Mayo County Council have agreed to transfer a €20 million overdraft into a €30m bank loan which will run over 30 years with an annual interest rate of €600,000.
The measure was described by the County Manager, Peter Hynes as the ‘common-sense’ approach to dealing with their overdraft problems but outspoken Independent councillor Frank Durcan opposed the move claiming the Council were being sold a ‘pig in a poke’.
The details of the loan transfer were outlined by Financial Officer, Peter Duggan who explained that the overdraft was being used to pay for capital projects around the county and the average level of overdraft over the past 24 months was €20m. He said the Council were carrying the cost of the assets on the overdraft and proposed that the Council refinances these assests by way of long term borrowing.
He recommended that the Council borrows €30m over 30 years with an annual rate of 2.7 per cent which would take the interest cost to €1.4m per annum. However he said that due to decreases in next year’s budget, they will save €800,000 and the net interest will be €600,000 per annum.
Mr Duggan admitted that this will have an impact on annual spending in the 2012 budget which will be debated by the Council on January 6.
Fine Gael councillor Joe Mellet described the figures as ‘frightening’ but felt it made sense to transfer it to a loan and supported the council’s proposal.
He was seconded by his party colleague, Cllr Jarlath Munnelly but felt that the Council had made mistakes in their spending in the past and they needed to prioritise what they spend in the future and not make the same mistakes.
However, Cllr Frank Durcan said he would not support the proposal claiming that a €30m loan over 30 years was ‘absolute lunacy’ in the current financial climate.
“We have sold a pig in a poke to the people of the county who are not responsible for the present situation and we cannot guarantee what funding we will get over 30 years. I once paid an interest rate of 18 per cent and there is no guarantee we will not be paying that again in the next 30 years. Nothing is guaranteed in the world at the moment in this financial climate which is very serious,” he said.
The decision by the Council to transfer the overdraft to a loan was broadly accepted by the councillors but the behaviour of the banks to small businesses was severely criticised.
Cllr Gerry Coyle said the people with balaclavas in banks were now ‘behind the counter’ and the bankers were ‘absolute robbers’.
County Manager, Peter Hynes denied that the Council had made mistakes in the past but there had been made in when the outlook was ‘vastly different’ from what it is now.
He said they will continue to negotiate with the Department of the Environment regarding money owed but said their understanding of what is owed is not what the Department’s understanding is.