Local authorities shall be entitled, within national economic policy, to adequate financial resources of their own, of which they may dispose freely within the framework of their powers.
Article 9.1 of the Charter ensures the right of local authorities to have their own resources and the liberty to spend them as they wish. Therefore, as stated by the Contemporary commentary higher-level authorities are expected to make certain that local authorities have the legal, budgetary and fiscal capacity to make use of these rights. It further clarifies that local entities’ own resources are typically made up of various components, such as local taxes, charges, fees, profits under private and commercial law, interest on their bank accounts and deposits.
Moreover, this Article states that resources should be “adequate”, however as discussed in the Contemporary commentary this is not an absolute term but must be exercised in relation to national economic policy.34 Additionally, the wording “adequate financial resources” incorporates the requirement to ensure proportionality between mandatory functions of local authorities and the funding available.
The Contemporary commentary further highlights the link between Article 9.1 and Article 9.3 of the Charter as these two paragraphs deal with the issue of adequate financing and consequently with fiscal autonomy, where local authorities enjoy two substantial powers: the power to have enough resources and the power to raise revenues according to the local situation (i.e., the socio-demographic and socioeconomic conditions).
In San Marino, allocation of funds for Township Councils is determined annually by the Congress of State. The system of financing of local authorities is centralised. 50% of the annual fund is distributed equally between Township Councils and 50% is distributed in proportion to the number of residents (Art 33, paragraph 3 of the Law on Township Councils).
Article 33, paragraph 5 of the same Law states that “the fund allocated to each Township Council shall be managed autonomously by the Council.” However, information provided by the Ministry of Finances reveals that, on average, expenditure relating to Township Councils accounts for less than 1% of government expenditure.
Local authorities in San Marino have no fiscal powers and cannot raise tax revenues. Differences exist between individual Townships as to whether they have some other additional sources of revenue. During the meetings of the delegation with local authorities it became clear that only some municipalities could generate additional income, for example through property rentals or market management. However, these revenues did not appear to be significant enough to ensure adequate independent income.
The State, in collaboration with the State Autonomous Corporation for Public Works (AASLP), is primarily responsible for fundamental activities like road maintenance, signage, and snow removal. According to the Ministry of Finance, this partnership operates on an annual budget of around EUR 3 million and follows a shared intervention schedule. Local authorities can make additional requests for works not covered by this programme, as per Article 32, paragraph 3 of the Law on Township Councils.
According to Article 32, paragraph 3 of the law on Township Council, local authorities are allocated an allowance of 3 000€ (three thousand) per year to cover small-scale ordinary maintenance work in relation to roads, public lightning, pedestrian and public green areas. In the opinion of the rapporteurs, and as confirmed by local elected representatives during the visit, this amount appears insufficient.
Based on the above-mentioned, the rapporteurs consider that local authorities of San Marino are not entitled to their “own” funding of which they may freely dispose as required by Article 9.1 of the Charter. The rapporteurs therefore conclude that the current system does not comply with requirements of Article 9.1.