Funding is of the key questions about the future of raion or county councils. The revenues from leasing out water bodies and objects is one short answer so far, unless norms on alternative sources are passed by July 2021 when county councils will have to complete the transfer of property to territorial hromadas. The key task of county councils — to organize the transfer of property to the new hromadas — does not look easy though.

Amidst the lack of clarity about their property and future, county council deputies in the rearranged counties in Vinnytsia Oblast have tried to transfer the property to hromadas at the end of their term in violation of the procedures. This happened in former Koziatyn County that is now part of the newly established Khmilnyk County. The county council deputies voted to hand over a sports center in Koziatyn to the Hlukhivtsi hromada which has no link to Koziatyn whatsoever. 

“The easiest way to return the property is for the deputies of the Khmilnyk County Council to abolish the decision of the Koziatyn Council as such that contradicts the law,” says Andriy Kavunets, chair of the Hromady Vinnychyny Resource and Information Center, an NGO. “Otherwise, it should be taken to court. It’s that anything that used to be funded with the county budget was accounted as part of the common local public property. That drove the decision of the deputies of the former county council: ‘If this is common property, it can belong to any hromada within the former county.’”

Under the law, all property of county councils should go to the hromadas on which territory it is located. In theory, this geographic factor simplifies the transfer procedure. There should be no controversies around it, but some do come up. 

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“Koziatyn hromada refuses to take over the whole sports center and the sports school and put them on its balance sheet. They only want the premises, but not the staff,” says Yuriy Slabchuk, head of the newly elected Khmilnyk County Council. “Although the law says that the legal entity is transferred, and that includes both the premises and the employees that have employment contracts with it. The Hlukhivtsi hromada has not yet decided on taking over the sports center. So, everything is hanging in the air. We are talking to them and I hope that we will manage to solve all this.” 

This is not the only source of conflict. According to Slabchuk, Koziatyn hromada does not want to take over the Culture Club, the territorial center and the library and put them on its balance sheet either. All this is in just one part of a newly created county. Soon enough, communities all over Ukraine will face similar processes around transfer of property. 

“I think that the problem is the overlap of many structural units. The town of Koziatyn had its agencies, and now the agencies of the county are handed over to it too. So far, we have no solution to this. Khmilnyk and Kalynivka shouldn’t have any problems with property transfer, while Koziatyn does have problems. We will have to take difficult decisions, make cuts, etc.,” Slabchuk comments. 

It is unclear what can be done with the property that used to be on the balance sheets of county councils, that territorial hromadas do not want. The law only says that county councils have to take it off their balance sheets and hromadas should accept it. How much property will end up hanging in the air after county councils get rid of it and hromadas refuse to take it on is also an open question. The only solution until legislators deal with this gap is to shut that property down. Meanwhile, even the property that hromadas will get to own may have to be shut down too, even if it turns into neglected objects eventually. 

On the other hand, both current and former county capitals benefit from this as they will end up with most property. The problem is that, in addition to the property that can be appealing as investment objects, they end up with county hospitals. 

“Hospital maintenance was funded from county budgets before, but it is now out of this balancing system,” Andriy Kavunets says. “The National Health Service of Ukraine only covers medical services, and who will pay for the maintenance, utilities and so on? There is no clear answer as to what county hospitals should do.”

He sees two options for them: one hromada taking on the expenses, or several hromadas sharing the cost in municipal cooperation. “If the hospital is good and provides a lot of services, the hromada can even make money on it,” he comments. “You have to invest into hospitals sometimes, buy equipment, repair them, etc. Take Khmilnyk. Does it need a county hospital? It’s unclear. You should look at the numbers: how many beds it has, what services it provides, how much demand there is for the hospital and so on. For example, Voznesensk in Mykolayiv Oblast took a few years to figure out whether it needed a county hospital. They decided that they needed one and invested in it, winning a grant to insulate, reequip and repair it. Those who did not think about this or had no opportunity to do the same have a problem now.” 

Apart from that, the network of hub hospitals does not match the number of counties as there are 11 hospitals per six counties. The newly enlarged Khmilnyk County has three hub hospitals now.

“This is too much for our county unless the central or oblast government funds the hub hospitals,” Yuriy Slabchuk thinks.

By contrast, Kavunets points out that hub hospitals are better equipped to earn income as they provide more services and do COVID-19 treatment.

Some hromadas do not understand why they should fund a hospital that used to service the entire former county.“Take the county hospital in Zhmerynka. When it was a county, it covered what is now three new hromadas — of Zhmerynka, Stanislavchyk and Severynivka,” says Yevheniy Shapovalov, decentralization expert and deputy at the Vinnystia Oblast Council. “The county hospital goes to the balance sheet of Zhmerynka hromada but it provides extraterritorial healthcare and the services are paid for by the National Health Service of Ukraine. So people can come to get treatment here all the way from Vinnytsia. That’s how the hospital ends up with more money. Add to this personal income tax from the wages of staff that returns to the hromada. So, the owner is interested in making the hospital flourish. At the same time, the owner is in charge of utilities and all the rest, so the hromada needs to make money to pay for it all.” 

The property that can bring profit generates disputes as well. “Many hromadas are furious that one hromada that used to be a former county capital gets everything that was common property. Every county has its own situation,” Kavunets comments. “For example, a shopping mall in Zhmerynka is owned by the county. If it stays there, they will have a source of revenues to the budget unlike other counties. But this is just one aspect of it. It’s possible hypothetically, but the law does not say whether that property can be leased out.” 

The administrative reform has thus added the issue of property that generates confusion, disputes and misunderstandings. There are no clear answers to all questions that come up. Everyone interprets laws in their own ways. This leads to controversies. County councils complain too that they do not have enough funding to cover wages, let alone pay for the facilities they have on balance sheets now, that have not been transferred to hromadas yet.

“Of course, some people are confused because this is a reform,” says Yevheniy Shapovalov. “From January 1, objects on the territory of hromadas will be funded from their budgets regardless of who owns them. Gradually, procedures will be passed to regulate these relations. There is no reason to worry.”

Shapovalov points out that the hromadas have duties in addition to powers now. It does not always make sense to create new separate agencies for small village hromadas. But the Law on Cooperation of Territorial Hromadas offers them a solution. That is how many hromadas cooperate already, receiving the services of one-stop-shop administrative centers, Security Centers and other agencies in adjacent hromadas. At the same time, the law has imperative norms: county councils must hand over their facilities and property and hromadas must accept them. 

When it comes to the future funding of county councils, there is little clarity on where revenues for their budgets should come from. “It is said that county councils will fill their budgets by leasing out property. But what will they lease out if they don’t own anything?” Andriy Kavunets points out. “What property? Printers and computers? County budgets are now out of the system of budget balancing. So this is an open question. Kyiv thinks that hromadas will help fund county councils but that’s utopia. Just imagine a county council sending a letter and asking for UAH 100,000. Clearly, no one will give them anything.” 

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Yevheniy Shapovalov claims that one source of revenues for county budgets is leasing out water bodies: “Indeed, this will bring little revenue. In addition to the fee for water objects, the revenues can come from concession. This will amount to around UAH 400-500,000.”

Slabchuk believes that this will not even cover wages as all employees of former county councils and county state administrations will continue to work for two months. “They were warned about dismissals, so they will be joining liquidation commissions during these two months and dealing with the transfer of property, etc.” he says. “We should end up with residual funds at the end of the year. But that’s still not enough to cover all financial issues. I believe that all this should be solved at the central level. We have prepared an inquiry on this situation to the national administration.”  
Andriy Kavunets insists that county councils have neither property, nor powers. “Nobody can say clearly what they will do after July 1,” he notes. “What issues will they deal with? So, counties should have been abolished, and that’s it. Their existence for the transition period makes no sense. What functions will county councils perform once their property is handed over to hromadas? There is no answer to this question.” 

In the best-case scenario, the Law on Local Self-Governance will be voted in spring, he adds. It is currently at the stage of intense debates, with countless proposals and working groups convening weekly. When the law is passed, it will ultimately clarify the future of county councils. 

Tetiana Shcherbatiuk, Vinnytsia

Translated by Anna Korbut

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