State making local governments prefer secondary investments

Photo: Margus Ansu

Cities and rural municipalities cannot use €70 million in extraordinary national investment support for already budgeted renovation and construction work, meaning projects need to be reshuffled at breakneck speed to avoid losing access to support.

“The city of Tartu will be given €3.9 million for new investments, while we are forced to postpone planned and carefully considered work in the volume of €4 million,” Mayor Urmas Klaas (Reform Party) said. He added that while state support is very welcome, a peculiar situation has been created where local governments need to replace urgent investments with new ones.

“Tartu is a big city and so are its investment needs, which is why we have objects that meet requirements,” Klaas said. He said that the state’s investment support will go toward renovating kindergarten classrooms and Oa Street.

At the same time, Tartu is forced to postpone five or six investments in its 2020 budget. The reason is that income tax receipt is forecast to fall by €8 million, meaning the city’s €40 million investment budget needs a 10 percent cut.

“All major investments, including the Annelinna High School, Riia-Vaksali intersection complete with overpasses, renovation of Ülikooli and Vanemuise streets will be made,” the mayor promised. “We will be postponing smaller things.”

Urmas Klaas said that the state’s extraordinary investment support is not very effective because the conditions are too rigid. “Unfortunately, the ministry did not consider proposals made by the Estonian Association of Cities and Rural Municipalities to qualify existing projects for support,” he said.

Hurrying troubling

The Ministry of Finance is making support sums calculated individually for every local government available only for objects not included in 2020 budgets or for long-term project work to be done in the coming years. Applications can be filed until November 15 and contracts need to be signed by mid-December for the government to pay out sums this year.

“Võru Municipality is getting over €600,000 and it is rather difficult to find a use for the sum in a short time,” Võru Municipality Mayor Kalmer Puusepp said. “Major investments require the community to be consulted and deliberations in the municipality council. Next come decisions, planning and tenders. It takes at least two years to go through all of it when building a school or kindergarten. I understand the government is seeking to liven up the economy now, but it will be tight.”

The municipality mayor said that the money cannot be used to construct the new building of the Sõmerpalu Kindergarten that the locals want to see. More promising plans that qualify for investments include constructing a rental dwelling in Vastseliina and renovating the Kääpa Social Center and the Väimela Health Center.

Võru Municipality is also concerned it might be left with a deficit by the year’s end. “It is possible we’ll have to cancel, postpone or borrow to carry out major investments,” Puusepp said.

Põlva Municipality Mayor Georg Pelisaar said it is unclear where new investments of €730,000 will be channeled and whether the local government will have to dial back its €10 million investment plan. “Income tax deficit has grown to €200,000, but because the state has given us fiscal support, we are not in the red yet,” he said.

Economic amplification

“Support will not be made available for already budgeted work because this would not bring new orders for the economy,” Minister of State Administration Jaak Aab (Center) said. “Additional investments are what is needed to deliver an impulse and mitigate the economic effects of the crisis.”

Local governments are allowed to construct, demolish or renovate whichever objects, install communications or procure furniture using support. Cost-sharing is not required, while every investment must be at least €20,000 (€6,000 on small islands).