Rafal Andrzej Stanek, OCDE - “INTER-MUNICIPAL COOPERATION: concept and forms. Results from the OECD financed task on sustainable business models for rural sanitation”

THE SPECIALIST FOR PUBLIC CONSULTING

EAP Task Force

11

“INTER-MUNICIPAL COOPERATION: concept and forms. Results from the OECD financed task on sustainable business models for rural sanitation”

Rafal Stanek, 5 June 2012


Information about the project

Project: Improving Environmental Quality of the Black Sea through better waste water treatment and climate change adaptation of the water sector in Moldova.

Objective: improve the water quality of the Black Sea basin, and health situation in Moldova and downstream.

Sponsors: European Commission (DG ENV) and OECD/EAP Task Force

SoW: 3 tasks and task 3 is to develop a viable business model for rural sanitation. This task comprises studies on business models existing in other countries. Inter-communal cooperation is a one type of business models discussed.


Objectives of presentation

Present results of the studies on IMC (business models) for water supply and wastewater services existing in other countries;

Present two different approaches to inter-municipal co-operation in WSS: voluntary and (semi)obligatory.

Overview examples from European countries.


Voluntary model

Local authorities (municipal) are legally responsible for organizing water and sanitation (wastewater collection and treatment) services (WSS).

Local authorities have free choice to form inter-municipal partnerships to provide jointly WSS services.

Incentives may be provided to encourage inter-municipal cooperation e.g. easier access to EU grants.

Example of countries where voluntary model of IMC is applied for WSS: Austria, France, Croatia, Germany, Czech Republic, Poland, Romania.


(Semi) Obligatory model

Regionalization process is required by the legislation and heavily promoted

England and Wales, Romania, Bulgaria, The Netherlands (only water).


France

In France, provision of water service is a municipal responsibility and many small towns have decided to combine service areas to improve service efficiency with private participation contracts.

The local representative of the central government (the Prefect) can mandate or influence the creation and shape of proposed aggregated structures. In particular, the Prefect can apply the principle of “territorial continuity,” requiring that all aggregated municipal services have a geographical boundary in common to strengthen the technical coherence of the grouping.

Municipal associations Municipal associations (établissements publics de coopération intercommunale, EPCI) are widespread in water and sanitation service.

63% out of 36,700 municipalities is part of municipal associations providing water and sanitation services (there are 2,000 such associations).


France

An example of a single-purpose intermunicipal association for water supply is the Syndicat des Eaux d'Ile-de-France;

SEDIF groups 144 municipalities in the metropolitan area of Paris except for the city of Paris itself. Leaving private service providers apart, it is the largest utility in France, serving more than 4 million users.

While SEDIF owns its infrastructure, it has contracted out service provision to the private enterprise Veolia Eau.

Some municipalities within SEDIF's service area have chosen to provide water services themselves through communities of municipalities or metropolitan communities


Austria

Type of Utility / Owner Water supply Wastewater treatment

Number of water

suppliers

Connected

inhabitants [%]

Number of

wastewater

Companies

Connected

inhabitants [%] –

Provincial enterprise (state

run, public enterprise)2 6% - -

Associations of

municipalities

(publicly owned)

125 21% 330 51%

Municipalities - publicly

owned1,900 59% 1,100 38%

User Cooperatives

(cooperation of private

persons)3,300 4% 650 1%

Private wells / cesspits* 250,000 10% 250,000 10%


Austria

An interesting case study for the improvement of the rural water supply and sanitation in Austria is Oberösterreich Wasser (OÖ Wasser), an umbrella organisation (association) representing water and wastewater cooperatives in the federal state of Upper Austria.

The association is a feasible model for a sustainable waster supply and sanitation solution in rural areas.

The association provides support and advice on the set-up of water cooperatives, organise trainings and offer external quality control of of water/wastewater services provided by their members.

Members: 972 water cooperatives, 542 melioration cooperatives, • 119 wastewater cooperatives and others


Austria OÖ Wasser principles:

Non-profit character, Professional competence, Cost recovery , Voluntariness

OÖ Wasser services: Advice and support in technical, legal, financial and

organizational questions. legal information, technical audit, pooling program for water metering, water analyses, measurement and detection services, leak detection, location of pipes and valves, water loss analysis, measuring flow rates and pressure, operational services, emergency water supply service, advice and help to assemble and change water meters, water analyses, measurement of chemical, physical and bacteriological parameters, maintenance service, spring tapping, drainage and channel maintenance, education and training for officials and technical personal / capacity development

Members are outsourcing those services to OÖ Wasser


Poland

According to law on municipal self-government (1990) municipality is responsible for the provision of water and sewerage services within its territory.

WSS services can be delegated to other local government (meanings another municipality or other tiers of local government).

Law on municipal self government defines legal framework for inter-municipal associations.

Single purpose inter-municipal association is treated as local governemnt

Thus WSS services could be easily delegated to the association.

The model is not wide-spread (about 1400 WSS utilites for 2500 municipalities)


Poland – Dolina Redy i Chylonki Inter-municipal association

Established in 1991 by eight municipalities (population of 446.4 thousand);

Water/wastewater treatment, waste management, central heating, environmental education;

Association set up several companies: WSS, waste management, central heating.

WSS utility (PEWIK Gdynia Ltd.) - 43.8% of shares owned by Gdynia largest member of the association.

Interesting one of the important members of the association (Sopot – 38 thousand) does not participate in joint WSS project (Sopot delegated services to private operator).


Poland – Podhalańskie Przedsiębiorstwo Komunalne In 2003 Podhale Inter-

municipal Association set up inter-municipal company for joint provision wastewater treatment services in ten municipalities from Podhale region

The company operates 16 local WWT plants and 300 km of sewarage network (but not water);

Municipalities transfered assets to the company.

Not all the municipalities from the association joint the company.

Name of municipality Inhabitants (thousand)

Members of association in PPK

1. Nowy Targ – miasto 33.0 No2. Nowy Targ - gmina 22.3 Yes3. Poronin 10.8 Yes4. Biały Dunajec 6.8 Yes5. Szaflary 10.3 Yes6. Kościelisko 8.0 Yes7. Czarny Dunajec 21.4 Yes8. Czorsztyn 7.3 Yes9. Łapsze Niżne 8.8 Yes10. Ochotnica Dolna 8.0 No11. Krościenko nad

Dunajcem6.5 Yes

12. Szczawnica – miasto 7.3 Yes Total 150.5


The Netherlands

The degree of fragmentation is very different for water supply, wastewater collection and treatment.

Water supply is highly consolidated with only ten regional water supply utilities.

Wastewater collection is much more fragmented as most of municipalities operate their own systems. On the other hand wastewater treatment is responsibility of 25 wastewater boards.


Romania

Strong regionalization process – only municipalities that join regional structures can benefit from EU funds for WSS investments;

Business model promoted under reform: Formation of Intercommunity Development

Association (IDA) Setting up regional operator/regional operating

company (ROC) Delegating water supply and wastewater services

to a regional operator. Number of small operators is constantly decreasing

and the model becomes predominant.


Montenegro

“Light” regionalization. In 2005 the government together with several municipaliteis (Bar, Tivat, Herceg Novi, Budva and Kotor) set up a Joint Service and Coordination Company for Water and Waste Water Services for the Montenegrin Coast and the Municipality of Cetinje (Vodacom).

The company works as the agency for implementation of the KfW loans and grants, and as a partner for municipalities and water utilities in their work on improving the overall functioning of the network, water distribution, and waste water collection and treatment in the coastal region.

Except project preparation and implementation services, Vodacom performs some consulting services for water utilities operating in the region. These includes performing benchmarking, organizing trainings, GIS system and hydraulic modeling, preparation of business plans and recently “Vodacom“ performs a tariff studies for it member local governments.


Bulgaria

Service delivery is highly consolidated by creating regional WSS companies.

Only a few municipalities have not participated in the regional companies and provided services on their own.

According to new law (2012 proposal) all municipalities will be obliged to join regional companies.

Publicly owned regional water & wastewater utility companies. According to new policy utilities will be operators of the infrastructure, assets ownership will be transferred to municipalities and state.


Basic Features – centralized vs. decentralized Co-operation Tariff policy

Decentralised - There is no co-operation between municipalities. - Services are provided predominantly by individual municipalities

or utilities to which municipalities delegate responsibilities.

Tariffs are set by local authorities.

Light regionalisation

- Services are predominantly provided by individual municipalities or utilities to which municipalities delegate responsibilities.

- Regional agency is set-up to facilitate service provision and project preparation (it has mostly advisory role, some technical services, however, maybe subcontracted to regional agency etc.).

Tariffs are set by local authorities (advice can be provided by the regional agency).

Voluntary regionalization

- Municipalities enter formal cooperation to provide jointly the services.

- Inter-municipal utility is set-up to provide services.

Tariffs are set by inter-municipal structures (agreement necessary between municipalities).

Obligatory regionalization

- Governmental policy requires that the services are provided on regional level;

- Country is divided into regions – regional utilities are set-up

Tariffs are set by regional structures.


Basic Features

Advantageous Disadvantageous Decentralised - Good understanding of local population

needs

- Limited technical and institutional capacities to operate and maintain the infrastructure (e.g. lack of qualified structures capable to react quickly to emergency situations).

- Limited capacities to prepare investment programmes.


- Technical advice provided to local governments with regard to investments preparation and system operation.

- Some technical adivce

- Regional agency do not have direct control over the system (advisory role may yield limited benefits).

Voluntary regionalization

- Firm and formalized commitment to provide jointly the services.

- (Potential) benefits ensuing from economies of scale.

- Due to local political factors some municipalities may stay out of the inter-municipal structures (even if they are in geographical system boundaries). This may interrupt investment optimisation.


- (Potential) benefits ensuing from economies of scale.

- Municipalities that are capable to provide services in more cost-efficient manner than regional utility are worse-off.


Basic Features – direct service provision by municipality or delegated service provision

Direct Delegated

Decentralised - Direct service provision by municipality or its department

- Municipality delegates service provision to selected utility (e.g. private operator or neighbouring municipality that has more developed sanitation system).


As above - As above. - There is also possibility to delegate some services

to regional agency (e.g. maintenance services). Voluntary regionalization

No direct service provision Service provision is delegated to inter-municipal institution. In this model inter-municipal bodly may be service provider or services may be further delegated to private operator.


No direct service provision Service provision is delegated to regional institution. In this model inter-municipal body may be service provider or services may be further delegated to private operator.


Consolidation & privatization

Consolidated (regional)

Fragmented (municipal)

PublicPrivate

England & Wales

France

Czech Republic1999

1989

1973

Bulgaria

2012

1990s1990s

2000-2004Poland

Lithuania

1990

0% 20% 50% 80%

Denmark 2009

Romania

2007-2013

Documents

Rafal Andrzej Stanek, OCDE - “INTER-MUNICIPAL COOPERATION: concept and forms. Results from the OECD financed task on sustainable business models for rural sanitation”