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Towns lower debt, score low in transparency

MUNICIPALITIES did a good job with decreasing their debts in last the three years, but steps to improve transparency have stalled, according to reports by the Institute for Economic and Social Reforms (INEKO) economic think tank and Transparency International Slovakia (TIS).

MUNICIPALITIES did a good job with decreasing their debts in last the three years, but steps to improve transparency have stalled, according to reports by the Institute for Economic and Social Reforms (INEKO) economic think tank and Transparency International Slovakia (TIS).

According to INEKO, the average indebtedness of the 50 biggest cities per person reached 28.2 percent of the average resident’s income in the end of 2013 while the total debt per person increased just in 25 of 138 towns and cities. The report uses data about all 2,930 Slovak municipalities gathered by the Finance Ministry from 2010 to 2013, according to INEKO.

“I evaluate the management of towns positively since the vast majority of them were able to improve their management,” INEKO analyst Matej Tunega told The Slovak Spectator.

When it comes to transparency, the biggest towns and cities averaged scores of just 47 points out of 100 in the TIS study. The most transparent town in 2014 is Martin (72 points), Prievidza (71 points) ended second and Rožňava (70 points) was in third. The town of Sabinov was last with just 23 points. The data about Slovakia’s 100 most populous municipalities were gathered between July and September 2014 and reflect answers to 102 questions in 11 topics, according to the TIS webpage.

“Many towns’ representatives probably don’t have the ambition to open up decision making processes to their citizens and make access to information easier for them,” Martin Kollárik of TIS told The Slovak Spectator. “We do this rating exactly to point out this situation and motivate towns to improve themselves.”

Big cities improved the most

From the 50 biggest towns and cities in Slovakia the management of Trenčín, Trebišov or Lučenec has improved the most on INEKO’s scale ranging from zero to six. On the other hand, towns where the management worsened the most were Nové Zámky, Banská Bystrica and Považská Bystrica.

The capital Bratislava scored 3.6 points on INEKO’s scale, with a debt 56.6 percent of the average income. The second most populous city Košice got the same amount of points with 27.9 percent debt.

In general, the biggest towns and cities succeeded in improving their management the most. It is related to the pressure from governments and improved transparency of their management, the study says. Another reason is that big towns and cities were placed in low positions in a previous report from 2010 due to the ongoing financial crisis, so it was not difficult to significantly improve their management.

“To be fair, it has to be stated that it is easier to improve management of a town which was previously managing worse than a town which already has good financial health,” Tunega said. “Such a town has a significantly lower possibility to improve its mark by the same value than a town which had a bad mark.”

For example, Trenčín which improved the most in the 2014 report received just 1.74 points in 2010 and increased its mark by 1.97 to 3.71 in 2013. On the other hand, Banská Bystrica, the town which placed second-to-last in 2014 decreased its result by 0.48 points from 4.71 to 4.23 in comparison with a previous report from 2010 but still has a better result than Trenčín.

In total, municipalities owed banks €1.05 billion in 2011; €1.01 billion in 2012 and €961 million in 2013. In the end of 2013, 15 municipalities did not have debts at all, according to the Sme daily.

Besides a decrease in municipalities’ indebtedness, another trend resulting from the report is a decrease of capital expenses which could be seen over the last three years. However, decreasing the amount of investments into infrastructure may have negative consequences in the future. Expenses of municipalities thus may again increase in future years, according to Tunega.

Žilina got help

Žilina is still the most indebted city in Slovakia even though it managed to decrease its debt by one half. In 2010 the debt of Žilina reached €878 per habitant and the number decreased to €442 in late 2013. Žilina’s debt per person is 77.1 percent of the average income per capita, thus it is the only town in Slovakia where debt per person exceeds the 60-percent threshold. According to Slovak legislation this means the city cannot take out loans, Sme reported.

The indebtedness of Žilina is, however, increased by a loan from the government which the city used to purchase land intended for the KIA automobile manufacturing plant which launched in 2006.

Five days after INEKO published its report, the government accepted the resolution on October 8 which forgives the city debt in a sum of €17.5 million used for construction of a village for managers of KIA. The city was not able to sell seven housing units and nine family houses constructed in 2006, so it does not have money to pay the loan.

This decision will decrease the city’s debt to 36 percent of habitant’s income and will allow the municipality to pursue loans normally, according to Žilina Mayor Igor Choma, the SITA newswire reported.

Prime Minister Robert Fico pointed out that this case shows how important it is when city mayor is also the member of parliament of the Smer party which rules the country.

“We want to help city of Žilina,” said Fico, as quoted by SITA. “It shows how necessary it is to cooperate; when mayor and head of self-governing region have connections to government structures or structures of NRSR [parliament].”

However, this decision to forgive debt “just like that” may demotivate more responsible municipalities and those with higher debt may feel that they do not have to save money since state could eventually help them, according to Tunega.

“I consider this decision to be controversial and it could be dangerous precedent for other municipalities which tend to manage less responsibly,” Tunega said.

Just one-third improved transparency

Between 2010 and 2012 municipalities increased their transparency however within period from 2012-2014 those efforts stagnated. One-third of 100 evaluated municipalities improved, another stagnated and the last third worsened in TIS’ ratings. The most improved town is Vranov nad Topľou which moved from 98th position in 2012 to seventh in 2014. On the other hand, Veľký Krtíš fell from 44th to 98th position. Bratislava placed fourth with 69 points and Košice 19th with 57 points.

“From a general point of view it could be stated that less transparent municipalities improve while those which placed [in previous ranking] better stagnate or even slightly decline,” Kollárik said.

Kollárik pointed out that TIS evaluated data shortly before municipal elections take place on November 15. It is time when municipalities focus mainly on measures with immediately visible results, for example, reconstruction of infrastructure. The less visible measures such as improving of transparency usually take place at the beginning of the term.

In its response on the TIS report the Association of Towns and Villages of Slovakia (ZMOS) stated that citizens have the right to be informed about everything related to a municipality and its management directly in the office or via the internet. Legislation also gives the public possibility to visit parliament sessions or comment on the creation of a municipalities’ edicts.

Citizens have another tool to evaluate work of their mayor which is municipal elections, according to ZMOS spokeswoman Marta Bujňáková.

“The fact that many mayors [do their job] for more than 20 years is proof that citizens respect their work, that they [mayors] do their job well and have their [citizens’] trust,” Bujňáková told the press. “Despite this media don’t report about them and they don’t occupy first positions in transparency rankings.”

The area in which municipalities gathered the highest number of points is access to information about running of municipalities via web sites and through requests for information. Moreover, in four years, the number of towns publishing audio or video records from parliament sessions tripled and those which have an ethical code doubled, TIS project coordinator Katarína Klingová said.

On the other hand, the least transparent area is still the selling or renting of property, according to the TIS report.

“It is not an exception that municipalities sell or rent their property disadvantageously and significantly under the market value,” Kollárik said.

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