Councils face cuts in services as 'mini-Nama' scheme suspended
CASH-strapped city and county councils will have to fork out millions of euro in loan repayments for land that was supposed to be transferred to a government-run scheme.
The Department of the Environment can no longer afford the scheme to bail out the councils, meaning services will have to be cut to make up the shortfall.
Councils had applied to have land that was bought for development for housing during the boom transferred to the department's Land Aggregation Scheme.
However, the department is now saying it is not agreeing any proposals without first reviewing its spending.
Under the scheme introduced in 2010, described as a "mini-NAMA for councils", local authorities would transfer ownership of land to the Housing and Sustainable Communities Agency to decide if it was to be developed or sold on the open market.
The move came after local authorities spent millions on landbanks to develop social and affordable housing during the boom, which had been approved and encouraged by the department.
The transfer of land under the scheme removed the burden of interest repayments from the local authority.
For example, Kerry County Council had applied to transfer almost 14 hectares of development land (34 acres), and now faces a bill of €750,000 for interest loan repayments next year.
The land was purchased between 2005 and 2007, at the height of the housing boom.
Up until now, the council had availed of a seven-year interest-free period, but this is due to run out at the end of the year.
So far, applications worth €316m in loan value have been received by the department for inclusion in the scheme and 73 sites, representing 247 hectares and just over €162m in loans, have been accepted.
But the scheme is now under review and the department is not currently processing any more applications. While the matter is waiting to be resolved, councils will have to find the cash in their budgets to service the loans.
At its monthly meeting, Kerry County Council heard this would have "serious implications" for the budget, and services would have to be cut to make up the shortfall.
Director of housing John Breen said he had been informed verbally of the changes, but formal written notification had yet to be received.
Several other local authorities that had applied to transfer land also now have to face the prospect of cutting services.
"We were encouraged to buy this land by the department and we're now in a position, like a lot of developers, where it must be paid for," Mr Breen told the Irish Independent.
Mr Breen said the department had invited applications for the Land Aggregation Scheme, and the council had complied with everything it had been asked for.
"And now, at the final hour, they've turned around and said they can't afford it, but there's going to have to be some resolution on it," he said.
"Everybody is in the same boat because they're not approving any applications, and what the department is saying is this is now a debt issue and they're looking to move it to the Department of Public Expenditure."
A spokesman for the department said funding for the scheme was agreed on condition that it be kept under continuous review.
He said the scheme was currently under review and the department was not in a position to progress any applications until this had been completed.