Latvian minister allows Rezekne municipality could be at risk of financial stabilisation procedure

Currently available information about the financial difficulties Rezekne municipality is in suggests the municipality may be at risk of financial stabilisation procedure to be administered by the Ministry of Finance, as LETA was told by Minister of Environment Protection and Regional Development Māris Sprindžuks.
Rezekne municipality is in a difficult financial situation, as reported by Latvijas Radio. To cover all expenses for this year, the municipality lacks approximately EUR 3 million. To save finances, the municipal administration has also laid off employees.
The minister admits that because Rezekne municipality receives funding from the Municipal Equalisation Fund, he is concerned about the municipal administration’s uneconomical behaviour.

The main purpose of any municipal administration is ensuring completion of functions delegated to them by the Law on Municipalities.

According to information from Sprindžuks, Rezekne municipality is in financial difficulties because of the construction of a recreational centre near Kovšu Lake, the costs of which have surged, making it difficult to finish. On top of that, the municipal administration has yet to find a private operator to manage the centre. If they fail to find the EUR 3 million needed to finish the project, Rezekne municipality will have to return the EUR 5 million already invested into the centre’s construction.
The minister has justified concerns about the municipality’s ability to objectively assess its own functions and available financial resources.
LETA previously reported that construction of the recreational centre is planned to be completed by autumn. The building itself is planned to be commissioned by the end of the year. The total costs of “Rezekne recreational centre for tourism development” reaches EUR 12 476 073. This amount covers street reconstruction, landscaping, SPA building, the municipality explained. The construction costs have increased by several million euros since the start of the project.

This summer Rezekne municipal council announced hopes to find a tenant for the recreational centre that would invest at least EUR 5 million into it.

The first suspicions of Rezekne ending up in financial difficulties appeared at the meeting of the Latvian Association of Large Cities half a year ago, when participants looked at various municipalities’ financial data.
At this meeting the Minister of Regional Development allowed that members of the opposition do not have access to objective information about the municipality’s finances, which results in the wrong decisions being made. Rezekne is ruled by former Harmony member Aleksandrs Bartaševičs, who has founded his own party after the conflict and leaving Harmony.
Sprindžuks has contacted the Ministry of Finance in order to look for the best possible solution to stabilise the situation in Rezekne and perform a full audit there in order to grasp the real situation with finances there. The Ministry of Finance will wait until the 7th of August for Rezekne municipality to report information about their financial situation. Once this information has been received, the decision will be made as to what should be done, Sprindžuks explained.
The minister said the Ministry of Environment Protection and Regional Development will look into just how economical Rezekne municipality truly is, whereas the Ministry of Finance could potentially commence a financial stabilisation procedure to help reorganise the budget management processes.

If the decision to initiate a financial stabilisation procedure is made, the minister of finance will appoint a supervisor for the procedure.

Currently none of Latvia’s municipalities are under financial stabilisation procedure.
As reported by Latvijas Radio, Rezekne hopes to save EUR 3 million through various austerity means, lay-offs included.
Rezekne municipal council is currently working on an action plan to improve the financial situation in a long-term perspective. Future lending options will largely depend on it.
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