Town halls prepare for a spending spree with next year's local elections in mind

In the past two years Malaga city hall has spent 7.8 million euros on the purchase of 21 buses as part of its financially sustainable investment projects.
In the past two years Malaga city hall has spent 7.8 million euros on the purchase of 21 buses as part of its financially sustainable investment projects. / SUR
  • The government has reduced restrictions so municipalities with a healthy bank balance can invest in projects which do not increase everyday expenses

With the next local elections just over a year away, in June 2019, we can expect to see councils embarking on numerous new projects to impress their voters, although of course the extent of these will depend on how much money is in the municipal coffers.

Some councils do, however, have an advantage: those whose finances are in a healthy enough condition are being permitted by the government to use part of their surplus from 2017 on investments which are “financially sustainable”, and in many cases it means they will have tens of thousands of euros to spend.

This is a type of 'prize' which the Spanish government has been awarding since 2014 to town halls who have reduced their public deficit, but this year it goes even further by expanding the type of projects that can be carried out using these funds.

There are some conditions involved: no project must generate greater expenditure in the future or increase the council's normal running costs (on salaries, for example), and before rubbing their hands with glee at the amount of surplus, they must make payments on bank loans.

However, this year the government is allowing these funds to be spent in more ways. Until now the money could only be used for projects such as street lighting and drainage, green zones, public transport and minor improvements to streets and roads, but now it can also be spent on new equipment and vehicles for the Local Police, the fire brigade and Civil Protection services, social welfare programmes, the creation and running of nurseries and even the restoration and improvement of council buildings.

The local authorities also have a longer period to carry out these projects: the decree which was approved by parliament on 23 March gives them until 31 December 2019. This was in response to concerns from mayors that they were losing time because of the delay in the government obtaining approval for its 2018 general budget, as the measure is included within the budgetary conditions.

Pressure from mayors

The mayors put pressure on the Ministry of Finance through FEMP, the Spanish Federation of Municipalities and Provinces. It demanded more flexibility in the use of the money, bearing in mind that due to the restrictions imposed by the government to control council spending the town halls were only using a quarter of the money they could otherwise have invested.

This type of parental control has been applied since 2012 through the Montoro Law, an abbreviated name for the Law of Budgetary Stability and Financial Sustainability, which closed the tap on spending by all administrations and obliged them to spend every euro they had saved on reducing their level of debt.

The first to do their homework properly were local councils, and in 2014 the Ministry of Finance began to reduce the pressure on them as long as they met three conditions: they had a surplus, a moderated level of public debt and they paid their suppliers in full and on time.

Those who meet these criteria are allowed to use the money which is left over once part of the debt has been paid off, but it is one thing to have resources to spend and another altogether to have the full freedom they used to enjoy before the difficult years of economic crisis arrived. Firstly, because all the operations have to be financially sustainable, and secondly because of the spending ceiling imposed by the Finance Ministry. This is a limit on non-financial expenditure, which is calculated in accordance with the administrations' income and which since 2012 has also applied to councils to prevent them getting into more debt than they should.

With these instructions on the table, the councils are now doing their sums to decide how best to invest the money and, especially, which projects can be completed before next year's local elections.

In Malaga city the council has a surplus of 127 million euros and hopes that this year there will be even more to spend than the 37.5 million euros last year, which were used on 150 projects in the 11 districts of the city which should all be finished before the end of this year.

“We would like to have a similar sum again this year, but we need to look at the accounts carefully to see exactly how much there will be and what to spend it on. Within a month we should have definite plans drawn up,” says councillor Carlos Conde.

Other municipalities have already started planning: in Marbella, for example, the council announced this week that it will be spending over 20 million euros during the rest of this year and the whole of 2019.

In Fuengirola, the situation is similar. The town hall has had a positive balance of 20 million euros for three consecutive years and it hopes to be able to spend a similar sum to last year on investment projects. Last year, it used 12 million euros from the 2016 surplus.

In Estepona, the town hall expects to have a surplus of 30 million euros, but has not yet released information about new projects. “The money will be used as laid down by the law,” is all that sources there were prepared to say.

Benalmádena council has already laid down an order of priorities. The mayor, Víctor Navas, says the funds they can use (they do not yet have exact figures) will be spent on “improving basic services, such as rubbish collection and beach maintenance”.

They had hoped to employ more street cleaners, Local Police officers and firefighters, but the government decree does not permit the money to be used in that way. In the meantime, the town hall is continuing to reduce its debt, which is currently 72 million euros. This is 50 million less than three years ago. It has also reduced its average payment period for suppliers to 16 days.

On the other side of the coin is Torremolinos. Far from having a surplus, the town hall there is one of the most indebted in the province, a situation which has led to a strict adjustment plan still being enforced. In recent years the council has had to focus on reducing this debt, which is 2015 was 197 million euros.

“Our situation is different, because we are showing that with the accounts properly taken care of the town hall has the ability to recover its financial muscle. Our annual surplus has to be spent on reducing the municipal debt and reducing the average payment period for suppliers,” says deputy mayor Maribel Tocón.

Nor is Torremolinos alone. In Rincón de la Victoria, the council ended 2017 with a surplus of 3.5 million euros, all of which will have to be spent on reducing its debt.

Contributors to this report: Agustín Peláez, Héctor Barbotta, Charo Márquez, Eugenio Cabezas and Alberto Gómez.