Municipal Property During the Post-socialist Transition in Slovakia

Abstract

When local governments gain significant new powers, their main concern is the maintenance and expansion of their assets. This has been particularly true among the transition countries of Central and Eastern Europe. Looking at Bratislava, the capital of Slovakia, this paper examines changes which occurred after the collapse of communist rule in 1990. Slovakia underwent four main phases of transition. Each had its impact on local government assets and asset formation. The first was a phase of restitution and de-étatisation, when central government restored properties to local governments when those governments were themselves re-established, often transferring control of formerly state-owned enterprises. This was followed by a phase of asset consolidation. Firms were rationalised, broken up, sold off, or closed down. Assets were inventoried, and some sold to support local spending. A third phase was the establishment of a new, decentralised system of government. Local governments received a dedicated income based on income tax and gained the freedom to impose local taxes and fees. At this time, schools and other public buildings, and surplus facilities, such as army bases, passed into local government hands. The final period, which has recently ended, was again one of consolidation. Transfers of property and other assets took place against a backdrop of rapid economic change. Land buildings often became unexpectedly valuable, forcing local governments to choose between retaining them to generate long-term income or selling them to reduce debt, repair and improve infrastructure, and expand the city’s asset base. Local governments had to become familiar with borrowing practices and learn to manage local debt. Change required new institutions to oversee the management and privatisation process at both the national and local levels and forced local governments to become familiar with the operation of property and debt markets. Local governments had to decide which services should be privatised, which should be run as public-private partnerships, which should remain under municipal control, and which should be run jointly with other local governments. The gradual process of change allowed most Slovak governments to successfully cope with increased powers. However, over the longer term, local governments need to further develop expertise in strategic planning and in asset management to ensure that they have rainy-day reserves and to protect and expand existing asset-derived revenue streams.