Erin McGreehan (Fianna Fail)
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I welcome the Minister of State, Deputy Noonan.

Victor Boyhan (Independent)
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I thank the Cathaoirleach for selecting this Commencement matter and welcome the Minister of State. The Commencement matter is about municipal bonds and the important issue of financing local government. I was spurred on to table the matter by an inquiry from Councillor Karey McHugh Farag, on Galway County Council, who is doing a master's degree on the issue of bonds and the importance of funding to local government.

The Minister of State knows and I know, as I think all politicians in these Houses know, that local government is experiencing significant difficulties and challenges with the provision of ongoing funding. My focus is on how we might in some way leverage some mechanism of bonds. There are similar operations in New Zealand, Australia, Canada and the United States. I am familiar to a lesser extent with the position in Britain but am very conscious of what is happening in Denmark and Belgium. There are other imaginative mechanisms and innovative ways of leveraging money for essential infrastructure projects. We have to learn about best practice. There has to be alternative infrastructure financing that we can use in respect of strategies in developing long-term infrastructural development that communities and local government need.

I wish to focus on three issues today. How can we look at the need for new funding sources to generate resources for infrastructure projects? How can we look at new financing mechanisms that offer flexibility but also the potential for cost-effective ways of financing critical infrastructure across the country? How can we look at new financial arrangements and synergies that involve the private sector and that partner with the private sector, the non-profit sector and the public sector? They can all participate and ultimately have some benefit in these critical infrastructure projects. That is the key. We all want to deliver critical infrastructure, and there are a number of key issues when we look at this. We need to help to fund new development. We need to match payments with benefits in some way. If people put something into this, they need to have some benefit. It is very important that this is a mechanism whereby we can raise funding. This is critical and does not require voter approval. It should be remembered that the electorate votes people into office to get on with the job. We should not apologise in that regard. People are put into power and into office to get on with the job. We know the importance of critical infrastructure. Yes, there are weaknesses in the system in terms of administration. I do not want to overburden local government administration with the administration of additional mechanisms, particularly in the area of finance and funding, but there is enormous potential if we develop imaginative and constructive ways of looking at infrastructural funding.

In summary, like many elements of local government, these elements are challenging, but we need innovation, we need infrastructure and we need finance. That has to be at the very heart of new projects if we are to succeed. There is no doubt but that there is ambition in local government and on the part of central government, although perhaps not enough. If I have any criticism of central government, it is that it lacks real commitment to devolving real powers back to communities. We talk about mayors and reform of local government, but nowhere do I see a real commitment centrally, in central government, to devolve powers. When powers are devolved to somebody else, be it local government or whatever else, that must come with finance. The core issue I would like the Minister of State to look at today and maybe undertake to look at further with his officials in the Department is how we can leverage finance and bonds to facilitate the roll-out of our ambition, which is critical infrastructure and the engine to get the economy and communities going.

Malcolm Noonan (Carlow-Kilkenny, Green Party)
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Gabhaim buíochas leis an Seanadóir as an gceist seo a ardú. It is a really interesting question. He and I have debated this on a number of occasions, both in the Chamber and in these corridors.Local government services such as those referenced in the matter raised here today are funded in a variety of ways. Some programmes are supported by Exchequer funding and others from local authorities' own income, often a combination of both. Local authority income, in turn, comes from sources such as commercial rates, local property tax, charges for goods and services and, importantly in the context of the matter raised, through borrowing.

There is a framework in place to manage local authority borrowing, with authorities having recourse to the Housing Finance Agency, retail banks and to both the European Investment Bank and the Council of Europe Development Bank. Municipal bonds do not form part of this framework and are not considered necessary at the current time, although they could be given consideration.

Local authority borrowing and overall compliance with fiscal rules are managed and monitored by the Department of Housing, Local Government and Heritage, in conjunction with the CSO and the Department of Finance. These rules form part of the EU Stability and Growth Pact, which has its origins in the Maastricht treaty. Under the pact, there is a limit on budget deficits across the EU. As part of this, the general government balance, GGB, monitors borrowings and budget surpluses or deficits across the wider government sector, which includes local government.

Adherence to these rules by individual authorities requires a balanced revenue account and keeping the net increase in non-mortgage borrowing within approved levels. It is for this reason that local authorities are required to seek sanction from the Department, or to quote from the legislation, from the appropriate Minister, for all borrowing, over and above the requirement for formal approval by the elected members.

Expenditure of local authority reserves or own resources, including development contributions which often contribute to community infrastructure such as lighting and footpaths, is also subject to GGB limits. In order to ensure Ireland remains compliant with the overall pact, local authorities have been directed that capital expenditure should generally not exceed capital income within the reporting year. Notwithstanding that, within the overall limits, there is capacity for the expenditure of capital balances and own resources, subject to sanction. In reviewing requests for both borrowing sanction and the expenditure of reserves, consideration is given to ensuring that priority infrastructural investment can proceed, that contractual commitments and ongoing projects can proceed; and that development contributions already collected and aligned to specific capital projects can be utilised efficiently. The Department makes every effort to facilitate all such requests.

Compliance with the pact means that member states must avoid deficits above 3% of GDP and must limit public debt to 60% of GDP. To put that in context, in 2020 Ireland recorded a deficit of 4.9% and a debt to GDP ratio of 58.4%. There is therefore a need to carefully manage any proposed increases in local authority borrowing within the overall envelope. There are no current plans to expand the borrowing options available to local authorities through the introduction of municipal bonds, which as I have said are not at present a feature of the local government funding model. Having said that, it is critically important that research is done into alternative sources of funding for local authorities. The Senator mentioned that research piece.

Victor Boyhan (Independent)
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I thank the Minister of State for his reply. It is clear there is no intention of introducing municipal bonds. I have read extensively in a number of papers in the last few days. There is a lot of information on best practice in other jurisdictions. It is something we should look at. We have to be ambitious. We have ambitious public representatives in local authorities. We have ambitious chief executives in local authorities. The Minister of State knows from Kilkenny that there is no shortage of ambitious ideas coming up from the ground. I understand we have to operate within the fiscal rules and the Department of Housing, Local Government and Heritage ultimately has a role as does the Department of Finance. However, we can be more ambitious. We have to convince the people we represent in local communities that we can deliver greater infrastructure and develop a range of greater resources. However, they have to be financed. People are ready to commit to financing local authorities. People do not expect everything for nothing. They are not looking for a free ride.

Perhaps the Oireachtas Joint Committee on Housing, Planning and Local Government, of which I am a member, could look at the matter and work with the Department. Let us look at municipal bonds, how they work internationally and whether we can apply any aspect of that to our own situation in Ireland. I thank the Minister of State for coming in today.

Malcolm Noonan (Carlow-Kilkenny, Green Party)
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I thank the Senator. The suggestion he made there is very useful. It would be a really useful exercise for the housing committee to have a look at this and at the overall funding of local government in general. We have a significant challenge. As the Senator rightly said, our local authorities are ambitious both at corporate level and among the elected members.They show real innovation - often in the face of dwindling resources - yet they cannot continually rely on car parking charges or development contributions, which are not sustainable sources of funding. We are trying to decouple them and move towards sustainability. If we look at possibilities around public banking and local authorities being involved in that or developing energy supply companies, we can see there are opportunities there on which local authorities in other European countries have been leading. We should look at all options given the challenges we face and the opportunities, particularly around climate action, biodiversity and all various aspects of local authorities' work, which is expanding. The work rate is expanding and yet the funding sources are challenging. The Department will continue to work with local authorities. The Minister of State, Deputy Peter Burke, is deeply committed to doing that but it is important to consider all sources.