BALLOONING ARREARS

City Hall aims to collect Sh829.6 billion debts

County sets up debt collection unit to pursue defaulters, issuing notices and take vigorous enforcement action

In Summary

• In the last financial year, outstanding liabilities increased by Sh200 million from Sh76.7 billion as of December 2019.

• Finance CEC Allan Igambi says debt has continued to rise as a result of  strained revenues due to accrued interest and penalties, especially on statutory debts.

Nairobi City Hall.
CITY HALL: Nairobi City Hall.
Image: FILE

City Hall aims to collect Sh829.6 billion from debtors to cover the ballooning Sh76.9 billion it owes.

In the last financial year, the county’s liabilities increased by Sh200 million from Sh76.7 billion as of December 2019.

In the Sh856 million way leave by Kenya Power, City Hall has commenced a debt swap with the utility firm. The exchange is part of the medium-term debt management strategy.

The county owes the state agency Sh692 million.

In November last year, City Hall relied on power generators for three days after electricity was cut off over an unpaid Sh1.2 billion bill.

Generators were used in selected offices at City Hall Annex and City Hall.

City Hall is owed Sh811 million in loading zones fees by national government institutions and private users.

Others include Sh268 million for advertisements, Sh114 million from rental markets, Sh904 million in single business permits, Sh302.4 million in rent arrears by court house tenants and Sh644 million by sundry debtors.

Also, Nairobi residents owe Sh825 billion, including Sh803 billion in interest and penalties.

The county has formed a debt collection unit to pursue defaulters.

“The county government will now issue demand notices followed by enforcement upon expiry of the notices," Finance CEC Allan Igambi said.

"If the county is able to collect the account receivables, it will be easy to pay all debts."

DEBT BREAKDOWN

Igambi said the debt has been increasing because of limited revenue due to accrued interest and penalties, especially on statutory debts.

“The debt portfolio worsened over the years due to failure to achieve revenue projections and high-compounded interest and penalties charged by statutory creditors,” he explained.

As a result, the county has trouble servicing the debt, resulting in the ever-increasing debt portfolio.

Nairobi’s  debt consists of Sh55.1 billion in verified debts and another Sh21.8 billion in book debts (unverified).

The Sh21.8 billion unverified debt was inherited from the defunct Nairobi County Council as part of the loans taken to fund water infrastructure projects in the 1970s as well, as well as government-guaranteed loans in the 1980s.

Outstanding liabilities to creditors top the list at Sh38.7 billion, from Sh39.5 billion in 2019.

Money owed to suppliers and contractors rose from Sh4.7 billion to  Sh6.7 billion recorded in December 2019.

City Hall  also owes retired staff  Sh173 million in benefits and Sh926 million in utilities.

The county owes Sh4.1 billion in legal fees.

Payment of legal fees has raised concerns, getting the attention of investigative bodies. What's the legal department for and why outsource so much, critics ask.

In January this year, the Ethics and Anti-Corruption Commission began investigating City Hall’s planned payment of Sh500 million  to 25 law firms.

In 2019, Nairobi was  among 15 counties flagged by acting Treasury Cabinet Secretary Ukur Yatani over unpaid arrears.

The others are Baringo, Garissa, Kiambu, Mombasa, Nandi, Kirinyaga, Bomet, Tharaka Nithi, Migori, Tana River, Isiolo, Vihiga, Machakos and Narok.

Yatani directed that all verified pending bills totalling Sh51.2 billion were to be paid before next month.

(Edited by V. Graham)