Chronicles of decentralization in Kharkiv region: seasonal review (December 2017-February 2018) | Center for Political Analysis “Observatory of Democracy”

Chronicles of decentralization in Kharkiv region: seasonal review (December 2017-February 2018)

The fourth seasonal review closes the annual cycle of the dynamics of decentralization analysis in the Kharkiv region. Last winter has provided a lot of information for the research, and the new material of the Center for Political Analysis “Observatory of Democracy” examines the financial and budgetary indicators, the electoral prospects of the forthcoming elections in the UTC (united territorial community), as well as some other aspects of decentralization that are relevant for the Kharkiv region.

Decentralization for Kharkiv

Usually in the previous seasonal reviews, the main object of the research was the united territorial communities: on the one hand, indeed, due to decentralization the greatest changes could be seen there, but on the other hand, this approach leaves the problem of a little involvement of the population of the region into the reform. In the material “Decentralization in a big city: the political aspect of BPS (body of people self-government) and ACAB (association of co-owners of apartment building)”, we have already attempted to shift the focus of the research to the regional center where the majority of the region’s residents live. In the winter seasonal review we will also start with the subsection on Kharkiv and then we will  proceed to UTC.

Decentralization is designed to increase the resources, power and responsibility of city authorities. However, it is the responsibility’s aspect under the unique one-party majority format for the Ukrainian regional centers in the city council, that caused predicted difficulties. The February accident on heating systems, as a result of which 666 (!) objects of housing and social sphere (among which 605 apartment buildings) of Nemyshlyansky district of Kharkiv were left without heat and hot water, showed the unwillingness of the mayor’s office to take responsibility in crisis situations. Vice-mayor Igor Terekhov stressed that “there will be no hurry with personnel decisions in the mayor’s office”, and the cause of a series of accidents was the deterioration of pipes and frost.

Ten billion UAH will be needed to repair 10% of pipes per year, according to Igor Terekhov, and in this matter the mayor’s office hopes to attract European credit and additional funding from the state budget. And the growth of the city budget should be considered through the prism of such capital expenditures for modernization.

Income

of the city budget

Own revenues Subventions

from the state budget

2018 16,1 billion UAH 64% 36%
2017 13,5 billion UAH 59% 41%

Source: Official site of the Kharkiv City Council

The Kharkiv city budget really increased by 19%, although we should not forget about inflation, which in 2017 was 13.7%. However, there is no direct correlation between the statistical growth of the city budget and the level of well-being of Kharkiv residents. Despite the additional 2.6 billion UAH, in spring the city executive committee has planned another increase in the fare in electric transport (in trams and trolleybuses – up to 4 hryvnia, in the metro – up to 5 hryvnia).

The structure of the revenue and expenditure part of the city budget is interesting. In the revenue part, the rate of the budgets own incomes increased (from 59% to 64%), and this corresponds to the logic of decentralization. If we talk about expenditure, in particular, on the “development budget” (3.8 billion out of 16.1 billion of all expenditures), then the prioritization by the city authorities causes legitimate discontent from the Kharkiv opposition.

Source: the website of the Kharkiv City Council (given in billions) UAH.

The greatest amount of expenses will be directed to the reconstruction of the zoo in the first billion UAH prescribed for “culture” – in 2018 it is about 742 million UAH, and 1.753 billion UAH is required in total to complete the project. This sum is especially impressive in comparison with what the city government put for the repair of heating systems: the main public oppositionist in the city council, Igor Chernyak gives the eloquent comparison: “the budget provides less money for the reconstruction of heating networks than for repairing one toilet in Park Gorky”.

If the Kharkiv parliamentary lobby, which includes many deputies bound personally to Gennady Kernes with their mandate, raise the issue of allocating additional funding from the state budget for the modernization of urban heating systems, they may face with the counterargument prophetically voiced by deputy prime-minister Gennady Zubko back in October 2017 – “first of all is heat supply, and then zoos”.

As for the reputational aspect, the February series of heating systems accidents and traffic collapse due to snowfall may damage the image of the mayor as a “strong manager”, but it would not affect the electoral layout radically. And the stake on the zoo as a personal image project of Igor Terekhov as a possible successor to Gennady Kernes can still play in the local elections of 2020 (especially as an attack to the main image asset of one of the possible opponents – “Feldman Ecopark”).

At the same time, the problem of heating systems’ worn out (75% of which need replacing) would become more relevant every winter. And as the events of recent weeks have shown, Kharkiv is absolutely defenseless against the threat of a communal catastrophe, like in Alchevsk in 2006, and from the point of view of the logic of decentralization – these are exclusively our problems…

As for the positive aspects associated with the strengthening of the role of the Kharkiv community in self-government, the implementation of the “Participation Budget” program in the city, for which 50 million UAH are allocated in 2018, should be noted. At the moment, voting for the members of the working group on the specially created website “Kharkiv resident Portal” is taking place. So far, the activity of Kharkiv resident is quite low – for the majority of candidates only a few votes have been submitted. An active role in the implementation of the project is played by the Youth Council under the Kharkiv city mayor: the mayor’s strategy “if you can’t beat them, lead them” seems to be logical and working.

Financial sustainability of the communities

The trend of statistical growth is typical for the budgets of the united territorial communities of the Kharkiv region. At the moment 12 UTCs of Kharkiv region have already switched to direct relationships with the state budget of Ukraine, due to which their incomes have increased substantially. The director of the Kharkiv Center for Local Self-Government Development Diana Barinova reported that on average the UTC budgets that switched to direct relationships with the state budget have increased in 3 times.

For example, we can consider one of the seven communities, where the first election was held on October 26, 2017 – Malodanylivska UTC. After the merger with Cherkassy Lozova and the transition to direct relationships with the state budget, the amount of the community’s budget has increased from 15.2 to 72.9 million UAH, while own incomes has increased from 11.6 to 41.1 million.

Own (2017) Total (2017) Own (2018) Total (2018)
Malodanylivska 11,6 15,2 41,1 72,9

Source: Malodanylivska UTC website

Prospects for the further growth of own revenues of the Kharkiv region UTCs are also connected with the Law №3038 on “decentralization of oil and gas rents” that entered into force on January 1, 2018 – according to the estimation of the head of the regional council Sergei Chernov, this law would bring 465 million UAH to local budgets of the region this year.

As for the four UTCs of the Kharkiv region, which have switched to direct relationships with the state budget since 2017, they also continue to have a tendency to raise income, which, however, does not guarantee positive changes for local residents.

An illustrative situation has developed in the Merefianska UTC: on the one hand, in the budget for 2018 a record amount of revenues is planned: it is 138 million UAH (in 2017 the revenue part was 103 million UAH). On the other hand, local residents had to defend their right to special reduced fare in public transport for several weeks of protest actions and negotiations with the mayoralty.

The opposite side of decentralization – in the state budget of Ukraine in 2018, there are no subventions for local budgets to compensate fares of “beneficiaries”. And if the mayors in Kharkiv and Merefa still have decided to meet “beneficiaries”, then, for example, in the Lviv region, pensioners lost the right for free fare in urban and intercity buses.

Merefianska, Chkalovska, Roganska and Starosaltivska UTCs as emerged before the beginning of 2017 were included in the final “rating of financial sustainability of the communities” prepared by the Ministry of Regional Development, Construction and Housing of Ukraine. As in previous ratings, only one united community of the region (Roganska) took the place in the first hundred (in total, the financial sustainability of 366 UTCs of Ukraine is estimated).

Assessment of financial sustainability of UTC of Kharkov region for 2017

 

Position

 

UTC

Own income per 1 resident (UAH) % basic / reverse subsidies Capital expenditures per 1 resident. (UAH, without subventions) % of expenses for maintenance of the management apparatus in own revenues

 

38 Roganska 3770 -7,3% 1313 14,5%
144 Starosaltivska 3274 8,7% 1446 25,8%
182 Merefanska 2429 6,1% 670 14,9%
189 Chkalovska 2502 3,2% 1141 29,1%

* negative values ​​in the subsidization column mean that the local budget falls under the “reverse subsidy” as a mechanism of “horizontal alignment”, i.e. gives part of its own income, and does not receive additional funds.

Source: website of the Ministry of Regional Development, Construction and Housing of Ukraine

Compared with the November rating, Starosaltivska UTC has improved its positions (by 15 positions) only, while Chkalovska UTC has dropped by 4 lines, Roganska UTC – by 6, and Merefianska UTC – by 81 (!).

New communities – new elections

16 united territorial communities have been created in the Kharkiv region so far, in 12 of which the first elections have been already held. In total, according to the Prospective plan for the formation of the community territories of the Kharkiv region, the formation of 58 UTCs is planned. Consequently, the Plan has been completed at 27.6% so far.

However, two remarks should be made here. Firstly, this is more likely a formal indicator, the importance of which should not be exaggerated. For example, once bill №6466 is adopted in the second reading, in which the regional cities are equated with UTC, this percentage would increase significantly automatically (and the population involvement would increase much more). Secondly, the percentage of implementation of the Plan, which is often operated by experts, does not automatically correspond to the same Plan: in many cases, instead of planned merging of several (5-7) communities, there is a “tax optimization” for the “center” by joining only one village council.

Since the majority of the population is concentrated in the “center” of the community, such UTCs are given a status of wealthy, however, more and more “white spots” remain in the region de facto. In the long term, non-aligned communities could become part of the UTC, but in practice such merging post factum is rare, and just one case was recorded in the Kharkiv region (Grakovsky Village Council decided to join the Chkalovska UTC).

Anyway, according to the results of the February monitoring of the formation of UTC from the Ministry of Regional Development, the Kharkiv region has risen to the 13th place, although some elements of the evaluation methodology look ambiguous. In particular, we are talking about two criteria, according to which the Kharkiv region has the 1st and 2nd places; they are “the number of UTCs with a population of less than 5 thousand people” and “% of the area covered by the perspective plan”.

For example, according to the first criterion, a region in which no UTC was created would be a leader, since UTC with a population of less than 5 thousand is also not created in it. But it would be absurd to encourage such a region for passivity, raising its cumulative rating. The second characteristic is weakly correlated with the actual formation of UTC and just evaluates what is prescribed on paper, and not implemented. It would be more logical to replace it with the criterion “percentage of accordance to the plan”, which would evaluate the correspondence of the number of subjects (councils) participating in the merging according to the plan.

Source: website of the Ministry of Regional Development, Construction and Housing of Ukraine

As for newly formed UTC in Kharkiv region, the first elections will be held there on April 29.

UTC Population United councils Acting head Year of the 1st election of the head
Pesochinska

(Kharkiv district)

21 079 2

(+Berezovsky)

Oleg Chernobay 2015
Velikoburlutska

(Velikoburlutskyi district)

9 140 2

(+ Gnylitskiy Pervyi)

Victor Tereshchenko 2015
Tsirkunivska

(Kharkiv district)

9 102 2

(+ Russko-Tyshkivskyi)

Nikolay Sikalenko 2015
Staroverovska

(Novovodolazhskiy district)

5 952 3

(+ Karavanskyi

+ Melikhovskyi)

Nikolay Bindus 2006

Source: data from the CEC and the Portal of the united communities

The first thing we should pay attention to is the minimum number of united councils. In three of four cases, only two councils are merged, whereas the Prospective Plan has provided much more numbers (in particular, in the Velikoburlutskyi district, the merging was planned according to the principle “1 district – 1 community”). As a result, tax preferences for “UTC in miniature” would be received, but the problem with refused localities (mainly because of the personal ambitions of village heads) remains open.

The second interesting aspect is that three of the four acting heads of the “central” localities were elected just in 2015 in the first time (it is unusual for Kharkiv region). With a high degree of probability, the acting heads will be co-opted into the team of the “BPP “Solidarity” as in the elections that were held in October 2017.

The greatest interest among Kharkiv residents is likely to be caused by the elections in the Pesochinska community, which is close to the city territorially. The current village head, Oleg Chernobay, was elected for the first time in 2015, gaining 4156 (56%) of votes (the nearest opponent – 29.7%).

Oleg Chernobay came from the law enforcement sphere to politics. He started his career in the Kharkov district police department. However, it is difficult to call Oleg Chernoby as a “new face” in the Pesochin politics. He is rather a continuation of the administrative dynasty: his father, Alexander Chernobay, held a position as the village head for over 30 years, and since 2006 Oleg Chernobay had headed the budget commission in Pesochinsky village council, and then was a deputy mayor.

Chernobay family in Pesochin has its own business – in particular, they own the supermarket “ATB”, built on the site of the former hospital. The senior partner of the Chernobav family is Emil Ter-Stepanyan, the president of “KDSK” (the firm that built with apartment buildings the Pesochin microdistrict Mobile), and the deputy of the region council of the VI convening. A number of land areas near the Uda river and the places where further building is planned are also owned by the Chernobav family.

In 2015, the Chernobays were co-opted into the new party of power (not the first for them): it is illustrative that just Olexander Chernobay in the “subject of nomination” column has “Solidarity” out of the 26 deputies of the Pesochinsky village council, and rest of the deputies are self-nominees there.

Peter Poroshenko came personally to open the school in Pesochin on September 1, 2017, and in January 2018 in Pesochin a new sports complex was opened that was built for the money of the state (!) budget. In the village there are no problems with the street lighting and the asphalt roads, therefore there are not so many local hypothetical topics for oppositionists – the problem with the buses going to Mobile and the lack of places in the kindergarten.

The backbone of the civil opposition is made up of community members from the “Alternative” organization that cooperated with the party “Samopomich” in the local elections in 2015. Objectively, their chances to destroy the monopoly of the Chernobay family in the upcoming elections seem to be minimal, because of the opening of the school and sports complex, the acting head can feel quite confident.

Representatives of the regional authorities often try to present “Pesochin case” and its infrastructural successes as “a showcase of decentralization”. Probably, it would be correct if new projects in the community have been implemented in the own budget, and therefore it could rather be an illustration to the electoral strategy of the “BPP “Solidarity” and the President for 2019. It is the patronage network, where lower-level linkage are such village heads with high support and financial injections into their villages, would have to provide the desired result in 2019.

Conclusions

  1. Decentralization opens up new opportunities for territorial communities, the potential of which has not been exhausted yet. The tendency to budgets increase is maintained both at the level of the region / Kharkiv (the city budget increased by 19%, to 16.1 billion UAH), and at the level of UTC (on average growth in 3 times). Due to the recent decision by the government to transfer to the united communities the land outside the localities, the UTC of the Kharkiv region will have access to the disposal of land by October. According to experts, this will increase budget revenues by ~ 25%. Among the first communities, which have been given the opportunity to dispose the land outside the localities, there is a representative of the Kharkov region – Natalinska UTC.
  2. Due to these new opportunities, in Kharkiv region in 2017 more than 500 infrastructure projects were implemented – and they are localized both by the territory of the UTC and other localities. The last example is the completion of a long-term building of the pool in Lozova. Probably, the implementation of such projects predetermines the positive dynamics of citizens’ attitude towards decentralization: according to the Kyiv International Institute of Sociology, among the respondents in Eastern Ukraine, 60% felt the changes for the better as a result of decentralization in their communities.
  3. It is interesting that the support of decentralization is weakly correlated with the ratings of the central government (in the Kharkiv region, according to the “Rating”, Petro Poroshenko has the lowest result among all regions, and the rating is 4%), but strengthens the positions of local leaders. As a result, central and local authorities make a kind of deal – “resources” in exchange for “loyalty”, and the patron-client network of the incumbent President grows to the low level of village heads. In the context of the elections to the UTC, a new series of which will be held on April 29 and will affect 4 communities of the Kharkiv region (Pesochinska, Velikoburlutska, Tsirkunivska, Starovirivska), this means the necessity for the acting heads to represent the “BPP “Solidarity” formally and actually. In the context of the electoral strategies of 2019, the imbalance between the popularity of central and local authorities put such a model as “identification effect”, in which the President is interested in including local leaders in local ratings (and not vice versa, as happens, for example, in Russia).
  4. In terms of the pace of formation of sustainable UTC, according to the February monitoring of the Ministry of Regional Development, Construction and Housing of Ukraine, the Kharkiv region has reached the 13th place among the regions of Ukraine. At the moment there are 16 united communities in the region, 12 of which are already in the direct relationships with the state budget. Prospective Plan provides for the formation of 58 UTCs in total. However, in addition to the percentage of implementation of the plan for the UTC creating (27.6%), attention should be paid to the contours matching of the formed communities to the Plan. For the Kharkiv region, the formation of the UTC by the “1+1” principle is symptomatic: one village council merges with the center of a potential association, so a tax optimization takes place just for the “center”. Perhaps the potential of the voluntary merging format is exhausting itself, because it is necessary for local heads to become part of the President’s team. Many representatives prefer to refrain from the alliance and wait for the results of the presidential election in 2019.
  5. Traditionally, the hardest season for local authorities – winter – has shown that decentralization has a downside: a new responsibility is added to new resources, powers, and opportunities. The expenses of higher education institutions of the I-II level of accreditation (vocational schools, colleges), to compensate the fares of a beneficiaries and some other points, which will grow with each year have already been transferred to local budgets. For example, it is illustrative that the educational subvention from the state budget (1.1 billion UAH) covers 35% of Kharkiv’s expenditures on this sphere only. Decentralization is not just about the growth of budgets and the “cutting ribbons”, but also an increase in the requirements for an effective and rational choice of local policy priorities. Accordingly, there is a growing demand for civilian control over the development and implementation of local policies. Passivity in this matter threatens: at the present time in the Kharkiv budget priorities are arranged in such way that in a few years in winter at the zoo long lines wishing to warm up in the “Kingdom of elephants” or at least in the “House of Penguins” may appear…

Anton Avksentiev, PhD in Political Science

Center for Political Analysis “Observatory of Democracy”

Published on the website “Newsroom”

The paper was prepared with the support of the European Endowment for Democracy (EED). The content of the publication does not necessarily reflect the views of the EED and is the sole responsibility of Center for Political Analysis “Observatory of Democracy”.