Public-private partnership

Public-private partnership Legal Grounds and Obstacles The work on a separate Act on PPP is in progress. Instead of it, this seems to be more beneficial to introduce a definition of a partnership agreement in one of the existing legal acts. In the Polish legal system there is no such concept as a public-private partnership. However, this does not mean it is a new instrument. The PPP is in fact an “organisational” name: it covers a number of activities and stages of realisation and it includes also determined rules of project financing. Different definitions of PPP agreements are not a symptom of chaos, although they may be perceived in this way, but a list of some previous undertakings. The list is not closed, any project drawn up according to this formula may become a premise for creation of a new type of agreement, beside BOT (Build, Operate and Transfer), DBFO (Design, Build, Finance & Operate) etc. This depends on a function, which the PPP is going to perform in the commune, a specific situation of each self-governing community and on developing a PPP agreement for a particular case. It is the agreement, which is the starting point for introducing the PPP to the legal system. However, let’s start with the basis of this investment financing instrument. Subsidiarity principle This means that, whenever this is possible, the needs should be fulfilled applying one’s own resources (this refers to individuals, society, private institutions etc.). The subsidiarity principle has developed along with the new attitude towards economy. The so called Reaganomics started the deregulation, i.e. liquidation of state regulation in many fields of social and economic life. As a consequence, the “opportunity state” notion appeared, referring to the administration. The possibility creating state should ensure to the society a minimum level of existence, but it should give the opportunity of living in affluence, and not provide it directly to the citizens. In the European Union, the formal ruling concerning the subsidiarity principle appeared in Art. 1 (previously A) of the amendment to the primary law, made by the Treaty of Maastricht in 1992: Communes and Regions “within the framework of implementing the subsidiarity, take over a part of macroeconomic instruments of the state”. Contractual culture Public-private partnership is an element of contracting services having the so called contractual culture of public character in the field of administration, connected with the new public management, which considers a contract as a basic form of ensuring the performance of public objectives. Private partner “takes over” a determined task and “performs” it completely during the long period specified in the agreement – the commune is only responsible for its effects. The assignment of performance of a public task to a private entity results from application of management instruments in relation to the commune. One of such instruments is strategic planning, which is the basis for strategic management that comprises development of a plan and acting according to this plan (e.g. managing commune’s financial resources). The commune’s self-government has to create conditions for provision of services, for instance, by defining the tasks for providers of different kinds of municipal services. This is also about treating the statutory communal tasks (e.g. in reference to provision of water), i.e. the systems, such as water provision system, educational system or infrastructure maintenance system, as markets, in the economic sense of this word, and to analyse them in the same way, as it takes place in case of private sector markets. The commune’s responsibility in terms of performing public tasks is defined as the “commitment to create appropriate conditions for safety and continuity of service provision as well as the permanent development of infrastructure”. It has to be emphasised, that the commune’s commitment to serve the local community does not depend in any manner on the property rights to infrastructure elements. Public-private partnership means entrusting a private entity with performance of a public task. The commune, however, is always present in this undertaking, especially maintaining the liability for performance of the task. Collision with the Public Procurement Act The principle of contractual freedom has strong grounds in the Civil Code and the Municipal Economics Act. From this principle we get to the basic element of a PPP undertaking, which is an agreement. The main PPP agreement is concluded between a public entity (e.g. a commune) and a private entity. This is at the same time a “parent agreement” for other agreements: the ones concluded with consultants, subcontractors etc. We do not mention here the issue of the organisational form of the private entity. This can be a company, a joint venture company, a consortium of investors. Without agreement, which guarantees the partnership, there would not be a public-private partnership. In case of assigning the performance of public tasks to external entities, the principle of contractual freedom is limited by the obligation of application of the Public Procurement Act. Beside the obstacles to PPP projects resulting from the regulations of this Act themselves, we should point out the question of the choice of a partner. It is characteristic for PPP projects that there is considered the whole set of features of the desired contractor, such as experience, cost calculation for a given undertaking, the extent, in which it will contribute to the commune’s additional benefits, e.g. resources saving, promotion of technology transfer or employment rising. Theoretically, one could imagine that the image and parameters of a private partner would be defined so precisely that only one entity would meet presented requirements. However, the commune cannot entrust it with performance of a public task because the Public Procurement Act imposes on it the obligation of following a tender procedure. If the commune organises a tender in such a way so the particular entity wins it (for instance, it will develop the specification of important order conditions so it suits best that given entity), the tender procedure will be against the law. If it decides to entrust the particular entity with the task without a tender, then the decision will be against the Public Procurement Act. The Public Procurement Act does not apply to the situation, in which a private entity exercises an initiative to carry out a PPP project. Two priorities collide in such a case. On the one hand, a special legal position of the commune, which has to organise a tender procedure for each undertaking. On the other hand, a proposal of making an investment, which is presented by a private entity in response to the commune inhabitants’ needs and the infrastructure shortages. A private entity operates in free market conditions and even though it wants to perform a task assigned to the commune, it is driven by its own financial interest. The self-government is obliged to enforce effectiveness in entrepreneurs’ actions, and the tender should decrease the level of freedom of choice when it comes to choosing a contractor by the Local Self-Government Unit. Debt definition Public-private partnership can also plant doubts in respect to the Public Finance Act. Art. 114 thereof stipulates that the total amount of debt at the end of a budget year cannot exceed 60% of the Local Self-Government Unit income in a given budget year. If the relation of the national public debt to the amount of GNP (Art. 12 (1) (2) (b)) exceeds 55%, the amount of the liabilities cannot exceed 12% of the planned commune income. On the other hand, according to Art. 113, total amount of credit and loan interests to be paid in a given budget year, potential payments of the amounts resulting from guarantees given by the commune along with the interests on those credits and loans due in a given year, discount interests due as well as securities issued by the commune and due to be redeemed in that budget year, cannot exceed 15% of the commune income planned for a given budget year. It should be also emphasised that the Constitution, Art. 216 (5), prohibits getting loans and giving financial guarantees, which would result in the national public debt exceeding 60% of the annual GNP. The key issue as far as the possibility of carrying out PPP projects is concerned, is the interpretation of the “total amount of debt”. In compliance with the theory of finance law, this expression should signify a “cumulated amount of loans made by the government (commune)”. In other words, these are “total financial liabilities of public sector entities resulting from legal-financial events, diversified from economic and legal point of view, and especially from deficiencies, created as a result of financing the surplus of public expenses over public income, cumulated in previous periods”. This shows that for a commune to be able to carry out a project via the PPP, the liabilities it incurs in order to perform a public task should not be treated as incurring a debt. This opinion is strongly favoured, as quite often the value of the subject of a PPP agreement is so big that it would make it impossible for the commune to participate in the project – financial liabilities would exceed statutorily allowed limits. If the commune’s expenses connected with the PPP project were to be treated as a debt, than the proposal of those interested in the PPP is that the whole amount of the liabilities would not become payable in the budget year, in which it was created, but to make it payable gradually, along with subsequent stages of the project. Otherwise, Art. 114 precludes carrying out extensive investments by means of PPP because the costs the commune incurs in connection with them are treated as a part of the total amount of debt. Additionally, the public debt includes all the potential guarantees given by the commune. The expense limit for service of debt in a given budget year includes only the guarantees potentially payable in that year. As it has been proposed by M. Moszoro, in order to avoid a single expenditure of the whole amount of the guaranteed credit and interests, “the solution should be looked for in the structure of the very agreement concluded with a bank (creditor), which would determine the scope of the guarantee’s commitment. In a particular guarantee agreement there may be incorporated a clause, according to which in case the credit becomes payable immediately, the guarantee shall fulfil his commitment not “immediately”, but in compliance with the deadlines resulting from the schedule of payment of the credit and interests, specified in the credit agreement.” Without an agreement, which guarantees the partnership, there would not be public-private partnership. In order to pass by the ruling of the Act on Public Finance, the commune could also establish a company operating under commercial law, so it incurs liabilities instead of the commune. This solution makes it possible to limit the commune’s responsibility for the company’s liabilities (although the author does not consider a company with commune’s share as a PPP, in the precise sense of this expression). Legislative changes Bearing in mind the key importance of a PPP agreement, one has to take into consideration two legislative solutions: introduction of a new Act on the PPP to the legal system or introduction of a definition of a PPP agreement to one of the existing acts and adapting to it all other regulations concerning PPP undertakings. It seems, despite the apparent complication of it, that the second solution is more beneficial for PPP undertakings. Obviously, one cannot forget about advantages of a new act (such as complexity and uniformity of the regulations, easier access to the rules and potential changes to them), but it has to be taken into consideration that in both cases introduction of amendments to several dozens of acts already concerning PPP projects will be unavoidable. A wholly new act could limit the performance of PPP projects and then we would find ourselves in the same situation as today: facing once again statutory obstacles. On the other hand, introducing a new definition to one of the acts on local self-governments would be a natural consequence of law development towards this kind of undertakings. Public-private partnership Not As Bad As It Seems When we hear about the public-private partnership, what immediately comes to our minds is great investments and, unfortunately, still mythical funds. The truth is, however, that the idea of cooperation between the public institutions and private capital often concerns much smaller undertakings. In one of the articles devoted to this issue, published recently in “Wspólnota”, we promised to elaborate on the PPP. So, let us show you how to realise the idea of public-private partnership. There is a number of PPP models, but in Polish legal-economic practice only the concession, management agreement and BOT seem to be interesting for communes, especially in reference to the access to EU financial resources. Due to the particularity of each project carried out in accordance with PPP principles, creation of one, appropriate, universally applicable model is simply impossible. Nevertheless, it is possible to find some repeating elements that appear in all the solutions applied in practice. Management agreement Practitioners use this expression for an agreement, on the grounds of which a contractor, let us call him an operator, in exchange for certain payment, takes over from the commune, on the commune’s behalf and at its risk and expense, duties connected with provision of services, and no direct formal connections are created between the operator and the recipient of services. One could say that the operator, who usually takes over the personnel employed by the commune, holds the function and tasks of a facility manager. The operator acts on the grounds of a financial-economic plan developed and passes by the municipal council. Obviously, the owner’s common sense makes him agree with the contractor on the assumptions of this plan. The company’s assets are still the municipal property. The commune, being still statutorily responsible for performance of its own objectives, is liable for preparation, financing and realisation of the investment program. Usually the operator assumes the whole responsibility for the economic condition of the municipal company. However, there have been examples of such agreements covering only the technical issues in the company. It is also possible to isolate from the property structure of a municipal company the elements of the technical structure to be covered by the management agreement (e.g. exclusion of the sewerage system or the sewage-treatment plant or, possibly, the post-sewage deposits treatment plant). However, it has to be emphasised that if the parties to the agreement want to reach an optimum effect of rational usage of the available assets and funds, they should tend to the situation in which the whole structure of the company is taken over. Management agreement COMMUNE <--------------------------> OPERATOR Contractual remuneration Clients’ payments, subsidies, subventions, surcharges CLIENTS Concession This notion, popularised in Poland during the discussion on solving the problem of motorways financing and building, has not been precisely defined yet. In the international practice this expression means that the concessionaire takes over the existing equipment to manage and operate it. He is also the one responsible for financing the necessary development and modernisation of the managed system. All the devices, however, remain property of the commune, it is also the beneficiary and the unique administrator of the rights resulting from the natural monopoly. By virtue of the granted concession, the concessionaire pays to the commune the so called concession fee (in one payment or by instalments). In order to avoid misunderstandings, we need to emphasise that we are not discussing the concession as it is specified in the Act on Commercial Activity Law. A concession in the municipal administration is a special kind of permit connected with a an assignment of administrative authorisations. BOT The BOT is one of the most popular methods of participation of private capital in realisation of infrastructure investments. In BOT projects the public sector transfers the risk to the private sector, allowing it to invest directly in such projects as construction of roads, sewagetreatment plants, waste utilisation plants or power plants. Advantages of the BOT:  Possibility of true optimisation of conditions of investment preparation and realisation; precise division of liability between the investor and the commune performing a supervisory function;  The commune is not burdened with financing the investment; released public funds can be used for other investment objectives;  Examples from the EU countries show the possibility of significant cost reduction;  The commune, choosing an investor through a tender, can maintain appropriately great influence on the undertaking by shaping the agreement terms and conditions; the commune does not lose due to the increase of costs during the construction: services are provided for an inalterable contractual price;  There is no conflict of interests between the commune as a regulator and the commune as a provider of services. Disadvantages of the BOT:  This solution does not release the commune from the obligation to provide services: it has to substitute the investor immediately in case he declares bankruptcy and it is not possible to find a substitute company;  The influence over management can be exercised in the framework of the concluded agreement. PPP is a way to plug the holes in the state and local self-governments’ budgets, but it is also an encouragement for citizens to participate actively in the commune’s life. The idea is simple and clear: Build: a private company or consortium arranges with the government or a governmental agency that it will invest funds in a public infrastructure project. The company provides financing of performance of the project. Operate: a private company operates and manages the facility during an agreed and determined period (e.g. for 25 years) and gets the return on investment (ROI) by making charges for using the constructed facility. Transfer: after the agreed concession term is finished, the company transfers property rights to the constructed facility to the government or to the appropriate governmental agency. The intention of the BOT model is to receive sufficient revenue during the utilisation stage in order to ensure service of the debt incurred while designing and constructing the facility, to cover the working capital and maintenance costs, to pay the capital back to investors and to ensure a reasonable income for own investors. BOT is the most expanded form of private investor’s engagement in performance of municipal investments: a private company designs, finances and builds equipment or facilities and then operates them during a period specified in the agreement (e.g. 25-30 years). A private partner takes over investor’s obligations from the commune, he is also the owner of facilities, including the ones build on municipal grounds. The investment does not burden the commune budget and the invested capital is refinanced by means of clients’ charges. The charges are approved and exacted by the commune, which uses this income to cover its expenses and the contractual remuneration due to the investor. Organising a tender for comprehensive development, financing, construction and operating makes it possible, as it has been proven abroad, to calculate optimally the price of provided service: usually the bidder has to quote the future price (along with the principles of its change). Public-private partnership has recently acquired more importance. However, the term defining this type of combination with private capital is already politically used up. Either all the evil associated with privatisation is attributed to it or it is treated as a “cure for all diseases”. As a result, the PPP is most frequently criticised as a form of hidden privatisation, even though de facto the sale of municipal property should be a contradiction to the idea of partnership. Due to the particularity of each project carried out in accordance with BOT principles, creation of one, appropriate, universally applicable model is simply impossible. Nevertheless, since we can find some repeating elements that appear in all the undertakings of this kind, it is possible to create a simplified model. It allows to present the main parties participating in BOT projects and their functions at subsequent stages of project realisation. The main parties participating in a BOT project are the following: the commune, private investor, financial institutions, constructing companies, operating company and users. The objectives of the operating company (sometimes called at the first stage of investment a concessionaire company) are the following: designing, financing, building and operating the constructed facilities. Investors COMMUNE Agreements Invested capital and ROI Operating company Credits CLIENTS (designing, constructing and operating the facilities, e.g. water and sewage systems) Payment of credits and interests Others: - contractors; insuring companies; Charges providers of machines and devices Financial institutions (also support funds) Public-private partnership Resistance will diminish? Today, when everybody is waiting for manna from heaven, there are no reasons to complicate life looking for troublesome partners. The way of thinking may change if what we get instead of manna is a cold shower. Without implementing private partnership, Poland will not use effectively European funds – this is what experts say. The practice has been exactly opposite so far: private partners (or e.g. companies, in which the commune has not got 100% share) are eliminated from “public” projects for the years 2004-2006. This is because the Union subsides to lesser extent the projects with private participation and, secondly, different legal-fiscal problems may delay the undertaking. The strategy at the moment is to grab as much as possible. This is somehow understandable because we have very little time left. So, if there were any PPP projects in applications for EU funds, they are more likely to refer to the next planning period (2007-2013). The applicants will have more time then, they will be more experienced, too. They will know, for instance, that only a few of them will get such support from the EU, which will be significant enough to solve any of their problems. In government departments Recently a public-private partnership division has been created in the Ministry of Infrastructure. This does not mean it is supposed to coordinate this matter in the country, it is used for internal needs of the department. They can be described in this way: In the years 2004-2006, Poland is going to receive Euro 1.8 billion from the Cohesion Fund. Sectoral Operational Program “transport and maritime economy” contributes another 600 million. But only the needs of the international network of road and railway connections TEN (this what the Cohesion Fund serves for) before the year 2015 are estimated for EUR 27 billion. It is clear that European and budget resources will not be sufficient. Hence the need to look for private partners. The effects are pitiful, as we have seen in case of the A1 Motorway project. A team working on the PPP has been also organised this year. It is managed by the Deputy Minister of Economy, Ms. Irena Herbst and it consists of representatives of the departments of finance and infrastructure, the Office of the Committee for European Integration (OCEI) and the Public Procurement Office. The team is to propose legal facilitations. It is also considering the Act on PPP. We do not know any assumptions of this Act yet and the sense of the Act itself is still being discussed. Krzysztof Siwek, the director of the PPP division in the Ministry of Infrastructure provides arguments “in favour”: psychical comfort and safety while making a decision. As we know, it is risky for public functionaries to get into business with private entrepreneurs, especially now, when more and more scandals are revealed. The Act would stipulate that this is legal, it would determine procedures, records. At the same time, it would solve different problems, such as the role of the PPP in the public debt, the ones that have to be dealt with even without a separate act. You can find the instructions of the European Commission on combining the Union and private funds translated into Polish at the OCEI website. Examples from Europe Krzysztof Siwek has a lot of descriptions of specific realisations of the PPP. Athens Airport: 50% financed by the EU (as much as EUR 2.2 billion), the rest was contributed by the EBI and from commercial credits. Light railway in Dublin: 8% - the EU, 82% - the government, 10%- local resources. Madrid underground: as much as 85% from the EU, but in that case the private operator appeared only at the operating stage. This was the matter of project structure. These are well known, great examples, but there have been lots of smaller projects. In general, the EU contribution to public-private undertakings is not big in terms of percentage. But it helps to start more such projects, which clearly contributes to stirring up the economic development. But this is a way of thinking of a “landlord”, operating on a significant area and not the one of a player, whose only objective is to grab the biggest possible slice of the cake for himself. Unfortunately, for the time being, as far as using the EU support is concerned, the government has placed self-governments (even the biggest, province self-governments) in the role of such players. What is worse, it seems that the government itself has joined them. Marek Jefremienko – expert on the PPP: As a former treasurer and chairman of a budget commission, I realise how difficult it is to get a PPP project through the commune council. When we arrived as advisors in Stalowa Wola, where a city hall is being constructed within the framework of the PPP formula, the words I heard at the first meeting with the council could not be cited here. But the last voting, as far as I remember, was 28 votes “for” and 4 votes abstaining. But this was a result of multiple visits, explanations and presentations of the process, as it developed. We made a market analysis and presented it to the members of the city council. We made simulations of the flux of money and presented their results to the council members. The resistance was diminishing gradually. And this is the way. The draft of specification of important terms and conditions of the order should include a statement that we prefer a candidate, who will not demand from us a bank guarantee for the credit he was granted. This is a delicate issue, for the council too. In Stalowa Wola, three plots (the office building located on one of them) were to be given to the partner for a long-term tenure, the ownership was not to be transferred. The partner was to build the city hall with office space for rent on one of two empty plots. An administration building or a dwelling-house was to be built on the third plot, according to the decision of an investor. Five companies took the specification of important terms and conditions of the order but none of them took part in the tender. However, when all the deadlines passed, all the companies came to negotiate. The capital is not mentally prepared yet that a PPP contract in Poland has to be won through a tender. Janusz Piechociński, MP – chairman of the Infrastructure Commission in the Sejm: The PPP has been mentioned as a source of success for the last 6 years. We have heard about the airport in Athens, a bridge over the Tejo River for EUR 660 million etc. And almost nothing results from this. The obstacles are the lack of an act on the PPP and the social attitude. For a town mayor (even if he/she was strengthened by direct elections) entering into the PPP is the simplest manner of losing next elections. Competitors would certainly spread a word that the mayor arranges something for himself at the public interest expense. A few examples of successful PPP include the improvement of street lighting and undertakings connected with the thermomodernisation, replacement of boilers for more ecological ones. These are situations in which there was sufficient social approval. Public-private partnership Instead of Bonds and Credit We talk to Agnieszka Leszczyńska, the agent on public procurement of the president of Cracow For several years, investments in traffic and transport solutions, requiring enormous resources, have been of particular importance among the objectives of the commune of Cracow. Cracow authorities have noticed a possibility of financing municipal traffic objectives through the public-private partnership... Indeed, apart from issuing bonds, taking bank credits and using the support from EU funds, carrying out its tasks connected with traffic, the commune is going to take advantage of the possibilities provided by the public-private partnership. The city of Cracow would like to offer its potential partners the realisation of many common public objectives. This type of cooperation is very important for regional economy and development, the examples of which are the express railway connections in the Netherlands or modernisation of motorways and main roads in Great Britain. What are the advantages and threats of the public-private partnership? Among potential advantages of the PPP, we usually include the following: application of innovations, new technologies or know-how resulting from the effect of the scale, lowering investment and operational costs of the objective, transfer of advanced technologies, improvement of quality of provided services, improvement of effectiveness, risk sharing, exchange of experience between sectors and activation of the private sector thanks to the raise of employment and faster economic development. According to specialists, potential danger created by the PPP can be found: in the risk of limiting the public partner’s influence on the public utility market, increasing charges, often connected with the service cost realignment or a worse negotiation position of the public partner, which results, for instance, from the greater experience of a private partner in reference to provision of certain services. The public-private partnership is a new category in Poland. What are the biggest obstacles hindering its realisation in our reality? Let me start with the comment that there is no such notion like the public-private partnership in the Polish legislation. However, contracts based on it are legally approved and belong to the category of the so called unnamed agreements. Therefore, carrying out an investment in this way, one has to adapt the model of cooperation to the general legal standards. The basic obstacle for realisation of a PPP are the laws on public procurement, especially the prohibition against concluding agreements for periods longer than 3 years. This has an impact on almost all the contracts concerning traffic or infrastructure undertakings, which have to be concluded for longer periods – this requires an approval of the president of the Public Procurement Office. A change of the Public Procurement Act is being planned and the new law, as it is the case in European legislation, is going to include regulations concerning the concession, which will consist in concluding between the public and private sector a contract on performance of services typical for the public sector. This would give the concessionaire certain rights but also specific obligations. Other important barriers are the legal regulations concerning the matter of public finance, especially the upper limit of a debt that can be incurred by a local self-government unit, i.e. 60% of the income. These are also numerous permits, approvals, authorisations and prolonging procedures, which are required by Polish investment law and which have an influence on the profitability of an investment and its social reception. In which direction? PPP models - comparison of terms MODEL OWNERSHIP Public Service Contract FINANCING Investments Working capital MANAGEMENT Public (sometimes Private) Public Public Rarely encountered form of the public-private partnership  The commune bears full responsibility for operations, overhauls and current repairs  Private service provided is paid only for the performed work  Term of agreement:12 – 24 months Public Management Contract Public Public Private Full transfer of responsibility for operations, overhauls and current repairs on the private service provider  Remuneration on the following basis: “Costs plus efficiency bonus”  Term of agreement: 3 – 5 years Public Private Private Concession Full transfer of responsibility for operations, overhauls and current repairs as well as investments necessary to ensure the appropriate level of services on the private partner  Partner has the right to use the fixed assets owned by the commune during the term of the concession agreement  Remuneration: private partner has the right to charge clients directly  The height of charges is determined by the commune according to the principles being an integral part of the concession agreement  Term of agreement: 20 – 30 years MODEL OWNERSHIP First Private, then Public FINANCING Investments Working capital MANAGEMENT Private Private BOT/BOOT/FBOOT Build, Operate, Transfer or Build, Own, Operate, Transfer or Finance, Build, Own, Operate, Transfer Public + Private Join Ownership Private Outright sale Public + Private Reflect the cooperative model Public + Private Private Private Full privatisation. Operation can be privatised separately from the fixed asset, which is a material base for operation - rarely encountered form of the publicprivate partnership  Alternatively: purchase of shares on the stock market [...] such as changes to legal regulations, excessive political intervention and the lack of independence, authority’s decision, society’s pressure resulting from dissatisfaction over the quality of provided services or internal factors, such as lack of money for functioning, a feeling that the previous management model has burnt out, a feeling of weakness or a sense of failing to meet expectations or just a simple need of development. Which direction to choose selecting the legal-organisational form? In Poland, the most commonly used is a transformation of a state-owned company into a company operating under commercial law – S.A. company or ltd. company. This is astonishing, how many state-owned companies, whose management model seems to be completely burnt out, is still operating. Public-private partnership is a rather new form of management in Poland (even though it has been applied worldwide for some time now). A lot of benefits speak in favour of it. Participation of a private partner opens an access to the capital, it relieves the public sector of some investment financing and allows for more effective financing, cost reduction and actions based on economic calculations and finally, for reducing political influences. But there are also some threats: bigger risk, smaller social confidence, negative connotation of private capital in public sector. There is also a very serious problem of the lack of knowledge and of the distrust among decision makers. They are afraid to loose power and sovereignty, they fear they could limit themselves or be accused of corruption. The obstacles for implementation of the public-private partnership are also placed by legal regulations, especially by the Public Procurement Act and the Public Finance Act, which do not forbid, but also do not facilitate the public-private partnership. It seems that the premises for success of the public-private partnership would be overt and transparent procedures of selection of an appropriate partner, overt agreements and adequate risk sharing among partners. It is obvious that it is not easy to build a public-private partnership based on the cooperation that is to last for more than ten years if the legal system changes several times a year. This is why it is so important, at the time of choosing this legal-organisational form, to convince the public sector and the society that this management model will be the most beneficial for public management. How to choose an appropriate legal-organisational form then? It seems that a public enterprise can be managed as effectively as a public-private partnership or a private company can be. It only needs similar formal-legal conditions as well as independence and freedom to decide when it comes to acting. After all, a public enterprise can properly manage customer service, attract very advantageous external financing sources, carry out extremely ambitious investment programs, gain money from the European Union, which is not easy for private companies, it can be effective. All this can be realised by a public enterprise and can be effective but only if the enterprise is not a political booty, the manager is stubborn, consistent, resistant to influences and extremely persistent, when the owner keeps [...] PPP in Poland FIRM SAUR Neptun Gdańsk INVESTOR SAUR International PPP POPULATION MODEL Joint venture with the 600,000 city Operating company Taking shares of 285,000 an existing company Taking shares in an existing 135,000 ltd. company Propertyoperating 70,000 company TERM OF AGREEMENT 30 years of contractual obligations INVESTOR’S SHARE FIXED ASSETS INVESTOWNERSHIP MENTS Commune SNG advisor 51% Commune (infrastructure) AQUA SA International Bielsko Biała Water Ltd (IWL) PwiK Sp. z o.o. Dąbrowa Górnicza RWE Aqua GmbH 12 years of contractual obligations 21% after purchase of shares: 31% Company Company 20 years of contractual obligations 25 years of contractual obligations 34% Company Company Tarnowskie Vivendi Water Góry Miasteczko Śląskie PwiK Gelsen-wasser Taking Sp. z o.o. AG shares of Głogów an existing company 33.85% after rising the capital: 53% 46% 3% WFOŚ* 51% Commune Company Company 75,000 - Company Company * Voivodship (Regional) Environment Protection Fund Warsaw, November 2001 CONTENTS Introduction ...................................................................................................................................... 3 Selected social-economic conditions of development of municipal infrastructure in the 90’s ... 4 1.1 Type of commune in respect to the level of infrastructure planning at local level ...................... 4 1.2 Structure and distribution of settlement network in reference to infrastructure development ..... 6 1.3 Selected elements of demographic situation ................................................................................ 13 1.4 Elements of economic base in reference to infrastructure development ...................................... 20 2. Monitoring of financial situation of communes ......................................................................... 28 2.1 Commune budget income ............................................................................................................. 33 2.2 Sources of commune budget income ............................................................................................ 41 2.3 Commune budget expenses .......................................................................................................... 77 2.4 Income and expenses of districts in the years 1999 – 2000.......................................................... 111 2.5 General assessment of commune budget management ................................................................ 112 3. Monitoring of municipal infrastructure development .............................................................. 115 3.1 General characteristics of changes in utilised infrastructure ........................................................ 115 3.2 Branch analysis of municipal infrastructure development ........................................................... 120 Annex – Selected social-economic conditions of development of municipal infrastructure in the 90’s..................................................................................................................................... 143 4. Investment needs of communes ................................................................................................... 164 4.1 Needs of communes ..................................................................................................................... 164 4.2 Value range of investment needs .................................................................................................. 174 Conclusion ......................................................................................................................................... 176