Ostrow model of municipal management
In 1990 started the process of transforming and privatization of the companies realizing the municipal services, with the assumption that the municipal commune should not independently render the public services, but it should only organize the market of those services and take care of their proper realization.
Before the reform of administration was introduced in Poland,
until 1989 and before the process of restructuring was started, the
municipal economy of Ostrow Wielkopolski functioned in the form of
budget companies allocated from the city budget. This did not
encourage the rationalization of expenses, improve management
methods or to undertake new financial-capital initiatives. The
level of investments realized in the companies depended on the
funds gained from the city budget. In turns city budget's
revenues were set up by the state. So the central limitation of
means had a negative influence on the amount of investments
realized in the city.
There was a huge discrepancy between needs of inhabitants and possibilities of supplying those needs. Dependence of the city's revenues from the will of the central organs led to a big financial deficit. There was a threat of financial paralysis of the city.
The enterprises financed from the city budget were replaced with
new legal entities, having capability of independent operation and
financing, using for this purpose all possible financial
instruments. These entities started their activity acting on the
basis of Civil Code. At present, several years since the beginning
of the transformation, all the companies are joint stock companies
or limited liability companies. They dispose their property more
effectively, invest and gain profits.
Everything takes place without any allocation from the City Hall. It means that the taxpayers' money are not involved in the activity of the companies. Higher efficiency and significant improvement of communal services are the measures of these changes.
The enterprises financed from the city's budget were
replaced with new legal entities, having capability of independent
operation and financing, using for this purpose all possible
financial instruments. In 1991 there was started the process of
transforming enterprises on the basis of Civil Code. At present all
the companies are either joint stock companies or limited liability
companies and note an increase of market value and effectiveness.
They dispose their property more effectively, invest and achieve
It should be added that it takes place without any allocation from the city budget, so the taxpayers' money are not involved in the companies' activities. Companies' managers feel hosts in their own companies. It made them active and resulted in higher efficiency and significant improvement of communal services.
Effect of the transformation was establishing the first in Poland communal capital group - Holdikom S.A. Company. It possesses the stock capital established by bringing in shares and share capital of seven communal companies: These companies did not lose their legal and financial independency. Shares of four companies are noted in the public circulation CTO. HOLDIKOM, owing to the fact that it manages a powerful share capital, is a good and reliable partner in negotiations with financial institutions and possesses at this point much greater capabilities than the City itself.
Process of transformations in the commune economy resulted in
real effects both in the material and promotional sphere. Achieving
founds from bonds' issue and designing them to improvement of
technical infrastructure was an answer to the needs submitted by
the inhabitants. Negligence in this area was enormous. The success
was achieved not only in the promotional sphere but also in
improving the quality of inhabitants' life, creating job market
when realizing tasks connected with improvement of communication
routes, water mains an heating system. The fact that inhabitants
locate economic enterprises near newly built roads is also of
Introduction of Ostrow's bonds into the public circulation had additional advantages. It makes clear and legible actions of the commune which is obliged to perform its information duties: informing about the most important events in the city and actions undertaken by the local government. Thanks to this the city's credibility increases. Ostrow is perceived as a city managed in the modern and over and above the average way.
Ostrow's experience shows that when changing the approach to
the municipal economy, after introducing modern managing methods
and gaining abilities to achieve funds from the capital market, one
can achieve an economic and promotional success. At the beginning
of local governments' functioning, before 1990 negligence in
the communal sphere was enormous. For instance, only 2,5 km of
roads were hardened a year. This meant that housing estates'
residents would have to wait for about 25 years for hardening their
roads, assuming that that no new ones would appear.
The issue of communal bonds appeared to be an effective financial and promotional solution. Modernization of roads led to the that willingness of inhabitants to locate economic enterprises and build their houses nearby. So the value of areas near the modernized streets was increased and so was the quantity of newly established economic entities. It resulted in higher receipts to the city budget from the property taxes.
Residents of Ostrow, Poland
City of Ostrow Wielkopolski
P.O. Box: 63-400
63-400 Ostrow, Poland
Stanislaw Krakowski, tel. 0048 591 81 14
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Practice | Ostrow - Model of Municipal Management
01 Jan 2002, pdf, 130KB