Not Flush But Bust: Mallorca's town halls

The total debt of town halls in Mallorca is just short of 475 million euros. Two hundred million of this is accounted for by Palma, the ninth most indebted city administration in Spain.

The 2010 report into town hall debt issued by the national finance ministry will make uneasy reading for the new Partido Popular administration. Apart from Palma, not run by the PP over the past four years, eight of the ten most indebted town halls in Mallorca were governed by the PP and still are.

The PP of José Bauzá is intent on austerity, adding to that which central government has already demanded of town halls. The fact that town halls have been barred from acquiring further debt just emphasises the parlous state of public finance in Mallorca and in Spain.

It is, or should be, an embarrassment to the PP that, outside Palma, two large municipalities - Calvia and Llucmajor - both controlled by the PP and, in the former case, ruled over until recently by cabinet aspirant Carlos Delgado, account between them for over 20% (100 million euros) of Mallorca's town hall debt. Inca, another PP enclave and one formerly presided over by the new "speaker" of the Balearics parliament, Pere Rotger, has amassed close to 16 million.

While it is to be expected that larger towns might have greater debt, this doesn't explain how tiny Escorca, with only 276 residents, manages to outstrip even Calvia, to the tune of 2.5 to 1, in terms of debt per head of population. It is the per capita debt that gives a rather more real picture of debt, and it is this which relates to the eight out of the top ten most indebted town halls being PP-run.

This figure is more real because the responsibilities of town halls, just as with the number of councillors a town hall can have, are determined by the size of a municipality's population. Logically, the greater the responsibilities and the greater the population, so the greater is the demand for funding, which invariably means debt. The issue isn't so much that there is debt, but that there is so much of it. (It should be pointed out that the costs for servicing smaller municipalities are, in relative unit-cost terms, higher than those of larger towns.)

The Spanish equivalent of the Audit Commission fired a warning shot across the bows of town halls in December last year by saying that there needed to be rationalisation, by which it meant merger of municipalities or the sharing of resources. Though the federation of local authorities in the Balearics had admitted some months before that cuts were going to have to be made, such as to fiesta budgets, it argued that the current system of financing was the best. Despite all the debt, therefore.

One reason why debt has become such an issue relates to the sometimes staggering increase in the cost of town hall staffs since the turn of the century. Take another small municipality: Santa Eugènia. It has a population of just over 1500 people. It is not one of the worst offenders when it comes to debt (just shy of 600,000 euros, three-quarters that of Escorca's), but its town hall personnel costs rose 2700% between 1999 and 2009. Admittedly it was starting out from a very low base - the equivalent of 14,300 euros in 1999 - but the increase was still startling.

What shouldn't be forgotten, however, is that during the first decade of this century there was an equally startling increase in Mallorca's population - 25%.

Notwithstanding the figures produced by the finance ministry, doubts prevail as to the real level of debt at certain town halls. In Pollensa, for example, a lack of transparency is blamed for uncertainty as to the true nature of debt, while in Alcúdia the Mallorcan socialists, who hold the key to the town's future administration, have made a comprehensive audit a stipulation of any pact it will broker.

Whatever the real figures, there is no question that there is one hell of a lot of debt sloshing about in Mallorca's town halls, but it is debt that has been driven, in no small part, by extraordinary population growth. However, if you also take into account the fact that the local authorities' federation reckons that town hall revenues have declined by as much as 40%, then you have a situation in which something has to give.


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