Dario Runtic, NALAS Network of Associations of Local Authorities of South-East Europe
Relevance of the Practice
There are two levels of subnational governments in Croatia, regional (counties) and local (cities and municipalities). Competencies and finance differ significantly between regional and local governments, although large cities have taken over some of the competencies of the regional government. There are many similarities in competencies of cities (urban) and municipalities (rural) local governments as well as funding arrangements. However, the underlying economic and demographic factors are distorting service provision levels and fiscal capacities of cities and municipalities.
Three types of subnational entities are involved in informal or formal legislative processes in order to realign the structure of competencies or improve fiscal capacities of respective regional or local governments. Large cities and regional governments could distort the competency-finance matrix due to their relative political and economic weight thus widening the urban-rural divide.
A highly polarized political environment makes it rather difficult for an individual or a smaller group of politically aligned or likeminded local governments to successfully address national policy or legislative issues since such efforts are commonly observed with political bias or through a prism of potential political gains. Fragmentation of the local government landscape further derails any such individual or small group activities because of relatively limited political influence of executives of small and economically minor local government units.
Institutionalization of intergovernmental relations is one of the vehicles used in order to establish a non-partisan and transparent policy process that balances the interests of urban and rural communities or lagging and developed areas.
Description of the Practice
When it comes to institutionalization of intergovernmental relations and balancing of urban-rural interplay, Parliament is one of the key institutions tasked with this function. Therefore, it is essential to establish a proper balance among key actors of intergovernmental dialogue at the parliamentary level in order to safeguard interest of all parties involved.
A three-level mechanism of institutionalized intergovernmental relations in the parliament is the Parliamentary Board for Local Government. The primary task of the board is to prepare or discuss draft legislation and legislative initiatives and provide advice or amendments on proposed legislation to the parliament. The board can also discuss citizens’ complaints and proposals related to local governance.
The board can hire, involve scientific or other organizations and individuals in preparation of the proposals or reviewing acts, or propose to the government to entrust specific ministries with such a task. The board is also authorized to carry out public hearings related to proposed acts, parts of the acts or resolving an issue of public interest. It can establish sub-committees or task forces to carry out some of those tasks.
Key areas of operation of the board include the structure and competencies of local governments; founding, termination and amalgamation of local government units; finance and legal issues related to local public servants.
The Ordinance of the Parliament prescribes that the board has a chairman, deputy chairman and eleven members appointed from the members of the parliament for duration of a term at the parliament. Additional nine members are representatives of the four largest cities, two counties and two municipalities (one continental, one coastal) and one lawyer. Although the Ordinance of the Parliament does not provide a seat for representatives of local government associations (LGA), the board has been inviting representatives of LGAs to all of its meetings for over a decade.
There are three national voluntary associations of local governments in Croatia, one for each type of subnational government – counties, cities and municipalities – as prescribed by the Law on Local and Regional Self-Government. The County Association represents all 21 counties, the Cities Association represents 126 out of 128 cities and the Municipal Association represents 328 out of 428 municipalities.
Local government associations in Croatia represent interests of their members before national authorities, the legislature and the Constitutional Court. In a highly polarized national political environment and a fragmented local government landscape, LGAs are the non-partisan and uniform voice of local governments which contributes to consensus building and the protection of local government interests. Sound LGA processes and policies in the legislative process contribute to a reduction of the urban-rural divide. LGA provides influential vote to small local governments by building policy consensus among most or all local governments of different political affiliations and economic power, and presenting or advocating for those policies in non-partisan fashion at the national level.
LGA executive boards are tasked with regular legislative policy consensus building. County and municipal associations’ executive boards are comprised by one member from each county. Due to the fact that cities in Croatia range from large urban units to small units which equivalent municipalities, the executive board of the Association of Cities is comprised of all seat-of-county cities and one other city from each county elected by the cities from that county. Such an executive boards structure helps maintain territorial, political and urban-rural consensus over legislative policy.
Croatia partially ratified the European Charter for Local Self-Government in 1997, leaving out some of the provisions LGAs considered critical for local governments. LGAs advocated before the line ministry for full ratification of the Charter in 2007/08 with no success. Therefore, in 2008, LGAs turned to the Parliamentary Board for Local Government for the full ratification of the European Charter for Local Self-Government. The board was receptive to the effort, which prompted the government to prepare amendments to the Law on Ratification of the European Charter and submit it to the parliamentary procedure. The Charter was fully ratified in 2008.
Ratification of the Charter included Article 9(5) which provides for the institution of financial equalization procedures for protection of financially weaker local government units. Generally, small towns and municipalities are fiscally lagging behind larger cities due to economic and demographic reasons which leads to a vicious cycle of increasing urbanization and widening of the urban-rural divide. Based on Article 9(5) of the Charter, the LGA initiated an expert study for fiscal equalization in 2011 and advocated for the institution of financial equalization. The government passed the legislation instituting financial equalization in 2017.
As previously mentioned, the Parliamentary Board for Local Government has an advisory role in Parliament and Parliament can overturn or ignore the advices of the board. Ignoring broadly accepted, non-partisan advice of the LGAs and/or advice of the board, the parliament on occasion passes a legislation violating local government autonomy or adequacy of financial resources guaranteed by the European Charter and the Constitution.
Should any of the LGAs find such a violation is critical, it can file a motion with the Constitutional Court requesting legislation review. The constitutional law on the Constitutional Court allows any individual or organization to file a motion with the Constitutional Court which will review it in a regular process that can take several years to complete. The constitutional law enables local councils to file a motion with the Constitutional Court for resolution within 30 days, should the issue relate to local government structure, competencies or finance. Therefore, LGAs can put a motion forward and provide local councils with a draft motion with request to submit it to the Constitutional Court to expedite the procedure.
In 2016 the parliament passed two laws, the Defense Law and the State Asset Management Law, despite objections of the Association that the laws are violating the right of local governments to freely dispose of own revenues and that the parliament would cross the boundaries of its legislative powers by approving such legislation. The laws exempted state and military facilities from paying the communal fee (a form of property tax or infrastructure impact tax) which is local government own source revenue. The Association filed two motions with the Constitutional Court and asked local councils to support the motion. Five local councils and the County Association supported one motion. In 2017 the Constitutional Court ruled that the parliament actually crossed the boundaries of its legislative powers and the laws violated the right of local governments to freely dispose of local revenues and extensively explained the issue of local government fiscal autonomy for future reference.
However, in 2018 the parliament once again violated the fiscal autonomy of local governments by exempting state and military structures from paying the communal fee, despite extensive efforts of the LGAs to explain the relevant ministry that such regulation was already a subject to constitutional review. Two local governments submitted the motion for review to the Constitutional Court and the Court swiftly confirmed that the law is violating local government fiscal autonomy.
Assessment of the Practice
The examples of successful and unsuccessful intergovernmental dialogue presented above illustrate the two sides of the intergovernmental relations’ spectrum in Croatia. High level institutional intergovernmental relations mechanisms can be mission-critical in pushing forward broadly accepted norms and standards which are sometimes a precondition for improving overall local government environment, including fiscal equalization mechanisms aimed at reducing disparities among urban and rural local governments.
The existence of such advisory mechanisms does not guarantee legislation quality but it does allow different parties, irrespective of their political or economic power, to raise awareness of other stakeholders prior to legislative change. In extreme cases, seeking legal protection from the Court and setting a precedent, can also be seen as an input into (future) intergovernmental dialogue.
References to Scientific and Non-Scientific Publications
Legal Documents:
The Constitution of the Republic of Croatia, 2014
Law no 4/2008 on Ratification of European Charter of Local Self-Government
Law no 85/2015 on Access to the Information
Law no 98/2019 on Local and Regional Self-Government
Scientific and Non-Scientific Publications:
Bajo A, Bronic M and Primorac M, ‘Oblikovanje modela vodoravnog fiskalnog izravnanja u Republici Hrvatskoj’ (2012) Udruga gradova
Kopric I, ‘Widening the Scope of Local Self-Government Powers and Narrowing Central Government Supervision’ (2000) Hrvatska javna uprava 391
Alliance of the Association of Cities and the Association of Municipalities, ‘Europska povelja o lokalnoj samoupravi’ (Stari grad, 2008) <https://stari-grad.hr/?show=11437&nid=17893> accessed 7 June 2020
HINA, ‘Ustavni sud – nema poskupljenja odvoza smeća’ (Lider Media, 30 January 2020) <https://lider.media/poslovna-scena/hrvatska/ustavni-sud-nema-poskupljenja-odvoza-smeca-129898> accessed June 7, 2020
Ljubica Gatarić, ‘I država mora plaćati komunalnu naknadu za svoje nekretnine’ (Vecernji list, 6 September 2017) <https://www.vecernji.hr/vijesti/i-drzava-mora-placati-komunalnu-naknadu-za-svoje-objekte-1192668> accessed 7 June 2020 Runtic D, ‘Preoblikovanje komunalne naknade i doprinosa u opći prihod’ (Udruga gradova, 6 March 2012), <https://www.udruga-gradova.hr/preoblikovanje-komunalne-naknade-i-doprinosa-u-opci-prihod/> accessed 7 June 2020