Sustainability Bonds Framework

App4-The Budgetary «Golden Rule» for French Local Authorities In its public report on local government finances published in October 2013*, the Cour des Comptes (National Court of Auditors) highlighted that local authorities "[...] represent in practice a sub-sovereign risk due to the golden rule: they must ensure that they are able to make capital repayments on their loans from their own resources and may only borrow to finance their investment needs. Compliance with this rule is guaranteed by the statutory budgetary audit mechanism involving regional and local Courts of Auditors acting at the behest of the State representative. It notably includes a procedure for rectifying excessive deficits in the accounts" This rule ensuring balanced budgets is notably codified in Article L.1612-4 of the CGCT: "The local authority budget is balanced when the operational and investment sections are both balanced and approved, with revenues and expenditures assessed in a faithful manner and when funding from the revenues of the operational section to the investment section, added to this section's own revenues (excluding proceeds from borrowings) and to depreciation and provisions, provide sufficient resources to cover annual capital repayments falling due during the financial year." Article L.2331-8 of the CGCT states that proceeds from borrowings represent one of the non-tax revenue items of the investment section in local authority budgets. Borrowings correspond to long-term debts taken out during the period. Borrowings may also only be used for funding investment requirements and must be differentiated from short-term debts, which only cover annual requirements and which are not included in the budget. 54 CAFL Lo bonque des collectivités

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