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Benesov technical services ltd.

From Municipal Cooperation

Benesov technical services ltd.
Service Areas: Infrastructure, Solid Waste Management
Country: Czech Republic
Municipalities: Benešov, Týnec nad Sázavou
Contact persons: Zdeněk Březina, Martin Kadrnožka
Legal form: Commercial company
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Coordinates: 49° 46' 53" N, 14° 41' 12" E
Photo 1 Good Practice Form for IMC-tynec-FINA.JPG
Photo 1 Good Practice Form for IMC-tynec-FINAL.jpg
Photo 2 Good Practice Form for IMC-tynec-FINA.JPG

Description of the problem/need for IMC

Týnec nad Sázavou provided all the communal services directly through its Municipal Office carried out by its own 2-4 employees. This situation was unsatisfactory for a few reasons:

  1. The Association had to rely on one garbage collection lorry; in case of breakdowns, which were frequent because it was an old vehicle, they had enormous problems in collecting the garbage.
  2. They owned several other machines (a small lorry, a small digger, a gully sucker and other mostly single- purpose machines), which not often used.
  3. The person responsible for the communal services was overloaded as he was also responsible for housing and investment.

Týnec nad Sázavou wanted and needed to solve the described situation. Benešov converted its Communal Services Unit into a limited company (Technické služby s.r.o.) in 1994. The company was already operating smoothly when the problems in Týnec nad Sázavou were accumulating (1995–1996). Due to having knowledge of the situation in this geographical area, the two towns came up with the idea that Týnec nad Sázavou would enter the company as a second owner.

The main objective of Týnec nad Sázavou is to provide more efficient services, in particular, using its equipment to its full potential.

Description of the IMC practice

In 1994, the limited company (Technické služby Benešov s.r.o.) was established, with registered capital of CZK300,000 (a non-monetary contribution). In 1997, Týnec nad Sázavou entered the company and contributed CZK100,000 to the registered capital (a non-monetary contribution in form of a lorry AVIA); 75 percent of the company is owned by Benešov and 25 percent by Týnec nad Sázavou.

It functions just as any limited company based on the Commercial Code. There are three Executives: the Mayor of Benešov, the Mayor of Týnec nad Sázavou and a support officer. The General Assembly parties held twice a year.

Týnec was interested in the cooperation due to the above mentioned reasons together with the fact that Benešov had a landfill. Benešov was interested for two main reasons:

  • Týnec nad Sázavou has a long history with the landfill: it contributed to its construction.
  • Increase of area served (the distance between the two towns is only about 10 km).

The company operates on a market basis. It provides services to any municipality on a contractual basis for the same prices, so the owners of the company do not apply special prices. The service contracts are annual and include costs for each service provision separately.

Today, the company employs a staff of about 115 people, 14 of which are management and office staff. In addition to the services provided for the two owner municipalities, it provides waste management in more than 40 other municipalities and operates two landfills.

The company provides information as per the Law; it submits its annual reports to the Registry Office. The Companies register is partly electronic. Since 2003, the annual reports have been available electronically;, earlier ones are available in hard copy at the Registry Office. The company has its own web page (http://www.tsbenesov.cz/). The expenditures for the individual services are clearly stated in the municipal budgets, which are published on the website of the municipalities. The service contract between Týnec Nad Sázavou and Technické Služby Benešov s.r.o. is not confidential; to the knowledge of both Zdeněk Březina and Martin Kadrnožka, no one has ever inquired.

The Municipalities monitor the contract provisions and also the costs. For example, when they were not satisfied with the price of tree maintenance, they announced a selection procedure and chose another provider for this particular service.

All the company’s profit is reinvested back into the company, thus there are no other arrangements regarding profit division. The costs, as mentioned above, depend on the volume of contracted services.

During the ten years of the cooperation, the range of provided services expanded. Since last year, the company has supplied water, sewage and a sewage plant to both Týnec nad Sázavou and Benešov. It must be pointed out that these municipalities recently carried out several small construction projects

Establishment of the IMC practice

In 1996, Týnec nad Sázavou signed a contract with Technické služby Benešov s.r.o. for waste collection. The officials of Týnec nad Sázavou then negotiated both with the Officials of Benešov and the company. For the above reasons, they soon agreed that Týnec nad Sázavou would enter the company. They hired an external lawyer who prepared all the contracts and other necessary documentation.

The cooperation started because there were clear advantages for both participating towns. Although it may look as if it was the small town that joined the larger one, in fact, the situation was more balanced. Involvement of Týnec nad Sázavou enabled the company to grow. This growth is important because it provides both employees with specialization and expertise, and equipment. The economy of scale is significant.

Main success factors:

  • Interest from both sides
  • Well-balanced partners
  • Significant benefits for both towns:
    1. the complexity of the provided services
    2. expertise
    3. the entire service, if purchased for an annual fee without having to perform daily management of the area.

Benefits and shortcoming of the IMC practice

Benefits

Unfortunately, there is no evidence of savings, which were surely made. The IMC track only the expenditures for the particular services. It knows, for example, how much it spends for the waste collection in total, but not the unit cost or if there was an increase of quality. The total expenditures increase with the volume and quality of the services.

In addition to the cost savings, there are three main areas of benefits:

  1. Municipal Office – It does not have to manage the services, not resolve various unexpected situations or emergencies (i.e. how to collect waste when the only lorry is broken).
  2. Budget Officer – Since there is a fixed annual fee for each service, the total expenditures for an area are known in advance; no reserves need to be accumulated, for example, in case of harsh winter or of a machine breakdown.
  3. Citizens – They receive higher quality and a greater range of provided services.

Shortcomings

There is no agreement on the arrangements should one of the owners decide to sell his or her share in the company to a third party.

Future plans for the development of the IMC practice

The company gradually increases the number of its services it provides based on the needs of the two owners. For example, it operates street lights and provides small infrastructural works for Benešov, and operates the water and sewage services and the sewage plant in Týnec Nad Sázavou. If advantageous, it can also provide some related services for the two municipalities. Together, they are involved in the Voluntary Municipal Association Obecní lesy Benešovska (Municipal Forests in Benešovsko) and participate in several other IMCs.

Main lessons learned on how to establish IMC and make it a success

  • Strong and equal benefits should be provided for both partners.
  • There must be a considerable economic of scale.
  • The proper legal form is required (a limited company is much more flexible than a municipal unit)

Many of the municipal communal services units were converted into limited or stock companies, some of which are owned by more municipalities or other actors. However, none of the interviewed actors were aware of an identical situation (two municipalities with no other partner).

The establishment of this IMC was not supported externally, but it frequently applies for various grants for further development of the landfill, some environment projects or some company activities. Since most of the grant schemes are directed towards the municipalities, they are extremely flexible in arranging certain property rights with the company so that they would be eligible for the grants.

Readiness to support other municipalities to establish IMC

The IMC is willing to share its knowledge and experience.

Acknowledgment

The information about this practice was collected and presented by Lucie Sedmihradska.