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Municipal Contractual Loan
Municipality of Svishtov
Background
The existing water-supply network on the territory of the Municipality of Svishtov is very old and worn-out. The loss of drinking water is up to 50%. Due to earthquake activity in the 70ies and the 80ies, some of the sewers of the water network are damaged and there is a leakage of waste water together with drinking water. This leads to an activation of the landslip and thus jeopardizes the existing residential fund.
The idea of taking advantage of a contractual loan for financing and improvement of the infrastructure is generated after a study tour in the USA, connected with a program of the LGI, USAID.
The existing water-supply network on the territory of the Municipality of Svishtov is very old and worn-out. The loss of drinking water is up to 50%. Due to earthquake activity in the 70ies and the 80ies, some of the sewers of the water network are damaged and there is a leakage of waste water together with drinking water. This leads to an activation of the landslip and thus jeopardizes the existing residential fund.
The idea of taking advantage of a contractual loan for financing and improvement of the infrastructure is generated after a study tour in the USA, connected with a program of the LGI, USAID.
Practice
The decision making process passes through several stages:
- The Municipal Administration confides the Unity Invest mediator the preparation of a financial report, demonstrating the real possibilities of the Municipality to be the emitter of a contractual loan.
- The report of the investment mediator is submitter for approval and discussion at a regular session of the Municipal Council; after detailed consideration the Municipal Council decides to start the implementation of the project.
- After 5 months of steady work of the municipal financial and economic departments, the final project is submitted to the Municipal Councilors.
After discussion in the commissions, the project is approved at an official session of the Municipal Council and signed by all councilors present.
The project for the modernization and reconstruction of the water-supply network aims to:
- Increase the quantity of the extracted and sold water, respectively;
- Improve the quality of the drinking water;
- Reduce the specific expenditures for electricity;
- Maximize the consideration of geological and geographic conditions;
- Reduce the loss of drinking water throughout the network.
The contractual loan will be used for the renovation of the water network, which was built more than 50 years ago. The solution of the problem will affect not only the social but the economic prosperity of the community, as well as reduce the leakage of the water-supply network. According to the Municipal Administration the contractual loan will be an instrument for alternative financing of the Municipality.
The expected environmental effect is reducing the amount of water loss. The expected social effects are:
- Ensuring sufficient quantities of water for the needs of the population;
- Reducing the loss of drinking water;
- Reducing the prime cost of supplied water.
The decision making process passes through several stages:
- The Municipal Administration confides the Unity Invest mediator the preparation of a financial report, demonstrating the real possibilities of the Municipality to be the emitter of a contractual loan.
- The report of the investment mediator is submitter for approval and discussion at a regular session of the Municipal Council; after detailed consideration the Municipal Council decides to start the implementation of the project.
- After 5 months of steady work of the municipal financial and economic departments, the final project is submitted to the Municipal Councilors.
After discussion in the commissions, the project is approved at an official session of the Municipal Council and signed by all councilors present.
The project for the modernization and reconstruction of the water-supply network aims to:
- Increase the quantity of the extracted and sold water, respectively;
- Improve the quality of the drinking water;
- Reduce the specific expenditures for electricity;
- Maximize the consideration of geological and geographic conditions;
- Reduce the loss of drinking water throughout the network.
The contractual loan will be used for the renovation of the water network, which was built more than 50 years ago. The solution of the problem will affect not only the social but the economic prosperity of the community, as well as reduce the leakage of the water-supply network. According to the Municipal Administration the contractual loan will be an instrument for alternative financing of the Municipality.
The expected environmental effect is reducing the amount of water loss. The expected social effects are:
- Ensuring sufficient quantities of water for the needs of the population;
- Reducing the loss of drinking water;
- Reducing the prime cost of supplied water.
Results
In June 1999 the first contractual loan, proposed by the Municipality of Svishtov, was approved by the Stocks and Stock Funds Committee. 100 000 stocks amounting to 1 billion leva will be released and the citizens will be able to buy them at 10 500 leva each. The money will be regained for a 7-year period at 3% annual interest over the basic interest percentage. During the first two years only interest will be paid.
In June 1999 the first contractual loan, proposed by the Municipality of Svishtov, was approved by the Stocks and Stock Funds Committee. 100 000 stocks amounting to 1 billion leva will be released and the citizens will be able to buy them at 10 500 leva each. The money will be regained for a 7-year period at 3% annual interest over the basic interest percentage. During the first two years only interest will be paid.
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