Bulgaria to recategorize municipalities based on new criteria

All municipalities in Bulgaria will be reclassified according to new criteria based on the 2021 census. This recategorization is crucial for various municipal financing systems, including construction taxes, allocation of funds under new investment programs and provisions supporting state-delegated activities.

An audit by the media “Sega” revealed that new criteria for the categorization of municipalities and estates were voted on at the end of last year. Following the decision of the Court of Justice in November 2023, a six-month deadline was set for the preparation of the categorization methodology, which has already been approved. However, the assessment of individual municipalities using this methodology is still ongoing.

Significant changes are expected in the categories of municipalities due to the dynamic nature of the indicators used in the assessment. The assessment criteria are divided into four categories: demographic status (population, age dependence, changes since the last census), economic potential, infrastructure development and territorial potential. The methodology includes maps for each indicator, with municipalities being assessed on a scale of 1 to 5, with higher scores indicating poorer performance. The final categories to be approved by the Regional Minister have not yet been listed in the methodology, although the dynamics of the indicators are noteworthy.

There have been notable changes in population rates. The data show an increase in the number of smaller municipalities and a decrease in the number of larger ones, although this grouping is only an illustration of the dynamics.

Currently, the Ministry of Regional Development and Public Works (MRDPW) is finalizing agreements with municipalities under the 2024 investment program, based on their categories. The maximum funding available to a municipality is set based on its category: 50 million leva for category 1, 30 million leva for category 2, 15 million leva for category 3, etc. The largest cities, with a population exceeding 180,000, can receive up to 100 million leva. It is expected that some municipalities may be reclassified to lower categories due to deterioration in indicators, although agreements may already be concluded before the regional minister issues a regulation with new categories. The timeline for this regulation remains unclear.

The new categories will affect various budget allocations and financing standards, including the assessment of property taxes, the financing of municipal administration, emergency response standards, and educational allowances for schools and kindergartens in small and remote areas.