Municipal Network for Energy Efficiency

• Some countries have a priority system where the national government requires cities to pay certain types of expenses first (such as salaries of city employees). Bank loans are often the last priority. While laudable in principle, the priority system ties the hands of municipal leaders and a "one-size-fits-all" approach may not be appropriate for some local governments. And obviously, this system is not likely to be attractive to banks.

• Most countries place debt limits on cities - meaning local governments cannot borrow beyond a certain percentage of their total budget. This makes sense and is even a requirement for accession to the European Union. However, in some countries, innovative financing, such as leasing and ESCO contracts count against debt limits. This can be reformed to encourage energy efficiency while maintaining the financial health of municipalities.

• Some Ministries of Finance require approval of commercial lending done by cities - although this serves a definite public function, it obviously this slows things down.

To deal with the finance issue, MUNEE held its second regional exchange in December 2001. This workshop included two audiences, both from the national level: National Environmental Protection Funds and National Finance Ministry Officials Responsible for Municipalities. The seminar brought together different points of view of how finance ministries can adopt municipal budgeting rules that make it easier for cities to reduce energy expenses. In addition, national environmental protection funds can provide financing for municipal energy efficiency projects. The goal here is to provide some additional options for cities hampered by a banking sector that has little experience working with local governments.