GEO

Tbilisi budget: a political game or caring for people?

20 February, 2014

For three months now Tbilisi’s residents have been waiting in vain for Tbilisi Council to approve the city’s most important financial document - the 2014 budget. Amidst endless discussions, political debates and accusations, impeding the process and neglecting the interests of the citizenry — it has still not been approved. While the City Hall has taken the majority of the City Council’s requests into account — and the budget has been modified several times over — each time the City Council then invents a new requirement, creating further delays.

Of late, several of the City Council comments related to the resignation of the city government officials, and were not relevant to the city budget at all.  Yet another sad confirmation that the budget approval process has been hijacked for a political game, rather than motivated by a legislature’s love for its people.

Continuing down this path, just several months before the local elections, which is very likely to lead to the resignation of Tbilisi government, is not the right thing to do.

The first draft budget (GEL 720 million) was sent to the City Council in November 2013. The City Council responded to the Tbilisi government with 14 comments. In December 2013 Tbilisi government submitted a second draft ( GEL 730 million) and in January 2014 a third draft of GEL 785 million. In February 2014, the City Hall submitted a fourth draft ( GEL 850 million). Subsequently, the draft budget underwent changes twice, taking into account the City Council requests. On February 12, the City Council voted against the budget for a fourth time.

TI Georgia believes that both sides/the City Council have unnecessarily dragged out this process — neglecting the interests of the local population — to try and score political points.  While the City Budget is far from ideal, the substance of the City Council’s actual arguments are thin and unconvincing.

As noted above, the budget approval processes involved several stages.

Stage 1

The 14 comments produced by the City Council concerning the initial 2014 draft budget dealt mainly with the increase of funding in different directions, such as:

  • fortification of damaged buildings (by GEL 10 million)

  • assistance to Homeowners’ Communities (by GEL 1 million)

  • social assistance (by GEL 3 million)

  • abolishing financing of Boards of Trustees set up within private and public law entities

  • and providing an inventory of the road infrastructure program and construction and rehabilitation of underground walkways based on the list of sites provided in the budget.

The comments included that these issues that have no urgent need of funding: such as funding the setting up of a basketball team or erecting a statue of Lado Asatiani on Rustaveli Avenue in Tbilisi, something that Tbilisi government is intending to carry out with the cost savings resulting from the 2014 public procurements.

The City Council’s original comments concerning the 2014 budget vs Position of Tbilisi government



The City Council comments

The level to which the City Council comments had been addressed (provided by the Tbilisi government & the City Council)

Increase funding for the fortification of damaged buildings by up to Gel 10 million.

Partially Incorporated:

Reinforcement of damaged buildings will increase by GEL 5.0 million.

Increase budget funding to support the development of the Homeowners’

Communities in Didube, Chughureti, Isani, Krtsanisi, and Mtatsminda districts by GEL 200 000 per each district. A total of GEL 1.0 million.

Incorporated:

Homeowners’ Community Development Assistance Program funding grew from GEL 34 million to GEL 35 million, of which GEL 15 million is allotted according to specific districts as stipulated in Annex 5 of the draft budget.

Increase the amount of compensations paid to the residents of demolished houses by GEL 498 000.

 

Not Incorporated:

According to Tbilisi government, the comment refers to the entire program with no appropriate reference to specific sub-programs. The funds for the program and relevant subprograms are calculated in the draft based on the existing real data about the number of beneficiaries as well as the budget measures to be implemented. If additional funding becomes necessary (resultant from the reinforcement of damaged buildings), the required sums will be allocated from the Tbilisi government’s reserve fund.

Increase funding for other welfare programs by GEL 3 million.

 

Not Incorporated:

According to Tbilisi government, the draft budget provides for the growth of the welfare program up to GEL 6.4 million  compared to GEL 6.2 in 2013. Other social assistance measures shall be covered consistent with the introduction of universal health insurance throughout the county.

GEL 150 000 to be allocated with the purpose of erecting the monument of Lado Asatiani in Rustaveli Avenue.

 

May be Incorporated:

 

According to the Tbilisi government, the statue erection works can be covered within the funding allotted for the city design measures set in the draft budget, consistent with the savings resulting from public procurements.

Establish a professional basketball club “Tbilisi”  with a budget defined in an amount equal to Gel 1.0 million

 

Not Incorporated:

 

According to the Tbilisi government, talks are being held regarding the return of the "Dynamo" sport club to municipal ownership. Hence, there is no need to allot additional GEL 1 million for funding one more professional basketball club.

Abolish financing of Boards of Trustees set up within the legal entities of Private Law (commercial and non-profit) as well as Public Law with the view to save the budget expenses.

Incorporated:

Boards of Trustees set up within the legal entities of Private Law has already been cancelled.

List the sites included in the construction, repair and maintenance projects funded by the 2014 draft budget and attach it to the ”Road Infrastructure Construction, Repair and Maintenance” Program in the form of an annex.

Incorporated:

According to the information received from both the City Council and the Tbilisi government, alongside the 2014 draft budget, the Tbilisi government sent the City Council an annexed list of sited included in the ”Road Infrastructure Construction, Repair and Maintenance” Program that can be specified during the year.

Submit a full list of all sites included in the underground walkway maintenance and rehabilitation measures in the form of an annex.

 

Incorporated:

According to the information received from both the City Council and the City Hall, alongside the 2014 draft budget, a provisional list of sites designated for the underground walkway maintenance and rehabilitation measures has been submitted in the form of an annex that may be specified throughout the years.

Have the budget separately define compensations for those unlawfully released from work in the City Hall and its companies, as well as in Gamgeobas, district administrations, pursuant to final court decisions.

Incorporated:

 

According to the City Hall, the draft budget has allotted GEL 1.0 million for the program of debt redemption of previous years (including the enforcement of court decisions) (10.26), which shall cover the relevant costs.

Within the existing possibilities, increase funding for planting activities, including the Zoo and Botanical Garden development facilitation programs.

 

Not Incorporated:

 

According to the City Hall, funds assigned by the 2014 budget for planting activities will be sufficient to fully implement the planned projects and activities.

Add measures designed for upgrading the courtyard of Tbilisi Mental Health Center.

Not Incorporated:

According to the City Hall, the Mental Health Center is not a municipal property

Provide funding of water supply system improvement activities in the attached territories from the development programs. Activities should be implemented by the company winning the tender. The water supply system should be listed as local property, subsequently commissioned to GWP under certain terms.

Mostly Incorporated:

 

According to the City Hall, to ensure financing of the activities related to the arrangement of the water supply networks in the territories attached to Tbilisi, assistance will be provided to the residents of those areas; funding will include designing the activities to ensure the water supply, the actual implementation of the above work, financial estimates of the projected work and the work to be implemented, and the inspection and the inspection costs for the work to be implemented. As regards the legal side, we believe that solution of the above problem requires time, and, therefore, it is unwise to link it to the budget approval.

Amend Tbilisi City Council assignations (program code 10.1) in accordance with the Annex.

 

Incorporated:

 

The City Council assignations have been amended in accordance with the submitted Annex

Stage 2

The City Hall has addressed the majority of the City Council’s original comments, to do which it, of course, had to increase the budget. However, at a meeting held on January 31, the City Council chairperson, questioned the need to increase the budget by GEL 55 million. Over ⅓ of the increase (GEL 55 million) will go to finance the City Council initiatives. The overall sum of GEL 55 million is distributed as follows:

  • GEL 10 million for transport upgrades,

  • GEL 1 million for the cableway,

  • GEL 15 million for home communities,

  • GEL 10 million for the city development program,

  • GEL 2 million for the water supply system measures,

  • GEL 5 million for kindergartens,

  • GEL 11.8 million for the Olympic Festival, and

  • GEL 200,000 for Royal District Theatre.

As for the remaining comments, with the exception of the increase in the funding for social activities, other initiatives, such as amends to the residents of the destroyed houses, upgrading the Tbilisi Mental Health Center courtyard, programs facilitating the development of the Zoo and Botanical Garden, and establishment of the basketball team, have been provided for (reasons for granting or rejecting the City Council requests have been detailed in the above table).

Stage 3

On February 10, the Tbilisi City Council faction of "Georgian Dream - Democratic Georgia" provided the City Hall another series of comments regarding the city budget. The comments pertained to:

(1) treatment of patients suffering from leukemia and hemophilia;

(2) construction of the social house for the homeless;

(3) providing support to families particularly heavily indebted to the gas, water and power companies; (4) allotment of funds to compensate citizens affected by the 2012  flood;  

(5) allocation of GEL 20. 000. 000 to support the economic development and businesses; and

(6 allocation of GEL 150. 000 for the 100 000 Georgian Saint Martyrs Metekhi Bridge design works.

Other comments regarding the city budget have also been submitted to the City Hall from other factions and commissions of the City Council on February 10. The City Hall decided to grant all those comments almost fully, which led to an additional increase of the budget by GEL 65 million causing it reach GEL 850 million. To cover these needs, the City Hall plans to mobilize the funds from the sale of its non-financial assets. However, the City Council did not approve the budget on February 12 either.

We additionally present our own brief overview and assessment of the 2014 Tbilisi budget (the version uploaded on the City Hall website) as well as the relevant budgets of the past two years.

2014 Tbilisi Budget

In 2014,  Tbilisi expenditures decreased by GEL 73 million (11.2 % ) compared to 2013  making up GEL 575.51 million. However, Tbilisi expenditures increased by GEL 139.11 million (32 %) compared to 2012. The city revenues in 2014 increased by GEL 32 million compared to 2013 reaching GEL 699.5 million, notwithstanding the offsetting transfer decrease by GEL 49.9 million in 2014. The revenue increase mainly occurred at the expense of the increase in non-tax revenues.

Compared to 2012, Tbilisi government in 2013-2014 made three important steps forward: (1) the 2013 and 2014 budgets include more information on the budget expenditures than the previous budgets. In particular, 9 basic program costs are broken down according to the funding of their individual components; (2) the city budget deficit in 2014 decreased by 64 % compared to 2012 and by 45.7 % compared to 2013; (3) the City Hall maintenance total costs decreased by 16.2 %, while  the estimated costs of salaries decreased by 37.3 %.

The three distinct priorities in the 2014 budget are: health care and social insurance (GEL 172.5 million), construction and repair of transport infrastructure (GEL 132.4 million), and construction of infrastructure facilities and fortification of damaged buildings (GEL 134 million). Under the existing draft budget for the year 2014, Tbilisi is going to spend GEL 80 million on education, GEL 66.5 million will go to maintenance and improvement of the environment, GEL 52.4 million will be spent on culture, sports and Youth programs, GEL 35 million will be allotted for the development of homeowners communities, and GEL 35 million will go to public order and safety.

Although social security costs in 2014 are growing by GEL 5.7 million, health care costs are reduced by about GEL 1.3 million. The city budget will no longer fund treatment of thyroid diseases, tonsils and adenoid glands, gall bladder diseases, uterine diseases, and surgical treatment of benign and malignant tumors. This might, for the most part, be due to the fact that these expenditures now fall under the General Public Insurance. The 2014 budget incorporates expenses for psycho-therapeutic rehabilitation of drug addicted patients (GEL 200,000), not provided for previously. Increased costs of social security will cover the water supply system improvement, free soup kitchens, and compensations of the residents of destroyed houses.

The most significant increase in 2014 budget compared to that of 2013 is in educational programs (GEL 25.1 million), mainly on the promotion of preschool institutions. Importantly, in 2014, there will no longer exist the program supporting out-of-school education institution and public school reform aimed at setting up a modern system of education and training, and implementing creative projects in general education and out-of-school institutions.

Tbilisi city budget priorities in 2013 and 2014  (GEL)

It is worthy of note that non-financial assets in the 2014 budget grow by GEL 118.5 million, which means that Tbilisi government procurements in 2014 will increase markedly. It should also be noted in addition that the City Council maintenance expenses in 2014 increase by 16%, while the City Hall maintenance costs decrease by 16.2%.

We will still witness undifferentiated spending of state funds in 2014, which, in our opinion, is a problematic issue. It is positive that impoverished families will keep receiving GEL 250 as part of the utility voucher program that will reimburse utility costs for electricity, water and cleaning through transferring the payable sums to the distribution companies, however, the City Hall will continue to distribute GEL 100 utility vouchers to over 300. 000 families in Tbilisi. i.e. to all subscribers. Overall budget spending on the utility vouchers is going to be GEL 43 million. We think that this kind of undifferentiated approach constitutes an obvious case of unreasonable spending of public funds. Utility vouchers should be given only to the vulnerable families. The argument that identifying vulnerable households would require more resources than distributing vouchers to all families is not convincing at all, since there already exists a database registering families with 70, 000 and lower rating points which enables the identification of families below the poverty line as well as assessing their social and economic status.

Conclusion

We believe that the City Council’s remaining comments concerning the initial draft of the 2014 budget did not constitute an intractable obstacle and, subsequently, grounds for the rejection of the budget. The fact that the City Council could have sent the City Hall all its comments on the budget at the initial stage, rather than piece by piece, signals political motivation on the part of Tbilisi legislature. If Tbilisi City Council could not have provided all its comments  at the initial  stage, the City Council would have had the whole year ahead during which it could make changes to the city budget. Coming up with new comments on the budget on a continuous basis arouses a suspicion that the Tbilisi City Council  are biding the time.

Author: Transparency International Georgia