RISK OF OVERINVESTMENT IN MUNICIPALITIES

Abstract

This article describes investment activities of self-government territorial units. Its aim is to present the importance
of investments for the provision of public services by municipalities. The opinions of the respondents
about the causes of excessive or misguided investments and the ways of reducing their scale were presented.
Surveys were conducted in 2015 and the temporal scope of the analysis is 2009–2014. The importance of
investments for the provision of public services, shaping the living conditions of inhabitants, and conducting
business activity were described. Based on that, overinvestment was identified as a negative trend in public
resources management. The most frequent causes of excessive investment are megalomania of the municipality
authorities and their desire to gain the support of the inhabitants (voters). Another important aspect is
the lack of sufficient social control in the decision-making process regarding investment tasks execution. It
was also demonstrated that overinvestment is due to the purpose of spending financial resources, not to the
relative amount of investment expenses. Among the actions preventing excessive or misguided investments,
the cost and benefit analysis was indicated the most often. Using strategic planning tools is also beneficial for
the effectiveness of investing in self-government.