Minister to scrutinise Cork City Council's soaring compensation payments to county council

Darragh O'Brien said: "If I was to receive any submission from Cork City Council or from the executive, I will look at it and will assess it but I have yet to receive it.” File picture

The Minister for Local Government says he is happy to examine the potentially crippling compensation payments issue facing Cork City Council arising out of the 2019 city boundary extension.

But Darragh O’Brien declined to comment specifically on whether he can change the part of the arrangement which linked the city council's annual payment to the county to inflation, and which could cost the city an additional €22m over a decade. He said he has yet to receive any specific submission from the city council on the issue.

He was speaking in Cork just days after the city council’s chief executive, Ann Doherty, told councillors that its annual compensation payment to Cork County Council arising out of the boundary extension has soared because of surging inflation.

Under the terms of the boundary extension legislation, the city must pay an annual index-linked contribution to the county for a minimum 10-year period, at which point the agreement is subject to review.

Its first payment in 2020 was just over €13m but because it is linked to inflation, the 2022 payment had increased by €600,000. Soaring inflation over the last 12 months has pushed the 2024 payment to €15.4m—€1.8m more than this year, and a €2.4m increase since the first payment.

“This is not a sustainable cost for Cork City Council,” Ms Doherty said. City officials estimate that inflation could add at least €22m to the overall compensation payments over the course of the 10-year payment period.

What's your view on this issue?

You can tell us here

Sources said the city has no issue paying the baseline €13m annual payment but has a real difficulty with the index-linking element. Ms Doherty said officials are in discussions with the department in relation to this cost increase but no agreement or commitment to fund this additional cost has been reached to date.

She asked councillors who were debating the city’s 2024 budget to capitalise the additional cost until a funding stream becomes available. But when Mr O’Brien was asked what he planned to do to address this issue, he said: “The boundary extension is done, and preceded my taking over as minister.

“The two local authorities work well together. If I was to receive any submission from Cork City Council or from the executive, I will look at it and will assess it but I have yet to receive it.” 

When asked specifically if he could remove the index-linked element of the compensation payment, he said he talks regularly to the chief executives of both local authorities – most recently about a review of the emergency response to Storm Babet, before adding: “If I receive a submission from the city council, I’ll assess it.” 

During last week’s city council budget meeting, Fine Gael Cllr Shane O’Callaghan described the compensation payment as the “elephant in the room”. He said the inflationary cost could escalate over the coming years, depending on inflation, and said: “Such a situation is totally unsustainable from the city council’s point of view.” 

He said if the issue is not addressed, it could present the city with a real financial crisis and lead to a “confrontation between the city and county and potentially”. He urged officials to consider withholding the inflationary element of the payment until the matter is resolved at government level.

There is a mechanism under Section 24 of the 2019 Boundary Extension Act which allows the minister to intervene.