COMHAIRLE CONTAE ÁTHA CLIATH THEAS
SOUTH DUBLIN COUNTY COUNCIL

MEETING OF SOUTH DUBLIN COUNTY COUNCIL

Monday, January 12, 2015

QUESTION NO. 8

QUESTION: Councillor W. Lavelle

To ask the Chief Executive to provide a detailed report on the options available to local authorities and/or ‘off-the-book’ companies established by local authorities to borrow from state bodies, social finance lenders, financial institutions or other bodies for the purposes of seeking to fund major capital projects in the sports and leisure area?

REPLY:

Section 106 of the Local Government Act 2001 provides that (subject to subsections (3) and (8) and any regulations made under subsection (5)) a local authority may borrow money in any manner which it considers suitable for the effective performance of its functions.

subsections (3) provides that the borrowing must have the sanction of the appropriate Minister

subsections (7) provides that the decision to borrow is a reserved function 

subsections (9) provides that a local authority shall not borrow money except in accordance with this section (of the LG Act 2001)

This means that any borrowing by the Council for a major capital project must be approved in advance by both the members as a reserved function and by the appropriate Minister (e.g. the Minister for the Environment, Community and Local Government or the Minister for Transport, Tourism and Sport)

It is a normal requirement when a company owned or controlled by a public body is borrowing monies, that the bank or credit institution places a lien or mortgage on assets to reduce the risk associated with the loan.  If the company does not have assets in its own right the bank may look to the assets of the public body for security or may request a letter of comfort from the public body.  Financial controls which were introduced via  S.67 of the Credit Institutions (Stabilisation) Act 2010 provide that the approval of the Minister for Finance should be sought if local authorities wish to “mortgage, pledge or otherwise encumber its own assets or revenues to secure any present or future indebtedness or any guarantee or indemnity given in respect of such indebtedness”. This means that the Minister for Finance must approve the mortgage of assets or proposed letters of comfort or guarantees before they can be provided by a public body.

The Council may therefore borrow in accordance with the approval of the appropriate Minister or a special purpose company may borrow utilising the securitisation as agreed by the Minister for Finance and once this has been granted the council or the special purpose company will review the best lending terms available for the project so that the capital works may progress.