EIB grants E20 million loan to Torun
As part of a E60 million development project for Torun, the European Investment Bank (EIB) has agreed to lend the northern city E20 million to upgrade its drinking water, wastewater networks and other municipal schemes, according to an EIB press statement released last week.
The other E40 million Torun is looking to receive from The Instrument for Structural Policies for Pre-accession (ISPA), which provides environmental and transport infrastructure aid to European Union (EU) aspirant countries. In total, Poland will need about E30 billion to upgrade its environmental protection schemes before it's ready to join the union. It hopes to finance 8-10% of this figure through specific project grants, officials at the Environment Ministry (MOS) said.
EIB's loan to Torun will be a credit line payable within 20 years. The interest rate will be 5.5% annually. The city will receive loans for particular projects and until a loan is granted, no additional costs will be assessed, said Maciej Kruszewski, an employee with Torun City Hall. "We are pleased with the conditions of the loan," he said. Before agreeing to extend credit, the EIB required that the city secure a government guarantee for 2% of the loan's value.
Nevertheless, even a low-interest loan is difficult to repay for cities that don't have much money to begin with. But Bydgoszcz, the only Polish city to have been granted both ISPA funding and a European Bank for Reconstruction and Development loan, decided to combat this problem by increasing water and sewage fees for city residents through its municipal water supply and sewage systems company.
Ewa Wesolowska, the adviser to the environment minister, predicts that "fee increases will likely be the major way for cities to pay investments back." However, it is illegal for state institutions, but not companies, to calculate investment costs into bills, she said. Bydgoszcz's solution to pay back the loan through increased water and sewage prices was legal since the loan was given to the municipal water supply and sewage systems company, owned by the gmina. Torun's loan, on the other hand, will have to be paid back with money received from real estate taxes, said Boleslaw Tymolewski, treasurer for Torun City Hall.
