Text consolidated by Valsts valodas centrs (State
Language Centre) with amending laws of:
7 October 1999 [shall come
into force on 3 November 1999];
7 December 2000 [shall come into force on 3 January
2001];
20 October 2005 [shall come into force on 1 January
2006];
4 December 2008 [shall come into force on 1 July
2008];
20 September 2012 [shall come into force on 18 October
2012].
If a whole or part of a section has been amended, the
date of the amending law appears in square brackets at
the end of the section. If a whole section, paragraph or
clause has been deleted, the date of the deletion appears
in square brackets beside the deleted section, paragraph
or clause.
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The Saeima1 has adopted
the President has proclaimed the following law:
On the Stabilisation of Local
Government Finances and the Monitoring of the Financial
Activities of Local Governments
[20 October 2005]
Chapter I
General Provisions
Section 1. The purpose of this Law is to regulate the
procedures by which the stabilisation of local government
finances shall be performed in order to ensure the continuous
fulfilment of the functions of local governments as prescribed by
Law in cases when local governments have come into extreme
financial difficulties.
[20 October 2005]
Section 2. The stabilisation of local government
finances shall be performed if at least one of the following
features are determined:
1) the debt obligations of a local government for which the
time limit for reimbursement has set in during the current
financial year, together with the debt obligations of the
previous years for which the time limit for reimbursement has set
in, exceed 20 per cent of the total amount of the local
government budget for the current financial year;
2) the local government is unable or, due to circumstances as
can be proved, will be unable to settle its debt obligations;
3) the debts of the local government exceed the asset values
in its ownership according to the market value of these
assets.
[20 October 2005]
Section 3. For the purposes of this Law, the following
shall be construed as debt obligations of a local government:
1) expenses for the payment of credit and credit interest;
2) expenses in relation to the guarantee obligations provided
by a local government;
3) missed payments, surcharges, and other expenses related to
these payments.
Section 4. A local government shall be recognised as
one that is unable or, due to circumstances as can be proved,
will be unable to settle its debt obligations if the Minister for
Finance has confirmed at least one of the features referred to in
Section 2 of this Law that has arisen due to the following
reasons:
1) a person who has debt obligations towards the relevant
local government is declared insolvent;
2) the uninsured property of a local government has
perished;
3) a local government has not performed or received payments
for longer than three months regarding those debt obligations for
which the time period for reimbursement has set in;
4) as a result of the unlawful activities of another person,
losses have been caused to a local government.
[20 October 2005]
Section 5. (1) The stabilisation of local government
finances shall be performed using the following:
1) the financial resources of a local government;
2) State budget funds;
3) donations, gifts, and other types of assistance, including
foreign assistance.
(2) In the process of the stabilisation of local government
finances, the local government shall consider the following
options:
1) to improve the chargeability of taxes and other
payments;
2) to become involved in measures promoting regional
development;
3) to propose a matter regarding the merging of local
governments;
4) to privatise the property objects of a local
government.
(3) The measures referred to in Paragraph two of this Section
shall be realised in accordance with special laws.
[20 October 2005]
Chapter II
Procedure for Application for the Stabilisation of Local
Government Finances
[20 October 2005]
Section 6. (1) An application for the stabilisation of
local government finances (hereinafter - the application for
stabilisation) is a submission approved by the council in which
at least one of the features referred to in Section 2 of this Law
is indicated and to which calculations regarding the costs for
financial stabilisation and a plan of measures to be performed
are attached.
(2) The following may propose that a local government council
submit the application for stabilisation:
1) the chairperson of a local government council;
2) a minister who has been authorised by the Cabinet for the
supervision of local governments (hereinafter - the authorised
minister);
3) the Minister for Finance;
4) the Auditor General.
(3) The persons referred to in Paragraph two of this Section
shall inform respectively the Minister for Finance and the
authorised minister of the proposal for a local government to
submit the application for stabilisation.
[20 October 2005; 4 December 2008]
Section 7. (1) A local government council shall
consider the proposal for the submission of the application for
stabilisation (hereinafter - the proposal for stabilisation) and
take the decision not later than within two weeks following
receipt of such a proposal.
(2) The local government council shall approve or reject, by a
substantiated refusal, the proposal for stabilisation submitted
by the persons referred to in Section 6, Paragraph two of this
Law. The decision of the local government council on the
submission of the application for stabilisation or the rejection
of the proposal for stabilisation shall be sent to the Minister
for Finance and the authorised minister not later than within
five days from the signing thereof.
[20 October 2005; 4 December 2008]
Section 8. (1) Having received the decision of a local
government council on the application for stabilisation, the
Minister for Finance shall take one of the following
decisions:
1) to initiate a process for the stabilisation of finances if
a local government has submitted the application for
stabilisation;
2) to not initiate a process for the stabilisation of finances
if a local government council has rejected the proposal for
stabilisation submitted by the persons referred to in Section 6,
Paragraph two of this Law by a substantiated refusal, and the
submitter agrees with this;
3) to examine the necessity for the financial stabilisation of
a local government at a Cabinet meeting if an agreement is not
reached between the person referred to in Section 6, Paragraph
two of this Law and the local government regarding the necessity
for financial stabilisation.
(2) The Minister for Finance shall establish a permanent
committee in which representatives of the Ministry of Finance,
institutions specified by the Cabinet which shall supervise the
work of local governments, and representatives of the Latvian
Association of Local and Regional Governments shall be included,
and such committee shall be established for the examination of
the application for stabilisation and the harmonisation of the
project for the stabilisation of finances approved by a local
government council.
(3) In the process of work, the committee established by the
Minister for Finance shall invite the chairperson of the relevant
local government council or an authorised representative thereof
and the representatives of those ministries and other State
authorities who are associated with the matters to be
examined.
[7 October 1999; 20 October 2005; 4 December 2008]
Section 9. If a decision is taken regarding the
initiation of a process for the stabilisation of local government
finances, the Minister for Finance shall appoint a supervisor of
the process for the stabilisation of local government finances
(hereinafter - the stabilisation supervisor) by entering into an
employment contract with him or her.
[20 October 2005]
Chapter III
Project for Stabilisation of Finances and the Harmonisation
Thereof
[20 October 2005]
Section 10. (1) A local government council shall, not
later than within one month following the appointment of the
stabilisation supervisor, prepare, with the participation of the
stabilisation supervisor, approve and send to the Minister for
Finance a project for the stabilisation of local government
finances (hereinafter - the stabilisation project).
(2) The chairperson of the local government council shall be
responsible for the preparation and approval of the stabilisation
project.
(3) The Minister for Finance has the right to reject the
stabilisation project adopted by a local government by a
substantiated refusal and return it to the respective local
government for redrafting.
(4) Implementation of the stabilisation project shall be
initiated following the receipt of acceptance of the Minister for
Finance in written form for the stabilisation project.
(5) If the Minister for Finance rejects the stabilisation
project prepared by a local government by a substantiated refusal
for three times, the matter regarding the acceptance, rejection
or redrafting of the stabilisation project shall be examined by
the Cabinet.
[7 December 2000; 20 October 2005; 4 December 2008]
Section 11. The stabilisation project shall include the
following:
1) a decision of the local government council on the approval
of the stabilisation project;
2) the application prepared in accordance with the decision of
the local government council;
3) detailed information with economic justification for
measures to be performed in accordance with the stabilisation
project;
4) a calculation of the joint financial resources necessary
for the stabilisation of finances, and also the financing
necessary for the specific measure of stabilisation in the
respective year;
5) a statement from the State Revenue Service regarding the
debt obligations of a local government and social insurance
payments on the first day of the month when the stabilisation
project is submitted;
6) a statement from the local government on the creditor and
debtor debts of the local government on the first day of the
month in which the stabilisation project is submitted;
7) a local government report on the budget implementation in
the period of time up to the first day of the month in which the
stabilisation project is submitted;
8) a project for planned amendments to the local government
budget that is developed in order to promote the stabilisation of
local government finances;
9) a schedule for the receipt and reimbursement of a
stabilisation loan;
10) a schedule of the loans, guarantee obligations, and
long-term liabilities of the local government.
[20 October 2005; 4 December 2008]
Section 11.1 If a local government is
planning to implement a new investment project within the
framework of the stabilisation project, then, in addition to the
documents referred to in Section 11 of this Law, it shall submit
the relevant investment project. The opinion of an independent
licensed expert shall be appended to the investment project.
[20 October 2005]
Section 12. Upon implementing the approved
stabilisation project, a local government council may propose to
the Minister for Finance that amendments be made to the
abovementioned project. In such a case amendments to the approved
stabilisation project shall be harmonised and approved by such
procedures provided for in this Law for the harmonisation and
approval of the stabilisation project.
[20 October 2005; 4 December 2008]
Chapter IV
Stabilisation Loan
Section 13. Stabilisation loans shall be granted to
local governments within the framework of the stabilisation loans
specified in the annual State budget law.
Section 14. (1) A stabilisation loan agreement shall be
entered into following the approval of the stabilisation project
between the chairperson of the local government council or his or
her authorised person and the Minister for Finance or his or her
authorised official.
(2) The following shall be specified in the stabilisation loan
agreement in conformity with the provisions of this Law:
1) the size of the loan;
2) the measures for the implementation of which the resources
will be used;
3) the interest on the loan;
4) the procedures and time limits for the reimbursement of the
loan;
5) the procedures and time limits by which a loan will be paid
into the local government account;
6) the liability of the contracting parties for the fulfilment
of obligations;
7) a guarantee (security) for the reimbursement of the
loan;
8) the procedure by which disputes of the contracting parties
shall be examined.
[20 October 2005; 4 December 2008]
Section 15. (1) The time limit for the reimbursement of
a stabilisation loan shall be determined by the Minister for
Finance within the framework of each specific stabilisation
project. The period in which reimbursement of the principal
amount of the loan does not take place shall not exceed three
years.
(2) The interest rates of the stabilisation loan shall be
determined according to the procedures prescribed by laws and
regulations.
[7 December 2000; 20 October 2005]
Section 16. (1) The fulfilment of the approved
stabilisation project as well as the stabilisation loan agreement
shall be monitored by the stabilisation supervisor.
(2) Each quarter a local government shall, by the fifteenth
day of the first month of the subsequent quarter, inform the
Minister for Finance in writing of the process of the
implementation of measures for the stabilisation of finances as
well as the financial situation of the local government. A
statement from the State Revenue Service on the debt obligations
of a local government and social insurance payments on the first
of the month in which the report is submitted shall be appended
to the information. The Ministry of Finance has the right to
request any information associated with the stabilisation of
finances.
[20 October 2005]
Section 17. (1) If a local government which, according
to the stabilisation project, has received a stabilisation loan
provides false information or hides conditions that may
significantly influence the implementation of the approved
stabilisation project, the Minister for Finance may, by a
substantiated decision, suspend the payment of the unpaid part of
the stabilisation loan. In such case the approved stabilisation
project shall be considered as non-harmonised and the
implementation thereof shall be suspended until repeated
harmonisation of the project with the Minister for Finance.
(2) The decision referred to in Paragraph one of this Section
shall be sent to the relevant local government and examined
according to the provisions of Section 10 of this Law.
(3) The substantiated decision of the Minister for Finance on
the suspension of payment of the unpaid part of the stabilisation
loan may be appealed by a local government to court.
(4) If a local government which has received a stabilisation
loan or the chairperson thereof repeatedly violates the
requirements of this Law in relation to the implementation of the
stabilisation project, the local government council or the
chairperson thereof may be dismissed in accordance with the
procedures determined in Chapter XII of the law On Local
Governments.
[20 October 2005; 4 December 2008]
Section 18. If necessary, not later than within a month
following the announcement of the annual State budget law, the
Minister for Finance shall propose to the local government
councils to make amendments to the approved stabilisation
projects in order to harmonise these with the approved State
budget law. In such case the proposals of the Minister for
Finance regarding amendments to stabilisation projects shall be
examined and approved in accordance with the procedures provided
for in Section 10 of this Law.
[20 October 2005; 4 December 2008]
Chapter V
Monitoring of Local Governments During the Period of the
Stabilisation of Finances
[20 October 2005]
Section 19. (1) The stabilisation supervisor shall have
the following duties:
1) to participate in the development of a local government
stabilisation project;
2) to prepare and submit, together with the stabilisation
project, an opinion to the Minister for Finance in written form
regarding the stabilisation project, expressing support or
specific objections in the opinion and the substantiation thereof
regarding the project overall or regarding separate points
thereof;
3) in cooperation with a local government council, to
supervise the implementation of the approved stabilisation
project;
4) to make proposals to the local government council regarding
budget amendments that are necessary for the implementation of
the stabilisation project;
5) to propose that the local government council make
amendments to the approved stabilisation project;
6) each quarter by the fifteenth day of the first month of the
subsequent quarter, to inform the Minister for Finance, the
committee referred to in Section 8, Paragraph two of this Law,
and the local government council in writing of the process of the
stabilisation of local government finances and the implementation
of the stabilisation project.
(2) The stabilisation supervisor shall prepare in written form
and submit to the local government council the proposals referred
to in Paragraph one, Clauses 4 and 5 of this Section. The local
government council shall examine the proposals submitted by the
stabilisation supervisor in the meeting of the local government
council within 15 days by convening a special meeting if
necessary.
[7 December 2000; 20 October 2005; 4 December 2008]
Section 20. (1) The stabilisation supervisor has the
following rights:
1) to request from the chairperson of a local government
council, his or her deputy (deputies), and the executive director
such information on the activities and finances of the local
government which is necessary for him or her in the performance
of his or her tasks;
2) to request information associated with the stabilisation of
local government finances from the heads of local government
institutions and capital companies and the heads of the capital
companies the equity capital of which contains shares owned by
the respective local government;
3) to propose that the audit commission of a local government
and the Auditor General perform a special audit in relation to
the administration and finances of local government institutions
and capital companies;
4) pursuant to the procedures by which it is done by the
chairperson of a local government council in accordance with the
law On Local Governments, to submit draft decisions to the
relevant finance committee of a local government and to the
council for examination, and also to propose amendments to the
previously adopted decisions;
5) to propose that the Minister for Finance suspend such a
decision of a local government council which is in contravention
of the implementation of the approved stabilisation project,
concurrently submitting proposals regarding amendments to the
abovementioned decision;
6) to monitor the expenses of a local government, including
signing the local government payment orders if required by the
Minister for Finance. The Minister for Finance shall determine
those types of payments which may be performed during the period
of the stabilisation of local government finances with a written
permit of the stabilisation supervisor;
7) to propose a matter to the Minister for Finance regarding
the suspension of payments of stabilisation loan resources to a
local government.
(2) [20 October 2005]
[20 October 2005; 4 December 2008]
Section 20.1 The activities of the
stabilisation supervisor shall be monitored by the Minister for
Finance. The duration of the activities of the stabilisation
supervisor shall be determined by the Minister for Finance within
the framework of each specific process of the stabilisation of
local government finances, evaluating the financial situation of
the relevant local government.
[7 December 2000; 20 October 2005]
Section 21. The wage, the expenses of official trips
and work trips, the costs envisaged for the payment of
telecommunication services, operating expenditures, and also
other expenses incurred by the stabilisation supervisor and
associated with the ensuring of the stabilisation process shall
be paid from State budget funds, providing resources in the
budget of the Ministry of Finance as a grant from the general
revenue.
[7 December 2000; 20 October 2005]
Section 22. If the elected stabilisation supervisor
does not fulfil or is unable to fulfil his or her duties, the
Minister for Finance may dismiss him or her from the fulfilment
of duties before the termination of the term of office and, if
necessary, appoint another stabilisation supervisor for the
remaining period of time.
[7 December 2000; 20 October 2005]
Section 23. All documentation compiled during the
period of activities of the stabilisation supervisor regarding
the process of the stabilisation of local government finances
shall be stored in the Ministry of Finance until it is
transferred to the National Archives of Latvia in accordance with
the Archives Law.
[7 December 2000; 20 October 2005; 20 September
2012]
Transitional Provision
[7 December 2000]
Amendments to Section 21 of the Law in relation to the
covering of expenses for the ensuring of a stabilisation process
from the State budget funds that are provided for in the budget
resources of the Ministry of Finance as a grant from the general
revenue shall come into force on 1 January 2001.
[20 October 2005]
The Law has been adopted by the Saeima on 21 May
1998.
President G. Ulmanis
Rīga, 3 June 1998
1 The Parliament of the Republic of
Latvia
Translation © 2022 Valsts valodas centrs (State
Language Centre)