An Examination of alternative revenue sources in urban local governments, Sri Lanka

Abstract

Local governments are the main grassroots unit close to the local community as it provide comfort, convenience, democratic values and accelerate economic development. Though it has the power to maintain its budget by creating new sources to perform as an independent body under the decentralized power vested by the central government, in Sri Lanka, most Local Authorities (LAs) are running on a deficit budget. Therefore, local governments are in a dilemma to provide essential services to the local community which leads to community dissatisfaction and ultimately there is a discourse of returning the power to the central government. However, due to rapid urbanization and wicked urban problems top-down governance is complex and revisiting the local opportunities and challenges have for local governance is timely. In this context, this research attempts to introduce new revenue sources for enhancing local authority revenue while examining the opportunities and challenges. A comprehensive literature review was done to identify alternative revenue sources practiced in other countries. Interviews is the main method administered in selected urban local authorities (ULA) in the Western Province. Key participants are officers of the local authorities and professionals who are working in the local governance system. The collected materials were transcribed and analyzed using a content analysis inspired by grounded theory. According to the findings, development levies, betterment fees, profit-oriented events, and income-generating projects/businesses are the potential alternative sources of revenue that can be considered in the Sri Lankan context. Further, procedural changes and capacity building enhancement for (Internal) Urban Local Authorities are essential to identify potential stakeholders and standardize the services provided.