Municipal revenues have decreased by more than 40% only for the period March - April 2020

01.06.2020

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NAMRB collected data through a survey conducted among all municipalities.

The scope of the study is reported data about own source revenues of municipalities, as well as the incurred expenses, including the unforeseen ones related to the introduced anti-epidemic measures. It covers the period 1 March - 30 April and compares the data with the same period in 2019.

82% of the municipalities or 217 out of 265 participated in NAMRB survey.

On the basis of data provided the following main tendencies can be described:

  • The income from own source revenues of municipalities has decreased by 41%, compared to the previous year, with tax revenues declining by 45%. The most affected are the large municipalities - regional centres, where the average decrease is at 44-46%.
  • The "loss" of own source revenues for the period compared to the previous year, exceeds BGN 159 million. The projected contraction of the planned annual revenues is estimated at 11%. According to the analysis, at the end of May this "loss" is expected to exceed BGN 200 million.
  • Due to the lack of predictability in the implementation of anti-epidemic measures, it is impossible to limit expenditures at the same rate as revenues. Municipalities managed to limit their expenditures only by BGN 44 million at the end of April, compared to the same period in 2019. Reduction of expenditures for local activities and reduction of the volume of co-financing as of May is not expected, on the contrary - the forecasts are for growth of expenditures by over BGN 242 million, compared to the previous year (March - May).
  • Municipalities make great efforts at local level to maintain employment in municipal enterprises, companies and activities, the operation of which for objective reasons were suspended, respectively - the ability to generate revenue.
  • Pursuant to the recommendations of the health authorities, the municipalities spend about 0.4% of their income from own source revenues for the implementation of anti-epidemic measures. The costs for these new and unplanned activities for March and April 2020 exceed BGN 6 million, and by the end of June they are expected to reach BGN 18 million.
  • The data shows a clear trend for long-lasting deficit in municipal budgets as a result of the imposed state of emergency and the restrictions to limit the spread of the coronavirus infection, which by the end of May is expected to exceed BGN 77 million.
  • Considering the general situation in the country and the slowdown of the economy, the probability for overcoming the deficit in short term is minimal.
  • The expectations that a large share of local tax revenues will be collected by the end of June are also overly optimistic.
  • The percentage based contraction of expenditure in the budgetary sphere would cause mass unemployment in the municipal enterprises most affected by the crisis. In parallel this would result in additional burden to the state budget for paying unemployment compensations. The employees in the local government sector are over 36 thousand people, whose salaries are financed with own source revenues.
  • Last but not least both citizens and business expect that all municipal services are maintained, i.e. the current quality and quantity of services should be preserved during the crisis and in the post crisis period.

Similar conclusions and tendencies can be found in many other international analysis and surveys. Mitigating the financial impact and supporting the local authorities will be essential. Their future financial stability will depend significantly on the level of extraordinary support from central governments.