Reform of Municipal Communal Services Enterprises in Ukraine
Before the Ukrainian city of Kalush finally received assistance to modernize its outdated water supply system, a school child would often not be able to obtain a drink of water between classes at any one of the city’s schools. Patients in local hospitals could not hope to wash up during the morning hours. But most dangerous of all, firefighters had no guarantees that water would be available wherever they went to fight a blaze.
Fortunately, all has changed since USAID invested approximately $150,000 through its implementing partner, Planning and Development Corroborative International, Inc. (PADCO), in Kalush’s communal services enterprises (CSE) to upgrade the city’s water pumping stations. The upgrades ensure a continuous flow of hot and cold water to the first two floors of all buildings in the city, a considerable improvement on preexisting conditions. Prior to the USAID-funded improvements, service was sporadic at best and water was rarely available during the late morning hours.
“The water supply was turned off up to four times a day, which played havoc with our pipes every time pressure fell and then returned,” explained Kalush Mayor Roman Sushko. “We regularly had flooding due to bursting pipes, sometimes ten times within a day.”
Mr. Sushko noted with satisfaction that the next phase of the project would guarantee water availability on a 24-hour basis to up to nine floors of buildings, which would include most all of those found in Kalush, a city of 73,000 residents located not far from the Polish border.
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| CSE employee monitors water flow in new pumping station |
During Soviet times, CSEs in Ukraine traditionally focused on the daily operations of buildings, including providing water, wastewater removal and heat, while the central government was responsible for planning and investment. With the transition to a market economy, CSEs across Ukraine faced similar, daunting challenges: low-performing capital assets, soaring energy costs, tariffs set below cost-recovery levels and inadequate tariff payment collections. Combined, these challenges significantly hindered CSEs’s ability to generate the financial surplus required for rehabilitation of their aging systems.
To improve the delivery of essential communal services to urban residential consumers, PADCO initiated a tariff reform and communal services enterprises restructuring project in 17 pilot CSEs across nine Ukrainian cities, including Kalush and Komsomolsk. CSE staffs participated in the extensive training programs in accounting and financial analysis, tariff calculation, payment collection, technical system management, capital investment planning and public participation. PADCO worked with CSE directors and staff to integrate the results of the training into a comprehensive strategic planning process. With project assistance, each enterprise prepared its own five-year Strategic Action Plan (SAP).
In Komsomolsk, an industrial city of 54,500 located in central Ukraine, city residents along with representatives of the CSEs took part in public hearings and focus groups to develop more transparency in the workings of government and determine community grievances. One of the benefits that resulted was that when new tariff increases were implemented as part of the CSE rehabilitation project, the local citizenry understood why they were needed. They were also aware that they had the right to expect an increase in quality of services as well, which did in fact occur.
“The new tariff system allowed us to invest $150,000 into the development of our CSEs,” explained Komsomolsk Mayor Oleksander Popov, “With the result that revamped water pumping and heating systems have give the city an annual savings of approximately $100,000 in energy costs.”
In general, the USAID/PACDO effort to increase the quality of municipal services in Ukraine has already met with marked success: all 17 CSEs servicing the nine cities involved in the project have submitted cost-recovery tariffs to their respective city councils, eight of which have been approved. Six municipal water supply systems and three heat supply systems have implemented service improvement projects, and four of the cities have created Energy Saving Funds.
Another significant result is the way in which newly-trained city workers now view their relationship with the residents they serve, with a more acute awareness of the need for cooperation.
“The most important outcome seems to be that the attitudes of municipal workers and the representatives of the CSEs has changed considerably,” explained Mayor Popov.
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