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Providing and financing a municipal infrastructure : a long run analysis of water and sanitation investments in Milan (1888-2000)

Olivier Crespi Reghizzi

Centre International de Recherche sur l’Environnement et le Développement (CIRED), AgroParisTech – Paris; Centro di Economia Regionale, dei Trasporti e del Turismo (CERTET), Università Commerciale Luigi Bocconi – Milano

Abstract


Water and sanitation services (WSS) have been mostly provided in Italy (and in Europe) at the municipal level. WSS are highly capital intensive. How water and sanitation infrastructure has been financed by Italian municipalities? What were the financing tools implemented to cover the huge investments’ costs in the short run? Who were the final end-payers in the long run?
In Italy intergovernmental financial relations between municipalities and the central state changed significantly from 1861 till now : fiscal autonomy or dependence from central state transfers, balanced budget obligation or not, degree of borrowing autonomy. Water supply and sanitation legislation was largely modified too through the 20th century in Italy. The evolution of both intergovernmental financial relations and water supply and sanitation legislation is a useful background element to our work.
The major part of our paper is focused on a detailed analysis of the rolling-up phase of Milan modern water and sanitation service (1888-1924). A variety of implemented financing schemes and institutional solutions (municipal budget - fiscal resources, municipal bond and land added value capture schemes) are identified and described. The financial equilibrium of the WSS is analysed. A basic overlapping generation model is used to explore how the infrastructure costs have been allocated between the various generations.
The last part of our paper adds a long run perspective (1953-2000) to the detailed analysis undertaken in the first part of the paper. Once the rolling-up phase has gone how was the infrastructure provided, expanded and financed over the 50 years after WWII ? What was the financial equilibrium of WSS ? Was it financed by municipal budget fiscal revenues or relying only on tariff revenues ? A discussion on the long run cost allocation and on the intergenerational transfers is made.


Keywords


Financing history, Municipal Infrastructures, Water supply and sewerage, Milan, intergovernmental relations, 3T’s, cost sharing, deficit financing, Italy
JEL: H54 – H71 - H72 - H74 - L95 - N73 - N74 - N83 - N84 - N93 - N94

Full text: http://www.cesifo-group.de/portal/page/portal/CFP_CONF/CFP_CONF_VSI/VSI%202013/vsi13-eip-Picot/Papers/vsi13_eip_CrespiReghizzi.pdf