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Dakar (Senegal), December 6 to 10, 2004

WUP - WBI Water Supply and Sanitation Sector Reform Course Session 8 Special Challenges of Urban Sanitation Jan G. Janssens World Bank. Dakar (Senegal), December 6 to 10, 2004. ã. World Bank 2004. Outline. Introduction Issues in urban sanitation Institutions and regulatory framework

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Dakar (Senegal), December 6 to 10, 2004

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  1. WUP - WBIWater Supply and Sanitation Sector Reform CourseSession 8Special Challenges of Urban SanitationJan G. Janssens World Bank Dakar (Senegal), December 6 to 10, 2004 ã World Bank 2004

  2. Outline • Introduction • Issues in urban sanitation • Institutions and regulatory framework • Economics, pricing, financing • Overview of economics, pricing & financing of urban sanitation • Principles for design of pricing, funding and subsidy mechanisms (linked to service levels, technologies) • Conclusions Dakar, 6 to 10 December 2004 ã World Bank 2004

  3. Outline • Introduction • Issues in urban sanitation • Institutions and regulatory framework • Economics, pricing, financing • Overview of economics, pricing & financing of urban sanitation • Principles for design of pricing, funding and subsidy mechanisms (linked to service levels, technologies) • Conclusions Dakar, 6 to 10 December 2004 ã World Bank 2004

  4. Context • Sanitation lags behind water supply in coverage, but is mostly dependent on piped water • Adequate/safe sanitation is not just a private household issue, but a community-wide issue Dakar, 6 to 10 December 2004 ã World Bank 2004

  5. ã World Bank 2004 Objectives of urban sanitation • Improvement/protection of health • Safe removal of waste (liquid & solid)from homes and cities • Safe disposal/reuse to protect downstream users • Protection of the environment • Fish, vegetation, aquatic ecosystems • Water resource conservation – water demand management • Urban development • Urban planning, extension, attraction to industry • Optimal use of resources • Wastewater reuse for agriculture • Sensible investment/cost recovery issues Dakar, 6 to 10 December 2004

  6. Urban sanitation and health • High density living in urban areas requires safe sanitation to safeguard community heath (typically requires a sewer network) • Lower density peri-urban areas can have low cost on-site systems which protect health A safe facility in itself does notguarantee an absence of health risk Dakar, 6 to 10 December 2004 ã World Bank 2004

  7. Hygiene Fluids Sanitation Fingers Future Victim Faeces Food Flies Fields/Floors ã World Bank 2004 Controlling disease within the city Dakar, 6 to 10 December 2004

  8. Outline • Introduction • Issues in urban sanitation • Institutions and regulatory framework • Economics, pricing, financing • Overview of economics, pricing & financing of urban sanitation • Principles for design of pricing, funding and subsidy mechanisms (linked to service levels, technologies) • Conclusions Dakar, 6 to 10 December 2004 ã World Bank 2004

  9. River & Environs City Ward Peri-domestic Home (street, school, work-place) ã World Bank 2004 The urban environment

  10. Peri-domestic Home (street,school, workplace) Ward City Central Treatment Works Street Sewers Collectors House Connections ã World Bank 2004 An “engineer’s” view

  11. River & Environs Street Sewer Sewer Mains City Ward Peri-domestic Interceptor/ Collector Home House Connection Treatment Plant/Outfall ã World Bank 2004

  12. ã World Bank 2004 Some questions that arise Wastewater treatment standards • Objectives of standards: health, environment? • What standards can we afford? • Uniform treatment standards or vary with receiving water and its use? • Reuse of wastewater when there is water scarcity (industrial/irrigation) Sanitation and public health • How do we set priorities on sewerage investment? • Which towns? • Which streets? • Where is onsite sanitation (infiltration) acceptable? Dakar, 6 to 10 December 2004

  13. ã World Bank 2004 Urban sanitation issues Economics, Pricing and Finance • What is a realistic approach to paying for sanitation? • How can we balance investment decisions and priorities against available resources? • Customers are willing to pay for drinking water, but not for wastewater ? • In case of non-payment drinking water can be cut off, wastewater can not … Dakar, 6 to 10 December 2004

  14. ã World Bank 2004 Urban sanitation issues Institutional arrangements • Who is responsible for what? • Are different arrangements needed in small towns, large cities? • How is this decided/negotiated? Dakar, 6 to 10 December 2004

  15. ã World Bank 2004 Sanitation, hygiene and water • Public health issues of faecal contaminationis about more than “protecting water quality” • “Groundwater protection”is not an absolute…it depends uponuseof groundwater as to whether it is an issue • How to target sanitation investmentswhere they will have the biggest impact? • Industrial wastesare an entire major topic that merits a workshop on its own! Dakar, 6 to 10 December 2004

  16. ã World Bank 2004 Who needs to be involved? e.g. • Min. of Public Works (finance, capital budget) • Min. of Economic Affairs and Finance (subsidy issues) • Min. of Health (health priorities, hygiene) • Min. of Environment • Municipality • Health department (priorities, hygiene promotion) • Urban development • Utility (service provider, bill collector) • Householder (acceptance, bill payer) • and Others… • None of the above can solve on their own! Dakar, 6 to 10 December 2004

  17. Understanding the technologies • Network systems • Centralized and decentralized • Standard and condominial • On-site systems • Conservancy tanks • Septic tanks and variants (pour-flush etc) • “Dry” systems (pits, VIPs) • Informal systems • The “flying toilet” Dakar, 6 to 10 December 2004 ã World Bank 2004

  18. ã World Bank 2004 What are the lessons? • Focus on the household… • Where most disease transmission occurs • Which are most exposed, most vulnerable? • Hardware and software • Hygiene is crucial to achieve health benefits • Hygiene is a challenge everywhere in the world…consistently shown to reduce diarrhoeal disease by up to 50% • Many sanitation technologies do the job • …depends on the context…what can best serve the household? Dakar, 6 to 10 December 2004

  19. Outline • Introduction • Issues in urban sanitation • Institutions and regulatory framework • Economics, pricing, financing • Overview of economics, pricing & financing of urban sanitation • Principles for design of pricing, funding and subsidy mechanisms (linked to service levels, technologies) • Conclusions Dakar, 6 to 10 December 2004 ã World Bank 2004

  20. Institutions, and,regulatory framework ã World Bank 2004

  21. Institutional arrangements • Choice of delivery institution affects financing options • Water and sewerage/sanitation utility • Sewerage/sanitation utility (rare) • Local government provision (common) Dakar, 6 to 10 December 2004 ã World Bank 2004

  22. ã World Bank 2004 Water and sanitation services Drinking water supply Wastewater collection Domestic and industrial clients Wastewater treatment Dakar, 6 to 10 December 2004

  23. ã World Bank 2004 Functions in the water sector • Drinking water supply • Intake • Production and transmission • Distribution • Billing and collection • Wastewater collection • Transport • Billing and collection • Wastewater treatment • Treatment • Discharge • Billing and collection Dakar, 6 to 10 December 2004

  24. ã World Bank 2004 Overall Objective • The objective is to make the most efficient, effective and equitable use of the investments in sanitation Dakar, 6 to 10 December 2004

  25. ã World Bank 2004 Options • Integration of all services • Specialization of services Dakar, 6 to 10 December 2004

  26. ã World Bank 2004 Separate functions Specialization • high quality service • high reliability • adequate services but, triple: • billing and collection • laboratories • management • asset planning Wastewatercollection Drinking water supply Wastewatertreatment Dakar, 6 to 10 December 2004

  27. ã World Bank 2004 Separate functions allow for other combinations in institutional arrangements • River Basin Management plays a role in wastewater collection and treatment • Wastewater collection combined with roads (Municipalities) • Separate systems for storm and wastewater • Urban drainage and solid waste disposal Dakar, 6 to 10 December 2004

  28. ã World Bank 2004 Integrate services • Closed water cycle • One tariff including all services • Efficiency gains • one laboratory • billing and collection • emergency service • management Drinking water,wastewater collection,wastewater treatment Customer Dakar, 6 to 10 December 2004

  29. ã World Bank 2004 Option: asset holding integrated; and operations separated(example: France) Asset holding integrated (Municipalities) Operator drinking water Operator waste water collection Operator waste water treatment Dakar, 6 to 10 December 2004

  30. ã World Bank 2004 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 Owner of assets and Operator: Municipalities Owner of assets and Operator: Water Boards Dakar, 6 to 10 December 2004

  31. ã World Bank 2004 Option: integration of all services including electricity(example: Casablanca, Morocco) Municipality, contracted a concession with LYDEC All water supply, sanitation and electricity services,including investments and operations Dakar, 6 to 10 December 2004

  32. ã World Bank 2004 Option: integration of sanitation, but separated from drinking water(example: Tunisia) SONEDE Drinking water, investment and operations Tariff collection also for ONAS ONAS Wastewater collection and treatment, investments and operation Tariff through SONEDE Dakar, 6 to 10 December 2004

  33. ã World Bank 2004 Option: asset holding and operations integrated for all water supply and sanitation services(example: UK (private and regulated)) Asset holding and operations for all water services integrated in one water company Dakar, 6 to 10 December 2004

  34. ã World Bank 2004 River Basin Authority (RBA) Within a national water strategy, • RBA is responsible for the quality of water resources and for allocation • Responsible for prevention of pollution: options: • Sets standards and monitors • Manages, conserves and protects water resources, and, implements basin strategies • Establishes rules to regulate water use • Plans, designs and constructs treatment facilities (management of means) and operates • Manages the means and contractoperations out • Tariffs: surcharge on water bill or taxes Dakar, 6 to 10 December 2004

  35. Outline • Introduction • Issues in urban sanitation • Institutions and regulatory framework • Economics, pricing, financing • Overview of economics, pricing & financing of urban sanitation • Principles for design of pricing, funding and subsidy mechanisms (linked to service levels, technologies) • Conclusions Dakar, 6 to 10 December 2004 ã World Bank 2004

  36. Economics, pricing, financing ã World Bank 2004

  37. Understanding the costs • Four cost elements • Health/hygiene awareness and education • Safe disposal (at/from site) • Collection (network cost) • Treatment (environment & health benefit) • Full costs include • Asset expansion and renewals • Profit or return on asset (if appropriate) Dakar, 6 to 10 December 2004 ã World Bank 2004

  38. Understanding the incentives e.g. toilet waste into open storm water channels in street. • Households have incentives to export their waste beyond their immediate area • Local communities have incentives to protect their area from the risks of sanitation-related diseases • National government has incentives to improve sanitation related to political profile of sanitation (usually low), however, national government is usually willing to make some resources available to assist This is reflected in property and land prices. Experience suggests national governments are seldom willing (and able) to pay thefull sustainable costs Dakar, 6 to 10 December 2004 ã World Bank 2004

  39. The essential financing choice extent of “geographic base” of income Regional / national tax base Local tax base Money to pay for the costs of urban sanitation must ultimately come from one ofthese three sources User charges Dakar, 6 to 10 December 2004 ã World Bank 2004

  40. Users who benefit, pay for the service But benefits of services extend beyond the private household Where there are significant backlogs in services, then some form of user charge is more equitable than none User charges User charges extent of “geographic base” of income Dakar, 6 to 10 December 2004 ã World Bank 2004

  41. User charges – sewer network • Fixed charge • f(Property area) • f(number of toilets) • Water consumption related charge • Volume and quality related charge (industry) Dakar, 6 to 10 December 2004 ã World Bank 2004

  42. Property tax captures willingness to pay for community-wide benefits of an adequate sanitation system in the area But valuation roles and local tax systems may be absent, out of date or inefficient Some (but limited) possibility of cross-subsidy exists Local tax base Local tax base extent of “geographic base” of income Dakar, 6 to 10 December 2004 ã World Bank 2004

  43. National tax collection could be more efficient than local tax and also more redistributive Problem is one of allocation whilst minimizing distortions Better to use this to promote access (funding capital investments) and not operating costs Capital subsidies should be targeted (e.g. service level targeting, or property value targeting) National/regional tax base National/regional tax base extent of “geographic base” of income Dakar, 6 to 10 December 2004 ã World Bank 2004

  44. Getting the balance right Supplements local sources of financingwith targeted capital grants to extend coverage Regional / national tax base Local tax base Captures benefits of sewer networkand treatment through local property tax User charges Captures willingness to pay for improved sanitation on part of household. Dakar, 6 to 10 December 2004 ã World Bank 2004

  45. Sources of finance • Equity • Debt • Public (government) – fiscal transfers Dakar, 6 to 10 December 2004 ã World Bank 2004

  46. Equity finance • Private equity not likely to be a major source of financing for urban sanitation. However, some opportunities do exist: • BOT type contracts for wastewater treatment • Concession contracts for combined water and wastewater utilities • Enhanced lease contracts with limited investments (for connections, say) Dakar, 6 to 10 December 2004 ã World Bank 2004

  47. Debt finance • Requires a secure income stream • Combination of user charges and taxes • Banks seem generally more reluctant to lend for sanitation compared to water because the financial revenue stream is less secure than that for water Dakar, 6 to 10 December 2004 ã World Bank 2004

  48. Public finance • Reliance of public financing through local taxes and/or regional/national taxes is much greater in sanitation than is the case in water supply (which can more easily be directly self-financed through user charges) • Disadvantage vis-à-vis income from tariffs, is the dependence each year of the budgetary process (political agenda …) Dakar, 6 to 10 December 2004 ã World Bank 2004

  49. Cape Town (South Africa) 500 000 sewer connections for a population of about 3 million • 50% of income through property tax • tax exemption for property values less than $10 000 (new comprehensive valuation role) • 50% of income linked to volume of water purchase with a volume cap Dakar, 6 to 10 December 2004 ã World Bank 2004

  50. Subsidies for sanitation • Important to target the poor • Promoting on-site sanitation • Additional cost of improvement • Administration of subsidy an issue • Subsidizing domestic sewer connections • Requires household contribution • Funded from a levy or local tax base Dakar, 6 to 10 December 2004 ã World Bank 2004

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