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Delnice public communal enterprise

From Municipal Cooperation

Delnice public communal enterprise
Service Areas: Solid Waste Management, Water Management
Country: Croatia
Municipalities: Delnice, Brod Moravice, Fužine, Lokve, Mrkopalj, Ravna Gora, Skrad
Contact persons: Mladen Majnarić, Ivica Briški
Legal form: Commercial company
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Coordinates: 45° 23' 38" N, 14° 47' 54" E

Description of the problem/need for IMC

The joint public communal enterprise (PCE) Komunalac was established to ensure the continuity of communal services provision (drinking water supply, drainage of wastewaters and management of communal waste) in 1993, after the territorial reorganization and the division of the Municipality of Delnice into seven new municipalities.

Description of the IMC practice

The joint PCE Komunalac provides water supply, sewage and communal waste management services to almost 16,000 inhabitants on an area of almost 720 km2. Komunalac has a total of 48 employees and is the 9th largest company on the territory of all seven municipalities,

Komunalac is a PCE with the status of trade company, established on the basis of a contract between seven municipalities (Delnice, Brod Moravice, Fužine, Lokve, Mrkopalj, Ravna Gora and Skrad). The individual shares of the municipalities in the ownership structure and the share of votes in the Assembly of the company are equal to the share of the population of each municipality in the total population covered by the services (according to the 1991 Population Census).

The main bodies of the company are the Assembly (Skupština), the Supervisory Board (Nadzorni odbor) and the Managing Body (Uprava društva), represented by the Director.

The Assembly consists of the representatives of all seven municipalities. It meets at least once a year and is responsible for passing the Statute and other internal regulations, approving the annual reports, plans and programmes, and appointing the Director of the company. The Assembly decides by majority vote (the number of votes is equal to the share of the population of each municipality in the total population); however, in practice, the decisions are made by consensus.

The Supervisory Board oversees the business operations of the company and the managing procedures. It consists of seven members, each representing one municipality. The President and Vice President rotate annually, so that each municipality is represented every seven years.

Management of the company is represented by the Director, who is appointed for a four-year mandate, on the basis of a public competition. He or she is responsible for the management and legal representation of the company.

The reports, annual plans and budgets must be approved by representative bodies of all the municipalities, as well as any proposal for an increase in service costs.

The infrastructure development projects of Komunalac are planned according to the individual plans of the municipalities: 51 percent of the infrastructure projects are covered by Komunalac and 49 percent by the municipality in which the infrastructure project is implemented.

Establishment of the IMC practice

PCE Komunalac was established in 1974. Prior to the territorial reorganization of Croatia, it provided services for approximately 17,500 inhabitants on the territory of the former Municipality of Delnice.

In 1993, the territory of Delnice Municipality was divided into seven new municipalities, including one town (City of Delnice) and six communes (Brod Moravice, Fužine, Lokve, Mrkopalj, Ravna Gora and Skrad). The establishment of new municipalities raised problems of ownership, management and financing of the PCE, and the provision of communal services for citizens of the new municipalities. The seat of the PCE, and most of vehicles, equipment and communal infrastructure (including communal waste disposal) are located in the City of Delnice, which covers approximately 30 percent of the surface area and includes 40 percent of the inhabitants of former Delnice Municipality.

It should be noted that similar problems occurred all over Croatia, since the new territorial system multiplied the number of local self-government units – 68 towns and 486 communes were created to replace 101 municipalities. In 1993, the total number of municipalities increased to 555 (129 towns and 426 communes).

In order to resolve ownership issues, the Law on Communal Management of 1993 prescribed that the property of PCEs registered for communal activities would come under the joint ownership of the new municipalities. In addition, the Law prescribes the obligation of local self-government units to agree on modes of sharing joint property. However, the Law does not elaborate in detail on how the shares would be divided.

The local authorities of all seven newly established municipalities agreed to ensure continuity of service provision. The total property value was calculated by using external financial consultants, and the shares in Komunalac were determined proportionally to the share of the population in the total population of the former Delnice Municipality. The draft of the agreement was prepared on the basis of individual decisions of the municipal councils.

Benefits and shortcoming of the IMC practice

The model of the reorganization of the PCE was successful and ensured the continuity of service provision. Komunalac is a fully self-sustainable company whose regular activities are financed through service provision fees (the prices of services are within the Croatian average), while larger infrastructure investments such as the regional water supply chain are co-financed by the municipalities and central state agencies. The municipal authorities are satisfied with company operations and the citizens are satisfied with the quality of the services. Political changes in leadership of the municipalities (three local elections were held from 1993 until now) have not influenced the overall operations of the company.

Future plans for the development of the IMC practice

The possibilities for further expanding the IMC practice to neighbouring municipalities are limited, since similar models of IMC in the provision of drinking water supply, sewage and waste management have already been introduced and widely applied in other Croatian municipalities. As far as other less expensive communal services are concerned (such as maintenance of cleanliness of public spaces, maintenance of green areas, funeral services, chimney cleaning services, etc.), municipalities prefer to organize their own services.

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

Preliminary research on IMC in Croatia has identified a total of 29 joint PCEs providing various communal services for a total of 38 towns and 153 communes, but there are probably more similar cases. Establishment of IMC practices on such a large scale primarily depended on the legal framework, i.e. the Law on Communal Management, which prescribed the obligation of municipalities to resolve ownership issues after the establishment of new municipalities.

Although not particularly innovative, the basically externally driven IMC in the joint delivery of communal services proved an efficient way to organize the communal services in newly formed small municipalities surrounding the central town. The main success factors were the enabling legal framework and the awareness of the municipalities that reorganization of PCEs is the most rational solution to organizing service delivery (i.e. outsourcing, establishment of their own PCE or buying services from communal companies owned by neighbouring municipalities).

Readiness to support other municipalities to establish IMC

The representatives of the municipalities and the PCE are willing to share their experiences by participating in information events and offering professional support and advice whenever necessary.

Acknowledgment

The information about this practice was collected and presented by Marco Kovacic.