Proposals for Urban
Economic Development in Liberia
By Winsley S. Nanka, CPA
Wnanka@theperspective.org
The Perspective
Atlanta, Georgia
July 12, 2006
The civil wars in Liberia (1989-2003) decimated the Liberian capital, Monrovia. Each round of civil war brought a new level of destruction upon Monrovia. This incapacitated various social services and infrastructural development. In addition, the influx of people from Liberia’s political sub-divisions to Monrovia constrained the available scarce resources. Massive urban growth as the result of the civil conflict undermines economic growth in Monrovia. Therefore, I believe the implementation of my urban reconstruction and development proposals which are based on public and private partnerships will enhance socio-economic development in Monrovia.
Given that Liberia is experiencing the transition from an international protective security regime (United Nations protective force) to a domestic security system, investors are unsure what would be the level of stability in Liberia when the transition is complete. Also, the lack of basic infrastructures to attract foreign capital to Monrovia, the lack of competent human resource capacity to sustain economic development, the absence of a transparent legal system and regulatory environment, and other socio-economic considerations, it would be difficult to attract substantial private capital inflows to embark on Liberia’s revitalization in the short to medium term. For the stated reasons, this article presents the framework for initiating urban economic development to stimulate economic growth in Monrovia and other urban centers of Liberia:
A. Tax Incremental Financing (TIF) is a method of
financing local economic development in economically
depressed locations. It is primarily intended to expand
the tax base and improve the local economy. TIF stimulates
private investment, increases property values, and
creates employment opportunities, www.commerce.state.wi.us.
TIF is based on two principles-
(1) New private development increases the taxing district
tax base, thereby expanding tax revenues. (2) The
taxing authority must provide incentive such as public
improvement and the taxing district must share in
the cost of public improvements. The Monrovia City
Government through its economic development agency,
MURA should work with the Ministry of Finance (MoF)
to identify various TIF districts in Monrovia. These
various TIF districts should include West Point, New
Kru Town, Sinkor Old Road, and other blighted communities
in Monrovia.
For example, Sarah Johnson plans to build a seafood restaurant complex and shopping mall in West Point, a TIF district. However, West Point needs the demolition of some abandon properties, reconstruction of asphalt pavement, and a levy system to protect the new development against erosion. MURA would provide or guarantee funding for these infrastructural developments, because the development of a restaurant and shopping complex would not occurred without these developmental changes.
Let’s say the annual tax revenue before the implementation of TIF in West Point equals US $10,000 after the implementation of TIF, the annual tax collected equals US $30,000, the increment in the tax revenue of US $20,000 would be used to service the debt that financed the project. The US $10,000 would go to the taxing authorities. TIF would allow the authorities in Monrovia to partner with developers to finance various development projects in and around Monrovia which could not otherwise occur without the financing tool. Primarily, the purpose of TIF is to help cities, towns and villages finance economic development projects. TIF is a revenue distribution and reallocation process that should benefit Monrovia because MURA would identify financing pool that would compliment private capital to promote industry and redevelopment that should provide employment opportunities.
The revenue from the TIF district is pledged to the lender and security interest is granted to secure the repayment of the debt incurred. The guarantee real estate tax and other payments are necessary to payoff the debt. First, the taxing authorities must establish an account in a reputable financial institution to control the TIF revenue which is deposited directly into the fund. Copies of the TIF revenue deposited are mailed to the owners of the property and the bank disburses the funds toward the payment of the debt, www.ura.org. The bank then must inform MURA in a week upon payment. Interest on TIF fund shall accrue to the Government. The TIF Fund should be audited yearly by a reputable public accounting firm.
B. MURA should establish the Urban Development Fund (UDF). MURA should work with the Ministry of Finance and Liberia’s external development partners to garner US $10 million for the fund. The fund should be geared towards stimulating economic growth of new and existing businesses in Monrovia and its environs. The UDF should provide market rate gap financing option to small or medium size businesses. The UDF should benefit entrepreneurs who are unable to finance fully their projects with equity, bank financing and other private/public financing options. For example, John Kollie plans to build a purified water plant in Monrovia that would produce 100,000 bottles of purified water a month. The project costs US $1 million dollars. However, John Kollie can finance US $800,000; MURA would provide or guarantee US $200,000 at the market rate of interest to John Kollie.
C. Buchanan, Gbarnga, Ganta and other major municipalities in Liberia should also establish redevelopment authorities to serve as the foundation for economic development model after MURA. The economic redevelopment authorities should serve as the medium to build the economic capacity of local areas to improve the living standards of the Liberian people.
D. MURA and the other redevelopment authorities should establish partnerships with economic redevelopment authorities in Pittsburgh, Philadelphia, New York, Boston, and other cities around the world that have successfully used the concept of economic redevelopment authorities to revitalize devastated communities.
The establishment of the Monrovia Urban Redevelopment
Authority should be cost neutral to the Liberian government.
It will not involve new budgetary allocation. It should
be created from the reorganization of the government
which will bring urban planners, development specialists,
project advisors, and architects among others from
the City of Monrovia, Ministry of Local government
and other agencies associated with urban economic
development.
MURA should in no way contradict the roles and responsibilities
of the National Investment Commission (NIC). The NIC
responsibility should be to attract large scale capital
investments such as mining concessions, large scale
agro-industrial development, semi-finished processing
plants, etc to Liberia. MURA and the other redevelopment
authorities should be primarily responsible for small
to medium scale economic development projects.
The establishment of MURA and redevelopment authorities
in Liberia’s major cities would be in line with
my previous proposal for the establishment of a development
council in each political subdivision of Liberia,
(see President Sirleaf: Transfer 25 Percent of Government
Revenue Annually to the Counties For Socio-economic
Development, published April 18, 2006) . I stated
that the development councils shall be responsible
to set the social economic development agenda for
each political sub-division. MURA and the Development
Councils, (DC) are structures that should enhance
socio-economic development through the participation
of the people in development initiatives. The two
structures should also serve as the foundation for
economic empowerment and decentralization in Liberia.
As Yarsuo Weh-Dorliae noted in his book: Proposition
12 For Decentralized Governance in Liberia Power Sharing
For Peace and Progress, Liberia’s experiences
with corruption, disloyalty, gross economic mismanagement,
lawlessness and other decadent social vises for more
than one hundred fifty years of its existence means
that its citizens should not put their faith in a
centralized political system with an imperial presidency
(P.6), but a decentralized political and economic
system where the Liberian people set their own socio-economic
development agenda.