Effective Management of Municipal Business – is it Possible?

During the debate the difficult matter of good management of municipal enterprises and problems related to financing and investment was discussed.

The thematic block ‘Effective Management of Municipal Business – is it Possible’ began with the Stories of Success conversation with a special guest, Roman Ciepiela, the President of Tarnów. The discussion was moderated by Zdzisław Majewski – Vice-President of the Management Board, Municipium, Poland.

Medium-sized cities, such as Tarnów, are exposed to marginalisation. This concerns the issue of migration of people to larger cities with better career prospects, especially young and educated people.  Good financial policy, compulsory programmes and integrated territorial investments are needed for medium-sized towns to be able to emerge. The government should not take away funds from cities by reducing taxes if is unable to compensate them in any other way. Government programmes are tools which can improve the situation of medium-sized cities. However, according to expert reports, these cities have a chance to defend themselves by attracting investment, business and human capital. It is worth betting on education, which would be supported by state funds, but for now the cities themselves have to contribute to education.

The discussion panel ‘Effective Management of Municipal Business – is it Possible?’ was opened by the moderator, Teresa Siudem – Editor-in-Chief of ‘Dobra Administracja’ (Good Administration)  a weekly supplement do ‘Rzeczpospolita’ daily – with presentation of the subject of discussion: the tasks of local government in the financial context.

Renata Ćwirzeń-Szymańska, Treasurer in Opole City Council, emphasized the key role of investments for cities:

The problem is the lack of funds to implement them. Cities use EU funds, funds from the sale of property or those from the state treasury, loans such as those offered by the Polish Development Fund.

The panellist added that Opole is currently in a very favorable situation, there is a good economic situation, thanks to the EU funds for investment.  It has a relatively low unemployment rate and low interest rates. The city council focuses on financial possibilities, partnerships with private entities are a good example. Another financing instrument is the sale of shares in municipal companies to investors. Then Henryk Kapera, President of the Board of the City Company of Public Utilities in Limanowa, spoke about his municipal company’s experience in selling shares:

Limanowa sold around 40 per cent of its shares to the Polish Development Fund. The infrastructure of the water supply and sewage systems was outdated and in need of modernization. The agreement with the Fund was concluded for 20 years, but the city plans to buy back the shares at an earlier date. 

Janusz Adamek, President of the Board of the Water Supply Company “Sądeckie Wodociągi”  Sp. z o.o., presented similar experiences of his company. Under the Polish Development Fund programme, the company implemented the largest investment programme in Małopolska region.

Marian Łyko, President of the Board of Municipal Heating Company in Cracow, stated that Kraków has no similar experience because Cracow and its company actively participate in the absorption of EU funds and have sufficient own funds.

Joanna Budzińska-Lobnig, Director of the Department of Local Government Investments in the Polish Development Fund, tried to answer the moderator’s question: how can the Fund support municipal companies?

The Polish Development Fund invests in municipal companies by offering capital and acquiring shares, as it was in Nowy Sącz and Limanowa. The company has the possibility to buy off the shares of the Fund at any time. Improvement and growth in the value of companies are possible thanks to loans instead of using only closed-end funds. Companies should keep a very transparent account so that the Fund can make forecasts and valuations. Before granting a loan and signing a contract with a local company, Polish Development Fund carries out a study of its investment potential.