Cork City Council cannot sustain compensation payments to county council, warns chief
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Inflation has driven Cork’s city annual boundary compensation payment to over €15m — a figure which is no longer sustainable, the city council’s chief executive has warned.
Ann Doherty made her comments as city councillors met to approve the city council’s 2024 budget, which will see €292m invested in the delivery of services — a €24m increase on this year.
The main contributors to the increase in expenditure are:
- An almost €11m increase in housing funding;
- A €4.7m increase in Croí Conaithe funding;
- An €8.2m increase in payroll costs, including €1.2m extra for the fire service;
- And an extra €200,000 for homeless services.
She included a specific warning about the soaring cost of the city’s annual payment arising from the 2019 city boundary extension.
Under the terms of the boundary extension legislation, the city must pay an annual index-linked contribution to Cork County Council for a minimum 10-year period.
Its first payment in 2020 was just over €13m but by 2022, the figure had increased by €600,000.
But soaring inflation has pushed the 2024 payment to €15.4m — €1.8m more than this year, and a €2.4m increase since the first payment, all due to inflation.
“This is not a sustainable cost for Cork City Council,” Ms Doherty said.
City officials estimate that inflation could add at least €22m to the overall cost of the compensation scheme over the course of the 10-year compensation period. Ms Doherty said:
“For the 2024 budget, we are proposing that this additional cost should be capitalised until a funding stream becomes available.”
She told councillors that the city agreed to make a compensation payment, but argued, unsuccessfully, against the index-linking element, and said the council has flagged with the department of local government the need for the issue to be reviewed.
Fine Gael Cllr Shane O’Callaghan said unless the issue is addressed, it could spiral and present the city with a real financial crisis, and he said the city should consider withholding the inflationary element of the payment until the matter is resolved at government level.
“This is a matter for the minister for local government to resolve,” he said.
“We now have a farcical situation where under the criteria used by the department to allocate extra money to local authorities to combat inflation, Cork County Council is getting an extra €10m per year whereas Cork City Council, which is obligated to pay an extra €2.4m to the county council because of inflation, is only getting an extra €1.5m in funding to combat inflation — that’s a net loss (to the city) of €900,000 per year.”
Chair of the council’s finance committee, Fianna Fáil Cllr Sean Martin, said he is working to address the index-linked element, and that he has spoken to “some of the people involved in the decision-making process” in relation to the allocation of additional funding to local authorities to help combat inflation.
He said five criteria, including landmass, were used to assess the amount of inflation compensation paid to local councils and because landmass accounted for almost 40% of the weighting, Cork County Council, which oversees Ireland’s largest county, performed well.
“This was not fair to urbanised local authorities,” he said.