Municipal
assets consist of movable and immovable property, financial assets and rights.
The value of such assets is stated in the balance sheet of assets, approved by
each municipality in accordance with the law.
Municipalities
manage the following property:
·
land (building land, vacant
building land, agricultural land), acquired by a municipality through payment
or by other means;
·
municipal infrastructure (roads owned by the municipality, waterworks, hot water
supply, gas supply, etc.);
·
housing (subsidised and
non-profit municipal housing);
·
commercial space (available
for rent for various commercial and non-commercial purposes);
·
capital shares (in public companies, public institutions and commercial
companies, banks, etc.);
·
financial resources from the
budget, public funds and agencies;
·
other financial resources (deposits, securities, etc.).
The
municipality must manage all its property in line with sound economic
principles.
The
disposal of municipal assets is possible only against payment, unless the
assets are donated for humanitarian, scientific, research, educational and
other purposes of this kind. The Municipal Council is the body competent to
decide on such disposal.
A
municipality may manage its property in several ways. It may:
1.
manage it on its own through
its municipal administration office;
2.
establish a public fund to
which it transfers a certain kind of property for management (e.g. housing
funds manage the housing and business premises);
3.
establish a public
institution for the management of a certain kind of property (e.g. a public
institution for the management of building land in cities);
4.
establish a public enterprise or a public commercial institution to manage certain
types of property (e.g. public waterworks, public sewerage, waste disposal,
maintenance of municipal roads, etc.);
5.
grant concessions to natural and legal persons for the management of certain
types of property.
In 1999,
we introduced a new system for the financing of municipalities. In 1998,
amendments to the Financing of Municipalities Act were adopted which
established a new system of municipal financing. The essence of these changes
lies in the introduction of new bases for the financing of those tasks which
are performed by municipalities according to the Constitution and the law.
The
legal powers vested in municipalities to perform certain tasks are meaningless
if the authorities do not have the financial resources required for their
implementation. In Article 9 of the European Charter it is stipulated that
local authorities are entitled to certain proper financial resources within
national economic policy, to be used by them freely within their authority.
The financial resources
of local authorities must be proportional to the tasks defined by the
Constitution and prescribed by law. At least part of their financial resources
must come from local taxes and contributions, with the amounts or limits
determined by local authorities themselves in accordance with the law. In order
to protect financially disadvantaged local authorities, it is necessary to
introduce procedures of financial equalisation.
These
are the basic principles of the system for financing municipalities:
Article 142 of the Slovenian Constitution
states that municipalities must raise their own revenue. Financially disadvantaged municipalities, unable to fully perform their
duties, are eligible to receive additional financial assistance from the state
in accordance with the principles and criteria prescribed by the law. Relying
on a constitutional provision, the Local Government Act stipulates that local
matters of public interest are to be financed by the municipality's own
resources, state budget and loans. A municipality’s own resources include taxes
and other contributions, and revenue from its assets.
The Act Amending the Financing
of Municipalities Act abolished the system of financing of expenditure, which
was based on criteria for allocating expenditures predetermined by line
ministries in cooperation with municipalities and which had a major impact on
the so-called financial equalisation of municipalities or additional resources
from the state budget. Only municipalities that are unable to provide their own
resources for the implementation of the functions related to their local
matters of public interest, as set by the Constitution and by the law, are
entitled to such financial equalisation.
A system
of appropriate expenditure, i.e. an appropriate amount of resources, has been
introduced so as to allow a municipality to carry out its constitutional and
legal responsibilities.
The
basic principle of the Financing of Municipalities Act is that a municipality
is financed through its own revenue. Municipalities which cover the cost of
appropriate expenditure with their own revenue are not entitled to financial
equalisation. The Act differentiates between two kinds of municipality
revenues, i.e. revenue under Articles 21 and 23 and revenue under Article 22 of
the Act.
Revenue
under Article 21 and Article 23 consists of:
·
35% of personal income tax
(which amounts to an average of 77% of the entire revenue of a municipality);
·
inheritance and gift taxes;
·
taxes on profits from lotteries
and gaming;
·
taxes on real estate
business transactions;
·
administrative fees and
duties;
·
special tax on the use of slot machines outside casinos.
Municipalities
do not exert any influence on the tax rates, as they are determined by law and
are assigned to municipalities by the state.
The
revenue under Article 22 consists of:
·
property tax;
·
compensation for use of
building land;
·
local tourist taxes;
·
municipal communal rates;
·
various fees;
·
indemnities due to a change
of land use of agricultural land or forest;
·
compensation and indemnity
for the degradation and pollution of the environment;
·
administrative revenue;
·
revenue defined by other acts.
The most
important of the stated revenue sources is compensation for the use of building
land, which amounts to 56% of all revenue under Article 22 of the Act.
Financial transfers and other resources
Appropriate expenditure
The Act
specifies that all resources which allow the municipality to perform its
constitutional and legal responsibilities, represent
the so-called scope of resources for the financing of matters of local public
interest.
The
appropriate expenditure per inhabitant is defined by the Slovenian National
Assembly when the state budget is passed for a set fiscal year. This
expenditure is determined as an average amount of resources per inhabitant of
Local
interest tasks can be grouped in the following way:
·
the work of municipal
administration and bodies;
·
matters of local public
interest in the area of elementary education, culture, sports, social care,
primary health care and other social services;
·
public commercial services
of local interest financed through a municipal budget (public utilities, road
works, housing construction, physical planning, environmental protection, and
other similar activities);
·
fire safety matters and
protection against natural and other disasters;
·
other matters of local public interest (mortuary services, tourism,
agriculture, business – particularly small businesses).
Appropriate
expenditures do not include funds for urgent investments in the public
utilities and other public infrastructure.
The
appropriate scope of resources (appropriate expenditure) for the financing of
previously stated tasks is determined on the basis of a mathematical equation
in which the appropriate scope of resources per capita, defined by the National
Assembly, amounts to 70% of resources, while correction factors amount to a
total of 30%.
The
correction factors taken into consideration are:
·
ratio between the per capita
length of local roads in an individual municipality and the per capita length
of local roads in
·
ratio between the per capita
surface area of an individual municipality and the per capita surface area of
·
ratio between the share of
population under the age of 15 in the entire population of an individual
municipality and the average share for municipalities in
·
ratio between the share of persons under the age of 65 in the entire population
of an individual municipality and the average share for municipalities in
The
above mentioned equation is used by each municipality to calculate its
appropriate expenditure.
Those
municipalities which cannot ensure their own resources to finance appropriate
expenditure are entitled to financial equalisation by allotment of funds from
the state budget. In 1999, 172 municipalities out of 192 made use of this
possibility. Those municipalities whose own resources exceed the calculated appropriate
expenditure are not entitled to financial equalisation may freely dispose of
such surplus resources and may not have these surpluses removed from them.
Municipalities
are also entitled to state co-financing of municipal investments (elementary schools,
kindergartens, road construction, infrastructure for public utilities) in the
amount of 10%-70% of the value of investment. The state share of co-financing
depends upon the economic standing of a municipality, so that municipalities
with smaller revenue receive greater share of funds for investments. The law
defines the scale for such co-investments, while the decision on co-financing
is made by the Government of the
Municipalities
are also entitled to raise loans for the co-financing of their programs and
projects in the area of regional development, for advancement of agriculture,
small business and for other developmental tasks.
Municipalities
unable to cover the appropriate expenditure with their own resources as
stipulated in Articles 21, 22, and 23 of the Act, can rely upon the state for
financial equalisation.
Financial
equalisation is the balance between the volume of resources for appropriate
expenditure and the volume of municipalities' own resources. The following
rules are used for financial equalisation:
·
financial equalisation can
be provided for the amount of appropriate expenditure only;
·
for the purpose of financial equalisation the municipality's own revenue is
assessed according to the rates defined by law, however, if no such rates
exist, average national rates are applied.
Article
26 of the Act sets the rules of co-financing of investments in municipalities.
The volume of co-financing funds depends on the per capita share of personal
income tax in a municipality in comparison with the average of such shares of
municipalities in
In
Article 24b, the Act specifies that municipalities may use the budget
independently and in accordance with the law. Regardless of whether the
municipality obtains its budget through its own revenue or by financial
equalisation, it may freely disposes. However, the municipality is obliged to
implement its legal functions and, in turn, to provide resources for them.
Municipalities
can incur debts only for those investments that are approved by the Municipal
Council.
Municipalities
may not incur debts exceeding 10% of the realised revenue of municipalities in
the year prior to the year of borrowing, while the repayment of principal and
interest in a particular year must not exceed 5% of the realised revenue.
Exceptionally,
a municipality may incur a larger debt, but only for financing housing
construction, water supply, sewage and waste disposal.
Public
enterprises and public institutes, which were co-founded by a municipality may incur debts only with the approval of the
founder. Any approvals issued must define the scope of additional borrowing
possible.
Findings
show that the appropriate expenditure resources provide at least
25% (approx.) of the resources for
investments undertaken by local authorities.
On the basis of the system
of appropriate expenditure and financial equalisation, municipalities can finance the performance of their functions
as specified in the current legislation, while also investing
some of their resources in development. Municipalities with a better economic standing whose own resources exceed
the calculated appropriate expenditure are certainly in a stronger position. The adequacy
of financial resources for the
implementation of their functions also depends on the extent of
a local authorities' readiness to impose liabilities on their residents.