Against the backdrop of the war in Ukraine and its effects on refugees, local governments and the country, experts discussed many different subjects, including Polish and European financial tools and policies, energy security, and financial management of local governments faced with restrictions on own resources.

Mid- and long-term support to resolve the humanitarian crisis

Local authorities are investing a lot of effort and expense to support refugees. The European Commission has taken extraordinary measures to enable a flexible use of unutilised funds from the previous financial perspective and REACT EU. These funds need to be disbursed very soon. Furthermore, the new situation calls for a revision of the partnership agreement and the national recovery plan. The experience of working on a special act addressing refugees residing in Poland shows that collaboration between local governments and the central government on specific provisions produces quick and good results. Any revisions of these regulations arising from observations and changing conditions should be processed in a similar manner.

In her welcome address, Commissioner for Cohesion and Reforms Elisa Ferreira addressed Polish local government representatives, thanking them for their engagement in providing aid to Ukrainian refugees.

“All of us, across Europe, are uplifted by the spirit of generosity of the Polish people”, she emphasised, announcing future support under the CARE programme. We provide faster support to member states and regions receiving and hosting refugees for the purposes of investing in infrastructure, healthcare, education, and social integration.

Financial outlook for local governments
Representatives of local authorities noted the increasing challenges in meeting the objectives of development policies. Changes in the tax system, including the ‘Polish Deal’, have had a meaningful negative impact on own revenues of municipalities, town, and cities. The Strategic Investment Programme launched by the government, which offers support on favourable terms for local government projects (starting from December 2021, funding up to 98% of investment value) does not bridge the gap in own revenues and creates a risk of political clientelism. At the same time, rating agencies announced downgrades of municipal ratings, which will entail higher debt service costs.

When own revenues do not increase, this restricts the ability of local authorities to undertake long-term financial planning and to make further investments. Uncertainty also exists around the surge in current expenditure, inflation, and multifaceted ramifications of the war in Ukraine.

“We will be able to do much less than what we expected. We are also more and more dependent on decisions made by the central government”, said Mieczysław Struk, Marshal of the Pomorskie Province.

On the other hand, Małgorzata Jarosińska-Jedynak, Secretary of State at the Ministry of Development Funds and Regional Policy, reassured the attendees that the funds offered by the cohesion policy and the National Recovery Plan would help address these challenges.

Development and widening disparities

Another important topic discussed during the 2nd Local Government Finance Congress were the considerable disproportions between cities and small municipalities.

“We have become engrossed in widening disparities. The EU makes countries equal, but it deepens the differences within them. We should demonstrate more solidarity, otherwise soon we will have to populate our easternmost regions” – Krzysztof Iwaniuk, the mayor of Terespol, Chairman of the Association of Rural Municipalities of the Republic of Poland.

This development additionally entails the risk of digital exclusion, as noted by the participants of the debate on the development of local telecommunications infrastructure organised in cooperation with PLAY. Structuring of the community energy system could offer an opportunity for growth to rural municipalities. The attendees of the Local Government Finance Congress also discussed the socioeconomic benefits of creating such an ecosystem.

Energy security has many facets for local authorities
Especially following the outbreak of the war in Ukraine, the issue of energy security has acquired a new meaning. The attendees of the congress pinpointed three key areas. Firstly, transformation of large-scale power generation, which cannot be postponed. The practical example of ZE PAK SA shows that we can reduce lignite production, develop renewable energy sources, and provide jobs for miners. Secondly, community energy should bring stability to the domestic energy market with benefits for local communities and the power system. Unfavourable regulations and the insufficiently developed electricity network are two significant barriers to its development. Thirdly, offshore wind energy. We should ensure that the Polish installation ports are ready to carry out large investment projects which will boost the development of coastal municipalities and regions in many ways.

Participants of the event stressed that such discussions between professionals, experts, and local government representatives are critically needed and, as emphasised by the Mayor of Sopot, Jacek Karnowski: “Only by working together will the plagues of centralisation, inflation, and war be overcome.” The next event of the Local Trends initiative is scheduled for autumn. The 2nd European Local Government Forum will be held from 17 to 18 October at the Poznań Congress Center on the premises of the Poznań International Fair.