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The most typical trend observed in the third group of regions was the setting of pilot sites, where the provisions of federal law No. 131-FZ were implemented in full as an experiment. Thus, in the Kemerovo oblast it was envisaged to fully introduce the municipal reform in nine municipal districts, in the Tver and Saratov oblasts - in two municipal districts, whereas in the Khanty Mansi Autonomous Okrug it was planned to implement the municipal reform in full in 11 settlements of three districts. It is of interest to analyze the terms of such an experiment conducted in the Tver oblast, where, according to the available information, in the pilot territories the practice of delegation of powers from settlements to municipal districts on the basis of respective agreements had been significantly limited and the municipal reform was implemented in its Уpure formФ. In the regions belonging to this group, where test sites were organized, different rates of transition to the full scale implementation of the municipal reform were set depending on the status of the settlement - was it urban or rural one (the Vladimir oblast), or was in the jurisdiction of a certain municipal district (the Novgorod budgetary powers were retained at the level of municipal districts, in the list of regions, which had fully implemented the municipal reform, is also open to questions.

RUSSIAN ECONOMY IN trends and outlooks oblast). In certain regions belonging to this group the division of powers was carried out taking into account the individual specifics of settlements, their economic and human resources capacities.

At last, in 2007 only the Sakhalin oblast could be defined as a region belonging to the fourth group of regions, i.e. of those, which failed even to launch the implementation of the municipal reform. The Sakhalin oblast chose to create urban okrugs on the basis of rural districts, and at the moment in its territory there exist only three urban and three rural settlements. All local issues in these settlements were delegated to municipal districts.

The analysis of the regional legislation on the procedures governing the resolution of local issues in newly created settlements, which were used in 2007, permitted to arrive to the conclusion that there was achieved a certain progress as concerns the scale of implementation of the municipal reform in the territory of the Russian Federation as compared with 2006;

however, it should be taken into account that the real depth of the transformations depended not only on the stipulations of the regional legislation. There was sufficient number of tools, both within and outside the legal framework, which permitted to impose limitations on the independence of municipal entities even in the case all rights and powers envisaged by the federal legislation were assigned to them.

5. 6. 3. Need to Change Approaches to the Territorial Organization of Local Self-Government General Description A component of the implementation of the municipal reform in the Russian Federation was significant transformation of the territorial organization of local self-government. The base concept of the reform in this sphere was the mass transition to a two tier model - it was envisaged that across the whole territory of the country with the exception of large cities and sparsely populated territories local self-government should exist both at the level of municipal districts and rural and urban settlements. The practical implementation of this approach resulted in the fact that the number of municipal entities increased almost twofold150; it should be noted that rural settlements accounted for the bulk of the total growth. In the course of implementation of the reform of the territorial organization, the legislation on local selfgovernment failed to take into account the financial capacities of newly created municipal entities, as well as existing engineering and social infrastructure. As a result, the majority of rural settlements were being organized within the limits, where there had previously existed rural councils; it should be also noted that there was not taken into account the existence of prerequisites necessary to resolve the issues of local importance as it was envisaged by federal law No. 131-FZ УOn the general principles of the organization of local self-government in the Russian FederationФ151. Such an approach was inevitably fraught with inevitable problems and conflicts, what was indeed observed in the course of the practical implementation of the municipal reform.

According to the data presented by the RF Ministry of Regional Development, as on January 1, 2007, in the Russian Federation there existed 24.2 thousand municipal entities, whereas prior to the launch of the reform this number made 12.6 thousand.

In a number of regions, for instance, in the Tver and Vologda oblasts, as well as in the Khabarovsk krai, in the course of transformation of the territorial structure there were adopted more balanced approaches.

Section Institutional Problems The start of the practical implementation of the municipal reform revealed a need to introduce changes in the approaches to the territorial organization of local self-government. In 2007, these processes affected many regions and were implemented along different avenues. It should be noted that there were observed the following changes in the territorial organization:

- Attempts to merge rural settlements, envisaging first of all incorporation of financially unviable municipal entities into those with more developed economic base;

- Continuation of the processes facilitating the withdrawal of the status of city okrugs from towns and incorporation thereof in the composition of municipal districts;

- A tendency towards creation of city okrugs on the basis of municipal districts;

- Registration of precedents of initiatives aimed at the division of artificially formed city okrugs and recreation of the two tier system of local government in the respective territories;

- The beginning of processes of enlargement of municipal districts;

- A search for mechanisms of administration of city agglomerations.

The intensification of processes of the territorial transformations revealed the following inconsistencies and problems related to these reforms:

Х High proneness to conflicts of the processes of transformation of the territorial organization of local self-government;

Х Lack of regulation of many avenues of territorial transformations in the legislation resulting in the fact that they fully or partially developed outside the legal framework;

Х Public consciousness (including the consciousness of regional legislators) was dominated by the concept of legitimate nature of any decision adopted by referendum regardless of the fact if the respective issue was in the terms of reference of the respective tier of government and if an expression of the popular will was envisaged as a mechanism governing the resolution of this issue.

Such a situation resulted in a significant differentiation of approaches to the implementation of the territorial transformations in different regions and different interpretations of the federal legislation and its adaptation to local needs, as well as significant difficulties concerning the transformation of the territorial organization of local self-government in different subjects of the Russian Federation.

Enlargement of Settlements and Municipal Districts In different regions, the processes of amalgamation of settlements developed with the different degrees of success. According to the information presented by the RF Ministry of Regional Development, a rather large scale enlargement of rural settlements was registered in the Kirov oblast, where this process affected 12 municipal districts, whereas the number of rural settlements in the oblast declined by 33 settlements152. At the same time, in a number of other regions large scale initiatives in this sphere remained unimplemented.

In this respect, an illustrious example was the situation observed in the Chelyabinsk oblast, where there was advanced one of the most large scale initiative aimed at the transfor Itogi realizatsii Federalnogo zakona ot 6 oktyabrya 2003 g. No. 131-FZ УOb obshchickh printsipakh organizatsii mestnogo samoupravleniya v Rossiyskoi Federatsii v 2007 g. [The results of implementation of federal law No. 131-FZ of October 6, 2003, УOn the general principles of the organization of local self-government in the Russian FederationФ in 2007] / D. R. Khromov, Ed. - M.: ID УYurisprudentsiyaФ, 2007. - p. 24.

RUSSIAN ECONOMY IN trends and outlooks mation of the territorial organization of local self-government. In the summer of 2007, the oblast administration made a list of 67 settlements to be liquidated due to their financial dependence by the way of merging them with more financially independent territories153. As a criterion, there was used the amount of tax and non-tax revenues, which in the settlements planned for liquidation was below 200 thousand rubles a year, what was insufficient even to maintain their administrative staffs. This initiative encountered an active opposition on the part of the municipal community of the oblast. On August 14, 2007, in Chelyabinsk in order to discuss this issue there was held a round table organized by the Association of rural settlements of the Russian Federation and the Association of rural municipal entities of the Chelyabinsk oblast154. In the course of the meeting, the heads of settlements and the associations representing them voiced their resentment of the idea of amalgamation stating that too little time had passed since the moment of the launch of the reform for the local self-government could realize its potential and defended the right for the equalization of fiscal capacities at the level of the subject of the Russian Federation, what should ensure that each settlement could resolve the issues of local importance.

After the encounter with the resentment of the ideas they advanced, the regional authorities did not insist on the planned large scale amalgamation. Already by the time of organization of the round table the number of settlements entered in the list was reduced to about two dozens. Later, by the date of the vote timed to coincide with the date of elections to the RF State Duma on December 2, 2007, only 8 projects of amalgamation of settlements remained on the list155. In the course of the voting, such projects were rejected in the overwhelming majority of settlements. It should be noted that the turnout of the voters made from 66 per cent to almost 75 per cent, i. e. this ballot reflected the real will of the population. Only in one case the population voted for enlargement: residents of the Babarykinsky and Spassky rural settlements situated in the territory of the Verkhneuralsk district supported the initiative aimed at the merger of settlements. The turnout in these settlements amounted to 83 per cent and 66 per cent and 52 per cent and 82 per cent of the citizens participating in the ballot cast their votes for the enlargement. However, on the whole it may be acknowledged that the initiative of the regional authorities aimed at the enlargement of settlements has failed, at least for now156.

A similar situation was also observed in the Amur oblast. In this region, the voting on the issue of amalgamation of municipal settlements was held in 23 settlements. Similarly to the situation in the Chelyabinsk oblast, the turnout of voters was rather high. However, the decision on enlargement was taken only in two cases. It should be noted that against this decision voted mostly the residents of economically weak municipal entities to be included in other municipalities.

In total, there were 274 settlements in the territory of the Chelyabinsk oblast.

As concerns the range of problems relating to the municipal entities lacking the sufficient tax base and recommended to be merged with other municipal entities, see the verbatim report of the round table УMestnoye samoupravleniye kak resurs razvitiya stranyФ [Local self-government as a resource for the development of the country], Chelyabinsk, August 14, 2007.

The information on the results of the voting is presented as published by the local press. See, for instance, Alexander Polozov, Alexander Panan, УURA.RuФ, August 7, 2007, an interview of a deputy of the Governor of the Chelyabinsk oblast, УGuberniyaФ, September 5Ц11, 2007.

However, attempts to merge settlements continue - a new stage of the voting on this issue is to be held on March 2, 2008.

Section Institutional Problems As concerns the processes of enlargement of municipal districts, at present this issue in the majority of regions is less urgent than the problem of amalgamation of settlements. Nevertheless, in certain subjects of the Russian Federation the regional authorities are planning large scale reforms along this avenue justifying them, in particular, by the need to create favorable conditions for the implementation of regional strategies.

The Change of the Status of Municipal Entities The legal framework concerning local self-government contains only one variant of changes as concerns the change of the status of urban settlements in connection to the granting to it of the status of a city okrug or withdrawal of the status of a city okrug. In 2007, transformations of this kind were a characteristic feature, for instance, in the Krasnodar krai. In this krai, there were underway the process of withdrawal of status of city okrug from towns and inclusion of them into the composition of municipal districts. Thus, law No. 1254-KZ the town of Yeisk was deprived of the status of a city okrug and granted the status of an urban settlement included in the composition of the Yeisk municipal district. Similar procedures were launched with respect to the city okrugs Tikhoretsk and Tuapse.

Along with the legitimate (although not always positive) processes of change of the status of the city okrug, in 2007 the transformations of this type were characterized by two other processes, none of which was regulated by the federal legislation. On the one hand, in a number of regions there began apparent the tendency to grant the status of city okrugs to municipal districts. On the other hand, there were observed precedents of the advancing of initiatives aimed at the division of artificially created city okrugs and recreation of the two tier system of local self-governance in the respective territories.

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