18 March 2019

Kenya: Land Rate Defaulters Owe Sonko's City Hall Sh120 Billion, National Government Leads the Pack

National Government has been flagged for being the biggest defaulters in payment of land rates to City Hall accounting for most of the Sh120 billion debt owed to the county by both private and government entities.

Government institutions including Parliament, Department of Defence (DOD), Parliamentary Service Commission, Central Police, National Treasury, Vigilance House, KICC and other affiliated agencies have been mentioned as some of the biggest culprits.

Nairobi County Head of Rates Mr Albert Okiro, appearing before Nairobi County Assembly Budget and Appropriations committee on Monday, said that only 150, 000 properties pay land rates out of more than 1.5 million properties in the capital.

"The national government is one of the biggest defaulters since it has a lot of properties in the city centre that do not pay land rates to the county with government institutions, some of them parastatals and even all the police stations not paying the rates at all. In total we are owed Sh120 billion in land rates from properties in the city," said Mr Okiro.

He explained that efforts to recoup the debts have hit a snag with the majority of the government institutions resorting to legal battles that have taken long to end and in the process dragging in payment of rate arrears.

The officer had been summoned by the Robert Mbatia-led committee to know why City Hall had not met its revenue targets for the department for the past five financial years since 2013 despite the executive putting up ambitious targets.

Mr Mbatia questioned why City Hall's rates collections have been falling since 2016 despite being charged at a constant rate of 34 percent.

"Does the county have any scientific way of arriving at this figures so that we based, on this we can identify the real challenges in the rates sector?" posed Mbatia.

This was after it was revealed that the county government has struggled to meet its land rates revenue targets since 2013 managing to collect only Sh12.9 billion against a target of Sh21billion for the period.

It emerged that City collected Sh2.6 billion was collected in the 2013/14 financial year, Sh2.7 billion the following financial year, Sh3.2 billion in the 2015/16 financial year while a drop in revenue started in the 2016/17 fiscal year where only Sh2.6 billion was recorded and in the last financial year only Sh1.8 billion was realized against a target of Sh5.5 billion.

The committee vice chair Peter Karani also sought for an explanation why the dwindling revenues even though the county has over the years been forced to clamp down defaulting properties yet the strategy seems not to be yielding desired targets.

In 2017, the county assembly amended the Revenue Act 2015 to give City Hall powers of temporarily repossessing defaulting properties.

This financial year which ends in June, so far only Sh1.1 billion has been collected against a target of Sh4.6 billion with only two months to go.

But Mr Oriko explained that challenges such as lack of title deeds for properties, an aged valuation system and long legal processes have also hindered efficient collection of land rates by the county.

Mr. Okiro however explained that challenges such as lack of title deeds by property owners made it easy for them not to pay rates. He further pointed out that protracted legal battles between city hall and rates defaulters in a bid to recover the arrears hampered revenue collection.

"We base the rates we charge on title deeds but most of the properties in Nairobi right now do not have titles meaning they do not pay their land rates," he said.

He added that a lack of a proper integrated system for revenue payment for land rates has also made it difficult to get accurate results on land rates, saying that the valuation system currently used to determine the rates a property owes is also obsolete since it does not bring out the real value of property.

"The valuation system was last updated in 1982 and since then the value of property has tremendously increased. Local Authority Integrated Financial Operations Management System (LAIFOM) is very old and often doesn't give accurate results," he said.

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