Pádraig Mac Lochlainn (Donegal North East, Sinn Fein)
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Question 25: To ask the Minister for the Environment, Heritage and Local Government his plans to address the situation whereby local authorities cannot spend the substantial amounts in capital water services accounts to repair essential water infrastructure due to the terms of the EU Stability and Growth Pact. [6921/11]

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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In February 2009, my Department set out details of the financial requirements for local authorities relating to their overall management of capital and current accounts. These requirements flow directly from the requirement for Government finances as a whole to be managed in accordance with the Stability and Growth Pact established under the Maastricht Treaty, and the associated limitation on budget deficits.

The Government has set a limit of €200 million for the contribution of the local government sector to the deterioration in the General Government Balance (or GGB) in any one year. In order to stay within this limit, it is necessary for local authorities to maintain both their current and capital accounts broadly in balance.

My Department continues to work with all local authorities to ensure that, within the context of the overall GGB requirements, decisions on matters of capital investment are taken in a way which maximise available resources and give the necessary prioritisation to environmental, economic and social infrastructure, with a particular emphasis on improving national water infrastructure.

In 2010, some €124.4 million in local authority borrowings was sanctioned in relation to water infrastructure. Such borrowing forms part of the financing of water services capital, but it should be noted that the largest portion of capital investment in water services is met by the Exchequer. While the level of grant at project level averages around 75-80%, the level of Departmental funding for rehabilitation and replacement of water mains is generally 90% and authorities should have the capacity to advance such contracts on a timely basis notwithstanding the overall financial constraints. The availability of access to borrowing on an annualised basis for schemes in progress effectively ensures that Water Services Authorities have access to borrowing for water services schemes when it is required.

In accordance with the Government's Water Pricing Policy, the marginal capital cost of providing water services infrastructure to the non-domestic sector is funded by that sector. Pending the receipt of funds from the non-domestic sector in respect of such works, local authorities fund the works themselves through the proceeds of development levies or access to borrowing.

An overall allocation of €435 million being made available in 2011 from the Exchequer for investment in water services infrastructure. The process of prioritising loan applications for such projects in 2011 is almost complete and my Department has been guided by local authorities in respect of the most critical projects requiring funding.