Model of administrative-territorial reform in Ukraine,
Worked out by the Institute of Society Transformation.

The model of administrative-territorial reform in Ukraine (further is the Model) was worked out and elaborated by the Institute of Society Transformation (Director is Oleh Soskin) and offered to discussion for the first time at the round table Forming cities-areas in the frameworks of the reform Ukraines territorial order. This measure was initiated and conducted by Institute of Society Transformation (IST) on September 14, 2005 in Kyiv with participation of 30 Ukrainian city mayors, experts, representatives of the Verkchovna Radas of Ukraine (the Supreme Council of Ukraine) Plenipotentiary on Human Rights, the Coordinator of OSCE projects in Ukraine. Discussion of the Model has been prolonged during other events organized by IST, such as: the workshop The administrative-territorial reform: steps to realization (on the example of the Poltava region) with the participation of 14 Poltava region mayors (Poltava, December 14, 2005); the round table European choice of Ukraine. Administrative-territorial reform: problems and methods of its implementation with the participation of 8 Cherkasy region mayors (Cherkasy, May 19, 2006); the Finlandmodel of self-governanceand opportunities of its exploring in Ukraine with the participation of 20 Ukrainian city mayors (Kyiv, June 30, 2006); the workshop Strengthening of the system of local self-governance in the context of conducting the administrative-territorial reform in Ukraine with the participation of 29 Lugansk region mayors (Lugansk, October 4, 2006); the workshop Ways of local self-governance strengthening: Norwegian experience and Ukrainian prospect(Kyiv, November 3, 2006) with the participation of 15 Ukrainian city mayors; the workshop Ways of self-sufficient local communities forming in the context of Ukrainian administrative-territorial reform (Kchmelnytskyi, December 1, 2006) with the participation of 13 Kchmelnytskyi region city mayors and 2 village headmen; the training Practical aspects for stimulation of Ukrainian cities economy in the context of Finland experience (Kyiv, December 12, 2006) with the participation of 9 Ukrainian mayors; the workshop Reform of the Ukrainian local self-government system: elaboration of optimum model (Mykolaiv, June 21, 2007) with the participation of 7 Mykolaiv region and 3 Kcherson region mayors and village headmen. Practical suggestions, remarks, clarifications have been expressed to the Model during the discussions. Some important conclusions of experts (in particular, Petro Maslyak, Vadim Proshko, Igor Bystryakov) and Ukrainian city mayors were taken into consideration. As a result, the total Model was corrected and the consolidated document from a number of key principles and statements which are suggested to put in the basis of administrative-territorial reform in Ukraine was produced. Nowadays the Model is supported by the 150 Ukrainian city mayors. On the initiative of IST the All-Ukrainian Council of Mayors for the Implementation of the Administrative-Territorial Reform in Ukraine was created (July 12, 2007).

Fundamental objectives of administrative-territorial reform in Ukraine realization

1. Conducting of the system administrative-territorial reform in Ukraine is an objective necessity. It must create the background for development of our country according to the model of public capitalism on the principles of democracy and territories self-sufficiency.

2. The purpose of administrative-territorial reform should be demonopolization and decentralization of the state governing system by widening of local self-governing bodies plenary powers. State authority should mainly work out and realize national strategy of development.

3. The model of local self-government created during the reform must be supported by proper financial base which will protect from a bribery and false money redistribution.

4. Interests of local communities should be in the basis of the administrative-territorial reform strategys choice instead of state machine. The main function of state governing system must become providing citizens with larger amount of public services.

5. Draft law About territorial device of Ukraine, offered by the former Vice-Prime-Minister of Ukraine Roman Bezsmertnyi, does not match national interests of Ukraine, does not have scientific basis, and therefore it can not be a base document for carrying out of administrative-territorial reform in our country.

6. Exactly the Ukrainian city mayors, due to professional skills of which the state outlived difficult political times, must become a motive force of administrative-territorial reform. They should initiate elaboration of a new law which will correspond to the interests of local communities.

7. It is needed to provide the complexity of carrying out the reform of local self-government. It means that the change of administrative-territorial structure must take place with tax and budgetary reforms simultaneously.

8. The new Law About administrative-territorial device of Ukraine must include such conceptual issues:
- two-step administrative governing system;
- local community is a basic unit of local self-government;
- liquidation of the delegated plenary powers of local self-government bodies;
- liquidation of the district councils and district state administrations;
- creation of the palanka-departments (working name) instead of regions;
- liquidation of the State treasury system at the level of local communities;
- abolishment of the force agencies at the level of local communities.

For the successful implementation of the reform in Ukraine optimal, historically and economically conditioned conception of new territorial device of the country and self-governing realization should be preliminary working out.

The territorial self-government system in Ukraine must have an integral vertical-horizontal structure of local self-government and consist of two elements (levels):
1) city and rural communities;
2) palankas (departments).

City-agglomeration which is a special form of self-government should be an additional element of this two-level system.

The first level. Community must become a base level and a basic unit of local self-government of Ukraine. It is certain quantity of people that live on common territory and make decision about an association in self-sufficient self-governing unit by a local referendum. It is necessary to cast aside the criterion of quantity as condition of community creation. Any settlement can be a community independently of quantity of persons who live in it.
Existence of districts is inexpedient, while any settlement can be a community, regardless of its quantity, if persons who live in it consider that they are able to provide the proper terms of social-economic and humanitarian development of this settlement.

Communities can form cities, villages and settlements of city type. Settlements and villages are in a right on a voluntary basis to join and to form the joint community. They also can join a city, if their communities and city community accepted the decision about this on a local referendum.
Community elects a city (rural) Head and Community Council by direct elections. Community Council elects its Speaker and asserts Executive Committee of community (city, rural) which is headed by a Head automatically.

All public affairs of local value must belong to the sphere of community activity, namely: soil disposing, organization of communal system and infrastructure functioning, drawing of investments, maintenance of the common use objects, organization of communal transport work, housing building, trade areas facilities construction, environmental protection, organization of educational and cultural life, health protection, keeping public security, organization of fire services etc.
Its reasonable to abolish the SBU (Security Service of Ukraine), Ministry for Internal Affairs, tax administrations.

The second level of local self-government is palankas (departments, districts, regions). The idea of their introduction is based on French experience of territorial reform realization by Sharl de Goll, that is acknowledged as the most successful administrative-territorial reform of the XX century. When serious separatism tendencies appeared in France at the level of traditional regions, de Goll' introduced in the state system of local departments (94).
Realization of similar approach in Ukraine will enable to liquidate bureaucratic formations in the form of administrative districts and regions, and to create instead of previous one the system of self-sufficient local structures that are equal between themselves. Such administrative-territorial division will allow approaching power to the people, activating enrolment of communities in the process of governing, avoiding unnecessary bureaucracy and separatism.
Its proposed to create 99 palankas instead of 25 regions and 490 districts. Embodiment of the offered model will inevitably pull down 25 centres and raise 74, and power vertical line will get rid of additional link districts. Palanka is the traditional Ukrainian name of the organized and guided territory (cossack palanka).

State governmental administration and local self-governing elected body Palanka Council must operate within the frameworks of each territorial palanka. Palanka Council will elect its Speaker, form Executive Committee and appoint a Head of Executive Committee from a number of deputies.
The functions of State governmental administration and body of local authority in palanka must be written clearly and provided with the proper financing from the palankas budget or from the state one. Its essential to abolish the delegated plenary powers system in order to prevent mutual accusations of state and local bodies of authority in non-fulfilment of their responsibilities.

A main task of self-governing bodies of palankas is forming of the territory development strategy, realization of the general programs (concerning building and maintaining roads, infrastructure, providing of ecological balance etc.). Military units, structures of the SBU and Ministry of Internal Affairs, public prosecutors offices, courts are kept by the State governmental administration. The bodies of the military organizations are created exceptionally at the level of palanka, instead of communities.

Palanka implements public tasks that are not within the fields of communitys activity, in particular: social help, transport and palanka setting ways, territory development, water services, protection of public security, overcoming of extraordinary situations and maintenance of the common use objects. The culture and education sphere, medical providing must be financed from the palankas budget and from the state budget both. It depends on purpose of use of objects which are the elements of their infrastructure. For example, large medical and scientific centres, clinical hospitals must be financed by the state, and small policlinics, hospitals of first-aid, kindergartens by palankas. Colleges, institutes, universities must pass to the private pattern of ownership. A few palankas can combine their efforts for projects implementation which are regarded as mutual interest.

The special form of territorial self-government city-agglomerations must become. Their status is equal to palankas. The question is about large megacities with adjoining to them communities that are out of the agglomeration city-centre, but they are associated closely with it by numerous functions. An agglomeration is characterized by the difficult functional-territorial structure, by connection with the one city-centre (in the case of monocentral agglomeration), large specific weight of non-agrarian population, high level of population density, urbanization and industrialization, well ramified transport city and intercity networks and others. Territorial structures included in a city-agglomeration elect Agglomeration Council. Approximately 30 city-agglomerations can be formed in Ukraine. Among them 25 are the present regional centres of the country.
Thus, according to the new state territorial structure, there will be no division of Ukrainian cities on district, regional and central one. All cities will be equal.

For the proper financing of new self-governing units system it is necessary to change the model of taxation in Ukraine. Fair, rational and transparent methodology of the collected taxes splintering must be put in the basis of the tax system: 40% of all taxes receipts must be left at the level of community, 20% is to be transferred to the palankas budget, others to the state budget.
Procedure of taxes payment must be simple and clear, but their amount is to be limited. For any state may be regarded as optimum introduction of such taxes and their levels, as: tax on the incomes of physical persons 10%, tax on sale of goods and services 5%, land tax (depending on the area of lot land which is in the ownership of physical or juridical subject) from 5 to 10%, local collections, if community decides about their introduction. The united social tax 10% must be recounted on the individual social savings accounts of citizens instead of present assignments for different social funds. Value-added tax, tax on enterprise income, deductions to the Pension fund and also other social funds must be abolished and these funds are needed to liquidate.
Community Council and Palanka Council form their control chambers that keep on eye correct implementation of budgets expenditure part. Treasury at the level of community must be liquidated, but it must stay at the palankas level. It must control only those financial resources that are given communities, city-agglomerations, palankas from the state budget.

The Cabinet of Ministers of Ukraine must set out boundaries of the new-created communities, and the boundaries of city-agglomerations and palankas are to be ratified by the Verkchovna Rada of Ukraine.

Realization of administrative-territorial reform in Ukraine must be based on such principles:
Unitarity is prior state interest. Creation of powerful self-sufficient palankas will not threaten the unity of country, but vice versa, will strengthen it. The State governmental administrations will guarantee it at the level of palankas and equated with them city-agglomerations.
Bodies of local self-government should be provided with wide powers for realization of communities development aims. In that way effective regional state development will be realized and considerable part of the Ukrainian citizens will be drawn into the decision-making process in the state.
A priority help or subsidizing of communities is for resolving problems in social sphere. The question is if community is unable to solve the social tasks that are put against it independently, the state must help it. At the same time the collaboration of local authority with business for the purpose of needed to the community resources drawing is encouraged.

National well-being. This principle foresees reduction of break in profits and living standards between rich and poor people, creation of powerful middle class and construction of public capitalism economic model in the country, the basis of which national bourgeoisie will become.
Simultaneous introduction of all territorial self-government levels, such as communities, palankas and city-agglomerations is essential. That is caused by the necessity of functional tasks and duties repartition between the different bodies of state and local power. Such approach will allow: to minimize the amount of costs, needed for reform realization; to reduce the terms of its conducting; to provide the normal process of society adaptation to the changes; to organize the mutual partnership system between the state machine, palankas and communities; to establish possibility of common interregional development programs creation.

Proper preparation for the reform. Creation of territorial self-governmental bodies, conducting of the proper explanatory work with communities, adjustment of basic state laws and regulations with a legislation about new administrative-territorial order must be provided before the practical introduction of the new model of administrative-territorial order in Ukraine. It is important to define correctly mechanisms of property and financial questions solving: the property division between the self-government levels of communities, palankas and city-agglomerations, formation of the accounting procedure for the given state subsidies, recount and division of costs and debts of administrative units that will be liquidated during the reform.
Proper preparation for the reform will protect the country from disorganization and administrative mess during the period of adaptation for innovations. It will also give ability to avoid limitations (or invasion) of human rights and freedoms.

Dr. Oleh Soskin,
Director of Institute of Society Transformation,
Head of the Department of International Economics and
Entrepreneurship of the National Academy of Management, Professor

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