RIGA, June 12 (LETA) - The association of Riga and Pieriga municipalities Riga Metropolis calls on the government to start discussions with local governments before pushing the new local government financial equalization model for approval and implementation, the organization informed LETA.

Riga Metropolis is not opposed to the principle of financial equalization and recognizes that there are municipalities in Latvia that need additional support due to objective socio-economic circumstances. However, it points out that solidarity must be based on transparent calculations, clear state participation and an objective assessment of municipalities' needs.

According to available estimates, the new model would mean EUR 20 million less revenue for the Riga Metropolis municipalities in 2027 after equalization compared to the current system.

Riga Metropolis board co-chairman, Riga Deputy Mayor Maris Sprindzuks stressed that solidarity between municipalities is necessary, but it must be based on data and real needs. "The heated discussions about which municipality should be given more and which one should be given more only point to the fact that municipalities in general do not have enough funding to carry out the functions assigned to them by law, so it is necessary to look for ways for municipalities in the regions to generate a steady income from regional business, including agriculture, forestry and natural resource exploitation, which currently account for a negligible share of municipal revenues," says Sprindzuks.

He explained that Riga and the Pieriga municipalities have started important work on public transport and mobility issues. The new equalization model could jeopardize this process.

In the view of Riga Metropolis, state participation in the financial equalization system should be significantly higher. At present, the main burden is shifted to the Riga Metropolis municipalities, while the state contribution is not commensurate with its responsibility for balanced regional development, according to the municipalities. The current euqlization regulation provides that the equalization fund consists of both municipal contributions and a state budget subsidy. In recent years, the state subsidy has amounted to EUR 35 million and the compensation to around EUR 15 million, while the Riga Metropolis municipalities contribute around EUR190 million to the fund. The organization comments that a reasonable initial step would be to take an equal share in the equalization fund.

Riga Metropolis considers that the new model does not take sufficiently into account the different needs and development conditions of municipalities. Municipalities in Latvia are not the same - they differ in terms of population, demographic structure, pace of development, infrastructure pressure and economic activity. Therefore, an approach that effectively tries to apply the same criteria to very different territories is unacceptable, the organization says.

"The municipalities of the Pieriga region are facing rapid population growth and increasing demand for schools, kindergartens, roads, public transport and municipal infrastructure. These needs have to be largely financed from their own budgets," said Aivars Ositis (For Latvia's Development), board member of Riga Metropolis and chairman of the Marupe regional council.

According to him, fair and proportional financial equalization does not mean treating everyone equally, but objectively assessing different needs.

Riga Metropolis is open to constructive dialogue and calls on the government to ensure an in-depth analysis of the real reasons for the financial gap in each municipality, to increase state participation in the equalization fund and to develop differentiated criteria that reflect the different needs and development conditions of municipalities before introducing a new model.

As reported, Prime Minister Andris Kulbergs (United List) believes that the current financial equalization solution is not the best and needs to be looked into. In an interview on the Latvian Television earlier, the prime minister stressed that a compromise will definitely have to be found. He thinks, however, that a perfect model is not possible. He also expressed his concern whether this "issue that has been unresolved for years" could be resolved in four months.

It is also reported that in March, even before the resignation of the government of Evika Silina (New Unity), the promotion of a new model for the equalization of local government finances stalled due to numerous objections.

Local governments had many objections to the draft law prepared by the Ministry of Finance to improve the system. The ministry informed at the time that it had therefore decided not to advance the draft law to the government for consideration at this stage, and that in the period ahead it was planned to continue dialogue and explanatory work with local governments, as well as with parliamentary fractions, on the basic principles of the model, which in general envisaged significant improvements and a reduction in administrative burdens.

At the end of May, the Minister of Finance of the resigned government, Arvils Aseradens (New Unity), highlighted the development of the new local government financial equalization model as one of the achievements of the former government, stressing that its aim is to ensure a more balanced and fairer system of financing local governments, while maintaining incentives for economic development in the regions.