Decentralizing Municipal Services
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In 2010, in a very bold step, a law was passed to enforce payment for services. The law links payments for all services (water, electricity, gas, telephone, and garbage) to one another and empowers all service utilities to discontinue all service provision if a consumer fails to pay for any service for three consecutive months. Following passage of the law, commercial losses fell from 60 percent in 2004 to 20 percent in 2011.5
Results It is difficult to untangle the anticorruption achievements from the broader reforms of local self-government and municipal service in Georgia. What is clear is the broad array of improvements in governance, especially with respect to local transparency, accountability, and service delivery. Key results are described below.
Improved Municipal Infrastructure, Especially Water Supply The municipal development sector has improved dramatically since 2003. Public spending to rehabilitate and expand municipal infrastructure increased from $50 million over 1993–2003 to $600 million over 2003–13. Average daily water service increased from 4 hours to 16, the share of rehabilitated municipal roads rose from 10 percent to 75 percent, and the out-of-pocket cost consumers had to pay for service fell by 70 percent. Fraudulent lists of people eligible for targeted subsidies were replaced by an integrated social assistance program. Collection rates for water service increased from 20–30 percent in the early 2000s to 70–75 percent in 2011.
Higher Income of Local Self-Governments The income of local self-governments rose from about GEL 400 million in 2003 to about GEL 1.7 billion in 2011 (figure 9.1). As a result, according to Minister of Finance Dimitri Gvindadze, municipal service delivery improved. Better intergovernmental fiscal relations and oversight strengthened fiscal discipline, allowing local self-governments’ defaults and arrears to the Municipal Development Fund to fall from 22 percent in 2003 to almost zero in 2011.
Development of the Municipal Development Fund The Municipal Development Fund has grown steadily. It now manages a solid loan portfolio and reinforces fiscal discipline in loan repayment.