The Package for medium-sized cities is one of strategic projects as part of the Strategy for Responsible Development. It aims to recover the potential of medium-sized cities which are losing their social and economic functions and to strengthen their role as important hubs of social and economic activity. This is to foster more sustainable development of our country. The Package was among others to aid local and external companies which planned to move their business to medium-sized cities and thus make the cities more attractive for business. The Package for medium-sized cities covers cities of more than 20 thousand inhabitants and cities of over 15 thousand inhabitants which are the seats of districts, except for provincial cities – now 255 locations.
The Package assumed a range of measures for medium-sized cities, such as:
- support of companies’ innovative projects,
- making medium-sized cities more attractive for potential investors in terms of investments,
- improvement of the quality of human capital and stimulation of local economic and social initiatives and housing,
- support of local government development initiatives based on principles offered as part of national programmes and capital instruments of the Polish Development Fund.
A lot of money was earmarked for the Package implementation, e.g. from the EU funds, other foreign support sources, state budget funds and own funds of the Industrial Development Agency. Two phases of the Package implementation have been assumed - the first one in 2017-2023 and the second one starting in 2020.
Key audit findings
Performance indicators for the Package objectives were achieved but they referred only to preferences for medium-sized cities and beneficiaries from their areas in the access to funds, tools and instruments helping them achieve their development goals. Those preferences helped increase the number of investments in medium-sized cities and the value of EU-funded projects. However, the EU funds were used to a little extent to implement innovations (only 34% funds were used by the Polish Agency for Enterprise Development). The reason was that the entrepreneurs from medium-sized cities had little interest in this type of support.
The NIK audit covered six of nine initiatives. Three of them were accomplished and six were in progress.
Medium-sized cities in European Funds
As part of that initiative, nearly PLN 3.5 billion was planned to support beneficiaries from medium-sized cities and neighbouring communes. Less than PLN 1.5 billion was spent, which makes about 42% of that amount. The primary reason why the funds were not used was that entrepreneurs from medium-sized cities had little interest in research and development projects. The data shows that the financial aid as part of this Package initiative may not be fully used.
Pre-investment meetings of Polish Development Fund and Local Government Investment Fund
The objective was achieved. It was to increase the share of medium-sized cities in the Local Government Investment Fund (LGIF) managed by the Polish Development Fund (PDF). All medium-sized cities were invited to present one or two investments to be covered by PDF expert analysis in terms of various financing possibilities. 147 cities declared 270 investments. All cities could meet with PDF experts. As of 31 October 2020, five agreements on PDF’s purchase of shares in communal companies were signed, which helped the cities acquire funds for investments.
New Zone Policy – Polish Investment Zone (PIZ)
The Act of 10 May 2018 on support for new investments changed the existing principles of aiding entrepreneurs by offering them tax reliefs for new investments in 2018. As part of the New Zone Policy (the so-called Polish Investment Zone) tax exemptions are available Poland-wide and require meeting relevant qualitative and quantitative criteria. Preferences related to 122 cities losing their social and economic functions were introduced. The PIZ initiative was undertaken among others by the Industrial Development Agency. Out of 109 entrepreneurs participating in the Polish Investment Zone on two special economic zones managed by that Agency, 35 entrepreneurs implemented projects under the Act on support for new investments (in 18 cities selected for support as part of the Package).
Development of the sector of modern business services in medium-sized cities
The initiative was fully implemented. Based on recommendations from the report on the investment potential of medium-sized cities, developed by the Association of Business Service Leaders, financed from the POWER funds as part of the Package, aid was provided to 33 State Higher Vocational Schools for education programmes tailored to the needs of the labour market.
Programme “Factory”
The main objective of the Programme “Factory” implemented by the Industrial Development Agency was to activate the potential of medium-sized cities losing their social and economic functions by ensuring development conditions for companies from the sector of modern business services. Meetings were held with authorities of previously selected 38 of 122 cities losing their social and economic functions. Letters of intent were signed with six cities which were the most promising in terms of quick onset of investments. Joint investments, involving the construction of office and services complexes, were started at the end of 2019 only with two cities. The progress of those investments until the end of the audit was small.
Programme “Industria”
Until the end of the audit in December 2020, although three years passed from the launch of the Package for medium-sized companies, the Industrial Development Agency did not adopt Programme “Industria” for implementation which NIK evaluated negatively. In line with the Agency’s explanations, the reason was the COVID-19 epidemic and the Agency’s involvement in efforts to counteract the COVID-19 consequences. NIK points out that the Agency started works on Programme “Industria” only in 2019, although the Package for medium-sized companies was being implemented for two years at that time so the delay did not only result from the COVID-19 epidemic. The failure to adopt the Programme means that the Agency does not support investments in selected medium-sized cities.
Partnership Initiative of Cities
In case of that initiative the Ministry’s efforts amounted to promoting potential participation of medium-sized cities in that project among potential beneficiaries. The Partnership Initiative of Cities is a strategic project as part of the Strategy for Responsible Development, separate from the Package for medium-sized cities, and it deals with sustainable development.
Competition “Human Smart Cities”
Projects in medium-sized cities, losing their social and economic functions were given extra points as part of the subsidy competition announced by the Ministry in July 2017 called: “Intelligent cities co-created by their inhabitants”, financed from the funds of the Technical Assistance Operational Programme. In line with the information as of 31 October 2020, agreements for the total EU subsidy amount of nearly PLN 24 million were signed with 14 out of 15 medium-sized citied selected in the competition. By assumption, the projects should be accomplished in 2022.
Programme “Local Development’
On the audit ending date, the evaluation of complete project proposals (2nd phase of the competition) was pending in the Ministry and it was assumed that the cities to be subsidised would be selected in the first quarter 2021. The first phase of the competition was conducted and settled properly. That phase was available for all 255 medium-sized cities. However, 122 cities losing their social and economic functions were given extra points in the content-related evaluation. As many as 212 draft projects from medium-sized cities were filed, of which development concepts from 54 cities were selected for the following phase and 13 cities from the reserve list were indicated. The cities also submitted the so-called Complete Project Proposals on time.
Questionnaire survey of 255 medium-sized cities on the Package support
To obtain information and opinions of presidents and mayors of medium-sized cities concerning the use of the Package aid, NIK addressed an electronic questionnaire to all 255 cities. 215 cities responded. 100 cities declared they used at least one initiative as part of the Package. The remaining 115 medium-sized cities (53%) did not use any form of assistance, mainly because their projects did not qualify for financing or because the support was not tailored to their needs.
Key recommendations
To the Minister of Finance, Funds and Regional Policy to:
- ensure continuation of support for medium-sized cities and consider its expansion in years to come, following consultations with representatives of medium-sized cities;
- provide information on a broad scale about possible support in years to come.
To the President of the Management Board of the Industrial Development Agency to:
- analyse the possibility of speeding up works on the Programme “Industria” aimed to support medium-sized cities.
