Constitution to give the regional
council more authority. It is asking for
increased power to make laws, plan state
budgets and control Indonesia’s executive
body. These steps would increase the
regions’ bargaining power and implement
a true bicameral parliamentary
system, according to their proponents.
The chairman of the Regional
Representatives Council, Ginandjar
Kartasasmita, has expressed optimism
that the president and political parties
will support the proposed constitutional
amendment following the 2009 general
election. In that election, support for the
proposed empowerment of the council
is expected to be a key campaign issue
that will probably be supported by candidates
for posts of governors and
regional heads.
Treated unfairly
Kartasasmita said resource-rich provinces
such as Riau and East Kalimantan
have demanded special autonomy
because they believe they were treated
unfairly by Jakarta, which gave local
authorities only 15 per cent of the taxes
on oil produced there.
The chairman, Kartasasmita, said
most provinces and regions have supported
the idea of fair distribution of the
country’s wealth. He said Jakarta should
not monopolize the fiscal domain, but
instead should transfer more funds than
it has in the past to resource-rich provinces
; otherwise, they will either
demand federalism or seek separation.
Ikrar Nusa Bhakti, a political analyst
at the Indonesian Institute of Sciences,
and someone who believes in Indonesia
remaining a unitary state, has warned
that devolution in the country’s changing
political system is the equivalent of
Indonesia becoming a federation.
Bhakti predicted that the increasing
demands for additional authority and
autonomous funding for the provinces,
combined with the central government’s
habit of ignoring problems such as
mounting levels of poverty and unemployment,
would inevitably lead to the
implementation of “a federal system” in
Indonesia such as that of the United
States and Germany.
Smoke billows from a palm oil refinery on the
island of Sumatra. Every year, an area of
forest the size of El Salvador is lost to
logging, agriculture and development. Some
provinces, like Aceh and Papua, have
clamped down on illegal logging and have
cut deforestation.
AP Photo/dita alang kara
Cities and their
Robert Young is professor of political science at the University of
Western Ontario, where he holds the Canada Research Chair in
Multilevel Governance.
FEBRU ARY | MARCH 2008 Federations
Cit y of Ottawa /Roge r La londe
Ottawa City councillors march on
Parliament in December 2007. Councillor
Michel Bellemare, surrounded by his
fellow councillors, repeats the call for
Ottawa to give one cent of the federal
sales tax to Canada’s cities.
Local governments chronically
In this thematic section on Local Go vernment and Metropolitan
regions in federal countries, our experts examine how municipalities
in Brazil, Canada, India, South Africa and Spain go
about delivering front-line services to their clamoring, burgeoning
The common thread for these five countries is that local
governments are struggling as they do not have the wherewithal
to provide the costly services they are obliged to deliver
and must rely on other orders of government for funds.
In Brazil, economics writer Brian Nicholson tells a fascinating
tale of contrasts between the municipality of Altamira,
which covers 159,700 square kilometers and Diadema, a city in
the grimy industrial belt around Sao Paulo. Brazilian municipalities,
depending on their size, receive funds in the form of
transfers from the federal government or from states’ valueadded
Canadian cities however are creations of provincial governments
and Prof. Robert Young of University of Western Ontario
recounts how municipalities are scrambling for money, as the
federal government under Prime Minister Stephen Harper disapproves
of Ottawa circumventing the Constitution to help
fund the cities, undoing a policy his predecessor had embarked
In India, there are 60 cities with populations exceeding one
million people. Journalist Rashme Sehgal notes that the mayor
of Delhi, India’s capital, is fuming, contending that Delhi has
had its powers encroached upon by the state government.
Indian cities raise the bunk of their revenues from property
taxes, but require transfers from the central and state government
for education, health and welfare.
South African cities are bustling with new construction as
they prepare for the 2010 World Cup of Soccer. But there has
been a proliferation of community protests over lack of service
delivery by municipal governments, explains Annette
Christmas of the University of the Western Cape.
In Spain, municipalities are also struggling with delivering
services. Carlos Alba and Carmen Navarro of the Autonomous
University of Madrid tell how Spaniards are counting on a general
election in March to elect a government that will complete
a reform meant to empower local government.
period of former prime minister Paul Martin’s Liberal government,
December 2003-January 2006. More recently, however,
the pendulum has swung backward, as Stephen Harper’s
Conservative government, elected in 2006, has largely backtracked
from bold initiatives on the municipal file. This
illustrates a fundamental feature of federalism: when some
pressing problem is not in the jurisdiction of a particular order
of government, the constitution provides an excuse for that
level of government not to address it.
Municipalities in Canada are “creatures of the provinces.”
Cities, towns, villages and rural municipalities fall under provincial
jurisdiction. There are significant differences among the
provinces as they relate to the municipalities, but there are
commonalties as well. First, the country’s municipalities are
subject to provincial legislation concerning the environment,
housing, land use, police and many other matters. Second,
local governments are rather dependent on provincial government
financial transfers, which make up about 16 per cent of
municipal revenues. Federal transfers to municipalities, on the
other hand, make up only about two per cent of their revenues.
Finally, Canadian municipalities are heavily dependent on
property-tax revenue, which does not rise automatically with
economic growth. Property taxes are also visible and politically
difficult to increase.
Municipalities flex their muscles in Ottawa
Municipalities do have political power when they are united
and determined. This is true in provinces dominated by cities.
Rural inhabitants may resent this weight, but the City of
Winnipeg’s population makes up 60 per cent of that of the
Province of Manitoba, while the three biggest Canadian cities –
Toronto, Montreal and Vancouver – loom large in the provinces
of Ontario, Quebec and British Columbia, where they account
for 41 per cent, 47 per cent and 51 per cent of the respective
SPECIAL SECTION : Cities an d thei r agen das
FEBRU ARY | MARCH 2008 Federations
SPECIAL SECTION : Cities an d thei r agen das
The federal government must also respond to urban voters.
The three largest cities alone elect 85 of the 308 Members of
Parliament, and most federal programs and expenditures are
delivered in cities and towns. However, direct contact between
Ottawa and the municipalities has waxed and waned over time.
Until recently, the high point of engagement with municipalities
was in the 1970s, through the short-lived federal Ministry of
State for Urban Affairs. But the pendulum swung decisively
towards more federal involvement when former prime minister
Paul Martin’s Liberal government took power in Ottawa.
Pushing the ‘Cities Agenda’
Pressure for change in the federal government’s stance grew
from the mid-1990s on. Continued urbanization created problems
of growth in the larger centres, because foreign
immigrants are attracted mainly to the largest cities. In Western
Canada there was also a trend of Aboriginal people moving
from reserves into cities. Meanwhile, peripheral municipalities
struggled to continue providing services to declining or stagnant
numbers of residents.
In some provinces, transfers to municipalities were reduced,
arguably because of cuts to federal-provincial transfers after
1995. But the major issue was municipal infrastructure – the
roads, sewers, bridges and water supply systems – both in the
rapidly growing cities and in smaller towns and villages. The
Federation of Canadian Municipalities (FCM), an increasingly
expert and effective lobby in Ottawa, estimated the “infrastructure
deficit” at some C$60 billion, a sum clearly beyond the
capacity of municipalities to handle alone. Consequently, pressure
grew on the federal government to become more involved
in solving municipal problems.
Federal involvement in 2004
When the Martin government was formed in December 2003,
the federal government did move. Mr. Martin had promised a
“New Deal” for cities, even though this would mean surmounting
the “reefs of entrenched ways and attitudes.” He quickly set
up a Cities Secretariat within the Privy Council Office, the elite
research and secretarial department of the Canadian government.
By July 2004, there was a Minister of State responsible for
the new portfolio of Infrastructure and Communities. In the
first budget, municipalities were granted a 100 per cent rebate
on their federal sales tax payments, a benefit estimated at C$7
billion over 10 years, and C$4 billion was allocated for cleaning
up contaminated sites. The next budget delivered C$5 billion in
transfers to municipalities over the following five years, nominally
from the federal share of the tax on gasoline, and another
C$300 million was added to the Green Municipal Funds which
are administered through the Federation of Canadian
Beyond this, while the government awaited a report from an
external advisory committee, Ottawa renewed urban development
agreements with the cities of Vancouver and Winnipeg.
These were tripartite, cost-shared pacts signed by the city, the
province and the federal government, and they involved tightly
co-ordinated programs and spending. New agreements were
signed in 2005 with the cities of Regina and Saskatoon and the
provincial government of Saskatchewan, and further negotiations
were being undertaken with other cities. While the
negotiations with Toronto were taking place, the Martin government
was defeated on a vote of confidence and, after
winning the subsequent election, Stephen Harper and his
Conservatives took power.
The Cities Agenda meets ‘Open Federalism’
To explain the current government’s approach to municipalities
– or, more precisely, its retrenchment and withdrawal from
the daring initiatives of its predecessor – one needs to understand
the broader framework of Mr. Harper’s approach to
federalism. Mr. Harper calls his approach “Open Federalism.”
Significant principles of his approach include:
• There should be rectitude and order in federal-provincial
relations, with principled agreements instead of improvised
deals and last-minute compromises.
• Provinces are legitimate actors that occupy important areas
of jurisdiction for which they are responsible.
• The constitutional division of powers should be respected,
with the federal government focusing on its core functions
such as defence, foreign affairs and the economic union
(though Ottawa must continue its involvement in health,
higher education and infrastructure, in a respectful and cooperative
• Quebec is a province with special responsibility for its culture
and institutions, and it is of great importance that
Quebecers perceive that federalism can work for them.
The implications of the Conservative approach to the municipal
file are obvious. Municipalities fall within provincial
jurisdiction. Determination to maintain provincial control has
been strongest within Quebec governments. Municipalities
might require more secure and stable revenues, but the provinces
are the principal actors for municipal governments.
Ottawa may devise policies to attack particular urban problems,
such as crime and immigrant settlement, but continuous tripartite
relations are not congruent with the doctrine of Open
Pulling back and re-engaging
Very quickly Harper’s government folded the Department of
Infrastructure and Communities into the much larger and older
Department of Transport. Officially this resulted in a new
“Transport, Infrastructure and Communities Portfolio,” but the
separate position of deputy minister of Infrastructure and
Communities did not survive long, and the communities
branch has largely disappeared from official websites.
The Conservative government did extend the gasoline-tax
transfers from the federal government to the municipalities
until 2014, and it remains committed to infrastructure programs,
where allocations have increased steadily. There are even signs
of a new national urban transit policy.
But a clear signal about the Harper government’s withdrawal
from the ambitious agenda of its predecessor was
delivered when the Prime Minister addressed the Federation of
Canadian Municipalities in 2006.
[Continued on pa ge 22]
eep in the Ama zon jun gle , there ’s Altamira , a sparsel y
populated municipality, bigger than most U.S.
states, covered with rainforest and Indian reservations.
Nearly 2,000 kilometres away sits Diadema; a
densely packed, low-rent sprawl in the grimy industrial
belt around São Paulo, the largest metropolitan
area in the southern hemisphere. Uniting them both is the challenge
facing Brazil’s local leaders, how to improve living
standards in a decentralized, three-tier federal system in which
the balance between resources and obligations can often seem
Altamira, which covers 159,700 square kilometres, cuts a
swath through the south-east Amazon in the state of Pará. It is
by far the largest of Brazil’s 5,560 municipal districts – local officials
like to claim the world record – although the population of
100,000 is dwarfed by 14 Brazilian municipalities with one million
or more people. Although Altamira is mainly rural, its
population is heavily concentrated in the municipal seat, where
jobs are scarce.
“Our biggest challenge is the lack of work,” Deputy Mayor
Silveiro Albano Fernandes said in an interview. The scarcity of
employment is caused by a primitive, undeveloped economy
that has a low tax base, generating insufficient revenues to
spend on a better infrastructure and education, which could
help attract investment and generate jobs. “We do what we can,
but there’s simply not enough to go around; if we build one
school, we can’t repair another,” Fernandes said.
Municipal transport by plane
The daunting size of the municipality of Altamira compounds
the problem. Mayor Odileida Sampaio was away visiting an
outlying district, Fernandes said in the interview, and would be
gone for several days. Parts of her turf lie three hours away by
single-engine plane, with the flights mostly skimming virgin
forest. The alternative is a circuitous, 1,400-kilometre expedition
along mainly earth roads wending through eight
neighbouring municipalities.
“A municipality is easier and cheaper to administer if it’s
smaller with a higher concentration of people, rather than various
remote rural communities,” Fernandes said. “If we need to
build a health centre, for example, we have to provide one for a
community of maybe 1,000 people or less. But it could serve
The federal constitution determines that Brazil’s local governments
can raise taxes themselves, mainly on property and
services, but they also receive shares of a host of other revenues
from the federal and state spheres. Economists José Roberto
Brazil: a tale of two cities
bra z il
Districts have same powers, but face radically different challenges
Brian Nicholson of São Paulo is a British economic journalist who
has lived in Brazil for 30 years.
FEBRU ARY | MARCH 2008 Federations
A slum fronts on the Hilton Hotel in Sao Paulo. Brazil’s cities generate wealth, but not enough revenue to meet the needs of their residents.
SPECIAL SECTION : Cities an d thei r agen das
REUTERS/Caetan o Barrei ra
Afonso and Erika Amorim Araujo wrote in the World Bank’s
2006 book Local Governance in Developing Countries that
Brazilian municipalities raised 5.5 per cent of all taxes in the
country, but ended up spending 17.1 per cent, thanks to transfers.
In 2005, local governments raised US$17.1 billion and spent
US$52.8 billion– an average of US$9.5 million per mayor.
Current dollar values are probably 40 to 50 per cent higher
because of economic growth, increased tax revenue and,
mainly, a stronger local currency.
Altamira, with a budget of about US$32 million this year,
more than 90 per cent of it from federal and state governments,
is ahead of the pack. The lion’s share of transfers is related to
population size, and Altamira has three times the national average.
But the huge distances create problems that are only partly
compensated for by the smaller adjustments made to some
transfers to help compensate for the vast land area. Overall,
Fernandes said, it’s a bad business being big.
Ban on dividing municipalities
The obvious solution is to split up into several smaller municipalities,
initially probably three or four. Local officials have
been planning such a move for some time. But in 1997, the
Federal Congress placed a 10-year freeze on all municipal subdivision
Until 1988, municipalities were created by, and in many ways
subordinated to, state governments, which now number 26,
plus the Federal District. In 1988, a new federal constitution,
introduced after the end of the military dictatorship, gave
municipalities independent status and made their creation a
matter for local plebiscites. Their number rose dramatically,
increasing by 24 per cent since 1990. In many cases, the new
administrative units lacked viable size and reflected more a
desire by local political leaders to expand their power bases.
The net result was a diversion of public resources into legislative
and administrative structures, “at the expense of more
productive spending on, for instance, social programs and
urban infrastructure,” according to a World Bank report. The
moratorium prevents Altamira from resolving part of its problem,
but the deputy mayor said its leaders hope to move ahead
with subdivision by 2009.
Another source of constant irritation is land use. Fernandes
estimates about two-thirds of the municipality is taken up with
various kinds of reserves, including Indian reservations,
national forests and environmental reserves. Most come under
federal jurisdiction while others are state-controlled. Either
way, it’s municipal territory over which the local authority has
no control.
“Two or three years ago, the state government produced an
economic and ecological zoning plan for the whole state, telling
us what could happen in each area; for example arable
agriculture, pasture, preservation and so on. But we were hardly
consulted. Things like that tend to come down from top to bottom,
in final form,” Fernandes said.
Compounding the problem is that many rural properties
have unreliable title deeds. “Some people have been occupying
an area for 15 or 20 years, and still can’t get good documents,” he
said. Often the solution lies in state or federal hands, depending
on where the contested land might be. But as long as such
questions are unresolved, the loss is municipal, because without
proper title deeds, the land owner cannot get authorization
for development projects. For example, sustainable exploitation
of timber could create jobs and boost the local economy.
From forests to factories
More than 2,000 kilometres to the south, Mayor José de Filippi
Jr. has basically the same constitutional and legal instruments
to handle what is in many ways a different situation. Just 50
years ago, Diadema was a quiet town of 8,000 people about 16
kilometres southwest of the city of São Paulo. But Diadema
missed out on the huge post-war investments that brought
General Motors, Ford and Volkswagen to better-located areas
nearby, and consequently failed to form a prosperous middle
class. Today, its 390,000 mainly poor inhabitants are packed
into 30.7 square kilometres of urban sprawl within the seemingly
endless industrial hinterland of Greater São Paulo.
When Brazil opened its economy to foreign competition in
1990, this sparked a large exodus of traditional industry from
the São Paulo metropolitan region to lower-cost locations
[Continued on pa ge 21 ]
FEBRU ARY | MARCH 2008 Federations
Brazil: another view of the
two cities
By Fernan do Re zen de
It may seem at first glance that Altamira – in the Amazon basin
– has a bad deal in comparison to urban Diadema, but the
actual situation is not quite as simple as that.
The economic problems that Altamira faces – environmental
barriers that keep it from exploiting its natural resources and a
lack of jobs – are beyond the scope of the local administrators’
responsibilities. Altamira’s problems will not be solved by lifting
the ban on dividing large rural municipalities.
On the other hand, Diadema benefited from the dispersion of
the manufacturing industry around different parts of the São
Paulo Metropolitan area. Getting a share of industrial plants
helped to boost its finances and therefore to improve living
conditions in the city.
The finances of large rural municipalities and small metropolitan
ones respond to very different factors. Rural
municipalities depend heavily on federal transfers and small
cities depend on their share of their states’ value added tax.
Would Altamira be better off if its urban core could secede
from the vast rural hinterland? In my opinion, no.
The suggestion by Altamira administrators that “the obvious
solution is to split into several smaller municipalities” simply
exports Altamira’s problem from the city centre to rural areas,
which could end up worse off than before.
What Altamira really needs is a better coordination of federal,
state and local policies to increase its prospects for
SPECIAL SECTION : Cities an d thei r agen das
Fernando Rezende is a Professor at the Brazilian School of Public
Administration of the Getulio Vargas Foundation.
By Carlos Alba an d Carmen Nava rro
ities and municipalities ma y be the last governments
to regain their full powers in Spain’s return to
democracy after dictator Francisco Franco’s death
in 1975. The country’s 8,100 cities, towns and villages
are still struggling for what they see as their fair
share of taxes and municipal powers to carry out
their responsibilities.
Over the past three decades Spain has seen territorial devolution,
the creation of a solid welfare state, integration into the
European Union and significant economic and social development.
Yet in terms of revenue and urban development, local
governments lag behind both the central government in
Madrid and the governments of the 17 “autonomous communities”
that make up Spain.
Local government is scarcely mentioned in the constitution,
in contrast to the autonomous communities. The constitutional
charter limited its treatment to the formal recognition of local
government autonomy and the principle of financial self-sustainability.
Yet more than two decades later, neither of these
traits can be found in Spain’s municipalities. Local authorities
occupy a poorly-defined political space.
Powers denied
The autonomous communities, who had the power to improve
things for the municipalities, showed no interest in granting
them the powers and resources that the communities had only
recently acquired for themselves. In a way, they were reproducing
the old centralism except that, in this case, the
centre-regional conflict was being played out on the regionallocal
When the Spanish Local Government Act was enacted by
the national Parliament in 1985, it helped to clarify local competences
and responsibilities. The act also gave support to the
policies and actions that municipalities had developed – in a
legal vacuum – for nearly two terms of active democratic government.
In the late 1990s, further reforms were implemented
and local governments saw the lifting of former restrictions.
Today the end of that process is in sight. To prepare for full local
government, all political parties have joined in drafting a reform
to the 1985 Local Government Act, the last of a number of such
revisions, and the text has been submitted to the parliament for
its approval. If enacted, it will mean that local municipalities
will finally receive clearly defined powers and responsibilities,
as well as the economic resources to carry them out. Local governments
would then be given a defined and precise list of
areas of competence.
Approval postponed
Until now, the list of local powers was quite imprecise and it
meant that other levels of government could interfere in a number
of local areas. Also, city councils did not get the resources to
implement policies in those areas. With the passage of this act,
necessary transfer payments would come from other tiers of
government to allow municipalities to develop their welldefined
powers. But the draft reached parliament extremely
late in the national government’s term– only a few months
before the March 2008 general elections. Thus the process has
been interrupted by confrontation among the political parties.
Ratification will have to wait for the new government.
Today, local governments have only 15 per cent of the total
public-budget expenditure, and they want an increase to 25 per
cent. A representative of a group of Spanish mayors recently
declared: “We have to aspire to complete autonomy … which
saves us from being poor administrations. To do that we need
to work on the basis of a financial system that allows us to meet
claim their
space in the
Spanish system
Spain’s municipalities are the
last order of government to
Carlos Alba is a professor of political science at the Autonomous
University of Madrid. Carmen Navarro is an associate professor of
political science at the Autonomous University of Madrid.
FEBRU ARY | MARCH 2008 Federations
In Barcelona, commuters were jammed into buses for two months during repairs
and reconstruction of the city’s rail lines in October and November 2007. The
government of Catalonia provides funds for urban infrastructure renewal, but
other parts of Spain are not so fortunate.
SPECIAL SECTION : Cities an d thei r agen das
AP Photo/Man u Fernan dez
the demands of citizens, who come to us (for services) because
we are the closest administration to them.”
The challenge for local government is to improve performance,
which requi res autonomy and f inancial
self-sustainability. However, local governments have to act as
vehicles of democracy, providing services in response to local
needs. Local governments must also reinforce the legitimacy of
their actions, achieving their goals without wasting available
resources. Bureaucratic effectiveness and efficiency are clearly
factors here.
In general terms, Spain has levels of voter turnout similar to
other developed countries. Although local elections traditionally
have lower turnouts than national elections, they achieve
rates close to the national level. Local turnout varies between 61
per cent and 70 per cent. These elections usually indicate what
will happen in the national elections.
Confronting local challenges
In addition to holding free and fair elections, an important way
to strengthen local legitimacy is to have transparency and participation
in the governing process. Through participatory
democracy, citizens must be able to express their preferences
in designing and implementing specific policies. Election-campaign
slogans and poorly debated party platforms are a
one-way means of communication: governments must also
seek the specific views of residents. A more intense civic
engagement is needed; participatory tools such as neighbourhood
councils, public consultations and district boards are only
now beginning to be used in municipalities. Spanish local
authorities have been implementing such policies over the past
decade, more rapidly in the last four years. Some municipalities,
such as Alcobendas, a suburb of Madrid, have neighbourhood
councils, public hearings, improved access by citizens to city
councillors, and other participatory avenues for citizen involvement.
Still, a view of Spain’s entire local political landscape
reveals mediocre success in involving citizens in public life.
To reinforce political legitimacy through results, municipalities
must confront the task of delivering services effectively and
efficiently. This is complicated for several reasons. First, Spain’s
network of 8,100 local municipalities, with their corresponding
government structures and powers, is diverse and fragmented.
About 85 per cent of them have populations of less than 5,000
inhabitants. Asking for efficiency in such small localities is not
realistic. The only way of producing good outputs is for the
municipalities to come together to provide at least part of their
services in common, particularly for the very small communities.
Second, municipalities also have to increase their
efficiency and cost-effectiveness. The “New Public
Management” instruments for government such as outsourcing,
privatization, budgeting techniques and public-private
partnerships have been introduced in many countries to modernize
bureaucratic administrative machinery. They have been
much less intensely adopted in Spanish municipalities than in
other European countries or in the town halls of the United
States. Local governments have to reinforce their levels of good
organization and their capacity to provide quick and effective
responses to real problems.
After almost 30 years of democratic local government,
Spain’s achievements are many but so are the tasks that lie
ahead. The country is witnessing the longest period of peace
and political stability in its history yet the edifice of strong local
democracy is still a work in progress.
FEBRU ARY | MARCH 2008 Federations
How democracy returned to Spain
Free and competitive elections took place in Spain for the
first time in 1979 and democratic local governments started
to introduce policies and reforms that dramatically transformed
the underdeveloped cities and towns of the 1970s. At
that time, mayors had clear agendas for building infrastructure
and introducing basic public services. Today, while the
basic needs are fulfilled, the remaining challenges are not so
straightforward. On the one hand, local governments must
strengthen their position in relation to other levels of government,
and find their rightful place in the Spanish political
system. On the other hand, local authorities are confronted
with the difficulty of improving performance in a world in
which problems are complex, resources scarce and solutions
can come only from the joint effort of public and private
Modern Spain emerged out of the late dictator Francisco
Franco’s highly centralized political regime. In the 1979 constitution,
autonomous communities were not labelled as
“states” and the system was not defined as “federal” for several
reasons. First, the word “federalism” was carefully
avoided throughout the transition due to that term’s association
with separatism, political instability and past
pro-independence movements. Second, the system is not a
traditional federal one because the Spanish model is not an
agreement among political representatives of its constituent
units, and Spain is far from assigning a standard set of governmental
functions to all the federal units. In practice, there
are similarities to Belgium, Mexico and South Africa – three
centralized countries that have devolved to the point where
many political scientists describe them as federal.
Until recently, there was an important distinction in practice
between autonomous communities that are simply
“regions” and those that are “nationalities,” such as the
Basque Country, Catalonia and Galicia, which have a background
of autonomy and self-government as well as a
distinct language and culture. Strong political entities, these
communities have their own legislatures, executives and
judiciaries. They enact laws that have the same force as those
of the Spanish state and their administrations are not subordinate
to central control. Their jurisdiction over critical policy
areas such as education or health, makes them at least as
powerful, if not more so, than any other subnational government
in Europe. Since 1996, however, recent political and
constitutional developments have given all the regions in
Spain the status of autonomous communities with similar
levels of autonomy and powers. Despite this change,
attempts to describe all regions of Spain as equal in status is
always criticized by those regions that consider themselves
“nations” and believe that they should be treated differently.
SPECIAL SECTION : Cities an d thei r agen das
ocal government S in South Africa face immense
challenges to meet the needs for housing, transport,
clean water and electricity of rapidly growing populations.
These problems appear even larger when
compared to the successes of the national government
since the end of apartheid. Since 1994, while
creating a multi-racial democracy, South Africa has succeeded
in improving the standard of living, doubling exports and creating
a robust economy.
To measure local successes – and failures – the Minister for
Provincial and Local Government, Sydney Mufamadi, launched
a national review of provincial and local government. The minister
has called on everyone to participate, from civil servants to
the private sector, higher education institutions and, most
importantly, ordinary South African citizens.
When South Africa launched its successful bid to host the
2010 FIFA Soccer World Cup, the bid’s detractors cited the difficulty
that local governments would face in trying to meet this
challenge. Yet municipalities have demonstrated creativity and
resolve in their preparations for 2010. On the coast of the Indian
Ocean, the Municipality of eThekwini – formerly Durban–was
lauded for its innovations. The municipality used its newly
developed port infrastructure and soccer stadiums to develop
impoverished areas surrounding these existing facilities, even
creating new transport hubs to service them. Mayor Obed
Mlaba stated that the municipality viewed the 2010 World Cup
as an opportunity not only to grow the local economy but “to
transform the city into an effective service-delivery
The landscape of local government
Local government in South Africa is made up of 283 municipalities,
which range in population, size and resources from
severely under-resourced rural municipalities to first-class
metropolitan giants called “metros.” The constitution recognizes
two types of local government. First are the metros, which
have exclusive municipal authority in their jurisdiction. Second
are local governments outside of the metros, made up of district
municipalities that include smaller local municipalities. In this
second category, district and local municipalities share powers
and functions in a two-tier level of local governance.
The six metros in South Africa are home to one-third of its
population. The smallest, Nelson Mandela Bay, has 1.1 million
residents, while the City of Johannesburg is home to 3.2 million.
The metros, which produce 59 per cent of the GDP, are South
Africa’s economic powerhouses.
Nonetheless, South Africa remains one of the most unequal
societies in the world when measured by the gap between rich
South African cities tackle
new challenges
south africa
Urban centres, the
economy’s powerhouses,
could take on more powers
Annette Christmas is a researcher with the Local Government Project
of the Community Law Centre, at the University of the Western Cape,
in Cape Town.
FEBRU ARY | MARCH 2008 Federations
Street vendors, once banned under apartheid, sell maize in front of the largest corporate
headquarters in Johannesburg, South Africa.
REUTERS/Juda Ngwen ya
SPECIAL SECTION : Cities an d thei r agen das
and poor. With rapid urbanization in the metros and cities,
unprecedented wealth coexists alongside abject poverty. The
metros have a difficult task. They must balance their constitutional
mandate of basic service delivery and improving the lives
of citizens, with the more immediately realizable incentives
that come from encouraging investment and economic development.
Johannesburg was recently ordered to reach a
settlement agreement with poor inner-city dwellers whom they
had evicted as part of a regeneration project to attract investors.
Constitutional guarantees
The autonomy of local municipalities, as part of their own order
o f g o v e r nme n t , i s
entrenched in the constitution.
Prior to 1994, local
governments were creatures
of the national and
provincial governments.
Their powers, functions and
resources entrenched the
apar theid governance
model of poor or non-existent
service delivery in
non-white areas. Since 1996,
local government has a
much broader goal of promo
t i n g s o c i a l a n d
economic development,
creating safe and healthy
environments and involving
communities in local
government, thus deepening
To fulfil this mandate,
the constitution grants
local government a list of
powers and functions. To
match these powers, it has
the right to raise its own revenues
through property taxes and surcharges on service
charges for the delivery of water, sanitation and electricity.
These account for 83 per cent of local government revenue, with
the balance made up of transfer payments from the national
government. At first glance, these taxing powers seem to confer
a generous revenue base on municipalities. However, there is a
vast difference between the revenue of cities and urban centres,
which have stable and substantial homes, offices and businesses,
and the revenue of smaller municipalities where there
is not much to tax.
District municipalities were originally created to integrate
and co-ordinate local municipal services within single areas.
The plan was to use economies of scale at the district level, so
that the district municipality would act as the supplier of bulk
services. The districts were also given the task of supplying and
assisting impoverished municipalities. However, practice has
revealed that they play a very different role from the original
plan. District municipalities are, more often than not, directservice
providers to local communities, creating uncertainty
about the functions and powers of the local municipalities. This
results in duplication of administrative and political centres
and creates potential for conflict. In July 2006, tax levies on
businesses were abolished, ending an important source of revenue
and severely diminishing the capacity of districts to
redistribute services to local communities.
All of these factors have raised the question of whether there
is a need for the two-tier system of local government outside
the metros. Local municipalities with strong emerging urban
centres, such as Bloemfontein, do not benefit from the hierarchical
parameters of the district system of government. It has
been suggested that local municipalities with strong urban centres
be given metropolitan status, while the two-tier system of
district and local government
should be collapsed
into one system.
Stumbling blocks
In the past 18 months, various
parts of South Africa
have been affected by a
growing number of community
protests. Most of
the protests have been over
the lack of service delivery
by municipalities. Reports
in the media have highl
ighted communi t ies’
concern about the slow or
non-existent delivery of
housing and basic services.
Part of the problem is
the lack of a clear and simple
delineation of powers
and functions between
local and provincial governments.
The constitution
provides that where a
national or provincial function
can be more effectively
administered by local government, that function must be
assigned to municipalities, provided that they have the capacity
to fulfil it. While water, electricity and sanitation are firmly in
municipal hands, housing remains a provincial function. The
mayor of Cape Town, Helen Zille, cited “red tape delays with
the municipality’s own projects, especially when it comes to
housing” as a key impediment to delivery. The Western Cape
Province has not granted the metro’s application to take on
housing, prompting the metro to declare an intergovernmental
dispute with the province. Even the smallest metro, Nelson
Mandela Bay, has categorically stated that it is “more than capable
and is in fact already fulfilling this function.” Despite this,
housing remains a provincial function, and local government
often has to bear the brunt of community dissatisfaction with
failure to deliver.
Another critical obstacle facing local government is a lack of
capacity and the skills to deliver services to its citizens. In the
restructuring of local municipalities in 2000, much of the institutional
memory of local government was lost when older civil
Continued [pa ge 22]
FEBRU ARY | MARCH 2008 Federations
Striking construction workers in Cape Town demonstrate outside the site
of the city’s 2010 Soccer World Cup stadium in September 2007.
SPECIAL SECTION : Cities an d thei r agen das
REUTERS/Mike Hutc hings
FEBRU ARY | MARCH 2008 Federations
umbai , India ’s lar gest urban and financial centr E
with a population of more than 14 million,
ground to a halt during the rainy season on July
26, 2005. In the city formerly known as Bombay,
unprecedented flooding surged through several
of its most densely populated districts. Even
Mumbai International Airport was forced to shut down for the
next two days.
Mumbai is not alone in having to cope with such problems.
Indian cities have experienced exponential growth, and today
there are more than 60 cities with populations greater than one
million people. Such rapid expansion has meant growth of
unplanned neighbourhoods with a high concentration of the
poor. Shelter is the major problem of the urban poor and most
municipal corporations are trying to address this issue, especially
as the majority of residents are younger than 18. Council
members complain of a lack of adequate financing and a corrupt
bureaucracy in a number of cities. When councillors try to
take action in some areas, they find themselves in conflict with
the state or central governments, which share certain powers in
municipal areas under the Indian constitution.
The floods in Mumbai, which left 600 dead and millions of
rupees worth of property destroyed, came from the Mithi River
that empties into the Arabian Sea. The floods were triggered by
massive construction projects on both sides of the river, that
shrank its flood plain and forced rain water to flow onto city
With India’s federal system, to prevent or even reduce the
damage from future floods, the Mumbai administration first
needed to win support from the state of Maharashtra. In many
cases, the central government in New Delhi also gets involved
in municipal affairs. Municipalities receive funding directly and
indirectly from both the state and central government. To carry
out a plan to reduce flooding, Mumbai needed infrastructure
projects that were beyond the city’s resources. To fund the plan,
Mumbai asked for financing from two federal ministries: the
Ministry of Water Resources and the Ministry of Urban
Floods continued to inundate the city in 2006 and 2007.
Mumbai Mayor Shubha Raul has had to persuade all city council
members to agree to several long-term measures to halt the
flooding of the river.
One way to do this, Raul said, is to remove major obstructions
that are blocking the natural flow of the river.
Slum-dwellers on both sides of the river are being dissuaded
from dumping sewage and garbage into the water, she said.
One easy first step is to make the city plastic-free.
“I have launched a huge drive to stop the use of plastic bags
in the city,” Raul said. “The Mithi River is (full of) plastic waste. I
am also keen to upgrade the slum rehabilitation program so
that we can make Mumbai slum-free by 2020.”
This, she concedes, is easier said than done, considering that
more than 6 million Mumbai residents live in slums. “We are
working towards this objective … we can certainly accomplish
our objectives if we have the requisite political will,” Raul said.
The Maharashtra state government has created a slum rehabilitation
program for Mumbai with a target of providing new
housing for every slum dweller in the city. The plan offers private
companies the rights to develop part of the land in return
for building new housing units for slum dwellers.
Cities and villages in India
push for greater powers
The ideal of village
democracy is one thing:
implementing it is another
Rashme Sehgal is a journalist based in Delhi who specializes in
investigative reporting. During the past two decades, she has written
for the Times of India and The Independent.
A medical self-help group in Kanipur was inspired
by the recent election of a significant number of
women to the village council.
SPECIAL SECTION : Cities an d thei r agen das
REUTERS/Parth San yal
FEBRU ARY | MARCH 2008 Federations
Political support does not come easily. In this case, there are
different political parties or coalitions in power in the municipal,
state and central governments. As well, municipal
corporations operate directly under the jurisdiction of state
governments, which have the power to overrule decisions.
Mumbai and Delhi, each with 14 million residents, have state
governments that are run by different political parties from
those of the city councils. In addition, there are 19 towns in the
National Capital Territory of Delhi plus suburbs which extend
into the states of Haryana and Uttar Pradhesh. The city councils
of many of these municipalities are also controlled by different
political parties.
The mayors of both these key metropolitan areas are women.
The 73rd and 74th amendments to the Indian Constitution
required that one-third of the seats on city and village councils
be reserved for women elected
to the councils – a revolutionary
step. The two amendments also
devolved greater powers to the
local bodies.
Defanging the mayor
However, in Delhi, Mayor Aarti
Mehra accuses the state government
of hav ing s t e adi l y
encroached upon the powers of
the municipality. “They want to
leave us a toothless body. The
74th amendment ensures that
municipal corporations be
vested with absolute power, but
that does not happen (in reality),”
Mehra said.
“The Delhi state administration
has very mischievously
taken away some of our key portfolios,”
she added, in describing
how the maintenance of key
roads has been placed under the
Federal Ministry of Urban
Heading the Municipal
Corporation of Delhi is similar to
administering a small nation
that extends over 1,453 square
kilometres and has 150,000
employees working for it, with
an annual budget of 35,000 million
rupees (about US$880
million). The municipal corporation
is responsible for the repair
and maintenance of roads, the supply of water, sanitation and
sewage disposal services, as well as the rural outskirts of the city.
Ms. Mehra’s council is the largest of three within the National
Capital Territory, the other two being the New Delhi Municipal
Council and the Delhi Cantonment Board.
The job of mayor should make Mehra a powerful woman,
but she has her problems. The other municipalities are under
the control of the federal government and are administered
either by federal bureaucrats (in the New Delhi Municipal
Corporation) or army officers (in the Delhi Cantonment
The development of roads and highways is crucial for Delhi,
which is an industrial and commercial hub surrounded by satellite
towns like Gurgaon and Faridabad, located in
neighbouring Haryana state, and Noida and Ghaziabad, which
belong to the state of Uttar Pradesh. People commute daily
between Delhi and these satellite towns which provide both
employment and housing. Traffic management becomes a critical
issue with roads frequently choked during peak hours. In
the greater Delhi region, mayors often feel as if they are walking
a tightrope between their own municipality and the federal
Rotating mayors
In many municipal councils, the
practice of rotating the mayor’s
chair each year often leaves little
time for individual mayors to
implement new programs.
A city of more than 200,000
can have its own municipality. In
most cities in India, after the
election of city council members,
the councillors gather to elect
one of their number as mayor
during their first meeting. Every
municipality enjoys a five-year
term for its councillors, but in
some municipalities the mayoral
duties are rotated each year.
In Delhi, it was decided to elect a
female mayor for one year, a candidate
from the “untouchables”
category for the next year and
then for the remaining three
years to elect two different candidates
f rom the general
category, either male or female.
“One year is just too short a
period to initiate any kind of
meaningful reform. During the
first eight months of my mayorship,
I initiated payment of
housing taxes online to stop
needless paperwork. I have also
taken steps to make the city
greener. But by next March, I will
have to step down,” said Mehra.
In India, municipalities are
responsible for maintaining roads, collecting local property
taxes, maintaining parks, collecting garbage, and managing
water supply and sewage disposal. They share responsibility
with the state and central governments in the areas of health,
education and welfare.
The largest part of municipal revenues comes from property
taxes. This is not sufficient to pay for all city services and staff, so
the cities also receive transfer payments from the central and
Monsoon rains in Mubai flooded homes, submerged rail lines
and forced hundreds of thousands of people onto the streets in
June 2005.
SPECIAL SECTION : Cities an d thei r agen das
REUTERS/Punit Paran jpe
FEBRU ARY | MARCH 2008 Federations
state governments. These two orders of government both contribute
to paying for education, health and welfare facilities in
municipalities. The central government, with matching funds
from the states, recently launched the huge Nehru Urban
Renewal Program to provide funds for infrastructure development
in cities.
Seats reserved for women
The situation is equally difficult for municipalities at the village
level. When one-third of all village council seats were reserved
for women a decade ago, more than one million women were
elected to village councils, called panchayats. Separate quotas
were also established at that time for socially marginalized
groups, including those castes and tribes that are granted special
status under the Indian Constitution.
India’s panchayats go back centuries, if not millennia. The
culture of these councils is quite different from that of large cities.
The central government in New Delhi even has a “Minister
of Panchayati Raj,” who is concerned solely with village affairs.
In the village of Chuttumail Doks on the India-Pakistan border,
the government primary school was not operating and the
dropout rate for children studying up to grade seven was so high
that the school-age population was down to 17. A 40-member
Village Education Committee made up of panchayat members
and parents decided to take matters into their own hands. Every
villager was asked to pay 10 rupees per month to build up a
small fund to be used to hire additional teachers and purchase
computers for the school. The result was a dramatic rise in
school enrolment, which rose to 85 children. Neighbouring districts
now want similar education committees to be set up in
their villages.
Digging wells
Political parties dominate both village panchayat and municipal
corporation elections. Candidates are selected according to
their political affiliations, with huge amounts of money spent
on these elections. Yet despite the diversion of politics, there
were significant non-partisan efforts, in many cases spearheaded
by the women, transforming the landscape of their
villages by digging wells and installing hand pumps, building
roads and public toilets, and also facilitating the building of
schools and community centres.
Mayors and city council members are demanding greater
autonomy. At present, they complain that they are facing
increasing pressure from not being able to carry out projects
that would help their cities. Panchayat experts believe that,
except for Kerala, most state governments have not devolved
power to the panchayats, the majority of whom are now working
only in poverty alleviation programs, and not in other key
areas that should have been given to them following the passage
of the Panchayati Raj Amendment.
India’s experiments with grassroots democracy and local self
governance are coming of age. Slowly but surely, ordinary citizens
in big cities and small villages are learning to wield political
power, and use it effectively and responsibly to improve their
own lives as well as the lives of those in the communities around
Bra zil – [From pa ge 14]
within the state, or out of it. Diadema, the “ugly duckling” of the
industrial south side, perhaps had less to lose, but it also had
less to fight with. At the same time, starting in the mid-1990s,
mayors faced severe budgetary constraints under a public-sector
squeeze imposed by the federal government to end
hyperinflation that had plagued Brazil since the mid-1980s.
“Cities faced new challenges, partly because of the new reality
of the Brazilian economy, but also because of the new world
economic order,” the mayor said. “We had to start fighting for
economic development within the context of globalization that
was more and more hostile, more and more competitive.” That
meant working more efficiently, reducing costs and creating
attractive conditions for new investment.
Escaping urban decay
Using a special team of policy advisers, Filippi – mayor in 1993-
96 and again in 2001-08 – has managed to escape the
low-revenue, low-investment trap, boosting tax revenue and
spending the new funds in ways that attract further investment.
Industrial output rose seven per cent in 2006 and another four
per cent in 2007, after falling for eight straight years. The municipal
budget is up 70 per cent in real terms from 2001, to a
projected 2008 level of about US$270 million. His key measures
• Urban violence: In 1999, the municipality had the highest
murder rate of the São Paulo metro region, at 109 per
100,000 population. The murder rate fell 59 per cent, thanks
to a 2002 decree forcing all bars to close at 11 p.m. – a measure
that sparked widespread interest in other cities.
• Urban development: Diadema built three large flood control
reservoirs to catch water from heavy rains. This allowed
development of low-lying areas, one of which attracted a
major industrial investor who is now the city’s largest single
• Urban renewal: New sidewalks, public lighting, street repair,
litter bins, park benches and flower beds help create a more
pleasant environment, which in turn becomes a safer environment,
including for investors. “We make small
revolutions – three years ago, one neighbourhood had 40
small commercial establishments, now it has 250. That’s a
lot of investment in small business, shops and services, and
consequently a bigger tax base. This is a direct consequence
of urban renewal,” the mayor said.
• Creative incentives: Diadema shunned simple tax breaks,
but offered reduced land taxes for investors who increased
payments of other taxes.
• Social spending: Infant mortality declined to 12.9 per 1,000
births in 2006 from 85 in 1983 – improving from double the
state average to slightly better than average.
“The best investment any mayor can make is in social programs,”
Filippi said. In Diadema, innovation by municipal
leaders has made real improvements. For rural municipalities
like Altamira to make comparable gains, a stronger role for local
municipalities in joint planning with the state and federal governments
could allow such local innovations to begin.
SPECIAL SECTION : Cities an d thei r agen das
FEBRU ARY | MARCH 2008 Federations
South Africa [from pa ge 18]
servants were let go. A major concern is that appointment of
municipal staff is often made on the basis of political patronage
and not skills and expertise. However, through Project
Consolidate, the central government has begun to deploy
skilled workers to particularly weak municipalities to assist in
capacity building. There are still concerns that this initiative is
not enough and that scarce skills may have to be imported from
Looking forward
Despite these many challenges, there are municipalities that
have found new and innovative ways to balance development
with service delivery. The Nelson Mandela Bay metro has
embarked on an extensive program to find efficient alternate
energy sources to reduce emissions and attract investment to
the city. In tandem with the renewable energy projects directed
at industrial centres, the metro has established pilot projects to
supply solar-heated water to low-income areas. Installation
and maintenance costs are minimal. While still in the preliminary
stages, these projects could bring hot water to many
low-income homes. The director of electricity and energy for
the city, George Ferreira, said that without the “buy-in of the
political leadership of the municipality, this project, which
explores uncharted terrain, would not have seen the light of
Creating integrated sustainable cities in which the marginalized
in South African society would share the benefits of
development in local government is an immense project. The
metros – the success stories of local government in South Africa
– could easily be the drivers of development, with limited provincial
and national government interference. Many South
Africans are asking that wherever local government capacity is
lacking it should be developed as a priority.
The review process on government raises critical questions
as to whether the current configuration of provincial and local
government has improved the delivery of basic social services
and deepened democracy in South Africa. The answers to these
questions could fundamentally change local government and
improve the lives of all South African citizens.
Canada [from pa ge 12]
He complimented local governments, but referred several
times to the “levels of government”
in Canada, rather that the egalitarian
designation of “orders of
government” long coveted by the
FCM. He maintained that “for
decades – and especially in recent
years – Ottawa has stuck its nose
into provincial and local matters,”
and insisted that Ottawa would confine
new program spending to
“jurisdictional areas that are clearly
federal.” Significantly, he pointed to
Quebec, which “zealously guards its
constitutional responsibilities,
including those for municipal
affairs,” noting that the Quebec gove
rnment had subs t ant i a l l y
increased its own transfers to
The pendulum swings
To explain Ottawa’s swing back, it is
difficult to appeal to constitutional
jurisdiction as such, because the
federal government has long been
active in areas of provincial responsibility
by virtue of the “federal
spending power.” This power is
invoked by the federal government
when it makes certain direct transfers to people or when it
offers transfers to provinces conditional on them delivering on
their particular programs.
The reason for Ottawa’s pullback, one might argue, is that it
was possible. The division of jurisdiction in Canadian federalism,
as elsewhere, provides a rationale for Ottawa not to act in
some policy areas. In a unitary state,
in contrast, one government is
responsible for the entire scope of
public policy, and public demands
about some pressing local problem
inevitably become a problem of the
central government. An essential
feature of a federation, in contrast,
is that governments do not have
responsibility for certain policy
fields, and this absolves them from
acting to solve such problems.
It is true that once involvement
has become deep, as in the
Canadian health care system, retreat
is politically unthinkable. But on the
cities and communities agenda, the
Harper government can invoke the
constitution to step back from new
initiatives. And there are reasons for
doing so. Such big undertakings
raise expectations across the country
and these are difficult to meet.
The needs of Canadian communities
are enormous, and there is a fear
that municipal governments could
become a bottomless pit for spending.
For a federal government that is
ambitious to act boldly in its areas of
responsibility, such as defence, and
eager to cut taxes as well, there needs to be an excuse not to act
in other areas. Insofar as Canadian municipalities are concerned,
the constitution provides such a rationale. And so the
pendulum has swung.
SPECIAL SECTION : Cities an d thei r agen das
Rebuilding an overpass that collapsed in Laval,
Quebec, in 2006 took money as well as muscle.
Canada’s cities face shortages of funds for replacing
major parts of their aging infrastructure.
CP Photo/Paul Chiass on