The still empty SPA center in Rezekne, built with the support of structural funds, is a symbol of the style of the city's development, said Guna Puce, the head of the municipality's interim administration, in an interview with LETA. But the administration's agenda also includes other concerns, and other "surprises" left behind by the council dissolved this summer are not ruled out.

You have been the head of the interim administration in Rezekne since the beginning of July. Can you say that you have familiarized yourself in detail with the financial situation in the municipality?

We have been focusing on it all all the time. If at one point it seemed that everything was clear, then came a court ruling in a case where there are again EUR 800,000 to be found in this year's budget.

What is the main conclusion about the financial situation?

I already expected it to be challenging, and it is. I understood from the public communication beforehand that some unknown facts might emerge, and this has been confirmed in practice. I suppose there could be some more challenges or surprises in store.

So, is the financial situation tough?

It is. It would have been impossible to recover without the government loan. At the moment, with the support of the government loan, we are managing to cover the 2023 bills where there were arrears, but there are still long-standing arrears that have not been paid. These transactions are currently undergoing an in-depth assessment - whether they can really be paid or not, because there are different situations.

Who does the municipality owe to and for what amount?

For example, there are debts for construction work. Overall, we are managing to reduce the debts. But there are still around EUR 800,000 in unpaid invoices, excluding the new ones that are coming in. (The amounts owed have decreased since the day of the interview.)

Have there been any transactions that you look at with doubt, that the municipality should not have had these?

There is one construction project where the commissioning certificates have been submitted, but when we look in more detail in the Construction Information System, we discovered that there may have been unauthorized construction, work that was not approved by the construction authority. So, there is a question whether the municipality should really pay for something like this. Discussions are therefore ongoing with the builder to clarify the invoices and remove the disputed amount.

Do you feel any resistance from employees?

Of course, one of the biggest challenges is that employees have been working in the same culture, in the same environment, but now they have to adapt and work differently. I think it is a challenge for all parties. Sometimes it feels that maybe there is some deliberate hesitation, withholding of information or partial sharing of information.

On the other hand, I understand that it can also be challenging in a municipality, because people are afraid of what will happen in a year's time, what their own individual future will be, whether, for example, cooperation with the interim administration will later be seen as a disadvantage. People's individual fears and everything in general create a situation where the rhythm of work is jerky, and that is also challenging.

Given the unpaid invoices, are you not afraid that there will be new litigation?

There is a risk. Given that there are long-standing unpaid invoices, it is not excluded that penalties could be imposed. So, it cannot be ruled out.

How is the performance of the municipal budget? Was the budget plan too optimistic?

The biggest target that is not being met and will probably have to be addressed by amending the budget is the forecast for the sale of real estate. They were quite optimistic or ambitious, but we can see that the year is coming to an end and that this figure has only reached close to 25 percent.

We can see that personal income tax is performing well. Therefore, further communication with the Financial Stabilization Commission, headed by the Finance Ministry, is expected so that this surplus can be redirected to covering debts. At the moment, there is a government decision that the entire surplus from personal income tax should be redirected to cover the loan from the government. We can ask the Financial Stabilization Commission for approval to redirect the surplus for other purposes. However, our first priority is to cover the debts so that we do not incur new penalties, so that we can stabilize the situation and get back on a normal track.

How about selling properties at auction?

Lawmakers drew up a list of properties to sell. Staff members are organizing auctions but there is no response. That is why we are assessing now whether there is a problem in the sales process. We also proposed that the staff members should promote the auctions more, not just formally organize an auction procedure, in order to really reach the target audience.

Another option is to review the list of properties. Perhaps different properties should be put up for sale. However, this would be an extreme decision, given that we are, after all, an interim administration, but this list has been drawn up by the elected authorities, with a view also to assessing the long-term impact. So, we will be very cautious. We may simply have to look at which other items to revise in order to cover the shortfall from the revenue that has not been collected.

How much is the debt against the budget?

In total, the principal amount of debt is EUR 78 million. Together with interest payments and debt servicing, this amounts to EUR 115 million, which is over 20 percent of what municipalities are allowed to borrow.

SPA center built by the municipality is cited as one of the main reasons for the municipality's financial problems. Is it so?

I think that the SPA center is a symbol of the overall style in which the city has been developing. When you go to Rezekne and walk around the city, you can see that development is taking place and the city's facilities are unique in Latvia - the SPA center, there is an outdoor swimming pool at the Olympic Centre. The projects have been implemented on a grand scale.

On the one hand, it is not a bad thing that the municipality has ambitions and a desire to make the environment better for the citizens. But on the other hand, can the municipality afford it in the long term, will there be business. At the moment, the SPA project is proving that the calculation of the economic benefits has obviously not been justified, because it has not been possible to find an investor who will work and make it possible to achieve the objectives of the project, which the municipality has committed to by investing structural funds.

Do you see a solution to this problem?

I think we can work individually with potential investors, change the approach. Of course, bearing in mind that the scenarios could be different, because time is moving forward while we are looking for an investor. However, the SPA center is definitely one of the "top" projects and issues on the agenda.

But I would not want to blame the municipality entirely either, because when they planned this project, the idea was also to build a hotel. The fact that there is no hotel has a big impact on investors. Do the math yourself - you drive three hours from Riga, spend a few hours in a SPA and drive back three hours. That is not how it works.

After the project, it is easy to talk about how things should have been done. However, when it was launched, there was no Covid-19 and there was no war. The question is whether the response of the municipality was appropriate at that moment, when external conditions were changing significantly. Such a huge investment has been made and the municipality took on so much debt. Perhaps at some point decisions had to be reassessed.

But, as I said, it is biased to judge in those categories, although it is indicative of the approach in general - there are ambitious ideas, but the question is about the return, the economic benefit, the ability to sustain these projects in the long term.

Are there any strategic decisions of the council that you could reverse? For example, on the school network.

In relation to the education sector, we are currently assessing options, but we are cautious about the school network. There is a question whether it should be on our agenda, given our status.

Speaking about the strategic decisions, the closest that will be reviewed are the development projects. A list of development projects was approved at one of the last council meetings and will now be reassessed entirely, looking at whether the project is important to the municipality at all, whether it can afford to sustain it in the long term, and also what the potential sources of funding would be. This is a very challenging issue, because looking at the overall financial situation, there is a feeling that the municipality cannot afford anything at the moment.

However, we cannot stop completely either, because in the long term it will have bad consequences. All the other municipalities are making these investments, so there has to be proportionality, there has to be further development and investment.

What are the projects that could be abandoned?

There is a two-page list of, I think, 20 projects in total. I assume that about most of them there is a question of whether this is really the priority of the municipality.

We have decided that we could give priority to the development of the industrial park, because it is a long-term contribution and also a business promotion, an investment attraction.

At the same time, many construction projects are unclear, such as the reconstruction of the cultural center, because it has relatively little co-financing from the structural funds and is quite a burden for the municipality. The question is therefore whether this is the most critical project needed in the long term. The Culture House is certainly needed, because it houses collectives, the theatre, but at this moment of financial crisis it is unlikely to be the primary need.

Looking ahead to next year, we are starting to take stock of where the municipality may have given up some benefits or initiatives. Looking at everything together, the question is whether the reconstruction of the cultural center is more important than the renewal of some benefits, the provision of services.

What does it look like now? Will you be able to renew any initiatives next year, or will you have to cut something else?

We are still waiting for key decisions for the country as a whole, which will also affect the municipal budget and the minimum wage. If there are changes that will affect local government, the question is whether there will be compensatory mechanisms. There are also questions about the municipal harmonization fund. So, all the rules of the game are not clear yet.

How might staff salaries change in the light of the planned national changes?

The municipality has been looking at these issues and the question has been all along whether we should move to a four-day week. Thus, salary increases are out of the question, but I am not thinking about cutting them, either. The most important thing is to have specialists in the municipality, and switching to a four-day week is the last, most extreme solution.

But in the context of next year's budget, are the discussions about a four-day week still in force?

I do not want to make any statements at the moment. There may be different solutions, there may be some other circumstances.

Is there an estimate of how much litigation of former lawmakers about dissolution of the local council will cost the municipality?

It is difficult to say. The Constitutional Court is of the opinion that the issue is of sufficient legal importance. Of course, it will be interesting to see how the process goes. At the moment, no requests for information have been received by the municipality. Theoretically, the matter could be examined without the presence of the municipality, but in any case, preparation of the information would be an additional burden for the municipality.

The loudest case related to municipal companies in the media was the trip of employees of Rezeknes Siltumtikli heating utility to Prague. Did you have any reassurance from the meetings with the representatives of other municipal companies that they were working efficiently?

What happened in Rezekne Siltumtikli also raises questions about the other municipal companies, because at the beginning it seemed that everything was fine in this company too. Of course, after such cases, questions arise as to how capital companies are managed, what the control mechanisms are, how budgets are coordinated.

In relation to transferring regional hospitals at least partly to the state, do you think that Rezekne Hospital would work more efficiently then?

Rezekne Hospital is not on the agenda at the moment, so we have not looked at this issue from that perspective. The hospital does not require an additional subsidy from the municipality, so it is not at the top of our "to do" list.

Are there no plans to review the intention of Rezeknes Namsaimnieks property manager to participate in the low-cost rental apartments project?

We are reconsidering this, because the project must involve a private investor. Yes, the municipality should participate by drawing up binding regulations, an auction, but the municipality should not finance it.

What about other municipal companies?

We are currently in intensive communication with the board of Rezeknes Satiksme public transport company. Public transport is a challenge everywhere, in my opinion. This company is largely subsidized by the local government. It is necessary to assess whether the route network and the frequency of runs are optimal.

Do the three members of the administration have the capacity to carry out such a large volume of work?

It is challenging, but it is good that there are at least three of us, because then we can also trust each other and also divide up some of the issues, so that it is not the case that all three of us are spending resources on one issue. But there are many things that we simply do not have the time to go into. All this takes time, and that is in short supply.

Do local residents come to you with complaints about problems in the city?

They do. All three of us have office hours. Residents come to us with various practical problems where they want to see solutions. These are very economic issues - about the streets, about the apartments that the municipality has rented, about how the housing stock is maintained, about public order, about the work of the municipal police, about their ability to react.

How do you evaluate the work of the police, given that the municipal police had to be created anew in the city?

At the moment, the police are in place, but the capacity is not sufficient - the neighboring municipality has nine people, but we have five, and they only work during municipal working hours. So, a lot of the work falls on the State Police anyway.

When you study the work of the municipality, can you assess how important operations of Latgalija, the family business of the former mayor Aleksandrs Bartasevcs, was in the work of the municipality?

Whichever project you take, Latgalija is more or less involved in it. Directly or as a subcontractor or otherwise connected. But to say that the company had a direct impact on the municipality's financial situation would be too loud.

Is there a chance that the same people will be in power after the next municipal elections?

It cannot be ruled out, because I see them working as politicians, they are meeting with the citizens. Rezekne is not a small town, there are many people there, and, for example, a part of the population that was dissatisfied with the current situation is likely to come to a meeting with the interim administration. But I fully believe that there are people who still support the previous administration, and I can see that the work with the voters is going on.

What is your overall impression of the city over these months?

Very positive. I am from Madona myself, so it is not like "we come from the capital". No one in the administration is from Riga. Yes, we are based in Riga, but our roots are in the regions.

The overall impression is good. I had a very good experience with Rezekne when I was in charge of the Register of Enterprises, because at one point we expanded the Rezekne regional office, where you could find very qualified staff. So, I have always had a good impression of the region.