C a s e S t u d y

PUBLIC PRIVATE PARTNERSHIPS FOR ECONOMIC DEVELOPMENT

MUNICIPALITY OF GABROVO

1. Summary

The project of the Municipality of Gabrovo had the following goals:

• to encourage private sector growth by using municipal resources;

• to involve private sector members in the development of the municipality by establishing partnerships with the municipality;

• to improve the quality of life by means of developing the private economy, improving public space and infrastructure.

• to encourage review of local ordinances and identify new mechanisms to create public-private partnerships in economic development

2. Problem Statement

Between 1990 and 1998, many of the state-owned and municipally-owned companies within the Municipality of Gabrovo, which provided employment for a lot of citizens, have been or are being privatized, restructured or liquidated. This has imposed the need of finding ways to employ the free workforce by means of establishing conditions encouraging growth in the private sector. Besides that, there is also a need to stimulate the private sector to participate in the economic development of the municipality by providing new jobs and making investments for the improvement of infrastructure and public works.

The project aimed to improve the bidding process for municipal lots. To solve this problem, it was necessary to unify the efforts of citizens, business people, NGOs, and representatives from the City of Portage who have a great experience in this area.

3. Project Description

The project includes the sale of municipal lots for commercial and industrial purposes, based on certain evaluation criteria for the bids. In this case, a model for establishing public-private partnerships had to be developed to be used in the future development of the municipality.

Four lots were identified for the purposes of the project, a title survey was conducted, as well as a survey of existing communications, infrastructure, town-planning indicators, and summarized information was prepared for each of the lots.

During the visit of the Gabrovo experts to the City of Portage, the experience of the American partners was shared and the practice of having pre-bidding meetings with potential investors was adopted. The meetings are aimed at providing publicity and receiving feedback. The pre-bid meeting is considered essential to facilitate the exchange of information and receipt of suggestions on the bid documents and bid process.

Bidding documents had to be prepared in order to have a pre-bidding meeting. The expert teams from Gabrovo and Portage developed the specifications independently and simultaneously. During the work visit to Gabrovo, the experts compared the two sets of bidding documents. After changing them so as to be consistent with Bulgarian legislation and with local ordinances, the final bidding documents were prepared and included the actual contract to be executed by the successful bidder.

The bids for the sale of municipal lots were announced in the local media, at the Municipal Information Center of the Municipality of Gabrovo, through contacts with NGOs, the Gabrovo Chamber of Commerce and Industry, the Union of Private Entrepreneurs and Craftsmen in Gabrovo, the Gabrovo branch of Bulgarian Industrial Association.

The bids were held on July 27, August 2-3 and August 31, 1999. Many private companies were interested and involved and made commitments to create new jobs and to provide investments.

4. Implementation Timeline

The project of developing a model for establishing public-private partnerships was implemented between February and August, 1999, and included:

February:

Evaluation of lots and preparation of preliminary specifications /sketches/, zoning, size, existing infrastructure, etc.

March:

An expert group from Gabrovo visited Portage to study the Portage experience.

April - May:

Bidding specifications were developed and the pre-bidding meeting was announced in the local media.

June:

The pre-bidding meeting with private investors was held in the presence of the experts from Portage. The final bidding documents were prepared.

July:

The bids were announced and bidding documents were sent to private investors.

July - August:

The bids were opened and the title on lots transferred.

The experience in establishing public-private partnerships will be used by the Municipality of Gabrovo in the long run.

5. Solutions Overview and Specific Results

A change in private investors activity occurred as a result of the project. The increased interest in the lots offered for sale made buyers to make greater commitments to provide investments, improve the infrastructure of Municipality of Gabrovo and create new jobs.

As a result of the bids held, the Municipality of Gabrovo signed contracts with Inex Ltd., ET Radema, and ET Slavi Georgiev to establish a cardboard items production, a cafe, 2 shops and kiosks. Lots were sold at the total price of BGN 81, 000 when the initially fixed price was BGN 27,365. The new owners are committed to open 46 new jobs and to make investments in the municipal infrastructure to the amount of BGN 11,000.

6. Benefits

The benefits from the project can be defined as follows:

• a working model of establishing public-private partnerships was developed;

• new jobs were created and investments in infrastructure were provided;

• additional tax revenue for the municipality;

• the lessons learned will be used in the future and the long-term impact is still to be evaluated.

7. Conclusion

In conclusion, we need to state that a project for public-private partnership was implemented with the joint efforts of the Municipality of Gabrovo and the City of Portage, Michigan, USA, and that the results were extremely positive.

We are convinced that the established interaction with private investors, as well as the approaches and practices used in the process, are a successful model for stimulating the economy of the Municipality of Gabrovo.