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OFFICIAL GAZETTE OF THE REPUBLIC OF KOSOVA / PRISTINA: YEAR III / NO. 27 / 03 JUNE 2008
LAW NO. 03/ L- 049
ON LOCAL GOVERNMENT FINANCE
Based on chapter IV article 65 item 1 and also Chapter X article 124 item 5 of the Constitution of Republic
of Kosova, recognizing the need to specify the financial resources available to municipalities in Kosovo,
including municipal own source revenues, grants, and other sources of finance needed for the discharge
of municipal competencies,
The Assembly of the Republic of Kosovo,
Hereby approves:
LAW ON LOCAL GOVERNMENT FINANCE
CONTENTS
PART I General Provisions
Article 1 Definitions
Article 2 Municipal Financial Autonomy
Article 3 Limitations on Municipal Financial Autonomy
Article 4 Own Competencies
Article 5 Delegated Competencies
Article 6 Enhanced Competencies
PART II Municipal Financial Resources
CHAPTER I General
Article 7 Municipal Financial Resources
Article 8 Categories of Own Source Revenues
CHAPTER II Municipal Taxes and Fees
Article 9 Immovable Property Tax
Article 10 Business License Fee
Article 11 Professional Business License Fee
Article 12 Motor Vehicle Fee
Article 13 Municipal Administrative Fees
Article 14 Permit Fees for the Construction and Demolition of Buildings and Other Structures
Article 15 Other Municipal Fees
Article 16 Fees for Issuing Certificates and Official Documents
CHAPTER III Charges, Rents, Fines and Co-Payments and Other Own Source Revenue
Article 17 Regulatory Charges for Infrastructure Development and Preservation
Article 18 Traffic Fines
Article 19 Fines for Offences against Municipal Regulations
Article 20 Rental Income
Article 21 Education and Health Co-Payments
Article 22 Other Own Source Revenues
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PART III Operating and Equalization Grants
Article 23 Operating Grants
Article 24 General Grant
Article 25 Specific Grants for Education and Health
PART IV Other Grants and Transfers
Article 26 Transfers for Delegated Competencies
Article 27 Grants for Enhanced Competencies
Article 28 Spending Authority and Monitoring
Article 29 Extraordinary Grants
PART V Municipal Borrowing and Commitments
Article 30 Municipal Borrowing and Long Term Commitments
PART VI Institutional Provisions and Grants Commission
Article 31 Provisions Concerning Operating Grants
Article 32 Grants Commission: Membership, Organization, Meetings
Article 33 Grants Commission: Responsibilities
PART VII Transitional and Final Provisions
Article 34 Minimum Grants for FY 2009
Article 35 Use of New Population Data
Article 36 Implementation, Sub-normative Acts
Article 37 Entry into Force
PART I
General Provisions
Article 1
Definitions
1.1 For the purposes of interpreting and applying the present law, the following defined terms shall,
whenever used in the present law, have the indicated meaning unless the context within which such term
appears clearly intends another meaning:
-“Appropriation”- means the identification in an Appropriations Law adopted by the Assembly of Kosovo
of the maximum amount that may be made available during a fiscal year for expenditure by a budget
organization for a specified program or other expenditure category or for transfer by a budget
organization to a public authority or public undertaking as a grant;
-“Assembly”- means the Assembly of the Republic of Kosovo;
-“European Charter”- means the European Charter of Local Self-Government, as adopted by the
Council of Europe on the 15th of October 1985;
-“Chief Financial Officer”- or “CFO” shall have the meaning assigned thereto by the LPFMA;
-“Delegated competencies”- shall mean the areas of municipal competence specified in Article 18 of the
LLSG;
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-“Enhanced competencies”- shall mean the areas of municipal competence specified in Article 19 of the
LLSG;
- “Fee”- shall mean a fixed amount paid for the receipt of a privilege, permission, document or
professional service. Fees are charged for such things as a license, permit, document, specific service or
other items that do not require substantial variations in the amount of effort, time or materials needed to
satisfy the request;
-“Fine”- shall mean a payment required for violation of a municipal law, rule, or regulation. Generally,
fines are used for punishment, and should be charged in accordance with fixed schedules for minor
violations of municipal legislation;
-“Fiscal year”- shall mean the period from January 1 of a year to December 31 of the same year;
-“FMC Rules”- means Financial Management and Control Rules and shall have the meaning assigned
thereto by the LPFMA;
-“General Grant”- shall mean an amount appropriated to a municipality that may be used by the
municipality for any purpose relating to its competencies;
-“Government”- shall mean the Government of the Republic Kosovo;
-“Grants Commission”- shall have the meaning and functions as specified in Articles 33 and 32 of this
Law;
-“Kosovo Business Registry”- means the Kosovo Registry for Business Organizations and Trade
Names;
-“Kosovo Consolidated Budget”- or “KCB” means the overall budget of Kosovo for all budget
organizations.
-“Kosovo Consolidated Fund”- or “KCF” shall mean the fund that was first established pursuant to
UNMIK Regulation 1999/16, as amended, or the account or the consolidated group of accounts defined in
the Treasury Accounting Record for the purposes of receiving deposits and making payments of public
money and any interest accrued thereon;
-“LPFMA”- means the Law on Public Financial Management and Accountability;
-“LLSG”- means the Law on Local Self-Government;
-“Local Self-Government”- shall have the meaning assigned thereto by the LLSG;
-“Mayor”- shall have the meaning assigned thereto by the LLSG;
-“MTEF”- or “Medium Term Expenditure Framework” shall have the meaning assigned thereto by the
LPFMA;
-“Municipal Assembly”- shall have the meaning assigned thereto by the LLSG;
-“Municipal competencies”- shall mean the areas of municipal competence specified in Article 16 of the
LLSG;
-“Own competencies"- shall mean the areas of municipal competence specified in Article 17 of the
LLSG;
-“Municipal regulation”- shall have the meaning assigned thereto by the LLSG;
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-“Municipality”- shall have the meaning assigned thereto by the LLSG;
-“Municipal property”- means property, including immovable property, lawfully owned by or lawfully
under the administration of a municipality;
-“Official bank account”- shall have the meaning assigned thereto by the LPFMA;
-“Operating Grants”- is a general term that means and includes a General Grant, a Specific Grant for
Education and a Specific Grant for Health;
-“Own source revenues”- shall mean and include any item of public money that has been lawfully
assessed and collected by a municipality from a source specified in Article 8 of this Law;
-“Person”- means a natural person or an undertaking;
-“Public undertaking”- shall have the meaning assigned thereto by the LPFMA;
-“Rule of procedure”- shall have the meaning assigned thereto by the LLSG;
-“Specific Grant for Education”- shall mean an amount appropriated to a municipality that may be used
by the municipality only for education;
-“Specific Grant for Health”- shall mean an amount appropriated to a municipality that may be used by
the municipality only for health;
-“TSA” or “Treasury Single Account”- shall have the meaning assigned thereto by the LPFMA;
-“Undertaking”- means any body, establishment, institution, association, enterprise, business
organization, legal entity, or other organization; and
-“UNMIK”- means the United Nations Mission in Kosovo.
1.2 References in the present law to any other law or regulation shall be interpreted as including any
amendments or successor legislation thereto.
Article 2
Municipal Financial Autonomy
2.1 Kosovo municipalities shall be entitled, within national economic policy and having due regard for
the municipalities and the central government fiscal sustainability, to adequate financial resources of their
own that they may dispose of freely in the discharge of their municipal competencies in accordance with
the applicable laws of Kosovo.
2.2 Municipal financial resources shall be commensurate with municipal competencies provided for
by the Constitution and the LLSG.
2.3 The concerned municipal assembly, and its executive officers, shall have the right and authority
to autonomously regulate and manage, in the interest of the municipality’s population, financial resources
derived from the municipality’s own source revenues or provided to the municipality under a General
Grant.
Article 3
Limitations of Municipal Financial autonomy
With exception of a tax on immovable property within its borders, a municipality shall have no authority to,
and shall not assess, levy or collect any other duties or taxes. This prohibition applies to, but is not
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limited to, customs and other duties, taxes on the revenues of persons, value-added taxes, excise taxes,
taxes on capital, and any charge having an equivalent effect as the aforementioned duties and taxes;
provided, however, that this prohibition shall not apply where the municipality is fulfilling a function or
responsibility that has been formally and lawfully delegated to it by the Government.
Article 4
Own Competencies
The principle of municipal financial autonomy shall be applied with respect to the financing and
implementation of a municipality’s own competencies; provided, however, that such financing and
implementation must be done in the interest of the municipality’s population, and in accordance with the
standards and requirements applicable to such competencies established by law.
Article 5
Delegated Competencies
Where the Government delegates a competency to one or more municipalities, the concerned
municipalities may, insofar as possible, adapt the exercise of such competency to local conditions. A
municipality shall be required to provide services under a delegated competency on an open and equal
basis. The Minister of Economy and Finance, the Government and the Assembly shall ensure that the
KCB provides to a municipality the funds needed for the performance of a delegated competency; and
such funds shall be provided at a level that is sufficient to cover the municipality’s reasonable costs
incurred in connection with such performance.
Article 6
Enhanced Competencies
Where a law assigns to a certain group of municipalities additional own competencies (“enhanced” own
competencies), such additional competencies shall be treated in the same manner as other own
competencies. The Minister of Economy and Finance, the Government and the Assembly shall ensure
that the KCB provides to the concerned municipalities the funds needed for the performance of such
competencies. If the enhanced competency involves the provision of a public service, the funding shall
be sufficient to permit the municipality to provide it in accordance with minimum quality and quantity
standards, as expressed by the standard rules of the central public authority having principal
responsibility in Kosovo for the delivery of such service; and, such funds shall be provided at a level that
is sufficient to cover the municipality’s reasonable costs incurred with such performance.
PART II
Municipal Financial Resources
CHAPTER I
General
Article 7
Municipal Financial Resources
7.1 The financial resources of a municipality consist of its (i) own source revenues as specified in
Article 8 of the present law, (ii) operating grants, (iii) grants for enhanced competencies, (iv) transfers for
delegated competencies, (v) extraordinary grants, (vi) financial assistance from the Republic of Serbia,
and (vii) proceeds from municipal borrowing.
7.2 Municipalities shall comply with the applicable provisions of the LPFMA when handling any such
financial resources.
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Article 8
Categories of Own Source Revenues
Any revenues collected or received by a municipality under the authority of a law from the following
sources shall be such municipality’s own source revenues:
a) municipal taxes, fees, user charges, other payments for public services provided by the
municipality, and regulatory charges and fines authorized by the present law;
b) rents on immovable property situated in the municipality and under the administration or
ownership of the municipality;
c) revenues from the sale of municipal assets;
d) revenues from undertakings wholly or partly owned by the municipality;
e) co-payments from consumers of education and health services provided by the municipality;
f) revenues collected by any agency, department or organization of the municipality as a result of
the provision of any good or service;
g) interest on municipal deposits, if any;
h) grants and/or donations from foreign governments (except for financial assistance from the
Republic of Serbia) or from foreign organizations, including governmental and non-governmental
organizations and international and supranational institutions, and
i) any other category of revenue that is designated as municipal own source revenue in a law of the
Republic of Kosovo.
CHAPTER II
Municipal Taxes and Fees
Article 9
Immovable Property Tax
A municipality shall have the authority to collect a tax on immovable property located within its boundaries
in accordance with and to the extent provided for in UNMIK Regulation 2003/29.
Article 10
Business License Fee
10.1 A municipality may, by municipal regulation, require business organizations that are currently
registered with the Kosovo Business Registry to obtain a license to conduct business activity from
premises located within the municipality (the “business license”). Licenses for business organizations
providing professional services from premises located in the municipality shall be governed by Article 11
of this law, and not according to this Article.
10.2 A municipality may, by municipal regulation, also establish an annual fee that must be paid by
registered business organizations to obtain or maintain such a business license. Such regulation may
also establish a fee schedule that imposes different fees on different categories of business activities.
Any such business license fee shall be assessed only on the basis of rules established by municipal
regulation. The schedule and the rules shall not impose different fees on business organizations
conducting the same or similar business activities.
10.3 The concerned municipal regulation may impose different business license fees on the basis of:
a) the category of business activity, such as retail sales, food processing, handicraft, hotel and
restaurant services, banking activities and financial services, insurance, and other business
activities.
b) the type of premises where the business activity is conducted, such as a shop, market stand, or
kiosk.
c) the sale of drinks containing alcohol.
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10.4 The concerned municipal regulation may not impose different business license fees on the basis
of any of the following:
a) the number of employees in the concerned business organization;
b) the volume of the business organization’s business activity, whether determined by turnover,
production, or any other similar indicator;
c) the amount of space used by the business organization;
d) the location of the business activities being conducted; and
e) the income, profit or cash flow of the business organization.
10.5 A business license fee shall be assessed on each location where a business activity is conducted
within the boundaries of the municipality. If a business organization conducts business activity in more
than one location in the same municipality, a business license may be required for each location.
10.6 Municipalities shall require documentary evidence of the current registration of the business
organization with the Kosovo Business Registry prior to granting such business organization a business
license to conduct business activity within the municipality.
10.7 Municipal regulations shall require business licenses to be publicly displayed in the business
location for which each such license has been issued.
10.8 A municipality shall not permit any person or undertaking that is not registered with the Kosovo
Business Registry to conduct any business activities within the municipality, unless such person or
undertaking can demonstrate that the Law on Business Organizations exempts them from such
registration.
Article 11
Professional Business License Fee
11.1 A municipality may, by municipal regulation, require business organizations that are currently
registered with the Kosovo Business Registry and that are providing professional services from premises
located in the municipality to obtain a professional business license (the “professional business license”).
11.2 A municipality may, by municipal regulation, also establish an annual fee that must be paid to
obtain or maintain such a professional business license. Such regulation may also establish a fee
schedule that imposes different fees on different categories of professional services. Any such
professional business license fees shall be assessed only on the basis of rules established by municipal
regulation.
11.3 A professional business license for professional work of accountants, lawyers, doctors, dentists
and other professions shall be issued only after the applicant provides documentary evidence of licensure
and/or official certification to practice in accordance with the applicable legal requirements established by
or pursuant to the laws of the Republic of Kosovo.
11.4 The issuance of a professional business license by a municipality shall not be construed as
indicating that the municipality has judged the fitness of the holder to practice that profession.
Article 12
Motor Vehicle Fee
12.1 A municipality shall have the right to require natural persons who are residents of such
municipality and business organizations and other undertakings that have their Kosovo headquarters in
such municipality to pay an annual motor vehicle fee (the motor vehicle fee) for each vehicle owned by
such a resident, business organization or undertaking.
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12.2 A municipality shall not assess the motor vehicle fee on vehicles owned by natural persons who
are not residents of that municipality or on business organizations and undertakings that have their
Kosovo headquarters in another municipality.
12.3 If a municipality decides to assess such a motor vehicle fee, the municipal assembly shall issue a
regulation thereon. The motor vehicle fee shall be assessed based on the engine size of the motor
vehicle and/or the general type of vehicle (motorcycle, passenger automobile, truck, or bus).
12.4 The municipal assembly may, by regulation, exempt or establish a reduced motor vehicle fee for
vehicles used (i) for emergency services, (ii) for the transport of disabled persons, and (iii) for other
significant social or public purposes.
Article 13
Municipal Administrative Fees
13.1 A municipality may, by regulation, establish a schedule of fees to be assessed for specific
administrative services provided to persons by the municipality.
13.2 No such municipal administrative service fee shall be established at a level that exceeds the cost
of providing the concerned service, including costs for labor, materials and equipment usage.
13.3 Municipal administrative fees shall be in addition to the other fees required for the issuance of
licenses, permits, documents.
Article 14
Permit Fees for the Construction and Demolition of Buildings and Other Structures
14.1 A municipality may, by regulation, (i) require a person who desires to construct or demolish a
building or other structure within the municipality to obtain a permit for such activity, and (ii) establish a
fee schedule for such permits that imposes different fees on the basis of the surface area occupied or to
be occupied by such building or structure.
14.2 The cost of any inspection or supervisory activities that the municipality is required by law or
regulation to conduct with respect to construction or demolition activities may be charged as a fee for
municipal administrative services under Article 13.
Article15
Other Municipal Fees
Municipalities may regulate and levy charges on other activities, including the following:
a) vehicle parking on municipal property, including pavements, sidewalks and streets;
b) the use of municipal property for recreation, including camping;
c) for hunting or fishing within the municipal boundaries and on municipal property;
d) for marketing or exhibitions on municipal property;
e) for ceremonies or functions performed by municipal officers, for example performing weddings;
f) such other municipal fees shall be defined by municipal regulation.
Article 16
Fees for Issuing Certificates and Official
Documents
16.1 A municipality may, by regulation, establish a schedule of fees to be assessed for the issuance of
(i) certificates or other official documents such as wedding certificates, birth certificates, divorce
certificates, certificates on the economic and social situation, and other similar certificates, and (ii) copies
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of such certificates and other original documents, including copies of official documents that are required
to be made publicly available under the laws of the Republic of Kosovo.
16.2 No such fee shall be established at a level that exceeds the cost of providing the concerned
certificate or copy.
CHAPTER III
Charges, Rents, Fines and Co-Payments and Other Own Source Revenue
Article 17
Regulatory Charges for Infrastructure Development and Preservation
17.1 A municipality may, by regulation, establish charges that are to be assessed to reimburse the
municipality for the cost of establishing, improving, expanding or repairing municipal infrastructure if such
action is made necessary as a direct consequence of (i) the construction of new buildings or (ii) the
expansion or substantial rehabilitation of existing buildings.
17.2 If such construction, expansion or rehabilitation increases the number of dwelling units in the
municipality, a municipality may, by regulation, establish charges that are to be assessed for the impact of
the estimated population increase on the educational, healthcare and other municipal services provided
by the municipality
Article 18
Traffic Fines
18.1 A municipality shall, by regulation, establish its traffic rules and establish fines for violations
thereof. All traffic rules of a municipality shall be consistent with those established by the laws of the
Republic of Kosovo.
18.2 Fines paid for traffic violations within the territory of a municipality shall be the municipality’s own
source revenue. Transfers shall be made in accordance with the LPFMA and shall include payments that
are made through the Kosovo Police Service and the courts as a result of court decisions.
Article 19
Fines for Offences Against Municipal Regulations
19.1 Municipalities may impose fines and other measures for offences against municipal regulations
approved by the municipal assembly. The specific amounts of fines and/or severity of other enforcement
measures shall be commensurate with the importance of the offence, and shall include the legal, juridical
and administrative expenditures necessary for collecting the fine and/or enforcing the measure.
19.2 A municipality shall, by regulation, also establish fines on private persons who obstruct or limit, or
attempt to obstruct or limit, public access to municipal property through the unauthorized construction or
placement of temporary or permanent barriers, obstacles or signs.
Article 20
Rental Income
20.1 Municipalities have the right to charge and collect rent for the use of municipal property by
undertakings or natural persons.
20.2 The basis for the rental charge for using municipal property shall be the market rental value
except as provided in paragraph 6 of this Article.
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20.3 Rental charges for the use of municipal immovable property shall be the market rental price
based on (i) the size of the building or land as measured in square meters or another measure of area, (ii)
the location and type of the building or land, and (iii) the type of usage, whether it is for business, trade,
residence, agriculture, or professional work.
20.4 Municipalities may charge and collect rent from business organizations that use municipal
property to conduct their activities, including – but not limited to - kiosks, sales desks, and restaurants that
are located on or that use sidewalks, pavements, roads, public easements, municipal land or other
municipal property.
20.5 The rental charges shall not be determined on the basis of the revenues or turnover of the
business organization using the municipal property.
20.6 Municipalities may charge and collect rent that is lower than the market rental value if the
concerned use of the municipal property clearly serves a significant social or public purpose that has
been identified as such in a regulation adopted by the municipality assembly.
Article 21
Education and Health Co-Payments
21.1 All co-payments, charges and fees for municipal health care services shall be treated as the
municipality’s own source revenues; provided, however, that these amounts shall also be the dedicated
revenue of the concerned health care facility. The foregoing sentence shall apply notwithstanding any
other provision of the present law governing the use of own source revenues. The handling, accounting,
reporting, monitoring and verifications of these co-payments, fees and charges shall be done in
accordance with the LPFMA.
21.2 All co-payments, charges, fees and tuition for municipal education services shall be treated as the
municipality’s own source revenues; provided, however, that these amounts shall also be the dedicated
revenue of the concerned education facility. The foregoing sentence shall apply notwithstanding any
other provision of the present law governing the use of own source revenues. The handling, accounting,
reporting, monitoring and verifications of these co-payments, fees and charges shall be done in
accordance with the LPFMA.
Article 22
Other Own Source Revenues
Own Source Revenues authorized by the present law shall not be comprehensive. Municipalities may
levy and collect other revenue sources allowed within their responsibilities established by law or
agreement with central authorities.
PART III
Operating and Equalization Grants
Article 23
Operating Grants
Municipalities shall receive Operating Grants under the KCB. The Operating Grants shall be: (i) a
General Grant, (ii) a Specific Grant for Education and (iii) a Specific Grant for Health. Grants shall be
based on fair, transparent and objective criteria ensuring greater municipal autonomy in the allocation and
expenditure of such grants.
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Article 24
General Grant
24.1 Municipalities shall be entitled to receive a General Grant that they may use in the discharge of
any of their municipal competencies in accordance with the applicable laws of Kosovo. The General
Grant shall (i) provide for a reasonable degree of stability in municipal income, (ii) provide for an
appropriate measure of equalization between municipalities, (iii) take into account the respective ability of
the inhabitants of each municipality to access public services, and (iv) provide an adequate allocation of
resources for the non-majority communities in the respective municipalities.
24.2 The amount of the General Grant shall be ten percent (10%) of budgeted central government
total revenues, excluding (i) revenue from the sale of assets, (ii) other extraordinary revenue, (iii)
dedicated revenue and (iv) proceeds from borrowing.
24.3 To equalize for the low own-source revenue capacity of the smaller municipalities, from the total
of the General Grant, each municipality shall receive a lump-sum amount of €140,000 per year less €1 for
each member of the population, or €0 for municipalities with populations equal to or greater than 140,000.
24.4 The remainder of the General Grant shall be allocated among municipalities in proportion to: (i)
the size of their total population, (ii) the size of their minority population, (iii) whether a majority of their
population is composed of national minorities; and (iv) the size of their physical area.
24.5 Population shall be weighted at eighty-nine percent (89%); the size of their minority population at
three percent (3%); municipalities with a majority of their population composed of national minorities at
two percent (2%); and the size of their physical area at six percent (6%).
24.6 The population, area size, and minority data used to calculate weights are included in Annex 1 to
this Law.
Article 25
Specific Grants for Education and Health
25.1 Municipalities shall receive a Specific Grant for Education and a Specific Grant for Health. The
determination of the amount of such grants shall be based on an open-ended funding approach.
25.2 The Specific Grant for education shall finance the cost of providing a minimum standard level of
pre-primary, primary and secondary education.
25.3 The Specific Grant for health shall finance the cost of providing a minimum standard level of
public primary healthcare.
25.4 The Specific Grant for education shall be defined and allocated to municipalities according to the
allocation formula established by the Grants Commission; and such formula shall be based on student
enrollment and standards supplied by the Ministry of Education, Science, and Technology. The formula
shall principally be based on the normalized number of teachers and effective enrollment. It shall also
take into account the national curriculum, special needs education, non-wage operating expenses, class
size norms and location. Minority students shall be given higher weights.
25.5 The Specific Grant for health shall be defined and allocated to municipalities according to the
allocation formula established by the Grants Commission; and such formula shall be based on the
normalized population and standards established by the Ministry of Health. Normalization shall consider
the age and gender distribution of the population registered with primary health care providers, and the
number of elderly persons and of persons needing special health care.
PART IV
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Other Grants and Transfers
Article 26
Transfers for Delegated Competencies
Where Government competencies are delegated to municipalities, the concerned municipalities shall
receive financing from the KCB for performing those functions through budget transfers from the relevant
ministries. This financing shall be in addition to funds provided under Operating Grants and shall comply
with the requirements of Article 5 of this Law.
Article 27
Grants for Enhanced Competencies
Where municipalities own competencies are enhanced according to law, the concerned municipalities
shall receive grants from the KCB to finance the performance of such enhanced competencies. These
grants shall be in addition to the Operating Grants and shall comply with the requirements of Article 6 of
this Law. The municipality shall be required to spend such a grant only on matters that are clearly and
directly connected to the enhanced competencies.
Article 28
Spending Authority and Monitoring
28.1 The spending authority for transfers for delegated competencies, and for grants for enhanced
competencies, shall be with the receiving municipality, which shall be required to comply with the
applicable provisions of the LPFMA when exercising that authority.
28.2 Ministries responsible for the subject matter of delegated and enhanced competencies shall
monitor and ensure that (i) such competencies have been executed in compliance with applicable laws,
sub-normative acts and standards, and (ii) the measures taken by municipality in the implementation of
such competencies are appropriate. Such ministries shall annually provide a monitoring report to the
Ministry of Economy and Finance and the Ministry of Local Government Administration on these matters.
Article 29
Extraordinary Grants
In the event that a natural disaster or an act of civil insurrection, war or terrorism seriously affects a
municipality, the Government may provide an extraordinary grant to such municipality to relieve the some
or all burden of such event on its municipal budget.
PART V
Municipal Borrowing and Commitments
Article 30
Municipal Borrowing and Long Term Commitments
30.1 Until legislation on national borrowing and debt is enacted, municipalities’ borrowing will be
regulated by this Article.
30.2 Municipalities shall have access to debt financing for capital investments under conditions
specified in this Article.
30.3 The Minister of Economy and Finance may authorize municipal borrowing upon submission of by
the mayor of a written request that has been approved by the municipal assembly. The request shall
include provisions addressing the following conditions:
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a) that international debt is not contracted;
b) borrowing shall only be allowed from the national capital market and without exposure to foreign
exchange risk;
c) the proceeds from borrowing shall be used for specific capital investment projects that are set out
in the MTEF and authorized in the KCB;
d) the proposed capital investment project shall have passed a successful review of the capital
investment and financial plans by the Grants Commission;
e) the proposed terms and conditions of the borrowing shall have been reviewed and approved as
being in compliance with market conditions by the Ministry of Economy and Finance;
f) so-called “grace periods” in loan arrangement, whereby debt service is suspended or alleviated
for an initial period, shall be prohibited;
g) any proposed borrowing shall be fully collateralized by immovable property owned by the
municipality. The immovable property to be used as collateral shall be owned by the municipality
free and clear of any other ownership claims or encumbrances;
h) the assessed valuation of the immoveable property to be pledged as collateral as described in
item (g) above shall have been approved by the Ministry of Economy and Finance;
i) the total annual debt service, consisting of all interest and principal payments, on the
municipality’s outstanding debt and which shall include the amount of the proposed new loan,
shall not exceed fifteen percent (15%) of the total of the municipalities’ own source revenues as
of the past fiscal year;
j) the total amount of the municipality’s debt outstanding, inclusive of the proposed borrowing, shall
not exceed fifty percent (50%) of the municipalities’ own source revenue as of the past fiscal year;
and
k) after the municipality has entered into the borrowing, copies of all documents shall be submitted
to the Minister of Economy and Finance.
30.4 The Government, upon the proposal of the Minister of Economy and Finance, shall be
empowered to suspend the application of paragraph 1 of this Article in view of macroeconomic
considerations for a period not to exceed four years.
30.5 Leasing contracts and all similar financial arrangements that provide for installment payments
over a period of time shall require the prior authorization of the Minister of Economy and Finance. The
annual costs of these financial arrangements shall be treated as debt and be specifically subject to the
limitations contained in paragraph 1 of this Article and treated as debt service for the purposes of items (i)
and (j) of that Article.
30.6 The restrictions on the making of grants, gifts, donations or subsidies to any person or
undertaking in the LPFMA shall apply to municipalities.
PART VI
Institutional Provisions and Grants Commission
Article 31
Provisions Concerning Operating Grants
31.1 When preparing a proposed annual Appropriations Law for an upcoming fiscal year, the Minister
of Economy and Finance shall include in the proposed appropriations for municipalities amounts that are
recommended to be appropriated to municipalities as Operating Grants. In proposing the amount of
such grants, the Minister shall utilize the formulae provided by this law.
31.2 A general grant may be used by the municipality for any purpose that is directly related to the
exercise by the municipality of any of its own competencies. Notwithstanding the foregoing, the Minister
may, with the approval of the Government, promulgate general guidelines for current and capital
expenditures that municipalities shall be required to comply with.
31.3 If the Ministry of Economy and Finance’s final reconciliation of a budget for a fiscal year shows
that actual revenues exceeded budgeted revenues by more than five percent (5%), then the amount of
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such excess revenues shall be apportioned to the municipalities in the same manner as provided in
paragraph 2, Article 24 of this Law. The Minister of Economy and Finance shall then (i) adjust the then
current year General Grant levels for each municipality in accordance with the formulae established in
paragraph 5, Article 24 of this Law, and (ii) initiate the normal budgeting and appropriations process
therefore in accordance with the LPFMA.
Article 32
Grants Commission: Membership, Organization, Meetings
32.1 There shall be established, under the authority of the present law, a Grants Commission
composed of the following members: (i) the Prime Minister or his representative, (ii) the Minister of
Finance and Economy, (iii) the Minister of Local Government, (iv) another Minister appointed by the
Government, (v) the Chairman of the Budget Committee of the Assembly, and (vi) four mayors, one of
whom shall be a mayor of a minority municipality. The mayors shall be selected by lottery as provided for
in paragraph 2 of this Article.
32.2 The selection of the mayors shall be done by two separate lotteries, which shall be conducted
annually by the Grants Commission at an open meeting. Except as provided in paragraph 3 of this
Article, the Grants Commission shall conduct such lotteries at its last meeting in each calendar year. Only
the names of majority municipalities shall be included in one lottery and only the names of minority
municipalities shall be included in the other. The names of three municipalities shall be chosen in the first
lottery and the name of one municipality shall be chosen in the second. The names of municipalities that
are then represented on the Grants Commission shall not be included in any lottery for the selection of
mayors who will serve on the Grants Commission during the next year. The mayors of the chosen
municipalities shall serve on the Grants Commission during the next calendar year.
32.3 The mandate of the Grants Commission that is in place at the time this law is promulgated shall
expire at midnight on the 30th calendar day after such promulgation. During such 30 day period, that
Grants Commission shall conduct the lotteries required by paragraph 2 of this Article, at an open meeting,
to choose the mayors who will sit on the new Grants Commission. If the current Grants Commission fails
to conduct such lotteries within the 30 day period, the Government shall immediately conduct such
lotteries. The mayors of the municipalities chosen in such lotteries shall serve on the Grants Commission
only until the end of the calendar year in which they were chosen. Their successors shall then be chosen
as provided in paragraph 2 of this Article.
32.4 The Grants Commission shall hold regular meetings, to be called by the Minister of Finance and
Economy, at least once every calendar quarter. Any two members may jointly call other meetings,
provided that any such non-regular meeting shall be called and noticed at least seven days before it is to
be held. A meeting of the Grants Commission may only be validly convened or continued only if six or
more members are present and the Minister of Economy and Finance or the Prime Minister is among the
members present. The Prime Minister, if personally present, shall chair a meeting of the Grants
Commission, if not, the Minister of Economy and Finance shall chair the meeting.
32.5 The Minister of Economy and Finance shall provide a permanent secretariat to support the
Grants Commission. Funds necessary for the work of the Grants Commission shall be provided from the
budget of the Ministry of Economy and Finance. The Ministry of Economy and Finance shall perform, or
arrange for the performance of, any expert and/or administrative-technical operations or analyses
reasonably needed by the Grants Commission.
32.6 A quorum of at least six members shall be required for any matter to be put to a vote. If the
Grants Commission cannot reach a decision on a particular matter by a majority vote, the matter shall be
decided by the Prime Minister or – if the Prime Minister is not personally present at the concerned
meeting – the Minister of Economy and Finance.
32.7 All decisions and recommendations adopted by the Grants Commission shall be published on the
Ministry of Economy and Finance’s web-site. The Grants Commission may, however, agree, by majority
vote, to conduct discussions about a specific matter in private.
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Article 33
Grants Commission: Responsibilities
The Grants Commission established by the present law shall be responsible for:
a) reviewing the grant allocation formulae in this law after 2 years following promulgation and at
least every 3 years thereafter, and recommending proposed amendments to such formulae to the
Government, who shall forward the Commission recommendations to the Assembly along with
the Governments concurrence or why they recommend rejection;
b) annually establishing allocation formulae for the Specific Grant for Education and the Specific
Grant for Health in accordance with the principles laid down in Article 25 of this Law;
c) preparing and submitting to the Government by March 31 of each calendar year a report for the
previous calendar year assessing the adequacy of the financing system;
d) reviewing appeals by municipalities regarding the application of such formulae, including
financing for delegated and enhanced competencies, and recommending to the Government
proposed actions with respect thereto;
e) making recommendations for the allocation of additional amounts to those municipalities that
have been assigned enhanced municipal competencies according to Articles 19 through 22 of the
Law on Local Self-Government to ensure the ability of such municipalities to adequately perform
such enhanced competencies;
f) monitoring the implementation of the Article 34 of this law and make appropriate
recommendations to achieve its goal;
g) monitoring the adoption of post-census population data and the implementation of the hold
harmless clause according to Article 35 of this law, and make appropriate recommendations to
achieve its goal;
h) reviewing proposed budgeted capital expenditures for municipalities by Government of Kosovo
budget organizations, which shall be submitted to it by the Minister of Finance and Economy, and
providing recommendations to the Government with respect thereto;
i) reviewing requests by municipalities for additional funding to address exceptional needs, and
recommending to the Government proposed actions with respect thereto, and
j) supporting the Ministry of Finance and Economy and the Minister of Local Government
Administration and other public authorities in securing the implementation of this law.
PART VII
Transitional and Final Provisions
Article 34
Minimum Grants for FY 2009
If in the first year of implementation of the grant system provided for in the present law, the overall
amount of the Operating Grants for a municipality, as calculated in accordance with the present law, is
less than the amount of the prior year’s overall grants, the total amount of such Operating Grants shall,
only for the concerned municipality and only for the first implementation year, be equal to the total amount
of all grants received by that municipality in such prior fiscal year.
Article 35
Use of New Population Data
35.1 The Government, upon a recommendation from the Minister of Economy and Finance and the
Minister of Local Government Administration, and with the consent of the ICR, may, during calendar year
2008, modify Annex 1 as needed to incorporate new or changed population information.
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35.2 Thereafter, if data resulting from a new population census makes it necessary, the Government
shall amend Annex 1 to incorporate the data resulting from such census. If a budget development cycle
has commenced and thereafter new official census data is published, the Minister of Economy and
Finance may, but shall not be required to, take into consideration such data during that budget
development cycle.
35.3 If the use of new census data would cause the amount of an Operating Grant for a specific
municipality to decrease from the prior year’s amount for such grant, the amount of such grant shall, only
for the concerned municipality and only for one fiscal year, be equal to that received in the prior fiscal
year. The cost of compliance with this Article shall be paid out of additional funds from the KCB and not
out of any amounts needed to fund the Operating Grants.
Article 36
Implementation, Sub-normative Acts
The Ministry of Economy and Finance, in consultation with the Ministry of Local Government
Administration and other Ministries as needed, may issue sub-normative acts required to effectively
implement this law.
Article 37
Entry into Force
37.1 This law shall enter into force after its adoption by the Assembly of Kosovo and upon publication
in the Official Gazette of the Republic of Kosovo.
37.2 This Law shall enter into force fifteen (15) days after its publication in the Official Gazette of
Republic of Kosova.
Adopted by the Assembly of the Republic of Kosova
Date: 13.03. 2008
Annex I: Data used for allocating the General Grant
Area size
Minority
communities
Minority
Municipalities
Population (sqkm) In Municipality in Kosovo
1 Deçan 40,400 297 294
2 Dragash 35,000 430 12,935
3 Ferizaj 111,000 345 3,367
4 Fushë Kosovë 33,682 83 3,730
5 Gjakovë 115,000 587 6,013
6 Gjilan 100,348 392 4,058
7 Gllogovc 60,000 276 0
8 Hani I Elezi (Kacanik) 10,000 83 0
9 Istog 44,000 454 2,646
10 Junik (Decan) 9,600 74 0
11 Kaçanik 33,000 211 4
12 Kamenica 49,581 424 4,670
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13 Klinë 44,000 309 1,863
14 Leposaviq 19,000 539 510 19,000
15 Lipjan 69,115 338 4,952
16 Malishevë 52,000 306 28
17 Mamusha (Prizren) 6,000 32 0 6,000
18 Mitrovicë (South) 90,000 331 0
19 Novo Bërdë 9,899 204 2,785 9,899
20 Obiliq 26,000 105 3,360
21 Pejë 115,000 603 12,650
22 Podujevë 117,000 633 735
23 Prishtinë 388,561 514 4,961
24 Prizren 214,963 603 30,077
25 Rahovec 63,000 278 1,953
26 Shtërpcë 11,000 248 3,438 11,000
27 Shtime 28,000 134 560
28 Skenderaj 56,000 374 366
29 Suharekë 80,000 361 471
30 Viti 46,458 270 293
31 Vushtrri 75,000 345 2,615
32 Zubin Potok 15,000 333 800 15,000
33 Zveçan 16,000 123 600 16,000
34 Gracanica 18,642 131 2,670 18,642
35 Klokot 4,542 23 1,205 4,542
36 North Mitrovica 20,000 5 1,990 20,000
37 Partesh 5,217 29 0 5,217
38 Ranilug 4,955 69 0 4,955
Total 2,236,000 10,901 116,599 130,255