Mayiladuthurai CCPJUNE2007

Tamil Nadu Urban Infrastructure Financial Services Limited (TNUIFSL)
Final Report
Conversion of City Corporate Plan to Business Plan for Mayiladuthurai municipality
June 2007
ICRA Management Consulting Services Limited
Table of Contents 1. Introduction ___________________________________________________________ 1

1.1 1.2 1.3 1.4 2.1 2.2 2.3 2.4 2.5 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 4.1 4.2 4.3 4.4 5.1 5.2 5.3 5.4 6.1 6.2 6.3 6.4 6.5 Background to the study____________________________________________________ Scope of work ___________________________________________________________ IMaCS approach to the study ________________________________________________ Structure of the report _____________________________________________________ Location and connectivity __________________________________________________ Social and demographic characteristics ________________________________________ Economic Development ____________________________________________________ Land use management _____________________________________________________ Strategy for development ___________________________________________________ 1 1 1 2 3 3 4 5 5
2. Mayiladuthurai - a brief profile ___________________________________________ 3
3. Review of operating performance __________________________________________ 7

Water Supply ____________________________________________________________ 7 Sanitation _______________________________________________________________ 8 Storm water drains ________________________________________________________ 8 Solid Waste Management___________________________________________________ 9 Roads __________________________________________________________________ 9 Street lights ____________________________________________________________ 10 Bus stands _____________________________________________________________ 10 Capital Investment Plan ___________________________________________________ 10 Income and Expenditure summary of MyM ____________________________________ Revenue streams of ULB in Tamil Nadu ______________________________________ Revenues ______________________________________________________________ Analysis of Costs ________________________________________________________ Public private partnerships (PPP) ____________________________________________ Potential for revenue enhancement___________________________________________ Measures for cost management _____________________________________________ Other measures / interventions ______________________________________________ Financial and Operating Plan time horizon and scenarios ________________________ Basis and assumptions ____________________________________________________ Revenues ______________________________________________________________ Financial projections _____________________________________________________ Key results _____________________________________________________________ 12 12 13 17 20 20 23 24 25 25 25 29 30
4. Analysis of financial performance ________________________________________ 12
5. Potential areas for improvement _________________________________________ 20
6. Business plan projections and investment capacity of MyM ___________________ 25
Conversion of CCP to BP - Mayiladuthurai Municipality
List of Exhibits
Exhibit 1.1 IMaCS approach to the study ............................................................................................................... 1 Exhibit 2.1 Population trend................................................................................................................................... 3 Exhibit 2.2 Land-use - 1996 and 2011 (proposed) ................................................................................................. 5 Exhibit 3.1 Water supply ........................................................................................................................................ 7 Exhibit 3.3 Sanitation facilities ............................................................................................................................ 8 Exhibit 3.4 Storm water drain network ................................................................................................................... 9 Exhibit 3.5 Solid Waste Management - current status ............................................................................................ 9 Exhibit 3.6 Road network ....................................................................................................................................... 9 Exhibit 3.7 Existing Street Lighting Facilities ...................................................................................................... 10 Exhibit 3.8 MyM - Felt needs (2006-15)............................................................................................................... 11 Exhibit 4.1 Income and Expenditure of MyM - Last five years ............................................................................. 12 Exhibit 4.2 Revenue streams - ULBs in Tamil Nadu............................................................................................. 13 Exhibit 4.3 Revenue trend ..................................................................................................................................... 13 Exhibit 4.4 Property tax - analysis of key revenue drivers ................................................................................... 14 Exhibit 4.5 Property Tax - breakup of assessees ................................................................................................. 15 Exhibit 4.6 Professional Tax - revenue drivers .................................................................................................... 15 Exhibit 4.7 Professional Tax assessee break up ................................................................................................ 15 Exhibit 4.8 Water charges - revenue drivers ........................................................................................................ 16 Exhibit 4.9 Water charges - category wise connections and tariff ....................................................................... 16 Exhibit 4.10 Costs - FY 2001 and FY 2004 .......................................................................................................... 17 Exhibit 4.11 Power costs - Water & Sewerage and Street Lights ......................................................................... 18 Exhibit 4.12 Loan Statement ................................................................................................................................. 18 Exhibit 5.1 Key issues and suggested measures ................................................................................................... 21 Exhibit 6.1 Assumptions for other income ............................................................................................................ 27 Exhibit 6.2 Expenditure ........................................................................................................................................ 27 Exhibit 6.3 Assumptions - Assets .......................................................................................................................... 28 Exhibit 6.4: Loan Statement as on 30.09.2005 (Rs in lakhs) ................................................................................ 28 Exhibit 6.5 New loans ........................................................................................................................................... 29 Exhibit 6.6 Other Liabilities ................................................................................................................................. 29 Exhibit 6.8 Income and Expenditure projections .................................................................................................. 30 Exhibit 6.9 Summary of key results ....................................................................................................................... 30
List of abbreviations
Build Operate Transfer Cumulative Annual Growth Rate Capital Investment Program City Corporate Plan Financial and Operating Plan Ground Level Reservoir ICRA Management Consulting Services Litres per capita per day Mayiladuthurai municipality Municipal Solid Waste National River Conservation Program Over Head Tanks Public Private Partnerships Sewerage Treatment Plant Solid Waste Management Tamil Nadu Urban Development Fund Tamil Nadu Urban Development Program Tamil Nadu Urban Infrastructure Financial Services Limited Under Ground Drainage
BOT CAGR CIP CCP FOP GLR IMaCS LPCD MyM MSW NRCP OHT PPP STP SWM TNUDF TNUDP TNUIFSL UGD
Executive Summary
The Tamil Nadu Urban Infrastructure Financial Services (TNUIFSL) mandated ICRA Management Consulting Services (IMaCS) for conversion of City Corporate Plan (CCP) of Mayiladuthurai Municipality (MYM) into a Business Plan. The CCP for Mayiladuthurai was prepared in 2002, under the Tamil Nadu Urban Development Project - II (TNUDP-II) to develop vision, strategies and tasks to be carried out by MYM. Subsequently, MyM has prepared a Vision Plan, identifying various projects that it plans to undertake during 2004-09. The objective of this study is to enable effective implementation of projects envisaged in its CCP and Vision Plan through preparation of this report on conversion of the City Corporate Plan to a Business Plan.
City profile and growth potential

The population of Mayiladuthurai was 84,505 in 2001, implying a growth of 9.29 % over the population of 76,837 in 1991. The population growth has slowed down during the last couple of decades, after double digit growth in the previous decades.
Parameter Population (2001) Decadal Growth (1991-2001) No. of Wards Sex Ratio Literacy rate 2001 Details 84505 9.3% 36 1012 80%
As per Census 2001, the slum population in Mayiladuthurai was 13% of the population. However, the municipal data shows an increase in slum population and this is a major concern area for the municipal corporation. As per the Vision Plan of MyM, there were 26 slums with a total slum population of 16,434. Of these 23 slums have been provided with amenities. Mayiladuthurai is an industrially backward town and there is no major industry in this town. Being a temple town (the Mayuranathar Temple attracts pilgrims from other places), Mayiladuthurai a tourist centre. It is also strategically located in close proximity to the famous nine Navagraha temples. A number of important tourist places including Poompuhar, Mayuram, Tanquebar and Therazendur are in close proximity to the town. Since Mayiladuthurai has a good road and rail system, it acts as a halting junction for pilgrimages. The CCP points out that there is good scope for exploiting tourist potential. The CCP observes the need for initiatives for economic development and outlines following strategies for development.

Provision of food processing centre for fruit and milk products Improvement of agro-processing industries around the town Improvement of linkages of the town to other urban centres Provision of better facilities including lodging and boarding facilities for tourists.
Additional areas that emerged based on consultation with Chairperson and select ward members on potential economic activities for the town include the need to create employment intensive investment including rice milling and tourism development. It was also suggested that the municipality along with the Tamil Nadu Slum Clearance Board should identify vacant/acquirable land areas within the municipal areas to create land parcels for industrial development and slum rehabilitation.
Municipal Services - Status assessment, gaps and actions being taken

Exhibit 1 presents a summary of service levels and status with respect to select indicators in Water Supply, Sanitation, Transportation, Street lights and Solid Waste Management.
Exhibit 1 - Status of Municipal services
Sl. no Parameter / Indicator Value A. Water Supply 1 2 3 4 5 6 7 Total Water Supply (MLD) Water Connections - nos. Public Fountains - nos. Daily Per Capita Supply (LPCD) Storage Capacity / Daily Supply (%) Pipe length / Road Length (%) Water connections / properties (%) 7.5 ~ 6300 ~ 180 90 63% 100% 37%

Issues and Gaps
Demand Supply MyMs supply of 7.5 MLD corresponds to 90 LPCD which is in line with municipal norms. Pumping equipment requires upgrade from 120 kVA to 180 KVA. Additional borewells are also required to augment capacity. Scope for adding water connections Water connections account for only about 37 % of the number of properties assessed and indicate the scope for adding more connections. Poor collection efficiency - Current collection efficiency was only 65 % in FY 2005 and is a major cause for concern. Other issues - Uneven distribution and low pressure supply complaints prevail in select wards in the town. MyM is currently implementing an Underground sewerage system with assistance under NRCP. About 31 km of additional areas uncovered under the initial scheme has been identified to be covered at an outlay of Rs. 4 crore. Storm water drains are provided only in approximately 10 % of the total road length within MyM limits and require significant improvement MyM maintains a road network of nearly 87.5 km of which surfaced roads (both B.T. and CC) constitute 87 %. In addition, nearly 20 km of highway roads traverses the MyM area. The road network requires significant upgradation in view of the ongoing UGD scheme. Nearly 76 % of the lights are tube lights and 24 % are sodium vapour lamps. Average spacing between the lights (~ 28 m) is in line with the municipal norm of 30m MyM proposes to develop a new Class A bus stand at Thennamara salai at an outlay of Rs. 6.5 crore
B. Sanitation 8 UGD network (Yes/No/In progress) In progress 9 10 11 12 13 Households with septic tanks Number of Public conveniences Length of Storm drains (km) Est. access to sanitation (%) Storm Drains - % of road length ~ 12000 31 43 85% 10%

C. Roads, Transportation and Street Lights 14 15 16 17 Total Length of Roads Total number of Street Lights BT + CC roads / Road length (%) Road length per Street Light (m) 107 ~ 3100 93% 28 m

D. Solid Waste Management 18 19 20 21 22 Total Waste Generation (MT) Collection - % of waste generated Compost yard area -available Compost yard - required (Acres) Compost Yard - Gap - Acres 38 92% 4.62 8.8 (4.15)
MyM is in the process of implementing a project at an outlay of Rs. 53 lakh to improve its solid waste management handling infrastructure
Analysis of financial performance

Exhibit 2 provides a summary of the financials of MYM, along with a) an analysis of the growth and b) change in composition of various revenue and expenditure heads. Key highlights are summarised below:
A 10 % growth in operating surplus and a 8 % CAGR in revenue and by keeping costs in check. Tax income has grown at a CAGR of 5 % over the last five years in spite of no revision in Average Rental Value (ARV) since 1998. User charges have grown by a healthy 30 %, aided by increased in collection of water charges and other fee income including sewerage deposits The share of user charges/fees has increased from 12 % of revenue to 25 % of revenue over the last five years. Grants / Contributions from state have been the biggest revenue driver and have doubled in the last five years. They contribute to nearly 23% of income. Expenditure has remained flat over the last few years, showed an increasing trend till FY 2003 and marginally declining over the next two years. Salaries have marginally declined due to reduction in staff, while Operating expenditure has grown at 13 %. Overall, revenue expenditure appears to have been in control. Interest expenditure has shown a steep increase, up from 2% of income in 2001 to 12% of income in 2005.
Capital Investment Plan

We have compiled the felt needs of the city under various service areas, based on

Review of projects recommended in the City Corporate Plan Status and progress on projects identified as part of the Vision Plan (2004-09) Consultations with stakeholders and Discussion with officials
Exhibit 2 - Financial analysis
2001 2002 2003 2004 2005 CAGR % INCOME Own Income 295 300 377 526 382 7% Property tax 155 164 177 182 187 5% Professional tax 16 16 19 19 23 10% Water charges 19 13 36 109 89 47% Sewerage charges 1 5 38 121 49 214% Service Charges and fees 36 33 44 41 18 -16% Other Income 68 70 65 54 16 -30% Assigned Revenue 87 38 147 154 92 1% Devolution and Grants 73 77 144 200 144 18% Prior Period 34 3 1 Total 456 449 671 880 618 8% EXPENDITURE Staff and terminal benefits 261 254 361 270 249 -1% O&M 50 55 66 84 81 13% Program Admin 10 126 59 34 31 32% Prior Period 8 3 1 0 Operating Expenditure 321 443 490 389 361 3% Operating surplus 134 6 181 492 258 18% Finance charges 9 12 49 76 69% Depreciation 7 13 104 81 30 46% Cash surplus 125 6 169 443 182 10% Overall surplus 118 (8) 64 362 152 6%
Exhibit 3 provides a summary of the CIP for MYM.

Exhibit 3 Capital Investment Plan
Segment Outlay as given in Vision CCP SFC Plan 1052 1100 350 120 1,125 325 Outlay reqd.* 2006-15 2000 1000 Remarks on ongoing projects/Projects envisaged Roads require significant upgradation in view of the ongoing UGD scheme CCP highlights significant gaps in storm water drains Comprehensive water supply project undertaken. Outlay required for distribution gaps, pumping system upgradation, additional borewells and providing new connections Immediate outlay for procuring equipment (Tipper lorry / Dumper place bins) for upgrading primary collection and secondary collection Installation of timers / energy saving timers and additional lamps Bus stand at an outlay of Rs. 6.5 crore and other market developments at an outlay of 92 lakh Development of school infrastructure
Roads Storm Water Drains
Water Supply
30
130
200
Solid Waste Management Street Lights Bus stands and rem.enterprises Education
18 170 81 150
64 200
12 712 70
30 671 50
30 1000 100
Segment
Outlay as given in Vision CCP SFC Plan 4216 82 6732 4280 316 6060 622 1,054 4,184
Outlay reqd.* 2006-15
Remarks on ongoing projects/Projects envisaged Completion of remaining part of UGD scheme Coverage of additional areas of approx. 31 kms to be covered Health centres, burial ground etc, Tourism projects
Sewerage and Sanitation Others TOTAL
650 100 5130
List of priority projects

Priority projects identified by the municipality are listed below. These projects and the capital expenditure estimates given above have been arrived at based on projects identified in the City Corporate Plan prepared earlier and based on discussion with Chairperson, Commissioner and municipal officials. Select projects identified by MyM are identified below

Completion of ongoing UGD scheme. Additional areas left out in the current scheme of approximately 31 km of roads as identified by MyM also need to be taken up. Restoration and upgradation of roads in view of the poor condition following implementation of UGD scheme and heavy rains last year. Development of new Bus stand. This could be taken up on BOT basis to reduce pressure on financials of the municipality. Remunerative projects on a BOT basis, specifically relating to tourism development. There is a proposal to develop a Theme park on a BOT basis at Chitarkadu, where 6 acres of municipal land is available.
Reform Agenda
ULB level MYM could potentially increase its own income to Rs. 550 lakh by 2010 through focused interventions in the following areas: 1. Property tax: through revision in ARV, widening assessee base and closer scrutiny. 2. Professional tax sustaining a growth in assessments of 5 % in the assessments through widening tax base among traders and self-employed professionals 3. User charges - MYM should target achieving another 4000 water connections even by FY 2010. Implementation of UGD scheme structured partly on public deposits and user charges could also add to revenues and investment capacity. 4. PPP / remunerative projects - MYM also needs to explore land development as a revenue enhancement mechanism and should focus on attracting private sector participation through appropriate BOT/ SPV structures for implementing remunerative projects. There is a proposal to develop a Theme park on a BOT basis at Chitarkadu, where 6 acres of municipal land is available. 5. Energy costs - A savings of 10-15% reduction in energy costs appears imminently achievable. A comprehensive energy audit is required in this regards. 6. Collection Efficiencies - MyMs collection efficiency is very low across all its revenue heads namely, property tax, professional tax and user charges and needs significant improvement from
current levels. MyM should consider a) a focused one-time drive to clear up its dues and b) strengthening of its collection process and organisation to ensure that the overall levels of efficiency in order to improve and sustain its collection efficiencies. 7. NGOs / Corporate participation - Intensify focus on attracting NGOs/advertising revenue for city beautification projects. Actions from GoTN and GoTN agencies 1. Initiate action to complete ongoing updation of land use and master plan for Mayiladuthurai municipality on priority to guide future growth of the town in an orderly manner. 2. Revise ARV for property taxes, pending since 1998 at the earliest. 3. Develop model concessions / formats for involving Private sector in various areas including Solid waste, STP O&M, street light maintenance and remunerative projects 4. Incentivise energy conservation and implementation of SWM guidelines through specific grants 5. GoTN should continue its thrust on e-governance, accounting systems and capacity building/training. Specific actions on this have been identified in the report.
FOP, borrowing capacity and investment capacity

While the borrowing capacity computed as the minimum of NPV of operating surplus, 30% of revenues during the projection period works out to Rs. 464 lakh, actual projections reveal that Mayiladuthurai faces a severe Debt Service Coverage issue even at this level of borrowing. This is due to the strain of repayments on its existing loans which stood at nearly 13 crore in FY 2006. Therefore, Mayiladuthurai borrowing capacity is negligible even with improvements.
Exhibit 4 Summary of key results
Summary of FOP results Revenues FY 2006 (Rs. Lakh) 467 Revenues FY 2015 (Rs. Lakh) 799 Revenue CAGR % - FY 2006-15 6.14 Avg. Op. Surplus (Rs. Lakh) (53) Avg. Cash Operating Surplus 41 Avg. TE (excluding depreciation)/TR (%) 94% Average Debt Servicing/TR (%) 26% Borrowing Capacity as a minimum of NPV of NPV of 50% of Cash Surplus (without new loans) 80 NPV of 30% of Revenue 1,239 Borrowing Capacity 80 Investment Capacity 612 Investment Requirement 3,767 IC/ IR 16%
Some drastic measures including restructuring of its existing loans is required for Mayiladuthurai municipality to improve its investment capacity. Otherwise, MyM would need to utilize Grants from schemes like UIDSSMT and IHSDP to undertake its investments. Further, MyM could also consider involvement of private sector in implementing remunerative projects including bus-stands, markets and slaughter houses etc.
1. Introduction
1.1 Background to the study
Mayiladuthurai is a selection grade Municipal Town and taluk headquarters of the Nagapattinam District in Tamil Nadu. Under the Tamil Nadu Urban Development Project - II (TNUDP-II), a City Corporate Plan (CCP) was prepared for Mayiladuthurai Municipality (MyM) in 2004. The objective of the CCP was to outline a vision for development of the city and to identify strategies and tasks to be carried out by MyM. Subsequently, MyM has also developed a 5-year Vision Plan (2004-09), identifying various projects that it plans to undertake during this period. In order to enable effective implementation of projects envisaged in its CCP and Vision Plan, The Tamil Nadu Urban Infrastructure Financial Services (TNUIFSL) mandated ICRA Management Consulting Services (IMaCS) for conversion of City Corporate Plan (CCP) into a Business Plan (BP). 1.2 Scope of work
The scope of work for the study covered a) assessment of the financial and operating aspects, b) Review issues relating to revenue realisation and cost management and identification of improvement (revenue enhancement and cost reduction) measures and c) Development of a Financial and Operating Plan (FOP), taking into account potential revenue enhancement and cost reduction measures. 1.3 IMaCS approach to the study
Exhibit 1.1 gives a snapshot of IMaCS approach to the study.

Exhibit 1.1 IMaCS approach to the study
DIAGNOSIS EVALUATION OF CHOICES CCP Vision Plan Existing proposals of the ULB Understanding of context in which the ULB operates Assessment of Past Financials Review of ULB performance Underlying Operational indicators and service delivery Analysis of likely trends in revenue and cost drivers Areas and scope for revenue and cost improvement DEVELOP FINANCIAL & OPERATING PLAN
Clarify ULB priorities on projects /schemes
Base Case Business Plan Sensitivity analysis on key business drivers Critical operational outcomes to be achieved Steps to be taken by ULB/ GoTN /TNUIFSL towards achieving the Business plan milestones and targets
Demands on ULB for various services
Clarity on As-is state of the ULB in terms of financial and operating performance
Crystallize Strategic Choices going forward
Translate options into tangible and measurable projections
1.3.1
Step I Diagnostic review
The diagnostic review involved an assessment of the current status of MyM, its activities and financial performance, review of the City Corporate Plan (CCP) and discussions with TNUIFSL and MyM. We had the opportunity to interact with the Commissioner along with their team and had extensive interactions during our field visits. We collected relevant information on the performance (operational and financial) from MyM. Our review was focused on the following areas:

Financial position Operational performance Demands on urban services in the town/municipality
The diagnostic review was directed towards achieving a clear understanding of the operating and financial performance of MyM. 1.3.2 Step II Evaluation of options for financial improvement and projects
Based on the diagnostic review, we crystallised the options for MyM covering a) analysis of areas for revenue enhancement and cost management and b) Felt needs in terms of projects and estimate of capital outlay. 1.3.3 Step III Projection of financial statements and estimation of investment and borrowing capacity
We have projected financial statements for MyM under two scenarios namely, a) base case and b) with potential improvements. Under both scenarios, the optimum borrowing capacity and sustainable investment capacity have been computed. The Draft Final Report for the study was presented to the office of CMA, officials of Trichy Corporation and TNUIFSL in April 2006. Subsequently, the report was presented to Chairperson and select council members. This was followed by a review of the report at TNUIFSL by officials of TNUIFSL, CMA and MyM. This report incorporates the suggestions from these consultations. 1.4 Structure of the report
This report is organised as follows:

Section 1 Section 2 Section 3 Section 4 Section 5 Section 6
Introduction Mayiladuthurai - a brief profile Review of operating performance Analysis of financial performance Potential areas for improvement Business plan projections and investment capacity
2. Mayiladuthurai - a brief profile

2.1 Location and connectivity
Mayiladuthurai is a selection grade Municipal Town and taluk headquarters of the Nagapattinam District in Tamil Nadu. Mayiladuthurai is located at a distance of 281 kms from Chennai and is well connected to all major towns in Tamil Nadu by road and rails. Mayiladuthurai is home to the famous Mayuranathar Shiva temple and the historic tourist centres, Suriyanar Temple, Theralandur and Thirunallar are situated near to the town. The river Cauvery traverses through this town. 2.2 Social and demographic characteristics Mayiladuthurai with a total land area of 11.26 sq. km had a population of 84,290 in 2001.
Exhibit 2.1 Population trend
Year 1951 1961 1971 1981 1991 2001 Population Population Variation 43,436 51,399 60,196 67,710 76,837 84,290 10,766 7,693 8,797 7,514 9,332 7,158 Decadal Growth rate % 32.95 % 18.33 % 17.12 % 12.48 % 13.78 % 9.29 %
Source: Census of India
The CCP projects the population in the town to reach 92023 by 2013 and 99070 by 2023. Population density is higher in the core areas and lower in the peripheral areas of the city. But the CCP points out that there is outward movement of people to the periphery. Population density is more along the river palam Kaveri that run across the town from east to west in the southern part of the town. Low density areas are of new settlements that spread along the river banks at the periphery of the town. Due to the direction of the river and major roads being in the east west directions, developments are taking place in the same pattern. Mayiladuthurai1 recorded an overall literacy rate of 80.2 % with female literacy of 76.1 %, while the sex ratio was 1012 females per 1000 males. As per Census 2001, the slum population in Mayiladuthurai is 13% of the population. However, the municipal data shows an increase in slum population and this is a major concern area for the municipal corporation.
Source: http://gisd.tn.nic.in/census-paper2/TABLES/table-1c.htm 3
2.3 2.3.1
Economic Development Composition of workforce
The economic base of Mayiladuthurai is predominantly, tertiary sector activities with trading of agro products and cottage industries. Hence the participation rate is more in the tertiary sector. As per census data of 1991, worker population is about 28.6% of the total population, which is low compared to the state figure. The economic based of the town is predominantly tertiary sector activities with trading in agri-products and cottage industries. Nearly 67 % of the workforce is engaged in the tertiary sector. 2.3.2 Industry Mayiladuthurai is an industrially backward town and there is no major industry in this town. There are about 79 small agro based and household industry spread over the entire developed area. There are few engineering industries, welding and lathe works, auto works, tri-cycle manufacturing works and a large number of agro based industries that accommodate larger portion of workers. Only 6.325 hectares are under industrial use, which is very low compared to the standard of 370 hectares use. Key industries include rice mills, engineering works, printing press and confectionery making. The CCP indicates that the proposed ITI could spur the growth of small scale industry. Additional areas that emerged based on consultation with Chairperson and select ward members on potential economic activities for the town include the need to create employment intensive investment including rice milling and tourism development. It was also suggested that the municipality along with the Tamil Nadu Slum Clearance Board should identify vacant/acquirable land areas within the municipal areas to create land parcels for industrial development and slum rehabilitation. Heritage and tourism activities Being a temple town (the Mayuranathar Temple attracts pilgrims from other places), Mayiladuthurai a tourist centre. It is also strategically located in close proximity to the famous nine Navagraha temples. A number of important tourist places including Poompuhar, Mayuram, Tanquebar and Therazendur are in close proximity to the town. Since Mayiladuthurai has a good road and rail system, it acts as a halting junction for pilgrimages. The CCP points out that there is good scope for exploiting tourist potential and substantially increasing the economic growth of the town. Trade and commerce In terms of commercial activity, there are weekly markets and daily markets and an Uzhavar Sandhai functioning at present in Mayiladuthurai. The Municipality runs the commercial complex with 11 shops in the Kittapa Commercial complex. Apart from these, there are flower and vegetable markets from where goods are exported to other cities. The town is an aggregation centre for a special variety of mangoes called Pathiri got from the surrounding villages. Milk production is also an important activity around the town.
Conversion of CCP to BP - Mayiladuthurai Municipality 4
Economic activities
2.4
Land use management
Mayiladuthurai Municipality covers an extent of 11.27 sq. km. The CCP observes that the developments extend from the core of the town along the main roads as ribbon developments. High density residential areas are in the older parts of the town. Mayiladuthurai is located amidst a fairly large agricultural belt and trading in agricultural products thus forms an important activity in the town. 2.4.1 Issues in land-use
Mayiladuthurai municipal area has been declared as Mayiladuthurai Local Planning area. The member of the council form members of the planning area as well. Exhibit 2.2 provides details of land use. The urbanised area constitutes 620 hectares out of the total 1137 hectares. About 44.9% of the total area comes under undeveloped / non-urbanised land. The land use pattern in 1996 is as given below:
Exhibit 2.2 Land-use - 1996 and 2011 (proposed)
Sl. No 1 2 3 4 5 6 Type Residential Commercial Industrial Educational Public and semi-public Agricultural and others Total Land (ha) 498.84 68.87 6.33 22.35 24.27 506.35 1127 1996 % of total 44.27 6.11 0.56 1.98 2.16 44.92 100 Provided in master plan (2011) Land (ha) % of total 892.20 79.2 78 12 45 25 74.5 `1127 6.9 1.1 4.0 2.2 6.6 100
Residential areas proposed include Pattamangalam, Koradadu, Sithakadu, Mayuram, Tiruvillandu and Vellalagaram village parts with low-medium densities. The residential areas are divided into primary residential and mixed residential. The primary residential area has been zoned on newly developed areas and the central part of the town has been designated as mixed residential. The majority of commercial activity is spread around the existing bus stand area. Commercial areas have been proposed in the centre of the town around the bus stand between Mahathanapuram road and hospital road. Commerical areas are also proposed along the major highways including Kumbakonam road and Avoor road. An ITI is provided for as part of the master plan as part of the Industrial area, for which 12 acres have been allocated. 2.5 Strategy for development
The CCP outlines the following strategies for development:

Provision of food processing centre for fruit and milk products Improvement of agro-processing industries around the town that have direct and indirect impact on employment opportunities Improvement of linkages of the town to other urban centres Provision of better facilities including lodging and boarding facilities for tourists.
Additional areas that emerged based on consultation with Chairperson and select ward members on potential economic activities for the town include the need to create employment intensive investment including rice milling and tourism development. It was also suggested that the municipality should identify vacant/acquirable land areas within the municipal areas to create land parcels for industrial development and other economic activities.
3. Review of operating performance

This section presents a review of the status of infrastructure development undertaken by MyM 3.1 Water Supply
Water Supply to Mayiladuthurai town is through two water supply schemes of TWAD and hand pumps
Scheme I This was initiated in 1969 to provide protected water supply to the town and was designed to cater to ultimate population of 62000 at a per capita supply of 70 litres per day (LPCD). However the carrying capacity has been reduced to 55 LPCD. Scheme II TWAD has implemented an augmentation project at a cost of Rs. 11.25 crore including construction of a collector well and a pumping main of length of 20.2 km. Water supply is effected through three additional service reservoirs and a new distribution system of 45.8 km. Hand pumps - 296 hand pumps have been installed at various places in the town.
The new water supply scheme was designed to meet the intermediate stage (2011) and ultimate stage (2026) requirement of water supply, worked out to 103.5 lakh litres and 139.5 lakh litres respectively. Hence the water supply scheme is expected to satisfy the present and future demand of water for the projected population.
Exhibit 3.1 Water supply
Source I Source 2 Supply Sitharkadu Gandhi Nagar 27 6 Pumping Pumping Vennar 90 LPCD Distribution 99.47 km 99.8% Storage Source 2 Mamarathu medai 9 Pumping Coleroon
Source Location Daily intake (Lakh litres) Transmission type Location of Head works Avg. per capita supply Distribution main (km) % of road length covered Storage Capacity Existing capacity Norm
4 OHTs with capacity of 4.75 million litres 3.7 Million Litres
3.1.1
Key issues
Some of the key issues with respect to water supply are highlighted below:
Demand Supply MyMs supply of 7.5 MLD corresponds to 90 LPCD which is in line with municipal norms. Scope for adding water connections Water connections account for only about 37 % of the number of properties assessed and indicate the scope for adding more connections. However, the high proportion of slum population and availability of water fountains constrain the ability to add more connections. Further, availability of ground water for households also deters people from taking household connections.
7
Poor collection efficiency - Current collection efficiency was only 65 % in FY 2005. Overall collection efficiency is even lower due to poor arrears collection ( 40 % efficiency) and is a major cause for concern, especially considering the significant debt servicing obligation that MyM has. Other issues - Uneven distribution and low pressure supply complaints prevail in select wards in the town. Also certain extended areas of the town need to be provided with distribution main. There has been no formal leakage audit and this initiative could enable improve the efficiency of water supply.
3.2 3.2.1
Sanitation Under Ground Drainage (UGD)
Mayiladuthurai is currently implementing an Underground sewerage system with assistance under the National River Conservation Program (NRCP) Mayiladuthurai is in the process of implementing comprehensive Underground drainage scheme with assistance from NRCD at an outlay of Rs. 42 crore. Nearly 80 % of the pipeline work for the project has been completed. When completed the project is expected to be ready to serve more than 13000 house service connections. The project would have 8 pumping stations with 1 sewerage treatment plant. The UGD scheme is expected to be completed during the course of the next two years. Exhibit 3.3 provides details of the existing sanitation facilities in Mayiladuthurai.
Exhibit 3.3 Sanitation facilities
% of households 16070 12535 1562 12 19
Households Septic tanks Low cost sanitation Public conveniences (usable) Public conveniences (non usable)
Source: CCP
Cost of additional areas covering 31 km which were not covered by the above project is estimated at Rs. 4 crore. MyM is keen to implement the same upon completion of the existing project 3.3 Storm water drains
Storm water drains are provided in approximately 10 % of the total road length within MyM limits. Exhibit 3.4 provides the details.
Exhibit 3.4 Storm water drain network

Details Open pucca / surfaced Kutcha / unlined Total Drains (km) Roads without drains Total Road Length (km) Length in km 39 4 43 64 107 % coverage 36% 4% 40% 60% 100%
Source: SFC Questionnaire Jun 2005
3.4
Solid Waste Management
Mayiladuthurai generates nearly 104 MT of solid waste per day, while collection is estimated about 85 MT per day (implying nearly 80% collection). Exhibit 3.5 gives the current status of solid waste generation and management system of MyM.
Exhibit 3.5 Solid Waste Management - current status
Generation / day Collection / day Door - to - door collection Privatisation of door-to-door collection Compost Yard area 38 MT 35 MT All wards 39 streets 4.62 acres
MyMs vision plan has identified deficiencies in terms of compost yards and transportation infrastructure. MyM is in the process of implementing a project at an outlay of Rs. 53 lakh to improve its solid waste management handling infrastructure. 3.5 Roads
Exhibit 3.6 provides details of the road network under the jurisdiction of MyM.
Exhibit 3.6 Road network
Type Municipal Roads km Cement Concrete pavement BT. Roads W.B.M roads Earthen Roads Total % 6% 87% 4% 3% 100.00% 20.854 100 20.854 100% Highways km %
5.617 75.784 3.457 2.685

87.543
MyM maintains a road network of nearly 87.5 km of which surfaced roads (both B.T. and CC) constitute 87 %. In addition, nearly 20 km of highway roads traverses the MyM area. The road network requires significant upgradation in view of the ongoing UGD scheme.
3.6
Street lights
Exhibit 1 provides details of provision of street lights by MyM. Nearly 76 % of the lights are tube lights and 24 % are sodium vapour lamps. Average spacing between the lights (~ 28 m) is in line with the municipal norm of 30m. Exhibit 3.7 provides the details.
Exhibit 3.7 Existing Street Lighting Facilities
Type Tube lights Sodium Vapour Lamps Mercury Lamps High Mast /Others Total 3 3045 Nos. 2334 708
3.7
Bus stands
The existing bus stand in Mayiladuthurai is on the Kumbakonam Sirkazhi road. It is a class B bus stand with about 12 bus bays. The CCP observes that the bus stand is highly saturated. MyM has proposed to develop a Class A bus stand to the 8.74 acre site at Thenamara salai. The proposed bus stand is to developed at an outlay of Rs. 7 crore and would have 51 bus bays and all required amenities. 3.8 Capital Investment Plan
We have compiled the felt needs of the city under various service areas, based on

Review of projects recommended in the City Corporate Plan prepared earlier under TNUDP - II Status and progress on projects identified as part of the Vision Plan (2004-09) prepared by MyM Discussion with MyM officials
Priority projects as identified by MyM are listed below 1. Completion of ongoing UGD scheme. Additional areas left out in the current scheme of approximately 31 km of roads as identified by MyM also need to be taken up. 2. Restoration and upgradation of roads in view of the poor condition following implementation of UGD scheme and heavy rains last year. 3. Development of new Bus stand. This could be taken up on BOT basis to reduce pressure on financials of the municipality. 4. Storm Water Drains 5. Remunerative projects on a BOT basis, specifically relating to tourism development. There is a proposal to develop a Theme park on a BOT basis at Chitarkadu, where 6 acres of municipal land is available.
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Exhibit 3.8 provides a brief snapshot of the felt needs of MyM over the next ten years for various services and the estimated outlay for implementing these projects.
Exhibit 3.8 MyM - Felt needs (2006-15)
Outlay as given in Segment Vision Plan 1052 1100 CCP 350 120 SFC 1,125 325
Outlay reqd.* 2006-15 2000 1000
Remarks on ongoing projects/Projects envisaged Roads require significant upgradation in view of the ongoing UGD scheme CCP highlights significant gaps in storm water drains Comprehensive water supply project undertaken. Outlay required for distribution gaps, pumping system upgradation, additional borewells and providing new connections Immediate outlay for procuring equipment (Tipper lorry / Dumper place bins) for upgrading primary collection and secondary collection Installation of timers / energy saving timers and additional lamps Bus stand at an outlay of Rs. 6.5 crore and other market developments at an outlay of 92 lakh Development of school infrastructure Completion of remaining part of UGD scheme Coverage of additional areas of approx. 31 kms to be covered Health centres, burial ground etc, Tourism projects
Roads Storm Water Drains
Water Supply
30
130
200
Solid Waste Management Street Lights Bus stands and rem.enterprises Education Sewerage and Sanitation Others TOTAL
18 170 81 150
64 200
12 712 70
30 671 50 622 1,054 4,184
30 1000 100 650 100 5130
4216 82 6732
4280 316 6060
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4. Analysis of financial performance

This section provides a summary analysis of the financial performance of MyM. 4.1 Income and Expenditure summary of MyM
Exhibit 4.1 provides a summary of the income and expenditure of MyM. This summary has been prepared based on information provided by MyM2.
Exhibit 4.1 Income and Expenditure of MyM - Last five years 2001 2002 2003 2004 2005 CAGR % INCOME Own Income 295 300 377 526 382 7% Property tax 155 164 177 182 187 5% Professional tax 16 16 19 19 23 10% Water charges 19 13 36 109 89 47% Sewerage charges 1 5 38 121 49 214% Service Charges and fees 36 33 44 41 18 -16% Other Income 68 70 65 54 16 -30% Assigned Revenue 87 38 147 154 92 1% Devolution and Grants 73 77 144 200 144 18% Prior Period 34 3 1 Total 456 449 671 880 618 8% EXPENDITURE Staff and terminal benefits 261 254 361 270 249 -1% O&M 50 55 66 84 81 13% Program Admin 10 126 59 34 31 32% Prior Period 8 3 1 0 Operating Expenditure 321 443 490 389 361 3% Operating surplus 134 6 181 492 258 18% Finance charges 9 12 49 76 69% Depreciation 7 13 104 81 30 46% Cash surplus 125 6 169 443 182 10% Overall surplus 118 (8) 64 362 152 6%
4.2
Revenue streams of ULB in Tamil Nadu
Revenue of ULBs in Tamil Nadu can be categorised along three areas:
Own Revenue - comprising taxes (property tax and professional tax), user charges (water, sewerage, solid waste etc.) and other non-tax income (lease and rents, sale & hire charges etc) Assigned Revenue - Income generated revenues shared with the ULB Grants and Contributions - Grants and transfers made by GoTN
We have received the audited accounts from MyM for FY 2001 to FY 2004 and information on FY 2005 (as in the case of DCB statements) 12
Exhibit 4.2 provides a detailed classification of the revenue streams.

Exhibit 4.2 Revenue streams - ULBs in Tamil Nadu
ULB-Income
Assigned Revenue
Own Income
Transfer from Govt
Entertainment Tax
Non- Tax Income
Tax Income
Devolution Fund
Stamp Duty Property Tax Water Charges
Grants and Contribution
Other Charges
Profession Tax
Other Income
Other Taxes
4.3
Revenues
Exhibit 4.3 provides details of revenue of MyM along various heads between FY 2001 and FY 2005.
Exhibit 4.3 Revenue trend
Figures in Rs. Lakh

1000 55 200 500 68 73 87 56 171 0 2001
Taxes User charges
68 144 104 77 38 51 180 2002 147 118 195 2003
154 271 201 2004

Devolution and Grants
16 144 92 156 210 2005

Others
Assigned Revenue
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4.3.1
Tax Income
Tax income has grown at a CAGR of 5 % over the last five years. Share of taxes have declined from 37% to 34 % of income. Property Tax Property tax alone accounted for a 30 % of income of MyM in FY 2005 and is an important contributor of revenues to MyM. Following are the key issues / observations with respect to property tax. Exhibit 4.4 provides a summary.
Exhibit 4.4 Property tax - analysis of key revenue drivers
Collection Efficiency Arrears Current Total Properties Tax/property
Year 2000-01 2001-02 2002-03 2003-04 2004-05
Numbers
Growth %
18% 20% 19% 16% 42%
79% 81% 81% 69% 82%
56% 57% 55% 47% 67%
15737 15827 15938 16163 16373
1054 1090 1142 1146 1095
na 1% 1% 1% 1%
a) Decline in share of property tax - Even though the property tax has increased in absolute terms, its share in total income has declined from 34% to 30 % over the last five years. b) Low assessments growth - Assessments have grown at just 1% and the average tax per assessment has also been stagnant. The quinquennial revision of Annual Rental Value (ARV) due in 2003 has not been undertaken as of date. c) Low collection efficiencies - Collection efficiency is a cause for concern. While collection efficiency in current demand has been around 82 % in 2005, efficiency in overall collection has been very low (47% - 67% in the last 5 years). Overall efficiency has improved to 67 % in FY 2005, but needs significant improvement. d) Aging of arrears - Growth in arrears in the last 5 years is a disturbing trend and needs to be arrested. e) Break-up of assesses - Residential segment contributes 71 % of the total assessments, but only 58% of the total property tax demand. The municipality must take steps to increase property tax from this category. Exhibit 4.5 below gives the detailed break-up of assesses for property tax.
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Exhibit 4.5 Property Tax - breakup of assessees

Category of Property Residential Commercial Industrial State Government Properties Public Sector Undertakings Total Number of Assessments % Tax Demand 2005 - Rs. lakh %
11618 4433 84 309 2

16446
71% 27% 1% 2% 0%
100.00%
105 45 24 7 1
182
58% 25% 13% 4% 1%
Professional tax Exhibit 4.6 provides an analysis of key drivers for professional tax revenue.
Exhibit 4.6 Professional Tax - revenue drivers
Collection Efficiency Arrears Current Total Assessments Tax/assessment
Year 2000-01 2001-02 2002-03 2003-04 2004-05
Numbers
Growth %
3% 1% 0% 1% 3%
90% 88% 84% 85% 87%
26% 23% 24% 25% 29%
3140 3142 1840 1562 1505
503 498 1009 1240 1552
na 0% -41% -15% -4%
a) Share of professional tax in total income has increased from 3% to 4% b) Demand per assessment was Rs. 1552 per assessee in FY 2005. c) Collection efficiency has been very low While a current collection has been more than 85%, arrears collection is negligible. d) Composition of professional tax assessments - Exhibit 4.7 below shows the composition of assessments.
Exhibit 4.7 Professional Tax assessee break up

Category State/Central/Quasi Govt. Employees Traders Self-employed professionals Private employers/ Companies Private employees Total 1505 Number of Assessments 69 1362 42 13 19 % Annual Tax demand 1820 421 52 20 24 2337 %
5% 90% 3% 1% 1%
78% 18% 2% 1% 1% 100%
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4.3.2
User Charges / Fees
User charges have also grown by a healthy 30%, aided by 47% increase in collection of water charges and initiation of collection of deposits for sewerage connections. As a result, the share of user charges/fees has doubled from 12% of revenue to 25 % of revenue over the last five years. Exhibit 4.8 provides an analysis of key drivers for water charges.
Exhibit 4.8 Water charges - revenue drivers
Collection Efficiency Year 2000-01 2001-02 2002-03 2003-04 2004-05 Arrears Current Total Numbers Connections Charges/ connection Growth rate
17% 24% 30% 27% 40%
70% 85% 81% 52% 66%
42% 51% 62% 45% 55%
5131 5204 5439 5674 6131
245 242 428 705 701
na 1% 5% 4% 8%
a) No. of connections - There has been an increase in the number of connections from 245 in FY 2001 to more than 701 connections in FY 2005. Water connections account for about 37 % of properties assessed, indicating scope for increasing the number of connections. The low penetration is also due to the availability of water fountains in several areas (covering nearly 35% of population) which lead to loss of revenue for MyM. b) Water tariff / connection has increased from about Rs. 245 per year per connection to Rs.701 per connection in FY 2005. c) While 80% of the water connections are metered, water billing is being done on a flat (monthly) basis. Refer exhibit 4.9 for details of type of connections and water charges. MyM is considering collections on the basis of meter readings. d) Collection efficiency - Current collection efficiencies have ranged from a low of 63% (FY 2004) to a high of 75% (FY 2005) and have not shown a linear trend. Arrears collection efficiency has been very low and has ranged between 21% and 33%. The overall collection efficiency of 55% is quite low and needs significant improvement.
Exhibit 4.9 Water charges - category wise connections and tariff
Connections
Domestic Commercial Total
Metered Un-metered
Total
Billing system
6098 183 6281
6098 183 6281
97% Flat rate 3% Flat rate 100%
Connection Type
Domestic Commercial
Flat rate
Per KL
Minimum Rs. 70 /-PM Rs.5/Minimum Rs. 122/-PM Rs. 10/-
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4.3.3
Assigned Revenue
Assigned Revenue (which includes transfers of stamp duty and entertainment tax) has grown from Rs. 87 lakh to Rs. 92 lakh over the last five years, but its share in total income has declined from 19% to 15%. 4.3.4 Grants/Contributions
Grants / Contributions from state have one of the biggest revenue drivers and have doubled during FY 2001-05. They contributed to nearly 23 % of revenues of MyM in FY 2004. 4.4 Analysis of Costs
Exhibit 4.10 provides details of costs of MyM along various heads between FY 2001 and FY 2005. Total expenditure has shown an increasing trend till FY 2003, before decreased over the next two years. Salary expenditure has declined, while O&M and finance charges have shown an increase.
Exhibit 4.10 Costs - FY 2001 and FY 2004
1000
500 9 10 50 261 0 2001 Staff
0 134 55 254 2002 O&M
12 62 66 361
49 35 84 270 2004
76 31 81 249 2005
2003 Admin
Finance charges
4.4.1
Salary and wages
While salary and wages account for the highest expenditure (more than 40%% of total expenditure), it has shown a declining trend during FY 2001 to FY 2004. This has been due to the lack of addition in staff over the last few years and a number of posts remaining vacant. As of March 2005, the number of employees was 343. 4.4.2 Operations and Maintenance
O & M forms the other major component of total expenditure. In absolute terms, this expenditure has been around 10-13% of total income during this period.
17
Power costs Exhibit 4.11 gives the details of power costs out of the total repair and maintenance expenditure relating to Water & Sewerage and Street lights. Power costs have grown at a CAGR of 13%, driven primarily by a steep increase in power costs for street lights.
Exhibit 4.11 Power costs - Water & Sewerage and Street Lights
Power costs Water & Sewerage (WS) % of total W&S Street lights % of total Street light Total FY 2001 6 29% 21 65% 27 FY 2002 7 29% 23 63% 30 FY 2003 10 49% 43 83% 53 FY 2004 20 50% 41 79% 61 FY 2005 25 51% 42 76% 67
Source: SFC questionnaire
Power costs account for nearly 51 % of repair & maintenance costs of water and sewerage and t76% of operating street lights. Power costs have gone up from 19 % of O& M expenditure in FY 2001 to nearly 29 % of O&M expenditure in FY 2005. 4.4.3 Operations and Maintenance
Exhibit 4.12 gives the details of outstanding loans of MyM at the end of last five years.
Exhibit 4.12 Loan Statement
Amount of Loan 3 76.65 17.79 20.06 89.65 367.06 850.60 1421.81 Year of drawal 4 1998 1994 1995 2003 2003 2004 Interest Rate % 5 13.5% 8.75% 8.75% 9.05% 9.05% 8.20% Repayment period (years) 6 20 20 15 13 15 9 Total loan repaid as on 30.9.2005 Principal 9 35.76 8.66 8.12 33.36 85.90 Interest 10 7.16 20.53 30.77 22.65 8.62 74.30 34.96 168.22 8.62 74.30 68.32 254.12 89.65 367.06 817.24 1335.81 11.96 Total 11 42.92 29.19 Outstanding loan amount (3-9+13+14) 16 40.89 9.01
Lending Agency
2 Govt. Loan 1) Roads & Drainage 2) Construction of Shops 3) Special Roads 1) Water Supply Water Supply Total
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To summarise, MyMs financial position has improved from an cash surplus of Rs. 125 lakh in FY 2001 to a cash surplus of Rs. 182 lakh in FY 2005, though its outstanding debt (Outstanding loan of Rs. 13 crore) is high. Key highlights are summarised below:
A 8 % CAGR in revenue and by keeping costs in check. Tax income has grown at a CAGR of 5 % over the last five years in spite of no revision in Average Rental Value (ARV) since 1998. User charges have grown by a healthy 30 %, aided by increased in collection of water charges and other fee income including sewerage deposits The share of user charges/fees has increased from 12 % of revenue to 25 % of revenue over the last five years. Grants / Contributions from state have been the biggest revenue driver and have doubled in the last five years. They contribute to nearly 23% of income.
Expenditure has remained flat over the last few years, showed an increasing trend till FY 2003 and marginally declining over the next two years. Salaries have marginally declined due to reduction in staff, while Operating expenditure has grown at 13 %. Overall, revenue expenditure appears to have been in control. Interest expenditure has shown a steep increase, up from 2% of income in 2001 to 12% of income in 2005.
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5. Potential areas for improvement

5.1 Public private partnerships (PPP)
MyM should consider handling the operations and maintenance of the Sewerage Treatment Plant of the ongoing UGD scheme and implementation of the proposed slaughter house project through private sector participation. MyM should explore more areas to augment its own resources through use of PPPs. PPPs have been found to be very effective in addressing efficiency and asset management (through pre-defined service levels and accountability for operations and maintenance) aspects of infrastructure development. In this regard, 1. CMA, GoTN should develop a framework for PPP including specific policies and guidelines. 2. MyM should explore use of private sector participation in undertaking any remunerative projects in areas such as slaughter house, market development etc., through public private partnerships. To start with, MyM should explore developing the proposed new bus-stand and the amusement park at Chittarkadu through BOT / PPP structure. 3. Being part of an heritage circuit, MyM should actively pursue projects that improve the tourist experience in the town. Several initiatives relating to tourism development can be pursued in partnership with private sector investment / corporate donations and NGO/Self Help Group partnerships. In Mayiladuthurai, MyM should pursue the following

Encourage corporate / NGO partnerships for heritage preservation and city beautification projects, including development and maintenance of parks. Consider addition of more identified parking zones and pay-and-use toilets in the town. These could be maintained through Self-Help Groups. Explore the feasibility of provision of integrated concrete roads with ducts for underground cabling and storm water drains around important heritage/tourist areas and align traffic movement to ensure ease of tourist movement during festivals. This would also enable better tourist experience and better maintenance of heritage centres.
4. TNUIFSL should provide assistance covering necessary capacity building (in terms of evaluating mechanisms - BOT, SPV etc) and financing for developing projects through private sector participation. 5.2 5.2.1 Potential for revenue enhancement Property Tax
Exhibit 5.1 highlights the key issues and recommended interventions with respect to property tax. While a substantial improvement in property tax is contingent upon implementation of ARV revision (due in 2003), there are other interventions that would enable effective property tax realisation.
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Exhibit 5.1 Key issues and suggested measures

Issues Revision of Annual rental Value (ARV) has fallen due in 2003. The revision is yet to be implemented. 5. Recommended Interventions GOTN should implement the SFC recommendation of revision of property tax every three years, linked to inflation. This is will ensure gradual and stable increase, rather than the existing quinquennial revision. All assesses should be taxed on the same basis through a uniform and transparent approach to property tax assessment. Existing anomalies need to be removed at the earliest. Agency GoTN
In 1998 when the ARV scheme for assessing property tax was introduced, the old assesses were allowed to pay taxes based on capital value with marginal increase, leading to distortions and non-uniform rates. Survey of properties happens only when the ARV revision takes place. Apart from addition in properties without getting assessed, addition to area in existing properties or conversion of property from residential to commercial category also goes unnoticed leading to revenue loss
6.
GoTN / MyM
7.
Initiate a one-time survey to prepare a comprehensive database of properties available with it with updated information on the area / type and property tax details 8. Institutionalise a mechanism for conducting surprise checks on a sample basis in all wards on an ongoing basis and mandatory re-assessment of properties every five years. 9. Streamline procedures for assessment/ approvals of new properties / expansion of existing properties to encourage selfdisclosure of property development / modification 10. Computerise and web-enable property tax assessment and billing processes 11. Develop a GIS based system for effective data capture and monitoring 12. Launch a focused drive on existing arrears 13. Conduct one time settlement scheme for old arrears and incentivise payments through marginal rebates for arrears pending for more than 5 years. 14. Work with GOTN to moot creation of a special tribunal for speedy disposal of properties under litigation 15. Make provisions for the debtors and take steps for writing off bad debts 16. Implement Payment Due Date along with a 90 day grace period during which payments would involve a nominal interest payment. 17. Payments beyond the grace period should include a steep penal charge to encourage payments on time.
Ku
On an absolute basis, property tax arrears have shown an increasing trend.
GoTN/MyM
While Property tax is payable on a semi-annual basis, no interest /penal charges are levied on late payment.
GoTN/MyM
21
Issues Tax Dispute cases where the assessee approaches legal recourse without paying any tax.
Recommended Interventions 18. In case of disputed property tax, the assessee should first pay the tax under protest as in the case of excise or customs and then take the necessary legal recourse. The Act should be modified in such a way that no legal recourse should be available to the assessee without paying the tax under protest. 19. Exemptions from tax should be provided only to needy institutions. For example blanket exemption to educational institutions (including large self-funded private residential schools) should be reviewed. 20. All exemptions lead to a revenue loss to the ULBs and should be compensated by GoTN.
Agency GoTN / MyM
Blanket Exemptions to institutions reduce the property tax potential
GoTN / MyM
5.2.2
Professional Tax
Professional tax income has grown at a CAGR of 3 % over the last five years. Specifically, 21. MyM should focus on widening its professional tax base by bringing more traders and independent professionals within the ambit of professional tax. Specifically, MyM should consider tapping into databases of potential professional tax assesses including
Professional associations including Institute of Chartered Accountants of India (ICAI), the Bar Council, Medical Council etc. Commercial Taxes Department, GoTN to get details of sales tax registrations (existing and new) within MyM. User charges
5.2.3
MyM has been fairly successful in progressively increasing user charges, as reflected in the increase in the average water charges per collection and could augment its revenues through focused interventions including the following. 22. Increase penetration of connections for water supply. Currently MyMs water connections account for only 37 % of the properties assessed. MyM should target achieving at least 10,000 connections over the next five years. Introducing staggered payment of deposits (in instalments) instead of one-time payment may encourage additional connections and should be explored. 23. Provide water fountains only in areas with a predominantly low-income population to minimise revenue loss. Consider providing connections to groups of households and charge a nominal monthly user charge for the same.
Conversion of CCP to BP - Mayiladuthurai Municipality 22
24. Improve revenue per connection through implementation of either a graded water tariff scheme (as is being considered by CMA, GoTN) or a metering based tariff. While the metering based system would a better system in principle (charges on the basis of usage) and in terms of incentivising water conservation, ULBs have faced resistance in implementation of metered tariffs. 25. Consider implementing user charges for door-to-door collection of Solid Waste. 26. Adopt measures to improve collection efficiency. Overall collection efficiencies in water charges are very low and needs to be improved. MyM should consider stiff penalties for nonpayment of user charges. Specifically MyM should consider implementation of late payment fines and in case of extreme overdue situations, disconnecting supply. 5.2.4 Measures to improve collection efficiency
27. MyMs collection efficiency is very low across all its revenue heads namely, property tax, professional tax and user charges and needs significant improvement from current levels. MyM should consider a) a focused one-time drive to clear up its dues and b) strengthening of its collection process and organisation to ensure that the overall levels of efficiency in order to improve and sustain its collection efficiencies. 5.3 5.3.1 Measures for cost management Energy efficiency
MyM needs to take steps to address its power costs, which comprise nearly 60% of its operations and maintenance costs. The following steps are needed in this direction: 28. MyM should conduct a comprehensive energy audit to identify areas for reducing power consumption and related costs. As envisaged in its Vision Plan, MyM should implement automatic time based dimmers on street light network and ensure that all pumps / motors are energy efficient. 29. GoTN should also consider a specific grant / capital subsidy scheme to incentivise energy conservation initiatives for not just MyM, but for all ULBs. 30. CMA, GoTN and TNUDF should develop and implement minimum standards related to energy conservation including installation of energy efficient motors, right sized pumps etc.
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5.4 5.4.1
Other measures / interventions Accounting /Audit
While all ULBs in GoTN have implemented a double entry accounting system, most of the ULBs including MyM require significant improvement in their accounting practices. Several ULBs have redundant systems involving manual and computerised book keeping and errors often creep into MIS. Often, the MIS in the form of DCB statements and information provided in accounting statements are not reconciled. 31. CMA, GoTN should consider an outlay for technical assistance to ULBs to improve their accounting systems and practices and to provide adequate training to staff on the concepts of double entry book keeping. 32. Property tax system has been computerised but the software for accounting developed seems to have some errors. TNUDF should take steps to eliminate these teething problems in the accounting software. 33. GoTN should issue an order for phasing out manual books like the property tax DCB registers as the same data is being maintained both manually and also in computer database. 34. The LFA should also be given training in auditing through computer so that the manual books can be avoided in future. 35. GoTN should insist and implement closing of accounts and audit of the same within a fixed time period subsequent to the completion of financial year. The government should continue to provide for the payment of common accountants and computer assistant to work in the ULB which it was providing till date. GoTN should also evaluate the option of employing a local CA firm to give guidance and training to ULB staff on a regular basis. CMA, 36. TNUDF should consider a grading system to categorise ULBs on the basis of accounting and reporting practices
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6. Business plan projections and investment capacity of MyM

6.1 Financial and Operating Plan time horizon and scenarios
The FOP has been prepared for a ten-year period i.e., FY 2006-2015 for 2 different scenarios as given below:

Scenario I - Base projections Scenario II Projections with potential improvements
The basis and assumptions underlying income and expenditure projections for the FOP are detailed in section 6.2 6.2 6.3 Basis and assumptions Revenues
Property tax Property tax projections has been arrived at as a product of average tax per assessment and the number of properties assessed. Assumptions on these revenue drivers are given below:
Scenario I Base case Assessments growth 1.00% per annum (in line with the CAGR over the last five years), with a cap on the number of assessments at 20,000 properties. The base number of assessments has been taken as 16,373 properties. Average tax per property - Rs. 1095 per property assessed, in line with the average tax per property collected in FY 2005. Arrears collection efficiency - 42 % for FY 2006 (maximum during FY 2001-05) in FY 2005 and assumed to increase by 2 % every year (44% in FY 2007 and so on) Current collection efficiency - 82 % for FY 2006 (maximum during FY 2001-05) in FY 2005 and assumed to increase by 1 % every year (83% in FY 2007 and so on)
Scenario II with improvements Assessments growth 8% per annum, with a cap on the number of assessments at 32,000 properties. Average tax per property - Rs. 1095 per property assessed in FY 2006 with a one-time upward revision of 25% in FY 2007 Collection efficiency are kept at the same levels as Scenario I
Profession tax Profession tax has been arrived at as a product of average tax per assessee and the number of assessments. Assumptions on these revenue drivers are given below:
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Scenario I Base case Assessments growth 4.00% per annum (assumed as the CAGR over the last five years is negative), with a cap on the number of assessments at 4,000. The base number of assessments has been taken as 3140 assessments. Average tax per assessment - Rs. 1552 per assessment, in line with the average in FY 2005. No revision has been assumed for the base case. Arrears collection efficiency 3% for FY 2006 (maximum during FY 2001-05) in FY 2005 and assumed to increase by 5 % every year (8% in FY 2007 and so on) Current collection efficiency 90 % for FY 2006 (maximum during FY 2001-05) in FY 2001 and assumed to increase by 1% every year (91% in FY 2007 and so on).
Scenario II with improvements Assessments growth 5 % per annum, with a cap on the number of assessments at 4,000 Average tax per assessment - Rs. 1552 per assessment, in line with the average in FY 2005. Collection efficiency are kept at the same levels as Scenario I
Water Charges Water charges have been arrived at as a product of average water charges per connection and the number of connections. Assessments growth 4.55 % per (in line with the CAGR over the last five years), with a cap on the number of assessments at 10,000. The base number of assessments has been taken as 6131 assessments. Average tax per assessment - Rs. 701 per assessment, in line with the average in FY 2005. No revision has been assumed for the base case. Arrears collection efficiency 40% for FY 2006 (maximum during FY 2001-05) in FY 2005 and assumed to increase by 2 % every year (42% in FY 2007 and so on) Current collection efficiency 85 % for FY 2006 (maximum during FY 2001-05) in FY 2002 and assumed to increase by 1% every year (86% in FY 2007 and so on).
Scenario II with improvements Assessments growth 5 % per annum (in line with the CAGR over the last five years), with a cap on the number of assessments at 10,000. Average tax per assessment - Rs. 701 per assessment, in line with the average in FY 2005, with a tariff increase of 5% every three years. Collection efficiency are kept at the same levels as Scenario I
Other income The base amount for all the items listed below are taken on the average of the past five years. The other assumptions made in case of other income is summarised in the table below:
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Exhibit 6.1 Assumptions for other income

Item Base Amount (in Lakhs) Growth (CAGR %) Assumptions
Sewerage Charges Service Charges & Fees Other income Assigned Revenue Devolution Fund
42.69 34.44 54.63 103.39 161.28 (average of last 3 years) 2.34
214.4%
Negative Growth Negative Growth 1.5% 19.6%
CAGR of 4% on the base amount for FY 2005. CAGR of 3.7% on the base amount for FY 2005. CAGR of 1% on the base amount for FY 2005. CAGR of 5% on the base amount for FY 2005. CAGR of 5% on the base amount for FY 2005.
Grants & Contributions Assumptions - Expenditure
Negative Growth
CAGR of 5% on the base amount for FY 2005.
The major assumption adopted for projection in revenue expenditure based on the past performance is as follows:
Exhibit 6.2 Expenditure
Item
Base Amount (in Lakhs)
Growth (CAGR %)
Assumptions
Salaries Operating Expenses
249.03 80.80
Negative Growth 12.9%
CAGR of 3% with cost of FY 2005 as the base The expenditure has been assumed as 2% of the gross block of fixed assets (in line with the average over the last five years). An inflation of 5% has also been considered. The growth rate has been assumed at a nominal rate of 5% and has been applied on the base amount, which is for the year 2004-2005. Expenditure assumed as 1% of the gross block of fixed assets Refer 6.2.3 below.
Administrative Expenses
30.69
32.1%
Depreciation Finance Expenses
Assumptions - Assets and liabilities Since figures for the year 2004-05 were not given, the figures for the year 2003-04 were taken as the figures for the same. The major assumption adopted for projection of assets and liabilities is given below:
27
Other assets
Exhibit 6.3 Assumptions - Assets
Asset Head Stock Account
Debtors
Other Receivables
Bank Account
Assumptions The closing balance as given in the last balance sheet by the ULB has been taken as the base figure for projection. It has been assumed that the stock will be 95% of the last year balance This head represents the debtors for the three heads property tax, profession tax and water charges. As they form the major portion of revenue their debtors also have been grouped separately. The calculation of debtors has been done based on the current demand under each category of income and the collection efficiency for each of the category The closing balance as given in the last balance sheet by the ULB has been taken as the base figure for projection. It has been assumed that other receivables will be 95% of the last year balance. This account is the balance based on the cash flows for particular year
The detailed projections for each of the 4 cases are provided in section 6.3. Loans All loans taken by the ULB are long-term. The ULB has a loan outstanding of Rs.1335.81 lakhs and the scheduling of these loans and interest has been taken into account in the FOP.
Exhibit 6.4: Loan Statement as on 30.09.2005 (Rs in lakhs)
S.No
Lending Agency
Amount Year of Interest Repay of Loan drawal Rate % ment period (years) 76.65 17.79 20.06 89.65 367.06 850.60 2571.48 1998 1994 1995 2003 2003 2004 13.5% 8.75% 8.75% 9.05% 9.05% 8.20% 20 20 15 13 15 9
Total loan repaid
Outstandi ng loan amount
1 2 3 4 5 6
Govt. Loan Roads & Drainage Construction of Shops Special Roads Water Supply Water Supply Total
Principal Interest Total 35.76 7.16 42.92 8.66 8.12 33.36 85.90 20.53 22.65 8.62 74.30 34.96 29.19 30.77 8.62 74.30 68.32
40.89 9.01 11.96 89.65 367.06 817.24 1335.81
168.22 254.12
In case of the TUFIDCO loans for Rs 1700 lakhs we have assumed the moratorium period of 3 years. New Loans The requirement of new loans is related to capital expenditure (Capex) the ULB wants to execute. The loans has been taken as 60% of the total Capex while the grants is assumed at 30% and the own
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contribution by the ULB is pegged at 10% of the total Capex. The terms of the new loans is assumed as follows:
Exhibit 6.5 New loans
Particulars Rate of Interest on new loan
Repayment Period of new loan

Principal moratorium period Other liabilities
Assumptions 8% p.a. 15 years (inclusive of moratorium) 2 years
Exhibit 6.6 Other Liabilities
Liabilities Grants
Current Liabilities
Accumulated depreciation
Accumulated Surplus
Assumptions Closing balance as given in FY 2005 has been taken as the base figure. Grants assumed at 30% of the Capital expenditure, which would be added to grants balance every year. Closing balance as given in FY 2005 has been taken as the base figure. Current Liabilities assumed at 90% of the previous years balance. Closing balance as given in FY 2005 has been taken as the base figure. Every years depreciation has been added to the balance of the accumulated depreciation Closing balance as given in the FY 2005 has been taken as the base figure. Every year the cash surplus is added to this account while the contribution for the project from its own funds are deducted from the accumulated surplus.
6.4 6.4.1
Financial projections Income and expenditure projections
Exhibit 6.8 captures the Income and Expenditure projections for FY 2006-15 with potential improvements and sustainable borrowings.
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Exhibit 6.8 Income and Expenditure projections

Income Property Tax Profession Tax Water Charges Sewerage Charges Service Charges & Fees Sale & Hire Charges Other Income Assigned Revenue Devolution Fund Grants & Contributions Total Income Expenditure Salaries Operating Expenses Repairs & Maintenance Programme Expenses Administrative Expenses Finance charges Depreciation Total Expenditure Operating Surplus Cash Operating Surplus 2005-06 142.16 10.30 46.70 29.43 65.20 91.58 82.02 467.41 267.69 128.96 3.14 11.84 124.93 81.15 617.71 (150.30) (69.15) 2006-07 146.43 11.13 49.04 30.32 67.16 94.33 90.22 488.62 281.07 135.41 3.29 12.43 115.45 81.15 628.81 (140.19) (59.04) 2007-08 150.82 12.02 51.49 60.00 31.23 69.18 97.16 99.24 571.13 295.13 142.18 3.46 13.06 106.57 81.15 641.54 (70.41) 10.74 2008-09 155.34 12.98 54.07 63.00 32.16 71.25 100.08 109.17 598.04 309.88 149.29 3.63 13.71 98.35 82.44 657.30 (59.26) 23.18 2009-10 160.00 14.02 56.77 66.15 33.13 73.39 103.08 120.08 626.62 325.38 156.75 3.81 14.39 91.63 85.30 677.26 (50.64) 34.66 2010-11 164.80 15.14 59.61 69.46 34.12 75.59 106.17 132.09 656.98 341.65 164.59 4.00 15.11 86.31 89.67 701.33 (44.35) 45.32 2011-12 169.75 16.35 62.59 72.93 35.15 77.86 109.36 145.30 689.28 358.73 172.82 4.20 15.87 81.44 95.51 728.57 (39.30) 56.22 2012-13 174.84 17.66 65.72 76.58 36.20 80.19 112.64 159.83 723.65 376.67 181.46 4.41 16.66 77.09 102.92 759.22 (35.56) 67.36 2013-14 180.08 19.07 69.00 80.41 37.29 82.60 116.02 175.81 760.28 395.50 190.53 4.64 17.50 73.24 111.96 793.36 (33.08) 78.88 2014-15 185.49 20.60 72.45 84.43 38.40 85.08 119.50 193.39 799.34 415.27 200.06 4.87 18.37 45.77 122.71 807.04 (7.71) 115.00
6.5
Key results
While the borrowing capacity computed as the minimum of NPV of operating surplus, 30% of revenues during the projection period works out to Rs. 556 lakh, actual projections reveal that Mayiladuthurai faces a severe Debt Service Coverage issue even at this level of borrowing. This is due to the strain of repayments on its existing loans which stood at nearly 13 crore in FY 2006. Therefore, Mayiladuthurai borrowing capacity is negligible even with improvements.
Exhibit 6.9 Summary of key results
Summary of FOP results Revenues FY 2006 (Rs. Lakh) 467 Revenues FY 2015 (Rs. Lakh) 799 Revenue CAGR % - FY 2006-15 6.14 Avg. Op. Surplus (Rs. Lakh) (53) Avg. Cash Operating Surplus 41 Avg. TE (excluding depreciation)/TR (%) 94% Average Debt Servicing/TR (%) 26% Borrowing Capacity as a minimum of NPV of NPV of 50% of Cash Surplus (without new loans) 80 NPV of 30% of Revenue 1,239 Borrowing Capacity 80 Investment Capacity 612 Investment Requirement 3,767 IC/ IR 16%
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Some drastic measures including restructuring of its existing loans is required for Mayiladuthurai municipality to improve its investment capacity. Otherwise, MyM would need to utilize Grants from schemes like UIDSSMT and IHSDP to undertake its investments. Further, MyM could also consider involvement of private sector in implementing remunerative projects including bus-stands, markets and slaughter houses etc.
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Disclaimer: The report is based on information collected by IMaCS from sources believed to be reliable. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading, IMaCS is not responsible for any losses that the client may incur from the use of this report or its contents. The assessment is based on information that is currently available and is liable to change. The analysis that follows should not be construed to be a credit rating assigned by ICRAs Rating Division for any of the companys debt instruments. IMaCS is not a legal firm and our advice/recommendations should not be construed as legal advice on any issue.
For information about this report, please contact:
ICRA Management Consulting Services Ltd Building No. 8, 2nd Floor, Tower - A, DLF Cyber City, Phase - II, Gurgaon - 122002 Ph : 91 124 4545 800 Fax: 91 124 4545 850

Mayiladuthurai CCPJUNE2007

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Mayiladuthurai CCPJUNE2007

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Tamil Nadu Urban Infrastructure Financial Services Limited (TNUIFSL)

Conversion of City Corporate Plan to Business Plan for Mayiladuthurai municipality

ICRA Management Consulting Services Limited

Table of Contents 1. Introduction ___________________________________________________________ 1

2. Mayiladuthurai - a brief profile ___________________________________________ 3

3. Review of operating performance __________________________________________ 7

4. Analysis of financial performance ________________________________________ 12

5. Potential areas for improvement _________________________________________ 20

6. Business plan projections and investment capacity of MyM ___________________ 25

Conversion of CCP to BP - Mayiladuthurai Municipality

Conversion of CCP to BP - Mayiladuthurai Municipality

Conversion of CCP to BP - Mayiladuthurai Municipality

City profile and growth potential

Conversion of CCP to BP - Mayiladuthurai Municipality

Municipal Services - Status assessment, gaps and actions being taken

Issues and Gaps

Conversion of CCP to BP - Mayiladuthurai Municipality

Analysis of financial performance

Capital Investment Plan

Conversion of CCP to BP - Mayiladuthurai Municipality

Exhibit 2 - Financial analysis

Exhibit 3 provides a summary of the CIP for MYM.

Roads Storm Water Drains

Conversion of CCP to BP - Mayiladuthurai Municipality

Outlay reqd.* 2006-15

Sewerage and Sanitation Others TOTAL

650 100 5130

List of priority projects

Conversion of CCP to BP - Mayiladuthurai Municipality

FOP, borrowing capacity and investment capacity

Conversion of CCP to BP - Mayiladuthurai Municipality

Exhibit 1.1 gives a snapshot of IMaCS approach to the study.

Clarify ULB priorities on projects /schemes

Demands on ULB for various services

Crystallize Strategic Choices going forward

Translate options into tangible and measurable projections

Conversion of CCP to BP - Mayiladuthurai Municipality

Step I Diagnostic review

Financial position Operational performance Demands on urban services in the town/municipality

This report is organised as follows:

Section 1 Section 2 Section 3 Section 4 Section 5 Section 6

Conversion of CCP to BP - Mayiladuthurai Municipality

2. Mayiladuthurai - a brief profile

Source: Census of India

Conversion of CCP to BP - Mayiladuthurai Municipality

Economic Development Composition of workforce

Land use management

The CCP outlines the following strategies for development:

Conversion of CCP to BP - Mayiladuthurai Municipality

Conversion of CCP to BP - Mayiladuthurai Municipality

3. Review of operating performance

4 OHTs with capacity of 4.75 million litres 3.7 Million Litres

Conversion of CCP to BP - Mayiladuthurai Municipality

Sanitation Under Ground Drainage (UGD)

Conversion of CCP to BP - Mayiladuthurai Municipality

Exhibit 3.4 Storm water drain network

Source: SFC Questionnaire Jun 2005

Solid Waste Management

5.617 75.784 3.457 2.685

Conversion of CCP to BP - Mayiladuthurai Municipality

Conversion of CCP to BP - Mayiladuthurai Municipality

Outlay reqd.* 2006-15 2000 1000