Compensation payments for Cork boundary changes could push council into deficit, warns boss

In 2019, Cork City Council’s administrative area grew to include Douglas, Rochestown, Ballincollig, Blarney, and Glanmire

Valerie O’Sullivan: 'You can’t just drive a ship like Cork City Council into a deficit budget.' File photo: Joleen Cronin

Cork City Council is concerned that the uncertain duration and high cost of paying compensation to its sister local authority, Cork County Council, for boundary changes could place major regeneration projects for the city in jeopardy.

Chief executive Valerie O’Sullivan has raised questions about the council’s ability to finance such projects due to the burden of the annual compensation payments, which she claimed was “unsustainable”.

Under the terms of legislation governing the boundary extension of Cork City Council’s administrative area in 2019, it must pay annual compensation to Cork County Council for a minimum 10-year period.

Under the boundary changes, the expansion of Cork City Council’s administrative area increased almost fivefold, with an increased population of approximately 85,000 covering areas including Douglas, Rochestown, Ballincollig, Blarney, and Glanmire.

The first compensation payment to Cork County Council in 2020 was just over €13m but the annual figure had increased to €15.4m by last year due to inflation.

Officials in Cork City Council have estimated that inflation could increase the overall compensation bill over the 10 years by at least €22m.

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Ms O’Sullivan’s comments were made at a recent meeting between senior council executives and a delegation from the National Oversight and Audit Commission (NOAC) – a local authority watchdog – as part of NOAC’s routine scrutiny programme.

The council’s chief executive said the issue of the compensation payments was “something that is ongoing but never spoken about.” 

"It was a deal that was to last for 10 years, index-linked, and no one could have foreseen at the time the way interest rates would go – the way covid would come along and the war in Ukraine and all these things that have increased the interest portion in particular of that.” 

Ms O’Sullivan also expressed concern about the uncertainty surrounding what happens at the end of the 10-year agreement".

“We don’t know what 2029 holds in terms of cessation or otherwise...We are working hard on that, I would say in partnership with Cork County Council, because they have to prepare for the cessation of the payment and we have to prepare for what the outcome will be,” said Ms O’Sullivan. 

You can’t just drive a ship like Cork City Council into a deficit budget.

However, Ms O’Sullivan said that is exactly what was happening as a result of the requirement to make an annual compensation payment.

The council’s head of finance, John Hallahan, also expressed concern about the uncertainty over whether the council will have to make further compensation payments after 2029.

Mr Hallahan pointed out that Cork City Council required certainty on the issue as it will need to borrow in excess of €100m over the coming years to qualify for the 75% funding from the Government’s Urban Regeneration and Development Fund for major projects planned for the Docklands and city centre areas.

“We need to have certainty brought after the 10 years,” said Mr Hallahan.