Municipalities’ union welcomes new state funding formula

The Union of Municipalities on Tuesday welcomed a proposed change to the way municipalities receive annual state funding, saying the interior ministry had included its main proposals in an amendment bill. Under the bill, the existing fixed state grant of €117 million would be replaced by a fixed rate of 1.52 per cent of the state’s maximum ceilings for net primary expenditure, as included in the annual state budget. Net primary expenditure would exclude loan repayments, interest payments, investments, defence spending and Cyprus’ contribution to the European Union budget. The bill would also allow additional funding to be provided to municipalities in cases where there are serious and properly justified reasons. The Union of Municipalities said the proposed arrangement was the result of consultations held in recent months and addressed its long-standing request for a stable, institutionalised and predictable funding framework. It said linking municipal funding to the state’s actual fiscal figures would provide greater financial stability and help ensure the long-term viability of local authorities. The union said the new formula would move away from what it described as an outdated funding model and provide a more rational basis for financing local government. It also thanked Antonis Economides, head of the local government directorate, for his role in the discussions. The Union of Municipalities said it looked forward to the swift completion of the legal review and submission of the bill to parliament. It called on all parliamentary parties to support the legislation, saying its approval would allow the new funding framework for municipalities to be formally established.