Local Government Finance - Reform

Jackie Maguire

County Manager

Leitrim County Council

Commitment to Local Gov Reform

• Programme for Government , the Local Government Efficiency Review Group and the Report of the Local Government Alignment Steering Group……. Recognise and commit to the reform of local government

• Minister’s announcement awaited

Local Government Funding

• Key part of the reform of Local Government is the revision of funding sources

• Economic downturn further impetus for reform of local gov finanancing

Table 1: LGF 2006 - 2012

Year Local Government

Fund

€m

Change

€m

% Change

2006 877

2007 948 71 8.10%

2008 999 51 5.38%

2009 905 -94 -9.41%

2010 870 -35 -3.87%

2011 705 -165 -18.97%

2012 651 -54 -7.66%

2006-2012 -226 -25.77%

2008-2012 -348 -34.83%

Current Expenditure 2008 – 2012

2008 2009 2010 2011 2012 Reduction Change %

Gross Revenue

Expenditure

€5,224 €5,237 €4,847 €4,724 €4,482 -€742 -14%

Financed by

Commercial Rates €1,341 €1,403 €1,357 €1,366 €1,399 €58 4%

Government

Grants/Subsidies

€1,272 €1,255 €1,105 €1,129 €956 -€316 -25%

General Purpose

Grant

€1,000 €937 €774 €705 €645 -€355 -36%

Pension Related

Deduction

€0 €0 €79 €78 €79 €79

Goods and Services €1,600 €1,632 €1,518 €1,424 €1,380 -€220 -14%

Miscellaneous €11 €10 €14 €22 €23 €12

Gross Income €5,224 €5,237 €4,847 €4,724 €4,482 -€742 -14%

Revenue Expenditure by Division

-€31

-€270

-€9

-€68

-€249

-€76

-€93

€59

-€300m -€200m -€100m €0m €100m

Housing & Building

Road Transport & Safety

Water Services

Development Management

Environmental Services

Culture, Recreation & Amentity

Agriculture, Education, Health &

Welfare

Miscellaneous Services

Gross Revenue Expenditure Movement 2008 - 2012

What impacts Local Gov Finances ?

• Service providers

• Various functions

• Size and structure

• Local democracy highlights need to have smaller la’s , though larger la.s are often more efficient….

• Irish Local Government appears to be poorly funded in comparison to other EU countries ……….. !

2008 Sources of Funding

Sources of Local Govt Funding 2012

• Reform of Local Government finance constant policy issue since 1960’s…..

• 16 Reviews at least since the 1962 Economic Research Institute report ‘’ Local Government Finance in Ireland : A Preliminary Survey….

1985

The National Economic and Social

Council

The financing of Local Authorities.

Local Property Tax would improve local

accountability.

Widen the National tax base.

System of grants from Central government

should be continued to cover national services

at local level and to achieve an element of

equalisation.

1985

The Commission on Taxation

It reviewed the system of local government

finance.

It highlighted the importance of classifying the

services provided by local authorities as either

local or national. The Commission argued that

local services should be financed primarily from

local taxation.

1996

KPMG Report

A KPMG Report in 1996 for the Department of the

Environment, Heritage and Local Government

noted that Ireland had a highly centralised system

of financing of Local government .

In terms of funding options, the Report concluded that the

commercial rates base should be extended to include all

bed and breakfast accommodations and non residential

agriculture buildings.

It stated that there is scope to raise additional revenues

from Local Authority charges.

It suggested the introduction of a property tax as the

most feasible option to raise additional funding.

2005

Indecon Report

Highlighted the dependence of local Authorities on

commercial rates and central grants and recommended

a move towards more locally-based sources of funding.

Two key elements of this should comprise

Increase in local charges

Introduction of selected targeted local taxation

including a charge on second properties.

Commission on Taxation 2009

• Examined various options for the future financing of local government

• Seeks to change balance between nationally provided and locally collected sources of income from ratio 45:55 to 25:75

• Taxation of property (domestic and commercial) recommended as key source of local government income.

The Future ……

• Property Tax 2013……….?????

• EU/IMF Agreement….Household Charge a pre-cursor to full property tax.

• Provide stable funding base for LA’s

• ……………….An effective funding system,

related to a local funding base………………….

and incorporating local decision-making and accountability ……………………………………………….is a crucial element of good local government……