Saturday 1 October 2016

Councils splurged €640m on land in the midst of crisis

Published 08/04/2015 | 02:30

Fianna Fáil environment spokesman Barry Cowen
Fianna Fáil environment spokesman Barry Cowen
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Cash-strapped city and county councils continued to buy land during the downturn despite being forced to seek a bailout from the Government and already having sites valued at €2.2bn in their possession.

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Some €640m was spent between 2010 and 2013, at a time when local authorities held thousands of hectares of land which remained undeveloped despite the onset of a major housing crisis.

The splurge came despite the Government being forced to introduce a so-called 'mini-Nama for councils' in 2010, because many were unable to repay existing loans drawn down to purchase housing land.

The so-called 'Land Aggregation Scheme' involved the Department of the Environment taking over loans totalling €164m which were drawn down to purchase housing land which was unlikely to be developed in the short or medium term.

Despite this, new figures show councils spent some €308m that year alone, which fell to €174m in 2011; to €110m in 2012; and to €48m the following year, the most recent for which figures are available.

In total, some €640m was spent at a time when central government funding was being slashed, when income was falling - which resulted in services being axed - and as the local government spending watchdog repeatedly warned about the precarious financial position of many councils.

It also came at a time when construction of local authority homes and new roads effectively came to a standstill as the public capital spending programme was dramatically reduced.

The detail is contained in a report from the Local Government Auditor, which warns that the financial position of some councils is "deteriorating", with 20 technically insolvent as of the end of 2013, the most recent year for which figures are available.

They include Carlow, Clare, Donegal, Galway, Kildare, Kilkenny, Laois, Leitrim, Longford, Louth, Mayo, Meath, Monaghan, Offaly, Sligo, Waterford, Westmeath, Wexford, Wicklow and Waterford City.

Of these, nine have a deficit of more than €2m each, with particular concerns about Sligo and Donegal, which are running deficits of €21.7m and €17.7m respectively.

Fianna Fáil environment spokesman Barry Cowen said the report raised serious questions about why public money was spent on land when so much was readily available.

"There needs to be an elaboration on what land was bought and where, for how much and why? Had they exhausted all other land banks available to them?" he asked.

"The auditor should be alarmed. The problems of the land banks and inability to fund construction has been well highlighted and now we find this has been spent.

"The (Dáil environment) committee needs to highlight and expose that. It could be there is much merit, but against the backdrop of sterilisation of land it seems strange."

Spending

The report provides an overview of the local government sector and also reveals that councils are owed a total of €584m in unpaid commercial water charges, housing rents, housing loans and commercial rates.

It notes that councils have slashed annual spending in recent years, with annual spending on day-to-day services reducing from €4.7bn in 2008 to €3.95bn in 2013, a drop of €770m.

In the same period, capital spending, which would have funded roads, houses and other public works, fell from €6.1bn to €1.45bn per year.

Councils have assets valued at €92bn, including €11bn worth of water assets which will transfer to Irish Water this year; land valued at €2.2bn; housing stock totalling €18.4bn; and roads valued at €55bn.

But despite the enormous size of the asset base, registers are "incomplete" and not all assets are registered with the Property Registration Authority, it warns.

The report, 'Overview of the work of Local Government Auditors', also says that councils have long-term borrowings totalling €3.5bn, and are owed another €1.2bn in housing loans.

There are "increasing levels" of arrears in housing rents and housing loans, and they also have "unfunded capital balances" totalling €412m - this relates to completed capital works including land purchases for which no funding source has been identified.

The Department of the Environment said it was examining a "sample" of local authority annual financial statements which highlighted the spend on land.

"Without an analysis of the individual local authority annual financial statements, it is not possible to identify the expenditure," a spokesman said.

He added that land was purchased for a number of purposes, such as parks, commercial development, for amenity facilities and for roads.

€584m owed to city and county councils

Commercial rates

Councils are owed some €343m, €13m less than in 2012, but outstanding bills totalling €164m were written-off.

The percentage collected ranges from 53pc in Limerick city to a high of 94pc in Offaly. The overall percentage collection rate stands at 77pc, up slightly on 2012.

Housing rents

Rent arrears increased from €56m in 2012 to €58m, while the amount of debt written-off rose to €1.9m, up €200,000 year-on-year.

The lowest collection rate is in South Dublin, where just three in every four tenants, or 75pc, pay. This rises to 100pc in North Tipperary, and the average collection rate is 83pc, with no change year-on-year.

Commercial water

Arrears have increased from €139m in 2012 to €142m. Some €18m of unpaid debt was written-off, up €2m on the previous year.

Just 34pc paid in Leitrim, the lowest rate in the country, rising to 74pc in Cork city. A dozen councils (Clare, Donegal, Leitrim, Louth, Mayo, Roscommon, Sligo, South Tipperary, Waterford, Wexford, Westmeath and Wicklow) collected half or less of outstanding bills.

The overall collection rate is 56pc and there is no change year-on-year. Irish Water has been responsible for collecting this money since January 2014; however, local authorities continue to oversee this area.

Housing loans

Arrears are up to €41m, a rise of €4m over 2012 figures. In addition, there has been a sharp rise in the amounts written-off, rising from €400,000 in 2012 to €478,000 in 2013.

The percentage collected for each city and county council ranged from the lowest of 42pc in Roscommon, to the highest of 98pc in Fingal. Four councils (Kildare, Louth, Roscommon and Sligo) collect less than half of what's owed. The overall percentage collected stands at 69pc.

Irish Independent

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