national financing tools for local environmental infrastructure
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National financing tools for local environmental infrastructure. Emil Savov Deputy Executive Director National Association of Municipalities in Bulgaria. Enterprise for environmental management. Created in 2002 by the state Assists local governments, hospitals, utility companies, business - PowerPoint PPT PresentationTRANSCRIPT
National financing tools for local environmental
infrastructure
Emil Savov Deputy Executive Director
National Association of Municipalities in Bulgaria
Enterprise for environmental management
•Created in 2002 by the state
•Assists local governments, hospitals, utility companies, business
•Provides grants and interest-free loans
•Priority areas• - water management• - waste management• - biodiversity and ecosystems preservation
Enterprise for environmental management
Total revenue in 2010 – EUR 43 million
Revenue structure
•Nationally imposed eco fees – on envelopes, tires, batteries, cars, used motor oil etc.
•Fines defined in 8 laws – on water, protected areas, waste management, subsurface resources etc.
•State grant
Enterprise for environmental management
In 2010 PUDOS provided:
EUR 36 mil as grants for investment projects
EUR 1.1 mil as interest-free loans
Intervention areas•Water and sewer management•Waste management•Air monitoring an management•Biodiversity•Public awareness
EU membership challenges
Available EU resources for municipal investments –
EUR 3.2 billion for the period 2007-2013
National and sub-national co-funding – 15-20% of
project costs
Municipal co-financing needs - matching funds required at
the municipal level is estimated on the order of about EUR
130-150 million* per year, which is twice the level of the total
municipal investments in 2006
Creating a Matching Fund for EU Investment Grants
Key issues to be considered
• How much of municipality’s own source revenues should be able to contribute?
• How much debt the municipality should be able to raise?
• How much the project can produce in direct cost recovery through user charges?
• Impact of the fiscal decentralization policy
Funding needs
• Available funding for municipal investments under
the three Operational programs (2007-13) – EUR 3.2
billion/EUR 460 million per year
• Municipal funding needs – 36% or EUR 1 152 million
(co-funding, bridge financing + VAT) – both from
own-source revenue and borrowing
• Number of local governments – 264
• Size of average municipality – 30 000 citizens (largest – 1.2
million; smallest – 1 440)
• The total municipal Net Operating Surplus is concentrated
in 28% of the local governments
• 40 local governments can borrow freely at the credit
market (in 2008, before the world economic crisis)
• FLAG lends to municipalities having limited
creditworthiness or small size which prevents the
access to the credit market
Municipal projects’ characteristics
Energy efficiency in public buildings – schools, social care homes, libraries etc.
Water and sewer systems upgrade
Waste water treatment plants
Regional garbage collection and disposal systems
Renewal of cities’ open spaces – parks, civic centers etc.
FLAG was established by the Government in 2007 as a
commercial joint-stock company/non-banking financial institution
registered at the Bulgarian National Bank
The fund represents a financial instrument of the central
government policy for local and regional development.
Objective - to provide financial assistance to municipalities in the
process of developing and implementing viable investment
projects funded by the EU Structural Funds, Cohesion Fund, and
European Agriculture Fund for Rural Development
Fund for Local Governments and Authorities - FLAG
Fund for Local Governments and Authorities
- FLAG
Funding sourcesIn EUR millionSource Amount
Equity 30
EBRD Loan 70
Total 100
Fund for Local Governments and Authorities - FLAG
Types of loans
• Project development (small loans of EUR 50,000 –
500,000 for project preparation: feasibility studies,
technical design, etc.)
• Bridge financing – fills the gap between payments to
construction/suppliers until the reimbursement of the costs
from EU Fund Authority; and
• Municipal co-financing – (5-50% of the investment,
depending on the co-financing requirement) as well as
financing ineligible costs such as VAT.
Fund for Local Governments and Authorities - FLAG
Partnerships
Managing Bank - assists FLAG in the lending process;
Managing Authorities of OP – overall supervision of the
municipal investment projects for compliance with the
financial, procurement and monitoring rules;
EBRD – provides long-term financing for FLAG’s lending
process; assists the development and implementation of
FLAG’s policies.
Lending process
Project developme
nt
Municipal CouncilThe municipal council approves the borrowing by setting the loan upper limit, interest rate and fees, type of currency, maturity and repayment schedule/sources.
The mayor submits the loan application form to FLAG through the Managing bank.
Managing BankAssesses the application form and the supporting documents. The bank assesses the credit history of the borrower, its financial situation for the last three years and its creditworthiness related to the project to be financed. As a result the bank develops a proposal for approval/rejection of the loan application and sets a proposed risk component.
Investment project
Lending process - 2Managing
Bank
FLAGAssesses the loan application according eligibility vis-à-vis the respective Operational Program, project costs analysis and the project management capacity. The Board of Directors approves the loan and its terms.
Loan Agreement
A tri-party loan agreement is signed (between FLAG, the Managing Bank and the borrower).
MonitoringThe Managing bank monitors the execution of the loan.
FLAG and the Managing bank oversee the procurement process and the project implementation.
Fund for Local Governments and Authorities - FLAG
Main Results
The lending process started in January 2009
Loan contracts: 170 contracts for EUR 90
million, supporting the implementation of
municipal investments projects of EUR 250 million
Average loan size – EUR 0.5 million
Average maturity – 13 months
Fund for Local Governments and Authorities - FLAG
Offsetting the borrowing costs
Objective: to offset the borrowing costs of resource-
poor municipalities
Source: earmarked transfer from state budget for
2009-2011
Amount – EUR 2 million per year
Access criteria – based on 3 indicators: net operating
surplus; available local resources for debt repayment
per capita and share of municipal own revenues in
the municipal budget
Offsetting levels: 0-90% of the borrowing costs
Contacts
Address: 23 Golash Str.1111 Sofia, Bulgaria
Tel.: +359 2 943 4467
Fax: +359 2 943 4431
www.namrb.org
NATIONAL ASSOCIATION OF MUNICIPALITIES
IN THE REPUBLIC OF BULGARIA