Alūksne Municipality Considers the Repeated Rejection of Support for the Health Centre Project a Significant Obstacle to the Development of the Municipality

Alūksne Municipality considers the response received from the Ministry of Finance’s Project Application Evaluation Commission, in which the commission states that it is upholding without amendment the decision of the Central Finance and Contracting Agency (CFLA) of 2 September not to assume obligations and not to conclude an agreement with the municipality on implementing the project “Establishment of a Health Promotion Services Centre”, a significant obstacle to the development of the border region.

This summer, Alūksne Municipality planned to begin implementing the project “Establishment of a Health Promotion Services Centre” with co-financing from the European Regional Development Fund (ERDF). However, the municipality has not been allowed to do so because the responsible institutions have refused to conclude an agreement with the municipality on implementing the project that had initially been approved.

The municipal administration has repeatedly expressed public concern that the Ministry of Environmental Protection and Regional Development (VARAM) is deliberately unwilling to approve this project and intends to withdraw the ERDF funding approved for Alūksne, possibly reallocating it elsewhere.

“We see no substantially new arguments in the document received that would justify the decision. The commission states that, when assessing the tenant’s financial and operational capacity in relation to changes in the economy caused by the Covid-19 crisis and Alūksne’s geographical location, it has not been convinced that the specific support objective will be achieved. It is significant that the municipality received the response from the Ministry of Finance’s commission on the evening of 12 November, a couple of hours after the entire country learned of the resignation of Environmental Protection and Regional Development Minister Juris Pūce. It was precisely the ministry led by Mr Pūce that actively objected to the implementation of this project,” emphasises Arturs Dukulis, Chair of the Alūksne Municipal Council.

He points out that the health promotion services centre project was intended to promote the economic development of Alūksne Municipality and the surrounding region by creating new jobs, developing new services and attracting private investment.

“The municipality had explained the content of this project in detail to the responsible institutions, and now they conclude that it does not comply with the activity they themselves announced. Perhaps with this project we aimed higher and further than VARAM considers permissible. We cannot shake the feeling that the quality of life must not be improved in the regions, especially in border areas, and that investments here are considered futile. Nevertheless, the municipality has reserve project ideas at an advanced stage of readiness that we are prepared to implement,” says A. Dukulis.

Juris Pūce Misleads the Public on the Alūksne Health Promotion Centre Project in the Programme “Krustpunktā”

VARAM Minister J. Pūce, who announced his resignation yesterday, has repeatedly stated publicly that he does not support the Alūksne Municipality project. On Wednesday, 11 November, in the Latvian public media programme “Krustpunktā”, J. Pūce presented tendentiously negative information about Alūksne Municipality’s project “Establishment of a Health Promotion Services Centre”, once again misleading the public and casting a false shadow of suspicion over the project’s objectives.

“After listening to the programme, we at the municipality were surprised by what the minister said. Based on Mr Pūce’s answer to the journalist’s question during the programme, we concluded that, for some reason, the minister does not use the current facts about this project in his public communications, although the ministry undoubtedly has all the necessary information at its disposal. For this reason, we sent the minister a letter and are also making it known to the media. During the programme, Mr Pūce claimed that he had been to Alūksne several times, but did not say that he had met with municipal representatives in Alūksne only during an off-site meeting of the Cabinet of Ministers a year ago, on 12 November 2019. This summer, meanwhile, the minister visited a dog-sports competition in Alūksne Municipality, where he presented awards. It is regrettable to acknowledge that Mr Pūce did not wish to meet at the same time with the municipal administration, local entrepreneurs who are ready to participate in implementing the project, and residents in order to familiarise himself with what was planned in the project and clarify any questions, if there were any. Mr Pūce led the ministry responsible for the country’s regional development, yet the minister’s actions regarding a project of importance to the development of Alūksne Municipality indicate that regional growth and job creation are not his priorities. A campaign against the dissemination of misleading information has now begun at the national level. Even President Egils Levits has joined this campaign, calling on residents to carefully assess information sources and the messages they convey. This is precisely such a situation, in which a senior public official is publicly disseminating misleading information about a development project planned in Alūksne, thereby creating a false impression of it among the public,” notes Arturs Dukulis, Chair of the Alūksne Municipal Council.

PROJECT INFORMATION.

The project “Establishment of a Health Promotion Services Centre” was to be implemented in Alūksne with co-financing from the European Regional Development Fund in accordance with Cabinet of Ministers Regulation No. 645 of 10 November 2015, “Regulations on the Implementation of Specific Support Objective 5.6.2 of the Operational Programme ‘Growth and Employment’: ‘Revitalisation of Territories by Regenerating Degraded Territories in Accordance with the Integrated Development Programmes of Municipalities’”.

The construction costs of the Health Promotion Services Centre amount to €3.2 million from the ERDF and approximately €6 million in funding from Alūksne Municipality, which is planned to be borrowed from the Treasury.

The project provides for the construction of a health promotion services centre as a facility for commercial activity, to be leased for business operations as stipulated by the Cabinet of Ministers regulations, as well as the construction of an access road to it. The aim of the project is to create new jobs in Alūksne Municipality, attract private investment and make health-promoting services available.

In addition to the municipality’s and structural-fund contributions, the project requires equivalent private investment from entrepreneurs, the achievement of a specified number of new jobs, and non-financial investment equivalent to the amount of ERDF funding in the project area or in areas bordering the project implementation site. In accordance with the activity regulations, the tenant of the facility, together with businesses located in adjacent areas, must invest at least EUR 3.2 million in the project area and create at least 47 jobs.

Several companies in Alūksne Municipality have confirmed their readiness to contribute to achieving the performance indicators by developing commercial activity around the project area. A principal investor has been attracted who plans to build a hotel alongside the municipality’s Health Promotion Services Centre.

For the establishment of the Health Promotion Services Centre, the municipality has registered in the Land Register a building right on privately owned land, in accordance with the regulatory framework for implementing the project.

To reduce the project’s risks, the municipality identified the future tenant of the facility by organising an auction for lease rights, although the municipality would only be required to ensure this after the building had been commissioned. The municipality has satisfied itself that the company is capable of fulfilling its obligations and has received documents from the company confirming this. The project implementation regulations do not provide for restrictions or prohibitions concerning newly established companies. The tenant, SIA “Aluksne Hotel Invest”, as a newly established company, has no independent experience in commercial activity; however, it belongs to a group of companies owned by the beneficial owner that has extensive business experience both in Latvia and abroad.

The aforementioned project was submitted in a limited project selection process, in which, in accordance with regulatory enactments, all projects meeting the evaluation criteria are approved and funded. The project of Alūksne Municipality meets all the specified criteria; nevertheless, it is the only project submitted for the limited selection process in respect of which the Central Finance and Contracting Agency (CFLA) has refused to conclude an agreement with the municipality for its implementation.

The CFLA’s decision not to assume obligations and not to conclude an agreement with Alūksne Municipality on implementing the Health Promotion Centre project is justified by an additional risk assessment and the conclusions and considerations of expediency drawn from it by the agency and VARAM.

Exercising its rights, Alūksne Municipality challenged the decision adopted by the CFLA by submitting an appeal to the Ministry of Finance. The international financial experts engaged by the municipality carried out an assessment based on verifiable facts and established that the additional risk factors identified by the CFLA in connection with the potential tenant of the Health Promotion Centre are unfounded or do not significantly affect the implementation of the project and the achievement of its objectives; that the beneficial owner’s financial capacity is sufficient; that the financial indicators are stable and positive; and that the beneficial owner has extensive business experience to implement the “Aluksne Hotel Invest” project. Consequently, the legal experts engaged by the municipality concluded that there are no legal obstacles to concluding an agreement on implementing the municipality’s project.

In October, representatives of Alūksne Municipality, the experts it had hired and the parties involved in the project met with officials of the Ministry of Finance to provide information about the project, refute the assumptions on which the refusal to conclude an agreement on its implementation was based, and answer the questions of ministry representatives.