The impact of the economic downturn on local government: what is happening and what can be done about it? Local government contribution to economic recovery Review Conference Strasbourg, October, 2010 Gábor Péteri

Investing in local governments Promoting sustainable development: I.Increasing local capital investments II.Re-inventing local economic development Questions:  How capital budgets can be financed?  What are the innovative tools of LED? 2

Government debt, 2009

Sub-national capital expenditures

Sources of funding: 1. EU grants Measures for better utilization of EU funds: higher advances: BG, HU, PL simplified administrative procedures: CZ, EST bringing forward projects: Finland, Ireland lower tender prices setting up regional devt. funding schemes information, training 5

2. National funds for investments  National investments programmes & agencies  Indirect influence: targeting consumers, intermediaries (heating, housing)  Project preparation: centralised (Ukr) capping cost standards (Ro)  Sectoral focus:  utilities, housing, road building, rehabilitation  improving energy efficiency 6

Energy rationalization “Green growth”: savings + jobs + development New strategies; expanding municipal networks Automatic funding from CO 2 quota sale Local actions: energy savings at public institutions modernization of street lighting renewable, alternative energy sources national programs => lower local subsidies 7

3. Municipal borrowing Bond issue, as an alternative form:  drafting secondary legislation: ALB, SRB  co-financing large projects: HU, PL Restructuring debt: Municipal Loan Fund (ISL) +Increase of debt limits (Spain) - New limits on borrowing: GR, ALB, CRO => but EU projects are exempted! (EST, RO) 8

4. Private Sector Participation Overall decline: infrastructure, housing, public transportation Urban regeneration: lower public benefits (lower land prices, tax revenues) Specific legislation on PPP: BiH/RS, Cro 9

II. Local economic development Beyond mandatory local functions: jobs, local tax base, private funding of local infrastructure Long adaptation process: – EU limits on state aid lifted (€200K=> €500K) – business friendly local environment (CRO, D) – simplification of administrative procedures – local tax reliefs (D) – national loans for paying local contractors (RO) – Special funds (CRO, IRL) 10

II. LED: using municipal property Transfer of local government assets: Accelerating the process: Albania Computerized cadastre: Armenia Land development fee decentralized: HU New asset management techniques 11