need a solution for this real time scenario

Hi ,
I did a face an interview question like this.
I was asked to write the design architecture for this problem .

The existing project is for corperation of chennai.
There are around 125 corperation s in list of tamil nadu.
where each corperation head will be able to view the report of other area.

now the proposed will be
Each corperation will have separate users and separate roles.
The chennai coroperation will be limited to the particular area heads.
whereas if you take avadi, ambatur and other area nearer to it will be viewed by Regional directorate of municipality administration.
And on top of this Commisionarate of municipalites should be able to view all the coorperation report irrelevant of the area wise seggeration.

The exisiting one has a single database.
will you design a separate database for each municipality or how will you redesign the same.

please write to me if you have any queries.