Metro, Philharmonic, circuit. Prague wants to build, it asks for money, which the state is reducing
The last large Prague investment, the Blanka tunnel complex, was completed in 2015. Since then, the development of the capital has stalled. Alena Schillerová recently also criticized the excessive passivity of Prague. She reminded that the city has record financial reserves, but described the ruling coalition in the municipality as a “stuck brake” on the development of the metropolis.
According to Pavel Vyhnánek, the deputy mayor for budget and finance (the Prague movement itself), the stagnation of the last years of the previous Prague government – including the last, controlled by Schiller’s co-parties from ANO. “After the previous set, we did not inherit any large ready-made project,” Vyhnánek told SZ Business (an interview in which the deputy describes Prague’s investment plans and the way to finance them, you can start in the video above this article).
Prague is really rich like never before. She was delayed in preparing development plans during her pre-Eve prosperity years, with record surpluses in her accounts. Today, the city has almost 90 billion crowns deposited in banks, to which it had to repay the debt. Although part of the remaining money is reserved for city districts, the metropolis reaches an unprecedented financial reserve.
According to Vyhnánek, however, it is this reserve that enables projects that have changed the face of the city in the coming years. “We need money in the accounts so that we can launch large investment projects in the future. Led by a new metro line, “he said in an interview.
One hundred billion meters
The new line D will be built for another ten years and will cost at least 100 billion crowns. The city has already launched a tender for the supplier of the first section in Pankrác, is carrying out preparatory work and hopes that the actual construction will begin in the previous year.
The new metro is the largest planned investment in Prague, but not the only one. The expulsion that a number of smaller events are still taking place in the metropolis last year alone, the municipality and local town hall invested 20 billion crowns in them. From the two-billion reconstruction of the Industrial Palace at the Prague Exhibition Grounds, through the modernization of Revoluční Street or Wenceslas Square, or, for example, the construction of a new bridge to connect Holešovice with Karlín.
However, there are mainly two other large construction projects on the way, the significance of which exceeds the borders of the metropolis. The first is the completion of the inner city ring road, which still lacks a third to complete. According to Vyhnánek, the remaining almost nine more on the north-eastern border of the wider center will cost tens of billions of crowns. The exact amount is not known, so far the documentation for the zoning procedure is being prepared.
Prague also wants to build a new concert hall for the Czech Philharmonic. The very first public representative building in the metropolises since the fall of the previous regime will cost at least six billion crowns, however, the total costs together with the modifications of the surroundings in Prague’s Holešovice will be higher. The city has promised to announce an architectural competition this year, but only if the funding can be clarified.
In addition, the city’s leadership recently approved two strategic concepts that will reach tens of billions by the end of this decade. Firstly, a housing policy strategy that envisages the construction of thousands of city apartments. And then there is the climate plan for 2030, the total cost of which is estimated at 231 billion crowns. Cover most of the money from development and transformation funds, but Prague itself has to spend at least 1.5 billion crowns a year on its own to reduce emissions and ecology in the next nine years.
Record reserves are not enough
Because according to the heads of the town hall, the record wealth of Prague is only temporary for all these plans. What’s more, councilors say that under the current system of functioning public budgets for the city itself, the city does not have key projects such as the metro or the philharmonic. They therefore ask for the state to contribute to both.
“So far, the state does not want to talk to us about co-financing D-lines, which is wrong,” says Vyhnánek. According to him, co-financing of similar projects in metropolises from the state coffers is “an absolute standard in other countries of Europe and the world”.
“We can’t count on state funds yet. Fortunately, the construction of the subway takes a long time, so we are able to stratify the costs. But if the state needs to build on this construction in a way that does not concern it, and yet it is of national importance, it will mean for Prague residents that there may not be money left for many other investment projects during construction. That would be a pity, Prague is the economic engine of the Czech economy, “says Vyhnánek.
The deputy sees the financing of concert halls in a similar way. “The willingness of the state to co-finance is crucial for me. We are building a building with a nationwide overlap, primarily for the state ensemble – the Czech Philharmonic. It is not acceptable for only the city to pay for it. But I think there is a broad consensus at least at the ministerial level, “said Vyhnánek. According to him, ministerial promises “must be turned into some arrangement of at least symbolic character”. After signing the memorandum, it will be possible to enter the architectural competition.
More from taxes to municipalities
In addition to financial cooperation on large projects, Prague, as well as other cities and municipalities in the country, is pushing for a change in the budget allocation of taxes, a system by which the centrally collected tax revenues are distributed to the giants.
Demands for change intensified at the end of last year. The autumn tax package changed the calculation of employees’ income taxes, the tax was no longer calculated on the super-gross wage, and people are left with more money from their earnings. The tax revenue is lower, which significantly affected the municipality. Although part of the outage was eventually compensated by the state, the capital alone lost about five billion crowns this year. Which is a tangible hit on the $ 88 billion budget.
According to Vyhnánek, however, the whole way of redistribution of tax revenues between the state and the municipality is bad. “No direct share in taxes, in the price that occurs in Prague. We will build an expensive metro and we will have high costs with its operation, but all the added value, all the economic growth it brings, will then be redistributed throughout the Czech Republic, “he says.
According to him, the current form of budget determination of taxes is unsustainable. “The system does not motivate the municipality to economic growth, to try to find out some value. This is unique in the world. I don’t want to blaspheme, but if all the companies moved from Prague from day to day and all the tourists left for another city, I didn’t know it on the income of the capital, “he claims.
Higher real estate tax
According to him, cities would have a higher share of taxation of natural persons and in the future also of companies based on their territory. According to Vyhnánek, another source should be higher real estate taxation.
“Our property tax is really at its lowest level in the world. A higher property tax would unblock development, because if it worked, municipalities could finance their development investments from it. Today, when you invest in the city, take advantage of the value of local real estate, but only the property owner gets the full value. In the recommendation, the city and the holder could share this profit. I think it would be fair, then the cities would invest much more, “said Vyhnánek.
The growth of real estate tax is conditioned by the deputy by reducing the tax burden on labor, which is considered “alpha and omega” of fundamental changes in the tax structure. According to him, the shortfall in the state treasury could be replaced by savings and a better expenditure structure.
However, Prague is already exceeding the real estate tax, at least according to the possibilities allowed by the current law. The current Prague coalition reached an increase in the tax coefficient, which is in the competence of the municipalities, right at the beginning of its government. However, the tax was raised in this way only in those parts of Prague’s city, their mayors were interested in it.
When financing large projects, Prague also counts on the involvement of private capital. According to Vyhnánek, private companies could participate, for example, in the completion of individual metro stations and their surroundings. Another source should be loans or European funds.
More expensive services
At the same time, the municipality wants to get more money from the people of Prague and visitors themselves. Already this summer, public transport tickets will become more expensive. But that’s probably not the last word.
“Today, a third of the current expenditures of the capital city of Prague go to the operation of public transport. Prague has the cheapest public transport in the world and in the national comparison. On the one hand, it is beautiful, on the other hand, the money is missing in education, in social matters, in the environment. The question is whether Prague wants to bear such a high price in the future. If he wants to implement his ambitious projects, he will have to admit that he cannot give a third of the current expenditure only to the operation of public transport. And distribute those costs more fairly, “said Vyhnánek.
Similarly, the city has raised prices for waste collection. “I think that in general, Prague will have to be more responsible for its income. Historically, the cheapest water in Prague was the cheapest waste collection and so on. Earlier, Prague dealt with it by selling property. I think this is the wrong procedure. That it is not sustainable in the long run. Prague should honestly admit that it simply cannot keep some services so cheap, because otherwise we will cut a branch under ourselves, “concludes Pavel Vyhnánek, Prague’s deputy for budget.