FULL TEXT

Journal of Tourism, Recreation & Sport Management, vol. 1/2013
Section I - Tourism
Financial independence of communities
and the support of tourism infranstructure
by
Stefan Nowak1, Agnieszka Ulfik1
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: [email protected]
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
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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
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.
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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
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).
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