People make their own decisions about local economies, says the head of the Union of Towns and Municipalities
20. 02. 2023

People make their own decisions about local economies, says the head of the Union of Towns and Municipalities

According to the director of the Union of Towns and Municipalities (SMO CR), Czech municipalities have been struggling with their budgets since the beginning of the year. The energy crisis is now hitting them the hardest. In addition to the state, she said, private projects can also be turned to to support local projects in which the citizens of individual towns are interested.


As a director of the Union of Towns and Municipalities of the Czech Republic, you have direct contact with the representatives, whether at a financial conference or an inspirational forum. What have you heard most often from councillors there recently, what do they need?I'll take it from several angles. They need us at the Union to communicate towards the government and MPs, because a stable legislative and financial environment is necessary for municipalities to work smoothly. They need legislation and laws to have clear boundaries, but at the same time provide enough room for independent decision making according to their political campaign issues. In particular, it is important to be sure that the state will not interfere with the RUD to the detriment of municipalities, and then they will also have enough money to develop the area based on their candidate's goals.



The impact of the energy crisis will of course also affect municipalities, how are you helping them in this respect?

The energy crisis began with the collapse of Bohemia Energy, long before the armed conflict in Ukraine and the associated problems in the region. In turbulent times, the task of the SMO CR is to set up communication with the state so that towns and municipalities have enough time to comment on any proposals in an informed manner. In turn, we expect the state to ensure that the measures it adopts are easy to apply and to the benefit of the municipalities. We are, in effect, a communication bridge. I can demonstrate this with the example of the energy sector, where we have managed to negotiate to include organisations founded by towns and municipalities, such as sports grounds and swimming pools, which were not in the original proposal, in the price capping.


These are relatively small things, but they will help towns and villages significantly. Last autumn, the possibility of buying energy for municipalities through the so-called state trader was dropped. Many of them were caught by surprise by this information and found themselves in an uncomfortable situation. We at the Union immediately initiated negotiations with the relevant authorities and within a few days issued, in cooperation with the Ministry for Regional Development, the Energy Regulatory Office and the Office for the Protection of Competition, a methodology on how cities and municipalities should start buying as quickly as possible, whether to buy on the exchange or through a tender procedure, and so on. In general, it is a sheet of recommendations on how to get energy supplies for 2023 in a transparent, non-discriminatory and, above all, lawful way. This has provided some stability for the municipalities. They immediately knew which direction to take and what to do to avoid getting into trouble.


In the current situation it is difficult to put together an objective budget, do you have any recommendations for mayors?

Although it is only the beginning of the year, the question of preparing budgets for next year is very relevant. In our municipality, for example, we have capped energy prices for 2023, but we do not know what the prices will be for 2024. The flow of public administration activities is slow, it has its own rules. A year in public administration is like one week for a normal person. It is calculated over a much longer period. So municipalities must already start now to address how they will set up funding for projects and activities planned for 2023 in the current financial situation and how they will approach the distribution of funds for 2024, including what price developments can be expected in the energy sector. And we will be asking again, on behalf of the municipalities, how the government sees it for 2024. Around June, we will be approving the final accounts for 2022, and it is at that point that we will be watching the 2024 state budget with anticipation. We will also be anxiously awaiting the predictions from the 2024 tax budget so that we can again award the public contracts that will be implemented next year in the fall. Mayors need to start thinking now about how to set up a financial plan for activities they can't or won't be able to fund this year.


What is the state of smaller municipalities? Is it a purely regional issue or do you observe any common trends?

The common trends I observe are in the setting of budgets. The clear common goal is to achieve at least partial energy independence. One of the priorities is also the search for alternative energy sources and, of course, measures to reduce energy consumption.


In addition to these common trends, regional conditions also play a role. For example, financing is different in former coal mining areas, where municipalities can draw financial assistance from the Just Transition Fund. Municipalities also have the opportunity to draw on the national recovery plan, and the appropriate setting of subsidy titles from the state environmental fund or the amount of funding to be distributed by the national sports agency also has an impact on their further development. However, energy is a cross-cutting issue throughout the Czech Republic and it always depends on the outcome of the elections and the priorities of the coalitions.


I want to ask the same question about cities. They are taking on even more responsibilities, including, for example, closer links with the energy system. How are they approaching this?

Larger cities, for example, have to arrange public transport or suburban transport, which is much more dependent on gas and electricity supplies than smaller ones. The same situation arises, for example, in large housing estates that share a common heating system. Here, we are waiting for a new energy law so that communal energy or even island systems can start to emerge. This will be a major issue for voluntary associations of municipalities or large cities to ensure at least partial energy independence.


The larger cities, which are the centres of the regions, of course need to provide other related services, education, health care, but also culture, because people are fortunately returning to cultural life. Many cities have their philharmonics, their theatres, just as they have their sports clubs, which in turn provide sport for children. The issue of children returning to sport after the cavedown is very topical. How to motivate parents and children to take up sport will be a big challenge. I was discussing this with a representative of a large sports club, that at the moment, also due to energy price rises and inflation, sport is becoming an expensive luxury and we have an indirect property census, that children would like to play sport, but the more expensive sports are out of reach for them because parents do not have the means.


What will the budget complications mean for the support of local economies, such as sport, will municipalities have to cut back on it after all?

It just depends on how tight their budgets are and what priorities they have there. So far, municipalities seem to be aware of the need to support sport, support families, support culture. That is why they are not yet cutting spending on these activities. On the contrary, many municipalities are trying to distribute these funds transparently for the cultural and sporting use of their citizens.


What options do municipalities have to support the local economic system?

There are several possibilities. Firstly, there is the Public Procurement Act, where we have long been advocating an increase in the limits, because if the contracts are small-scale, it is sufficient, according to the internal regulations, for them to be subject to an inquiry procedure. This makes it possible to outsource work to local companies, which is much easier. In addition, municipalities try to encourage citizens to register their permanent residence with them, which brings them more revenue in the tax budget. But they also provide other incentives in the form of subsidies and grants just for their citizens.


We are talking about structural aid from the state. Are there projects in the private sector that would help municipalities in this regard?

There are such. A great thing is for example the Corrency project, which I had a chance to get acquainted with at the SMO ČR. It is a project designed to support the local economy. The way it works is that you set aside a certain amount of money from your budget to support the local economy, whether it's restaurants, shops or service businesses. And it doesn't have to be purely the municipal budget, it can also be linked to EU funds or involve businesses and entrepreneurs directly. The next step is to select a group of residents to provide this assistance. For example, you can help single mothers pay for their children's clubs and extracurricular activities. Or for the aforementioned utility bills. At the merchant, citizens only pay half, and Corrency makes up the other half.


What experiences with Project Corrency are you hearing from mayors and councillors?

So far I have detailed information from Kyjov, where I read the final reports from this project. And the information was very positive.


Do you see this as a model that has the potential to spread in the Czech Republic and help the local economy?

From my point of view, it is essentially a tool through which funds can be redistributed transparently among citizens. They can then spend it with local businesses or wherever the city leadership has determined. There is some control there. Mayors, for example, can use this to support their citizens in a more targeted, direct way. And that's different from indirect help through, say, sports clubs or other interest organisations. It always depends on the priorities of each political leadership, what path it takes and what goals it wants to achieve. At the same time, it gives a certain 'vote' to the citizens: they decide who provides honest services and who they will support. Corrency as a transactional system provides this opportunity to the full range of objectives and interests of the representatives.


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