Municipalities: Crisis and financial situation

Today the financial situation of each municipality can be classified as between delicate and alarming 

The economic crisis has also affected the municipalities:

The economic crisis has also affected the municipalities:

The services they provide must be affected. Today the financial situation of each municipality can be classified as between delicate and alarming (or even catastrophic), going through the categories of serious and very serious. In any case, it must be insisted that each municipality has its own situation and, therefore, a prior diagnosis is required for each case, before giving any type of recipes. Let’s see what factors have caused the crisis and what indicators give us indications of a more or less critical financial situation.

The crisis of the municipal finances is due to multiple factors among which the following can be highlighted. First, a conjunctural crisis due to the fall of construction and surplus taxes and the participation in state taxes. This crisis is more serious in those municipalities where the (extraordinary) income from the aforementioned taxes was used for ordinary expenses. Second, a structural crisis of the financing model that is due more to how it has been used – read underutilizing – the model and not so much that it requires a radical revision. Specific modifications are required (mandatory cadastral review, modernized vehicle tax, participation in generalized income tax, clear leveling mechanisms, etc.). Third, a crisis in defining competencies and managing expenditure. It must be clarified which administration does what and whether it should be compensated financially or not. The return of credits for investments and the expenses derived from maintenance and exploitation of these investments must be correctly planned, and the Generalitat must demand them with precision and transparency from each municipality. It must be denounced and avoid subsidizing that all municipalities must have all equipment (swimming pools, theaters, residences, libraries, etc.) if those of neighboring municipalities are underutilized. Fourth, the crisis of the size of 85% of municipalities as service providers at unbearable unit costs, especially in times of crisis. It is urgent that the Generalitat make realistic but courageous proposals. In short, they must be provided in an associated manner (commonwealth, consortium or county) many more services, including internal secretarial and intervention. And fifth, the crisis of values that represents having lost the concept of the economy as the administration of scarce resources, which means that not all citizen demands can be met, but prioritized, to make sustainable the provision of services.

 The Ministry of Economy website

 The Ministry of Economy website

What tells us that a City Council can have a serious financial situation? First, the relatively high level of living debt per inhabitant, which can be consulted on the Ministry of Economy website, although the legal ratios are important. Second, the negative cash surplus, read effective annual deficit. Third, a very low defaulter provision, for example, less than 20% of the receivables. These two indicators can be consulted on the website of the Comptroller’s Office. Fourth, the payment of providers beyond 90 days. Fifth, the existence of invoices in the drawer. This is difficult to detect from outside the municipal government. Sixth, a refinancing of the debt to lengthen the amortization periods in times of Euribor rise. Seventh, repeated breaches of the Sanitation plans approved by the Generalitat to authorize new credit operations. It is time for the Generalitat to plant itself before the breaches! Eighth, recent creation of companies or foundations to centrifuge the debt of the City Council. Ninth, no appearance of banks and boxes to the City Council invitations to formalize new loans in the short or long term- (° ͡ ͜ ͡ʖ ͡ °) Click on through and see. And tenth, concessions of services in which the concessionaires pay part of the investment or advance the canon of several years. 

If a red light is turned on in a number of indicators of the aforementioned, it is evident that the City Council has a serious problem, which must be addressed without delay the day after the inauguration of the new municipal governments.