Prague has started getting ready for the impact of the economic crisis. According to Mayor Pavel Bém, the city coffer will be short some CZK 1.7 billion due to lower tax revenue. Projects like further metro construction of metro, work on the largest European automotive tunnel, Blanka, or building the Prague ring road may be therefore endangered.
“It’s inconceivable that the crisis wouldn’t affect construction of these important projects,” Bém told HN.
City Hall has therefore ordered an analysis that should help councillors navigate away from the financial crisis and show where cuts can be made. It will be finished in the first half of June. “However, we will strive for the most important projects to be least affected by the restrictions,” the mayor said.
The head of the City Hall finance committee, Petr Hulinský, differs from Bém on the estimates of the crisis’s impact – he expects a CZK 3 billion shortage.
None of the construction will be completely halted because of the crisis, but City Hall expects several months of delays. However, construction projects that should follow the main works may be affected worse, such as construction of streets to link to the ring road or new water and sewage systems that would be built along with a new wastewater treatment plant. City Hall will also spend less money on healthcare next year. However, the mayor did not want to elaborate further.
Holding the Olympic Games in Prague is a separate chapter. Even though Bém wants to support the games further, he is not talking about them with such determination as when he was announcing the campaign. “It’s very difficult to estimate what the state of finances will look like in 2020,” Bém said.
Olympics in crisis
If the Czech capital aborts the sports show, it will cost taxpayers a lot of money: Prague has paid some CZK 70 million so far to seduce the Olympics. The end of the Olympic dream is approaching as some of its former supporters now are making statements against the games. For example, Hulínský, as head of the City Hall finance committee, has called the Olympic bid a dead project. His main argument was the lack of money in city coffers. “During the current crisis, with which the Czech Republic will unfortunately have to cope for many years, and without state support, the Olympics in Prague would be an unbearable burden on the city budget,” Hulínský said.
The head of company Praha olympijská, Tomáš Petera, even called for the postponement of the candidacy in an interview with MF Dnes. His statement very much surprised the Czech Olympic Committee, which has been counting on Prague’s candidacy until now.
Calculations in the economic study by PricewaterhouseCoopers show that the Czech Republic would be looking very hard for necessary finances. Prague is allegedly looking at direct costs amounting to CZK 88 billion, of which organizers expect CZK 47 billion to come from public sources, CZK 25 million of that from the state budget. However, another CZK 500 billion would be necessary for infrastructure.
It’s not just the capital cutting back
There is some consolation: Despite the crisis, City Hall should save about CZK 1.5 billion compared to past years (thanks to this, the budget deficit will be “only” CZK 1.7 billion). Especially easing the burden are companies that belong to the city, of which the biggest savings come from the Prague Public Transit Company.
The crisis will affect also other towns. According to the Union of Towns and Municipalities, CZK 7 billion will be missing compared with last year. This is caused by lower revenues from the shared taxes such as revenues from VAT or income tax, of which towns get approximately 20%.
For the first quarter of 2009, that money is down CZK 2 billion compared to last year.
Setbacks due to the financial crisis and its impacts
The tunnel system represents the largest construction of its kind in Europe. The project’s budget is around CZK 30 billion. Currently, Letná plateau is dug up due to the construction and the train service between Dejvice and the city centre is not operating due to the works. The project should be completed in 2011.
Prague ring road
The northwestern part of Prague ring road is a controversial point. Pavel Bém has been pushing for the so-called southern variant, while ecologists and mayors of the relevant city districts are for a northern variant that would not lead through Suchdol.
City Hall has launched preparations for the extension of the A line from Dejvice to Motol, where the metro should go in 2014. The route should be further extended to Ruzyně Airport. City councillors have already approved a schedule for the construction. Also construction of a new D line is planned.