The new proposal for amendments to the Law on Financing Local Self-Government stipulates that the entire amount of concession fees for renting airports belongs to the state budget, and then that 75 percent of that revenue be allocated from the budget to finance capital and development projects in the municipality where the airports are located. The Ministry of Finance only proposes to define more precisely the method of selecting those development projects that would be financed in this way.
This is stated in the explanation of the proposed amendments and the analysis of the regulatory impact assessment (RIA) carried out by the Ministry of Finance, which "Vijesti" had access to. The current law stipulates that 70 percent of the revenue from airport concessions goes directly to municipalities.
This legal solution was updated ahead of the decision to lease the airports in Tivat and Zeta for a long term with an initial fixed concession of at least 100 million and an increase in variable annual concessions. The proposal for amendments to the new text was adopted by the Government last week.
"A review of the submitted text shows that the aforementioned legal solution does not provide a sufficiently precise and development-oriented distribution of revenues from the concession fee for the use of airports. The proposed amendments to the Law on Financing Local Self-Government achieve key objectives: ensuring a more functional distribution of revenues from the concession fee for the use of airports and establishing a clear dedicated component of the fixed part of the concession fee for the use of airports," the opinion signed by the Minister of Finance states. Novica Vuković.
Presidents of the municipalities of Tivat and Zeta Željko Komnenović i Mihajlo Asanovic have already declared their support for the current proposal. Last year, the government proposed that the municipalities of Tivat and Zeta receive 30 percent of the airport concession, and the state take 70 percent, which was opposed by these municipalities, as well as part of the parliamentary majority.
The Ministry's document states that the objectives of the Law on Local Self-Government are to strengthen fiscal sustainability and development of local self-government in accordance with the principles of responsible public finance management, improve local infrastructure, and transparently manage revenues from goods of general interest.
They indicate that in accordance with these goals, they considered three options and that this new amendment to the law, with specified methods of selecting projects that would be financed from the revenues from this concession, is the best.
For the current option where municipalities would receive tens of millions, they state that there is no clear vision for the disposal of these revenues, nor does it provide a guarantee that the money would be used to finance local infrastructure projects of strategic importance.
Another option considered would be to maintain the current legal framework of a 70:30 split in favor of municipalities and distribute the money through bylaws - individual decisions and contracts, but it was rejected because it does not offer legal certainty, transparency, and long-term predictability.
That is why they opted for the third option, which is proposed in these amendments, because it "creates a direct link between revenues generated from the use of the airport and local development, with a clearly defined purpose of the funds and without negative fiscal or administrative effects."
They point out that the current solution determines the percentage that is allocated to municipalities "without a clearly defined purpose and mechanism that would enable a portion of these funds to be used in a planned and transparent manner for infrastructure projects in the territory of the municipality in which the airport is located."
"The current legal solution does not provide for a sufficiently precise and development-oriented distribution of revenues from the concession fee for the use of airports. Although airports, as goods of general interest, are located on the territory of specific local self-government units, the existing system does not provide for the obligation to direct part of the revenues from the concession fee in a clear and targeted manner towards the development of local infrastructure and projects of strategic importance for the municipality in whose territory the airport is located. This misses the opportunity to more directly link the revenue generated by the use of local resources to local development," the Ministry of Finance stated.
The proposed new solution, as stated by this department, achieves key goals: ensuring a more functional distribution of revenues from the concession fee for the use of the airport and establishing a clear dedicated component of the fixed part of the concession fee for the use of the airport for financing infrastructure projects of strategic importance for the municipality in which the airport is located.
The current solution does not guarantee that municipalities will support airports in terms of infrastructure.
The Ministry states that local communities "bear part of the infrastructure, spatial planning and development challenges associated with the existence and operation of airports", but that the existing legal solution did not offer a clear connection "between revenues generated from the use of airports and investments in projects of strategic importance for local development", including the operation of airports.
"Negative effects are reflected on the local population and economy through slower development of municipal and transport infrastructure and limited opportunities for improving the overall economic environment. If the current legal solution were to be maintained, there would still be a lack of earmarked allocation of part of the revenue from the concession fee for airports in favor of local governments. This would prolong the situation in which local communities do not have an adequate fiscal instrument for financing infrastructure projects related to the operation of airports, while the potential of concession revenues for stimulating local and regional development would continue to be used to a limited extent," the Ministry of Finance stated.
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