The current model of local government funding is a "basket case" and is unsustainable, a business lobby group has warned.
Research from Chambers Ireland has revealed that income from development contributions has risen from €0.11 billion to €0.55 billion between 2000 and 2005 and represents 13.6 per cent of local government expenditure.
Income from development contributions has risen dramatically in recent years, increasing by 62 per cent from 2004 and 2005 alone, Chambers Ireland said.
"Local authorities now rely on this income stream, which is unsustainable, as it is dependent on continued construction growth, which is predicted to fall in the coming years," said Hilary Haydon, chairwoman of Chambers Ireland Ratepayers' Council.
The ability of local authorities to provide essential services is hamstrung by a slipshod funding structure, which is exacerbated by the Government increasing local authorities' responsibilities without putting in place adequate and sustainable funding structures, the organisation said.
Chambers Ireland chief executive John Dunne said that the Indecon Report into the financing of local government earlier this year projected that within four years, additional funding of €2 billion will be required for local authority service levels simply to be maintained.
He called on the Government to take advantage of the favourable economic circumstances to redirect €2 billion of the Budget spending towards plugging the hole in local authority funding.
"In tandem with this, we propose replacing stamp duty with a rebalanced property tax that goes directly to local authorities," said Mr Dunne.
To relieve the burden on businesses, he said that local authorities should be allowed to fully implement the "user pays" principle and charge all users of services and producers of waste, including households, for the associated services and infrastructure.
