Land buys in boom pushed council debt to €94m

Protracted legal battle over Lissadell rights of way incurred significant costs

Lissadell House: council faces major legal bill after losing case on rights of way

Lissadell House: council faces major legal bill after losing case on rights of way

Mon, Feb 24, 2014, 01:00

If Sligo County Council was a property developer, it would almost certainly be in Nama now.

The council has accumulated a staggering debt of €94 million, at least some of it incurred by purchasing land at top-dollar prices during boom years.

The latest figure, which includes interest charges, was admitted by new county manager Ciarán Hayes in a recent interview with the Sligo Champion . Until then, it was put at about €80 million – and counting. In effect, the council is on its uppers.

But Hayes, a 53-year-old Dubliner and former GAA inter-county footballer and hurler, said he “will not be fazed” by the challenge of bringing the council’s debt under control and also insists that quoting the stark figure of €94 million doesn’t help.

He pointed out that it includes €30 million for upgrading Sligo’s water and sewage treatment plants, saying this loan “will be passed on to Irish Water”, and a further €30 million covers mortgages for people acquiring their homes with the council’s assistance.


Obligations
An independent financial appraisal by Grant Thornton, published in August 2012, found that the council was “facing a financial crisis” and queried its ability to meet its obligations due to the “severe budgetary position . . . along with unsustainable levels of borrowing”.

“Any additional cuts in funding will result in the county being in a position whereby they will not be able to carry out the functions/duties they are under statutory obligations for. In addition, there is no more scope for cutting the budgets to critical services.”

Grant Thornton blamed investment in “non-revenue generating” assets, staff legacy issues that restrict sharing services, inability to collect outstanding debts, a “pension funding gap” and the extra costs of having both a borough council and county council.

Although there were “a small number of land parcels that can be sold when market conditions improve”, the returns were likely to be “limited”. Financial projections showed the council “will experience growing financial losses . . . unless immediate action is taken”.

The report also noted that many of the “design, build and operate” contracts entered into by the council were for 15 to 20 years and based on “pre-2008 peak prices”; it recommended that these be renegotiated to reflect the “current environment”.


Budget deficit
It also recommended a “once-off injection of funds” from the State to reduce the current overdraft and bring the budget deficit down to a manageable level, so that Sligo County Council would be in a position to meet its obligations. This however has not been forthcoming.

Sligo Fine Gael Cllr David Cawley has suggested that “excess cash reserves” generated by councils in the eastern half of the State –“Meath, Kildare, Dublin . . . whatever” – should be used to fund the revenue deficit of “underfunded” western counties such as Sligo.

But Minister for the Environment Phil Hogan commented that “Sligo is certainly one of the reasons we are reforming local authorities”.

It was one of seven county councils with significant debts, but he made no commitment then – or since – to find funds for a bailout.


Legal costs
The council will also have to pay legal costs estimated at €7 million or more following the victory of Constance Cassidy SC and her husband Edward Walsh SC in their protracted legal battle to prevent the designation of public rights of way on their Lissadell Estate.

Former county manager Hubert Kearns, who oversaw spending of more than €1 billion on infrastructure projects during his 17 years in office, received a lump sum of €270,000 when he retired last November – plus a pension of €68,000 a year.

In 2012, when it was put to him by one journalist at a press briefing that his annual salary of €132,511 was more than the Spanish prime minister was paid, Mr Kearns quipped: “I am surprised that the Spanish prime minister earns so little.”

As for Sligo County Council’s crushing debt burden, he said it needed to be seen in context as the eighth in per capita terms among city or county councils while the overall value of its assets amounted to €1.67 million. “It’s not the end of the world,” he added.

Since then, however, a large chunk of these assets has been transferred to Irish Water.

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