Council wants to borrow hundreds of millions to fund flagship projects in the city – will central government let it?

On Monday evening, Dublin city councillors approved a new capital budget, laying out how much the council intends to spend on projects from libraries to pitches.

Several big-ticket items hang on Dublin City Council borrowing €358.5 million over the next five years, to get them over the line.

Among them: the proposed new city library on Parnell Square, the regeneration of Dalymount Park, the revival of the Smithfield Fruit and Vegetable Market, and also extra work to do up social homes, vacant and not.

By backing an approach that relies on borrowing, councillors and council executives have effectively put the fate of the projects on central government.

Because, to borrow that sum, the council needs sign-off – not just from councillors, but also from the Department of Housing. And there’s a cap on how much local councils, collectively, can borrow in non-mortgage loans each year.

For 2024, it was €118 million. For all the local councils in the country, combined.

If that stays the same, Dublin City Council is hankering after a massive percentage of that annual pot in the coming years, said Green Party Councillor Feljin Jose, at the February monthly meeting of the council at City Hall on Monday.

Especially in 2027 and 2028. The council’s budget shows it taking 75 percent of the national local-authority borrowing pot in those years, Jose said. “I’ve nothing against that. But how much of a risk is getting that approval?”

It was towards the end of a three and a half hour-long meeting when Jose posed that question. So Lord Mayor Emma Blain, a Fine Gael councillor, said that council managers would send a response in writing, later.

On Tuesday, a spokesperson for the Department of Housing said it asks local authorities what their priorities are for at the beginning of the year, “and will ensure equitable distribution of the available borrowing envelope across all local authorities seeking to borrow in that year, with a key focus on the delivery of Government priorities”.

“Debt sanctioning is an annual process but, in the case of multi-annual projects, the Department will work with local authorities to manage the available borrowing envelope across the years involved to best effect,” they said.

“The Department does not have any open requests for sanction on hand from Dublin City Council at this time but will work with them, and with all other local authorities, to manage expectations and timing of any sanctioning of borrowing for 2025,” they said.

A spokesperson for the Department of Finance, which sets out the budgetary framework with the rules for local authority borrowing, didn’t respond to queries about local authority borrowing.

Sinn Féin Councillor Séamas McGrattan, who chairs the council’s finance committee, said on Tuesday that there isn’t a Plan B in terms of funding streams for these projects. “Plan B is that it just doesn’t go ahead.”

The projects on the line

Councillors on Monday night gave final approval to borrow €132.5 million to help fund 441 cost-rental homes at one of the city’s flagship public-housing projects, at Emmet Road in Inchicore.

That project makes up almost a third of the anticipated borrowing listed in the council’s capital budget for the coming years.

But there are other big items.

The council is looking to borrow €90 million towards the first phase of the new Dublin city library and works on the Hugh Lane Gallery, towards an estimated total cost of around €155 million.

Phase 1 of this project, known as the “Parnell Square Cultural Quarter”, involves a new 5,500 sqm four-storey city library – with a conference centre, café and exhibition areas – as well as refurbishment of one of the nearby Georgian houses, and improvements at the adjacent Hugh Lane Gallery.

The council has been working through the tender processes, the report says, and expects a contractor to be on site in the last quarter of this year. “Phase 1 of the project is on target to be completed in 2028.”

Dublin City Council also wants to borrow €19 million towards the estimated €56.6 million cost of redeveloping Dalymount Park, the capital programme says.

The Dalymount Park project in Phibsboro includes a new stadium with space for a crowd of 8,000, to serve as a home ground for Bohemian FC. Designs include a new public, community facility and improvements to the public domain, says the capital programme.

And more projects

The council also wants to borrow €18.3 million towards the €26.4 million expected to be spent on the Victorian Fruit and Vegetable Market in Smithfield in the next three years.

Its vision for the building is of “a quintessentially Irish food market” which will “highlight the food offer to locals and visitors alike”, says the capital programme.

“It will provide opportunities for community growers and start up food business and also allow more established local producers a direct route to market with some producing on site,” the report says.

The council issued a tender for construction in August 2024, the report says. Construction and conservation works are expected to start in the second quarter of this year, and be done in the third quarter of 2027.

That construction will involve refurbishing the original stone, roof and structure, putting in new services for trading, along with an office, café/restaurants and new toilets, the report says.

The seven-day market should host at least 80 retail traders, and have spaces for food education and small events, it says.

The council also wants to borrow €67.5 million to help do up council homes that are vacant, either between tenancies or because the council has only recently bought them.

Councillors in some city neighbourhoods, such as Cherry Orchard, have complained about the blight of a rising number of long-term vacant social homes.

One challenge has been that the Department of Housing’s contribution to doing up vacant social homes – at about €11,000 a home – covers only about a quarter of the costs of the works, leaving the council to cover the rest.

Other asks include €13.4 million for planned maintenance of social homes, which the council has been struggling to get on top of, plus €11 million for three new fire stations, and €6.8 million to help fund refurbishment of Newcomen Bank and City Hall.

The rules

At the meeting on Monday night, councillors approved the capital programme for 2025 to 2027.

But – aside from the public housing project at Emmet Road – they still have to officially approve each of the other proposals for borrowing. Council officials intend to ask them to do that at their March monthly meeting, said the report.

“It is the intention to […] then seek approval from the Department of Housing, Local Government and Heritage to borrow,” the report says.

The council foresees that 9 percent of its capital budget would be covered with borrowing, the report says.

It envisions the rest coming: 75 percent from central government grants, 8 percent from levies, 6 percent from “other income”, and 3 percent from development income.

Yet how much local authorities can borrow is capped by a requirement that the country’s local-government sector remain neutral in terms of the general government balance, according to a Department of Housing briefing document.

“This means that in any year the local authority sector can borrow the equivalent value of the principal that will be paid on non-mortgage loans in that year,” says the Department of Housing briefing.

That rule is set in Ireland’s “medium term budgetary framework”, drawn up by the Department of Finance.

It flows from the fact that Ireland, as a European Union member, is subject to the Stability and Growth Pact, which caps countries’ debt-to-GDP ratio and annual government deficit.

The councils’ borrowing envelope was €118 million for 2024. But it was to be reviewed last year with the Department of Finance and the Department of Public Expenditure, says the Department of Housing Briefing.

The Department of Finance hasn’t responded to queries, including whether it was considering raising the borrowing envelope.

Jose, the Green Party councillor, says he thinks there needs to be a debate on increasing the borrowing limits for councils if they are to do the scale of public works that are needed.

More housing, libraries, the stadium, he says. “How are we going to borrow the money to do it, if the overall borrowing envelope is this?”

Especially, if the council is to gear up its own cost-rental housing projects and has to fund part of that itself, he says. “Given the housing crisis that we are in, and the level of house building that local authorities need to do, I don’t see how we can do that at €118m a year in borrowing.”

McGrattan, the Sinn Féin councillor and chair of the council’s finance committee, said what the council has proposed to borrow is the maximum he thinks it will look for for some time. “We’re probably going to stay at that for a while.”

Even if they were to look to borrow more, he is not sure there would be support for that internally, he says. “There’s potentially disastrous implications if things go wrong with that.”

Unless, of course, councillors and officials find a way to increase the council’s income, he says.

The council’s capital programme includes proposals for how to pay off the loans, if they are approved. It would take some of the council’s annual revenue budget, the report says.

Ideas to cover it include shaking more grant funding from the central government, growing commercial rates, raising more revenue via the local property tax, or getting the owners of government buildings to pay commercial rates to the council.

McGrattan, the finance committee chair, says the council is always looking for more grants from the central government but they just aren’t coming.

So, his focus is on the council’s own revenue streams – getting some new ones, tweaking some existing ones, giving some others more attention.

Councillors on the finance committee have continued to push for powers to bring in a hotel bed tax for tourists, which other European cities have.

Central government is just not engaging with this idea, McGrattan says. “There is resistance from the industry.”

Hotel owners see it as unfair, he says. They argue that they pay rates to cover the services they use, he says.

Getting owners of government buildings to pay commercial rates – a proposal made several times over the years in the council chamber – is also back on the agenda, he said. “We’re going to push that again.”

So is looking at whether they can adjust commercial rates so they aren’t based just on the size of a space, but on the revenue of the company occupying it, says McGrattan.

“There is scope for change,” he says. “We don’t want to hit the cafe or the corner shop that is struggling.”

Getting the collection of vacant site levies up would also help, he says. “That would add greatly to our budget.”

As well as all that, there’s also talk of reform of social housing rents through a national scheme which could impact on how much the council would bring in, he says. “There’s talk of that. I don’t know whether it will or not.”