Outstanding municipal debts are expected to top out at 200 million leva at the end of the year, Dora Yankova, mayor of Smolyan and chair of the National Association of Municipalities (NAM) in Bulgaria, said.

Municipal debts have ballooned by over 75 per cent since January, with the NAM saying in May 2009 that bulging debts would create tension, weigh on the 2010 budget and eventually block local administration accounts.

On September 28, the NAM adjusted its January forecast, saying it anticipated proceeds to decrease by 400 to 450 million leva, attributing the slump to the twofold slide in taxes and fees for real estate sale and construction.

Bulgaria's largest municipality of Sofia already faces difficulty in meeting its revenue target. Acting mayor Minko Gerdjikov expected a 46 million leva decrease.

The municipality amassed hefty debts to companies that clean the city and mend the streets, for which it will tap a 5 million leva loan from the privatisation fund to partially cover its dues.

The municipality was still expecting to dodge a deficit as the deferral of several infrastructure projects would offset lower revenues, Gerdjikov said.

At a debate on September 28 between local authorities and the executive, mayors urged for the introduction of more local taxes, including municipal road toll, among others.

Finance Minister Simeon Dyankov dashed hopes for patching up municipal budgets with state money and funding for local government projects, but pledged the state would restore advance payments for EU-funded municipal projects by the end of 2009.

Dyankov also promised the government would transfer the management of certain state properties to municipalities and switch to regional administration of EU funds, with central government overseeing the spending.

Source: Dnevnik.bg