Model “not robust enough to withstand downturn in economy…”

Sligo News File Online.

Sligo County Council’s €80 million debt has been blamed on the authority’s financial model.

Council Chief Executive Ciaran Hayes has said he believes the model was not “robust enough to withstand the downturn in the economy in 2008.”

Mr. Hayes was commenting following warnings by environment minister Alan Kelly that the council could face dissolution unless it found a way of dealing with its massive debt overhang within the next couple of weeks.

In a statement to the media, Mr. Hayes said that while Sligo may be currently to the forefront nationally in relation to Local Government finance, it was “also to the fore in implementing government policy. We were encouraged to be ambitious, to acquire land, invest in our water and waste water infrastructure.”

Defending the investment as “the right decision,” he said the expenditure was a “major factor in enabling us to promote Sligo as a prime location for direct foreign investment.” However, the council was never recompensed for its investment in the assets, he said.

The result for the authority “was a significant increase in our operating costs, with a major decrease in our revenue base. This has left the council with a legacy debt which has arisen due to our adherence to our government policy and our investment in the county’s infrastructure.

“Sligo is not solely to blame for this situation, therefore it is not equitable to expect us to have exclusive responsibility for dealing with it.

“The department has acknowledged that difficult decisions have been taken by Sligo County Council to address its financial difficulties.

“We have reduced our work force by 188, representing a 30% reduction and an annual saving of €6 million. We have also delivered major savings across our various services.”

However, the department, he said, was seeking further reductions in staff and other costs, with the suggestion of discontinuing or curtailing a number of services. “The staff have been excellent in terms of the way they have engaged in this difficult process.”

Mr. Hayes said he had “no difficulty” in trying to achieve further savings and efficiencies, but the council was also left with the responsibility of funding services it did not deliver. “For example, our duty to pay for Coroner’s fees could result in expenditure of over €200,000 in 2015.

“We are obliged to cut services while at the same time paying for services over which we have no control.”

He said the department had requested the council to resolve its financial issues by 24th November, the date of the council’s budget meeting. “I think it is essential that any actions taken by the council and the department should be in the context of the independent report on the council’s finances carried out by Grant Thornton, which acknowledged that we had no mechanism to deal with our legacy debt.”

Having stated he believed the core issue of the debt situation was that the council’s financial model  “was not robust enough the withstand the major downturn in the economy in 2008,” he said the financial challenges now facing the council were symptons of a wider problem, “and Sligo is not the sole author of its difficulties.

“It has to be borne in mind that we have corporate goverance obligations, and we need sufficient numbers of staff with the requisite competence to fulfil these obligations.

“I am not being prescriptive in trying to identify and implement additional savings and efficiencies, but it has to be acknowledged on all sides that Sligo County Council’s legacy debt was caused by a funding model underpinning our investment programme that was simply not fit for purpose.”