Analysis. Public finances. Budget of Kiev Articles.

The first 100 days of the Kyiv Mayor Vitaliy Klytschko were lost for the withdrawal of billions of hryvnias from the shadows – the experts say.

Tuesday, 30 September 2014 336
Despite Klytschko controlled the majority in the Kyiv Council and was appointed as the head of Kyiv City State Administration (KCSA), during his first 100 days he failed to implement any significant changes and Ukraine’s capital continues to suffer from the old problems

During his first 100 days the Kyiv Mayor Vitaliy Klytschko was in no hurry to fulfill the campaign promises. He also failed to set up the priorities, identify the key corruption risks and eventually reverse the critical situation with the revenues to the city budget. Despite Klytschko controlled the majority in the Kyiv Council and was appointed as the head of Kyiv City State Administration (KCSA), during his first 100 days he failed to implement any significant changes and Ukraine’s capital continues to suffer from the old problems. On 30th of September the Open Society Foundation organized the round table discussion titled "100 days of Mayor Vitaliy Klytschko: The Missed Opportunities to Remove Billions from the Shadows." The round table in the news agency “Ukrinform” welcomed the experts, members of local council and civil servants, who tried to understand how to solve these issues.

OSF president Lesya Shevchenko, one of the coordinators of the "Intensive Care Reform Package - Kyiv" initiative, stressed the opportunities available to Klytschko, and suggested various reasons why these had been lost. Shevchenko considers Klytschko’s non-transparent and non-public personnel policy to be his main problem. The heads of KCSA Divisions remained on their positions despite high corruption risks and multiple failures made by the previous Kyiv government. OSF conducted an independent anti-corruption examination of the Kyiv Council draft Regulation. It revealed more than 70 factors of potential corruption.

"The procedural mechanisms for the members of the city council to report on their work to the voters were not specified at all” - said Lesya Shevchenko. – “There are no procedures for accountability and responsibility of the chairpersons and members of the committees of Kyiv City Council".

The revised Kyiv Council Regulation provided no formal procedures for exercising the right of community participation and implementation of the general rule of the local government - the principle of people power. The agenda setting and decision making remain concentrated exclusively within the city government apparatus, its agencies and officials.


Ivan Sikora, the director of the OSF had focused on the key corruption risks that impede the performance indicators of planned revenues to the city budget, and harm the implementation of the "City Reform Roadmap", designed and delivered by the experts of the Foundation to Mayor Klytschko in June 2014 This document was designed to assist the Mayor in creating an effective budget and the anti-corruption policies.

The fact that Vitaliy Klytschko acknowledged the budget losses of land fraud of UAH 50 billion was extremely important, Sikora stated. The normative monetary land valuation was conducted and several public companies were audited. However, as in previous years, city budget revenues still experience a critical failure in the land lease. The land issues, according to Sikora, present the main corruption risks. As of September 1st 2014 the annual plan for revenue from the land lease was made by only 23% and the budget did not get more than UAH 2.8 billion. Last year, the plan was fulfilled by 52.7% and the budget lacked UAH 1.7 billion. The problem is not the increased plans, but the inability of the responsible officials to adequately perform their duties – OSF director stressed. Not a single step to review the relevant programs in land relations and urban development was made. The departments of the KCSA and the utility companies that do not perform the target revenues to the city budget still lack the optimizing. More than 75% of the Kyiv land is now ‘in the shades’.

"By legitimizing PIT one can get another UAH 5-10 billion, - Ivan Sikora added. - For example, UAH 100 million a year in personal income tax could be obtained by formal employment of 24 000 Small Architectural Forms (SAFs) workers".

The expert also considers the lack of the effective steps to control the utility companies output as a significant miscalculation. For example, according to the preliminary estimates, by introducing the proper accounting of passengers and cost optimization in communal enterprise "Kyiv Metro" the authorities could refuse to raise the ticket price and still manage to have zero losses.  

Ivan Sikora believes that the community is ready to help Kyiv Mayor, but he should be open to the community and ready for substantive dialogue. "The success of an athlete depends on the coaching staff. - Sikora added. - Klytschko owns his rank of the highest level of world-class athlete to his coach Fritz Zdunek. Now the city community of experts and activists are his coaching staff, and he should listen to them."

The former deputy chief architect of Kyiv Viktor Gleba spoke on the problems of Kyiv master plan. During his campaign Vitalyi Klytschko promised not to support the Master Plan-2025. Now, however, he is acting opposite. For example, this master plan was used for legalization of the "Bionic Hill" construction.  

"The master plan became a mean of legalization of illegal buildings. - Gleba said. – The developers avoid compensating the damages to the city and the residents. Instead they follow the principle ‘I forget everyone whom I own’. The question is – who benefits from this?"

According to the former official, the compromise between the authorities and the community is necessary. The decisions on the future development of Kyiv should be taken at the district level, as the district represents a complete city of 300 thousand people. A return to decentralization is much in demand.  

Volodymyr Bondarenko, the former Head of the Kyiv City State Administration and the head of the "Batkivschyna" fraction in the City Council, had generally agreed with the OSF and suggested that the city government should listen to them. According to Bondarenko, the personnel policy which does not meet the requirements declared on Maidan, deserves the criticism. In his view, the change of the city management means a return to the district councils. Today, however, everything is done to prevent this.  

The Kyiv Council Secretary Oleksiy Reznikov had noted the achievements of the Kyiv authorities made during the first 100 days. He agreed that although the criticism had its reasons, the new city government is trying to ensure the transparency of its agencies, and compliance with the procedural requirements.

Reznikov stressed the beginning of combat with SAFs and land audit activities. In particular, the Kyiv City Council had prepared the complaints and appeals to the Prosecutor General for recovery of UAH 736 million debt for the lease of land and public property to 132 investors. "I do agree with the previous speakers that the fight against corruption should be the fundamental basis for the Kyiv authorities, - said Reznikov. - It should be noted that this work has already started".

The Chairman of the Budget Committee of Kyiv City Council Andriy Strannikov had added that the City Council suffers not so much from the public pressure, but from the lack of the public control. He said that although the committee meetings are open, rarely the public comes to control its actions and decisions. Strannikov noted that the only non-governmental organization that has established the cooperation with the Committee was the Open Society Foundation. OSF was also the only one to send their proposals. "I invite the OSF to form the Public Council under the Committee, - said Strannikov. - We are ready to provide all necessary information and documents."

"We offer the city authorities to start the public discussion on the 2015 budget for  Kyiv in October, - said Ivan Sikora in conclusion. - It is particularly important to discuss the revenue items: the land, equity contributions, the single tax, legalization of PIT, utility companies, etc. For our part, we are ready to assist and accompany the public initiatives in the budget process. "

The round table was held under the "Open and Transparent Kyiv Budget: A Step towards the Effective Spending of the Public Finances" project, implemented by the Open Society Foundation and supported by the International Renaissance Foundation.

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