Financial mechanisms for local officials

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General situation

Due to limited budgets, municipalities in Bulgaria rely mostly on grants to fund their projects. This applies both to the construction of new buildings and refurbishment and upgrading of existing municipal buildings (mostly kindergartens, schools and cultural infrastructure). Municipalities benefit mainly from programs that have a high co-financing rate, usually between 95% -100%. Such programs are operating, mainly OP "Regional Development" 2007-2013.

Unfortunately, these schemes for financing investment limited energy efficiency measures that can be applied to the minimum requirements of the law in force in Bulgaria for energy efficiency and renewable energy sources. This in turn leads to the application of surfaces refurbishment to existing buildings and unsatisfactory level of energy efficiency in newly constructed buildings.

Introduction and use of flexible financing mechanisms is necessary to ensure efficient utilization of public funds provided in various forms and programs.

Selection of financial scheme

In the selection of financial mechanism is crucial to make a detailed analysis of the project intent - appearance, existing condition, improve or change the functions, exploitation and evaluation of maintenance costs.

The next step is to select the most effective financial mechanism to finance the investment. Analysis is important to allow the contracting authority to determine which option funding would be most appropriate for specific building- whether to look for 100% grant, whether you can use a financing mechanism for low-interest loans that can be a combination of two and more mechanisms, including the deductibles.


Following the analysis made within the project "PassREg", we can identify several possible scenarios for the financing of municipal buildings by simply optimizing the available financial resources.

  • Operational Programmes (funded by the Structural and Cohesion Fund of the European Union (85%) and financed by the national budget (15%))

One of the priorities of the OP "Regions in growth" in the new programming period, namely energy efficiency. This enables the municipalities to improve energy performance in existing buildings through various packages. Under the program, these measures will again cover the minimum legal requirements, but here lies the role of the municipality.

The analyzes show that it is possible to use this program in combination with an increased percentage of own contribution of the beneficiaries, to ensure funding of the necessary measures to achieve higher energy standards. Depending on the functions and volumes of building, the co-financing rate may vary between 5% and 10%, which is economically reasonable cost for beneficiaries, as the benefits in the long term are significantly greater than the initial investment.

  • JESSICA (Joint European Support for Sustainable Investment in City Areas) - a joint initiative of the European Commission, the EIB and the Development Bank of the Council of Europe to promote sustainable investment in urban areas.

The aim of JESSICA e providing loans, guarantees and share ownership by the Urban Development Funds (UDFs) on urban development projects and projects for public-private partnership to final beneficiaries - municipalities, private investors and public-private partnerships in the seven largest city of Bulgaria - Sofia, Plovdiv, Varna, Burgas, Ruse, Stara Zagora and Pleven. As the one of the basic conditions for financing projects with this facility is "Degree of economic return of the project, including social and environmental benefits, the net impact of the project in the region and beyond, if he fails," passive houses and buildings with energy consumption close to zero is especially appropriate. This financial facility is suitable for new buildings, which are intended to generate revenue and are not eligible for funding under the operational programs. More information on the scope of the initiative JESSICA, can be found at  : ;

  • ESCO

The contract with guaranteed results or third party financing is a modern financial mechanism for the implementation of energy efficiency measures. Generally ESCO contracts for the implementation of energy efficiency measures in existing buildings by companies that use their own capital to implement repairs, and whose remuneration consists in the achieved energy savings to the energy balance of the building before the renovation.

What can offer ESCO to municipalities?

From making the energy audit, identifying the potential for energy savings and provide financing to guarantee savings and their division between the municipality and the ESCO company. Despite the undoubted benefits still projects implemented under this scheme in Bulgaria counted on the fingers. The main reason is that municipalities and ESCO companies fear the use of EPC because of hidden obstacles associated with them, as they do not have enough knowledge and experience. Reducing the cost of fuel, energy and other supplies and increasing comfort in buildings, state or municipal ownership may be subject to management contracts and the operation and / or design, supply and installation. The use of contracts with guaranteed results is appropriate for municipal buildings without structural problems which have high energy costs for heating, cooling and lighting. When applying deep reconstruction of buildings, following the principles of passive house will provide quick payback on investment for the contractor and long term energy savings for the developer.

For more information: ESCO_in_Bulgaria ;

File:Check list for municipal buildings.xlsx

Финансови механизми за представители на местните власти