Dakar (Senegal), December 6 to 10, 2004

WUP - WBIWater Supply and Sanitation Sector Reform Course

Session 8Special Challenges of Urban Special Challenges of Urban

SanitationSanitation

Jan G. JanssensJan G. Janssens World Bank World Bank

Dakar (Senegal), December 6 to 10, 2004Dakar (Senegal), December 6 to 10, 2004

World Bank 2004

Dakar, 6 to 10 December 2004Dakar, 6 to 10 December 2004 22

OutlineOutline

IntroductionIntroduction Issues in urban sanitationIssues in urban sanitation Institutions and regulatory frameworkInstitutions and regulatory framework Economics, pricing, financingEconomics, pricing, financing

– Overview of economics, pricing & financing of urban sanitation

– Principles for design of pricing, funding and subsidy mechanisms (linked to service levels, technologies)

ConclusionsConclusions

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ContextContext

Sanitation lags behind water Sanitation lags behind water supply in coverage, but is mostly supply in coverage, but is mostly dependent on piped waterdependent on piped water

Adequate/safe sanitation is not Adequate/safe sanitation is not just a private household issue, just a private household issue, but a community-wide issuebut a community-wide issue

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Objectives of urban sanitation

Improvement/protection of healthImprovement/protection of health– Safe removal of waste Safe removal of waste (liquid & solid)(liquid & solid) from homes and from homes and

citiescities– Safe disposal/reuse Safe disposal/reuse to protect downstream usersto protect downstream users

Protection of the environmentProtection of the environment– Fish, vegetation, aquatic ecosystemsFish, vegetation, aquatic ecosystems– Water resource conservation Water resource conservation – water demand – water demand

managementmanagement Urban developmentUrban development

– Urban planning, extension, attraction to industryUrban planning, extension, attraction to industry Optimal use of resourcesOptimal use of resources

– Wastewater reuse for agricultureWastewater reuse for agriculture– Sensible investment/cost recovery issuesSensible investment/cost recovery issues

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Urban sanitation and Urban sanitation and healthhealth

High density livingHigh density living in urban areas in urban areas requires safe sanitation to safeguard requires safe sanitation to safeguard community heath (typically requires a community heath (typically requires a sewer network)sewer network)

Lower density peri-urban areasLower density peri-urban areas can have can have low cost on-site systems which protect low cost on-site systems which protect healthhealth

A safe facility in itself does notA safe facility in itself does notguarantee an absence of health riskguarantee an absence of health risk

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Controlling disease within the city

Faeces

Future Victim

Fluids

Fingers

Flies

Fields/Floors

Food

Sanitation

Hygiene

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WardCity

River & Environs

Peri-domestic

(street, school, work-place)

Home

The urban environment

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(street,school, workplace)

Peri-domestic

Street Sewers

Home

House Connections

An “engineer’s” view

Central Treatment Works

City

Collectors

Ward

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Ward

Sewer Mains

House Connection

Home

Peri-domestic

Street Sewer

City

Interceptor/ Collector

River & Environs

Treatment Plant/Outfall

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Some questions that arise

Wastewater treatment standardsWastewater treatment standards Objectives of standards: health, environment? Objectives of standards: health, environment? What standards can we afford?What standards can we afford? Uniform treatment standards or vary with receiving Uniform treatment standards or vary with receiving

water and its use? water and its use? Reuse of wastewater when there is water scarcity Reuse of wastewater when there is water scarcity

(industrial/irrigation)(industrial/irrigation)

Sanitation and public healthSanitation and public health How do we set priorities on sewerage investment?How do we set priorities on sewerage investment?

Which towns?Which towns? Which streets?Which streets?

Where is onsite sanitation (infiltration) acceptable?Where is onsite sanitation (infiltration) acceptable?

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Urban sanitation issues

Economics, Pricing and FinanceEconomics, Pricing and Finance What is a realistic approach to paying for What is a realistic approach to paying for

sanitation? sanitation? How can we balance investment decisions How can we balance investment decisions

and priorities against available resources?and priorities against available resources? Customers are willing to pay for drinking Customers are willing to pay for drinking

water, but not for wastewater ?water, but not for wastewater ? In case of non-payment drinking water can In case of non-payment drinking water can

be cut off, wastewater can not …be cut off, wastewater can not …

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Urban sanitation issues

Institutional arrangements Institutional arrangements Who is responsible for what?Who is responsible for what? Are different arrangements needed Are different arrangements needed

in small towns, large cities?in small towns, large cities? How is this decided/negotiated?How is this decided/negotiated?

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Sanitation, hygiene and water

Public health issues of faecal contaminationPublic health issues of faecal contamination is about more than “protecting water quality”is about more than “protecting water quality”

““Groundwater protection”Groundwater protection” is not an absolute…is not an absolute…it depends uponit depends upon useuse of groundwater as to of groundwater as to whether it is an issuewhether it is an issue

How to target sanitation investmentsHow to target sanitation investments where where they will have the biggest impact?they will have the biggest impact?

Industrial wastesIndustrial wastes are an entire major topic that are an entire major topic that merits a workshop on its own!merits a workshop on its own!

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Who needs to be involved? e.g.

Min. of Public Works (Min. of Public Works (finance, capital budgetfinance, capital budget)) Min. of Economic Affairs and Finance (Min. of Economic Affairs and Finance (subsidy issuessubsidy issues)) Min. of Health (Min. of Health (health priorities, hygienehealth priorities, hygiene)) Min. of EnvironmentMin. of Environment MunicipalityMunicipality

– Health department (priorities, hygiene promotion)Health department (priorities, hygiene promotion)– Urban developmentUrban development

Utility (Utility (service provider, bill collectorservice provider, bill collector)) Householder (Householder (acceptance, bill payeracceptance, bill payer)) and Othersand Others……

None of the above can solve on their None of the above can solve on their own!own!

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Understanding the Understanding the technologiestechnologies

Network systemsNetwork systems– Centralized and decentralized Centralized and decentralized – Standard and condominialStandard and condominial

On-site systemsOn-site systems– Conservancy tanksConservancy tanks– Septic tanks and variants (pour-flush etc)Septic tanks and variants (pour-flush etc)– ““Dry” systems (pits, VIPs)Dry” systems (pits, VIPs)

Informal systemsInformal systems– The “flying toilet”The “flying toilet”

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What are the lessons?

Focus on the household…Focus on the household…– Where most disease transmission occursWhere most disease transmission occurs– Which are most exposed, most vulnerable?Which are most exposed, most vulnerable?

Hardware and softwareHardware and software– Hygiene is crucial to achieve health benefitsHygiene is crucial to achieve health benefits– Hygiene is a challenge Hygiene is a challenge everywhereeverywhere in the world… in the world…

consistently shown to reduce diarrhoeal disease consistently shown to reduce diarrhoeal disease by up to 50%by up to 50%

Many sanitation technologies do the jobMany sanitation technologies do the job– ……depends on the context…what can best serve depends on the context…what can best serve

the household?the household?

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OutlineOutline

IntroductionIntroduction Issues in urban sanitationIssues in urban sanitation Institutions and regulatory Institutions and regulatory

frameworkframework Economics, pricing, financingEconomics, pricing, financing




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Institutions, and,Institutions, and,regulatory frameworkregulatory framework

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Institutional Institutional arrangementsarrangements

Choice of delivery institution Choice of delivery institution affects financing optionsaffects financing options– Water and sewerage/sanitation Water and sewerage/sanitation

utilityutility– Sewerage/sanitation utility (rare)Sewerage/sanitation utility (rare)– Local government provision Local government provision

(common)(common)

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Water and sanitation services

Drinking water supply

Wastewater collection

Wastewater treatment

Domestic and industrial clients

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Functions in the water sector

Drinking water supplyDrinking water supply– Intake– Production and transmission– Distribution– Billing and collection

Wastewater collectionWastewater collection– TransportTransport– Billing and collectionBilling and collection

Wastewater treatmentWastewater treatment– TreatmentTreatment– DischargeDischarge– Billing and collectionBilling and collection

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Overall Objective

The objective is to make the The objective is to make the most efficient, effective and most efficient, effective and equitable use of the investments equitable use of the investments in sanitationin sanitation

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Options

Integration of all servicesIntegration of all services

Specialization of servicesSpecialization of services

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Separate functions

SpecializationSpecialization– high quality servicehigh quality service– high reliabilityhigh reliability– adequate servicesadequate services

but, triple:but, triple:– billing and collectionbilling and collection– laboratorieslaboratories– managementmanagement– asset planningasset planning

Drinking water supply

Wastewatercollection

Wastewatertreatment

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Separate functions allow for other combinations in institutional

arrangements River Basin Management plays a role in River Basin Management plays a role in

wastewater collection and treatmentwastewater collection and treatment

Wastewater collection combined with Wastewater collection combined with roads (Municipalities)roads (Municipalities)

Separate systems for storm and Separate systems for storm and wastewaterwastewater

Urban drainage and solid waste disposalUrban drainage and solid waste disposal

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Integrate services

Drinking water,wastewater collection,wastewater treatment

Customer

Closed water cycle

One tariff including all services

Efficiency gains

•one laboratory

•billing and collection

•emergency service

•management

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Option: asset holding integrated; and operations separated(example: France)

Asset holding integrated (Municipalities)

Operator drinking water

Operator waste water collection

Operator waste water treatment

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Option: asset holding and operations integrated per individual service (example: Netherlands)

Drinking water

Wastewater collection

Wastewater treatment

Owner of assets and Operator:

Drinking Water Companies


Municipalities


Water Boards

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Option: integration of all services

including electricity (example: Casablanca, Morocco)

All water supply, sanitation and electricity services,including investments and operations

Municipality,

contracted a concession with LYDEC

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Option: integration of sanitation, but separated from drinking water(example: Tunisia)(example: Tunisia)

SONEDE

Drinking water, investment and operations

Tariff collection also for ONAS

ONAS

Wastewater collection and treatment, investments and operation

Tariff through SONEDE

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Option: asset holding and operations integrated for all water supply and sanitation services(example: UK (private and regulated)) (example: UK (private and regulated))

Asset holding and operations for all water services integrated in one water company

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River Basin Authority (RBA)

Within a national water strategy,Within a national water strategy, RBA is responsible for the quality of water RBA is responsible for the quality of water

resources and for allocationresources and for allocation Responsible for prevention of pollution: options:Responsible for prevention of pollution: options:

– Sets standards and monitorsSets standards and monitors– Manages, conserves and protects water resources, Manages, conserves and protects water resources,

and, implements basin strategiesand, implements basin strategies– Establishes rules to regulate water useEstablishes rules to regulate water use– Plans, designs and constructs treatment facilities Plans, designs and constructs treatment facilities

(management of means) and operates (management of means) and operates – Manages the means and contractManages the means and contract operations outoperations out

Tariffs: surcharge on water bill or taxesTariffs: surcharge on water bill or taxes

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Economics, pricing, Economics, pricing, financingfinancing

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Understanding the costs

Four cost elementsFour cost elements– Health/hygiene awareness and educationHealth/hygiene awareness and education– Safe disposal (at/from site)Safe disposal (at/from site)– Collection (network cost)Collection (network cost)– Treatment (environment & health benefit)Treatment (environment & health benefit)

Full costs includeFull costs include– Asset expansion and renewalsAsset expansion and renewals– Profit or return on asset (if appropriate)Profit or return on asset (if appropriate)

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Understanding the incentives

HouseholdsHouseholds have incentives have incentives to export their waste beyond to export their waste beyond their immediate areatheir immediate area

Local communitiesLocal communities have have incentives to protect their incentives to protect their area from the risks of area from the risks of sanitation-related diseasessanitation-related diseases

National governmentNational government has has incentives to improve incentives to improve sanitation related to political sanitation related to political profile of sanitation (usually profile of sanitation (usually low), however, national low), however, national government is usually willing government is usually willing to make some resources to make some resources available to assistavailable to assist

e.g. toilet waste into open storm water channels in street.

This is reflected in property and land prices.

Experience suggests national governments are seldom willing (and able) to pay thefull sustainable costs

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The essential financing choice

User charges

Local tax base

Regional / national tax base

Money to pay for the costsof urban sanitation must

ultimately come from one ofthese three sources

extent of “geographic base” of income

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User charges

Users who benefit, pay Users who benefit, pay for the servicefor the service

But benefits of services But benefits of services extend beyond the extend beyond the private householdprivate household

Where there are Where there are significant backlogs in significant backlogs in services, then some services, then some form of user charge is form of user charge is more equitable than more equitable than nonenone

User charges


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User charges – sewer User charges – sewer networknetwork

Fixed chargeFixed charge– f(Property area)f(Property area)– f(number of toilets)f(number of toilets)

Water consumption related Water consumption related chargecharge

Volume and quality related Volume and quality related charge (industry)charge (industry)

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Local tax base

Property tax captures Property tax captures willingness to pay for willingness to pay for community-wide benefits community-wide benefits of an adequate sanitation of an adequate sanitation system in the areasystem in the area

But valuation roles and But valuation roles and local tax systems may be local tax systems may be absent, out of date or absent, out of date or inefficientinefficient

Some (but limited) Some (but limited) possibility of cross-subsidy possibility of cross-subsidy existsexists


Local tax base

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National/regional tax baseNational/regional tax base

National tax collection could National tax collection could be more efficient than local be more efficient than local tax and also more tax and also more redistributive redistributive

Problem is one of allocation Problem is one of allocation whilst minimizing distortionswhilst minimizing distortions

Better to use this to Better to use this to promote access (funding promote access (funding capital investments) and capital investments) and notnot operating costsoperating costs

Capital subsidies should be Capital subsidies should be targeted (e.g. service level targeted (e.g. service level targeting, or property value targeting, or property value targeting)targeting)


National/regional tax base

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Getting the balance right

User charges

Local tax base

Regional / national tax base

Captures willingness to pay for improved sanitation on part of household.

Captures benefits of sewer networkand treatment through local property tax

Supplements local sources of financingwith targeted capital grants to extend coverage

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Sources of finance

EquityEquity DebtDebt Public (government) – fiscal Public (government) – fiscal

transferstransfers

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Equity finance

Private equity not likely to be a major Private equity not likely to be a major source of financing for urban source of financing for urban sanitation. However, some sanitation. However, some opportunities do exist:opportunities do exist:– BOT type contracts for wastewater BOT type contracts for wastewater

treatmenttreatment– Concession contracts for combined water Concession contracts for combined water

and wastewater utilitiesand wastewater utilities– Enhanced lease contracts with limited Enhanced lease contracts with limited

investments (for connections, say)investments (for connections, say)

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Debt finance

Requires a secure income streamRequires a secure income stream– Combination of user charges and Combination of user charges and

taxes taxes Banks seem generally more Banks seem generally more

reluctant reluctant toto lend for sanitation lend for sanitation compared to water because the compared to water because the financial revenue stream is less financial revenue stream is less secure than that for watersecure than that for water

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Public finance

Reliance of public financing through local Reliance of public financing through local taxes and/or regional/national taxes is taxes and/or regional/national taxes is much greater in sanitation than is the case much greater in sanitation than is the case in water supply (which can more easily be in water supply (which can more easily be directly self-financed through user directly self-financed through user charges)charges)

Disadvantage vis-à-vis income from tariffs, Disadvantage vis-à-vis income from tariffs, is the dependence each year of the is the dependence each year of the budgetary process (political agenda …)budgetary process (political agenda …)

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Cape Town (South Africa)Cape Town (South Africa)

50% of income through property 50% of income through property taxtax– tax exemption for property values less than $10 tax exemption for property values less than $10

000 (new comprehensive valuation role)000 (new comprehensive valuation role)

50% of income linked to volume of 50% of income linked to volume of water purchase with a volume capwater purchase with a volume cap

500 000 sewer connections for a population of about 3 million500 000 sewer connections for a population of about 3 million

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Subsidies for sanitation

Important to target the poorImportant to target the poor Promoting on-site sanitationPromoting on-site sanitation

– Additional cost of improvementAdditional cost of improvement– Administration of subsidy an issueAdministration of subsidy an issue

Subsidizing domestic sewer Subsidizing domestic sewer connectionsconnections– Requires household contributionRequires household contribution– Funded from a levy or local tax baseFunded from a levy or local tax base

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Output Based Aid (OBA)for sanitation

Per domestic sewer connection installedPer domestic sewer connection installed

Per cubic meter wastewater treated to Per cubic meter wastewater treated to standardstandard

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Conclusions - 1

There is no solution that fits allThere is no solution that fits all

Urban sanitation involves Urban sanitation involves many issues, many issues, many players many players who need to be involvedwho need to be involved

Strong coordinationStrong coordination is required to get is required to get the best out of hardware, software, the best out of hardware, software, finance, institutionsfinance, institutions

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Conclusions - 2

Put the household firstPut the household first …– in both public health and financial terms (cost in both public health and financial terms (cost

recovery)recovery)– provide maximum beneficial gains for customers, provide maximum beneficial gains for customers,

particularly the poor, from investments in sewerage particularly the poor, from investments in sewerage and sanitationand sanitation

Make Make arrangements transparenttransparent

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Thank Thank youyou

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Dakar (Senegal), December 6 to 10, 2004

Documents

Transcript of Dakar (Senegal), December 6 to 10, 2004