UNPUBLISHED GOVERNMENT records show many local authorities are facing “critical areas of vulnerability” due to funding shortages.
The records state that county and city councils are experiencing major challenges this year in collecting enough income from rates and charges to pay for vital services like roads, water and housing.
Cuts to Government spending over the past year have exacerbated the problem with local authorities increasingly reliant on local revenue such as commercial rates and development levies.
However, the slump in construction and the closure of businesses is making it more challenging to collect sufficient levels of revenue from these sources.
“In 2010 the biggest challenge facing local authorities will be their ability to collect income arising from rates and charges,” according to Department of Environment records, released under the Freedom of Information Act.
The records show that senior department officials have identified at least eight local authorities under acute pressure due to a range of different factors.
Local authorities in Leitrim, Longford and Waterford are classified as “vulnerable” due to their high dependency on grants and Government funding.
While these central Government sources account for less than half of the income for most county and city councils, they account for three-quarters of income in Leitrim (75 per cent), and around two-thirds in Longford (68 per cent) and Waterford (63 per cent).
Records state: “These authorities are very vulnerable to changes in grant levels . . . their low rates base does not provide a sufficiently strong revenue stream to compensate for any decline in grant levels.”
Other local authorities in Wicklow, Wexford and Donegal are regarded as vulnerable due to cash shortages, making them particularly exposed to changes in interest rates, levels of overdraft sanctions and the timing of grant payments.Sligo and Meath local authorities are regarded as vulnerable due to an oversupply of unsold affordable housing and deteriorating revenue from other sources.
Records states that as much as €300 million in outstanding development levies may not now be paid by debtors or developers who are in financial difficulty.
Latest official figures available show that a total of 17 local authorities had significant deficits at the end of 2008. They include Donegal (-€13 million), Kildare (-€5.6 million), Mayo (-€3.5 million), Meath (-€9.6 million), Sligo (-€4.2 million), Waterford (-€7 million) and Wexford (-€6.8 million).
The financial position of city councils, however, remained strong. When taken cumulatively, local authorities in Dublin, Cork, Limerick and Galway were in surplus.
The level of funding provided to local authorities by the Government through a “local government fund” – made up of motor tax and exchequer funding – has fallen significantly in recent years.
While it provided €1.6 billion to local authorities in 2008, this fell to €1.5 billion in 2009 and €1.2 billion last year.
Under legislation, local authorities are required to balance their budgets. Any local authorities which exceed their budgets are required to reduce expenditure in other areas.
A department spokesman said exceptions were made for some local authorities who, for example, borrow money for essential capital projects.
“In general, we monitor and have regular meetings with local authorities to ensure they meet their statutory obligation to adopt balance budgets,” he said.
There are moves to help ensure local authorities are less reliant on Government funding through water charges, due to come into force in 2014 and property taxes. The levy on second homes raised around €62 million for local authorities in 2009.
