Section I - Tourism Journal of Tourism, Recreation & Sport Management, vol. 1/2013 Financial independence of communities and the support of tourism infranstructure by Stefan Nowak 1, Agnieszka Ulfik 1 1 The Jerzy Kukuczka Academy of Physical Education in Katowice Abstract The reform of the administrative system in Poland carried out at the beginning of the 90 has initiated the process of decentralization of public finance. It induced a necessity of creating a development strategy, including the development of tourism infrastructure, at the level of the local government. The activity of local government units, tourism institutions and organizations largely influences the dynamics of local and regional tourism development however due to limited means the possibilities of shaping investments directly decrease. This article will discuss the problem of financial independence of communities, the degree of funding the organizations supporting tourism development at local level and also indicate chosen methods of creating local government units policy towards enlarging tourism infrastructure on its territory. Key words: local government, financial independence of communities, supporting investment implementation, sustainable growth, tourism infrastructure. Introduction The reform of the administrative system in Poland at the beginning of the 90 has initiated the process of decentralization of public finances. The reactivation of local government after forty years of its non existence only at the local level without any changes in the remaining structures was associated with numerous limitations of functioning of local communities (Act of 8 March 1990 r. on local government (Journal of Laws 1990 No 16, item 95)). Further changes in the country s administrative system were necessary. After ten years the second phase of the reform was prepared according to which a three level administrative division of the country was implemented. The next phase of decentralization of the state s financial policy was the adoption of the Act of 13 November 2003 on the income of local government units (Act of 13 November 2003 on the income of local government units (Journal of Laws 2003 No 203, item 1966)). The decentralization of public administration was to be implemented through partition of competences between the local government and government administration and also between particular levels of administrative divisions as well as through transmission of assets, necessary organization units to the local government and changes in the public finance system. One of the consequences of public Stefan Nowak The Jerzy Kukuczka Academy of Physical Education, 40-065 Katowice, Mikołowska 72a, Poland tel. (+48) 32 207 51 00; e-mail: s.nowak@awf.katowice.pl Accepted for printing in Journal of Tourism, Recreation & Sport Management vol. 1/2013 on May 2013 21
Nowak S., Ulfik A. Financial independence of communities and the support of... administration s decentralization is the principle of autonomy including the financial independence of local government units. The extraction of local government sub sector in the sphere of public finances must have meant the creation of basics for realization by those units a financial management. A broad scope of tasks imposed on the local government units required a guarantee of proper means for their implementation. The financial control transmitted to local government was guaranteed by the Constitution. The Constitution of Republic of Poland ensures local government units a share in public income accordingly to their tasks. All changes of competences and tasks of local government should take place after proper correction of the public revenue division. According to article 167 of the Polish Constitution there are three sources of revenue, those are: own revenue, general subsidies and appropriated allocations (from state s budget). Financial independence of a local government unit In order to follow the principle of self governing fully, it is not allowed to assume the temporariness and the fact that the basic tasks may not be fully implemented due to lack of means. So the financial independence which needs to be guaranteed to the local government, at least for the realization of its own tasks, is an unquestioned fact. The term of financial independence of local government units is not unequivocally defined. The financial independence can be interpreted as a state in which local organs are not hierarchically subordinated to central authorities but are, accordingly to the existing legal system, obliged to follow the law and in this case they are under the control of central organs (Sochacka Krysiak, 1995). The financial independence of a community can be also understood as allocation of rights to make decisions concerning the height and structure of revenue, expenses, revenue and expenses, creation and implementation of the budget (Glumińska Pawlic, 2003). Financial independence of a commune and efficient implementation of its tasks depends in big part on securing the revenue on a properly high level. The problem concerning the method of financing particular local tasks and most of all their structure (Pasternak, Kantyka, 2010) when it comes to the division of the revenue to own and those coming from the state budget is the issue of dispute during discussions on the topic of the correct economic and legal shape of local government unit s finances. The ratio of community s own revenue to its general income is not only the reflection its financial condition but also is a measure of independence, self sufficiency, investment ability and economic potential. Thus independence is bigger when the scope of own income is bigger and appropriated allocations smaller (Glumińska Pawlic, 2005). The big share of own income enables the communities to stay independent from the external factors like political situation in the country or interest rates on loans and advances. The goals of local government units activity should be based on those basics of independence which were created for them. But the financial independence of communities does not mean that they are automatically financially self sufficient. The investment activity of local government, especially the strategy of supporting institutions which helps to enhance local tourism, depends on the level of understanding the problem by local authorities. The functioning of the tourism development system in Poland The Act on Polish Tourism Organization of 25 June 1999 creates the basics for activity and indicates a division of competence in tourism development 22
Journal of Tourism, Recreation & Sport Management, vol. 1/2013 between the Polish Tourism Organization (POT) and Regional Tourism Organizations. According to the Act, the main created tasks of local and regional organizations are: tourism promotion of the area where they are functioning, supporting of functioning and development of tourist information, initiating, forming opinions and supporting development plans and modernization of the tourism infrastructure and also cooperation with the Polish Tourism Organization and other organizations working on the development of tourism (Act of 25 June 1999 on The Polish Tourism Organisation (Journal of Laws 1999 No 62, item 689 with later amendments)). Functioning of local tourism organizations can positively influence the enlargement of the tourist demand on local level, it is however dependent on the local government s adapted strategy in the field of supporting tourism especially on the amount of means allocated to the activity of LOT (local tourism organization). The transferred means should ensure the possibility of functioning the organization through allowing the continuity of employment of good qualified workers and through own contribution in the process of applying for external means. The conducted research (Andrzejewski, Kasprowicz, 2011) indicate that from 124 registered in 2012 LOTs 15 20% of them demonstrated lack of activity. Additionally when analyzing the height of income of the functioning associations research indicated that in 67,9% the budget of a organization did not exceed 100 000 PLN, and in 17,6% of cases it does not even exceed over the 10 000 PLN level annually which does not give a guarantee of efficient realization of tasks in the field of promotion and development of tourism. A percentage of organizations which do not lead any activity could be a proof for a malfunctioning system of tourism promotion especially in the area of supporting development and tourism infrastructure modernization plans at the local government level. Figure 1. Revenues of individual local tourism organizations. Source: own calculations based on Andrzejewski M., Kasprowicz A., Ekspertyza w zakresie działalności lokalnych organizacji turystycznych na terenie polski. Raport końcowy, page 20. A limitation of funding the local organizations to the level not exceeding 23
Nowak S., Ulfik A. Financial independence of communities and the support of... over 100.000 PLN has a real impact on the functioning of tourism development support system. Lack of funds for the implementation of basic tasks like employment of full time employees and lack of own income in the process of application for external grants, which results also in the lack of possibilities to raise own income, may cause a substantial decrease of activity effectiveness. Figure 2. Revenue structure of Częstochowa Tourism Organization. Source: own calculations Research on the financial structure of organization with a budget exceeding over 500 000 PLN show that a substantial part of the organization s revenue comes directly or indirectly from the local government budget. Częstochowa Tourism Organization revenue can be an example picture 2. It allows a stable functioning on the market and implementation of statutory tasks of the organization and first of all indicates a degree of involvement of local government units in tourism development at local level. Factors supporting tourism infrastructure at local level The involved means and assets of local tourism organization s activity may be factors which support tourism infrastructure development at local level. The main factor is the adopted strategy of supporting the tourism infrastructure development at the level of a community. It is connected with the local authorities approach towards the issue of supporting initiatives through the use of incentives and incentive mechanisms for investors. The structure of finances of particular local government units does not usually allow to support investment activities directly, that is why it is important to create a certain climate for development for investments and support in the process of obtaining special funds (Hadzik, Grabara, 2009). The role of local government in creation of development plans and supporting tourism is very important. Specifying development plans through strategic documents adopted by local government s 24
Journal of Tourism, Recreation & Sport Management, vol. 1/2013 body and its systematic implementation, forms a suitable environment for development of entrepreneurship which contributes to improving the level of service of visitors to the region (Tomik, Hadzik, Cholewa, 2012). Implementation of an adopted strategy, especially managing the community s assets, taking in consideration the rules of sustainable growth and creation of proper conditions for entrepreneurship development, leads to the improvement of the local community s economic situation and what follows to decreasing unemployment rates and a general increase of living standards (Bajdor, Grabara, 2012). A huge role in choosing the tourism product and destination play factors such as the destination, kind of entertainment available at the given place, tourism infrastructure, reputation of the travel agency organizing leisure, personal customer experience as well as the price and the type of discounts granted (Dziadkiewicz, 2012). The attitude of consumers choosing a particular region may be a measure of its attractiveness and evaluation of the policy in shaping regional promotion (Kot, Ferencova, Karas, 2012). An active policy led by the local government unit in the sphere of finding and supporting investors can result in enlarging of tourism infrastructure. Implementation of special incentives in the form of, for example, a temporary decrease in the level of taxation is an argument for the choice of investment. In addition, carrying out modernization and maintenance of existing infrastructure and the recognition of important investment partner in community development plan can serve as a catalyst for choosing a particular location. Creating favorable conditions for the conduct of investment business initiates and promotes the development of local entrepreneurship (Korzeniowski, 2011). References Andrzejewski M., Kasprowicz A. Ekspertyza w zakresie działalności lokalnych organizacji turystycznych na terenie polski. Raport końcowy, Ekspertyza wykonana w ramach projektu: Sieć lokalnych organizacji turystycznych drogą do wzmocnienia potencjału organizacji pozarządowych branży turystycznej niepublikowane materiały Lokalnej Organizacji Turystycznej w Toruniu, 2011. Bajdor P., Grabara J. K. Turystyka zrównoważona przegląd literatury i charakterystyka = Sustainable Tourism the Literature Review and Characteristics, [in:] S. Nowak (Ed.), Regionalne i lokalne strategie rozwoju turystyki. Materiały i studia, Wydawnictwo Akademii Wychowania Fizycznego w Katowicach, Katowice, 2012. Czerniec W. Stan i perspektywa rozwoju Lokalnych Organizacji Turystycznych, Raport końcowy opracowany na zlecenie Polskiej Organizacji Turystycznej w związku z 10 leciem systemu POT ROT LOT, niepublikowane materiały POT, 2011. Dziadkiewicz M. Ochrona konsumentów usług turystycznych przed niewykonaniem lub nienależytym wykonaniem usługi = Customers of Tourism Services Protection Against Default or Negligence in Performing System, [in:] S. Nowak (Ed.), Regionalne i lokalne strategie rozwoju turystyki. Materiały i studia, Wydawnictwo Akademii Wychowania Fizycznego w Katowicach, Katowice, 2012. Glumińska Pawlic J. Samodzielność finansowa jednostek samorządu terytorialnego w Polsce, Studium finansowoprawne, Wydawnictwo Uniwersytetu Śląskiego, Katowice 2003. 25
Nowak S., Ulfik A. Financial independence of communities and the support of... Glumińska Pawlic J. Wpływ zmian w ustawach o podatkach i opłatach samorządowych na poziomie dochodów jst w Polsce, [in:] L. Patrzałek (Ed.), Finanse samorządu terytorialnego, Wydawnictwo Wyższej Szkoły Bankowej w Poznaniu, Poznań Wrocław 2005. Hadzik A., Grabara M. Turystyka a inwestycje i imprezy sportowe, Turystyka i rekreacja nr 5 (2009). Korzeniowski L. Podstawy zarządzania organizacjami, Difin, Warszawa 2011. Kot S., Ferencova M., Karas L. Cena jako czynnik wpływający na wybór pakietów wakacyjnych przez klientów sektora turystycznego. Marketing i Rynek R.19 nr 5, 2012, Pasternak A., Kantyka J. Finansowanie kultury fizycznej i turystyki jako zadań własnych jednostek samorządu terytorialnego=financing of physical culture and tourism as its task of local government units, [in:] J. Kantyka (Ed.), Współczesne tendencje w zarządzaniu kulturą fizyczną i turystyką, Wydawnictwo Akademii Wychowania Fizycznego w Katowicach, Katowice, 2010. Sochacka Krysiak H. Finanse lokalne, Poltext, Warszawa 1995. Tomik R., Hadzik A., Cholewa J. Turystyka aktywna w materiałach promocyjnych województw w Polsce, [in:] A. Rapacz (Ed.), Wyzwania współczesnej polityki turystycznej. Problemy polityki turystycznej, Wydawnictwo Uniwersytetu Ekonomicznego we Wrocławiu, 2012. 26