Monday, 13 August 2012

Councils living on overdrafts


ALMOST two out of every three city and county councils are effectively broke and relying on overdrafts to meet day-to-day expenses.
A report from the Department of the Environment says "system-wide" changes are needed to bring council finances under control, and warns that services will be cut if "major efficiencies" are not achieved.
The revelation of the state of local authority coffers comes as councils across the country are being hit with cuts in funding from central government because of non-payment of the controversial household charge.
Some €160m was due from 1.6m households, but only €99m has been collected.
It means councils will have €61m slashed from their budgets over the coming months, and those with the lowest collection rates will be hardest hit.
A report from the Local Government Auditor has identified a range of problems surrounding how councils manage their money, including not getting best value on contracts, spending more than they take in and, in some cases, not knowing what assets they own.
Around 20 of the State's 34 councils are in the red, with nine highlighted as having very high "unfavourable balances" -- in effect overdrafts -- of more than €2m.
Donegal had the highest overdraft at more than €12.7m. Next is Sligo (€9.9m) followed by Meath (€8.3m), Waterford (€6.9m), Wexford (€6.3m), Kildare (€3.9m), Mayo (€2.7m), Wicklow (€2.1m) and Westmeath (€2.05m).
The report is based on the most recent audited figures, from 2010, but funding from central government has fallen since then as Ireland has remained mired in recession.
Earlier this week, Sligo County Council said it needed a €10m bailout from central government after its bank refused to extend its overdraft facilities.
Write-off
The report also shows local authorities owe more than €2.3bn in non-mortgage loans, a slight drop from the previous year when €2.44bn was owed.
These are long-term loans used to fund land purchases or to build capital projects such as water treatment plants.
The report warns that councils owe €637m for capital projects already built including water treatment plants and offices, but there is no money identified to pay for the works. Many schemes are reliant on the council borrowing money to meet the costs, or drawing down loans from the Department of the Environment.
Crucially, the report also says councils are owed almost €700m.
Local authorities are owed €269m in unpaid commercial rates, €160m for water and €185m in development levies, but not all are making provision in their accounts to write-off some of the debt.
Another €47m is owed in rent and €24m in housing loans, bringing the total to €685m.
Councils owe €4.9bn in loans, some of which are being repaid on an interest-only basis. Some of the money was drawn down at the height of the boom to buy land which has sharply fallen in value, while other loans were used to provide mortgages for council tenants who bought their homes.
Between them, councils have assets worth more than €90bn, but problems have been identified with titles and the accuracy of much of the property.
The report highlights the need for councils to identify new sources of income to help fund essential local services such as libraries, social housing, parks, water and grants.
The household charge (to be replaced by a property tax), water charges and septic tank inspection fees to be introduced in the next two years should help shore up the coffers.
Sligo -- one of the worst performing -- is seeking to make 42 workers redundant to help tackle its money woes.
The report says the county needs to prepare "realistic achievable budgets" which need to be "carefully monitored and implemented". It notes that these issues were previously raised in 2009.
Carlow County Council has been warned it cannot rely on the accuracy of a bond register which is supposed to show how much was lodged by developers to complete housing estates in the event they went bust.
In Cavan, 1.5 hectares of land bought five years ago has not yet been registered in the ownership of the council, while Cork County Council had a loss of €3.1m on the sale of affordable homes.
The report also warns that money for pensions is not being ring-fenced, and there are no proposals to change this system.
- Paul Melia
Read the article @ The Irish Independent

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