Nairobi City County Government is staring at a likely revenue crisis after a judge quashed its revenue-raising policies outlined in the Finance Act, 2023, for introducing various charges without a corresponding tariffs and pricing policy.
Justice Bahati Mwamuye, sitting at the High Court in Milimani, declared the Act unconstitutional for breaching the principles of public finance and public participation as provided in the Constitution.
Consequently, the judge quashed all new levies, rates, and fees imposed by the devolved unit through the Act. He ordered that the charges, levies, and rates that were in force before the enactment of the Nairobi City County Finance Act, 2023 will continue to apply.
“Accordingly, the levies, rates, and fees imposed by law and in force immediately before the enactment of the Nairobi City County Finance Act, 2023, which has been quashed, being those under the Nairobi City County Finance Act of 2022 or earlier shall now continue to apply and shall continue to be paid by all affected persons pending the enactment of a new Finance Act,” said Justice Mwamuye.
Among changes introduced by the Act was amendment of the Nairobi City County Transport Act, 2020 to increase the reserved parking fee for private use from Sh1,000 to Sh1,500 per day per car.
It also increased the annual loading/offloading zone parking slot fee from Sh220,000 to Sh250,000, while the fee for the display of motor vehicles for sale on the road reserve was increased from Sh10,000 to Sh15,000 per square metre per year.
The Act also amended the Nairobi City County Alcoholic Drinks Control and Licensing Act of 2014 to raise annual general retail alcoholic drinks license fee from Sh25,000 to Sh100,000.
Medium night clubs with 16-50 seats were charged a license fee of Sh70,000 up from Sh60,000 while small night clubs with up to 15 seats were charged Sh50,000 up from Sh40,000.
Also amended was the Nairobi City County Trade Licensing Act, 2019 to increase licence fee for mega transport firms with over 100 vehicles from Sh160,000 to Sh200,000 annually.
The court found that the Act was against Section 120 of the County Governments Act, which mandates counties to establish a tariffs and pricing policy for public services offered by the devolved unit or its agencies.
The findings emerged from a public interest petition filed by a Nairobi resident Jared Ngisa Nyabuto, who contended that the county government was using an illegal law to collect revenues.
The Act also introduced an application fee of Sh5,000 for online taxi-hailing operators for picking and dropping passengers. Initially, they used to pay Sh1,000.
Other changes involved the on-street parking (non-automated areas) by increasing parking fees in central business district from Sh200 to Sh300 for saloon cars and Sh500 for pick-ups and vans up from Sh200.
Mr Nyambuto said despite the Act having been enacted without the procedural and participatory measures outlined in the Constitution, it continued to affect the city residents financially for the 2024-2025 fiscal year.
He sued the county assembly, the speaker, and the county government. None of them filed any replying affidavit or submissions to controvert the petitioner’s case.
“The petitioner’s uncontroverted evidence shows that Nairobi City county did not develop, adopt, publish, or implement any tariffs and pricing policy before enacting the impugned Finance Act, 2023. Public participation involved presenting schedules of proposed fees without underlying policy or cost analyses,” said justice Mwamuye.
The verdict means that county governments ought not to impose taxes, charges, and levies without a corresponding tariff and pricing policy. The policy determines the costs of services. The court directed Nairobi to secure compliance with all applicable constitutional and statutory provisions.
Mr Nyambuto said the county enacted and implemented revenue-raising measures introducing, revising, and increasing numerous fees, levies, and charges without first developing, adopting, and implementing a county tariffs and pricing policy.
He argued that the policy was a mandatory requirement under section 120 of the County Governments Act, 2012.
He argued that lack of policy effectively denied the public the requisite information to engage meaningfully in the public participation exercise, rendering it illusory, ineffective, and constitutionally defective.
