CITY TRIBUNE
Reliance on rates will lead to ‘black hole’ in local authority finances
An over reliance on commercial rates to fund local authorities could see Galway City and County Councils face a black hole in their budgets as a result of the Covid-19 crisis, an expert in local government economics has warned.
With large numbers of businesses unable to pay rates due to closure, and many other income streams drying up as a result of measures introduced to slow the spread of coronavirus, central government will have to come up with additional grants for local authorities to avoid huge cuts to the level of service.
That was the stark warning from Dr Gerard Turley of NUIG School of Business and Economics, who said despite councils such as Galway County and City passing some of their biggest budgets ever in 2020, a shortfall as a result of this crisis could see a return to the lean days after the economic crash in 2008.
In their budgets for 2020, Galway City and County Councils surpassed all previous funding levels and were showing signs of finally escaping those dark days in the aftermath of the IMF Bailout – staffing levels, which had been slashed, were also returning to normal.
However, of a €100 million budget, Galway City Council was reliant on commercial rates for 38% of its income – the largest single source of finance it had available to it.
In the county, the €128 million budget was 23% funded by rates, second only to grants and subsidies from central government which made up 38% of income.
Dr Turley said that the Department of Public Expenditure and Reform was already looking at the likely “drastic” measures that would be required due to the fall in income for councils.
“Councils are not like central government; around the world, central government has most of the call on VAT, personal income tax and corporation tax. In terms of what local governments have here, it’s local taxes, local charges and grants from central government,” explained Dr Turley, adding that in Ireland, councils did not have the ability to borrow as such, and must, for good reason, balance their books every year.
Both councils in Galway have deferred the payment of rates to the end of June for businesses adversely affected by the Covid-19 crisis, but there are calls from many quarters to have rates suspended – businesses will already be in financial distress and, it has been argued, in no position to repay rates missed during this current period.
While day-to-day spending by local authorities during this period of shutdown would fall, the drop in income from not only rates, but also parking charges, and the payment they receive for use of amenities and facilities.
There was also a risk that if the economy does not rebound quickly and unemployment abounds, the income from rent on Council-owned houses will also decline as people have their rents recessed to reflect their reduced income.
Increasing commercial rates was a way in which councils had bridged budgetary gaps in the past, but this was not the most prudent way of handling things while businesses were struggling – and so, while unpopular, restructuring Local Property Tax might hold the key in the aftermath of this crisis as it was a more progressive tax, said Dr Turley.
The monetary powers of Councils to raise finances were limited, but included setting commercial rates and increasing or decreasing the LPT each year, he said – something that would likely be looked at by many local authorities as they grapple with the aftermath of this crisis when compiling their budgets towards the end of this year.
“The whole point of local government is to make decisions locally, and to be accountable for those decisions,” said Dr Turley, and if local powers shift to central government due to a lack of funding, there would be a detrimental effect on democracy.
The continued provision of adequate services, and the protection of necessary staffing roles in local authorities would require additional grants from central government, he explained, and its ability to do this would rely on the economy recovering quickly.
“We have to hope it will be a short shock and [the economy] will recover quickly. Local government, like central government, will be hit quite badly otherwise.
“The last crisis went on for a long number of years, followed by austerity up to 2014/15. What’s different this time around is the whole world is subject to all of this; in the last crisis, in countries across Europe, governments were increasing spending,” said Dr Turley, while Ireland and others were subject to harsh austerity measures.
The worldwide nature of the current economic difficulties was likely to draw a more coordinated response – particularly in EU countries, which would make for a less damaging long-term impact.
The adequate funding of local authorities was paramount to continued provision of services such as parks and amenities; social housing; local and regional roads; arts projects; playgrounds; tourism promotion; and many other services that are crucially important, but are often taken for granted, said Dr Turley.
■ Dr Gerard Turley is a lecturer at the JE Cairnes School of Business and Economics and Whitaker Institute at NUI Galway. Together with colleagues, he compiles an annual breakdown of which can be viewed HERE.
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From the Galway City Tribune – An impassioned plea for a ‘masterplan’ that would guide Galway City into the future has been made in the Dáil. Galway West TD Catherine Connolly stated this week that there needed to be an all-inclusive approach with “vision and leadership” in order to build a sustainable city.
Deputy Connolly spoke at length at the crisis surrounding traffic and housing in Galway city and said that not all of the blame could be laid at the door of the local authority.
She said that her preference would be the provision of light rail as the main form of public transport, but that this would have to be driven by the government.
“I sat on the local council for 17 years and despaired at all of the solutions going down one road, metaphorically and literally. In 2005 we put Park & Ride into the development plan, but that has not been rolled out. A 2016 transport strategy was outdated at the time and still has not been updated.
“Due to the housing crisis in the city, a task force was set up in 2019. Not a single report or analysis has been published on the cause of the crisis,” added Deputy Connolly.
She then referred to a report from the Land Development Agency (LDA) that identified lands suitable for the provision of housing. But she said that two-thirds of these had significant problems and a large portion was in Merlin Park University Hospital which, she said, would never have housing built on it.
In response, Minister Simon Harris spoke of the continuing job investment in the city and also in higher education, which is his portfolio.
But turning his attention to traffic congestion, he accepted that there were “real issues” when it came to transport, mobility and accessibility around Galway.
“We share the view that we need a Park & Ride facility and I understand there are also Bus Connects plans.
“I also suggest that the City Council reflect on her comments. I am proud to be in a Government that is providing unparalleled levels of investment to local authorities and unparalleled opportunities for local authorities to draw down,” he said.
Then Minister Harris referred to the controversial Galway City Outer Ring Road which he said was “struck down by An Bord Pleanála”, despite a lot of energy having been put into that project.
However, Deputy Connolly picked up on this and pointed out that An Bord Pleanála did not say ‘No’ to the ring road.
“The High Court said ‘No’ to the ring road because An Bord Pleanála acknowledged it failed utterly to consider climate change and our climate change obligations.
“That tells us something about An Bord Pleanála and the management that submitted such a plan.”
In the end, Minister Harris agreed that there needed to be a masterplan for Galway City.
“I suggest it is for the local authority to come up with a vision and then work with the Government to try to fund and implement that.”
The new Salmon Weir pedestrian and cycle bridge will be officially opened to the public next Friday, May 26.
Work on the €10 million bridge got underway in April 2022, before the main structure was hoisted into place in early December.
A lunchtime tape-cutting ceremony will take place on Friday, as the first pedestrians and cyclists traverse the as-yet-unnamed bridge.
The Chief Executive of Galway City Council, Brendan McGrath, previously said the bridge, once opened, would remove existing conflicts between pedestrians, cyclists and traffic “as well as facilitating the Cross-City Link public transport corridor over the existing 200-year-old bridge”.
The naming of the new bridge has been under discussion by the Council’s Civic Commemorations Committee since late last year.
One name that has been in the mix for some time is that of the first woman in Europe to graduate with an engineering degree – Alice Perry.
Ms Perry, who was from Wellpark, graduated from Queen’s College Galway (now University of Galway) in 1906. The university’s engineering building is named in her honour.
The bridge was built by Jons Civil Engineering firm in County Meath and was assembled off-site before being transported to Galway. Funding for the project was provided in full by the National Transport Authority and the European Regional Development Fund.
(Photo: Sheila Gallagher captured the city’s new pedestrian footbridge being raised on the south side of the Salmon Weir Bridge in December. It will officially open next Friday, May 26).
From the Galway City Tribune – Minister of State for Local Government and Planning, Kieran O’Donnell was labelled a “disgrace” for overturning councillors’ decisions to rezone land in the new City Development Plan.
Minister O’Donnell (pictured) confirmed in a letter to Council Chief Executive Brendan McGrath last week that he was reversing 25 material alternations made by councillors to the CDP 2023-29. He made the decision on the advice of Office of Planning Regulator (OPR).
Minister O’Donnell directed that 14 land parcels that were subject to land-use zoning changes by councillors as part of the Material Alterations to the Draft CDP should be reversed.
He directed that a further 11 land parcels in the city should become “unzoned”.
The Minister found that the CDP had not been made in a manner consistent with recommendations of the OPR, which required specific changes to the plan to ensure consistency with the national planning laws and guidelines.
At last week’s Council meeting Cllr Eddie Hoare (FG) asked for clarity on the process by which councillors could rezone the lands that had been changed by the Minister’s direction.
Cllr Declan McDonnell said, “What he [Minister O’Donnell] has done is an absolute disgrace”.
And he asked: “Do we have to have another development plan meeting to deal with it?”
Both Cllrs Hoare and McDonnell wondered what would become of the lands that were rezoned or unzoned by the ministerial direction.
Mr McGrath said the Council had put forward an argument in favour of retaining the material alterations in the plan, but ultimately the Minister sided with OPR.
He said if councillors want to make alterations to the new plan, they could go through the process of making a material alteration but this was lengthy.
The Save Roscam Peninsula campaign welcomed the Minister’s decision.
In a statement to the Galway City Tribune, it said the direction would mean the Roscam village area on the Roscam Peninsula will be unzoned and a number of land parcels would revert back to agriculture/high amenity.
A spokesperson for the campaign said: “the material alterations made by city councillors following lobbying by developers continued the long-standing practice of councillors facilitating a developer-led plan rather than an evidence- and policy-based plan that meets the needs of the city.
“The Minister’s direction is an important step in restoring confidence in the planning system. It is clear from the City Council’s own evidence on future housing projections that there was no requirement to zone these lands for residential purposes in order to meet the needs of the targeted population increase up to 2029,” the spokesperson added.
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