At the beginning of 2016 and after the initial success and the first results of the European City Economic and Financial Governance (CEFG) Group, this strategic partnership between CEOs/CFOs and Directors of Finance of European local governments was enlarged. Amsterdam (NL), Bordeaux (FR) and Vilnius (LT) were added as members of the group, the founders of which are Barcelona (ES), Dublin (IE), Hamburg (DE), the City of London (UK) and Milan (IT). The uniqueness of this high-level network consists in the fact that it is the first time that fiscal and financial management issues are discussed from a cross-border perspective at city level. It is a timely initiative as public sector financial and accounting practices are still highly fragmented within the European Union and even within many of the individual Member States. As it coincides with the efforts to formulate the European System of Accounts (ESA) and the European Public Sector Accounting Standards (EPSAS) and to implement them across the EU, it is officially recognised by the European Commission – Eurostat.
This initiative is chaired and managed by the European Institute of Public Administration’s antenna in Barcelona (EIPA Barcelona), drawing from its vast network of external experts from both the practitioner and academic field.
With the opening of the fifth group meeting, which was hosted by the City of Amsterdam (NL) on 21-22 April and embedded in events around the Netherlands EU Presidency, Udo Kock, the Alderperson for Finance and Water Management of the City of Amsterdam, encouraged the CEFG Group partners to continue asking tough questions in order to drive their cities forward. “The exchange in international networks and sharing of experiences and best practices across borders as in this partnership is a crucial element, which helps to overcome one of the biggest challenges of CFOs, which is (often) isolation from the real life,” he emphasised.
By discussing the burning topic of “Financing infrastructure and public-private partnerships (PPPs)” from an academic and also practical point of view in the course of two days, the eight city partners fulfilled one of their objectives: to contribute to European capacity building in the economic and financial field at city level. Issues in relation to the prioritised type of infrastructure of each city, how to face and overcome the challenges in relation to financial sustainability, different formulas for risk-sharing and financial (management) instruments as well as how to deal with the maintenance of infrastructure were debated.
Major findings were that public transportation and social housing are currently the most common priorities for local infrastructure projects. The extension of existing metro lines in the City of Milan via the construction of the two new lines M4 and M5 is as example of this. The new metro lines were built with the help of two different PPPs. Starting the partnership for M4 later than that of M5 allowed the City of Milan to bring in valuable lessons learnt for the new contract, such as a framework which is based on joint ownership of the concessionaire (2/3 owned by the city and 1/3 by the private sector) for increased transparency and control over the project.
Furthermore, it was interesting to see that some of the cities followed a mono-strategy for ensuring the financial sustainability of their infrastructure projects, while others opted for a multi-strategy. The majority of the eight cities used analyses of future scenarios, risk, impact on debt and self-financing to take the sustainability of their infrastructure projects into account.
Regarding the mode of financing infrastructure, the majority of the eight cities covers their infrastructure projects through state grants/subsidies, bonds or debt and PPPs. In view of the latter, it was stressed that PPPs should be understood as a broad strategic decision as they concern long lasting relationships with private partners, where reciprocal reliability is key. They represent formulas to increase public value. Examples are the construction of the new football stadium Matmut Atlantique of Bordeaux (which will also be used for the UEFA EURO 2016), the new sea lock in Amsterdam or the Guildhall School of Music and Drama in the City of London.
To round up the 5th CEFG Group meeting, all members were invited to visit The Wall and the FabCity that are part of the “Europe by People” programme of the Netherlands Presidency and to attend the Mayors’ Dialogue between Amsterdam’s Mayor Eberhard van der Laan and Athens’ Mayor Giorgos Kaminis. During this debate, the current refugee crisis was at the centre of an animated discussion. It became evident that the sustainability of public sector finances does not only guarantee Europe’s competitiveness, but also allows to support the wellbeing of those in need.
EIPA’s (Co)-Chair of the CEFG Group, Mr Alexander Heichlinger, was very satisfied with the open and dynamic discussions between the cities in this meeting. Furthermore, he pointed out how important it is to continue this journey for another two years by showcasing strong local experiences both to other cities as well as to European policy-makers.
Ms Julia Bosse
Research Assistant, EIPA Barcelona