N6 – Module 8
Consumer tariffs For example such particular services as water supply, electricity supply and sewerage collection and processing. Once again this tariff is often used to pay the cost of the loan (the interest and capital redemption).
Capital reserve funds These funds are accumulated from revenue derived from the tax fund and consumer tariffs. The funds can be for either specific purposes or for general purposes. An example of a fund for specific purposes is the parking meter fees and tariffs charged for other types of parking which are then placed into a fund for the construction or purchase of parking, and also for the maintenance thereof.
Land trust funds Local authorities often have control of land, sometimes called commonage, which might be sold and the proceeds of which should be used for the benefit of the public. This procedure probably had its beginning years ago when communities, through a local authority, owned a common piece of land which was accessed and used by all (for the grazing of cattle, for example). When such land is sold it has become practice to use the proceeds to purchase other land or for other capital financing projects which will benefit the community.
External Capital Sources Three external sources are generally recognised: • Donations from private individuals or organisations (wealthy people sometimes leave money or property to a city/town for the benefit of its inhabitants);
• Loans/grants by other authorities, including provincial authorities and central government authorities;
• Loans on the capital market – directly from local or foreign banks and other financial institutions.
Donations by private institutions or individuals may also include an endowment fee which is raised by the sale of plots in any new township – these fees are then used directly for the purpose of developing infrastructure such as roads, etc.
Loans and grants may include such from Parliament and used specifically
for the financing of capital assets (see Module 4, p.75-76). They may also include loans/grants for the development of housing for low-income groups. Funds may also be allotted for the development of industrial growth points for the development of the local economy to grow. Ad Hoc grants were discussed on p.76 and they are provided for capital projects such as roads, water purification plants, etc.
Loans on the capital market may include short term loans (usually up to five years) and long term loans (more than five years). This means that the local authority may be granted permission to obtain a loan from a commercial bank at a certain rate for a specific purpose which must include the financing of capital projects. Long term loans form the largest source of revenue for any local authority; used specifically for the development of infrastructure such as township development and services infrastructure such as roads, sewerage provision, water supply, etc.
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