Union of Municipalities welcomes proposed state funding formula

Nicosia, Cyprus. The Union of Municipalities on Tuesday welcomed a proposed change to annual state funding for municipalities, saying the interior ministry had incorporated its main proposals into an amendment bill.

Proposed funding formula

The bill would replace the existing fixed state grant of €117 million with a fixed rate of 1.52 per cent of the state’s maximum ceilings for net primary expenditure, as set out 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 municipalities to receive additional funding where there are serious and properly justified reasons.

Predictable funding framework

The Union of Municipalities said the proposed arrangement resulted from consultations held in recent months and addressed its long-standing request for a stable, institutionalised and predictable funding framework.

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, it said.

The union said the formula would move away from what it described as an outdated funding model and provide a more rational basis for financing local government.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.

Call for parliamentary support

The union 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 approval would formally establish the new municipal funding framework.