Although the last three years have been challenging for local governments, Janis Baiks (For Vidzeme and Valmiera), the chairman of the Valmiera regional council, said in an interview with LETA that he wants to prove that economic development is possible not only in Riga and its suburbs, but also in the regions. For Vidzeme un Valmiera party is already preparing a list for next year's municipal elections, but it has not yet been decided whether to run together with the New Unity.

On the 2025 municipal budget - what will the opportunities be for the municipality, where are the challenges, what will the priorities be?

The timetable for adopting the budget is similar to every year. Once the state budget is adopted, the drafting of the municipal budget starts and its adoption is scheduled for the last council session in January.

The past three years have been challenging. If we look at the increase in tax revenue, it has been 2.7 percent over three years. Inflation alone has been at 30 percent during this period. If we look at all the extra funds that have had to be found in the budget, it has been challenging work all the time.

In 2025 it looks like we will have less in monetary terms than in 2024. Although tax revenues are supposedly higher, if we add up all the mandatory functions that a municipality has to provide, we actually have less funding. So, there is a fourth year of survival. The priority will clearly be people. There is an increase in the minimum wage, so we will put in a salary for professionals equivalent to the increase in the minimum wage. At the moment, there is a cap of 2.6 percent on the wage increase. There is a pay freeze for top management, but there are very few senior managers and they do not have a very big impact on the budget.

Next, there are the investment projects that we currently have financed by European Union (EU) funds. Until 2021, we had about a third of the budget for investment, for development. In 2024, it is only 10 percent. For 2025, we will see. So, at the moment, the balancing of the budget is more or less at the expense of development. The only positive thing is that there are now many different EU fund programs that we are actively using. We have 26 active projects. This is an opportunity for us to move forward.

Will there be any reorganizations, given that the budget will not have enough money for everything?

We already did all this when the mergers took place during the Administrative Territorial Reform. In 2021 we merged eight municipalities, and we applied the model developed by researchers of the Vidzeme University of Applied Sciences. We have been working with this model for more than three years, therefore, we can say that it works. It was useful that the model was built by the people who worked in the field. For example, the heads of all the social services came together and worked out for themselves how they wanted to work after the merger. So, it was the professionals who decided, not the politicians. Similarly, whereas previously there were 1,060 people working in the administrations of all the municipalities, now there are 950 people working in the merged municipality.

At the moment, we see municipalities in Balvi and Talsi where the reorganization was not carried out in time, and they are therefore in a difficult financial situation.

I think that from an administrative point of view we are now very optimal. Of course, there are times when it is difficult. For example, more than 1,300 Ukrainian refugees have passed through our municipality. This was all done by the same social service, the same people who work on a daily basis, and it was a very difficult time for them, because they had to do both their direct duties and, in addition, everything to do with the refugees.

What has happened to the Ukrainian refugees in your municipality?

There are currently around 300 refugees in the municipality who have stayed, they are living and working here. Of course, there were many who were looking for something better, there were many who went back to Ukraine. At the very beginning, we were one of those who went after them ourselves, because we had to help evacuate a sports school, and then about 250 children came to us, and with them, a parent, a teacher. Many of those children are still here and training with our basketball team.

But have those who have stayed integrated into the life of the municipality?

Yes. I think the first thing is that they were very goal-oriented people. For example, these children came to take the opportunity that they could study and train with us. I mean, to do what they did in Ukraine.

We also have two Ukrainian women working in the municipal administration, whose task is to work directly with the Ukrainian community. One of them is the head of the European representation of the Ukrainian Association of Small Towns, who is currently coordinating cooperation between Latvian and Ukrainian municipalities.

You also decided to give up gas heating a long time ago. Was this influenced by the annexation of Crimea?

We took the decision in 2014 that we had to give up natural gas. At the time, maybe many people did not understand it, but we realized that it was going to be a problem.

Up until then we had only been heating with gas and the price was very good, so it was not a clear decision, but we decided to switch to wood chips. Now we have three new boiler houses heating the whole town, because the oldest one is just over eight years old. At the same time, there is an alternative, because it is possible to switch from woodchip to gas. This year we completed the construction of the newest boiler house.

Returning to the issue of administrative-territorial reform. In 2025, there are four years into the reform. Can we now assess what was positive and what was negative?

I was a supporter of the reform before it and, despite how hard it has been, I am still positive that it had to be done. We were too fragmented - too many and too small. One thing that nobody is talking about in the reform evaluation at the moment is that we have had all these three years with different crises. There has been the pandemic, the war in Ukraine and the energy crisis it caused, the refugee issue, there has been high inflation. This means that we have not only had to sort out the situation in the municipalities, but we have had to deal with emergencies all the time.

We are now working on building a community of municipalities. Initially, there was a kind of jealousy, a kind of mistrust that now Valmiera city would take everything away. We have unified a lot of things. The first thing that is over is the competition for where people will live. It was explicitly that the declaration of address was "bought" with some social benefits. The person lived in the city, but in order to receive these social benefits, they registered somewhere in the countryside. Now we have removed that stress because we are united.

Many also criticize the inadequate and unprofessional handling of the preparatory phase of the administrative territorial reform

Yes. The new borders were drawn and that was it. If we had not worked for ten months on our own, I think we would be in a worse, much worse situation now. But we were able to come to an agreement and we did a lot of homework ourselves.

I cannot say that we had much support from the state. Even that famous program by [Environmental Protection and Regional Development Minister Juris] Puce for EUR 300 million for regional roads was only half-fulfilled. People keep asking where the road is now, because we had certain stretches of road that were marked on the list of that program as the closest to the regional center.

The problem is that there is much less money for roads in the new EU programming period. This is really worrying for us, because the costs of both road maintenance and repairs are what they are. And of course we want mobility of the population, and that is where the road is the key.

How much can you allocate to roads from the municipal budget?

I will not give a percentage of the budget now, but I will give it in comparative values. We have 1,144 kilometers of municipal roads, the state gives us EUR 1.6 million from the Road Fund. So, EUR 1,000 per kilometer. These are tears of sorrow. We have EUR 2.6 million earmarked in the budget for road maintenance. All of this together is necessary to maintain the roads to a halfway decent standard. I would emphasize that this is without reconstruction, it is just maintenance. That means that EUR 4.2 million is the total budget for road maintenance, to clear the snow in winter, to apply anti-dust layer in summer, to dig a ditch.

If reconstruction is necessary, we can get money from EU funds somewhere, but unfortunately this is only possible if it is linked to an industrial development project. The rest is borrowing, and if we borrow, we have to provide 15 percent co-funding.

People also live in the countryside, and in order for them to go to work in Valmiera, they need a road.

Every day, the municipal school buses travel about 1,800 kilometers to collect the children and take them to the nearest school.

You are currently beneficiaries of the Local Government Equalization Fund. When will you become a contributor?

We became beneficiaries after the merger. The revenue in Valmiera and the northern part of Valmiera district is twice as different. The same differences exist when we look at the number of beneficiaries of social benefits. Therefore, if we look at the whole region, we are still on the negative side, because 55 percent of the population of the region lives outside Valmiera. The economic situation needs to improve, and we are all actively working on this.

I have been to the negotiations on the new Local Government Financial Equalization Model, and they are telling us that we need to promote economic activity more. Yes, good. Valmiera is second only to Riga and seventh in the Baltics in terms of gross domestic product (GDP) per capita. However, when you add the municipalities, we fall to 8th or 9th place among Latvian municipalities. To understand the difference, Valmiera has a GDP per capita of EUR 20,000, the municipality EUR 8,000. The further away from Valmiera, the lower the income of the people.

Unemployment in the municipality is 3 percent, which is not unemployment at all, because there is a category of people who cannot work because of their health, there is a category of people who will not work under any circumstances, and this is the case all over the world.

So, the question is, what else can we do? At the moment, we are developing industrial parks. We have five new factories under construction, each of which will create 20-30 new jobs.

When will these factories start working?

The Culimeta Baltics plant will open in January. They already have a production site in Valmiera and this will be their sixth. 99 percent of their production is exported. The Aimasa metalworking shop will also start working soon, where they will produce metal structures for their own needs. They will also have the most modern paint shop in Latvia, where armored vehicles will be painted. Bitus Latvia will open a door production shop in July. Liepkalni, the largest bakery in the region, is currently under construction in Valmiera, and they also plan to open their new plant in July. Klasmann-Deilmann Latvia is currently building a processing plant in Zilaiskalns, which will be ready by the end of 2025.

This is the result of what we have been doing in Valmiera all along. It is the infrastructure - the water supply and sewerage network has all been replaced, we have been working all the time to have the necessary electricity supply, and now we have a very good supply. Of course, it is the railways and the roads. There is also constant work to ensure that there is a workforce.

The new draft Local Government Finance Equalization Plan also addresses regional policy. Do you feel that there is a regional policy in Latvia at the moment?

No. Sometimes I really feel that Latvia ended somewhere 20-25 kilometers beyond the Riga border on many issues. We see that in many places. For example, in the banking sector - 20 kilometers around Riga there is still something going on and banks are lending money. In Valmiera, the situation is still normal, but even outside Valmiera it is difficult for people to get a loan if they want to buy a house.

I remember that I was very angry when, in 2014, a map appeared in Latvia's development plan that projected Latvia in 2030. Before that, there was the big financial crisis, when a lot of people left Latvia, and the plan was made in 2012, 2013. Also, the forecast was that Riga and the Pieriga Region were a warm island on the map and the rest was dark blue. With this, the state showed that we do not have a plan to deal with this, but you are all counting on the fact that there will be no more people there. Well, then, investors and banks are counting on that too - you can finance something around Riga, the rest is a risk zone.

If we are talking about the housing stock, at the moment two private local companies are building with their own resources, so slowly. The banks say they will lend, but that requires practically 200 percent collateral. This means that the core business is mortgaged, and if something goes wrong in the real estate market, the company ceases to exist.

We are grateful for the first Altum program for low-rent apartments, which has resulted in 120 apartments being built and it looks like there will be a second round. Finally, there is such an opportunity in the regions.

At the moment, the construction plans for four initiatives to build apartment blocks have been approved. But I have spoken to the developers and they say they are waiting for the money to become cheaper, both for them to build and for the people who will then take out the mortgage.

The Valmiera Theatre building is opened after reconstruction. What are the prospects for it?

The theatre is our national pride.

Moreover, we have to understand that people are not only interested in a work-house, house-work life. People also need to recharge themselves creatively, and theatre is very valuable. If there are 60,000 visitors a year, that means that every person in Valmiera has been to the theatre at least three times. Many people also come from elsewhere to see the plays, which boosts local tourism, which also benefits restaurants and hotels. But we also have a big contribution internally, because the theatre people also organize clubs in schools, organize events.

If we remember, Valmiera was also in the running for the title of European Capital of Culture, we lost to Liepaja in the final, but with that, we developed a cultural strategy for the new Valmiera region. Of course, it was much more ambitious than we can afford at the moment, but we are going step by step.

We are also very supportive of the amateur arts, and it is the amateur theatre movement that has developed a lot at the moment.

In 2025, there will be local elections. Will For Valmiera and Vidzeme party run alone or again in cooperation with New Unity?

For Valmiera un Vidzeme party is already 12 years old as a party and currently has 290 members, so we will definitely run in the elections. At the moment, the decision to run together with New Unity has not yet been taken. This will be decided when the list of candidates for the municipal elections is drawn up.

Most of the list is ready, but we are currently in a democratic process where party members can apply and compete for a place on the list.

What will you offer in the elections?

I have been in the management of the municipality of Valmiera for a total of ten years. We are currently evaluating what we have offered in the past and nothing will change significantly. It is support for entrepreneurship, for housing, quality education opportunities, culture, sport.

Would you like to lead your local government for another term?

Four years for sure, because we have started projects, we have the industrial park, which I personally started in 2014, when the first council decision was taken. We have gone through ten years of all the state bureaucracy. I want to prove that all this is necessary. We have been given EUR 20 million in funding, with which we will build a logistics yard for rail freight, which is very much needed. Then there are 36 hectares for new factories. We are investing money which will then bring us money back. It is no coincidence that we have a contract with the Estonian company Fibenol right next door. We have gone to great lengths for ten years to make it an attractive environment for business.

What is a little painful about the industrial park is that sometimes it feels like only we need it, only Valmiera needs it.

The state does not need it?

Yes. That's the most painful thing. All businesses are no longer in a country, they are in a municipality anyway. People work in them, they pay taxes there.

There was also a recent opinion of the State Audit Office on the development of entrepreneurship in the regions, and there is a feeling that the view on this all situation is very narrow. For example, how much the personal income tax has increased. I can give you an example: in 2016, we had 12 companies as partners in the project, of which there are now ten left, because two went out of business during the pandemic. Now, more than 100 jobs have been created, with a turnover of more than EUR 96 million. More than EUR 1 million has been paid in personal income tax and more than EUR 2 million in social contributions, which goes into the state budget. And that is just two taxes, not counting value added tax and everything else. So here we see that we, as a municipality, are even the smallest beneficiary, but how much does the state benefit? So, it feels like we are looking at everything in a very segmented way, but that is what everybody needs.

It is very good that we have finally found common ground with the Latvian Investment and Development Agency (LIAA), which helps us with many things. But when we work with LIAA, we have to define exactly what we need. If we just wait for LIAA to bring something, it will not happen. We have to be very active ourselves. I have a phenomenal team in this respect. We follow every project very closely and see what we can afford with the funding available.

For example, many did not believe that the former Valmieras Galas Kombinats’ site could be used because it was a degraded environment. But before the municipality took over the site, we called together business people, went into the site and brainstormed. The entrepreneurs said that nobody was prepared to clean up all 14 hectares and 27 buildings, but that if the municipality put the infrastructure in order, then they were prepared to take a "piece of the pie" from the site. There are already five tenants on the site and talks are underway with a sixth. I think in three or four years' time the site will be fully used.