Publication
Local Government Finance
From Department of Housing, Local Government and Heritage
Published on
Last updated on
From Department of Housing, Local Government and Heritage
Published on
Last updated on
In terms of Local Government Finance, the department is focused on the financial well-being and effective financial management and accountability of local authorities and the promotion of value for money principles in the sector.
Capital expenditure is expenditure that results in the creation of an asset beyond the year in which that asset is provided, for example: houses, swimming pool, library. It is financed largely by State grants with the balance being funded from development levies and borrowings and own internal resources and property sales. In the case of some projects (for example: local authority offices) they may be funded entirely by local authority own resources and borrowing.
The local authority Chief Executive prepares and submits to the elected members a report indicating the programme of capital projects proposed by the local authority for the forthcoming and following two years. The capital programme includes expenditure on the acquisition of fixed assets, infrastructure projects, work-in-progress and preliminary expenses.
The Annual Financial Statement (AFS) of a local authority provides details of Capital Account Income and Expenditure and overall Capital Balance.
A local authority’s annual budget represents current expenditure (sometimes referred to as revenue expenditure) which covers the day-to-day running of the local authority (including staff salaries, housing maintenance, pensions, operational costs). The annual budget is adopted by the elected council at its budget meeting.
The Local Government Act 2001, as amended by the Local Government Reform Act 2014, provides the legislative basis for the local authority budget process. The budget is developed in a phased process involving input from the Chief Executive, the Municipal District members and the Corporate Policy Group. It is a matter for each local authority to determine its own spending priorities in the context of the annual budgetary process having regard to both locally identified needs and available resources. The elected members of a local authority have direct responsibility in law for all reserved functions of the authority, which includes adopting the annual budget, and are democratically accountable for all expenditure by the local authority.
Individual local authority budgets are available from the council’s finance section and are generally published on the authorities’ website. Consolidated annual budget data for all local authorities, compiled by the department is available at Local Authority Budgets.
Current expenditure is funded from a variety of sources, as set out below, although the specific contribution of income from the different sources may vary between authorities.
Local authorities have powers to charge for services which they provide, for example, housing rents, waste charges, parking charges, planning application fees. In most cases the charge or fee is set locally although certain charges or fees are fixed at national level.
Local authorities are under a statutory obligation to levy rates on any property used for commercial purposes, in accordance with the details entered in the valuation lists prepared by Tailte Éireann under the Valuation Acts 2001 to 2020.
The levying and collection of rates are matters for each individual local authority. The Annual Rate on Valuation (ARV), which is applied to the valuation of each property, determined by Tailte Éireann to obtain the amount payable in rates, is decided by the elected members of each local authority in their annual budget and its determination is a reserved function of a local authority.
Specific grants are paid to local authorities by various government departments in respect of particular services and schemes, for example housing and road maintenance.
The Local Government Fund (LGF) was established in 1999 and is used to fund local authorities, primarily through Local Property Tax (LPT) allocations. Its income is made up of LPT, along with a significant contribution from the exchequer. The Government decides the expenditure from the Local Government Fund each year as part of the budgetary process. In recent years, expenditure includes;
The Local Property Tax (LPT) is an annual tax charged on the market value of certain residential properties in the State. The tax was first introduced in 2013 and is collected centrally by the Revenue Commissioners. The proceeds from LPT are subsequently transferred to the Local Government Fund for onward distribution to local authorities in accordance with Government policies on funding allocations. The overall purpose of the LPT is to provide a stable and sustainable source of funding for local authorities.
Annual LPT allocations provide financial support to individual local authorities allowing them to sustain their continued efforts to achieve balanced budgets. It helps fund important local services such as parks, libraries, leisure amenities, fire and emergency services, maintenance and cleaning of streets and street lighting - all of which benefit citizens directly. The annual LPT allocation supplements local authority income from other sources such as, commercial rates, local revenue from the provision of goods and services and Government grants and subsidies. Each local authority receives a minimum level of funding, regardless of LPT yield in its area, to ensure it has the necessary resources to provide essential services in its area.
Local authorities may vary the rate of LPT in their administrative area by up to 15% of the basic rate of the Tax. The decision to vary must be taken by resolution of the Council. The power to vary LPT rates enables elected members to directly influence the level of LPT income they have to meet their expenditure requirements.
A review of LPT baselines was completed by a working group in 2023.
Baselines for 2024 have been adjusted in accordance with the recommendations of this group, and furthermore, every authority has received an increase in baseline funding of at least €1.5m. Accordingly, the overall LPT baselines of Local Authorities are increased from €353m to €428.4m in 2024.
The Summary Report on Local Property Tax Baseline Review 2023 outlines the process, findings and recommendations of this review.
Each local authority is required to prepare an Annual Financial Statement (AFS) by the end of March following the year end and to publish it by the end of June.
These financial statements undergo an independent audit by the Local Government Audit Service of the department.
When all Audits are complete, the department publishes a consolidated Annual Financial Statement publication compiled from the Audited Financial Statements published by each local authority.
Queries in relation to the individual statements should be directed to the relevant local authority.