Guidelines on Local Government Borrowing and Recent Developments in South East Europe
8. How local government associations can help improve the local debt legislation and credit market

8.3. In relation to central governments

General remarks

The relationship between local government associations and central governments in the design of legislation regarding local public finance and debt is decisive. Local governments should make every effort to develop and consolidate a cooperative relationship with central governments as a first necessary step in the pursuit of their aims.

The relationship may be institutionalized or ad-hoc. In the former case, a national regulation should provide that draft legislation influencing local governments must be separately discussed and debated with representative associations. The names of the associations should be clearly stated. In addition, a procedure should be laid out dealing with at least the following issues:

the type of draft legislation to be consulted with local government associations (laws, government resolutions, emergency ordinances/ legislation, minister orders etc);

the areas of legislation to be consulted separately with local government associations (anything that influences the operation of local governments or a limited number of areas finance, allocation of expenditure responsibilities, human resources etc);

the phase(s) when the consultation takes place (before the final approval decision, before or after the first draft is completed, before endorsement by the initiating central government institution etc);

the forms of consultation (written communication, meetings, conferences etc);

the deadlines for written communications (for instance, the line ministry would expect feedback from the associations in 10 days from communication and 3 days in emergency situations);

the report on the consultation procedure and the associations’ points of view should be included in the description documentation accompanying the draft legislation to the decision-makers;

the sanctions for non-compliance with the consultation procedure (challenges to the administrative/ constitutional courts, fines etc).

The ad-hoc relationship does not require special consultation with local government associations. This can be carried out as part of the general public consultations. Special local government consultations take place only if the central government deems necessary. In certain situations, central governments may deliberately seek to avoid discussing to local government associations and stick to the minimum legal requirement for transparency. As a result of this approach the message of local government associations may dilute into a melting pot or may not be heard at all.

Consequently, it is wise for local governments to push for an institutionalized relationship with central governments as a prerequisite for successful influence on national legislation.

Example 1:
Istanbul Municipal Infrastructure Project financed by World Bank Development Program Loan of Environmental Projects
In Romania the relationship between the four local government associations and the central governments has been institutionalized since 2005 when a Government Decision laying down a special procedure was passed (G.D. no. 521/2005). The procedure requires all central government entities to consult the associations on every draft piece of legislation with direct impact on local governments 15 days (5 days in emergencies) before the approval/endorsement by the heads of the respective institutions. To this end, central government entities must assign contact persons and departments with specific responsibilities. Local government associations must send feed-back within 5 days from the reception of the draft (3 days in emergency cases). The associations’ opinions and the conduct of the procedures are included in a report attached to the draft piece of legislation and also conveyed to the Ministry of Administration and Interior (MoAI). The associations should inform quarterly the MoAI about the pieces of legislation which have been approved without consultation, their impact and related proposals for improvement. In turn, the ministry is required to present a quarterly general report to the government on the application of the consultation procedure.

In practice the procedure has been fairly well observed, but it does not compel the central government to accept the associations’ proposals. At times, the consultation is not conducted at all, but such cases are rare. Local governments have challenged to the administrative court government decisions approved without consultations, but to no avail. Finally, the quarterly reporting requirement from the associations and to the government on the conduct of consultations is not met by any stakeholder. As a conclusion, the consultation procedure has improved considerably the relationship and the influence of local government associations over central government legislation. Currently, whenever draft pieces of legislation are developed the ministries approach the associations by default. However, there are still situations when the consultation is not properly carried out. Also, sometimes the associations are overwhelmed by the multitude of feedback requests and fail to answer appropriately if at all.

Central governments may not always know the demands and grievances of local communities. Hence, the heads of the associations should seek to meet the members of the government and other decision-makers as often as possible. Also, local government associations should develop the habit of regularly informing the government and line ministries about their status and most pressing problems. Such reports should be send regularly and include tangible and reasonable solutions; the associations should be aware that no ministry gives attention to radical or unrealistic proposals. Finally, local governments could invite central government experts to visit their premises and experience firsthand how the legislation is implemented and what problems are encountered.