Strategizing for the Future in the Four ECA Cities: Budapest, St. Petersburg, Sofia and Split (Christine Kessides, May 2000)

Why these particular cities? Why these particular cities? - dialogue with the Bank - tranzition and urban issues Why focus on strategies for cities? Why focus on strategies for cities? - cities became aware of the need to take a proactive role in making their local economy able to compete internationally and domestically and in improving residents’ quality of life

Main Strategic Issues for ECA Cities through the Medium-Term The common feature of the four cities – the socialist legacy The common feature of the four cities – the socialist legacy Challenges: Challenges: - establishing a competitive urban market economy - the decentralization of political and fiscal authority to the cities

I. ISSUES IN THE TRANSITION FROM A SOCIALIST CITY TO AN URBAN MARKET ECONOMY 3 aspects taken into consideration: 3 aspects taken into consideration: - the spatial transition - the productive transition - the social transition

I.1. The Spatial Transition The former socialist cities – inefficient patterns of land use The former socialist cities – inefficient patterns of land use - distribution of population density and location of industry – ex. St. Petersburg -> “camel back” - the real estate markets are still too thin and underdeveloped - the need to clearly define their objectives for the spatial transition and what these imply for actions by the city and national governments and by the private sector

-Budapest’s City Development Concept gives central emphasis to the spatial development objectives - the St. Petersburg Strategic Plan identifies the need for enhanced rationalization of use of the city’s belts and reduction of the size of the industrial belt - in Sofia, spatial development objectives have not been articulated, but a city master plan is under preparation - in Split urban planning is geared to preserving the historical core and current residential areas while limiting increases in commercial use and avoiding the expansion of peripheral settlement

I. 2. The Productive Transition The socialism favored industry and large firms while de-emphasizing the services sectors and small-medium sized enterprises. The socialism favored industry and large firms while de-emphasizing the services sectors and small-medium sized enterprises. Under the emerging market economy these imbalances are changing Under the emerging market economy these imbalances are changing - Developing the services sector - Supporting SMEs - Reclaiming derelict sites – “brownfield redevelopment”

I. 3. The Social Transition Socialism had the objective of avoiding inequalities in income and living standards among the population and this was partly achieved through greater reliance on non-income transfers (social housing). Socialism had the objective of avoiding inequalities in income and living standards among the population and this was partly achieved through greater reliance on non-income transfers (social housing). The economic transition has increased rates of absolute poverty because of attendant recessions which have reduced formal wage income. The extensive job loss in the public enterprise sector also contributed to this. The economic transition has increased rates of absolute poverty because of attendant recessions which have reduced formal wage income. The extensive job loss in the public enterprise sector also contributed to this. Formal unemployment rates are lower than the national averages in Budapest, Sofia and St. Petersburg and about equal in Split – the major cities are relatively well placed to attract investment and to foster private job creation Formal unemployment rates are lower than the national averages in Budapest, Sofia and St. Petersburg and about equal in Split – the major cities are relatively well placed to attract investment and to foster private job creation

IMPLICATIONS FOR TRANSITION IN URBAN SERVICES 1. Housing - the way in which housing sector functions is fundamental to any city’s spatial development, its economy and use of capital and the quality of life for residents - the way in which housing sector functions is fundamental to any city’s spatial development, its economy and use of capital and the quality of life for residents Hungary-a more low-rise housing than in other socialist countries Hungary-a more low-rise housing than in other socialist countries Russia-the state control of urban housing was dominant Russia-the state control of urban housing was dominant the housing stock in Split-constructed to better quality standards the housing stock in Split-constructed to better quality standards

2. Public Transport - the socialist cities emphasized public transport to move workers between them => a highly developed mass transport system in Budapest and St. Petersburg. - however, the transport systems have deteriorated in quality since the economic transition; the rates of motorization in Budapest and Sofia have reached Western European Levels - the revolution of urban transport-implications for the special structure of the cities in transition, for the social equity 3. Infrastructure and Environment - the social legacy-a high level of access of public infrastructure services - however, the quality, reliability and operating efficiency were often low

II. THE IMPLICATIONS OF DECENTRALIZATION Challenges to be faced: Challenges to be faced: - refining the new frameworks of intergovernmental relations - ensuring that local governments have financial authority to match their new functional responsibilities - putting in place new-required capacities and processes of municipal governance.

II. 1. The Evolution of Decentralization and its Political Context The four countries and cities fall along different points on a continuum of structural arrangements, reform and implementation. The four countries and cities fall along different points on a continuum of structural arrangements, reform and implementation. Hungary: Act of Local Government(1990)-local governments among the most autonomous Hungary: Act of Local Government(1990)-local governments among the most autonomous Russia: local governments-subordinated to regions Russia: local governments-subordinated to regions Bulgaria: the municipality-the core entity of the local government; in 2000 local government reform still in its infancy Bulgaria: the municipality-the core entity of the local government; in 2000 local government reform still in its infancy Croatia: longer tradition of local government management; strong monitoring system by the central level; a reasonable framework for local government and finance Croatia: longer tradition of local government management; strong monitoring system by the central level; a reasonable framework for local government and finance

II. 2. Municipal Financial Performance – Trends and Issues trend in the transition countries: decentralization has tended to shift much larger share of government expenditures to the sub-national level than revenues trend in the transition countries: decentralization has tended to shift much larger share of government expenditures to the sub-national level than revenues Functions ad expenditures: the assignment of functional responsibilities for service delivery and resulting investments – principle of subsidiarity, clarity and consistency Functions ad expenditures: the assignment of functional responsibilities for service delivery and resulting investments – principle of subsidiarity, clarity and consistency - improving city financial mng. also requires measures to introduce more commercial practices and private sector participation in municipal services - achieved to a considerable extent in Budapest and also proposed in St. Petersburg by the Strategic Plan.

Revenues: transition cities base on central government transfers, which in many cases are based more on negotiation rather than on objective criteria. Access to capital market finance: the transition cities will need urban finance systems to be based on diverse sources and forms of finance (including intermediaries- banks or specialized municipal financial institutions for loans), revenue-based project financing and on the availability of credit enhancement mechanism (tax intercepts, dept pulling arrangements).

CONCLUSIONS The challenges of pursuing transition in the spatial productive and social fabric of the cities, carrying out consistent policies on fiscal decentralization and even prioritizing infrastructure investments in physical infrastructure in the context of EU accession represent a highly interrelated set of issues. The challenges of pursuing transition in the spatial productive and social fabric of the cities, carrying out consistent policies on fiscal decentralization and even prioritizing infrastructure investments in physical infrastructure in the context of EU accession represent a highly interrelated set of issues. The need to articulate a vision of goals and objectives and to set priorities through consensus-building processes will be more valuable for the transition cities given the multiple challenges and the rapidly changing context. The need to articulate a vision of goals and objectives and to set priorities through consensus-building processes will be more valuable for the transition cities given the multiple challenges and the rapidly changing context. Realizing strategic vision requires concerted actions and collaboration by a range of actors, both outside and inside the city limits. Realizing strategic vision requires concerted actions and collaboration by a range of actors, both outside and inside the city limits.