Examining the management of public utility companies owned by municipalities of county rank

Abstract

As regards the selection of tasks in the municipality sector, the local authorities have freedom both according to the former and current legislation. The advantages of providing tasks through companies owned by the municipality include the flexible adaptation to market conditions and integration into the relation network of the economy. In case of appropriate operation, the companies can be characterized by higher cost efficiency and by providing services of higher quality to the citizens and business actors. Moreover they ensure revenues for the municipality. The operation of companies, however, depends on municipality management, it is part of it because in many cases the tasks are assigned to them by the law. Some research works have proven, however, that their operation is rather risky, which in return determines the municipality operation, according to the above outlined thoughts. Out of the companies owned by municipalities of county rank, the present paper examines the management of water works, waste management and district heating companies between 2009 and 2011. We selected these three sectors because the (which?) municipalities had pricing authority competences at that time, therefore the operation of these companies was substantially affected by the fee policy of the municipality. In the frames of the research we reviewed the reports of companies and compared the formed indices, evaluating primarily their profitability, indebtedness, and solvency. In regards to liabilities of the examined companies, the dominance of short-term liabilities, increasing receivables and the profitable management were clear phenomena in most cases within the sample.