The Department of the Environment’s decision to scrap a national loan scheme means the council will have to pay off in the region of €8 million for land it purchased for about €5 million.
Clare County Council will have to fork out an additional estimated €358,000 each year for the next 20 years to pay unexpected loan charges for undeveloped land in Ennistymon and Feakle.
The circumstances surrounding the purchase of land for social housing in North and East Clare and the ending of a scheme to pay off loans taken out for social and affordable housing that was never built has been condemned as a “shambles” by Councillor Pat Burke.
Having criticised expenditure totalling more than €5m for this social housing landbank, councillors had hoped that the national exchequer would bear the cost of paying off the loan debts when the council requested its transfer to the Land Aggregation Scheme (LAS).
The scheme was set up by the Department of the Environment in 2010 to stop the mounting interest payments and wind up the loans city and county councils had taken out to buy land that had lost the potential for development.
However, the department has now scrapped the scheme, prompting criticism from Clare county councillors. This leaves Clare County Council with the headache of covering the substantial cost of a 20-year long-term annuity loan.
It is estimated that the initial cost of €5m for purchasing the land will eventually cost more than €8m to pay off when annual loan charges and accumulated interest and capital payments are taken into account.
Environment strategic policy committee chairperson, Councillor Patricia McCarthy has acknowledged in her annual SPC report that this will have budgetary considerations for the council, which will now have to provide for the loan repayments in future budgets over the period of a long-term annuity loan.
A council spokesman confirmed the council can’t appeal this decision, which places an extra financial requirement on the authority during difficult economic times
Clare County Council had applied to transfer two plots of land at Glen North, Ennistymon and Baurroe, Feakle into the LAS. However, these have effectively been refused after the department scrapped the scheme.
The council paid €2,634,596 for 9.12 acres at Glen North, which included the purchase price, legal and auctioneering fees. Interest on the loan of €494,822 has been charged to the end of last June.
The council is obliged to start making repayments on this loan from June 2014 and the estimated cost of funding this loan over a 20-year period is €190,000 annually.
The local authority also paid €1,038,774 to cover the purchase price, legal and auctioneering fees for another 4.68 acres at Glen North, which was financed by a loan. Interest on the loan of €151,444 has been charged to the end of June 2013.
The council has to commence making repayments on this loan from June 2014 and the estimated cost to the council of funding this loan over a 20- year period is €72,000 annually.
The authority paid €1,345,045 for 6.78 acres in Feakle. This was the equivalent of €198,384 per acre for development land in 2007. Loan charges will cost an estimated €96,000 every year over a 20 year-period.
While nothing has been paid by the council on the loan to date, accumulated interest of €223,232 means the final bill for the purchase of undeveloped land will be €1.568,277.
Councillor Burke proposed some alternative scheme should be put in place to alleviate the burden on Clare ratepayers and taxpayers.
Councillor Pat Hayes complained the ending of the scheme without any prior notice would result in additional charges or cutbacks to some local authority services in order to fund the additional cost.
Describing this setback as a double body blow for the council, in view of the lack of national funding for social housing, he pointed out this land bank was bought in good faith by the council.
Councillor Bill Slattery said it was unfair of the department to end the scheme and claimed the council should have completed a more detailed study concerning the need for social housing in North Clare.
“I hope a resolution can be found between the local authorities and the department to sort out this mess,” he said.
The Department of the Environment explained it decided to discontinue the scheme as the revised level of expenditure on LAS is unsustainable given the budgetary position for 2014.
It pointed out it is now not possible to support the scheme above the level of sites already approved and any submissions currently under consideration will not be accepted into the scheme.