I spoke with the executive director of the Union of Towns and Municipalities of the Czech Republic Radka Vladyková shortly after the Energy Conference that the Union organized. The need for cooperation not just between towns and municipalities but also the private sector, the creation of microregions, and inter-municipal cooperation wove throughout the whole interview like a thread.
Why did you organize the conference?
The idea came about sometime in late spring, early summer, and the members of the Union essentially made us do the conference because the so-called LEX OZE II (Translator's note: OZE is an abbreviation of the Czech words for renewable electricity sources) Bill amending the Energy Act, which has been in the draft stage for many years now, is steeped in misconceptions and raises a lot of expectations and even threats. And so, towns and municipalities started turning to us with questions about establishing associations, how to go about it, whether they can buy or sell energy, if funding for solar is beneficial for them, and if they have to approve all requests to build a wind turbine on their land... And on top of all that, we've seen a plethora of energy con men approaching even mayors now. That's why we decided to organize a conference based on the questions we've collected over time. When we were putting it together, we were under the impression that the Bill would have already been presented to the Chamber in some specific shape or form when the conference took place. Sadly, there's been no progress on the Bill, so we based everything on the current legal framework. It's naturally a major problem for towns and municipalities as the lack of the Bill prevents them from planning their energy projects. That's a major lapse by the government.
What do the municipalities need to be warned and notified the most about in terms of the construction of renewables?
Some have extreme expectations from the amendment of the Energy Act, almost as if energy should be free afterward. But they forget that the final tally is made up of several items. We might be able to influence consumed energy, but it only makes up about half the tally. We are fighting for things such as insular energy systems and proprietary distribution networks in towns and municipalities. However, we need to realize that renewables have limitations. Our land doesn't have massive Alpine rivers or even streams with a large volume and flow of water. We don't have a sea in the north with constant wind where we could build wind farms, nor beaches in the south where we could have solar panels. Biogas plants are also complicated. All you need to do is look at the latest developments in the wood market to realize that nobody knows how things will go with woodchips, and corn can't be grown all year long either. With that in mind, it's important that every municipality realizes the potential as well as the limitations of communal energy, and that it is honest in admitting what's possible and what isn't. That was the fundamental help that the conference was supposed to provide to the mayors – to make them think about their municipalities in terms of energy. To make them realize that even if they install some sort of an insular system, they'll still need to be connected to a stable source that will be under maintenance 24 hours a day, 365 days a year to make sure it works in case the wind doesn't blow or the sun doesn't shine. And energy storage is also a thing. The idea that we'll put solar panels on the roof of the town hall and build a wall out of batteries around the property is just terrible. What's more, battery storage will naturally make the whole project more expensive.
Is energy the burning issue for municipalities right now, or is there an even "hotter" topic?
It is without a doubt the new tax package, which was veiled in mystery for the longest time. It has already been reflected in the construction market – the massive amount of uncertainty in terms of financing is slowly but surely bringing construction to a halt. New numbers show that public procurement in the construction industry has dropped by 10.7 percent year-over-year after inflation. While competition has risen up to 5.5 offers, which is to say that an average of five to six companies apply for a single procurement tender. That's the highest level of interest since at least 2017; we were happy to have a single company sign up as recently as three years ago, for instance. There isn't enough work and there won't be for some time. That's a problem because construction is one of the sectors that brings in the most money to the national budget, it is the entire economy's litmus paper. A decline in the construction industry signifies that we're looking at a recession, not growth. Some may feel that a 0.2 percent annual decline in the economy is nothing, but it represents billions of crowns.
Why aren't there more public procurement offers from towns and municipalities?
The public procurement cycle lasts between one and six years and a larger contract takes roughly six to eight years to complete. Before you put everything together, win the tender, and so on, you'll certainly need more than one construction season. And a mayor needs to know that everything is covered by their budget, they can't sign a public procurement contract if they're not sure they'll have the money for it when it's finished. They confirm that with their signature and they are accountable. They can't do the same things that MPs can with their immunity. Mayors had no idea what they could count on for the longest time. In its consolidation package, the government was expecting a 10 billion profit coming from redistributed town and municipal taxes. The initial proposal was to amend the property tax, which usually goes to municipal budgets. When that didn't pass, it lowered the percentage we get from income tax, so we ended up losing the 10 billion anyway, or rather the citizens did. We made some calculations at the Union to come up with the total impact of the tax package. Taking into account higher expenses and lower income, we're looking at roughly 100 billion per year, which is nearly the amount of money invested by municipalities in aggregate. We used to invest around 120–130 billion. So our investment potential is de facto impacted by the annual decline. Mayors were forced to follow the binding regulation on property tax coefficients until the end of September. But because it was unclear at the time what exactly would happen with the property tax, many of them decided it was better to wait a year. Depending on growth predictions made by the Ministry of Finance at a time when a recession has been announced is just not possible. When we look at the 32% of cumulative inflation between 2020 and 2023 and subtract that from municipal incomes, it's clear to see that not a whole lot of real value is coming in.
What should all municipalities in general focus on more?
They should learn how to cooperate with one another as well as the private sector. To realize that a municipality doesn't need to do everything on its own, but that it can be a good partner, or even a good neighbor as part of various associations or unions. ČEZ ESCO is frequently a partner of our conferences. Its EPC (Energy Performing Contract) project is focused on building energy-self-sufficient buildings or making existing ones more efficient, and it can even pre-finance the whole thing and the investor pays it off gradually. That's one example of the public and private sectors cooperating. There's a lot that can be done that way in the construction industry. It's a normal thing in the West, but here you still need to sometimes explain to people that a private entity isn't an enemy of state administration and that "developer" isn't a bad word. That's a mental barrier we're still dealing with. But if the cooperation is set up well, both parties are sure to benefit. But let's get back to municipal cooperation – microregions should receive support, and they should in turn be an example of regional collaboration and cooperation on a municipal level. Which is, by the way, a project of inter-municipal cooperation run by the Czech Union of Towns and Municipalities. It served as an example for Slovakia – we used to go there to show them good industry practices. The project even gave rise to a bill on municipal associations, which is now in the Chamber. Regional cooperation will be one of the major challenges we'll face as part of the overall modernization regime we'll undergo to become a country that is self-sufficient in terms of energy. Someone who's appropriately located will have a wind farm, another will have solar, the next will have a biogas plant, and all of that should be shared across the shortest possible distances to create one big functioning system.
Do you also cooperate with Slovakia?
Yes, and not just on the inter-municipal cooperation project. The Czech Union of Towns and Municipalities has had long-standing cooperation with the Slovak Union as well as other V4 countries. We are a part of CEMR (Council of European Municipalities and Regions), which is a European association of municipal and regional administrations. We meet regularly; the closest meeting of the political committee (or a massive meetup of mayors from all across Europe, if you will) is happening in Prague in early December. And there, we will present a clear declaration as to how we see the vision and priorities of the EU going forward. Energy, the Green Deal, social cohesion, and social harmony – all of those will be major topics. By the way, we're all dealing with identical issues, no matter the country. How to deal with waste management, how to set up energy properly, how we're succeeding or failing at negotiating and sometimes even fighting with various non-governmental organizations to be able to implement certain projects. Construction approval taking five years isn't just a Czech thing. When they want to find a place for a wind farm or hydropower plant or even just a waste disposal bin in Austria or Germany, they're forced to deal with the same kind of haggling we are. We of course cooperate with the Slovak Union of Towns and Municipalities. Slovakia has historically been just as regionally fragmented as Czechia, and they are also keenly aware that the most important thing is to have financially independent municipalities, or, if not fully independent, then at least not as dependent on the state. They are also working on inter-municipal cooperation. Czechs and Slovaks have always been good friends and good partners. And nothing has changed about that on the municipal level, no matter what direction the winds are blowing up top.
GOVERNMENT COOPERATION
Radka Vladyková has been with the Czech Association of Towns and Municipalities for five years now, which means she's seen two governments in action. How did the cooperation between the Union and both governments go? "We met quite often with the ANO government," says Radka. "Our negotiations were very intense, and even though we sometimes got into heated arguments and did not always reach a consensus, they at least heard us out and tried to take our opinions into account one way or another. Currently, the communication is sadly absolutely minimal, if not non-existent. And if there is something, it usually ends up petering out without any results. It's a big difference."
INTOXICATED MPs
Many MPs in the Chamber have come up through municipal politics, and must therefore be aware that slow decision-making can subject the municipalities to a lot of issues and time pressure. "Not just the municipalities, but the state as a whole," points out Radka Vladyková. "I was born in Prague and I'm a proud patriot. Prague is beautiful and magical, so it must be having some intoxicating effect on them, and I guess they serve some sort of "forgetfulberry" jam in the Chamber... [laughs] We communicate, we know each other. They do often say that they don't agree with how things are done either but are forced to play along as part of the coalition.."
CV BOX
Radka Vladyková (born March 26, 1973, in Prague) is the executive director of the Union of Towns and Municipalities of the Czech Republic and former mayor of Jesenice u Prahy. She also worked as a member of the Union's Legislative Committee.
She graduated in European Studies and Public Administration from Metropolitan University Prague.
Vladyková is married and has three children – Martin, Míša, and Tomáš.
She is fluent in English, enjoys spending time with her family, and her hobbies include lifelong self-education and long walks in the Průhonice Park with her dog.
