LOCAL GOVERNMENT SLOWLY AWAKENS IN WESTERN GEORGIA

C O N F I D E N T I A L SECTION 01 OF 03 TBILISI 002393

SIPDIS

SIPDIS

DEPARTMENT FOR EUR/CARC

E.O. 12958: DECL: 09/14/2017
TAGS: PGOV GG
SUBJECT: LOCAL GOVERNMENT SLOWLY AWAKENS IN WESTERN GEORGIA

REF: TBILISI 220

Classified By: Charge d'Affaires Mark X. Perry for reasons 1.4 (b) and
(d).


1. (C) Summary: On August 7-9 an Embassy team traveled to
Western Georgia to assess the development of local
governance. Government of Autonomous Republic of Adjara
Chairman Levan Varshalomidze reaffirmed his support for the
USAID-funded Public Administration Reform program, which is
working to professionalize his executive staff. At
USAID-funded working retreats, local officials from Kutaisi,
Poti, and Batumi discussed their local situations, pointing
out that they needed more money to fund necessary local
services. David Melua, Executive Director of the National
Association of Local Authorities (NALA),said local
government's relationship with the central government
continues to grow, slowly. End Summary.

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NALA, Local Government Organization,
and the State of Decentralization
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2. (U) On 9 August, Poloff met David Melua, Executive
Director of NALA. Melua briefed Poloff on NALA's history and
the relationship between the local and central governments.
In Georgia, there are 5 semi-independent cities (Tbilisi,
Kutaisi, Rustavi, Batumi, and Poti.) These five cities have
their own city councils (Sakrebulos). In the rest of the
country, there are 69 municipalities, or Sakrebulos (4 are
non-functioning in Abkhazia and South Ossetia),which
represent all the villages and towns within their borders.
Each village has a paid Trustee, who represents the village's
needs before the Sakrebulo. Each Sakrebulo has a mayor, or
gamgebeli, who is a professional administrator (similar to a
city manager),appointed by and answering to the Sakrebulo.
Each Sakrebulo also has a chairman, elected by the Sakrebulo
council members. Additionally, there are nine appointed
representatives of the President (Governors) who serve in an
advisory capacity to the Sakrebulos and cities throughout the
country. There is no residential requirement for mayors,
gamgebelis, Sakrebulo chairmen, or Governors in Georgia.
Consequently, carpet-bagging does take place on the local
level. The Sakrebulo members were all elected in the local
elections of 2006. These elections were dominated by the
ruling National Movement (UNM) party. All mayors,
gamgebelis, and Sakrebulo chairmen can participate in NALA.


3. (SBU) NALA is funded by dues from the Sakrebulos.
Currently about one-half of NALA's members pay their dues.
NALA was created in response to Georgia signing the COE's
Charter on Local Self-Governance, as a professional
organization was a requirement of the charter. Melua advised
that in moving from 1000 districts (prior to the 2006
elections) to the 69 Sakrebulos, local government has become
much more manageable. However, the Governor positions and
their authority are questionable, because the government is
currently run by one party, the UNM. Most of the tension the
Sakrebulos face with the central government is now taking
place with the Ministry of Finance (MOF) over decentralizing
the MOF's power regarding budgets. A proposed equalization
formula, supported by the COE, would allocate set percentages
of tax to the municipalities for their budgets. However,
this is not supported by the MOF, which prefers an
alternative per capita distribution formula, which Melua said
does not meet the COE's standards. He said that the IMF is
also concerned about the formula, as it would create a large
amount of money with uncertain local control.


4. (SBU) In 2010, the local government system will change so
that mayors will be elected from the Sakrebulo Council
members, and then they will hire/appoint a professional city
manager. At that time, a new Ministry of Local Affairs will
be formalized and the Governors will report to this ministry.
The GOG will have to report to the COE on the progress of
decentralization in May 2008, most likely with a presentation
by Deputy Speaker Mikheil Machavariani. On the larger
question of decentralization, Melua said that the growing
pains between the central and local governments bode well for
the future. Eventually, he said, local government will have
to succeed. The only questions are what time, forum, and
tools it will require.

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On PAR with Varshalomidze
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5. (C) In an August 8 meeting with Emboffs, Adjara Governor
Levan Varshalomidze expressed strong support for ongoing
USAID-funded efforts to improve public administration in

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Adjara. He also promised to personally participate in the
Management Training component. Varshalomidze stressed that
tourism development is a priority for the region, and he
invited USAID to assist with public administration reform in
his Tourism Department as well.

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USAID Promotes Self Government with MPs, Locals
-------------- --


6. (U) On 8 and 9 August, USAID grantee Urban Institute (UI)
sponsored two local self-governance retreats. The first was
held in Batumi for members of Parliament's Committee on
Regional Policy, Self Government and Mountainous Regions.
The other was held in nearby Kobuleti for local
administrators including mayors, municipal council
(Sakrebulo) members, and professional municipal employees.
The MPs focused on Parliamentary priorities and the
development of self-governance in the Adjara region. Working
with regional Adjaran officials, they agreed to create a
working group to reconcile the Organic Law on Local
Self-Governments and the Adjaran Government with legislation
this fall. The local administrators focused on service
improvement in local government. The Embassy team presented
USAID-funded computers for service improvement to 5 of the
local municipalities, including Abasha, Lanchkhuti,
Chokhatauri, Tsageri, and Mestia.

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Municipal Government and Economic Conditions
In Kutaisi, Poti, and Batumi
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7. (C) On 7 August, Poloff met new Mayor Niko
Kachkachishvili, Deputy Mayor Giga Shushania, and Sakrebulo
Chairman Amiran Khvadagiani of the city government in
Kutaisi. Kutaisi is the second-largest city in Georgia, with
a population of approximately 180,000. Kachkachishvili
participated in an Open World visit to the US in 2007. The
city is working with a USAID implementer to increase the
transparency of their budget process. He said that it is
difficult to manage the city with the current budget. Their
draft budget is due in September, but they often do not know
how much money will be allocated to the city by the Ministry
of Finance until February. Most city services are
out-sourced and the city is not fully versed in public
procurement. The city has little in the way of revenue
streams (some small user fees) and lacks a financing
capability (i.e. public bonds). 300 new businesses were
registered in the city within the last year. The city is
hoping for donors to help establish information service
centers and a tourism development strategy. (Note: Local
media and the NGO community are monitoring the city for signs
of corruption, as two months earlier 24 local officials were
arrested in Kutaisi for embezzlement of public funds
(reftel). End note.) The Sakrebulo Chairman asked for USG
assistance in acquiring used/depreciated garbage trucks,
streetsweepers, and fire engines from U.S. cities.


8. (C) On 7 August, Poloff met Sakrebulo Chairman David
Shurghaia and Deputy Chairman Gocha Tughushi in the city of
Poti. Poti's population is approximately 50,000, and it is
home to the largest Georgian port on the Black Sea. It lies
on a sandy delta surrounded by the Rioni river, making it
vulnerable to floods and a nightmare for community water and
sewer systems. Although the water system will be repaired
via an MCC grant, serious problems will remain. Currently
all of the city's sewage runs to the sea. The landfill sits
on the flood-prone banks of the river, and also sends much
trash to the sea. Chairman Shurghaia described in detail a
$35 million USD plan for a seawall, reinforcing the river
banks, and creating a drainage system for the city. The city
is looking for donors for the project. They currently have
good relations with the Governor of Samegrelo, but they do
not like their tax money leaving the city to support lesser
populated regions. Shurghaia sees Poti as a unique city and
should be treated so, similar to Tbilisi. Poti officials
would like to form a bloc with the other four independent
cities (Tbilisi, Kutaisi, Rustavi, and Batumi) to represent
the cities' interest before the central government. They do
not currently see NALA as a strong proponent of their local
interests. The city is optimistic that the coming free
economic trade zone will benefit the local economy. UI
recently helped the city develop an economic development
plan, which now needs implementation.


9. (C) Amid rumors that Mayor Irakli Tavartkiladze was about
to be replaced, Poloff met with Batumi's Deputy Mayor, Robert
Chkhaidze, August 9 to discuss self-governance in that city.
(Note: The rumors proved true as Tavartkiladze resigned
August 14. Chkhaidze was elected the new mayor September 14,

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being the only nominee (of 6) presented for consideration by
the city assembly. Tavartkiladze has been appointed Georgian
Ambassador to Greece. End note.) Batumi is home to a large
port on the Black Sea, which continues to ship massive
quantities of oil brought from Azerbaijan on rail. It sits
astride the country's primary overland trucking route on the
Turkish border. Armenians and Georgians alike come to enjoy
the beach and sub-tropical climate. The city retains much of
its pre-Soviet architecture, and it is beautifully
illuminated at night. Numerous new hotels and apartments are
under construction, reportedly by Kazakh and Turkish firms.
Consequently, there is more visible economic activity here
than in the other cities visited. Echoing Varshalomidze,
Chkhaidze confirmed that tourism is the city's key economic
development goal. Officials are currently looking for an
investor to explore building a ski resort in the nearby
Shuakhevi mountains. Chkhaidze approximated the city's
population at around 115,000.


10. (C) Batumi is the heart of Adjara, and it experiences
significantly more autonomy from the Ministry of Finance than
the other cities and regions of Western Georgia. Due to its
political structure, the city retains much of its internal
revenue and has spent a great deal of money since 2003 on
infrastructure. Its budget of GEL 52 million (31.2 million
USD) is three times what it was before the revolution.
Unique among the cities visited, Batumi plans to arrange its
own financing for infrastructure repair directly with the
EBRD, without needing the central government to serve as
guarantor. As with the others, Batumi's waterworks are in
poor repair. MCC will fund temporary repairs, but the city
signed a EUR 93 mil deal with German firm KFW to completely
rehabilitate the water, sewer, and drainage systems of the
city by 2015. Chkhaidze cautioned that the city is not
completely autonomous. It currently receives funding from
the Adjaran and central governments, but he hopes the city
may be financially self-sufficient in a few years. Chkhaidze
said that Batumi's city government will improve once an
accurate property inventory is completed. Although Batumi is
an independent city (not a regional Sakrebulo, but it has its
own city council),Chkhaidze championed the recent structural
changes which formed the Sakrebulos into a manageable number
(69 nationwide.) Still, he mentioned that it is difficult
for many Adjaran villages to be adequately represented in the
other Adjaran Sakrebulos (outside of Batumi) with only a
single trustee.

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Comment
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11. (C) Comment: The GOG's effort to decentralize the
formerly top-down, federal structure are showing some signs
of success. Batumi is a case in point. With a strong
potential for tourism and forward-thinking leadership, this
once shabby Black Sea resort town has now become an
attractive destination for Western tourists. But other parts
of the country lack some of these natural qualities. A
record of strong, local public administration does not exist,
while a history of corruption does. All cities said that
they need more money and better information regarding their
budgets. Only Batumi has significant local revenue sources,
and all cities acknowledged that a lack of financing options
is a problem. Some were more outspoken about needing the
central government to be more responsive, but few see NALA as
a strong proponent toward the central Government at this
time. We will need to keep encouraging the government to be
responsive to the needs of local authorities, while at the
same time working to ensure local authorities have the
training and the checks and balances to properly carry out
their duty to represent and address local concerns and needs.
End comment.
PERRY