Rates and LPT hikes on cards as Covid hit calculated

The loss of millions of euro in revenue is not just set to impinge on expenditure already agreed for this year, but 2021’s budget as well.

Homeowners and businesses are likely to face hikes in both Local Property Tax (LPT) and rates as the full impact of Covid-19 on the council’s finances and the inevitable shortfall is calculated.

The loss of millions of euro in revenue is not just set to impinge on expenditure already agreed for this year, but 2021’s budget as well.

The alternative is the county could risk seeing a series of stringent cuts imposed across a range of local services.

Already the CEO Tommy Ryan and his senior management team have met to discuss the fall out, with a second meeting scheduled to take place later this week.

One outcome is to now examine in detail all income and expenditure, including roles and areas of discretionary expenditure.

As a result, citizens of the county will be looking with keen interest at two dates on the calendar; the September LPT meeting, and the Council’s Annual Budget Meeting later in the year.

At the LPT meeting, councillors will be asked to vote on a executive proposal to increase the cost by the maximum 15% allowed, while local businesses could also be asked to dip deep in their pockets to help the Council dig its way out of the forecasted financial mire.

“Bleak” and “stark” were among the words used by elected members to greet the fiscal outlook provided to them at their monthly meeting by the council’s Director of Finances, Margaret McNally last Monday afternoon (July 13).

There was anger too at the failure by the new government to keep councils in the loop about what the future holds in terms of meeting the cost of financial loss, or new measures for income generation.

Shortfall

The insight into the terrible impact the pandemic and subsequent lockdown has had on the Council’s revenue position up to the end of last month (June 30) has the potential, in a “worst case scenario”, to cost the local authority in the region of €8.5 million in rates income alone.

This equates to €710,000 per month, or €2.13m per quarter over a 12-month period.

The council has annual rates demands for 2020 to the tune of €16.5m, with opening arrears brought forward from 2019 of €3.5m.

Up to the end of June, the council has collected in the region of €5.5m, but almost half of that is made up of contributions from utilities Irish Water and the ESB.

It means that going forward the council is still owed approximately €14.5m.

Addressing the meeting, Ms McNally told councillors that the collection of rates has been “extremely difficult” given a range of factors affecting businesses.

The brunt of those problems are expected to continue over the next six-months also, with the executive taking the unprecedented step so early in the year to put councillors on notice of its intention to carry the balance of loss over into 2021.

“That itself presents its own challenges, for 2021 and the years going forward,” suggested Ms McNally bluntly.

Recoverable rates will also pose a problem, with the future of so many local firms cast into uncertainty as they attempt to trade their way out of the current Covid period or simply choose to shut up shop altogether.

Bad debts

To meet that, from a council position, the local authority envisages having to provide a “bad debt” provision in the 2021 Budget, and this is expected to affect other areas of anticipated expenditure on additional services.

Following last year’s revaluation of rates for businesses, which cost the council more than €860,000 in reduced revenue, there are 2,000 appeals being dealt with from Co Cavan by tribunal at present.

She added that last year’s revaluation was completed based on turnover, but in 2020 this had all been wiped out for businesses, particularly for those forced to close due to restrictions, such as those heavily exposed to the hospitality and tourism industry.

As a result, she noted the council could expect a lot more revaluation applications taking place because of Covid-19. A sink fund of €1.3m remains in place to account for successful revaluations, and Ms McNally expressed her belief to the meeting that this would almost “certainly be required”.

In a further blow, both ESB and Irish Water have both submitted their own respective appeals to rates amounts payable to the council, which are currently under review.

Goods and Services

The council had budgeted to receive €15.2m from goods and services in 2020, but this too has been hit. Making up 21% of the local authority’s overall revenue, a shortfall of up to €900,000 is expected.

Elsewhere there is a potential loss in parking charges, which are set to be reintroduced from Tuesday, August 4, of €400,000; in planning fees of €130,000; and Museum €70,000.

But as Ms McNally stated, a return to health in many of those finance brackets is heavily dependent on economic recovery in towns across the county.

There is a further reduction of €100,000 in fire safety control, which is largely connected to the hotel and hospitality industry, with Ms McNally telling the meeting that this “income will never be recovered”.

Compensation

To meet the shortfall, the council, like many other local authorities across the country, are looking to central government for assistance.

The government already committed to funding rates waived by councils during the first three months of the pandemic, plus the roll-out of a business restart fund, and there is an anxious wait to see what other subventions could be included in the economic stimulus plan, due later this month.

The three-month period for which rates were waived is expected to cost €2.275m.

Guidance

With more than six-months of the year past, Ms McNally noted that the council is still no clearer with regard financial security going forward or what government intervention there might be.

Ms McNally was involved in the preparation of a series financial audit reports for the council, which was submitted with other local authorities, to the department earlier this year. One outlined the rates situation in the county and the impact of that, while the other detailed the impact Covid-19 has had on the finances surrounding goods and services.

“The local government sector is really dependent on central government to meet shortfall across all sources of income for financial stability and the delivery of services at local level,” she summed up.

Review

Ms McNally went on to explain that the review of income and expenditure within all divisions at the council will continue this week, when Director of Services will again press on section heads to examine the running of departments against budget.

“A very clear message was given in terms of examining expenditure and exercising caution in all areas, and to identify savings where possible,” reported Ms McNally. The measures are being sought under the ominous warning of “...before it is too late” the meeting heard.

Cash flow projections are being prepared and monitored regularly, and a tracking system has been employed to manage all expenditure within the council specifically due to Covid-19.

“No specific areas have been identified as yet but will be over the next few weeks.”

2021 outlook

Looking ahead, Ms McNally outlined the need for further prudence.

The process of budgeting for next year has already begun, the meeting was told.

“Challenging times ahead,” is how Ms McNally described what is in store.

In the past a portion of the LPT collected was returned to a central fund, but it was hoped that the council would be allowed to hold on to the entirety of this, while also benefiting for a top-up from government coffers.

Both the LTP increase and rise in rates costs are “only options” at this stage, said Ms McNally. Funding from landfill (down €370,000) and collected through the second home payment (€165,000) have been used by the council to patch up budgetary holes in the past, but these can’t be relied on going forward.

As if to add to the council’s already sizeable financial woes, additional expenditure in the health and safety is expected. Also major projects across the county, driven through urban and rural regeneration plans, will require levels of matched funding.

The assessment by Ms Nally of the council’s financial position was backed up by CEO Mr Ryan.

He reiterated the need to be “prudent”, adding that the council is legally required to “make a balanced budget”.

He presented an even more austere outlook, saying it might not even be until the end of 2022 before the county can begin to welcome a new “economic normal”.

“Even with the best will in the world, 2021 is going to be difficult,” he warned.

Councillor reaction

From the floor, Cathoirleach Sarah O’Reilly, presiding over her first full meeting as first citizen, described what she and her fellow elected members had just heard as “comprehensive but stark”.

Fanna Fáil’s Clifford Kelly said it looked like a “bleak period” for local authorities across the country at a time when more funding was needed, not less.

Newly Independent Shane P O’Reilly lashed out at the government for its failure to outline what government intervention would be rolled out. “Fail to prepared, you prepare to fail,” said Cllr O’Reilly who also lambasted the pace at which the Microfinance Bill 2020 was being moved through the houses of the Oireachtas.

Fellow Independent, Brendan Fay was meanwhile joined by Fine Gael’s Peter McVitty in criticising the council’s proposal to increase rates costs, both pointing out that businesses who could ill afford to pay this year would hardly be in a position to pay more next year.

John Paul Feeley (FF) and TP O’Reilly (FG) also contributed to the debate.