Financial sustainability is fundamental for the provision of water and sanitation services in cities. However, water utilities in many countries have little say in the planning of investments or setting of tariffs. Operators without sufficient and predictable finances struggle to deliver the essential public services that underpin a healthy society. Clear and reliable revenue streams allow service providers to train staff, pay bills, buy needed equipment, keep systems maintained, develop resiliency plans and invest in new technology. Local governments supplying water and sanitation services must look principally at domestic resource mobilization rather than continued reliance on donors. Many developing countries have huge growing capital markets that should be tapped for development. Aging and inadequate (or absent) infrastructure is a major obstacle for local and regional authorities providing basic services to their inhabitants and guaranteeing the human right to water and sanitation. Local and regional authorities therefore need the powers and autonomy to establish water tariffs and/or the ability to prove their creditworthiness in order to leverage much-needed funding. Financial incentives to fix old/decaying infrastructure must be provided so that local and regional authorities may take on these tasks confidently. Expanding services into informal settlements also incurs costs beyond infrastructure, such as subsidies and capacity development, which local and regional authorities cannot generate through tariffs alone. Innovative financing models are becoming increasingly available: the use of official development assistance to leverage further funding; scaling-up of financing through improved access to financial markets; blending investments in water, energy and transport; and generating income from waste. States must ensure local and regional authorities have sufficient and appropriate resources to successfully carry out the tasks entrusted to them. In this respect, increasing transfers from the State, local taxation and appropriate tariffs are required
RECOMMENDATIONS
Decentralized financing must be increased to enable local and regional authorities to meet immediate and future water needs. Innovative financing mechanisms must also be explored, promoted and shared between local governments and water suppliers. For long-term sustainability, service providers must be able to generate income and access funding.
ALLOWING INVESTMENT FOR THE FUTURE: URBAN WATER FINANCE
4 | ALLOWING INVESTMENT FOR THE FUTURE: URBAN WATER FINANCE
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START WITH WATER