Management of Investment Processes of Municipalities - Legal and Economic Analysis in the Context of the Individual Debt Ratio Formula

Abstract

The new debt limitation rules, which have been in force since 2014, have been a significant setback for most local authorities in planning and managing their local finances. Over the four years of application, a number of drawbacks and inconveniences in the application of the new norms became apparent, and the 'creativity' of the local government financial sector showed that they could be circumvented with relative ease. The construction of the maximum indicator limiting the liabilities on titles defined by the legislator, falling due in a given year, is closely related to the provisions of the Public Finance Act. For the first time, it was applied to the grade of budgets passed in 2014. The essence of this legal regu-lation is the comparison of two indicators, included in the equation (formula) formula. A positive condition for the adoption of the budget is to obtain a relationship in which the left side of the formula (annual commitment repayment ratio) is less than or equal to the right side (maximum commitment repayment ratio).