SIGNAL ADDRESSED TO PFIA
The Anti-Corruption Fund /ACF/ has notified the Public Financial Inspection Agency /PFIA/ of serious irregularities upon the taking on of a long-term municipal debt by Stara Zagora municipality. The sum amounts to 6 million levs /BGN/.
According to the ACF legal team, there is a discrepancy between the specified type of the debt and its taking on, grounded as force majeure.
On 8 August last year (2017), at a special press conference, the mayor of Stara Zagora town, Bulgaria – Zhivko Todorov – announced that a distraint had been levied on the municipality’s accounts amounting to about 9 million BGN. The distraint is the consequence of an ultimately lost case against a contractor of a 2013 public contract involving repair works in the Stara Zagora quarter of “Zheleznik”. On 17 August the mayor suggested a public discussion on the intentions for taking on a long-term debt amounting up to 6.56 million BGN meant for funding and refunding ongoing repair works. About 560,000 BGN were for bridge financing of projects, which were part of the “Regions in Growth” operational programme in 2017. A public discussion with regard to taking on a long-term municipal debt took place on the following week.
Certain parameters have been set – funding and refunding of expenses associated with ongoing repair works on sidewalks, laying asphalt in streets, and development of the spaces between the residential buildings in the territory of Stara Zagora municipality. The mayor stated his motives during the discussion – he said that Stara Zagora municipality had to take on a long-term debt amounting to 6 million BGN in order to eliminate the consequences of “force majeure”. The chief financier of the municipality Mrs. Tsanka Ganeva presented some details with regard to the parameters of the debt. She announced that the municipality owed approximately 2.5 million BGN for already executed repair works on sidewalks, laying asphalt in streets, and development of the spaces between the residential buildings, and repair works for another 3.5 million BGN had been assigned to contractors and would be finished by the end of 2017.
In his proposal, the mayor determined the type of the debt as a “long-term debt aiming to prevent and eliminate the consequences of force majeure, taken on via a contract for a municipal loan”. By “force majeure” he means the distraint levied on the financial means with regard to the “Zheleznik” case. The motives in the mayor’s proposal to the municipal council reveal that the grounds for taking on a long-term debt is the funding and the refunding of expenses associated with executed and assigned repair works. These are activities that can be qualified as incurring capital costs, which, however, implies taking on a short-term, not a long-term, municipal debt pursuant to the Law on the Municipal Debt. The reason why the type of the debt has been qualified as “a long-term debt for preventing and eliminating the consequences of force majeure” remains unclear.
The unfavourable outcome of a lawsuit cannot be qualified as force majeure. ACF considers there is a grounded suspicion of a violation of the Law on the Municipal Debt in relation to the Law on Public Finances upon the taking on of a long-term municipal debt amounting to 6 million BGN through a bank loan. In its turn, PFIA accepts ACF’s conclusions as grounds for conducting a financial inspection in Stara Zagora municipality.