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FINANCIAL, BUDGET AND PERFORMANCE INDICATORS
Prepared by: VICTOR GIOSAN Page 1 of 8
Brasov-Review of the Financial, Budget and
Performance Indicators
1999-2000
Executive Seminar on Urban Planning and Local Economic Development, Iasi, Romania, March 20-23, 2001
Co-Organised by: The City Iasi and Harvard University Graduate School of Design, Center for Urban Development Studies
In Association with The Research Triangle Institute, USAID Local Government Assistance Program
FINANCIAL, BUDGET AND PERFORMANCE INDICATORS
Prepared by: VICTOR GIOSAN Page 2 of 8
Definitions of the main indicators:
a) Total revenues – the total revenues of a local government.
b) Total current revenues – the revenues that local governments may use directly, currently and
repeatedly. According to the classification of the Ministry of Finances, it includes current revenues,
which are own current revenues, and the local share of global income tax, which in economic
literature is considered an intergovernmental transfer through the partition of a state tax. These two
revenues are used to establish the limit of the debt established by Law 189/1998; the annual debt
service should not exceed 20% of the current revenues.
c) Operating revenues – the revenues composed of the current revenues, as they are defined
above, to which is added the (1) balance funds for the local budget, both those with special
destination and those with general destination, (2) operating subsidies received from the state budget
or others central budget, and (3) special taxes as they are defined by Law 189/1998. The following
are not considered operating revenues: the capital revenues, revenues with special destination
received from the state budget or other central budgets for investments, and transfers from the state
budget for the investments financed through external credits secured by the Government.
d) Operating expenditures – any expense, with the exception of capital expenses.
e) Operating transfers (subsidies) with general destination – any intergovernmental transfer
that local governments may use for any purpose. Included in these transfers is the local share of the
Global Income Tax used to balance the local budgets, whether they are available for the County
Councils or they are allotted through the state budget.
f) Operating transfers (subsidies) with special destination – any intergovernmental transfer
that may be used only according to its destination established by the law. Included in this is the local
share for heating, subsidies from the state budget or others central budgets.
g) Transfers (subsidies) for capital expenditures – intergovernmental transfers received to
finance the approved investment projects or investments financed through external credits. Included
in this are revenues with special destination received from the State Budget or any other Central
Budget or special funds and transfers with special destination received from the State Budget for the
investments financed through external credits (for example, programs MUDP I and MUDP II)
Executive Seminar on Urban Planning and Local Economic Development, Iasi, Romania, March 20-23, 2001
Co-Organised by: The City Iasi and Harvard University Graduate School of Design, Center for Urban Development Studies
In Association with The Research Triangle Institute, USAID Local Government Assistance Program
FINANCIAL, BUDGET AND PERFORMANCE INDICATORS
Prepared by: VICTOR GIOSAN Page 3 of 8
Table 1 (current lei)
Value in 1999 in Value in 2000 in Percent Difference
Indicator
thousands lei thousands lei 2000/1999 2000/1999
1. Total revenues 278,959,990 411,144,039 147.38% 132,184,049
2. Current revenues, out of which: 123,226,539 124,419,442 100.97% 1,192,903
2.1 Fiscal revenues, out of which: 116,090,981 113,929,995 98.14% - 2,160,986
2.1.1.Tax revenues, paid by the 81,753,678 40,986,543 50,13% - 40,767,135
citizens
2.1.2. The tax property paid by 39,332,437 65,905,400 167.56% 26,572,963
legal and natural persons
2.2. Non-fiscal revenues 7,135,558 10,480,447 147% 3,353,889
3. Capital revenues 6,631,523 2,885,997 43.52% - 3745526
4. Local share 111,943,997 202,945,594 181.29% 91,001,597
5. Current revenues 236,296,942 329,024,033 138.24% 92,727,091
6. Maximum annual debt service 47,259,388 65,804,807 139.24% 185,454,119
(20 % of the total current revenues)
7. Operating revenues 257,317,158 381,882,411 148.41% 124,565,253
8. Amounts used during the year out 0 2,439,857 - 2,439,857
of reserves (circulating fund)
9. Operating transfers (subsidies) 14,388,693 3,790,882 26.35% - 10,597,811
with general destination
10. Operating transfers (subsidies) 10,592,295 46,627,639 440.2% 36,035,344
with special destination
11. Capital transfers (subsidies) 10,992,129 26,375,631 239.95% 15,383,502
1. Total expenditures 272,585,512 408,199,908 149.75% 135,614,396
2. Operating expenditures, out of 233,327,480 364,418,301 156.18% 131,090,821
which:
2.1. Personnel expenditure 14,302,067 28,279,820 156.18% 13,977,753
2.2. Material expenditures 100,068,285 149,768,952 149.67% 49,700,667
2.3. Subsidies + transfers for 99,457,259 145,776,600 146.57% 46,319,341
heating and local transportation
(including the subsidies for poor
households)
3. Capital expenditures 39,258,032 43,781,607 111.52% 4,523,575
4. Population 311,059 309,671 99.55% - 1,388
Executive Seminar on Urban Planning and Local Economic Development, Iasi, Romania, March 20-23, 2001
Co-Organised by: The City Iasi and Harvard University Graduate School of Design, Center for Urban Development Studies
In Association with The Research Triangle Institute, USAID Local Government Assistance Program
FINANCIAL, BUDGET AND PERFORMANCE INDICATORS
Prepared by: VICTOR GIOSAN Page 4 of 8
Table 2 (value in constant lei 1999, inflation 2000/1999 = 140.6%)
Value in 1999 in Value in 2000 in Percent Difference
Indicator
thousands lei thousands lei 2000/1999 2000-1999
1. Total revenues 278,959,990 292,421,080 104.83% 13,461,090
2. Current revenues, out of which: 123,226,539 88,491,780 71.81% - 34,734,759
2.1 Fiscal revenues, out of which: 116,090,981 81,031,291 69.8% - 35,059,690
2.1.1.Tax revenues, paid by the 81,753,678 29,151,169 35.66% - 52,602,509
citizens
2.1.2. The tax property paid by 39,332,437 46,874,395 119.17% 7,541,958
legal and natural persons
2.2. Non-fiscal revenues 7,135,558 7,460,489 104.55% 324,391
3. Capital revenues 6,631,523 2,052,629 30.95% - 4,578,894
4. Local share 111,943,99 144,342,528 128.94% 32,398,531
5. Current revenues 236,296,942 234,014,248 99.03% - 2,282,694
6. Maximum annual debt service ( 47,259,388 46,802,850 99.03% - 456,538
20 % of the total current revenues)
7. Operating revenues 257,317,158 271,609,112 105.55% 14,291,954
8. Amounts used during the year out 0 1,735,318 - 1,735,318
of reserves (circulating fund)
9. Operating transfers (subsidies) 14,388,693 2,696,218 18.74% - 11,692,475
with general destination
10. Operating transfers (subsidies) 10,592,295 33,163,328 313.09% 22,571,033
with special destination
11. Capital transfers (subsidies) 10,992,129 18,759,339 170.66% 7,767,210
1. Total expenditures 272,585,512 290,327,104 106.51% 17,741,592
2. Operating expenditures, out of 233,327,480 259,187,981 111.08% 25,860,501
which:
2.1. Personnel expenditure 14,302,067 20,113,670 140.63% 5,811,603
2.2. Material expenditures 100,068,285 106,521,303 106.45% 6,453,018
2.3. Subsidies + transfers for 99,457,259 103,681,792 104.25% 4,224,533
heating and local transportation
(including the subsidies for poor
households)
3. Capital expenditures 39,258,032 31,391,123 79.96% - 7,866,909
4. Population 311,059 309,671 99.55% - 1,388
Executive Seminar on Urban Planning and Local Economic Development, Iasi, Romania, March 20-23, 2001
Co-Organised by: The City Iasi and Harvard University Graduate School of Design, Center for Urban Development Studies
In Association with The Research Triangle Institute, USAID Local Government Assistance Program
FINANCIAL, BUDGET AND PERFORMANCE INDICATORS
Prepared by: VICTOR GIOSAN Page 5 of 8
Table 3 (value of qualitative indicators considered in constant Lei 1999, in thousands lei)
Indicators 1999 2000
Budget excess 6,374,478 2,093,976
Operating revenues/Total revenues 92.24% 92.88%
Current revenues/ Total revenues 84.71% 80.03%
Operating revenues- Operating expenditures = 23,989,678 12,421,131
Operating excess/ deficit
Operating excess (deficit)/operating revenues 9.32% 4.57%
Total current revenues (fiscal and non-fiscal) as a % 44.58% 30.67%
of total revenues
Property tax revenue as a % of:
- operating revenues 15.29% 17.26%
- total revenues 14.1% 16.03%
Local share of global income tax as a % of total 40.13% 49.36%
revenues
Total transfers (subsidies) – operating and 12.9% 26.26%
investments – from the State budget as a % of total
revenues
Operating expenditure/total expenditure 85.6% 89.27%
Material expenditure/total expenditure 36,71% 36.69%
Personnel expenditure/total expenditure 5.25% 6,93%
Subsidies + transfers/ total expenditure 36.49% 35.71%
Compulsory expenditures/ total expenditures 41.74% 42.64%
Capital expenditures/total expenditures 14.4% 10.81%
Debt service/total current revenues 0 0
Total debt/total current revenues 0 0
Total expenditures/population (lei/inhabitant) 876,314 937,534
Operating revenues/population (lei/inhabitant) 827,229 877,089
Total current revenues/population (lei/inhabitant) 759,653 755,687
Own current revenues/population (lei/inhabitant) 396,152 285,761
Property tax revenue/population (lei/inhabitant) 126,447 151,368
Executive Seminar on Urban Planning and Local Economic Development, Iasi, Romania, March 20-23, 2001
Co-Organised by: The City Iasi and Harvard University Graduate School of Design, Center for Urban Development Studies
In Association with The Research Triangle Institute, USAID Local Government Assistance Program
FINANCIAL, BUDGET AND PERFORMANCE INDICATORS
Prepared by: VICTOR GIOSAN Page 6 of 8
Conclusions:
1. The increase in total revenues (index 104.83%) and of operating revenues (index 105.55%)
between 1999 and 2000. This fact points to the recovery of the local economic activity,
correlated to the recovery of the national economy through an important increase in (1) the local
share of the global income tax (index 128.94%), (2) transfers with special destination, (3)
operating transfers (index 313.09%) and (4) capital transfers (index 170.66%). It is important to
carefully analyze the local share of the global income tax because it has three major
consequences:
• The globalization of the income taxes, which in 1999 used to be collected 100% by the
Local Government as fiscal revenues (e.g. the income tax for the unemployed persons);
• The change of the wage tax collection, only at the companies’ headquarters, a fact that
favored the county’s residence compared to the others towns;
• The slight economic development during 2000, which was followed by an increase of the
real wages.
From all the three causes mentioned above, only the last one represents a positive trend, the
others are legislative aspects, which can be changed (especially the second cause).
2. A slight decrease in total current revenues (index 99.03%) and a major decrease in own current
revenues (index 71.81%), which was largely due to the evolution of fiscal revenues (index
69.8%). There are two explanations for this:
• A decrease in tax revenues collected from the population because of the application of
the global income tax;
• The low level of the local fiscal policy, which was at its minimum as allowed by law.
These factors lead to the decrease by 64.34% in tax revenues between 1999 and 2000.
3. A major decrease in balance funds with general destination, which in 2000 represented only
18.74% of the amount received in 1999.
4. The decrease in the share of own current revenues in relation to total revenues, from 44.58% in
1999 to 30.67% in 2000. This fact, together with the increase in the percentage represented by
subsidies with special destination (operating and capital transfers) from 12.9% to 26.26%,
indicates a decrease in financial autonomy of the Local Government and a more vulnerable
position of the Municipality vis-à-vis the State. This is particularly the case when on considers
the political way in which transfers with special destination are allocated by the Government and
County Council.
5. The level of the operating excess, which is a major indicator of credit worthiness for a local
government, was and is still very low; additionally, the trend is negative: 9.32% in 1999 and
4.57% in 2000. The operating excess in 2000 was half of what it had been in 1999. This fact
Executive Seminar on Urban Planning and Local Economic Development, Iasi, Romania, March 20-23, 2001
Co-Organised by: The City Iasi and Harvard University Graduate School of Design, Center for Urban Development Studies
In Association with The Research Triangle Institute, USAID Local Government Assistance Program
FINANCIAL, BUDGET AND PERFORMANCE INDICATORS
Prepared by: VICTOR GIOSAN Page 7 of 8
shows the narrow base the Local Government has available to contract credits or to extend the
capital expenditures from of its own current revenues, regardless of the amount of transfers
received from the State budget to finance investments.
6. The percent represented by compulsory expenditures (types of expenditures that are inflexible in
the short-term and that the Local Government must pay, regardless of its financial situation) and
social subsidies is quite high: 41.74% in 1999 (36.49% subsidies) and 42.64% in 2000 (35.71%
subsidies). One may note that subsidies represented 31.46% of the total budget expenditures in
1999. Compulsory expenditures include personnel expenditures, heating and public
transportation subsidies, and financial expenditures (debt service) – not for Brasov. Compulsory
expenditures as a percent of total expenditures show the rigidity of the latter. The situation of
this town is quite poor.
7. The level of capital expenditures is very low (14,4% in 1999 and 10.81% in 2000), due to the
rigidity of total expenditures. It is important to note that in 1999, capital expenditures
represented 22.03%. Additionally, capital expenditures are in an inverse ratio to subsidies, a fact
which often occurs in larger towns. Paradoxically, the biggest investments are required for
public transportation and heating. The subsidies for transportation and heating do not allow an
increase in capital expenditures. As a result, modernization, which would encourage a decrease
in the long-term operating costs, cannot be achieved. In effect, the subsidies for these two
domains actually increase the long-term costs of these services and the deterioration of services.
The municipality cannot afford to sustain a major public utility subsidy policy for long periods
of time. The following may help to increase total current revenues:
• Increasing local fiscal revenues in the following two years, by increasing the property tax
from the minimum to mid level according to the present law.
• Increasing non-fiscal revenues, by collecting more of the amounts from leasing, licenses
and transfers from the profit of the commercial businesses of the municipality.
On the other hand, the level of the subsidies for public transportation specifically may be
decreased according to the Government decrees 97/1999 and 48/2000. In developing such a
policy, the amounts saved should be reinvested in the same domain. This fact implies an increase
in tariffs for public transportation.
Regardless, the amounts obtained by increasing own current revenues or by decreasing subsidies
should be reinvested, such that within the following 2 – 3 years (2001-2003), the share of the
capital expenditures should exceed 20% and the operating excess should increase to more than
15%.
8. The Romanian legislation allows a maximum annual debt service of 20% of the total current
revenues; this level decreased in 2000 to 45,802,850 thousands lei, compared to 47,259,388
thousands lei in 1999. Expressed in USD. At an exchange rate of 1 USD = 16000 ROL in 1999,
it represents 2,925,178 USD in 2000 compared to 2,953,712 USD in 1999. Given this, the
maximum level of the loans Brasov may contract are 15, 20 or 25 years, at the following
interest rates, respectively: 6%, 8%, 10%, in USD interest rates in 2000. These interest rates are
Executive Seminar on Urban Planning and Local Economic Development, Iasi, Romania, March 20-23, 2001
Co-Organised by: The City Iasi and Harvard University Graduate School of Design, Center for Urban Development Studies
In Association with The Research Triangle Institute, USAID Local Government Assistance Program
FINANCIAL, BUDGET AND PERFORMANCE INDICATORS
Prepared by: VICTOR GIOSAN Page 8 of 8
quite possible for loans received from international financial institutions, such as EBRD, which
has a special program for municipalities without governmental guarantees that are only
guaranteed through future revenues. The values are presented in the following table:
Reimbursement The maximum loan The maximum loan The maximum loan
for a 6% interest for a 8% interest for a 10% interest
loan (USD) loan (USD) loan (USD)
15 years 23,093,511 19,944,395 17,551,068
20 years 26,592,527 22,501,369 19,501,187
25 years 29,251,780 24,376,483 20,894,129
Of course, the above is true only if total current revenues increase by at least the same rate that
the Romanian currency (compared to the USD) decreases by, such that increased index
balances out the currency depreciation risk. The data presented above represent the maximum
and theoretical levels, because for developing countries such as Poland and Czech Republic, an
annual debt service of 15% of total current revenues is considered an alarming level. This fact
is true for Romania as well when one takes into consideration the higher currency risk, the
economic and legislative instability (referring to the local authorities’ responsibilities).
Financial institutions credit locals governments for the capital projects that generate revenues,
and therefore have primary and secondary repayment. The preferred areas:
• Water and sewerage network;
• Heating;
• Collection and delivery of solid waste materials;
• Local public transportation.
Municipalities do not receive credits for road infrastructure because these projects do not have
primary and secondary repayment.
9. The high level of the budget excess in 1999 and 2000. Although the budget excess decreased
significantly (by more than three times) last year, it still remained quite high. This fact may seem
unusual, considering the “hunger” for credits. This reflects a need for better planning and improved
expenditures records.
Executive Seminar on Urban Planning and Local Economic Development, Iasi, Romania, March 20-23, 2001
Co-Organised by: The City Iasi and Harvard University Graduate School of Design, Center for Urban Development Studies
In Association with The Research Triangle Institute, USAID Local Government Assistance Program
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