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Councils to slash spending on vital services as debts hit €4bn

ROADS will go unrepaired and local services suffer as councils face a €4bn funding black hole.

Local authorities have plunged even further into the red as their income dries up and they borrow money to make ends meet, an Irish Independent investigation reveals.

The situation is so bad that massive cutbacks in spending areas including roads, public lighting, libraries, footpaths, parks and other vital local services are inevitable.

But the main political parties have only vague plans on how to address the issue, with no detailed proposals from any on how the funding crisis will be tackled. This is despite warnings as far back as 2006 that councils had to make serious efforts to balance their books and ensure that public money was being properly spent.

Reports seen by the Irish Independent show cost overruns on capital projects, the collapse in the housing market, and the failure of councils to collect money has brought them to the brink of financial disaster.

Despite councils slashing millions from their day-to-day spending, successive cuts in funding from central government and poor financial management are taking their toll. Reports from the Local Government Auditor, who examined the accounts of the country's local authorities for 2009, show:

  • Councils owe more than €4.35bn, borrowed to build housing, water treatment plants, roads, houses and other capital projects.
  • Seven local authorities have yet to publish their audits, meaning the final debt will be higher.
  • Some €730m is owed in development levies -- an increase of more than €300m since 2008. Another €160m is owed in unpaid commercial water charges and rates.
  • There is an oversupply of affordable homes, paid for by councils, which they cannot sell.
  • Dublin City Council has spent €75m so far on the Poolbeg incinerator, but construction work has yet to begin.
  • Three motorways that opened last year have run at least €70m over-budget.

The reports reveal how councils are struggling to keep services in place, and show that major projects including new council headquarters, roads and water treatment plants have run massively over-budget.

Some councils are keeping small local businesses afloat by working out special arrangements with them over their rates they cannot afford to pay.

But others have reached the end of the road in seeking payment and have begun legal proceedings to get the money they're owed.

In many cases, capital projects have been completed -- but there is no money to pay for them and they are being repaid from day-to-day spending budgets. Wexford County Council has moved into new offices in Gorey, built at a cost of €13.8m, but has to sell assets to fund the project.

Cork County Council is paying a loan to build water treatment projects on an interest-only basis.

Last year the Environment Minister John Gormley commissioned a high-level group to look at reforming and restructuring local government.

The Local Government Efficiency Review Group (LGERG) recommended a raft of changes including merging local authorities, introducing new taxes, and cutting senior management, which would lead to savings of €350m a year and generate €150m in new income.

The report, published in July, is still being considered by the Department of the Environment. Both Fine Gael and Fianna Fail will use the LGERG report as a template, which suggested imposing hikes in the cost of a driving licence and increased planning fees.

And the Labour Party believes local authorities could be merged.

  • Tomorrow: Water charges, overtime and the cost of conferences

Irish Independent