Nothing surprising about 70-fold rise in MBPP deficit, says ex-councillor

Penang Forum steering committee member Lim Mah Hui (left).

GEORGE TOWN: A former Penang Island City Council (MBPP) councillor says the 70-fold rise in deficit revealed in the recent Auditor-General’s Report comes as no surprise, adding that it is likely due to the council’s over-reliance on the fee charged to developers and contractors.

Lim Mah Hui from the Penang Forum, who served for six years as an NGO appointee in the council, said the issue was also likely due to less property development on the island, compounded by big spending on infrastructure.

He told FMT that the council could only improve its finances if it did its core job, which is to collect assessment rates from the islanders. He said MBPP must also have the political will to raise its rates instead of depending on non-tax-related revenue.

The 2017 Auditor-General’s Report showed that MBPP’s deficit had risen to RM98.61 million compared to just RM1.41 million in 2016 – a staggering 6893.6% deficit.

Lim said the council was currently reliant on non-taxable income such as development charges and infrastructure fees imposed on developers.

He added that development charges varied from RM15 to RM21 per sq ft for residential and commercial properties respectively. Development charges are to be paid to the council by developers.

As for infrastructure charges, he said, non-Penang developers are charged RM15 per sq ft while Penang-based developers are charged RM5.

Infrastructure charges are for the upgrade of public roads. They are imposed on commercial development and residential units if more than four units are built.

Over the past five years, Lim said, collection from non-tax revenue such as development and infrastructure charges had dropped to less than RM100 million per year from a high of RM200 million.

“During good times, you get more, and in bad times, you get less from these charges,” he said, adding that it was an unhealthy way of running the council.

He also said MBPP’s assessment rates were too low, and not commensurate with the properties of ratepayers.

He claimed the council had made repeated attempts over the years to raise the rates to boost its core revenue, but that these were vetoed by the state government for “populist” reasons.

On top of this, he said, the council had undertaken large infrastructure projects which realistically it could not afford, such as the Bukit Kukus paired road project which recently saw a major landslide.

“The council is spending too much money building roads and on state-directed projects,” he said. “The state is asking for such projects and the council is paying them.”

Adding that the council’s budget was usually RM300 million to RM400 million a year, he said the Bukit Kukus project alone would cost about RM300 million.

“Does it make any sense?”

It was reported that the council would spend RM275.6 million to construct three segments of the 5km Bukit Kukus paired road, connecting Bandar Baru Air Itam and Relau, which costs an overall RM545 million.

The project began on Jan 15, 2016, and was supposed to be completed on Jan 14, 2019.

It was halted after the major landslide which saw nine killed and four injured. The new date of completion is expected to be sometime in 2020.

The road is mostly built by the council, while a 1.4km stretch will be built by PLB Land Sdn Bhd and another 800m stretch will be completed by Geo Valley Sdn Bhd.

FMT has contacted MBPP for comment and is awaiting a reply.