Council’s corrective action lowers deficit to €82,000

THINGS didn’t end up as badly as once feared with Clare County Council recording an operational loss of €82,000 last year and not the €3million that was predicted in their half yearly report.
The projected deficit was reduced as a result of income generated under the Non Principal Private Residence scheme, the non-renewal of temporary contracts and the non-filling of vacant posts arising from retirements.
Payroll costs last year amounted to €36 million, a reduction of €1.7million on the previous year.
Head of finance Noeleen Fitzgerald said the 2009 Budget was difficult as the council had to make savings to negate the impact of a 7% reduction in the Local Government Fund and increased cost pressures in all service areas.
Additionally, a €7.5million reduction in road grants in March and a further 3% reduction in the Local Government Fund in June further impacted onfinances.
She outlined, “The half –year report for 2009 presented in September predicted a potential deficit for the year of €3 million if corrective action was not taken. The key areas of concern at that time were the reduction in the Local Government Fund, difficulties in collection of rates, the change in the road works programme and the reduction in income from Ballyduffbeg Central Waste Management facility.”
Ms Fitzgerald explained that in light of the predicted deficit, the council took decisions to match the day-to-day operating expenditure with available funding.
“It should be noted that the key contributors to the result for the year have been the generation of income from the new charge on non-principal private residences, the adjustment of the road works programme to align to the significantly reduced funding and savings generated in payroll.
“While the overall result can be considered to be positive or almost break-even, cognisance must be taken of the fact that this situation is only arrived as by virtue of the corrective actions taken by the council in reducing its expenditure in line with available funding in 2009,” she said.
In a report by county manager, Tom Coughlan, on the council’s financial situation at the end of 2009, he said that there were a number of key factors that influenced the financial performance of the council during the year. These included an overall reduction in the level of expenditure and income over the previous year, reduction in road grants from central government, reduction in the income at the Central Waste Management Facility, introduction of a charge on non-principal residences in mid-2009 (NPPR), introduction of the pension levy from payroll, reduction in the level of Local Government Fund, increase in the number of companies in liquidation, receivership or examinership, reduction in payroll expenditure and an increase in pension and gratuity expenditure and a change from an overall credit balance on the capital account to a debit balance.
He also pointed out that the commercial rates income billed amounted to €35.6m in 2009 and is the largest single income source generated in the county. The collection rate for 2009 did not achieve the target set in the adopted budget. Poor trading conditions for businesses as a result of the economic climate and changed purchasing patterns together with the reduction in tourist numbers were all evident in the year. This resulted in a considerable increase in the number of companies going into liquidation, receivership and examinership, with many, smaller, businesses closing their doors.
Salary and wages for 2009, are €36m, compared to €37.7m incurred the previous year, giving a saving of €1.7m. This saving arises from the non payment of the nationally agreed 3% pay increase which was scheduled to be paid in September 2009, the non-filling of posts arising from retirements, the non-renewal of contracts and the conversion of roads outdoor staff overtime to TOIL (time off in lieu). This saving financed the increased cost on pensions and gratuities over that budgeted.
Fixed assets of the council increased by €39m in 2009. This increase is explained primarily by the construction or purchase of local authority houses in the county (€18m) at Scariff, Corofin, Ennistymon, Shannon and the Ennis area. The balance includes additional water services treatment plants and networks (€17.8m) and the acquisition of plant and machinery including fire service vehicles.
The council’s long-term loans at December 31, 2009, amounted to €123m. Of this figure, €18.34m relates to mortgage-secured housing loans and €11m relates to loans to voluntary housing organisations. Both of these are matched by income from the housing loan customers or recoupments of loan charges from the Department of Environment, Heritage and Local government (DoEHLG). The balance of €94m relates to the funding of various infrastructure developments in the county and the loan repayments on this debt are provided for in the annual budget.
Arrears of rates, amounted to €3.85m at the year-end compared to €1.6m at the end of 2008. Over €221,000 was collected in January/February 2010 and €1m relates to amounts owed by companies in receivership, examinership or liquidation. The balance is been actively pursued through engagement with customers in agreeing payment plans or through legal action, where necessary.
Arrears of housing rents have increased by €60,000 in 2009 to a balance of €655,000 at 31st December 2009, while arrears on housing loan repayments have also increased by €48,000 to arrears of €268,000 at the year-end.
The county manager also noted that the capital account balance has deteriorated from an opening credit balance of €6.5m at the end of 2008 to a €1.9m debit balance at 31 December 2009. Debit balances are carried mainly in the Road Transportation and Water Services areas where infrastructure development has advanced prior to the receipt of grant funding, drawdown of loan financing or receipts from development contributions. These debit balances are the subject of ongoing consultation with the Department to clarify the availability of grant funding.
In conclusion, Mr Coughlan commented that while the overall result can be considered to be positive or almost break-even, cognisance must be taken of the fact that this situation is only arrived at by virtue of the amortization of the corporate loan and the prompt corrective actions taken by the council in reducing its expenditure in line with available funding in 2009. 
“While overall, the result is almost in line with the adopted budget, there are particular concerns in a number of key areas. In addition, concern remains over our ability to maintain budgeted income levels in 2010,” he said.