The centrality characteristics of large municipalities in Spain (with more than 75,000 inhabitants) increase their expenditure needs; yet, they have a positive impact on their fiscal capacity. As such, centrality implies certain additional costs, but it also brings some benefits. By contrast, the capital status of a municipality seems to generate mainly costs; that is, being a capital increases expenditure needs. This is the main conclusion to be drawn from the study Should large Spanish municipalities be financially compensated? Costs and benefits of being a capital/central municipality (Núria Bosch, Marta Espasa, Daniel Montolio).
Consequently, the local financing system for the large municipalities in Spain needs to give greater consideration to factors linked to capital characteristics, since the factors associated with the centrality characteristics of municipalities appear to be offset by their greater fiscal capacity and, hence, do not, in principle, need to be explicitly recognised by the financing system.
