Urban public finances in developing countries : a case study of metropolitan Tunis

DRAFT )R -7 702- THE WORLD BANK DEVELOPMENT ECONOMICS DEPARTMENT URBAN AND REGIONAL ECONOMICS DIVISION URBAN AND REGIONAL REPORT No. 77-2 URBAN PUBLIC FINANCES IN DEVELCPING COUNTRIES: A CASE STUDY OF METROPOLITAN TUNIS RMY PRUDIHOMME JANUARY 1975 These materials are for internal use only and are circulated to stimulate discussion and critical comment. Views are those of the author and should not be interpreted as reflecting the views of the World Bank. References in publications to Reports should be cleared with the author to protect the tentative character of these papers. fA Due to a typing error the decimal point is entered as a comma in all tables, following the French convention. This will be changed for the final version of this report. FORETORD This is one of a series of case studies of the public finances of urban governments in less developed countries. These studies, designed to be as comparable as the local conditions and availability of information permit, are meant to provide a) an understanding of the operation of finance systems in cities of developing countries; b) a format for describing and analyzing these systems; c) a menu of major problems facing these govern- ments; and d) a set of data which may be used to establish comparative norms against which aspects of the performance or problem severity of urban govern- ments generally may be evaluated. It should be emphasized that, although each case study contains a section on conclusions and policy implications, the primary goal is not to offer a p-rogram of detailed fiscal reform for individual cities. Rather, it is to..provide the beginnings of an analytic and informational base which will permit such judgments to be made on a consistent basis and with increasing confidence over time. All but a very small pQrtion of this work was carried out as a World Bank Research Project (RP0270) under the direction of Professor Roy Bahl, of the Metropolitan Studies Program, The Maxwell School, Syracuse University, and Mr. Johannes Linn, of the'Urban and Regional Economics Division of the World Bank. The overall project includes six detailed case studies of Ahmedabad and Bombay, India; Cartagena and Bogota, Colombia; Jakarta, Indonesia; and Seoul, Korea; plus four more limited studies of the public finances of Kingston, Jamaica; and Tunis, Tunisia--as part of RP0270; Lusaka, Zambia; and Manila, the Phillipines--as separate, related efforts. In the final hase of this research a set of papers will be prepared on major urban public finance issues, compai'ing practices and experiences in these ten case cities, as well as others for which comparable information exists. This case study of the Public Finances of Metropolitan Tunis is an outgrowth of field work carried out in 1974, by Mr. Remy Prud'homme. Douglas H. Keare Urban and Regional Economics Division Development FEconomics Department f ii) RESEARCH STAFF Roy Bahl and Johannes Linn have been responsible for the final editing of all papers issued under--or in association with--this project, ensuring accuracy and consistency, etc.; however, a large number of other persons have been involved in their production: Detailed Case Studies Principal Research Arising out of RP0270 Researcher (s) Assistant (s) Ahmedabad Roy Bahl, Douglas Keare Michael Wasylenko, Tamar Katz Bombay Francine Bougeon-Maassen, .Michael Wasylenko, Roy Bahl Tamar Katz, Carlos Noble, Mark Gellerso Bogota Johannes Linn, Roy Bahl Michael Wasylenko, Carlos Noble, Tran Than Dang Cartagena Johannes Linn, Roy Bahl Tran Than Dang, Carlos Noble Seoul Roy Bahl, Douglas Keare Hwang 11yong Chan, Michael Wasylenko \ Tamar Katz Jakarta Johannes Lin, Hartojo Wignjowijoto, Roy Bahl Limited Case Studies Arising out of RPO270 -- Kingston Francine Bougeon-Maassen, Johannes Linn, Roy Bahl Tunis Reny Prud'homme Limited Case Studies of Other Origins Lusaka Robert Saunders Manila Roy Bahl, Pamela Brigg (iii). Urban-Regional Economics Division Urban Public Finance Project Case Studies Paper No. Title Author 1 Urban Public Finances in Developing Countries: A Case Study..of Metropolitan Ahmedabad Roy Bahl 2. Urban Public Finances in-Developing Countries: A Case Study of Metropolitan Cartagena Johannes Limnn 3 Urban Public Finances in Developing Countries: Roy Bahl and A Case Study of Metropolitan Seoul Michael Wasylenk 4 Urban Public Finances in Developing Countries: A Case Study of Metropolitan Tunis Remy Prud'homme (iv) TABLE OF CONTENTS Page No. I. INTRODUCTION ........................................................ 1 Section 1. The "--rban Public Services Under Study .................... 2 Section 2. The Area Studied ......................................... 6 II. THE INSTITUTIONAL STRUCTURE .......................................... 17 Section 1. The Structure of Local Authorities in Tunisia ............ 18 Section 2. Special Features of the Local Authorities of the Tunis Region ............................................. 23 a. The boundaries of the Governorate of Tunis ........... 23 b. The Constitution of the Municipality of Tunis ........ 26 c. The Establishment of the District of'Tunis ........... 27 III. DISTRIBUTIONS OF RESPONSIBILITIES .................................. 32 Section 1. Water Supply ....................py....................... 32 Section 2. Electricity and Gas Supply ............................... 33 Section 3. Food Supply .............................................. 34 Section 4. Sanitation .............................................. 3 Section 5. Urban Transportation .................................... 37 Section 6. Telephone ................................................ 41 Section 7. Education ................................................ 41 Section 8. Health ................................................... 2 Section 9. Recreation and Sports..................................... 2 Section 10. Religion ................................................. 43 Section 11. Protection ............................................... 43 Section 12. Housing .................................................. Section 13. Employment ............................................... Section 14. Planning .666 IV. SERVICES PROVIDED BY THE COMRTMEE..................................... 49 Section 1. Administrative Organization ........................... 49 Section 2. Financial Organization: Budgetary and Accounting Procedures ............................................... d4 a. Budgets .............................................. 5 b. Approval of Budgets ................................. 57 c. Budget Execution ..................................... 7 d. Budget Nomenclature .............................. 61 Section 3. Amount and Structure of Receipts ......................... 63 Section 4. Land Taxes .67 Section 5. Receipts for Services................................... 73 Section 6. General Subsidies ........................................ 75 Section 7. Special Subsidies ........................................ 82 Section 8. Loans .................................................... 83 Section 9. Expenditures of the Communes ............................ 85 TABLE OF CONTENTS (Continued) Page No. V. SERVICES PROVIDED BY PUBLIC SERVICE COMPANIES .....................*** 93 Section 1. Services Provided in Tunis by SONEDE ..................... 93 Section 2. Services Provided in Tunis by STEG ....................... 96 a. Volumes Delivered .................................... 96 b. Expenditures and Costs .............................. 98 c. Rates and Receipts ................................... 99 Section 3. Services Provided in Tunis by SNT ........................ 104 a. Indicators of Service Provided ...................... 105 b. Ependitures and tods .............................. 106 c. Rates and Receipts ........... ...................... 107 Section 4. Services Provided in Tunis by SNCFT ...................... 111 Section 5. Services Provided in Tunis by OPAT ............. 1-14 Section 6. Services Provided in Tunis by OPNT .............. . 115 VI. SERVICES PROVIDED BY THE MINISTRIES .................................. 117 Section 1. Services Provided in Tunis by the Ministry of Posts, Telegraphs and Telemunications .............. 118 Section 2. Services Provided in Tunis by the Ministry of Elucation ................................................ 121 Section 3. Services Provided in Tunis by the Ministry of Health 126 Section U. Services Provided in Tunis by the Ministry of Infra- structure ................................................ 128 VII. SERVICES PROVIDED BY THE GOVERNORATE AND THE DISTRICT ................ 129 Section 1. Organization of the Governorates of Tunis and of the District ..................................... 129 Section 2. Finances of the Governorates.Of Tunis .................... 131 VIII. EXPENDITURES, COSTS AND FINANCING OF URBAN PUBLIC SERVICES IN TUNIS .............................................................. Section 1. Expenditures and Cost of Urban Public Services............ 134 Section 2. Financing of the UPS...................................c. 142 IX. CONCLUSIONS AND RECOMMENDATIOS....................................... 144 Section 1. Spn ary .................................................. 144 Section 2. Recommendations ......................................... 19 Chapter 1 INTR 0 DUCTI 0 N The rapid and unremitting spread of urbanization in Third World countries is posing formidable problems everywhere: how to supply the ever-growing city populations with water, power and food? How to dispose of their waste? How to provide them with transportation, education, health care, protection, etc.? The methods used to tackle these problems vary considerably from city to city. In an effort to bring light to bear on this subject as a whole, the World Bank has commissioned a study of urban public services in a sample of about ten Third World cities. This study will explore the diversity of methods used so that their advantages and shortcomings can be compared and recommendations made. Tunis is one of the cities included in this sample. The main purpose of the following monograph on urban public services in Tunis is therefore to provide material for a comparative study of urban public services in the Third World. It should not be too much to hope, however, that this study will also prove useful to those concerned with the development of Tunis, i.e,, the Tunisian authorities. "Urban public services in Tunis" is rather a loose concept. In order to know exactly what we are talking about we must therefore first define what we mean by "urban public services" and by "Tunis". Section 1 - The urban public services under study Exactly what is meant by urban public services (referred to below as UPS) is not at all clear. One could take it in a theoretical sense. Economic theory differen- tiates between private goods (or services) and public goods (or services). The first can be appropriated and consumed individually (bread, for example); the second cannot be appropriated and are by their very nature consumed collectively (justice, for example). Private goods can be produced and dis- tributed through the market; public goods cannot and have to be produced and distributed through what can be called political machinery, requiring the intervention of a public authority. The concept of public goods (or services) has been extended to include goods (or services) which could be produced and consumed individually but which, for ethical reasons, one does not wish to see handled through the market (education, for example); public goods of the latter type are often called merit goods; their public nature has a social basis, i.e., it varies in time and space and is not absolute: health and housing are sometimes considered private goods, which can be supplied through the market, and sometimes public goods, for which the govern- ment is responsible, and most commonly mixed goods, which the market can provide in the main but from which the government cannot disassociate itself, According to economic theory, there are also other types of goods that the market cannot conveniently supply. The most important of these are those goods that are necessarily produced on a monopolistic basis (water supply, for example). It can thus be seen that the concept of public goods or ser- vices cannot be narrowly defined. -3-. The qualification "urban" does not make things any easier. Certain goods or services (national defense, for example) are provided at national level only. Others (sanitation, for example) are produced and consumed at conurbation level. The distinction between "national" and "urban" public services is difficult to draw, however, for the simple reason that the urban areas or conurbations also go to make up the nation, and that certain goods (education, for example) are both national and urban at one and the same time. It is therefore preferable to list the urban public services rather than define them. The UPS studied are the following: water, electricity, gas and food supplies; sanitation; transportation; telephone service; edu- cation; health; recreation and sports; religion; protection of property and persons; housing; employment; and planning. Most of these services are provided through physical plant and facili- ties; in fact in certain cases the service is actually identified with the provision and maintenance of such plant. The following table shows the facilities that correspond to each UPS. Table 1-1 - UPS and urban public facilities UPS Facilities Water supply Distribution network Electricity supply Generation plant, distribution network Food supply Abattoirs, markets Sanitation Sewerage, waste collection facilities Transportation Roads, buses, ports, airports, railways Telephone Network Education Schools, colleges, universities Health Hospitals, clinics Recreation and sports Stadiums, theaters, parks Religion Mosques, cemeteries Protection Fire-fighting equipment Housing Housing developments Employment Industrial zones Planning No facilities needed Analysis of a UPS hinges on four questions: (i) who is responsible for this UPS? (ii) what is the "quantity" of services provided or sold? (iii) what expenditures and costs are involved in this UPS? (iv) how are these expenditures and costs financed? The first question is an administrative, legal and political one. UPS are always provided by government agencies in some way, but they can be pro- vided directly or indirectly: the government authority may undertake the production and distribution of the UPS itself or it may entrust this task to an enterprise that is private to some degree and which is subject to a greater or lesser degree of supervision. Moreover the Itgovernment authority" is multiple in nature: it can be the commune, the region, and/or the State. In fact, in the business of producing UPS these different bodies form inter- relationships which are often complex. It is sometimes difficult to answer the second question for statistical and above all, conceptual reasons. The service offered often has a qualita- tive dimension which (in the absence of any market prices) is difficult, if not impossible, to measure. The standard of education given, for exa ple, may be anything from excellent to poor. The third question raises the problem of differentiating between expen- ditures aud costs. This calls for some observations. Annual expenditures relating to a UPS are the sums actually paid out; these are of two types: capital expenditure for investments or plant needed for the creation of new facilities, on the one hand, and operating or running expenses. on the other, for the operation of existing investments. Expenditure is a financial concept. Cost, on the other hand, is an economic concept. The annual cost of a UPS corresponds to the hole made in the local authority's resources to pro- duce that TPS. It is basically made up of operating expenses, depreciation on the plant used to produce the UPS and what economists call the opportunity cost of capital, i.e., the interest on the capital plant used. The following example will illustrate these concepts. Let us assume a UPS provided by plant with a value of 100. This plant will be written off i.e., worn out, in five years; the annual depreciation is therefore 20. The interest rate (or, to be more precise, the discount rate) is 10%; the opportunity cost of the capital is therefore lO. Let us further assume that half the cost of this equipment was financed out of a loan carrying 10% in- terest; the annual amount of interest payable to the lender is thus 5. Operating expenses (salaries, purchase of raw materials, etc.) amount to 30 for year t. During year t investments made amount to 50 (bringing the value of the total plant from 100 to 150). Expenditures are therefore as follows: Running expenses 30 Interest paid 5 Operating expenditure _37 Capital expenditure 50 Total expenditure -6- The production cost of the UPS is calculated as follows: Running expenses 30 Depreciation 20 Cost (opportunity) of capital 10 Cost 60 The idea is to calculate both the expenditures and the cost for each UPS. The data available, which tend to be more financial and accounting- oriented than economic, relate more to expenditures than to cost. The amount of capital stock, in particular, is often unknown, which makes it difficult to calculate the cost. The fourth question relates to the financing of UPS. UPS are financed by means of taxation or sales or a combination of both. When the UPS is financed through taxation, we still need to know what kind of tax(es), levied by which government authority or authorities and with what consequences. When the UPS is financed by sales, the price(s) at which it is sold must be determined so that these prices can be compared with costs. Such are the basic questions we shall try to answer as they relate to the UPS in Tunis. Section 2 - The area studied The UPS studied are those that are provided "in Tunis". Before giving certain statistics needed for the purpose of the study, we need to state exactly what we mean by 1Tunis". It can be used to designate any one of the three following areas: (i) the area of the commune or municipality of Tunis, which comprises the M:edina and the European city, situated between Lake Tunis and Lake Es -7- Sedjoumai, but which extends quite far to the north and the south of this dense urban center; the municipality of Tunis covers an area of about 52 sq.km.1:/ (not counting the lakes). (ii) the metropolitan area of Tunis, which, in addition to the commune of Tunis, comprises another twelve communes, sometimes referred to as the banlieue (suburbs)-/, which flank the commune of Tunis on the east, north and southwest; the metropolitan area of Tunis, thus defined, extends over about 330 sq. km. (iii) the area known as the District of Tunis, defined as the area corresponding to the present Governorate of Tunis, as created by the Law of February 15, 1972; besides the thirteen communes that go to make up the metropolitan area, this area also comprises a large fringe surrounding the communes, known as the rural area; the total area of the District is about 757 sq.km. Strange though it may seem, statistics on the present population of the area under study are very sketchy. There are no reliable figures for later than 1966, which is when the last census was taken. Four sources give totally contradictory figures for 1972. First, the District, basing its estimates on figures established by local government officials (heads of the h3 District imadas), puts the popu- lation of the metropolitan area at 1,090,000 in 1973, i.e., about 1,040,000 in 1972, based on an estimated annual growth rate of 5%. 1. Estimate based on maps. 2. Le Bardo, La Manouba, Ariana, La Goulette, Carthage, Sidi Bou Said, La Marsa, Megrine, Ben Arous, Rades, Ez Zahra, Hamman-Lif. 8 In a documentl/ published in 1972, which is often quoted (by the World Bank in particular), the Direction de l'Amenagement du Territoire (DAT) puts the 1971 population of the metropolitan area at 868,000. At the 5% growth rate established by this source, this gives a population of 911,000 in 1972. In 1972 the Institut National de la Statistique (INS) undertook a sample survey on migration and employment covering 1,800 households. In this the population of the thirteen communes that go to make up the metro- politan area was put at between 711,000 and 793,000- . The INS also made a separate estimate, based on the 1966 population rate census, the natural growthand internal and international migration. / This time it put the figure for 1972 at 795,000 persons. We therefore have the following figures (expressed in thousands) for the same date and the same area: - INS survey 711-793 - INS projection 795 - DAT projection 911 - District estimate 1,040 We shall disregard the District's estimate, which has no scientific foundation at all. We shall also disregard the DAT figures, as the migration factor appears to have been exaggerated somewhat, while international migra- tion, which INS estimates at -0.82% per year, was totally ignored. For our purposes we shall put the figure at 800,000 inhabitants, which ties in with 1. Minist6re de I?Economie Nationale, Direction de l'Am6nagement du Terri- toire, Tunis 1972-76, Tunis, mimeo., October 1972, Annex A. 2. INIS, Enquete Migration et Emploi Tunis 1972-73, Tunis, January 1973, INS, mimeo., part 1, p. v. 3. Ibid., p. vi. -9- both the survey and the projection made by INS. To this must be added the institutional population, which is put at a constant figure of 30,000 per- sons. We do not have any reliable data that would enable us to break down the population growth between the commune of Tunis and the suburban communes. We have-had to work on the hypothesis that the natural growth rate has been identical and that the migration factor was equal in both these areas. We do not have any information on the population in the rural areas either. The population in the rural areas in 1966 can be estimated from the difference between the population of what was then the Delegation of Tunis (and which more or less corresponds to what is now the District of Tunis) and the population of the thirteen municipalities, viz. h0,000 persons. One may assume that this has increased at a rate slightly higher than the natural growth rate, i.e., at a rate of 3%. It is also known that the annual population growth rate of the Delega- tion of Tunis was 5.5% between 1956 and 1966; this rate has been used to construct the progression from 1962 to 1965 based on the 1966 figures. The following Table 1-2 was thus constructed: Table 1-2 Population of the District of Tunis, 1962-7 (in thousands) Municipality of Tunis Other Municipalities/ 13 Municipalities Rural areas District of TunisB__ WithoutWihb WithoutbY Wi t Wihou Wi 1962 362 392 142 504 534 33 38 568 1963 382 412 151 533 563 35 568 598 1964 403 433 159 562 592 37 599 629 1965 426 456 168 594 621 39 632 662 1966 h9 469 177 626 656 41 667 696 1967 73i 67 F 2'9 72 1968 482 512 196 679 709 43 722 752 1969 500 530 208 708 739 45 753 783 1970 519 5h9 221 740 770 46 786 816 1971 538 578 230 768 798 48 816 843 1972 558 588 242 800 830 49 849 879 1973 578 608 255 50 5o 884 914 a. The only figures that are anywhere near reliable are those for 1966. The figures for previous years were calculated on the basis of an annual growth rate of 5.5%. In addition the figure of 800 was used for the population of the thirteen communes in 1972 and the rest of the series was constructed by means of exponential interpolation. b. The institutional population (mainly military) assumed to be constant (totalling 30,000) and located in the commune of Tunis. c. The figures are for the population as of January 1 of each year. d. With present boundaries. O It will be seen that the figures put forward in the table are consid- erably lower than those generally accepted. This table suggests that the growth rate of Tunis has fallen considerably in recent years. It might be worthwhile to compare the size of the conurbation under study with the rest of the country. This is the purpose of Table 1-3. Table 1-3 - Population of Tunis in relation to the population of Tunisia in 1966 and 1971 (in %) Municipality of Tunis Metropolitan Area of Tunis District of Tunis Total Population Urban Pop. of Tunisia Urb. Population of Tunisia of Tunisia 1966 22.1 30.9 15.3 1971 22.6 31.1 16.6 Sources: For Tunis, Table 1-2; for Tunisia: Ministere de l'Economie Nationale, DAT "Villes et D6veloppementi, vol. 3 pp. 69 and 75 This shows that the Commune of Tunis represents more than one-fifth of Tunisia's urban population and that the thirteen communes that go to make up the metropolitan area represent just under one third of that population. The District as a whole represents a little over 15% of the total population of the country. Between 1966 and 1971 the relative importance of Tunis rose slightly, which means that the population of Tunis has been growing more quickly than the population of other urban centers in the country and a fortiori than the total population. - 12 - Data on economic activity in Tunis are available, thanks to the 1966 census and, above all, to a valuable survey carried out in 1972.1/ Accord- ing to the latter, "he economically active portion of the population in the metropolitan area amounted to 26.2%, and is believed to have dropped by one point between 1966 and 1972. Some of the economically active population are unemployed, however, or work somewhat irregularly. As established in the survey, the ratio of those who are "under-employed" to the total economically active population, i.e., the under-employment rate, ranges between 9 and 12%. This rate probably dropped almost four points between 1966 and 1972. This improvement in the unemployment rate is possibly attributable to international emigration, which must have siphoned off some of the unemployed. The employment structure by profession and by sector of economic activity is shown in Tables I-4 and I-5. Table I-4 - Economically active population in the metropolitan area of Tunis2Z by profession, in 1966 and 1972 1966 1972 Liberal professions 7,0 11,8 Business executives 2,0 3,1 Office workers 6,8 7,3 Salesmen 10,6 11,0 Transport and communications 5,9 7,8 Craftsmen, operatives, manual workers 42,1 39,7 Services 10,7 11,6 Miscellaneous 14,9 7,7 Total 100,0 100,0 1. INS, Engutte Migration et Emploi Tunis 1972-73, Part 2, Emploi et M6nage, Tunis, INS, mimeographed, January 1973, 169 p. - 13 - a. These figures refer to the thirteen communes in the metropolitan area only; for data on the District, but relating to 1966 only, see Tunis 72-76, E. cit., annex B. Source: INS, Enqutte Migration et Emploi, op. cit., part 2, p. 12. Table I-5 - Economically active population in the metropolitan area of Tunis, by sector of economic activity, 1966 and 1972 (in thousands) 1966 1972 1. Primary sector 3,7 1,8 2. Secondary sector: 24,3 26,2 Industry 18,9 Buildings and public works 5,9 Electricity, gas and water 1,4 3. Tertiary sector: 58,4 62,7 Commune 17,5 Transportation 6,0 Services and administration 39,2 4. Undetermined, and unemployed 13,6 9,3 Total 100,0 100,0 Source: INS, Enqu8te Migration et Emploi. op. cit., part 2, pp. 14 and 15. Table I-6 below gives an idea of the breakdown of industrial activity by sector in 1967. Table I-6 - Industrial activities-/ in the metropolitan area of Tunis, by sector, 1967 Number of companies Number of employees Electricity, gas and water 1 3,300 Iron and steel 13 1,400 Metal manufactures, engineering 29 1,600 Electricity, electronics 6 500 Chemicals, petroleum, rubber 26 1,600 Textiles, clothing 84 5,300 Food, beverages 119 9,300 Wood, furniture 21 1,300 Mechanical engineering supplies 33 4,100 Buildings and public works 47 13,400 Miscellaneous 46 2,700 Repair service, transportationb/ 116 18,600 Total 541 63,100 a. This table only covers establishments with more than six employees. b. Including SNCFT (8,000 employees), STM (1,300 employees) and SNT (2,000 employees). Source: Tunis 72-76, op. cit., p. '60. Information on prices is quite good. The official price index is in fact a price index for Tunis, as surveys are made in the capital only. Table 1-7 follows the movement of this index. - 15 - Table 1-7 - Consumer Price Index, Tunis, 1962-197 1962 100,0 1963 102,7 1964 107,0 1965 114,1 1966 118,5 1967 122,0 1968 125,0 1969 130,2 1970 131,6 1971 139,1 1972 142,1 1973 148,3 N. B.: Figures for 1.971-1973 calculated on the basis of a new index of 100 established in 1970 Source: INS lata on income levels in Tunis are unfortunately extremely sparse and tenuous. The following are the only sources: (i) a 1960 survey on family incomes in Tunis, which covered 1,000 households2l but which was limited in that it only covered families where the breadwinner was an operative, office worker or day laborer; (ii) a 1968 survey on household consumption and expenditure in Tunisia,/ which covered 7,147 households, 1,106 of which were in Tunis; the results are often quoted for the entire Governorate of Tunis (1,185 households), or for all the "major cities" (1,745 households); (iii) a survey in 1972 on migration and employment in Tunis,!/ covering 1,805 households and which included questions on income. The findings of these surveys are unfortunately not suitable for com- parison purposes, and cannot be used to establish a series, however rough. 1. EnquOte sur les Budgets de Famille -. Tunis 1960-61, n.p.n.d., mimeo., unpublished. 2. Secr6tariat dEtat au Plan et a 1'Economie Nationale, Direction G6nerale du Plan, La Consommation et les Depenses des Menages en Tunisie 1965-69, December 196b, mimeo., 421 p. 3. INS, Enqutte Migration et Emploi, op. cit. - 16 - We were only able to calculate the pattern of per capita income levels in Tunisia from national accounting data. Actual per capita income in Tunis is doubtless higher but there is no reason to suppose that the pattern has been much different from the one indicated. These calculations are given in Table T-8. Table 1-8 - Average per capita income in Tunisia, 1962-73 Nominal value Real value (current ) index (1962 D) index 1962 60,5 100 6o,5 100 1963 73,0 121 71,1 118 1964 76,4 126 71,4 118 1965 83,9 139 73,5 121 1966 82.3 136 69,4 115 1967 84,6 140 69,3 115 1968 83,5 138 66,8 110 1969 92,1 152 70,7 117 1970 101,2 169 76,9 127 1971 115,3 191 82,9 137 1972 133,2 220 93,7 155 1973 142,2 235 95,9 160 Source: IBRD Report No. 274 TUN, vol 7, tables 1-1 and 2-8. N. B.: Per capita income was calculated as the suma of house- hold savings and household consumption divided by The population. - 17 - Chapter II THE INSTITUTI 0 NAL STRUCTURE Tunisia's system of government and administration is characterized by (i) the pre-eminence of the national executive and (ii) the role of the Destourian Socialist Party. All the power is concentrated in one man -- the President of the Republic -- who is elected by universal suffrage. It is the President who appoints the Cabinet Ministers and removes them from office. It may be said that he controls the National Assembly since its members are elected by universal suffrage from lists prepared by the Party, and its powers to initiate legislation are rather limited in scope. He also controls the judiciary, albeit to a lesser degree, since he appoints the judges. This system is the result of three forces that have converged to bring about the same effect, (i) Until independence in 1956 and all through his- tory, Tunisia was governed mainly by foreigners (the Romans, the Vandals, the Byzantines, the Aglabids, the Fatimids, the Almohads, the Hafsids, the Turks and the French) who set up centralized governments. (ii) Independence was achieved through the efforts of one man (with the backing of a political party and widespread popular support), who naturally assumed full power him- self. (iii) The example and influence of France, where power is also con- centrated in a strong executive, also encouraged centralization. One may add here, too, that the relative smallness of the country also facilitated the concentration of power in Tunis and even justifies it to some extent. It therefore follows that the local authorities are particularly weak in Tunisia. They are of two kinds: the regions, or governorates, which number fifteen; and the communes or municipalities, which number 155. We shall go on to examine these from the point of view of their structure, powers and finances, first for the country in general and then more speci- fically as they relate to Tunis. Section 1 - The structure of local authorities in Tunisia The regions or governorates, or more precisely the governorate councils, are "public local authorities possessing civil and financial personality" and responsible for "managing the regional interests of each governorate".2/ They were set up in 1956 by a decree of the central government. The divi- sion into regions and consequently the number of regions has been changed several tines. Currently (March 1974) there are fifteen regions, but the division of the Sousse region into three smaller regions will very soon bring this number up to seventeen. Council members are not elected by direct universal suffrage, the Councils being composed of Party representatives, representatives of cer- taIn professional, social or trade union organizations (Union Generale des Travailleurs Tunisiens, Union Nationale des Agriculteurs Tunisiens, Union Nationale des Fennes de Tunisie) and of Presidents of Associations of Communes, where applicable. The executive head of the council is the Governor, who is not elected by the Council but appointed by the President. Herein lies the uniqueness of the Governorate and its ambiguity. The Governorate is at one and the same time an autonomous local authority and 1. -Decrees of June 21, 1956 and December 30, 1963; laws of August 17, 1957. - 19 - also an administrative district. The Governor is at one and the same time the representative of the central government and the agent of a local decen- tralized authority. As representative of the central government, he coordi- nates the work of State officials, censures public order, sees that laws are implemented and engages State appropriations in the Governorate. As representative of the Governorate, he leads the regional assembly, calls meetings, draws up the agenda, prepares the Governorate budget and engages funds appropriated under the budget, represents the council in the courts, etc. In actual fact, the Governor is first and foremost a representative of the central government. As the regional representative he is in any case subject to government supervision and control (exercised by the Secretariat of State of the Interior). This is why, for example, the governorate budget cannot enter into effect until it has been approved by the central govern- ment. As a local authority represented by the governorate council, the region therefore has very little power indeed. The governorates are divided into delegations. The delegations are the basic administrative units. These are subdivided into imadas. The communes or municipalities are in a stronger position as local authorities. It is striking to note, however, that the idea of communes is relatively recent in Tunisia. The first commune, that of Tunis, was given its first legal constitution in, 1858. Under the French Protectorate about sixty communes were established. About forty more were set up in the first few years of Independence. About fifty more have since been formed. Now in 1974 there are 155. - 20 - Communes are created by central government decree. It goes without saying that the total area of the communes represents a mere fraction of the total national territory, but the bulk of the country's urban population is concentrated in this small area. The structure and powers of communes are governed by the Municipal Law.i This defines communes as "local authorities under public law possessing civil personality and financial autonomy, responsible for the management of municipal interests" (Article 1). "Municipal interests" are defined in a negative fashion: only those collective interests that are not the responsibility of "higher" authorities. i.e., the State and the Governorate Council, may be regarded as municipal interests. The extent of municipal interests is thus residual. Commune inhabitants elect members of the municipal council by universal suffrage (for a three-year term). The council "determines the affairo of the commune by its decisions". It elects one of its members as president or mayor, to serve as the chief executive of the commune. Mayors are often important political figures (ministers, deputies, etc.). As chief executive of the commune, the mayor is responsible for pre- serving and administering community property, preparing the budget, author- izing expenditure, signing contracts, signing bills of sale and purchase, appointing and dismissing municipal officials, and, generally, implementing the decisions of the municipal council. 1. Decree of March 14, 1957, amended by several subsequent laws. - 21 - But -- and here we return to the same ambiguity that characterizes the post of governor -- the mayor is also an agent of the State. Like the governorate, +the commune is at one and the same time a local authority and an administrative district As representative of the State, the mayor is responsible for executing regulations and general security measures, per- forming the functions of civil registrar, etc. Moreover, when acting as representative of the commune, the mayor is subject to rather strict central administrative control, which obviously limits the commune's autonomy. In the case of the commune budget, in par- ticular, after it has been prepared by the mayor and approved by the munici- pal council, it has to be submitted to the governor or to the Ministry of the Interior and following joint review by the Ministry of Finance and the Ministry of the Plan and National Economy should it exceed D 500,000. The central supervisory authority has extensive powers in budgetary matters: it can reject or cut expenditure items, automatically enter or increase certain obligatory expenditures, etc. In any case, the budget cannot enter into effect until it has been approved by the higher authority. The same holds good for many other municipal council decisions: sales and purchases by the commune, the scale of charges to be levied by the commune, equity investment in an enterprise that is to manage an urban public service, health regulations, etc., must all be approved by the supervisory authority. The two types of local authorities in Tunisia thus have three charac- teristics in common: (i) they are recent in origin; (ii) they are ambiguous in that they are also administrative divisions of the State; (iii) they are weak. Figure II.1. is an attempt to illustrate the structure of local authority. - 22 - Figure II-A. Structure of Local Authority elect by universal President ofth suffrage Republic Government 4-D, 00 aGoývernor dvssGovernorate 0 e Counc2.1 o~ 0 President or ele unicipal Mayor Council4) 4, 0. THE PEOPLE - 23 - Section 2 - Special features of the local authorities of the Tunis region Tunis, as a geographic region, calls for special comment here, not only because it concerns us more particularly but also because it does have some peculiarities: -the boundaries of the governorate )e )een changed fre- quently, the constitution of the city of Tunis has also been changed, and, finally, a special entity has been set up here. (a) The boundaries of the governorate of Tunis It should be pointed out here that the geographic delimitation of the governorate of Tunis has been altered several times in the past ten years. Between 1957 and 1970 the area of the governorate of Tunis remained constant in spite of an increase in the number of delegations included in it, from two to three and then up to five. In 1970 the territory was enlarged to include four additional delegations that were taken away from the gov- ernorates of Beja (Fahs and En Nadour delegations), Nabeul (Zaghouan dele- gation) and Bizerte (Tebourba delegation). In 1972 the governorate was split into two: the governorate of South Tunis and the governorate of Tunis proper (sometimes referred to as North Tunis), the latter being composed of four delegations, making it considerably smaller than the pre-1970 governorate. In 1973 the number of delegations in the governorate of Tunis (North) was raised from four to eight, without any change in the boundaries. Figure 11.2 and Map II.1 make it easier to understand these complicated changes, which is essential in order to be able to analyze the data and figures that relate to the "governorates" of Tunis. Diagram II-B Composition (delegations) of the governorates of Tunis (1957-1974) Tebourba Fahs En Nadhoun Zaghouan La Manouba La Manouba La Manouba La Manouba Mornaghia Mornaghia Southern Hammam-Lif Hammam-Lif Suburbs Hammam-Lif Hammam-Lif La Goulette La Goulette La Goulette La Goulette Tunis -Sidi Tunis-Side el Bechir el Bechir Le Bardo Tunis-el Monzah Tunis Tunis and Tunis Tunis Tunis Bal Tunis Bab Northern el Kherdra Souika * Suburbs Tunis Bab . Dahr Tunis Medina Sept. 27/1957 March 8/1968 March 27/1969 Sept. 19/1970 Feb. 18/1972 July 21/1973 -25 - Map C-2 - BOUNDARIES OF THE GOVERNORATES OF TINIS 1962-1973 \Culette - Zagho iah .En }Nadhout Governorate of Tunis, 1957-70 Governorate of Tunis, 1970-72 Governorate of Tunis (North) since 1972 - 26 - It will be seen that the division into delegations and into communes is rather haphazard. Some delegations are made up of parts of the munici- pality of Tunis (which is thus shared among six delegations), others are made up of parts of Tunis and the suburban communes and yet others of subur- ban communes and the rural areas. (b) The constitution of the municipality of Tunis There are thirteen communes or municipalities in the governorate of Tunis. The constitution of the most important of these, Tunis, has been changed several times in recent years. (i) Up until 1966 Tunis had a constitution under ordinary law: an elected municipal council that elected a president (or mayor), who performed the duties of any other commune president; (ii) From 1966 until 1973 Tunis had a special constitution.1/ The municipal council still elected a president but his role was essentially honorary. The law in question stated that "the powers vested by law in the Commune President in other Communes" were to be exercised by the "Governor of the Governorate of Tunis". This Governor, who, as in the case of all governors, was appointed by decree, was called Governor-Mayor of Tunis. As the title conveys, this meant that he was both Governor of the Governorate of Tunis and Mayor of the municipality of Tunis; (iii) Since 1973 the constitution of the municipality of Tunis has again reverted to that of a constitution under ordinary law.-/ The president has regained his former duties. The fact remains, however, that the president 1. Cf. Law of May 24, 1966. 2. Cf. Law of August 2, 1973. - 27 - of the commune of Tunis, although elected by the municipal council, is "appointed" by a government decree, which gives the Government a kind of veto right. Furthermore, the president is assisted by a government-appointed Secretary General. (c) The establishment of the District of Tunis The District of Tunis was established in 1972.1/ This is defined as a "public establishment possessing civil personality and financial autonomy". The boundaries of the District of Tunis include the entire area of the present Governorate of Tunis. Provisions concerning the organization and functions of the District 2/ are set forth in some detail in the pertinent legal documents- but the exact nature of this new institution is still very unclear. The law that created the District introduces it as a Governorate Coun- cil: "(The District) replaces the Governorate Council in this adninistra- tive area (the Governorate of Tunis) and (...) it shall exercise all the functions that correspond to the Governorate Council and it shall be entitled to all the income, rights and advantages that legislation and regulations ascribe to Governorate Councils". The District differs in many ways from other Governorate Councils, how- ever. To begin with it was created as a "public establishment" and not as a "public local authority". Its form of management is also quite different. The District has at least five identifiable governing bodies: 1. Cf. Law of February 15, 1972, and Decree of February 18, 1972. 2. Cf. Decrees of February 18, 1972, June 23, 1972, and November 25, 1973. - 28 - (i) A District Superior Council (Conseil Sup'rieur de District), which is a veritable inter-ministerial committee, as it is presided over by the Prime Minister and is composed of the leading ministers and the Governor of Tunis; the Superior Council has extensive powers since, according to the 1972 law, it "defines options as regards development and infrastructure, approves the regional development plan (...), decides on the programming of public infrastructure projects, approves and monitors the Districtis budget"; (ii) A District Administration Council (Conseil d'Administration du District) which "in the Governorate of Tunis replaces the Governorate Coun- cil of this administrative area"; the administration Council, presided over by the Governor (appointed) is composed of the presidents of the Governorate's municipal councils and ten representatives of the municipal council of the city of Tunis; it prepares the decisions of the Superior Council. (iii) A Consultative Committee (Comit6 Consultatif), also presided over by the Governor, which is composed of members appointed by the Minister of the Interior on the recommendation of the Governor; "it advises the Administration Council on problems arising in the District". (iv) A Technical Coordination Committee (Comit6 Technique de Coordination), also chaired by the Governor and composed of the Directors of the Ministries involved in the provision of infrastructure in the District, the Director of Works of the City of Tunis and heads of public establishments and organi- zations operating within the District; this Committee "is responsible for coordinating the projects and programs concerning the District's infrastruc- ture prepared by public departments and establishments". -29- (v) A Director General, appointed by decree, whose "permanent mission is to promote and coordinate the District's activities". The following diagram illustrates this rather compleX structure: - 30 - Figure II-C. - GOVERNING BODIES OF THE DISTRICT OF TUNIS Superior, Council Consultative Administration Committee Council Governor 1 Technical Direc-tor General Coordination E cto:r _ _ Committee - 31 - It is too early as yet to judge how successfully this structure will function in practice. A few observations can be made, however. Firstly, this structure was very slow to take shape; although the District was set up in 1972, the Governorate Council still existed as late as 1973 and continued to collect revenues; the first Director was not appointed until December 1973. Secondly, the division of the Governorate of Tunis into the Governorates of South Tunis and North Tunis increases the authority of the Governor (of North Tunis) as the area he governs coincides with the District, which virtually makes him the "Governor of the District". Thirdly, we would say that the structure of the District greatly favors the central administration; the District has even fewer of the attributes of a local authority than does a Governorate Council; and the local authorities of the District -- the communes in general and the commune of Tunis in particular -- have very little say, the Administration Council being the only channel through which they can make themselves heard. - 32 - Chapter III DISTRIBUTI 0 N 0 F RESP 0 NSIBILITIES In Tunis, as elsewhere, the production and distribution of UPS are handled by many different agencies. In this chapter we shall attempt to provide a qualitative assessment of this problem, indicating the bodies responsible for each UPS. Section 1 - Water supply At present water supply is handled by a national company, the Socit Nationale drExploitation et de Distribution des Eaux -- SONEDE. SONEDE was established in 1968, Previously the State had been directly responsible for water supply and storage (in reservoirs) and the distribution concession had been held by STEG (Societe Tunisienne d'Electricite et de Gaz). SONEDE is a national company that is completely State-owned. It is managed by an eleven-man board of directors including representatives of the principal ministries and two user representatives. It is this board of directors that appoints the Director General. SONEDE?s freedom is very limited. The law whereby SONEVE was constituted states that "the approval of the Secretary of State for the Plan and the National Economy shall be required in the case of decisions of the board of directors concerning the following matters: (1) the draft operating account and the draft investment account (which SONEDE is required to prepare annually); 1. Cf. Law of July 2, 1968. - 33 - (2) the setting of service regulations and staff pay scales; (3) the setting of maximum tariffs governing user rates and charges; (4) the contracting of medium and long-term loans; (...)n. (Article 16). In addition, a financial controller and a technical controller appointed by the Secretary of State for the Plan and the National Economy are assigned to SONEDE and are entitled to attend meetings of the board of directors in an advisory capacity. Furthermore, contracts entered into by SONEDE must comply with the pro- cedures required for State contracts. On the other hand, if the need arose, the State would provide a subsidy to cover any deficit SONEDE might incur, although this is not the case at present. SONEDE operates throughout Tunisia, irrigation being included in its activities, which, in a drought-prone country like Tunisia, makes it an extremely important company. Its accounts are in the black. In principle the municipalities do not play any role in water supply. They do at times act as intermediaries, however, to facilitate installation of piped water connections for private homes. The thing is that SONEDE re- quires the private individual to have a title-deed, which some people either do not have at all or do not have as yet, in which case an affidavit from the municipality is required. Section 2 - Electricity and gas supply Electricity and gas are supplied by the Societ6 Tunisienne de 1'Elec- tricite et du Gaz - STEG, a State-owned industrial and commercial company. STEG was set up in 1962. Both the principal ministries and the users are represented on its board of directors, which is empowered to take-decisions. All decisions of major importance, however, have to be approved by the Min- istry of the Economy and the Plan and by the Ministry of Finance, which thus exercise strict control. The company's accounts are in the black. Commune participation is limited to the donation (or sale at very low cost) of land for the installation of transformers. Section 3 - Food supply The supply of foodstuffs is mainly handled by private entrepreneurs. Public authorities only step in where abattoirs and markets are concerned. These are the responsibility of the communes, which are responsible for "public health"Y1/ There are various types of abattoirs, however: - municipal abattoirs, belonging to the communes and managed by them, in La Goulette or Hamman-Lif, for example; - aba'toirs belonging to the Soci6te El Lohoum, a national company in which the city of Tunis holds 20 to 30% of the shares; - private abattoirs, which are merely supervised by the municipal authorities. A local tax is levied on animal slaughter. This is based on the weight of the animal (in kilograms), the rate varying depending on the type of 1. Cf. Article 79 of the Law of March 14, 1957, known as the Municipal Law, which states that public health include, among other things: "The in- spection of retail outlets selling food by weight or measure for accuracy and for the wholesomeness of the food offered for sale", -35- abattoir and ranging between 14 millimes in the case of abattoirs that are covered and equipped with water swilling facilities and 8 millimes in the case of open-air abattoirs. The municipalities play various roles with respect to markets. Certain communes, such as Ben Arrous, help with and encourage the establishment of markets by setting aside land for the purpose and selling this land very cheaply to private individuals. Others, such as La Goulette, own wholesale or local markets which they rent or lease out to private individuals. The communes also have their own price inspectors, who check on retail prices, investigate purchase prices and endeavor to see that the profit mar- gins established by ministerial order are respected. Section 4 - Sanitation Sanitation, i.e., the removal of water (waste and rain water) and refuse, is mainly the responsibility of the communes;1/ it is the State that handles sewerage, however. (a) As regards water drainage, the metropolitan area of Tunis has pumping stations, one treatment plant and two drainage networks. In principle, one of these networks collects rainwater and empties into Lake Tunis; the other one collects wastewater which is treated by the Cherguia treatment plant. The system is old (it is so old that the plans have been lost) and inadequate. It is estimated that about 65% of the homes in the commune of Tunis and a lower percentage of homes in other communes, i.e., slightly more than half the homes in the metropolitan area, are served by the main sewer system. 1. Cf. Articles 79 and 91 of the Municipal Law. - 36 - Rainwater tends to flood the storm drains and enter the wastewater mains, which overflow in their turn. The Cherguia treatment plant, which dates back to 1959, is,too small and functions poorly. There is therefore a need to improve the service in areas that are already served and to extend it to areas not now served. The municipalities are responsible for the maintenance of the networks and the stations. The improvement and expansion of the system, which is currently being undertaken with the help of a World Bank loan, is the combined responsibility of the State and the communes. The State, i.e., the Ministry of Infrastruc- ture and the Ministry of Agriculture, is constructing the collecting mains and granting subsidies, while the communes are financing or constructing the secondary mains. The system is interconnected, i.e., the plant in one commune can be used to drain or treat water from another commune. In practice this means that the Cherguia plant, which belongs to the commune of Tunis, treats water coming from adjoining communes. It should also be pointed out that this service by Tunis to the other communes is provided free of charge. (b) The collection of refuse, estimated to be produced at the rate of 500 g per inhabitant per day, is the responsibility of the communes. Each commune has its own equipment; for example Tunis has seven compacting trucks, thirty- four trash collectors (motorettes) and ten trucks (not counting ten compacting trucks and fifteen trash collectors on order) and Ben Arrous has one compact- ing truck and four tractors. The collection is carried out by municipal personnel but the municipality of Tunis is now planning to engage a private - 37 - company to take over the collection operation, to whom it would rent out the plant it owns. It will give this system a trial run in one sector of the city. The refuse is taken to supervised dumping grounds which are sometimes shared by several municipalities; thus refuse from Ben Arrous is disposed of in a dump in Tunis and the refuse from Carthage in La Goulettes dump. These services are provided free of charge. Although it is true that a portion of the rental tax is labeled usanitation tax", it is not based on the amount of water or trash actually involved (it is based on the rental value of the property) and neither is the money appropriated to cover the cost of these services. Section 5 - Urban transportation Transportation is an important UPS in which a large number of agencies are involved. (a) Roads, highways and bridges are the responsibility of the municipalities, the State (Ministry of Infrastructure) and the Govemnorate (for areas that are not included in communes). In principle, the State is responsible for highways or roads that are classed as "national highways", and the municipalities are responsible for all other roads and highways. This includes road construction, road signs, traffic lights and street maintenance. In practice, however, things are not so simple or clear-cut. Road classification does not follow any definite rule. When pressured by the municipalities the Ministry of Infrastructure will decide to take over such - 38 - and such a road; it then becomes a "national highway"; sometimes, however, it does not become classed as a national highway, which gives the Ministry the right to go back on its decision. The Ministry of Infrastructure's role is twofold: (i) it may grant subsidies for specific projects undertaken by a municipality; and (ii) it undertakes highway investments direct. A document produced by the Governorate of Tunis and dated July 1971 ventures certain figures on road construction between 1966 and 1970: the municipality of Tunis is shown as having built 423,000 sq.m. of roads and the Ministry of Public Works 700,000. One should remember here that the roads constructed by the Ministry relate to the area of the governorate at that time, which varied but was always larger than the present area. (b) Since 1965 the ports of Tunis and La Goulette have been managed by the Office des Ports Nationaux de Tunisie - OPNT. Prior to this the ports were managed by the Ministry of Public Works direct. The OPNT is an industrial and commercial public establishment with civil personality and financial autonomy. It operates nationwide and manages the country's conercial ports (excluding fishing and pleasure ports), i.e., in addition to the ports of Tunis and La Goulette it manages those of Bizerte, Sfax (which is the most important) and Gabes. OPNT's capital comes from the State, which, in its turn, exercises rather tight supervision over its operations through the Ministry of the Plan and the National EcQnomy and the Ministry of Infra- structure. 'oard decisions concerning the following matters, in particular, are subject to the approval of the supervising Ministers: "(1) the draft operating budget and the draft investment budget; (2) staffing, personnel service regulations and rates of pay; -'39 - (3) minimum rates of charges and taxes payable by the users; (4) contracting of loans for terms exceeding one year; ....). OPNT's accounts are in the black. (c) The Office des Ports A6riens de Tunis - OPAT is now responsible for the city's airport. Until 1966 it was managed by the Ministry of Public Works direct. From 1966 until 1970 it was managed by a Regie des Ports A6riens (Airports Administration) which was nothing more than an offshoot of the Ministry of Public Works and which only hanadled operations, not investments. OPAT was set up in 1970. It is a nation-wide authority, responsible for managing the country's three international airports (Tunis, Monastir, Djerba). It is an industrial and commercial public establishment and is fully State- owned. It has autonomy as far as budget and financial matters are concerned but this autonomy is strictly supervised by the Ministry of Transport and Telecommunications, the central administrative authority, which has to approve all the major decisions of the board of directors and particularly those relating to fees, salaries and investnents. Its accounts are in the black. (d) Public transportation is handled by two companies: (i) the Societe Nationale des Transports - SNT, which operates a fleet of buses and a rail- way; (ii) the Societe Nationale des Chemins de Fer Tunisiens - SNCFT, which operates a railway. The SNT is State owned. It was formed in 1962 from several companies that were taken over at that time. SNT operates a fleet of about 350 urban buses, a 9-kn double-track railway, which runs from Tunis to La Marsa via La Goulette (from which it gets its name - the TGM line), and a fleet of interurban coaches which does not concern us here. SNT's accounts showed a debit balance for the first time in 1973. The SNCFT is also a national company which operates the country's rail- way network. One line in this network -- running to Sousse and Sfax -- serves the communes of Megrine, Rhades, Ez Zahra and Hamman-Lif, and provides mass transport in the metropolis. SNCFT is in the red. Mass transport is extremely important in Tunis. About 76% of all journeys in the metropolitan area are by bus or train, 10% by taxi, motor- cycle or bicycle and only 14% by private automobile. These two companies are subject to the supervision of the Ministry of Transport and the Ministry of Finance, whose authorization they must. obtain for (i) decisions which, in the case of an ordinary commercial company, would normally require the agreement of the general meeting of shareholders; (ii) operating and investment budgets; (iii) remuneration of personnel; (iv) fares (v) sale of shares and (vi) loans. (e) Taxis, which number about 1,300, are owned and operated by private in- dividuals. Licenses have not been required since 1967. Taxi operation is now subject to authorization by the municipalities following an examination. Taxis may not work outside the boundaries of the metropolitan area. There are also about twenty "gros taxis" (outsize taxis) and "taxis grand tourisme" (sightseeing taxis) which are entitled to handle interurban traffic and whose number is restricted to a given quota. Licenses for these are issued by the Ministry of Transport, but the municipality of Tunis con- trols the condition, parking, etc., of these taxis. (f) Mention should also be made here of the Soci6t' des Transports L'gers, which has the monopoly on light freight transport in the commune of Tunis. This company was set up when transport by cart was banned. The carters who were thus put out of business were given a proportion (3%) of the company's capital and in some cases became employees. The municipality subscribed the majority of the capital (97%) and exercises administrative control over this company, whose accounts are in the black. It operates around one hundred trucks. Section 6 - Telephone Telephone services are provided by the Ministry of Posts, Telegraphs and Telecommunications (PTT) along with postal, telegraphic and postal check ("giro") services. Section 7 - Education Education services in Tunis, as in the rest of the country, are mainly the responsibility of the Ministry of Education. This statement must be qualified in two respects, however: (i) The communes participate in a limited fashion in the building of schools (by donating land, building a sports field or constructing a chemistry labora- tory, for example) and in their operation (by purchasing school equipment or by carr,ing out urgent repairs, for example). In certain instances, as happened in Hamman-Lif, for example, the municipality has even been known to build schools, with a grant from the Ministry. (ii) The governorate has acted as intermediary in the building of schools3 the Ministry grants it subsidies or assigned credits (credits d6l6gues) as they are called, for the building of specific schools that have been authorized by the Ministry. Section 8 Health Health services are primarily provided by the Ministry of Health and secondarily by the communes and the private sector. Although public health is in principle the responsibility of the cen- tral government, the communes also play their part in this field. For one thing they launch and finance public hygiene campaigns (mosquito eradication, rat extermination, etc.). Sometimes they even go so far as to set up and operate clinics (with the help of subsidies from the Ministry of Health). The private sector plays a minor role. It is estimated that there are about ten private clinics, which add about 150 beds to the total hospital capacity, which is more than 5,000 beds.1/ Section 9 - Recreation and sports Recreation and sports facilities are provided through the commercial market in the main. The public authorities, and the communes in particular, do play a significant role in this field, however. All parks and public gardens (of which there are not very many) are establis.hed and maintained by the municipalities. Most stadiums, sports grounds and centers, and particularly those that are used for school sports, are set up and maintained by the municipalities. In some cases the municipalities receive subsidies -" on the small side - from the Ministry of Youth and Sports for the construction of these sports centers. The "Cite Nationale Sportive" (National Sports City), a large and costly sports complex built in 1967 is the exception; this was built by the 1. DAT, Tunis 72-76, p. 45. Ministry of Youth and Sports and also benefited from a subsidy from the city of Tunis; the ministry offered the whole complex to the city but was turned down. In addition, the municipalities grant subsidies to sports associations. The municipalities also establish and maintain certain theaters (such as the municipal theater in Tunis), cultural centers (such as the Maison Ibn-Rachiq in Tunis) and youth centers. The Ministry of Youth and Sports sometimes gives grants for the construction of youth centers. Lastly, the municipalities also encourage and assist with the setting up of public Turkish baths (by making low-cost land available to private entrepreneurs, for example) and sometimes build and operate municipal showers. Section 10 - Religion The building of mosques is the combined responsibility of the communes and the State. The communes are often the principals but they receive sub- sidies from the Prime Minister (and sometimes the proceeds from public col- lections). In other instances it is the State that is the principal and the commune that makes a contribution, by donating land, for example. Section 11 - Protection Fire and rescue services are provided by the municipality of Tunis, which has three pump trucks, two ladder trucks, one ambulance and two motor- boats. The other communes use the services of the commune of Tunis free of charge. Property and personal protection services are provided by the police, which is a direct agency of the Ministry of the Interior. Section 12 - Housing Properly speaking housing is not a UPS; it is a service handled largely through the market; the role of public authorities in this field is limited to that of either promoter or less frequently that of landlord. Most municipalities in the past have acted as promoters. They have bought land or used land belonging to them, then they have developed these sites and have built low-cost housing out of their own funds, loans or State subsidies and have then sold the houses generally on a lease-with-option-to buy basis. Sometimes this promotion goes no further than the land development stage. In this case the municipality sells the construction site -- generally at below market prices -- to private individuals or to SNIT. SNIT (Societe Nationale Immobiliere de Tunisie) is a national company, fully State-owned, with legal personality and financial autonomy, subject to the central administrative control of the Ministry of Infrastructure. For a long time now SNIT has operated in a dual capacity:both developer and builder. As a developer SNIT purchased land, developed it and sold it again either to private builders (very seldom) or to itself. Thus it has played a role along the lines of that played in France by development companies in the SCET group. As a builder, SNIT builds low-income housing. In view of this it re- ceives subsidies from the State (financed partly from an IDA credit) and interest rebates. This housing is sold to private individuals who are given fifteen years to pay. Thus SNIT plays a similar role to that played by SCIC in France. The State has also acted as a promoter, particularly at the start of of the period under study. The Ministry of Infrastructure itself has launched and successfully completed several real estate projects favoring low-income groups. A reorganization of this effort is now under way. The promotion efforts proper would be placed in the hands of the Agence Fonciere d'Habitation (Housing Land Agency). The AFH is an industrial and commercial public establishment with civil personality and financial autonomy, which was set up in 1973. This agency's job will be to operate in areas earmarked for housing construction under the supervision of the Ministry of Infrastructure, handling the following activities: - all purchasing of real estate, land development and construction; - the exercise of pre-emption rights; - the resale of property belonging to it. AFH would as a general rule take over SNIT's and the State's develop- ment activities. SNIT would limit its field to construction. This field is in itself such a vast one that there are plans to split SNIT into several companies (or directorates) to operate at regional rather than national level, while retaining exactly the same constitution. Certain municipalities also operate in the real estate field, with pro- perties they have either inherited or built thenselves. The commune of Tunis owns about fifty pieces of property in the Medina, which were previously "habou" property, which are rented out at prices considerably lower than the cost of their upkeep, and the commune of La Goulette owns apartments that it rents out to officials temporarily assigned to the area. Section 13 - Employment Employment (and business activity in general) fits into very much the same category as housing, i.e., it is a field which is mainly the province of the market but where public authorities and the municipalities in partic- ular tend to become involved. This involvement hardly ever takes the form of seeking to improve the workings of the employment market or endeavoring to provide relief to the unemployed (except in thecase of loans under the "fight against under- development" scheme made available to governors in the State budget appro- priations), but in seeking to create jobs, i.e., by fostering the setting up of new businesses. Many municipalities have for this reason developed land or industrial areas which they have then made available, usually at favorable prices, to entrepreneurs interested in setting up plants. Certain municipalities, such as that of Tunis, are trying to wind down their role in this type of activity while others, such as Ben Arrous, are only too anxious to step up their efforts in this area and are even contemplating building factories which would be offered to industrialists to buy or to lease with option to buy. The purposes of the Agence Fonci6re pour IfIndustrie et l'Agence Fonciere pour le Tourisme are similar. Section 14 - Planning "Pla=ning", i.e., the projection and control of urban development, may be considered a UPS and a particularly important one. It is rather badly handled in Tunis. - 47 - Responsibility for this activity lies mainly 'with the State. The purpose of the Direction de 1'Am6nagement du Territoire (Directorate of Phy- sical Planning), which until 1973 was attached to the Ministry of the Plan and since then has been attached to the Ministry of Infrastructure, is to study the role of Tunis within the urban framework of the country and the internal development of the metropolitan area. The municipalities also participate in the planning process by posi- tioning and establishing the necessary infrastructure, naturally, but also by examining applications for permits to build. These permits, which are required for any type of construction, are actually granted by the Ministry of Infrastructure but the latter's decision is generally guided by the views expressed by the commune. An attempt has been made to assemble the key points contained in this chapter in the following Table III-1, giving rough estimates of the "share of responsibilityH of each group of agencies for each UPS studied. Naturally these figures are intended only as rough guides. 48- Table 111-1 - Distribution of responsibilities, by UPS, 1973 Munici- Companies palities Ministries or agencies Governorate Total 1. Water supply 0 0 100 0 100 2. Electricity 0 0 100 0 100 supply 3. Food supply 80 0 20 0 100 4. Sanitation 70 30 0 0 100 5. Transportation 10 10 90 p.m. 100 6. Telephone 0 100 0 0 100 7. Education 10 90 0 p.m. 100 8. Health 10 90 0 p.m. 100 9. Recreation and sports 70 30 0 p.m. 100 10. Religion 60 40 0 0 100 11. Protection 40 60 0 p.m. 100 12. Housing 20 30 50 p.m. 100 13. Employment 40 10 50 p.m. 100 l14, Planning 30 70 0 p.m. 100 N.B. In view of the vagueness of the concept of "responsibility" these figures are obviously highly arbitrary. - 49 - Chapter IV SERVICES PROVIDED BY THE COMMUNES We have seen that the thrteen communes of the metropolitan area are, de jure or de facto, responsible for a great number of the urban public services provided in Tunis. The present chapter is intended to explain this action by analyzing the expenditures of the communes as well as their administrative and financial organization, and especially their receipts. Section 1 - Administrative organization The Municipal Law governs not only the political organization of the communes (as discussed in chapter II), but also their administrative organi- zation. The analysis here is limited to the administrative organization of the municipality of Tunis, which is moreover in process of transformation. Municipal services are organized mainly on a functional basis. To be sure, the territory of the commune has long been divided into ten sectors, as shown in map IV-1. Each sector has a "sectoral office", directed by a sector head appointed by the municipality. In practice, however, the sector heads are subordinate officials and the sectoral offices are merely post office boxes. All decisions are made at municipal headquarters. Figure IV-1 shows the former organizational structure. Major changes are underway; these consist in strengthening the sectors, henceforth to be known as arrondissements. Each arrondissement will be headed by a member of the municipal council, with the title of vice- president, assisted by an administrator. The arrondissements will be directly responsible for (i) the civil registry, (ii) public health (iii) minor con- struction permits (e.g., installation of windows), (iv) sanitation and (v) streets and traffic. -0 - The municipality will retain only general services, in particular finance. The reform does not go so far as to give the arrondissements financial autonomy, and it is clearly understood that financial decisions will remain within the sole competence of the municipality. The latter, however, can assign personnel or physical resources to the arrondissements. A second change is envisaged. At present, the commune "does" a large number of things directly (by force account), such as waste collection and street repair. It would prefer to "have them done" by others by awarding concessions or by contracting with private or public companies. i 7 6 \~ 's-\,,\ -- -. -.-----"---i i pV- et,r fth uncpaiy fTui Fig. IV-A MUNICIPALITY OF TUNIS: FORMER ORGANIZATIONAL STRUCTURE Governor-Mayor later President Directorate Sanitation Directorate Directorate Directorate of Yard of of of Technical Public Economic and Administrative Services Health Social Affairs and Financial Affairs Streets Sewarage Municipal Construction Finance Personnel and and Buildings Permits Lighting Water Social Youth Supervision Affairs and of Sports Corporations -I Fig. IV-B Municipality of Tunis: New Organizational Structure President Technical Services Secretary General Sanitary Services Administrative Services Administrator Vice-President Arrondissement Administrator Arrondissement Arrondissement No. 2 No. 10 No. 1 Section 2 - Financial organization: budgetary and accounting procedures The budgetary and accounting practices of the local jurisdictions - communes and Governorate Councils (and thus the district of Tunis) - are identical, but are governed by different laws. (a) Budgets Two distinctions are essential. (i) The first is a dichotomy (borrowed from French practice) between operating expenditures, known as "ordinary" expenditures, and capital out- lays, known as "extraordinary" expenditures. The commune budget is divided into the ordinary budget and the extraordinary budget. The receipts of the ordinary budget, or title I, comprise all the annual and continuing receipts of the commune; the expenditures of the ordinary budget comprise the annual and recurrent expenditures of the commune, as well as debt repayment. The receipts of the extraordinary budget, or title II, comprise the surplus of the ordinary budget and occasional or temporary receipts; the expenditures of the extraordinary budget comprise "occasional or temporary expenditures, especially construction expenditures." The following table illustrates this distinction: Ordinary budget (title I) Operating expenditures 70 Taxes 100 Surplus, title I 30 Total 100 Total 100 Extraordinary budget (title II) Investment 50 Surplus, title I 30 Subsidies 10 Loans 10 Total 50 Total 50 (ii) The second important distinction, which largely overlaps the first, pertains to the "initial" and "supplemental" budgets. The commune budget actually consists of two documents prepared and passed successively. Consider, for example, the 1973 budget, which covers the calendar year. In July 1972 the Municipal Council passed the 1973 budget, known as the "initial budget." The comparatively long period between passage and the beginning of execution is explained by the desire of higher authorities to have enough time to propose the modifications deemed necessary before final approval. In practice, the initial budget is only an ordinary budget, making no provision for capital expenditures. This ordinary budget is more- over in balance3 and leaves no surplus that can be used to finance the extraordinary budget. In July 1973 the Municipal Council approved a supplement to the 1973 budget, known as the "supplemental budget." This budget is only an invest- ment budget. Its receipts are the subsidies obtained, loans planned, sur- pluses of the ordinary budget actually realized as of the date of approval of the budget, and surpluses of the extraordinary budget from the previous year. This system has two principal features -- or defects. (i) The sharp distinction between the operating budget and the capital budget prevents the authorities from (a) considering the total resources of the commune, and hence determininrl ;L amount and structure of resources in a satisfactory manner; and (b) seeing the possibilities of substitution between operating and capital expenditures, and thus establishing an optimal structure of expenditures. In point of fact, this distinction dates from a t;ime in which the main activity of the local jurisdictions consisted of operating expenditures. During that period, capital expenditures were truly "extraordinary." (ii) The distinction between initial and supplemental bubgets deprives the budget of its significance as a forecasting tool. In the communes of Tunisia, the budget is not the occasion for definition of a possible policy. The projections in the initial budget are not a forecast of receipts and expenditures; they are never borne out. Receipts, in particular, are 0 underestimated systematically and substantially (40 /o). The surplus of the ordinary budget, which helps finance the extraordinary budget, is never envisaged in the ordinary budget. Nor are the forecasts of the supplemental budget actually fore- casts: the 1973 budget is passed in July 1973 at the earliest and approved by higher authority in the fall of that year. It is not uncommon for the 1973 budget to wait until December 1973 for approval; obviously, it cannot serve to clarify or guide decisions taken in 1973. The amount of receipts shown in the supplemental budget is not a forecast but a verification: the comune verifies the surpluses realized against the 1973 operating budget, and the unexpended amounts of the capital budget. it posts these amounts to receipts. The amount of expenditures in the 1973 budget is indeed a fore- cast, but has nothing to do with expenditures incurred in 1973, nor, more- over, with those incurred in 1974. Everything takes place as though the capital budget were not an annual budget but a current account, credited each year with the surpluses of the operating budget, subsidies and loans, and debited from day to day with the capital expenditures made. The orocedure is as follows. In July of each year the commune decides upon the operating expenditures to be made in the following year. It decides nothing with respect to receipts, the amount of which is practically out- side its control. It verifies the surpluses accumulated and decides upon the capital expenditures to be made with these surpluses. (b) Approval of budgets The communes remain subject to supervision by higher authority. This supervision is exercised first of all over the budgets, which "may not be put into effect until their approval by higher authority." The higher authority is the Ministry of the Interior, acting in con- sultation with the Ministry of Finance in the case of Tunis and La Goulette, and in consultation with the Governor of Tunis (of Tunis-North, since 1972) in the case of the 12 other communes of the metropolitan area. Approval of the Minister of the Interior and of the Minister of Finance also is necessary when a commune seeks a loan. The higher authority can disapprove or reduce the expenditures voted by the commune. It can only insert or increase "mandatory"1/ expenditures (maintenance of city hall, costs of registration and filing of official acts and documents, salaries of commune personnel, repayment of principal and interest on loans, etc.). (c) Budget execution The essential feature of budget execution is the principle of separation of paying officers and finance officers taken from French law and practice. 1/ cf. art. 105, decree of March 14, 1957. '-58 - The paying officers (ordonnateurs) are the administrators responsible for providing the various public services. Their financial role is simply a consequence of their administrative activities. The Presidents of the municipalities are "the sole paying officers for items appropriated in the budgets" of the municipalities. The finance officers (comptables) are custodians of the public funds, which they alone can control. The execution of the commune budgets is entrusted to the collectors of taxes (receiveurs des finances), who are officials of the Ministry of Finance personally liable for full compliance with the operational and supervisory duties assigned to them. The President orders the expenditures, i.e. he signs the order for payment of the sums owed by the commune. But it is the collector of taxes who actually pays the creditor. At this time the finance officer ensures that the expenditure is proper, i.e. he verifies (i) that the expenditure is for an item properly appropriated and sufficiently funded and (ii) that the documents submitted by the paying officer justify the nature and amount of the service rendered. When the finance officer finds an irregularity he refuses his approval. The principle of separation of paying officers and finance officers is a valuable guarantee that public funds are expended properly. Both paying officers and finance officers are required to keep accounts of receipts and expenditures. The accounts of the President, closed at the end of the fiscal year, are grouped in the administrative account which is submitted to the Municipal Council (deliberating with the President absent) for approval. The accounts of the finance officers are compiled each month in a statement which also recapitulates the receipts and expenditures of the months elapsed since January ll. The statements for December are thus especially interesting because they present, under the budgetary nomen- clature, the total receipts and expenditures of the commune for the year. All these statements are sent to the Directorate of Public Accounting of the Ministry of Finance where they are filed. The set of statements, available for each commune and each year, is a valuable source of information. Nonetheless, a rather strange feature must be pointed out: receipts are posted on a cash basis, while expenditures follow the accrual method. The receipts posted are those actually realized during the past year, regardless of the fiscal year to which they refer; a late payment made in January 1972 on a tax due in 1971, for example,- appears in the account of receipts for 1972. On the other hand, expenditures are not similarly posted but are entered according to the budget year to which they refer: expendi- tures made in 1972 and pertaining to fiscal 1972 are posted to one sub- account; expenditures made in January, February, and March 1972 and pertain- ing to 1971, are posted to another subaccount (as, obviously, are expendi- tures made in January, February, and March 1973 for 1972); expenditures made in 1972 for 1970 or previous years, and expenditures made from April to December for 1971 are posted to a third subaccount, but unfortunately with no indication as to the nature of the expenditure. To determine the amounts actually disbursed in 1972 it is therefore necessary to add ex- penditures made at the beginning of 1972 for 1971 (as they appear in the March 1972 statement), expenditures made in 1972 for 1972 (as they appear in the December 1972 statement) and expenditures in the third category - 60 - (which appear in the December 1972 statement without indication as to their nature). To determine expenditures for 1972 it is necessary to add expenditures made in 1972 and pertaining to 1972 (as they appear in the December 1972 statement) and expenditures made in January - March 1973) (as they appear in the March 1973 statement); moreover, the estimate is incomplete since it does not include expenditures made after March 1973. One important point to be noted is that, largely because of the complexity of these procedures, the communes do not succeed in expending all the money they receive. They accumulate surpluses, as shown in Table IV-1. Table IV-1 Cash 4vailabilities of communes of the Tunis metropolitan areaa, 1962-173 Municipality ljtheir of Municipalities Total Tunis (1000 D) (1000 D) (1000 D) 1962 1,824 nd nd 1963 1,478 nd nd 1164 2,071 nd nd 1965 1,906 nd nd 1066 1,944 nd nd 1967 1,790 nd nd 1968 1,405 nd nd 1969 . 589 nd nd 1970 1,132 nd nd 1971 1,541 nd nd 1972 2,597 nd nd 1973 4,694 1,604 6,298 Source: Statement of finance officers a/ As of December 31 of each year. 61- (d) Budget nomenclature Budgets are prepared, passed, executed and audited in accordance with a procedure that calls for some clarification and some comments. Most budget sections are broken down into items, of which there are some 60 in all. Some items are then broken down into lines. The budgets definitely cannot be used for an economic analysis of the receipts and expenditures of the communes, for two reasons. The first, already noted, is that the figures are in no way approximations, even rough ones, of receipts and expenditures. The second reason is that the categories of the nomenclature have no economic meaning; they mix elements of completely different kinds. For instance, section I of resources in title I, "direct taxes and related receipts," combines a land tax levied by the comnune with a general subsidy granted by the Central Government. Again, section VII of expenditures in title II, "new works and procurement of equipment" combines outlays for works to be carried out or already completed with the purely accounting transfers from title .1 to title II. The first of these two difficulties is easy to resolve: it is suffi- cient to examine the statements of the finance officers showing receipts and expenditures actually realized from January 1 to December 31 of each year. The second difficulty, a more troublesome one, makes it necessary to analyze the individual item, which is thq only way that significant re- classifications can be made, but is a lengthy process. However, recourse to the item itself is not always sufficient; though it does permit proper analysis of receipts, it does not always permit a functional classification of all expenditures. For example, "personnel" expenditures cannot readily be detailed, and title II capital expenditures cannot be classified by type, except by going back to the accounting records themselves. - 62 - Table IV - 2 Budget structure of the communes Title I (Ordinary Bu11-dget) A. Resources Sect. I : Direct taxes and related receipts Sect. II : Indirect receipts Sect. III : Income from commune property Sect. IV : Miscellaneous income Sect. V : Occasional receipts B. Expenditures Sect. I : Loan repayments Sect. II : Personnel expenditures Sect. III : Operating equipment Sect. IV : Maintenance of municipal equipment Sect. V : Social expenditures Sect. VI : Economic expenditures Sect. VII : New works and procurement of equipment Sect. VIII: Rjimbursements and rebates Sect. IX : Contingencies Title II (Extraordinary Budget) A. "Exceptior4alu resources and earmarked receipts. Sect. I : Subsidies and other special resources Sect. II : Loans -63- B. Earmarked expenditures from "exceptional" resources Sect. I : Use of subsidies and other special resources Sect. II : Use of loan-proceeds Title III (Budgets for Expired Fiscal Periods) A. Resources assigned to expenditures for expired fiscal periods. Sect. I : Debt Sect. II : Other expenditures B. Expenditures of expired fiscal periods. Sect. I : Debt Sect. II : Other expenditures Section 3 - Amount and structure of receipts As may be seen, the nomenclatures used do not lend themselves to economic analysis. Receipts have been reclassified in five categories: - land and related taxes, - receipts for services, - general subsidies, - special subsid!is, - loans Before each of these categories of receipts is examined, attention is called to the development of the amount and structure of receipts over the past twelve years. Table IV-3 shows the progress of total and per capita receipts, in nominal and real values. An important fact appears: the significant 614- increase of the receipts of the communes in nominal terms barely offsets the rise in prices and the increase in population. In real terms, per capita receipts remained virtually constant during the period analyzed. Table IV-3 Receipts of the 13 communes of the Tunis metropolitan area, 1962-73 Total receipts Per capita receipts 1000 1000 Current D 1962 D Current D 1962 D 1962 3,722 3,722 7,0 7,0 1963 4,194 4,084 7,5 7,3 1964 5,039 4,709 8,5 8,0 1965 5,328 4,669 8,5 7,5 1966 6,270 5,291 9,6 8,1 1967 6,914 5,667 10,1 8,3 1968 6,230 4,984 8,8 7,0 1969 7,241 5,562 9,8 7,5 1970 7,031 5,342 9,1 6,9 1971 8,041 5,781 10,1 7,2 1972 8,910 6,270 10,7 7,6 1973 10,231 6,900 11,8 8,0 Source: Taken from the public accounts and statements of the finance officers. The structure by categories of receipts and their development over time may be seen in Table 17-4, which shows the relative importance of taxes. -65 - Table IV-4 Structure by categories of receipts of the communes of the Tunis metropolitan area, 1962-1973 (in O/o) Year Land and Receipts General Special .. Loans Total rental for subsidies subsidies valiq,e taxes services 1962 42,3h 22,28 18,84 3,76 12,75 100 1963 45,80 19,03 24,55 4,63 5,97 100. 1964 51,96 10,76 29,71 7,11 0,43 100 1965 39,70 17,14 29,76 12,48 0,89 100 1066 45,88 17,83 19,34 13,72 3,22 100 1067 44,18 16,07 20,83 18,26 0,64 100 1968 49,67 19,34 19,85 9,4o 1,72 100 1969 39,83 16,58 27,99 13,59 3,04 100 1970 45,05 17,56 23,96 12,60 0,80 100 1971 34,78 15,17 33,83 15,42 0,77 100 1972 44,77 19,71 24,67 7,76 3,06 100 1973 30,42 18,91 33,05 16,89 0,70 100 The land tax, which accounts for one-third to one-half of total receipts, is the most important source. On the other hand, loans account for very little. The structure of receipts by categories has not changed substantially over the last ten years. The geographical structure of receipts also should be studied. A distinction must be made between Tunis - the most important commune of the metropolitan area - and the other 12 communes. Tables IV-5 and IV-6 elucidate this point. The figures in Table IV-5 show the importance of the commune of Tunis, which accounts for about 80% of the total receipts of the communes of the metropolitanarea. This share has not changed appreciably over the period analyzed, and has varied little with respect to the type of receipts. - 66 - Table IV-5 Share of the commune of Tunis in the receipts of the communes of the metropolitan area, by type of receipts, 1962-73 (in % of total receipts) Year Land Receipts General Special Loans Total tax for subsidies subsidies receipts services 1962 76,09 81,87 80,72 1146 79,00 76,1 2963 P0,6 79,09 83,98 37,57 89,83 79,45 1964 84,20 65,80 96,54 56,70 0 83,56 1965 82,53 77,28 79,49 73,47 0 78,85 1966 84,50 78,39 71,94 64,16 3,73 75,58 1967 82,18 76,54 80,88 73,21 17,88 78,95 1968 82,71 77,95 79,59 68,72 0,22 78,43 1969 79,43 68,71. 83,68 81,77 67,67 79,63 1970 84,69 67,22 76,23 72,80 0 77,41 1971 79,68 71,26 85,53 83,85 0 80,41 1972 80,11 77,61 80,28 83,49 5,12. 79,04 1973 75,85 75,59 83,05 83,01 0 79,31 Table IV-6 Per capita receipts, commune of Tunis and other communes, 1962-73 Tunis Other 12 communes Ratio (1) (2) (3) =(1) /(2) (In 1962 dinars) (In 1962 dinars) 1962 7,2 6,2 1,2 1963 7,9 5,6 1,4 1964 9,1 4,9 1,9 1965 8,1 5,9 1,4 1966 8,5 7,3 1,2 1967 9,0 6,4 1,4 1968 7,6 5,5 1,4 1969 8,4 5,4 1,6 1970 7,5 5,5 1,4 1971 8,0 4,9 1,6 1972 8,4 5,4 1,6 1973 9,0 5,6 1,6 67 - The figures in Table IV-6 point up an inequality between the commune of Tunis and the other communes. The per capita receipts of the municipality of Tunis are about 1.5 times greater than those of the other municipalities. Moreover, this inequality has tended to increase slightly, and the other municipalities are seeing their per capita receipts decrease slightly in real terms. Section 4 - Land Taxes Land taxes are the most important source of receipts for the communes. Two types of land taxes must be distinguished: (i) the tax on unimproved land, and (ii) the rental value tax and related levies. The tax on unimproved land is of secondary importance in terms of yield. It was established by a decree of December 15, 1919, amended by a law of January 2, 1961. It applies to unimproved land within the commune limits. The basis of the tax is the rental value of the land, defined as 6% of its real value. The maximum rate charges is 5%. However, the 1961 law amended this legislation in order to compel owners of unimproved land either to construct residential buildings within two years or to sell the land for the same purpose at a price fixed by a special assessment commission established within each commune. Landowners who do not comply must pay, in addition to the regular tax, a surtax equal to four times the tax; an expropriation procedure also is prescribed in such cases. .-68 - The true land tax is represented by the rental value tax and related levies: sanitation tax, maintenance tax, compensation tax, single tax, and Fonds National dtAm6lioration de lHabitat (National Housing Improve- ment Fund) tax. All these taxes should be considered together since they apply to the same tax base and are calculated and levied together; their amount appears in a single item (item 1) of the budget nomenclature. The National Housing Tmprovement Fund tax warrants special mention. It is not a local but a national tax, levied on the same basis and at the same time, but its proceeds go to a national fund and not to the municipalities. The basis of these taxes is the rental value of buildings erected within the territory of the commune. The tax is not applied to ownership of land but rather to the rental value of dwellings, stores, plants, etc. constructed on this land. The tax varies according to the age or type of building. The law sets a maximun rate for each type of building. The communes are free to establish lower rates but in practice they apply the maximum rates. Table IV-7 shows the rates now in effect. - 69 - Table IV-7 LAND TAX RATES, 1974, IN PERCENTAGE Type of Property Property For Industrial or Commercial Use Residential Use Constructed Constructed after Type of Over l years Less than 15 before May May 1944 Tax old a/ years old b/ 1944 + 2 yrs. - 2 yrs. Rental Value 10 - 15 10 -- Sanitation and Maintenance 10 10 20 10 10 Fund (FNAH) (4) (4) -- -- -- Total (without (FNAH) 20 10 35 20 10 Total (with FNAH) 24 14 35 20 10 a/ Until 1969, buildings constructed prior to 1944 (known as moratory buildings because their rentals are frozen) were subject to a rental value tax of 10%, a sanitation and maintenance tax of 20%, a compensation tax of 5%, and the FNAH tax of 4%; i.e. a rate of 35% without the FNAH and 39% with the FNAH. b/ Buildings for recreational or resort use are not eligible for the 15-year exemption from the rental value tax. - 70 - The commune determines the basis of the tax. For each building it has a file containing a brief description of the property (number of rooms, facilities, etc.), the name of the owner and the rental value. In the case of a rented residence this amount is generally the rent actually paid by the tenant. In the case of an owner-occupied dwelling, it is the rental paid for comparable dwellings in the same area. In the case of a plant the amount is calculated by the formula V = 0.22 S, where V isthe rental value (in dinars) and S the constructed area (in m2). The assessments are made every three years by a commission, which goes to the site, notes any changes to the building, and fixes a rental value. This value is made known to the owner, who can contest the commissionts decision before a commission of review. This procedure calls for two comments. As far as can be judged, the evaluation of properties and changes is performed in a satisfactory manner, and very few properties escape the tax. In other words, the property records that serve as the basis for the tax seem to be well kept; it should be noted that, at a small additional cost, these records could become a highly valuable statistical source. The rental values entered in the files, which form the basis for the tax, seem to correspond well to the actual rental values in the case of dwellings that are rented. On the other hand, they seem to be underestimated (and rarely revaluated) in the case of owner-occupied dwellings. The method of determining the rental value of plants, which is very rough, un- doubtedly leads to gross underestimation; this moreover is deliberate and is done to attract potential investors. The revenue from the land tax during the past decade is shown in Table IV-8. It closely follows the increase in population. - 71 - No information is available on the distribution of the tax base or of the yield between buildings for residential use and buildings for industrial or commercial use. Tunis tax officials estimate that the tax base is distributed nearly equally between the two types. The rental value of buildings for industrial or commercial use in 1968 would thus be about 16 million dinars. The real tax base would then total 32 million dinars. The real tax rate in 1968 would have been about 8%. The multiplicity of tax rates shown in Table IV-7 precludes a ready comparison between the real and legal rates. The average legal rate seems to be about 20%; the real rate would then be slightly less than half the legal rate. In other words, evasion of the land tax would be about 60%. Data available on the growth of rental values are even less reliable. On the basis of the index of "housing" prices in Tunis prepared by the INS, and of the average rental in 1968, a series of average rents per household can be developed. A series of the number of households is then constructed (assuming the average size of households has remained constant) as well as a series of overall rental values. By correlating the tax received with the rental value estimated in this fashion, it is possible to develop a series for the real tax rate. Table IV-9 shows these calculations. The table suggests that the real tax rate has remained constant; in other words, the assessed value seems to follow the real value quite closely. -72 Table IV-8 Land taxes, communes of the Tunis metropolitan area 1962-73 Commune other 12 Commune other 12 of communes Total of communes Total Tunis Tunis (In 1000 current Dinar-sT.' (In 1000 constant -172 Dinars 1962 1,199 377 1,576 1,199 377 1,576 1963 1,538 383 1,921 1,497 372 1,870 1964 2,205 414 2,619 2,060 386 2,447 1965 1,746 370 2,115 1,530 324 1,853 1966 2,431 46 2,877 2,051 376 1,682 1967 2,510 54 3,055 2,051 445 2,504 1968 2,560 535 3,095 2,048 428 2,476 1969 2,291 593 2,884 1,759 456 2,218 1970 2,683 485 3,168 2,038 368 2,407 1971 2,229 568 2,797 1,602 408 2,010 1972 3,200 793 3,989 2,251 558 2,807 1973 2,361 752 3,113 1,592 507 2,099 This increase apparently cannot be explained by an improvement in collections. The tax is often paid late (sometimes as much as several years late, and arrears now exceed 2 million dinars), but it is paid. Nor is the increase in yield explained by the tax rates, which have remained constant or have decreased. Hence, it is the result of assessments. It is difficult to estimate the tax base (rental value) and how it has grown over the years. According to 1968 survey of household consumption, 52% of the households in Tunis were tenants and 48% owned their own houses or were occupying their dwellings without charge. The average rental was 113 dinars per year per household. The rental equivalent of nonpayers was assumed to be the same amount. According to the survey, the average size of households in Tunis was then 5,3 persons. It follows that the 13 communes of the metropolitan area contained 145,000 households. The rental value of housing in 1968 can therefore be estimated at 16.4 million dinars. - 73 - Table IV-9 Rental value, land tax and real rate, 1962-72 Housing Rent per Number Rental Total Land Real price house- of value rental tax rax index holdb/ house- of valuel/ (1,OOD) rate Tunis-a/ (D) holds housing (1,000D) (%) (1,_D_0 (1,000) (1,000D) 1962 100 97 110 1n,7 21,4 1,576 7 1963 110.1 97 115 11,2 22,4 1,921 9 196h 103.9 101 121 12,2 24,4 2,619 11 1965 109.6 107 126 13,5 27,0 2,115 8 1966 113.6 111 132 14,7 29,4 2,877 10 1967 113.2 110 138 15,2 30,4 3,055 10 1968 116.1 113 145 16,4 32,8 3,095 9 1969 122.5 119 151 18,0 36,0 2,884 8 1970 121.6 118 158 18,6 37,2 3,168 9 1971 122.5 119 168 20,0 40,0 2,797 7 1972 124.1 121 175 21,2 42,4 3,989 9 Note: In general, these figures are extremely unreliable and should be interpreted with a great deal of caution. Sources: a/ INS b/ Based on the known value for 1968 c/ Based on the preceding series and on the hypothesis that the rental value of housing represents one-half the total rental value. Section 5 - Receipts for services The category of receipts for services includes about 30 different sources. For the most part, these receipts are not markedly of the tax type; they are essentially income from services or activities performed. In 1973, 17 of these sources generated collections of over 10,000 dinars; they are shown in table IV-10. The categories indicate quite pre- cisely the nature or basis of the taxes, most of which were established at the beginning of the century. Table IV-10 Principal receipts for services, communes of the metropolitan area, 1966 and 1973 1966 1973 (1000 D) (1,000 D) License fees for sale of beverages 5,7 72,5 Slaughtering fee 76,7 114,3 Income from rented markets 5,6 22,4 Income from nonrented markets 145,8 345,2 Concessions on public ways 34,3 50,; Other concessions on public ways 3,1 12,1 Use of public highways 20,7 415 Rental of cammune-owned property 78,3 104,9 Income from nurseries and gardens 0,1 18,5 Other income from commune property 13,8 30,2 Pound 11,4 31,7 Reimbursement of water installation expenses 41,5 48,1 Entertainment tax 188,5 172,1 Issue of civil regisury documents 16,4 33,4 Other miscellaneous income 183,6 217,2 Property transfers 133,1 483,0 Assessment on property owners for construction 26,7 39,1 of drains Other 19,0 17,9 Total 1,004,3 1,854,2 Table IV-11 shows the ~growth in yield from these receipts, which has been quite rapid since collections almost doubled between the first and last years .of the period. Table IV-11 Receipts for services, communes of the metropolitan area, 1962-73 Commune, Other 12 Commune Other 12 of communes Tota2 / of communes Total Tunis Tunis (in 1,000 current dinars) (in 1,000 constant 1962 dinars) 1962 679 150 830 679 150 F30 1963 632 167 798 615 162 777 1964 357 185 543 333 172 507 1965 706 207 913 618 181 800 1966 876 241 1,117 739 203 942 1967 80 260 1,111 696 213 910 1968 940 266 1,205 792 212 964 1969 825 376 1,201 633 288. 922 1970 830 405 1,235 630 307 938 1971 869 351 1,220 624 252 877 1792 1,363 393 1,757 959 216 1,236 1973 1,463 472 1,935 986 318 1,304 Section 6 - General ,-ubsidies Transfers from the Central Government are an inportant part of the resources of the local jurisdictions. These transfers come from two special funds. Although the two funds are of the same kind, derived from national and taxes/allocated to the local jurisdictions, one is called, in accordance with its destination, the common fund for local jurisdictions; the other, denoted by the origin of the funds, is called the common fuel and tire fund. On the grounds that receipts of these funds are calculated on the basis of -76- receipts of ddrect national taxes, transfers to local jurisdictions are sometimes (especially in the budget nomenclature) classified as "direct taxes of local juxisdictions.1 Actually, for the local jurisdictions these resources are not taxes at all, but rather transfers or subsidies from the Central Government. They are known as general subsidies because the communes can allocate them freely. The general subsidy received by a commune depends on (i) the total amount of the,comuon funds and (ii) the procedure for distribution of these funds among the communes. The total amounts of the common funds could be fixed each year by the government and the legislature, since they actually arg part of the expendi- tures of the State budget. This is not done. The amounts vary with certain budget receipts, which therefore (breaking to the rule of budgetary unity) all partly earmarked. The common fund of the local jurisdictions consists of 10% of the proceeds of taxes on production, consumption and services, and 15% of the business license tax and of the tax on nonbusiness profits. The common fuel and tire fund consists of 10% of the proceeds of excise taxes on oil and gasoline and 10% of the tax on tires and tubes. Thus the basis of the first tax is the overall level of economic activity of the country, while that of the second is utilization of automobiles. In practice, what happens is the following. On March 31 the Treasurer General determines the amounts received from these taxes since September 30 of the preceding year. He reports this amount to the Ministry of the Interior, which distributes it among the local jurisdictions. The same thing is done on September 30 for amounts received after March 31. -77- In other words, the figures for 1970 actually refer to the period from October 1, 1969 to September 30, 1970. The procedure for distribution of the funds among the local juris- dictions is quite complex. The proceeds of these funds are distributed as follows: - 10% to a loan fund; - 17.5% to the Governorate Councils, prorated among the councils according to the population of the Governorates living outside the communes; - 10% to the commune of Tunis; - 17.5% to the communes of the Republic, prorated according to population; - 35% to the communes, prorated according to rental value taxes (for last three years) of the communes; - 10% to the communes of Tunis, Sfax, Sousse and Bizerte, prorated among these four communes according to their ordinary budgets. This latter grant has a distinctive feature: it must be allocated for oapital investment. It does not appear in title 1 of the accounting statements under the heading of "common funds"; more- over, it does not appear anywhere as such. Its amount is shown among the receipts of title II, together with capital subsidies and transfers from title I. We have included it with the special subsidies. The second fund is distributed as follows: - 10% to the loan fund; - 17% to the Governorate Councils, prorated according to the area of each Governorate road system; - 10% to the commune of Tunis3 -78- - 52.5% to the communes, prorated according to the area of each commune's road system; - 10% to the communes of Tunis, Sfax, Sousse and Bizerte, pro- rated according to the ordinary budgets and likewise earmarked for investment. Let A = amount of the first fund, B = amount of the second fund, Pi = population of commune i, Li = rental value taxes of commune i, Ri = road area of commune i, Si = contribution of the funds to commune i. Then: T0.17 Pi 0.35 Li 0.525 Ri Si = Pi Li + Ri and for Tunis (i = t) St = (*175 Pt 0.350Lt A + 0.525 Rt B + 0.10 (A + B) Pi Li Ri to which must be added (again for Tunis) the capital investment grant Sit; let Ot = ordinary budget of Tunis, Osf = ordinary budget of Sfax, Oso = ordinary budget of Sousse, Ob = ordinary budget of Bizerte Then: 0.10 Ot SIt = Os (A + B) Ot + Osf + Oso + Ob Table IV-12 shows the amounts thus apportioned to the communes of the Tunis metropolitan area during the period under review. - 79 - Table IV-12 General subsidies, communes of the metropolitan area, 1962-73 Commune Other 12 Commune Other 12 of communes Total of communes Total Tunis Tunis ( in 1,000 current dinars7 (in 1000 constant 1962 dinars) 1962 566 135 701 566 135 701 1963 865 165 1,030 842 161 1,003 1964 1,445 52 1,497 1,350 49 1,399 1965 1,260 325 1,585 1,104 285 1,389 1966 872 340 1i213 7,358 287 1,213 1967 1,165 275 1,440 955 275 1,180 1968 984 252 1,237 781 201 989 1969 1,696 331 2,077 1,302 254 1,557 1970 1,285 400 1,685 976 303 1,280 1971 2,327 394 2,721 1,672 283 1,956 1972 1,765 433 2,198 1,242 305 1,546 1973 2,809 573 3,382 1,538 386 2,280 Table IV-13 General subsidies (common funds), Tunisia, 1962-73 Tunisia 1st fund 2nd fund Total Total Current Subsidies Subsidies (1,000 D) (1,000 D) (1,000 D) budget budget as % of as % of receipts expenditures receipts current (1,000 D) (1,000 D) expenditures 1962 1,393 271 1,664 69,100 62,800 2,4 2,6 1963 2,860 520 3,380 74,800 63,000 4,5 5,4 1964 n.d. n.d. n.d. 86,900 68,800 n.d. n.d. 1965 3,127 481 3,608 106,600 78,900 3,4 4,6 1966 3,334 248 3,584 119,100 93,400 3,0 3,8 1967 4,338 212 4,551 120,000 100,000 3,8 4,6 1968 3,752 240 3,992 123,000 113,900 3,2 3,4 1969 4,738 232 4,969 152,400 122,600 3,3 4,1 1970 5,215 226 5,441 165,200 135,300 3,3 4,0 1971 6,323 115 6,438 183,500 151,900 3,5 4,2 1972 7,053 6 7,059 216,100 174,500 3,3 4,4 1973 8,652 310 8,963 239,800 188,600 3,7 4,8 -80- The analysis of a transfer of this type raises two questions: (i what has been the pattern of total subsidies to local jurisdictions in Tunisia, and (ii) what part of this total has gone to the communes of Tunis? Table IV-13 permits a broad response to the first question. To begin with, it shows that the first fund is much more important than the second, and that its importance is increasing; at present, the first fund accounts for about 85% of the total of the common funds. The table shows further that subsidies as a percentage of total budgetary receipts or of total current budgetary expenditures have remained virtually constant; or, put another way, that the elasticity of subsidies with respect to receipts or to budgetary expenditures is nearly equal to unity. Since the elasticity of these receipts and expenditures with respect to gross domestic product is about 1 (actually, it is slightly greater than unity), it can be con- cluded that subsidies are increasing along with GDP. Table IV-14 permits a response to the second question. It shows that the commune of Tunis receives one-fourth to one-third of the total, and that the communes of the metropolitan area receive 30 to 40% of the total. It will be noted further that these shares remained nearly constant over the period studied. -81- Table IV-14 Share of Tunis in total general subsidies (common funds) to local jurisdictions, 1962-73 Commune Other 12 communes of All communes of Tunis of Tunis metropolitan metropolitan area Tunis area () 1962 34,0 8,1 42,1 1963 25,6 4,8 30,4 1964 n.d. n.d. n.d. 1965 34,9 9,0 43,9 1966 24,3 9,5 .33,8 1967 25,6 6,o 31,6 1968 24',6 6,4 31,0 1969 34,1 6,6 40,7 1970 23,6 7,4 31,0 1971 36,1 6,2 42,3 1972 25,0 6,1 31,1 1973 31,3 6,4 37,7 These figures should be compared with Tunis' share of the total population and of the urban population of Tunisia. The population of the commune of Tunis represented 22.1% of the urban population in 1966 and 22.6% in 1971. Thus, residents of Tunis get "more than the;ir share" of subsidies. Table IV-15, which shows the subsidy per capita, leads to the same conclusion. -82- Table IV-15 General subsidies per capita, 1966 and 1971, in current dinars Commune Other 12 Tunis Cities Of communes metropolitan of Tunis area Tunisia 1966 2,34 1,77 2,15 1,84 1971 3,10 1,78 2,76 2,46 Note: To eliminate the effect of annual variations, which are significant, the average of 1965-67 has been taken for 1966, and the average of 1970-1972 for 1971. Residents of the other communes, on the contrary, receive "less than their share" and almost 50% less than residents of the commune of Tunis. Section 7 - Special subsidies Special or tied subsidies are granted to the municipalities by the ministries to finance specific investment projects. Obviously, it would be interesting to know the distribution of these special subsidies by ministry or by type of project, but such information is not available. The most important subsidizing ministries seem to be the Ninistry of Infrastructure (for certain roads and sanitation works), the Ministry of Youth and Sports, the Office of the Prime Minister (for mosques) and the Ministry of Public Health (for health centers). - 83 The amounts of these special subsidies is shown in Table IV-16. Table IV-16 Special subsidies, communes of Tunis, 1962-73 Commune Other 12 Total Commune Other 12 Total of communes of of communes of Tunis metropolitan Tunis metropolitan area area (In 1,000 current dinarsF ITr 1,000 constant 1962 dinars) 1962 16 124 140 16 124 140 1963 73 121 194 71 117 136 1964 203 155 359 189 144 335 1964 489 176 665 428 154 582 1966 552 308 860 465 259 725 1967 924 338 1,262 757 277 1,034 1968 402 183 $86 321 146 468 1969 805 179 984 618 137 755 1970 645 241 886 490 183 673 1971 1,040 200 1,240 747 143 891 1972 $78 114 692 406 80 486 1973 1,481 247 1,728 998 166 1,165 Section 8 - Loans Loans are a minor source of revenue for the communes. Over the years (see Table IV-17) they have accounted for 0.5 to 5% of total receipts. The irregular pattern of this series confirms the exceptional nature of recourse to borrowing. Most loans are contracted with the Caisse des Pr9ts aux Communes, R'gions Et Etablissements Publics Tunisiens (Loan Fund for Communes, Regions and Public Institutions of Tunisia). The Loan Fund is a public entity established in 1902 and governed by a decree of March 1, 1932; it is strictly controlled by the Ministry of Finance. Since 1964 the Soci6t6 Nationale dtInvestissement has physically administered the Loan Fund, but all decisions continue to be made by the Ministry of Finance. P mm Table IV-17 Loans, communes of the metropolitan area, 1962-73 Commune Other 12 Total Commune, Other 12 Total of communes of communes Tunis of Tunis of metropolitan metropolitan area area (In 1,000 current dinars) (In-1,000 constant 1962 dinars) 1962 375 100 475 375 100 475 1963 225 25 250 219 24 243 1964 - 22 22 - 20 20 1965 - 48 48 - 42 42 1966 76 195 202 64 164 170 1967 8 36 44 6 29 36 1968 0,2 107 107 0,16 85 85 1969 149 71 220 114 54 168 1970 - 57 57 - 43 43 1971 - 62 62 - 44 44 1972 140 133 273 98 93 192 1973 - 72 72 - 49 49 The Fund, which operates throughout the national territory, obtains . its resources from: - the common fund (see above) - loans it raises in the market, and - payments of principal and interest on the loans it makes. Loans are authorized by the Minister of Finance on the recommendation of the Ministry of the Interior; the projects are first studied at the regional level. Thus, the communes lack direct access to the Fund. The rather complex chain is as follows* commune, governorate, Ministry of the Interior, Ministry of Finance, Loan Fund. It is simplified for the municipality of Tunis, which deals directly with the Ministry of the Interior. Loans from the Fund are granted for 20 years at 2% interest. In addition, the municipality of Tunis contracted some loans abroad during the period under review in connection with fairly complex financial operations. Two hotels (the H8tel des Deux-Avenues and the H6tel du Paris- Bas) have been built by the Iskan real estate development company, in which the municipality is a 20% stockholder. These hotels were financed by Italian loans, which were negotiated between the Italian Government and the Tunisian Government. The latter then onlent the proceeds to the municipal- ity, which onlent them to Iskan, which repays them. The municipality participates only as intermediary and as guarantor. A conference center also was built with an Italian loan granted at 5% for 17 years. Here again the loan was negotiated by the Tunisian Government and construction was assumed by Iskan, but 50% of the loan will be repaid by the State and 50% by the municipality. The municipality will be the owner of the center; it intends to award it to a concessionaire and not to operate it directly. Section 9 - Expenditures of the Communes As already indicated, accounting practices and nomenclatures do not lend themselves readily to economic analysis. Nonetheless, it has been possible on the basis of the statements of the finance officers to accurate- ly distinguish operating expenditures and capital expenditures for Tunis and for the 12 other communes of the metropolitan area. The series thus developed are shown in Tables IV-18, IV-19, IV-20 and IV-21. - 86 - Table IV-18 calls for two comments. The first is that total expendi- ,tures have increased less rapidly than total receipts, particularly in the last few years, where they have in fact decreased in constant value. Because of the coplexity of procedures and the strictness of controls, the communes do not succeed in expending all their availabilities. Their credit balances crerease. The second comment, related to the first, is that per capita expenditures in constant dinars increased at the begin- ning of the period (from 1962 to 1966), remained steady at a high level in the middle of the period (1966-1968), and declined at the end (1969-1973). This movement shows no correlation with that of per capita receipts, which on the contrary held steady or declined until 1969 and increased sharply thereafter. Table IV-18 Expenditures of communes of the metropolitan area, 1962-73 Total Expenditures Per capita expenditures (1,000 current (1,000 1962 (current dinars) (1962 dinars) dinars) dinars) 1962 3,421 3,421 6,4 6,4 1963 3,792 3,692 6,7 6,6 1964 3,330 3,112 5,6 5,3 1965 5,721 5,01 9,2 8,0 1966 7,112 6,002 10,8 9,1 1967 7,587 6,219 11,1 9,1 1968 8,020 6,416 11,3 9,0 1969 7,270 5,584 9,8 7,6 1970 6,938 5 5,272 9,0 6,8, 1971 6,241 4,487 7,8 5,6 1972 7,108 5,002 8,6 6,o 1973 n.d. n.d. n.d. n.d. - 87 - Table IV-19 Capital expenditures of communes of the metropolitan area as a percentage of total expenditures, 1962-73 Municipality of Tunis Other 12 municipalities Total 1962 28 42 31 1963 25 32 27 1964 4 36 12 1965 39 41 40 1966 42 49 43 1967 38 43 39 1968 29 38 31 1969 29 33 30 1970 33 29 32 1971 18 28 21 1972 16 27 18 1973 20 40 24 Table IV-20 Share of commune of Tunis in expenditures of communes of the metropolitan area, 1962-73 Operating Capital Total expenditures expenditures expenditures 1962 79 70 77 1963 81 76 80 1964 81 22 74 1965 83 82 83 1966 82 77 80 1967 82 so 81 1968 83 77 81 1969 81 78 80 1970 81 83 78 1971 79 68 77 1972 81 68 79 1973 84 66 80 - 88 - Four points may be noted regarding the distribution of expenditures between operating and capital outlays and between the commune of Tunis and the other communes. First, capital expenditures are significant in relation to operating expenditures; on the average they account for one third of the total. Second, this proportion varies considerably from one year to the next; however, it is difficult to say whether these variations reflect variations in actual investment or whether they reflect only accounting constraints or delays. Third, the share of investment in total expenditures is higher Xor the suburban communes than for the com- mune of Tunis. Fourth, no trend in these ratios is observable for the period as a whole. The information in the statements of the finance officers does not permit analysis of expenditures - and much less of costs - by function. Such an analysis can only be made on the basis of the accounting records themselves. This has been done carefully for the commune of Tunis for 19681 . First, the author estimated the value of the stock of capital by function, and imputed to the costs of each function the amortization corresponding to the consumption of capital used for that function. The table he prepared for this purpose is worth reproducing because it gives an idea of the activities of the municipality (Table IV-22). (1) J. Bouinot, "Recherches sur les Finances de la ville de Tunis", Revue Tunisienne de Sciences Sociales, May 1971, pp. 235 - 247 and Bouinot, Jean, La Gestion Financiere de la Ville de Tunis, Tunis, December 1969, CERES, mimeo Vol. I, 120 pp. Vol. II, 131 pp., Vol. III, 98 pp. Table IV-21 Per capita expenditures of communes of the metropolitan area, 1962-73 (Current dinars) Commune of Tunis Other 12 communes Total 13 communes Operating Capital Operating Capital Operating Capital expenditures expenditures expenditures expenditures expenditures expenditures 1962 4,7 1,9 3,5 2,2 6,k 2,0 1963 5,5 1,9 3,h 1,6 4,9 1,8 1964 5,5 0,2 3,5 2,0 4,9 0,7 1965 6,3 4,1 3,4 2.A 5,5 3,6 1966 7,0 5,1 4,2 3,9 6,3 4,7 1967 7,6 4,J8 4,14 3,3 6,7 4,14 1968 9,0 3,8 4,7 2,9 7,8 3,5 1969 7,8 3,2 4,6 2,3 6,6 2,8 1970 7,0 3,4 4,0 1,7 6,1 2,9 1971 6, 8 1,5 4,5 1,8 6,2 1,6 1972 8,o 1,5 4,6 1,7 7,0 1,5 1973 5,0 1, 2 2,3 1,5 4,2 1,3 -90- Table IV-22 Assets of the municipality of Tunis, 1968 Amount Replacement Personnel value (1,000 D) Municipal markets 43,000 m 2 1,130 110 Municipal baths 124 stalls 62 35 Sports facilities 29.7 ha 1,826 185 Social and cultural facilities 3 recreation centers 432 100 3 youth centers 44 Parkland 426 ha p.m. 375 Sanitation n.d. 7,160 1,000 Streets 417 km 5,930 370 Rolling stock n.a. 889 n.d. Machinery n.a. 6 n.d. Source: Bouinot, oZ. cit., vol. 3, p. 106 Second, the author, following the classical approach of analytical accounting, distinguished final functions (cleaning, markets, fire protection, etc.) from intermediate functions (central administration, shops, etc.) and imputed the costs of the intermediate functions to the costs of the "final" functions. The distribution -ratios used for this purpose are variable: constructed area, direct cost of final functions, etc. The results of this interesting approach are shown in Table IV-23. The limits of this excellent work lie in the fact that the author analyzed title I of the budget and included the expenditures of section 7 (new works), which actually are investments and have no place in analyses of costs. Moreover, he excluded expenditures of "subsidies and transfers", which is a debatable decision because these expenditures serve fuhctions as well. - 91 - Table IV-23 Cost of functions performed by the municipality of Tunis, 1968 Amount % (1,000 D) Municipal police 43,5 1,3 Civil registry 190,9 5,8 Health 61,6 1,8 Sanitation 780,3 23,7 Fire protection 110,4 3,4 Municipal markets 92,0 2,8 Sports facilities .. 137,5 4,2 Social and cultural facilities 120,3 3,7 Parks 326,4 10,0 Sanitation equipment 298,9 9,1 Street infrastructure 582,4 17,7 New works 116,0 3,5 Sports facilities (new) 33,3 1,0 Sanitation equipment (new) 34,0 1,0 Street infrastructure (new) 139,0 4,2 Total 3,285,6 100,0 Source: Bouinot, 0P. cit., Vol. III, pp. 75-6 - .-92- The conclusions th;± ian be drawn from this analysis nevertheless seem well founded. The four most important services (in terms of cost) provided by the municipality are: - sanitation, i.e. primarily waste removal (about 25% of the total); - transportation, i.e. maintenance and amortization of roads and streets (about-20% of the total); - sewerage, i.e. operation, maintenance and amortization of sewers -and the Cherguia treatment plant; - parks and gardens (about 10% of the total). Table IV-24 provides some indicators of the activity of the municipality of Tunis in these areas. Table IV-24 Activities of the municipality of Tunis, selected indica- tors, 1956-73 Waste Parks aB Water tr ated by Cherguia removed2/ gardensV static (1,000m3 water) (1,000 T) (ha) 1956 125 1962 10,7 1963 10,2 1964 11,9 1965 79 12,2 1966 78 323 13,8 1967 78 14,3 1968 81 11,9 1969- 82 14,8 1970 83 14,1 1971 569 1,3 1972 14,7 1973 14,9 Sources: a/ Malek Malkouin, Problemes Actuels du Nettoiement, Municipality of Tunis, December 1971, 49 pp. b/ Hedi Bejaoui, Rapport sur les parcs, squares, esplanades et plantations, Municipality of Tunis, February 1972, mimeo. 23 pp. c/ Municipality 6f Tunis. - 93 - Chapter V SERVICES PROVIDED BY PUBLIC SERVICE COMPANIES It was noted in Chapter III that a number of urban public services are provided by more or less autonomous national agencies or companies. This chapter analyzes the services provided in Tunis by: 1. SONEDE 2. STEG 3. SNT 4. SNCFT 5. OPAT 6. ONPT Section 1 - Services provided in Tunis by SONEDE SONEDE has supplied water to Tunis since 1962. Up to that time STEG was responsible for distribution in Tunis. On the whole the distribution system is quite old, and losses exceed 20%.-/ SONEDE distinguishes three major categories of use: - domestic use, i.e. water consumed by households with private connections; - public use, i.e. water purchased by the municipalities or ministries and consumed by households (without charge) at public fountains or used to supply mosques and to water parks, gardens or streets; - industrial use. 1/ See Tunis 72-76, op. cit., pp. 73-74 We have no series referring to distribution by type of use, but the following published breakdown of consumption for 1969 is available: Table V-1 Water supply in Tunis, by type of customer, 1969 Consumption Number of connections 1,000m 3 1,000 m3 o Private 14,570 49 42,800 96,6 Governmenta/ 10,899 36,5 1,169 2,6 Industry b4,296 14,5 331 0,6 Total 26,691 100,0 44,300 100,0 Source: Tunis 72-76, Annex E-1 a/ Including public fountains. b/ Including tourism The operations of SONEDE are measured by the number of connections and cubic meters of water sold. The figures for 1962-73 are shown in Table V-2. SONEDE is currently introducing an analytical system of accounts which will permit precise analyses of the expenditures and costs of its operations in the Tunis zone. These accounts have served as the basis for the estimates in Table V-2, which date only from 1969; furthermore, the figures for 1969 are doubtful because the changeover from sale by STEG to sale by SONEDE in- volved time lags and reorganizations which deprive the figures of much of their significance. Table V-2 Water supply in Tunis, 1962-73 Number of Expenditures C9nsumption Connections Operating Capital Total Costs Receipts (100m3 of water) (3,000) (1,000 D) (1,000 D) 1962 20,8 26,8 815 d d 1963 21,4 28,4 839 d d 1964 22,9 30,4 897 d 1965 22,7 32,3 889 1966 25,8 36,7 983 1967 27,4 38,4 789 1,050 1968 29,4 41,3 846 1,205 b 1969 29,7 44,3 823 211 1,034 947 1,957 b 1970 32,4 h,2 1,021 127 1,148 1,133 1,977 1971 34,6 50,5 1,055 103 1,068 1,192 2,193 1972 35,5 55,5 908 89 997 1,042 2,2h7 C 1973 37,2 59,4 2,434 Notes: d/ Estimate b/ Errors due to assumption of operations by SONEDE d/ Calculated by multiplying the quantity consumed by average receipts per m in 1966-7-8. - 96 - The rate schedules of SONEDE, which are shown in the following table, have been adjusted only once in the past decade. They are identical for the whole of the country. Table V-3 Water supply in Tunis. Rates 1962-73 (in millimes per m2 a/ Industrial Domestic use Public use Use Before 1968 40 12 variable since 1968 68 30 45 Notes: a/ Sales to local jurisdictions, principally for public fountains. b/ Only one firm benefits from. this rate in Tunis (SOGITEX). The cost of water is higher on the average in Tunisia as a whole than in Tunis. It follows that equalization works to the benefit of the rest of the country. In other words, residents of Tunis partially subsidize water consumption in the rest of the country. Section 2 - Services provided in Tunis by STEG STEG supplies Tunis with electricity and gas. This section will con- sider in succession the volumes delivered, receipts and rates, expenditures and costs. (a) Volumes delivered The volumes of electricity and gas supplied are shown by several in- dicators in Table V-4. Table V-4 ELECTRICITY AND GAS SUPPLY IN TUNIS, 1962-73 Volume of Electricity Number of Customers Sold (106 kWh) for Electricity Volume of Number of Low Medium Low Medium gs sold Customers Voltag Voltage Total Voltage Voltage Total (10 thermies*) for Gas 1962 n.d. n.d., 85,8 n.d. n.d n.d. 56,9 25,000 1963 n.d. n.d. 89,4 n.d. n.d. n.d. 62,2 25,300 1964 n.d. n.d. 95,6 n.d. n.d. n.d. 64,9 25,500 a 1965 n.d. n.d. 157,5 n.d. n.d. n.d. 68,8 25,800 1966 n.d. n.d. 174,4 n.d. n.d. n.d. 72,6 26,000 1967 n.d. n.d. 187,8 n.d. n.d. n.d. 81,6 26,200 1968 n.d. n.d. 202,3 n.d. n.d. n.d. 86,8 26,400 1969 84,9 145,7 230,6 116,400 539 116,939 78,2 25,400 1970 98,5 151,6 250,1 122,770 554 123,324 81,3 25,700 1971 103,2 167,1 270,3 126,210 568 126,778 79,0 25,700 1972 113,0 183,0 296,9 132,610 605 133,215 88,6 26,100 1973 124,0 205,0 329,0 140,000 640 140,640 93,0 26,100 Note: a/ New division of the Tumis region introduced in 1965 Source: STEG -98 Gas is comparatively less important than electricity. In 1972 the volume of electricity sold in Tunis was about 117,000 tons petroleum equivalent; the volume of gas was 7,700 tons petroleum equivalent, or about one fifteenth. Accordingly, the analysis below refers only to electricity. (b) Expenditures and costs STEG distributes electricity throughout Tunisia. For the most part (80 to 95% depending on the year), electricity is generated by STEG in two thermal plants located at La Goulette (within the Tunis metropolitan area). Expenditures and costs may be broken down according to generation and distribution. The unit expenditures and costs of generation of electricity consumz;d in Tunis are identical to those of electricity consumed in Tunisia as a whole. On the other hand, the expenditures and costs of distribution of electricity consumed in Tunis are lower than those of electricity con- sumed in the rest of the country. Unfortunately, the accounts of STEG do not permit this difference to be calculated. They refer to generation and distribution for the country as a whole. Therefore, it is necessary to estimate the expenditures and costs of electricity supplied in Tunis by multiplying overall expenditures and costs by the volumes sold in Tunis expressed as a fraction of total sales in Tunisia. This procedure is approximately correct for production expenditures and costs, but it slightly overestimates the expenditures and costs of distribution, and hence total expenditures and costs. The results are shown in Table V-5. *T.N. 1 thermie - 1,000 kilocalories. - 99 - Table V-5 Electricity supply in Tunis - Expenditures and costs, 1962-73 (in 1,000 current dinars) Expenditures Costs Operating Capital Total 1962 2,358 619 2,977 3,249 1963 2,813 906 3,719 3,895 1964 3,870 3,364 7,234 4,421 1965 a 5,816 6,756 12,384 7,228 1866 5,363 4,265 9,628 6,762 1967 5,015 6,988 '12,002 7,399 1968 5,431 3,297 8,672 7,512 1969 5,260 3,056 8,316 7,541 1970 5,349 4,305 9,655 7,777 1971 5,928 6,582 12,510 8,365 1972 6,783 9,159 15,942 9,332 1973 7,373 6,786 14,159 10,226 Note: a/ New division of the Tunis region introduced 1965. Source: STEG (c) Rates and receipts Three comments can be made concerning rates: they are sophisticated, uniform and decrease as consumption increases. The rates are sophisticated in that they are based on installed power, total consumption and distribution over the consumption period. For low voltage, a distinction is made according to whether the sub- scribed power P is less than, or equal to or greater than 3 kWh. When PZ_ kWh, the monthly charge N (in millimes) is given by the following rate schedule on the basis of quantity consumed Q: - 100 When Q 7 P N = 4. Q When 7P < Q 18 P N = (hx7)P + 38 (Q-7P) When 18P < Q <30 P N = (45x7)P + (38x11)P + 30 (Q-18P) When Q > 30 P N = (45x7)P + (38x11)P + (30x12)P + 2(Q-30P) This decreasing scale is represented by the following figure: 1093? 0 . 733P jD 7P 18? 30P Q(kwh) When P > 3kWh, the rate is slightly more complex in that it 'includes a fixed charge; it is given by the following schedule (in millimes): When Q < 12P N = lOOP + 36Q When 12P < Q <32P N = 100P + (36x12)P + 22(Q=12P) When Q > 32P N =100P + (36x12)P + (22x20)P + 20(Q-32P) N 928P 9 100? 0 iOu0 12?P - 101 - For medium voltage, the rate is based on subscribed power at the peak period Pp ,subscribed power outside the peak period Ph, consumption during peak periods Qp, consumption during daylight periods Qj and consumption during night periods Qn. The peak period is from 5:30 p.m. to 9:30 p.m. The monthly charge is given by the following formula (in millimes): N = 1000Pp + o.4(Ph - P ) +1 Qp + 10 Qj + 5 Qn There is also a schedule analogous to that for low voltage where P>) 3 kWh (i.e. it decreases with quantity), but with other rates and particularly different rates depending on whether electricity is consumed during the day or at night. The economic justification for the decreasing rate schedule is the presence of fixed costs related to the installation of a station. The justification for taking subscribed power into account is the capital ex- penditure necessary to meet potential demand (independently of the expend- iture necessary to meet actual demand). The justification for the peak rate is the higher marginal cost of production at peak hours. These rates orient demand in the proper directions. The second point to be noted is that since 1970 rates have been identical throughout the country; up to that time they had been slightly higher in the Central Region (+ 10%) and the South (+ 15%) than in Tunis. Since costs are higher in the Central and South regions than in Tunis, it follows that the consumers in Tunis partially subsidize consumers in the rest of Tunisia. Only an order of magnitude of this subsidy can be given. Assume that the price dfferential of some 12% in effect until 1970 reflects the difference in costs between Tunis and the rest of the country. Assume further that the total receipts of STE are fixed. - -102- Lt: Qt = quantity sola in Tunis Qr = quantity sold in the rest of the country Rt = receipts from sales-in Tunis Rr = receipts from sales in the rest of the country Pt = present unit price in Tunis Pr = present unit price in the rest of the country Ptt = shadow unit pice in Tunis Ptr = shadow unit price in the rest of the country S = subsidy. The shadow unit prices are such that: Pr = 1,12 On a P't.Qt + Plr.Qr = Rt + Rr P't.Qt + 1,12 - P- P't Qr Rt +,Rr Pt Pt Rt: + Rr______ Pr Qt + 112 Qr S = Rt - rlt.Qt 8 = Rt - + Qt + 1,12 Qr Pt The subsiay for 1973 is calculated at about 370,000 dinars. -103- The third comment is that the rates have not been changed since 1958. The average price per kWh has even fallen because of the decreasing rate structure combined with the increase in average consumption by customers. In.constant dinars, the fall in price has been substantial, as shown in Table v-6. Table V-6 Electricity and gas service. Unit price, 1962-73 (in millimes per kWh) Low voltage Medium voltage Gas (in millimes per kWh) (in millimes per kWh) (in millimes per thermie) Nominal Real (1962) Nominal Real (1962) Nominal Real (1962) 1962 28,8 28,8 13,5 13,5 8,36 8,36 1963 29,0 28,2 13,7 9,6 7,80 7,59 1964 29,6 27,6 13,8 12,9 7,67 7,16 1965 29,0 25,4 14,2 12,4 7,65 6,70 1966 28,0 23,6 13,7 11,6 7,25 6,12 1967 27,8 22,7 13,7 10,8 6,97 5,71 1968 28,8 23,0 13,2 10,6 7,11 5,69 1969 27,4 21,0 12,8 9,8 7,70 5,92 1970 26,7 20,3 12,4 9,4 7,78 5,91 1971 26,4 20,0 12,7 9,1 7,14 5,1 1972 26,9 18,9 12,8 9,0 7,01 4,9 1973 26,4 a 17,8 12,3 a. 8,3 7,61 a 5,1 Source: STEG and IBRD, Report No. 274-TUN, Vol. 7, Table 9.6.5. a/ Estimates However, receipts have increased because of the rise in sales, as Table V-7 shows. Receipts from the sale of medium voltage electricity refer to industrial use. An unknown part of receipts from the sale of low- voltage electricity also corresponds to industrial use; part to street lighting; and the rest to domestic use. - 104 - Table V-7 Electricity and gas supply in Tunis. Receipts, 1962-73 (in thousands of current dinars) Low Voltage Xedlun Voltage Total Gas 1962 n.d. n.d. 1,596 a 476 1963 n.d n.d. 1,824 a 485 1964 n.d. n.d. 1,957 a 498 1965 2,113 n.d. 3,162 a b 526 1966 2,339 n.d. 3,267 a 526 1967 2,517 n.d. 3,47 a 570 1968 2,704. n.d 3,687 a 582 1969 2,390 2,024 4,414 602 1970 3,006 2,113 5,119 633 1971 2,802 2,270 5,072 564 1972 3,074 2,o00 5,474 621 1973 3,350 2,700 6,o5o 708 Source: STEG a/ Calculated on the basis of receipts collected in Tunisia, multiplied by quantities sold in Tunis and divided by quantities sold in Tunisia. Section 3 - Services provided in Tunis by SNT Public transportation is provided mainly by SNT, which operates a bus system, a railway line from Tunis to La Marsa (known as the TGM line and, until 1969, a streetcar* system.]/ This section examines the indicators of service provided, expenditures and costs, and finally rates and receipts. T.N. The remainder of the text refers to "trolleybusest. 1/ See IBRD maps 10422 and 10423 in IERD, Report No. 157a-TUN, for maps of the bus and railway lines. - 105 -~ (a) Indicators of service provided The quantitative development of this service can be seen in several indicators: number of passengers carried, number of kilometers covered and number of seats available. Tables V-8 and V-9 present these indicators. SNT has no information on the number of passenger-kilometers. Table V-8 Public transport in Tunis (SNT). Passengers, 1963-73 Bus System Railway Trolley Bus Bus Total (TGM) Total 1963 14,458 35,730 70,198 10,919 61,117 1964 14,380 42,181 55,567 11,332 67,899 1965 13,957 51,343 65,300 12,189 77,489 1966 14,575 61,175 75,750 12,679 88,429 1967 14,375 71,447 85,822 12,502 98,324 1968 13,025 82,997 96,023 12,598 108,621 1969 4,897 93,021 98,021 13,312 111,333 1970 109,146 109,146 15,o67 124.213. 1971 118,325 118,325 15,739 134.065 1972 129,623 129,623 16,257 145.880 1973 155,769 135,769 16,303 152,072 Source: IBRD, Report No. 157a-TUN, Annex . and S Table V-9 Public transportation in Tunis (SNT). Kilometers covered and seats available, 1963-73 (in thousands) Trolley bus and bus Railway (T G M) Total Kilometers Seats Kilometers Seats Kilometers Seats Covered Available Covered Available ".Covered Available 1963 7,318 84,597 2,455 12,757 9,773 97,354 1964 7,785 89,656 2,286 17,210 10,071 106,866 1965 8,826 96,799 2,233 16,810 11,059 113,609 1966 9,856 107,102 2,315 17,437 12,171 124,539 1967 11,298 119,386 2,340 17,380 13,638 136;766 1968 12,528 132,690 2,393 17,897 14,921 150,587 1969 14,022 152,723 2,458 18,408 16,568 171,131 1970 16,440 177,295 2,546 19,102 18,986 196,397 1971 17,095 186,692 2,572 19,327 19,667 206,019 1972 17,584 193,721 2,579 19,452 20,163 213,173 1973 18,996 202,922 2,661 20,137 21,657 223,059 Source: SNT - 106 - Qualitative performance is more difficult to evaluate. It may be noted that the number of bus lines rose from 32 in 1963 to 59 in 1973, and that the length of the system increased from 734 kilometers to 1,576 kilometers in the same period. The ratio of number of passengers to number of seats, which is an indicator of saturation, did not change substantially during the decade insofar as buses are concerned. It clearly declined in the case of the TGM. (b) Expenditures and costs The expenditures and costs incurred by SNT for its public transport operations in Tunis are 3hown in Table V-10. Table V-10 Public transportation in Tunis! (SNT). Expenditures and costs, 1963-73 (1,000 current dinars) Espenditures Costs d/ Operating b/ Capital c/ Total Nominal Real (dinars 1962) 1963 1,405 266 1,671 1,618 1,575 1964 1,495 28 1,5214 1,708 1,596 1965 1,573 304 1,877 1,840 1,613 1966 1,852 534 2,386 2,133 1,800 1967 2,027 370 2,397 2,366. 1,939 1968 2,158 691 2,849 2,544 2,035 1969 2,539 1,614 4,153 2,96,3 2,276 1970 2,936 186 3,122 3,486 2,649 1971 3,329 725 4,054 3,486 2,506 1972 4,063 960 5,023 4,582 3,224 1973 n.d. n.d. n.d. Source: aj The expenditures and costs shown refer to urban buses, trolley buses and the railway; they exclude interurban buses, taxis and rental vehicles. b/ Operating expenditures include labor, materials, financial costs and turnover taxes; they exclude amortization. c Capital expenditures, purchases of rolling stock, major repairs and other investments (in particular the Cherguia bus and coach depot and capital outlays at headquarters). These other - 107 - investments have been charged to urban operations on the basis of income earned from urban operations. d/ Costs include operating expenditures plus amortization minus financial costs. Real unit costs for 1963-72 are shown in Table V-11. Table V-11 Public transportation in Tunis (SNT). Real unit costs 1963-72 Cost Per Zilcaeter Covered Cost Per Seat Cost Per (in_ 11 ime s) Passenger 1963 161 16 26 1964 158 15 23 1965 16 14 21 1966 148 14 20 1967 142 114 20 1968 136 14 19 1969 137 13 20 1970 139 13 21 1971 127 12 19 1972 160 15 22 (c) Rates- and receipts The SNT rate structure is quite complex. The rate depends first of all on the type of ticket or pass: regular ticket, reduced-fare ticket, weekly pass, yearly pass. It then depends (except for yearly passes) on the length of the trip, which is divided into zones. Finally, it depends on the type of passenger: ordinary passenger, student, officials. Table V-12 attempts to show the current rate structure.1/ 1/ For rates prior to January 1,.1974, see IBRD, Report No. 157a-TUN, Annex 15. - 108 - Ordinary passengers with regular tickets account for 45% of total traffic and 72% of total receipts. Students, on the other hand, account for 32% of traffic and only 5% of total receipts. Over the last 20 years rates have been increased only twice: there was a 15% increase for the TGM in 1967, and an identical increase was ordered for buses in 1969. A 30% increase for the TGM and buses went into effect on January 1, 1974. It is not easy to gauge the impact of the first increase on the number of passengers using buses, since two trolleybus lines were eliminated at the same time. The fall in ridership noted at that time, which is shown in Figure V-A, seems due as much to elimination of the trolleybuses as to the price increase. - 109 - Figure V-A PASSENGERS USTG URBAN BUSES Passengers (1 000) 140. 130 120 110 Bus 100 90 Bus and trolley bis 80 70 4 60 50 40 30 20 10 1963 64 65 66 67 68 69 70 7 72 73 Source: IBRD, Report No. 157a-TIN, Annex 4, page 6. 110 - Table V-12 Public transportation in Tunis (SNT). 1974 rates (in dinars) I. Bus Fares Number of Tickets Weekly Yearly Passes Zones Regular Reduced i/ Passes Regular Officials 1 0,040 0,020 777= d0 2 0,050 0,030 0,380 32 6 3 0,070 0,oho o,620 46 46 4 0,080 o,oho 0,620 46 46 5 0,090 0,050 0,800 60 46 6 0,110 0,060 0,800 60 46 7 0,110 0,060 0,800 60 6 8 0,1o 0,070 0,800 60 46 9 0,140 0,070 0,800 60 46 10 0,140 0,070 0,800 60 46 11 0,180 0,080 1,500 60 46 12 0,180 0,080 1,500 60 46 13 0,180 0,080 1,500 60 46 14 0,220 0,110 1,500 60 46 15 0,220 0,110 1,500 60 46 16 0,220 0,110 1,500 60 ,46 17 0,260 0,130 2,000 60 46 18 0,260 0,130 2,000 60 46 19 0,260 0,130 2,000 60 6 20 0,300 0,150 2,000' 60 46 21 0,300 0,150 2,000 6o 46 22 0,300 04150 2,000 60 46 II. TGM Fares Number of One-Way Ticket Round-Trip Ticket Yearly Passes Zones Regular Reduced Regular Reduced Weekly Regular Rate for Rate Rate a/ Rate Rate 2 Passes -(Rate Officials 1 2 1 2 1 2 1 2 1 2 1 2 1 0,090 0,050 0,050 0,030 0,3h0 0,230 0,170 0,120 0,650 60 40 56 40 2 o,16o 0,090 0,080 0,050 0,30 0,230 0,170 0,120 0,650 60 0 56 4o 3 0,180 0,120 0,090 o,o6 0,340 0,230 0,170 0,120 0,650 60 0 56 Lo Source: Minister of Transport order of December 28, 1973 a/ Applicable to children (3 to 7 years), servicement, and handicapped and blind persons. b/ Permitting 12 trips per week 2/ There also are school passes valid for 9 months, at 4.5 dinars on urban lines, 5.7 dinars on suburban lines, 6.5 dinars on inter-lines and 11.5 dinars on long suburban lines. d/ There are also school passes valid for 9 months, at 21 dinars for first class and 14 dinars for second class, on routes including Tnis; and 17.6 dinars for first class and 12 dinars for second class on the route from La Goulette to La Marsa. - 111- Receipts for 1963-73 are shown in Table V-13. It will be noted that until 1973, and contrary to the statutes, SNT was not reimbursed for the reduced rates it granted at the request of the public authorities, particularly to students. Since 1973 it has received compensation for such reductions. Table V-13 Public transportation in Tunis (SNT). Receipts, 1963-73 (in current dinars) Bus Trolleybus TGM Total 1963 r35 216T 1964 1,003 215 446 1,664 1965 1,248 214 490 1,952 1966 1,485 217 505 2,207 1967 1,763 227 550 2,316 1968 2,080 202 599 2,684 1969 2,653 96 621 3,271 1970 3,075 670 3,748 1971 3,304 698 4,002 1972 3,575 730 4,305 1973 3,916 750 4,666 Source: SNT Section 4 - Services provided in Tunis by SNCFT SNCFT operates a railway line which serves the southeast suburban communes (Hamman-Lif, EzZagra, Rhades). The principal data pertaining to the operation of this line are given in Table V-14. SNCFT operates throughout Tunisia, but does have some figures available pertaining to suburban traffic. Precise cost calculations have been made for 1968 and updated for 1971; detailed analytical accounts will be available in the future. Amortization is calculated on the basis of replacement value, not purchase price (and therefore is called provision for replacement); this procedure has a substantial effect on the estimate of costs. SNCFT even 0 -112- calculates marginal costs, but in so doing follows the methodology of the International Union of Railways, which seems completely arbitrary and with- out economic significance. Table V-14 shows the series for expenditures and costs. Table V-14 Operations of SNCFT in Tunis, 1962-73 Number of Expenditures Costs Receipts passengers Operating Capital Total (in 1,000) (in 1,000 current dinars) 1962 7,652 496* 608* 268 1963 8,304 538" 660 287 1964 8,947 580* 710* 300 1965 9,476 614* 753* 319 1966 10,474 679* 832* 361 1967 9,266 601* 736* 391 1968 9,602 623 700 1,323 763 413 1969 10,783 7CO* M -* 435 1970 11,450 743* 910 465 1971 12,145 688 963 495 1972 13,000 7 7* 1,031* 534 1973 14,260 808* 1,130* 582 Notes: According to information furnished by SNT, the evaluation of amortization seems excessive, and the cost figure should be considered an overestimate. Expenditure and cost figures are available only for 1968, and with less reliability for 1971. The table has been completed by assuming that operating ex- penditures and costs per passenger-kilometer for 1962-70 are equal to expenditures and costs calculated for 1968, and for 1972 and 1973 are equal to expenditures and costs estimated for 1971. The figures thus obtained abviously are quite un- reliable and are marked with an asterisk. -113 Table V-15 shows the fare streature in effect since January 1, 1974, when a 30% increase took effect. The previous increase of 25% took place in 1966. Table V-16 shows the nominal and real prices of a ticket3 it will be seen that the nominal increases had the effect of returning the real price of'a ticket to its 1962 level. Table V-15 SNCFT rates/ in Tunis, 1974 Tunis-Rades Runis-Hamman-Lif 1st class 2nd class 1st class 2nd class Regular ticket 0,110 0,075 0,165 0,110 Half-fare ticket o,o65 0,050 0,095 o,o65 Weekly pass 5,2 6,5 Yearly pass 45 30 50 33 Student passb/ 20 12 25 15 Source: SNCFT 4/ Since January 1, 197)4 b Valid for 9 months Table V-16 SNCFT rates in Tunis, 1962-74 * Nominal value Real value (current millimes) (1962 millimes) 1962 70 70 1963 70 68 1964 70 65 1965 70 61 1966 85 72 1967 85 70 1968 85 68 1969 85 65 1970 85 64 1971 85 61 1972 85 60 1973' 85 57 1974 110 a/ 71 a/ a/ Estimate (the 1974 price index obviously is not kiown). ―기 ii5 of magnitude can be given: total capital expenditures for the country as a whole for the period 1962-71 were about 20.5 million dinars; on the basis of traffic, it can be estimated that 80% of this amount, or 16.4 million dinars., was expended in Tunis, giving an average of 1.6 million dinars per year. Another source estimates 8.3 million dinars for 1972., when the new airport was completed. Section 6 - Services provided in Tunis by OPNT Traffic handled by the ports of La Goulette and Tunis, which is shown in Table V-18., is an indicator of port activity in Tunis. Traffic remained at the same level during the period considered,, but its structure has chamged substantially, especially in recent years. Table V-18 Maritime transport, Tunis 1963-73 Commercial traffic E enditur s Costsy Receipts (arrivals + departures) Operating=' CapitaI Total (l'OOQ tons) (1,000 D) (11000 D) (13000 D) 1963 2.1489 n.d. n.d. n.d. n.d. n.d. 1964 2,.Jiq2 n.d. n.d. n.d. n.d. n.d. 1965 2,344 438 18 456 531 839 1966 2.1673 453 25 478 562 973 1967 2:315 434 267 701 488 989 1968 2.9168 473 130 603 552 835 1969 2.9454 69o 385 1,075 685 94-7' 1970 2,412 675 263 938 585 1,147 1971 2Y324 i,oo6 270 1,276 844 1,500 1972 2;516 1,146 491 1 ,637 753 1,876 1973 n.d. n.d. n.d. n.d. n.d. n.d. Source: based on data from OM a/ Purchases + personnel costs + financial costs + other charges b/ Purchases + personnel costs + other charges + amortization. - 116- Data on the expenditures, costs and receipts of OPNT for the ports of Tunis and La Goulette are shown in the same table. The rate schedule is complex, including at least 16 different rates.1/ In principle, rates have not been changed during the decade; however, there was an adjustment of the rate structure in 1970, resulting in an increase of about 5%. The increase in receipts during the last three years, which is explained neither by higher prices nor by an increase in traffic, is attributable to changes in the composition of this traffic. The major capital expenditures were made with the assistace of two IBRD loans (US$7million in 1964 and US$8.5 million in 1968) and internal financing. OPNT intends to make large investments in Tunis in the years ahead, and gives a figure of about 15 million dinars through 1980. 7 See OPNT; Bottin des Ports Nationaux de Tunisie, pp. 82-99 - 117 - Chapter VI SERVICES PROVIDED BY THE MINISTRIES As noted in Chapter III, a number of urban public services in Tunis are provided entirely or partly by the State. In fact, few public services are provided without some form of State participation. As we have seen, the municipalities and companies are under the super- vision of one or mora ministries, which grant subsidies to the muni- cipalities to carry out specific investments. But in certain areas the responsibility of the ministry is more direct. This is particularly true as regards the Ministry of Posts, Telegraphs and Telecommunications for telephone service, the Ministry of Education for public education, the Ministry of Public health for health and the Ministry of Infrastruc- ture (formerly Public works and Construction) for highway transportation and housing. The present chapter concentrates on these four cases, omitting the less important activities of certain other ministries such as the Ministry of Youth and Sports for sports and the Office of the Prime Minister for religion. In general (with the exception of the Ministry of Posts, Telegraphs and Telecommunications - PTT), the data available within the ministries are inadequate. This deficiency is explained by two factors. First, the responsibility of the ministries is national, and statistics where they exist refer to the whole country, sometimes to the governorate, - 118 - but hardly ever to the district or the metropolitan area. Second, the orientation of the ministries is administrative, not economic; informa- tion is compiled in terms of administrative or accounting needs, which rarely lend themselves to economic analysis. Section 1. Services provided in Tunis by the Ministry of Posts, Telegraphs and Telecommunications Of the services provided in Tunis by the Ministry of Posts, telegraphs and Telecommunications (mail, postal checking (Giro) accounts, telegrams, telex and telephone), ony telephone services will be con- sidered here. The governmental and nation-wide character of the ministry makes it difficult to distinguish operations, expenditures and costs for Tunis,'or those related to telephone service. However, it has been possible to assemble or develop some series for operations, receipts, and operating expenditures; they are shown in Table VI-1. The figures for operating expenditures are very tentative. They are based on a series of loperating expenditures for telecommunications" for the entire country, which itself is based on a highly dubious analytical method. No series has been developed for capital expenditures. For this purpose a detailed statement of expenditures is available for each year of the period 1962-71, with figures ranging from 4,000 to 200,000 dinars per year. However, the same official document estimates expenditures Commission Nationale Sectorielle des Postes et T61communications, Retrospectives D6cennales 1962-71 June 1972, mimeo, pages 109 ff. for telephone services in Tunis at 5 million dinars for the period as a whole. The difficulty of pinpointing capital expenditures related -o telecommunications, which is formidable (for instance, should a cable linking Tunis to Europe be regarded as a capital expenditure in Tunis?) does little to explain such a discrepancy. Within the Tunis region traffic has been completely automatic since the 1950s. There are seven exchanges, three of which are for the commune of Tunis and four for the suburban communes. Communications within the same exchange and between different urban exchanges are counted as one basic unit, regardless of the duration of the call. For other communications each three minute period counts as one basic unit. The basic unit price is 24 millimes and has not been change since 1965. Table VI-I Telephone service in Tunis, 1962-73 Number of main lines Commune of Suburban Tunis metropolitan Receipts Operating Tunis communes area expenditures (1,000 (1,000 D) current D) 1962 14,360 a/ 2,660 a/ 17,020 a/ 1,083 b/ n.d. C 1963 15,280 g/ 2,830 5 18,110 2/ 1,210 5/ 1,120 c 196) 16,070 8/ 2,980 j/ 19,050 S/ 1,360 b/ 1,148 1965 17,000 8/ 3,150 i/ 20,150 o"1, 574 / 1,384 1966 18,260 a/ 3,390 2/ 21,650 a/ 2,014 b/ 1,586 c/ 1967 12,690 3,758 23,448 2,080 / 1,806 / 1968 21,001 3,924 24,925 2,488 b/ 1,950 1969 22,814 4,109 26,923 3,110 2/ 2,173 / 1970 24,461 4,565 29,026 3,565 j/ 2,147 c/ 1971 24,824 4,891 29,715 4,032 b/ 2,413 9/ 1972 26,892 5,383 32,275 n.d. n.d. 1973 28,000 5,605 -/ 33,605 4,278 n.d. Source: Ministry of Posts, Telegraphs and Telecommunications. 120 - Notes: Estimate. For years prior to 1967 the number of lines in the governorate has been prorated among the commune of Tunis, the suburban communes and rural areas on the basis of average distribution in 1967, 1968 and 1969. bJ Computation: telephone receipts for Tunisia, divided by the number of telephone sets in the Tunis metropolitan area. This procedure slightly overestimates receipts. The figure for 1973 is actual receipts reported in the quarterly breakdowns. / Computation: based on "telecommunications expenditures"; -a correction has been made in proportion to receipts in order to eliminate telegram and telex expenditures. Expenditures for services have been prorated between Tunis and the rest of the country on the basis of the number of lines; this series is very imprecise. The table suggests that telephone service is highly profitable, and is becoming more and more so. One thing that is certain is that the current receipts of the Ministry greatly exceed its current expenditures; the difference goes to a special fund, known as the modernization fund, which finances the capital expenditures of the ministry. Moreover, this surplus comes mainly from telephone service. Since Tunis accounts for 60% of the telephone receipts, the figures in Table VI-1 are completely plausible. The surpluses shown in the table, at least in recent years, seem larger than the capital expenditures made in Tunis. It follows that, in all probability, telephone users in Tunis partly finance the development of postal and telecommunications services in the country as a whole. - 121 - The series for receipts is representative of operations measured by the number of basic units, at least since 1965, inasmuch as the basic rate schedule has remained unchanged since that date. Traffic has increased more rapidly than the ., P ber of lines; i.e. the number of telephone calls made on each line has increased substantially. Since the marginal cost of a telephone call in an automatic system is low, this increase explains the appearance and growth of the surplus just mentioned. Costs are equal to the sum of expenditures, amortization and the opportunity cost of capital. No information is available on the stock of capital used. If, for the purposes -of Chapter VII, we must hazard an estimate for 1971, a figure of 8 million dinars may be used. With a 10% amortization rate and a 10% rate of discount of capital, this figure represents an additional 1.6 million dinars per year, or 3 million dinars in 1971. Section 2 Services provided in Tunis by the Ministry of Education Educational services are provided in Tunis, as in the rest of the country, by the Ministry of Education. However, this statement should be qualified in two minor aspects: (i) the communes play a marginal role in school construction (e.g. by contributing land or by building an athletic field or a chemistry laboratory) and in school operation (e.g. by purchasing school supplies or making emergency repairs). (ii) the governorates have served as intermediaries in school construction with the Ministry granting subsidies, known as assigned credits, for school construction. - 122 - Information on the activities of the Ministry in connection with studies is especially sparse. The figures for the number of students or classes are aggregated at the delegation or even the governorate level. Data pertaining to expenditures and costs exist only for the country as a whole (when they exist at all). The establishment of a special file would be necessary to properly evaluate the development of this highly important urban public service. Table VI-2 shows the qualitative development of the service pro- vided. With respect to expenditures and costs, two sources are available, which unfortunately do not concur. Lyc6es, secondary schools, teacher training schools, colleges and professional schools are public institutions with financial autonomy. For each one, receipts (made up almost exclusively of subsidies from the Ministry of Education, since instruction is free and expenditures (operating and maintenance expenditures) are posted to accounts maintained by the Directorate of Public Accounts. They are recorded on a cash basis, i.e. receipts and expenditures are entered as they are actually received or disbursed. The General Account of the Financial Administration shows, for 1971 only, the amount of receipts and expenditures of all public institutions in the country. From this have been taken the operating expenditures of 14 secondary schools, totaling D 2,244,000, and those of 10 institutions of higher education in the District of Tunis, totaling D 2,52,000. -123-. Abd-el-Jabbar, Bsais has calculated the series of unit operating costs for the three levels of education for Tunisia as a whole. 1971 is missing from the series, but taking the average cost for 1970 and 1972 and multiplying it by the number of students in 1971, we obtain D 4,278,000 for secondary education and D 4,209,000 for higher education i.e. almost double the figures given in the preceding paragraph. Table VI-2 Education: number of students, Tunis, 1962-73. Primary Secondary Higher Number of students Number of Number of students Number of Number of (1,000) students per (1,000) students students c/ 100 pop. per 100 pop. 1962 93 ,/ 16,h 16,7 2,9 2,309 1963 102 4/ 17,1 18,4 3,1 2,869 1964 111 g/ 17,6 20,6 3,3 3,316 1965 118 a/ 17,8 22,7 3 4 4,587 1966 116 a/ 16,7 24,4 3,5 5,456 1967 126 g/ 17,4 27,7 3,8 5,903 1968 132 s/ 17,5 30,2 4,0 6,793 1969 141 g/ 18,0 32,6 142 8,316 1970 153 j.' 18,7 36,5 4,5 9,632 1971 162 19,2 37,7 4,5 10,549 1972 168 19,1 40,9 4,7 11,526 1973 173 18,9 41,7 4,6 n.d. Source: Ministry of Education Notes: a/ The available data refer to the governorate area: they have been corrected (multiplied by 0.87, the ratio of the number of students in the District area in 1971 to the number of students in the governorate area in 1971 in order to correspond to the area of the present governorate, i.e. the District area. b/ The available data also refer to the governorate area, but have not been corrected because all secondary institutions are located within the District area. c/' All institutions of higher education in Tunisia are located in the District of Tunis. -- 124 - The cost differentials between Tunis and the rest of the country, and Bsais' consideration of expenditures for services by the Ministry do little to explain the discrepancy between these two sources. It was tberefore decided to construct a series for secondary and higher education, on the basis of the Public accounts figures, making it possible to calculate a unit cost for 1971. According to Bsais the unit cost of higher education has remained stable in current dinars. These trends have been used to calculate the series of unit costs; multiplying by total enrollments, we obtain the series of total costs. For primary education, the Bsais figures have been used. The results of these cal- culations - such as they are - are shown in Table VI-3. Table VI-3 Education: Operating expenditures, Tunis, 1962-73. Primar a/ a/ Secondary Hi Unit Total Unitb/ Total nit yTtal 77 (,0 D) - (1,000 D) 77F (17oo D) 1962 16,6 1,543 42,8 715 242 559 1963 17,1 .1,742 43,9 808 242 694 1964 16,1 1,787 45,8 943 242 802 1965 17,4 2,053 48,8 1,108 242 1,110 1966 19,0 2,204 50,7 1,237 242 1,320 1967 20,0 2,520 52,0 1,440 242 1,428 1968 19,8 2,614 53,5 1,616 242 1,644 1969 20,3 2,862 55,7 1,816 242 2,012 1970 22,8 3,488 56,3 2,244 2h2 2,331 1971 23,0 d/ 3,864 60,8 2,292 242 2,789 1973 23,0 / 3,979 63,5 2,648 - Sources and notes: a/ Based on Bsais, Abd-el-Jabbar, D6penses d'Education Croissance Economique: le cas du Maroc et de la Tunisie, 1974. b/ Calculated on the assumption that the unit cost has remained stable in constant dinars. c Assumed to be stable in current dinars. d/ Estimate - 125 - In the case of capital expenditures, only national information is available, which can be used as such with respect to higher education. For each of the other levels of education, total expenditures from 1962- to 1971 were divided by the increase in the number of students during that period. This quotient is the average marginal cost of investment per student, which was then multiplied by the increase in enrollment each year, giving a series for capital expenditures. The procedure is based on the hypothesis that the stock of capital per student is con- stant, and that expenditures serve to maintain this stock at a constant level. Tn the short term this hypothesis does not necessarily hold true. An increase in the number of students in one year may not be accompanied by any capital investment: classrooms will simply become more crowded. But over a period of 10 years or so, the hypothesis is very reasonable. The series in Table VI-4 give acceptable orders of magnitude, even if their fluctuations are not guaranteed to be exact. Table VI-4 - Education, Tunis: Capital expenditures, 1962-73. Expenditures Primary Secondary Higher (1000 D) (1000 D) (1000 D) 2962 n.d. n.d. 43 1963 301 401 530 1964 309 533 270 1965 250 479 680 1966 75 645 600 1967 396 950 830 1968 244 720 1,905 1969 376 707 2,010 1970 521 1,197 2,580 1971 396 372 1,980 1972 278 1,049 n.d. 1973 237 261 n.d. The hypothesis of a constant stock of capital per student permits an estimate of amortization and of the opportunity cost of the capital utilized. It is sufficient to complete the analysis by noting that the of average and marginal costs of capital are equal. Hence the stock/capital - 126 - per student at the primary level was 33 dinars in 1962. Assuming that this capital is amortized over 20 years, annual amortization is 1.65 dinars. Assuming a discount rate of 10%, the annual opportunity cost of capital is 3.3 dinars. These figures have been added to the unit costs of Table VI-3. At the secondary level - and still looking at 1962 - under the same assumptions amortization is 11.6 dinars and the opportunity cost of capital is 23.6 dinars. These new data have been used to construct the series for the economic cost of education, which are presented in Table VI-5. Table VI-5 Education, Tunis: costs, 1962-73 Primary Total Secondary Total Higher Total unit D (1000 D) unit (D) (1000 D) unit (D) (1000 D) 1962 21,5 1,999 78,2 1,306 442 1,020 1963 22,5 2,295 80,3 1,477 442 1,268 1964 21,h 2,375 83,6 1,722 442 1,466 1965 23,1 2,726 89,2 2,025 hI42 1,954 1966 24,9 2,888 92,6 2,259 4h2 2,11 1967 26,1 3,289 95,2 2,637 442 2,609 1968 26,0 3,432 97,7 2,950 442 3,002 1969 26,8 3,779 101,7 3,315 4h2 3,675 1970 29,4 4,498 102,9 3,756 h42 4,258 1971 29,9 4,84 108,7 4,098 42 4,66o 1972 30,3 5,090 111,1 4,543 442 5,094 1973 30,4 5,259 115,8 4,828 442 n. d. Section 3. Services provided in Tunis by the Ministry of Health The Ministry of Public Health operates the hospitals, clinics and maternal-child health centers in the District, as it does in the rest of the country. The scant information available on the number and activities of these health centers is given in Table VI-6. The number of hospital beds is known only for 1961 and for 1969-72; interpolation has been used to construct a complete series, but it is very imprecise. 127 - Data pertaining to expenditures are even more sparse. However, hospitals are public institutions with financial autonomy, and their accounts appear in the records kept in the Directorate of Public Accounts. This source has been used to calculate operating expenses borne by the State in 1971, which total D 5,16h,000. A series has been constructed on the basis of this figure, assuming that expenditures are proportional to the number of beds; obviously, the series thus obtained is of extremely doubtful accuracy. Table VI-6 Health, Tunis, 1961-73 Hospital Days of Expenditures Hospitals Clinics beds hospitaliza- Operating Capital e/ tion (1,000) (1,000 D) (1,000 D) 1961 n.d. n.d. 3,112 a/ n.d . 3,20 d/ 650 1962 n.d. n.d. 3,342 b/ n.d. 3,520 R/ 650 1963 n.d. n.d. 3,572 b/ n.d. 3,770 d/ 650 1964 n.d. n.d. 3,802 b/ n.d. 4,010 E/ 650 1965 n.d. n.d. 4,032 S/ n.d. 4,250 Z/ 650 1966 n.d. n.d. 4,262 5/ n.d. 4,490 / 650 1967 n.d. n.d. 4,492 b/ n.d. 4,740 / 650 1968 n.d. n.d. 4,722 bJ n.d. 4,980 d/ 650 1969 13 n.d. 4,953 a/ 1,625 5,220 d/ 650 1970 13 19 4,980 2/ 1,538 5,250 2/ 650 1971 1 24 4,898 a/ 1,519 5,164 c/ 650 1972 14 19 5,022 a/ 1,461 5,290 d/ 650 Notes and sources: Ministry of Health Estimated by linear interpretation and therefore very imprecise c/ Directorate of Public Accounts d/ Estimated and very imprecise e/ Very rough estimate. The only available figure for capital expenditures refers to the entire 1962-71 period. Capital expenditures are given as D 6,655,000 for the decade, or an average of 665,000 dinars per year. -.128- This figure may be used to make a very rough estimate of the capital utilized in 1971: 10 million dinars. With an amortization rate of 10% and a discount rate of 10%, 2 million dinars must be added to operating expenditures to obtain the economic cost of health service. Section 4. Services provided in Tunis by the Ministry of Infrastructure The Ministry of Infrastructure - formerly the Ministry of Public Works and Housing - plays an active role in two main areas: the trans- port infrastructure and housing. Unfortunately, the available data are of little use in the evaluation of this activity. Action in the area of housing is disregarded here. The figures available on expenditures for the air and port infra- structures were given in connection with OPAT and OPNT. As for highway infrastructure expenditures, the following series has been constructed by adding capital expenditures made with budgetary funds to those made with foreign aid, as shown in Table VI-7. No data are available on the highway maintenance expenditures undertaken by the Ministry. Table VI-7 Capital expenditures on highways, Governorate of Tunis, 1962-73 1,000 current D 1962 200 1963 340 1964 --- 1965 160 1966 305 1967 529 1968 1,278 1969 585 1970 296 1971 17 1972 295 1973 304 Source. Ministry of Infrastructure Note: The boundaries of the Governorate of Tunis have varied. 1/ See Ministry of Economr, DAT Tunis 72-76, op. cit., Amex E5, for a list of the principal projects executed from 1966 to 1971. -129 - Chapter VII SERVICES PROVIDED BY TIE GOVERNORATE AND THE DISTRICT Section 1. Organization of the Governorates of Tunis and of the District It was noted in Chapter II that there is another local jurisdicti,:n above the communes, known as the governorate (or more precisely the Governorate Council), the ambiguous nature of which was pointed out. In the case oi the Tunis region, two important changes took place in 1972; (i) the Governorate of Tunis was divided into two governorates: Tunis- South and Tunis-North; and (ii) the Governorate Council of Tunis-North was made a District. The governorates have three main functions' (i) to administer the non-commune part of the territory; (ii) to supervise the activities of the communes; (iii) to carry out, on behalf of the technical minis- tries - which assign them credits for this purpose - a nimber of capital expenditures. Little can be said about the organization of the governorates before 1972. The governor, who was also the mayor of the commune of Tunis, used the technical and administrative services of the commune of Tunis, and had practically no administrative machinery of his own. The governorate is divided into delegations, which in turn are divided into imadas. The governorate of Tunis (District) presently comprises eight delegations and 43 imadas. It should be noted that this division into delegations and inadas applies to the govern-orate as an / f. Decree of November 25, 1973. -130 administrative division and not as a local jurisdiction. The District will shortly have an administration which has not yet been set up (February 1974) but which was outlined in a recent decree, as shown in the following chart. Office of Publications General Office of Administrative and Information Directorate and Financial Affairs Directorate of Planning Directorate of Programming Directorate of and Studies and Budget Supervision Supervision and execution of public investment . -programs; Office of Office of Office of Office of Supervision of activities Planning Studies Programming the of line agencies Figure VII-A Organization of the District. The financial and accounting organizatioa of the District is under study. It undoubtedly will not differ greatly from that of a governorate council, which is closely modeled on that of the communes. There is the same dichotomy between the ordinary or Title I budget and the extra- ordinary or Title II budget; the same practice of initial budgets for year t prepared in July of year t-. and of supplemental budgets pre- pared in July of year t; the same separation between the paying officer, who is the governor, and the finance officer, who is the collector of taxes (receveur) of the chief town of the governorate, or more precisely, in the case of Tunis, the receveur des Domaines3 and the same posting of receipts and expenditures by the paying officer and the finance officer. Similarly, the figures recorded in the statements for December of each year will be kept in the Directorate of Public Accounts of the Miristr of Finance. Section 2. Finances of the Governorates of Tunis Table VII-1 presents the figures for receipts and expenditures cal- culated on the basis of the statements prepared by the finance officers. Detailed analysis of the finances of the governorates is not very interesting for three principal reasons. The first is that the territory of the governorate of Tunis-does not coincide with that of the area under study; only the figures for the governorate of Tunis-North, available for 1972 and 1973, refer to the area of interest here. For prior years it is impossible to distinguish receipts or expenditures referring to the area of the District alone; one might assume that receipts and expendi- tures prior to 1972 were apportioned between the District zone and the zone of Tunis-South as they were apportioned in 1972 and 1973, but such an assumption would not have a serious basis. The second is that from 1962-1972 the territory of the Governorate of Tunis was modified several times. The variations in the series reflect these variations in territory as much as changes in the economic situations. The third reason is that the bulk of receipts and expenditures are actually assigned credits from the central ministries, which are merely channeled through the governorates. Earmarked subsidies, which average over 90% of the budget resources of the governorates of Tunis, correspond to specific investments which have been decided by the central ministries and which the governorates are merely authorized to carry out. Capital expenditures, which are financed almost entirely by assigned credits, are the counterpart of these special subsidies. The freedom of action -132 of the governorate council is thus limited. However, it is not completely lacking. First of all, certain governors can - illegally - change the assignments of credits and use the funds provided for school construction to build a mosque (or vice versa). Furthermore, the assignment of some credits is deliberately imprecise: such is the case of credits for the "struggle against underdevelopment", which appears to have accounted for 30-50% of the special subsidies. These credits, the purpose of which is much more social than economic, makes it possible to provide work for unemployed persons on public works projects. The governorate also has some freedom of action within the allocation of operaLting expenditures; but this is limited by the small amount of unassigned receipts. These unassigned receipts consist of contributions from the common fund. As noted in Chapter IV, 17.5% of the first fund is prorated among the governorates according to their population living outside commne boundaries, while 17.0% of the second is apportioned among the governorates according to the surface area of their road systems. The "other receipts" are the same as those of the communes and are modest. The rental value tax is applied to properties in the non-commine zones of the governorates; these are obviously few in number and moreover difficult to tax, and the yield is negligible. Financially, the governorate of Tunis scarcely exists. The district cannot perform its assigned functions without additional resources. -133- Table VII-1 Receipts and Expenditures of the Governorates cf Tunis, 1962-73 (in millions of D) General Other Earmarked Total Operating Capital Total subsidy receipts subsidies receipts qxpendi- expendi- expendi- tures tures tures TUNIS 1962 29 6 171 206 19 151 170 1963 37 7 956 1,101 53 300 353 1964 11 5 848 864 39 1,195 1,234 1965 59 18 761 839 56 842 898 1966 49 3 1,232 1,276 38 1,081 1,119 1967 29 10 1,182 1,221 46 1,517 1,563 1968 23 24 1,333 1,381 67 1,354 1,421 1969 34 11 1,539 1,586 32 1,400 1,432 1970 38 36 846 920 30 669 700 1971 91 23 774 885 89 793 882 TUNIS SOUTH 1972 76 5 150 231 33 101 134 1973 97 13 1,L87 1,598 87 709 797 TUNIS NORTH 1972 20 16 523 558 37 508 546 1973 26 4 1,537 1,567 13 850 863 Source: Based on statements prepared by the finance officers. Note: The figures refer to sums actually received and disbursed from January 1 to December 31 (cash system). CHAPTER VIII EXPENDITURES, COSTS AND FINANCING OF URBAN PUBLIC SERVICES IN TUNIS Section 1 - Exenditures and cost of urban public services It is now time to attempt a consolidation of the quantiative estimates made in the preceding chapters. Tables VIII-1 and VIII-2 show costs and expenditures for 1971, by type of public service and by agency. These tables should be interpreted with great caution; many of figures they contain are (as explained in preceding chapters) no more than guesstimates. Nevertheless, the orders of magnitude which they indicate can be regarded as acceptable. They can therefore be used to gain some idea of the relative importance of the various public services and of the d1ifferent agencies involved in providing those services. What does become clear both from the expenditures statement and fran the cost statement is that thei are four umajorn UPS: electricity, education (primary and secondary), transportation and health. Each of these accounts for roughly 20% of total expenditures and total costs. The remaining UFP, are much less important (in terms of cost) as they together account for the remaining 20% of the total. Turning to the agencies, we find that the State (which provides two of the major services - education and health- provides almost half, while the public service companies (which provide the two other major services) together account for roughly 40% of expenditures and costs. Even though the municipalities are involved in several fields, they bear only 10% of the costs and 16% of the expenditures. In the final analysis, therefore, their financial contribution is modest. Table vIII-1 operating Expenditures of U.P.S. in Tunis, by U.P.S. and By Agency 1971 (1000 dinars) Total U.P.S./Agency Water Electricity Sanitation Transportation Telephone Education Health Others Amount % Municipality of Tunis 1,370 b/ 390 b/ 2,154 b/ 3,914 13 Suburban municipalities 260 b/ 100 bI 674 b/ 1,034 3 Total Municipalities 1,630 bi 49 bI 2,828 b/ 4,948 16 Ministry of Posts 2,413 2,413 8 Ministry of Educatipn 6,108 aI 6,108 20 Ministry of Health 5,164 5,164 17 Ministry of Infrastructure n.a. n.a. Total Ministries 13,685 44 S.O.N.E.D.E. 1,055 1,055 3 S.T.E.G 5,928 5,928 19 S.N.T. 3,3,9 3,329 11 S.N.C.F.T. 61h8 688- 2 O.P.A.T 607 607 2 0.P.N.T 1.,006 1,006 3 Total Companies 12,613 40 GRAND TOTAL (1000 D) 1,055 5,928 1,630 6,120 2,413 6,108 5,164 2,828 31,246 100 GRAND TOTAL(%) 3 19 5 20 20 17 9 100 Source:- Preceding tables Note: a/ Primary and secondary education only bl Guesstimate I Table VIII-2 Costs of U.P.S. in Tunis, by II.P.S. aad by Agency, 1971 (1000 Dunars) U.P.S./Agency Water Electricity Sanitation Transportation Telephone Education Health othlc!rs unt Municipality of Tunis 1,079 a/ 600 a/ 1,284 a/ 2,963-a/ 8 Suburban municipalities 270 a/ 160 a/ 320 a/ 740a/ 2 Total Municipalities 1,349 a/ 750 a/. 1,604 / 3,703a! 10 Ministry of Posts 3,000 b/ 3,000b/ 8 Ministry of Education 8,942 8/ 8,942b/ 23 Ministry of Health 7,200 b/ 7,2001b/ 19 Ministry of Infrastructure n.a. n.a. n.a. Total Ministries 19,142b/ 50 S.0.N.E.D.E. 1192 . 1,192 3 S.T.E.G. 8,365 8,3-5 22 S.N.T. 3 486 3,486 9 S.N.C.F.T. 963 963 2 0.P.A.T. 946. 946 2 O.P.N.T. 844 344 2 Total Companies 15.796 41 GRAND TOTAL (1000D) 1,192 8,365 1,349a/ 6,989 3,000 b/ 8,942 b/ 7,200 b/ 1,604 a/ 38,641b/.100 lRAND TOTAL (.) 3 22 3 18 8 23 19 4 1.00 Notes: a/ Estimate, after Bouinot b/ Very rough estimates 01 -137 -- The picture does not change appreciably when we turn to Table VIII-3, showing capital expenditures. Even more caution is needed in interpreting this table, firstly because capital outlays can fluctuate from year to year (so that the 1971 data are notmecessarily typical) and secondly because in some cases the figures shown are highly questionable. The sizable capital expenditures incurred by STEM (4% of the estimated total) swell the proportion accounted for by the companies and reduce the State's share; the share of the municipalities remains close to 10%. Have these proportions changed noticeably over the past decade? Tables VIII-4 and VIII-5, together with the graph (Figure VIII-A) allow us totazard an answer, which is in the negative. The amounts and, above all, the rates at which expenditures have grown have not, of course, been identical. Expenditures by the municipality of Tunis have remained more or less constant since 1968; expenditures by STEG leveled off between 1965 and 1970; whis those of OPNT have been rising sharply since 1970. In general, however, there has been no major upheaval in the structure of expenditures. This statement must, however, be qualified as far as capital expenditures are concerned. While capital outlays by the municipalities and the State have tended to remain rather constant, those of the companies, in particular STEG, have been shooting up rapidly, with the result that the pattern of capital expenditures is changing in favor of the companies. These data on past expenditures tell us little or nothing about any increase or decrease in services provided. In certain cases, as for expenditures by the municipalities, we unfortunately know nothing about the progress or otherwise of the services provided (e.g. tons of trash collected). In other cases, as for the MInistir of Health, the expenditure figures have been Table VIII-3 Capital Expenditures of U.P.S.. in Tunis, by U.P.S. and by Agency, 1971 (1000 dinars) Total U.P.S./Agency Water Electricity Sanitation Transportation Telephone Educapion Health Others Amount % Municipality of Tunis 50 a/ 100 af 731 a/ 881 6 Suburban Municipalities 25 a/ 50!I 337 a/ 412 3 Total Municipalities 1,293 9 Ministry of Posts 300 a/ 300 at 2 Ministry of Education 1,000 a 1,000 at 7 1jinistry of Health 700 a/ 700 a/ 5 Ministry of Infrastructure 400 at 400 a/ 3 Total Ministries 2,400 a/ 16 S.O.N.E.D.E. 103 103 1 S.T.E.G. 6,582 6,582 44 S.N.T. 725 725 5 8.N.C.F.T. 700 / 700 at 5 O.P.A.T. 2,000 at 2,000 a/ 13 0.P.N.T. 1,276 1,276 8 Total companies 11,386 a/ 76 GRAND TOTAL (1000 D) 103 6,582 75 a/ 5,251 a/ 300 at 1,000 at 700 a/ 1,068 at 15,079 at 100 GRAND TOTAL(%) 1 44 - 35 2 7 5 7 100 Source: Preceding tables Note: at Very rough estimate CO b -H Table VIII-4 Operating Expenditures of U.P.S. in Tunis, by agency, 1962-73 (1000 dinars-current) Municipalities Ministries Companies Tunis Suburbs Total Posts Education Health SONEDE STEG SNT SNCFT OPAT OPNT 1962 1,863 h99 3,421 n.d. 2,258 3,520 n.d. 2,356 n.d. 496 n.d. n.d. 1963 2,266 510 3,792 1,120 2,550 3,770 n.d. 2,813 1,405 538 n.d. .n.d. 1964 2,363 560 3,330 1,148 2,730 4,010 n.d. 3,870 1,495 580 n.d. n.d. 1965 2,880 570 5,721 1,384 3,161 4,250 n.d. 5,816 1,573 614 n.d. 438 1966 3,282 741 7,112 1,586 3,441 4,490 n.d. 5,363 1,852 679 n.d. 453 1967 3,785 814 7,587 1,806 3,960 4,740 789 5,015 2,027 601 n.d. 434 1968 4,603 917 8,020 1,950 4,230 4,980 846 5,431 2,158 623 n.d. h73 1969 4,159 954 7,270 2,173 ,678 5,220 823 5,260 2,539 700 n6ld. 690 1970 3,824 887 6,938 2,147 5,543 5,250 1,021 5,349 2,936 743 :A.ed. 675 1971 3,914 1,034 6,241 2,413 6,108 5,164 1,055 5,928 3,329 688 607 1,006 1972 4,717 1,182 7,108 n.d. 6,190 5,290 908 6,783 4,063 736 818 1,146 1973 n.d. n.d. n.d. 6,627 n.d. n.d. 7,373 n.d. 808 1,017 n.d. Source: Preceding tables Table VIII-5 Capital Expenditures of U.P.S. in Tunis, by agency, 1962-73 (1000 dinars-current) Ministries Municipalities Infra- Companies Tunis Suburbs Education Health Structure SONEDE STEG SNT SNCFT OPNT 1962 739 320 n.d. 650 200 n.d. 619 n.d. n.d. 1963 771 244 702 650 340 n.d. 906 266 n.d. 1964 90 319 842 650 n.d. n.d. 3,364 28 n.d. 1965 1,870 401 729 650 160 n.d. 6,756 304 18 1966 2,389 699 570 650 305 n.d. 4,265 534 25 1967 2,381 607 1,346 650 521 n.d. 6,988 370 267 1968 1,930 571 964 650 1,278 n.d. 3,297 691 700 130 1969 1,684 473 1,083 65o 585 211 3,056 1,644 385 1970 1,857 370 1,718 650 296, 127 4,305 186 263 1971 881 412 768 650 17 103 6,582 725 270 1972 870 409 1,327 650 295 89 9,159 960 491 1973 n.d. n.d. 498 650 304 n.d. 6,786 n.d. n.d. Source: Preceding tables. 0: - 141. - Figure VIII-A Operating Expenses of Various Agencies 1962-73 If 7 000n 6 000 Helt 5 000 ea 4000 3 000 *ost* Psts ... .Suburbs *op1 1 000 L.~ - - -- - - 1962 53 64 65 66 67 68 69 70 71 72 73 1/ Logarithmic scae CorCi-nate) - 1h2 - calculated on the basis of the services provided (measured in terms of number of hospital beds). In yet other cases, as for the Ministry of Education, the measurement of the service provided (the number of students) is as unreliable as the estimated expenditures. In yet other cases, the service can be related to expenditures or cost. In these cases (electricity, water supply and mass transit) expenditures in current dinars have risen slower than or have kept pace with the growth of service. This means that expenditure per unit of service has fallen in real terms or, in other words, that most of the companies have achieved increased producttity. Section '2. Financing of the UPS It now remains for us to try to say who pays for the public services in Tunis. The first column of Table VIII-6 shows the "primary" financing of the UPS in 1971. For the companies and for the Ministry of Posts and Telegraphs, the table shows the amounts actually received; for the municipalities and the remaining ministries, actual expenditures are shown. The next question is: where do these sums come from? In the case of the companies and the Ministry of Posts, they come from the users, while for the ministries they come from the State budget. The sittation is a little more complex for the municipalities. Their budget is financed as to 35% out of the local land tax, 15% out of payments for services received by users, and 50% out of subsidies from the State budget. The primary financing of the municipalities can therefore be distributed over these secondary sources of financing. The last line of Table VIII-6 shows the secondary financing of the UPS. h143 - Table VIII-6 Financing of U.P.S. Expenditures in Tunis, 1971 (1000 dinars) Secondary Total Users State Budget Local Land Tax Primary Municipalities 4,948 742 2,474 1,732 Posts 4,032 4,032 Other ministries 11,272 11,272 SONEDE 2,193 2,193 STEG 5,072 5,072 SNT 4,002 4,002 SNCFT 495 495 OPAT 1,220 1,220 OPNT 1,500 1,500 Total (Amount) 34,734 19,256 13,746 1,732 Total (W) 100 55 40 5 It can thus be seen that the UPS in Tunisia are financed as to more than one half by users. A more detailed analysis would distinguish between households and enterprises. The State budget, i.e. national taxes and treasury receipts provides just under half of the financing for the UPS in Tunis. It would be interesting to compare this figure with the national taxes paid by house- holds and enterprises in Tunis (also taking into account other State expenditures from which Tunis benefits, such as expenditure on national defense). The balance, roughly 5%, is financed out of the local land tax. Chater IX CONCLUSIONS AND RE30'NEM1NDATIONS Sec tion 1 - Summary Urban public services in Tunis are provided by three distinct levels of government: the national ministries, the semi-autonomous national agencies, and the minicipalities (communes) of metropolitan Tunis. 1/ The ministries provide education, health and telephone services; the national autonomous companies are responsible for water supply, electricity, and public transport; the municipalities primarily provide refuse collection, sewerage, 2/ roads and bridges, parks, sports and recreation, markets, slaughter houses and fire protection. With the exception of telephone services, markets and abbatoirs, the national companies are responsible for the self-financing services, i.e. those services which are (at least in part) financed by user charges. The ministries and municipalities share in the remaining services, where self-financing is either not possible, or not utilized in practice. Expenditures in these areas are financed primarily by revenues from taxation. The national companies are well staffed and appear to be the most efficiently run of the three layers of public agencies. The companies' account- ing and budgeting systems are being upgraded rapidly, and should soon permit a fairly accurate financial and economic assessment of their operations, and a more consistent application of modern management techniques. In contrast, the 1/ An intermediate level of government, the Governorates and the recently created District of Tunis, functions mainly as an administrative inter- mediary between the national and the local governments. 2/ This function is soon to be transferred to O.N.A.S. (Office National de l'Assainissement), a new national agency. accounting and budgeting practices of the other agencies, in particular of the municipalities, are unsatisfactory and prevent adequate fiscal planning. Cumbersome budgeting procedures actually prevent the municipalities from fully spending their annual revenues. In terms of functional distribution of expenditures, four major urban public services may be distinguished: education, health, transportation, and electricity. Each account for roughly 20% of total expenditure, i.e. as much as all other urban public services combined. The first two of these services are provided largely by ministries, the remaining two by national agencies; no major urban public service is provided by the municipalities. Fithermore, the municipalities are administratively and financially dependent on the national government, which narrowly prescribes their resource base and functional responsibility. Between 1967 and 1971 real.per capita expeuditure on urban public services in metropolitan Tunis increased at an average rate of 4.4 percent. Considering that real per capita income in Tunisia as a whole increased at an annual rate of 4.6 percent during the same period, and since it may safely be assumed that per capita income in metropolitan Tunis grew at least as fast as the national average, one can conclude that the income elasticity of spending on urban public services during this period was close to, and probably slightly below unity. The fastest expenditure growth was recorded by the national companies, which experienced a real rate of increse of 11.7 percent in their per capita spending. The ministries increased their real per capita expenditure during the same period by an annual rate of 5.9 percent, while real per capita expenditure of the municipalities actually decreased at an annual rate of 12.2 percent. As a result of this differential growth 146 - performance, the share of the municipalities in metropolitan public spending fell from 25 percent in 1967 to 13 percent in 1971. During the same period the shares of the ministries increased from 42 percent to 45 percent and that of the national agencies from 33 percent to h3 percent. While the shift in expenditure distribution between national and local agencies as such is neither surprising nor necessarily detrimental, the decline in real per capita spending among the municipalities must be of concern. It is very unlikely that there are such large economies of scale in the services provided by the municipalities that the decline in real per capita spending did not also lead to a reduction in the quantity and/or quality of services provided to the growing population in the metropolitan area. Two reasons may be found for the -decline in real per capita expenditure of the municipalities. First, as mentioned earlier, th'local governments have not been able to increase their spending in line with their increases in revenues due to the cumbersome budgeting and financial procedures limiting the flexibility of the local governments in allocating current year revenues. Second, totthe degree that revenues limited the longer term spending capacity of the municipalities, the overall slow growth in revenues between 1962 and 1972 helps to explain the poor expenditure performance. Real per capita revenue of the municipalities remained approximately unchazaged over the period of 1962 to 1972. Since per capita incomes in the city increased during the same period, this implies that the income elasticity of local government revenues was considerably below unity; i.e. for every percentage increase in income generated in the metropolitan area the local revenues 1/ Note that during the period under consideration no major shifts in expenditure responsibility occurred from the municipalities to the national public authorities, which might have explained the drop in real per capita spending. -1)47 increased by a smaller percentage. Given the existing inadequacy in the availability of public services provided by the municipalities, and given the fact that expenditure needs in the urban area are likely to increase at least as fast as income generated in the city, the municipalities could not have met the demands even if expenditures had consistently grown in line with revenues. Among the municipalities' fiscal resources, locally collected revenue: declined in proportional terms, from 64.6% in 1962 to 49.3/O in 1973. These revenues have thus been even more inelastic than the overall revenue structure of the municipalities. The property tax is the prime source of local funds, despite its low effective rate (less than one percent in terms of a capital value tax on properties). Assessment and collection problems account primarily for the slow growth in revenues from this tax. Other sources of locally raised revenues, mainly minor taxes and fees, provided only veiy inelastic revenue growth. Given the constraints placed by the central government on local revenue authority, the municipalities could not tap new, more elastic revenue sources. Central government grants to municipplities were the other main source of local revenues. Their contribution increased steadily over recent years, and they accounted for about 50 percent of total local revenues in 1973. The relatively fast growth of national grants is explained by the fact that they are overwhelmingly shares in nabional taxes with a rela+1vy7 high income elasticity, and by the fact that the distribution formulae favor metro- politan Tunis as compared with the rest of the country. The expenditures of the ministries in metropolitan Tunis are financed from national budget resources, with the exception of the telephone services, which are self-financed. The national agencies (inparticular the water and electricity companies) charge equal rates throughout the country, including the Tunis metropolitan axea, even though the costs in Tunis are estimated to be below the national average. If one can assume that the demand for these services is quite inelastic with respect to price changes, such a policy merely involves a cross-subsidy from users in the metropolitan area to users in the rest of the country. This may be justified on the basis of nationally determined regional development and income-redistribution policies. If, however, the demand for these services is quite elastic, then the redistribution effect of the cross-subsidy has to be weighed against the loss in efficiency in resource allocation. 2/ The functional and geographical fragmentation of the provision of urban public services among the various layers of official agencies has resulted in the need for a coordinating and planning body for the entire area of metropolitan Tunis. Thenewly created District of Tunis is planned to meet this need, but its activities and procedures are only now beginning to take shape. The statutes -have so far provided only very broad guidance, charging the District with the responsibility for study of problems pertaining to infra-structure and physical planning, for physical planning itself, and for the coordination, 1/ This pricing policy appears to reflect national government priorities more than considerations linked to the financial or economic viability of the particular public utilities. A more detailed st-dy of supply and demand conditions of the particular utilities would be necessary to establish the precise nature of the trade- off between loss in efficiency and gains from redistribution. However, it is important that the policy maker be aware of the implications of his deciaion, even where quantitative estimates are not available. It is also important that the pricing policies resulting in subsidies from userslin metropolitan Tunis to the rest of the country be consistent with the policy implicit in the distribution of grants from the national to local governments, which in the past appear to have favored metropolitan Tunis. -24 9- direction and supervision o'f capital investments in metropolitan Tunis (Decree of February 18, 1973). For this purpose the District was given the authority to review the capital budgets of the national agencies, as they relate to metropolitan-Tunis, and to participate in the approval of the capital budgets of the municipalities in the District (Decree of November 25, 1973). However, the District still lacks certain instruments which could greatly assist it in becoming effective as the coordinating and planning agency for investment in urban public services in metropolitan Tunis. In particular, it does not engage in long term fiscal planning; it has only insignificant financial resources at its disposal with which to initiate and finance public service activities; and it yet has to acquire the capacity to review investment programs before decisions have effectively been made. The Government of Tunisia is aware of these deficiencies and is preparing measures to deal with these and other weaknesses. Section 2 - Recommendations This section presents a number of recommendations concerning the strengthening of the municipal fiscal structure, and the functions of the District of Tunis. The municipal fiscal structure can be strengthened through a number of complementary measures: First, the budgetary and accounting nomenclature should be amended. The present nomenclature does not allow an j_J_L economic analysis of the fiscal performance of the municipalities; even less does it permit a forward-looking fiscal planning approach. The nomenclature should break down expenditures by major functions, not solely by adninistrative unit, so that a systematic matching of needs with planned service provisions 150 - may be achieved. A more con istent separation of capital and current accounts should also be attempted. On the revenue side, items should be grouped so as to combine comparable revenue sources, e.g., local tax revenues, local non-tax revenues, national grants, etc. 1/ Second, budgetary procedures need to be reformed to give budgets their proper control, forecasting, and planning functions. The preparation of the annual budget should involve a comprehensive survey of what is desirable and what is possible. This implies that budgets should be adopted before the beginning of the fiscal year for which they are designed, and realistic estimates of prospective revenues be combined with a consistent set of planned expenditures. This applies in particular to the annual capital budget, which should be treated like the operating budget and should be prepared at the same time, i.e., in the last two months of the preceding fiscal year. Similarly, the budget and accounting procedures of the ministries could be improved to allow a better economic appraisal of the activities of these agencies in the metropolitan region. Further, a regionalization of accounts would be extremely useful in planning the regional expenditures of the ministries. As in the case of the municipalities a breakdown of expenditures by functions instead of by administrative units is also required. Third, the local revenue system should be strengthened by a reform of the property tax and by giving local authorities in Tunis access to new sour.ces of revenues. The reduction in the property tax rate as buildings get older might be replaced by a constant proportional rate on buildings irrespective of age, in order to eliminate the element of inelasticity 17- For detailed information on budget and accounting formats and classifications, see IF, A Manual on Government Finance Statistics, draft, June 1974, and the sources cited there, especially on page ix. For a French source, see M4. Buscher, Manuel du Syst6me Statistique d'Analyse Fonctionelle et Economiue des Comptes Locaux Europ6ens Normalis6s, Conseil de 111urope, Strasbourg, 1973. - 151 - introduced into the revenue structure as a result of the existing rates. The maximum limits on the property tax rates could be eliminated, or at least be raised, to give individual municipalities greater fiscal freedom. More frequent reassessment of all rental values of property, in particular of owner-occupied properties should be aimed for. The collection and enforcement procedures should be reviewed and strengthened. Moreover, an extension of the range of tax instruments to include such pobentially very elastic tax sources as motor vehicle taxation and parking fees in the metropolitan area should be considered. Finally, borrowing could be used to finance capital outlays of local government in metropolitan Tunis more frequently than customary up to now. These reforms require joint action by local and national authorities, and the District could assume an active role in the design and harmonization of tax reform within metropolitan Tunis. Fourth, the rationale underlying the national grant system needs to be reviewed. There is no compelling reason why the municipality of Tunis should be accorded special privileges over all other municipalities in the metropolitan area. Moreover, one of the criteria used in determining the distribution of grants, the area covered by roads, is not a satisfactory yardstick of a municipality's need for national funds, and might be dropped. 1/ The two remaining criteria presently in use, population and property tax revenues, are better founded. The rationale for the former is self-evident. The second is advantageous in that it encourages the municipalities to collect more revenues from the property l/ One possible justification for the application of this criterion is the link between road surface area and maintenance needs. But since road use is -.restricted predominently to local residents, there is no apparent reason why the national government should subsidize the maintenance of this service. If it is an indirect way of channeling back to the local community revenues from a national fuel tax, then more direct tax sharing arrangements may be appropriate. - 152 - tax. But it may have itsdangers, in possibly widening existing inequalities between municipalities: Those in which housing for the well-to-do, or industrial premises are concentrated, will receive more per inhabitant than the municipalities where lower income groups are concentrated Consequently it would be appropriate for the grant formula to use the ratio of property tax collection to average income level,or to the value of the tax base,in the various municipalities, in order to make relative, not absolute tax effort the criterion for grant distribution. Finally, the fragmentation of responsibility for urban public services within metropolitan Tunis raises a numberodissues which should be considered in detail. On the one side, past attempts at centralising control has led to an unnecessarily complex system of supervision weighing on the municipalities. Six layers of supervision and financial control presently exist, - many of which could be eliminated and replaced by careful ex post auditing, combined with sanctions if necessary. On the other hand, while a reduction. in unnecessary bureaucratic complications is desirable, a further decentralisation and fragmentation of responsibility and decision making along regional or functional lines does not appear to be desirable within metropolitan Tunis. To the contrary, a strengthening of the newly created District is required, if effective overall coordination and planning of public sector activities in metropolitan 1/ These six layers are: approval of the appointment of the municipal president, who may also be removed by the national government; separation of paying officer and finance officer at the municipal level; approval of the budget by the District (of the Governorate), by the Ministry of the interior, by the Ministry of Finance, and finally by the Prime Minister. 1 53- Tunis is to be achieved. This involves, first, a broadening of the scope of responsibilities of the District, and second, a more effective set of tools with which to implement its tasks, as compared with the present framework within which the District operates. It may be doubted whether the District's present scope of responsibility, which is largely limited to the development of physical plans and to the review of the annual budgets and projects of public agencies operating within metropolitan Tunis, will allow it to operate as an effective agent in coordinating and planning the provision of urban public services. The transformation of the District into a metropolitan authority with primary responsibility for directing the use of public resources in the metropolitan area appears to be indicated by the example of similar metropolitan-wide 1/ agencies operating in a number of major cities in developing countries./ Its tasks could include a more active role in the investment planning of all public agencies operating in the motropolitan area, coordination of the revenue policies of the local governments, and direct financial, if not administrative responsibility for some of the service functions presently in the hands of the municipalities. In order to take on this new role, the District needs to be given a set of additional tools. First, the District should be made responsible for comprehensive capital budgeting of metropolitan resources and public service investments. TI. *,(ald consist of the preparation of a five-year 1/ Examples are the Special District of Bogota, Colombia; the Federal District of Mexico City; Seoul Special City; the Special District (D.K.I.) of Jakarta; and most recently the Yalcutta Metropolitan Development Authority. capital budget, which lays out in detail the capital expenditures planned for the period and matches them with a forecast of sources of revenue from which these investments are to be financed. 1/ Although such a plan by itself is not sufficient to control actual investments, it can serve as a focus for comprehensive and coordinated decision making in the distribution of planned public expenditures, and it can provide the information base necessary to initiate systematic fiscal reform. Second, as a prerequisite for this exercise the District must be enabled to collect and process information and data on the operations of the various public entities providing services in the metropolitan area. Presently, these data are scattered among the agencies, and are frequently inadequate or even non-existent. The data required relate to population, employment, housing and construction, land use, local finance, and each of the public services examined in this study. In some cases, as for water, electricity, and telephone services, the District could use data that have already been prepared, or simply improve their method of presentation. In other cases, as for education and health, it will undoubtedly be necessary to compile data sheets and to collect the information directly. Particular emphasis would need to be given to the preparation of periodic surveys of all public investment activities proceeding in the metropolitan area. Third, the District should be given some resources with which to help direct public sector activities in the metropolitan area. An immediate step could be to transfer to the District some or all of the national grants, which are presently given directly to the municipalities. The District 1/ For an example of effectiv.e capital budgeting, see Metropolitan and Regional Research Center, A Framework for Fiscal Planning: Binghampton, New York, Syracuse University Research Corporation, Maxwell School of Citizenship and Public Affairs, Syracuse University, August 1972. in turn would channel these to the lower governments in line with its expenditure and investment priorities. Experience with DATAR in France suggests that skillful use of such funds can prove an effective tool for coordination and action. A more far reaching reform could involve endowing the District with the adtinistration and collection of the property tax in the metropolitan area, which would have the additional advantage of unifying the tax and collection procedures. Part of the resources raised in this way could be retained by the District for the financing of its own functions and investment activities; the remainder would be transferred to the municipalities to finance their residual public service responsibilities. Other new revenue sources which the District could be empowered to tap are, for example, a motor vehicle tax or parking fees. Such tax reform measures, while desirable and worthy of serious consideration, may be difficult to implement in the short tWM. Fourth, the District could be authorized to intervene directly in land use development in the metropolitan area. This is of cruciAl importance, first, in order to strengthen its capacity to implement its physical planning decisions; and sond, to recapture at least in part increases in land prices which result from improvements provided by the public sector. Two tools would be appropriate: First, the District should be empowered to determine the zoning regulations in the metropolitan area in line with its physical development plan. Second, the District might be l/ T.N. DATAR (Delegation de l'Amanagement du Territoire et de lAction Regionale) is the French Regional Develooment Agency, under the authority of the Prime Minister; for a description and analysis of its experience, see J. Monod et P. Castelbajac, L'AInagement du Territoire, Paris, P.U.F., 1971; and P. Durand, Industrie et R6gions, Paris, La Documentation Frangaise, 1972. - 19~6 - authorized to act as a public land banking institution, to buy land in advance of urbanization and selling (or leasing) it later with or without infrastructure improvements for particular uses, once the land has become accessable and has been zoned for urban development.- In Tunis the situation is complicated by the fact that existing public agencies are already engaged in developing land for industrial development, housing, and tourism. This limits the scope of the activities which the District might undertake. However, it could be given a partial role in this context, first, in coordinating the activities of these three agencies within the framework of a metropolitan development plans and pr1orities and its zoning prpvisions, and second, by acquiring land at an early stage and then determining the agency to which it should be released. A first step in setting up the District as a land banking agency could be taken in the context of the Tunis sewerage project which is presently under consideration. The project which aims at clearing up the Lake of Tunis, is expected to lead to substantial value increments for a large area of presently undeveloped land around the lake. The District could be given the authority and the resources to acquire this as yet low cost land, in order to benefit from the increases in value associated with the sewage disposal project, and to ensure systematically plAnned development of the area. Finally, the District needs to be given a more solid base in the Tunisian administration. Its present ambiguous status, partly local authority, partly independent agency, should be clarified by making the District a fully 2/ For a discussion of some of the issues involved in land banking and examples of attempts at implementation see: 0. F. Grimes, Jr., Urban and Public Policy: Social Appropriation of Betterment, IBRD Bank Staff Working Paper No. 179, May 197 . - 19~7 - autonomous public authority. This decision would facilitate the recruitment of qualified staff and the establishment of a personnel statute, including an appropriate salary scale, that would attract highly competent personnel. The administrative circulars presently in preparation should be completed and issued as soon as possible, and should take into account the suggestions made above. BIBLIOGRAPHY Bouinot, J,, La gestion financière de la ville de Tunis, Tunis, déc. 1969, CZRES, polygraphié, vol. 1,. 120 p., vol. Il, 131 p., vol. III, 98 p. J. Bouinot, Recherches sur les finances de la ville de Tunis, Revue Tunisienne des Sciences Sociales, mai. 1971, pp. 235-247. Chatti, Mustapha et Landrieu, Bernard, Les collec- tivités locales en Tunisie, Tunis, 1969, Ecole Nationale d'Administration, Centre de Recherches et d'Etudes Administratives, 49 p. Commission Nationale Sectorielle des Postes et Télé- communications, Rétrospective Décennale 1962-1971, juin 1972, polygr. 153 p. Loi' Municipale (mise à jour au ler janvier 1970), Tunis, 1970, Irimrimerie Dfficielle, 44 p. Institut National de la Statistique, Enquete Migra- tion et Emploi, Tunis 1972-73- janvier 1973, polygr., fasc. 1, 79 p., fasc. 2, 169 p. (Etudes et Enquêtes de l'INS, N° 4). Magnet, Jacques, Les finances publiques tunisiennes, Tunis, 1969, Ecole Nationale d'Administration, 244 p. Ministère de l'Economie Nationale, Direction de l'Aménagement du Territoire, Tunis 72-76, oct. 1972, polygraphié, 190 p. + annexes. Ministère de l'Economie Nationale, Direction de .l'Aménagement du Territoire (Groupe Pluit et CERES), Villes et Dévelopnewent, juin 1973, vol.1, 636 p., vol. II, 296 p., vol. III, 256 p. Secrétariat au Plan et à i'Economie Nationale, Direction Générale du Plan, La consommniation et les dézenses des rénages en Tunisic, 1956-1.968, déc. 1970, polygraphié, 421 p.