PSOE And The Mallorcan Debt Mountain

Some serious questions need to be answered. The government of José Bauzá may be exaggerating the size of the Balearics debt and laying all the blame at the door of the previous administration, but there were clearly some pretty odd things going on during that administration.

Bauzá hasn’t discounted the possibility of setting in motion legal processes if there were irregularities over and above mere inefficiencies at both regional government and Council of Mallorca levels between the springs of 2007 and this year. Recourse to the law does smack of possible vengeance by the Partido Popular. Voices in the party levelled accusations of a politicisation of the legal system in respect of the pursuit of officials dating to its 2003-2007 period of office. There is just a hint of payback.

The Balearics debt has accumulated over years, not just the four years of the PSOE administration. There has been a spend-spend mentality at all levels of government in the islands, including that of the Partido Popular from 2003 to 2007; a fair amount of which spend is still under scrutiny by anti-corruption prosecutors.

However, it was the case that the last administration did opt for a spend budget in 2008 at precisely the time when it could least be met. It may have been unfortunate that crisis took hold, but there is no getting away from the fact that PSOE helped to push the islands into ever deeper debt.

To an extent, doubly unfortunate therefore, the mounting debt was the consequence of a fall in tax revenues brought about by crisis, but fiscal explanations lack the appeal of being “sexy” when compared with the missing millions designed to take a headline-writer’s fancy and flabbergast a public.

The International Monetary Fund, as well as barons in Brussels, who have been pressing Spain on the need to reduce the burden of regional debt, must have gasts as flabbered as the rest of us in trying to understand how the rotten borough that was (still is, to be honest) the Council of Mallorca could have spent some 100 million euros of state money, intended for road-building, on grants and paying salaries. Actually, it is quite easy to understand, as sound governance of public finance has long been only a chapter in a textbook and not something put into practice in Mallorca.

There was also the farce of the Manacor to Artà train, now effectively abandoned, into which vast sums were pumped despite heavily conflicting evidence as to how much traffic the railway line would generate. A delicious but sad irony of the work that has seen land ripped up and levelled is that it was the brief of a transport minister from the environmentally righteous PSM (Mallorcan socialists) who later also became environment minister in the PSOE-led regional government. The work on the line paralysed, the damage to the landscape has been environmental vandalism, predicated on a project with a questionable business rationale. How much will it cost to put the land right again, if it ever is?

Going back to the Council of Mallorca, we now have another intriguing example of public financial management. It relates to a consortium known as Eurolocal-Mallorca. What its precise purpose is, is not entirely clear. Ostensibly it is intended to support active European participation in local Mallorcan authorities, which means … . Well, which means what?

The consortium was established in 2009 and was an initiative of the former president of the Council, Francina Armengol. In its two years of existence there is little evidence as to what it has achieved (perhaps unsurprising given the vagueness of its purpose). It has operated with a budget of 126,000 euros and its director has been trousering 70 grand a year.

Mainly, or so it would seem, the consortium people have spent their time heading off to Brussels. Why? Who knows. But mention Brussels, and who can forget the occasion, in February 2009, when some 40 mayors plus government politicians and others (150 of them in all) headed off to the Belgian capital for a spot of lobbying against the European pyrotechnics directive that Europe had no intention of using to try and ban demons’ fire-runs. Ah, those were the days; when public money could be easily spent on a jolly with airline tickets and accommodation chucked in.

The new president of the Council, Maria Salom, is going to close the consortium down. Having also decided to shut another spectacular waste of money, the Council’s tourism foundation, one wonders what other bodies are lurking that need disinterring and what other questions will emerge that need answering.

Any comments to andrew@thealcudiaguide.com please.

Can’t Pay, Won’t Pay

Payback time. As reported in “The Bulletin” (17 August), the Council of Mallorca faces a likely demand from central government to pay back subsidies for road building that didn’t happen and which were used for other purposes.

The Council faces an additional demand. The national finance ministry is owed 9.8 million euros by the Council. It is the shortfall between money that was paid on account by Madrid in the expectation that tax revenues generated by the Council would meet the estimate of this payment and would be handed over to the finance ministry.

This system of advance payment, a sort of cash-flow measure if you like, works only if the local authority is in a position to pay it back and only if the estimate was realistic in the first place. The estimate may have been realistic, in historical terms, but the demand for the 9.8 million relates to the year 2009. The year of crisis taking hold. Tax revenues plummetted.

The Council is far from being the only local authority which faces a demand for payment. The town halls of the Balearics are into the finance ministry for a total of 32 million euros. Palma owes 7.9 million, and the five largest towns in Mallorca after Palma – Calvia, Manacor, Llucmajor, Marratxí and Inca – all owe over one million euros; very nearly two million in Calvia’s case. Of other towns, Alcúdia owes most – close to 800,000; Pollensa faces a demand for 350,000, Santa Margalida for 439,000. The only municipality that is owed by the ministry is Escorca – all of 1,600 euros.

How are the local authorities going to pay these demands? If they are all like Santa Margalida, they won’t be paying. Its mayor says there isn’t any money. Of course there isn’t. One estimate of Santa Margalida’s debt puts it at eleven million. The Council of Mallorca would seem to have little hope of handing over virtually ten million, not when it is technically bust and over 300 million in the red.

The demands have led to all manner of accusations as to where the blame lies. In Santa Margalida it is the fault of the previous Partido Popular-led town hall administration. For Manacor’s PP mayor it is the fault of the PSOE socialist national government for not having reformed local authority financing. Pollensa’s PP mayor says that central government got its sums wrong.

Wherever the fault lies, extracting repayments out of many town halls is going to be a tough call. Manacor, for example, faces, in addition to over a million being demanded of it, the unexpected cost (around one million itself) of complying with the idiotic demolition of the Riuet bridge in Porto Cristo. And it’s not as though the towns can just wave their hands, plead penury and expect to not have to pay. Higher authorities than the town halls have been known to seek legal and financial redress from the municipalities and indeed from mayors for non-compliance with certain orders; as Antoni Pastor, Manacor’s mayor, knows only too well.

What does the finance ministry do though? Does it withdraw advance payments and expect future tax revenues to cover the repayment? If so, then the town halls will be bankrupted. In addition to the debt which hovers over most of them are the constraints placed on them in respect of seeking credit. Tax revenues down in any event, how do they continue to function?

The system of public finance gives the impression of being close to collapsing. While there is a sense of chickens coming home to roost and of previous profligacy now being punished, this does nothing for assuring that public services are maintained. One ray of light in the mess comes from what Alcúdia’s lady mayor has to say, that some formula will be worked out. It may well be, and it may well be that her colleagues in the PP nationally, if and when they assume office after the election in November, will find an accommodation. A question would be, what sort of accommodation? The PP is more minded to slash public funding than the current government.

Where the Council of Mallorca is concerned, its repayment burden simply adds to its precarious position and to its highly questionable viability. And what exactly was it doing spending state money on projects other than those for which the money was intended?

Perhaps this was it though. The Council, as with the town halls, had just looked upon the state as their sugar daddy and had expected that the good times would continue to roll along with the cash, whether fully accounted for or not. Unfortunately, daddy bet the house and lost, and the IMF and others have attributed Spain’s financial troubles less to shaky banks and more to the amounts spent by regional authorities.

The local authorities can’t pay and probably won’t pay, and so Spain’s financial woes just deepen.

Any comments to andrew@thealcudiaguide.com please.

Along For The Ride: Travel fairs and public finance

During the winter the Balearics go on tour. London before Christmas, Madrid and then the biggy, Berlin in March. These are the venues for the three main travel fairs, chances for the great and good and less great and good of Balearic politics and tourism to press some flesh and have their photos taken.

The islands have been to Madrid for FITUR, the Feria Internacional de Turismo en España. In addition to directors and sinecure holders of whatever the tourism agencies are these days, there are hoteliers, airline top brass and of course the politicos. The latter have been in Madrid en masse. President Antich and tourism minister Barceló have been making the most of what may be their last opportunities to partake of the free vino before being taken down in May’s elections like stands at the end of an exhibition.

They have been joined by jolly Joe Ray Bowser, the mental-lapsing leader of the Partido Popular, who’s presumably been there to try and learn something about tourism. This is the politician who believes that the Baltic States are competitors to Mallorca. He’s a shining example of tourism knowledge and, as such, deserves to become president.

Also along for the craic has been Joe Melià. Not the Joe Melià, a minor British television actor, but the Joe Melià, a minor Mallorcan politician, as in the latest in the list of leaders of the Unió Mallorquina. Amazing that he has dared show his face, given his party’s involvement with the corruption cases at the tourism ministry and the little local difficulty it is presently experiencing with the waste scandal. “Oi, Melià, what you doing here? Collecting the rubbish?”

This year they have also dragged along kids from the choir at Escolanía de Lluc, which is attached to the monastery. Known as the “Blauets”, one of the choir sang the Sibil·la for the assembled dignitaries. All part of promoting Mallorca’s newly bestowed “intangible cultural heritage of humanity”, that is the Sibil·la, and all very sweet but also all rather clutching at straws if the tourism worthies seriously believe this is going to be something that will have tourists flocking to the island.

A great deal of attention is paid to FITUR and the other fairs, a reflection of the importance of tourism and of all the press opportunities the fairs afford the politicians and the tourism industry. President Antich has seized the moment to state that investment on tourism has never been as high as it has been during his current period of office.

Not that he has said much about spending on tourism promotion this year. In fact he hasn’t said anything, because he can’t. The tourism ministry is still in negotiations with the treasury which is desperately hunting down the back of its sofa and inside its jacket pockets for any loose change it can come across to pay for some promotion.

Antich was responding to complaints from the hoteliers as to the apparent tardiness with which money is being made available for promotion. But they, the hoteliers, will be aware of just how dicey the Balearics’ financial state has become. It is not as parlous as that of Catalonia which started selling debt to its own people in October because it is more or less shut out of international capital markets, but it isn’t in a healthy position. At the same time as the politicians have been enjoying themselves in Madrid, the regional government has decided to follow Catalonia (and also Valencia and the Basque Country) in selling public debt to the initial tune of 200 million euros. Catalonia, despite the sale, is said to have only a couple of months’ worth of reserves.

The FITUR fair has been a case of putting on a brave face. By the time the Balearics take Berlin in March, hopefully the debt sale will have been that successful that there will be cash floating around that has been earmarked for tourism promotion. But the Balearics, as with the other autonomous regions of Spain, are firmly under the central-government microscope, Zapatero having warned that the government will intervene if necessary to control the regions’ debts. The governor of the Bank of Spain has said that the regions may pose the “greatest risk” to Spain’s finances (as reported by “Bloomberg Businessweek” back in October).

All this suggests, therefore, that money is going to be even tighter than might have been imagined, which means that it will be even tighter for tourism promotion. It’s not a particularly optimistic picture, and the whole issue of regional funding is likely to get worse. Which makes you wonder what participation at future fairs is going to be like and, more importantly, how capable Mallorca and the Balearics are going be in promoting themselves.

The days of the junkets at the fairs might be over, and if you want just one example of what is spent on them, other than the costs of shipping the politicos and the rest, then look no further than the new stand at FITUR – just over two million euros. Is this a lot? Perhaps not, but it becomes so when you realise what the government is trying to raise through its bonds.

Any comments to andrew@thealcudiaguide.com please.

We Want Our Money Back: Town hall employees in Muro

Along the canal in Playa de Muro that connects Albufera with the sea are moorings for boats. These are not grand boats; they are mainly small fishing craft. The owners have been expressing their concerns regarding security. And have been doing so for nigh on two years. They have wanted a security barrier to be installed, but have also wanted greater vigilance from the police.

The local police in Muro have not had an easy relationship with the town hall. In March there were complaints that they had to go out on patrol wearing their own clothes because the town hall was only issuing uniforms as and when they were necessary. The mayor added that the town hall was aware that there was some moonlighting where uniforms were concerned; boots being worn by some local police when they went hunting.

Prior to the complaints about uniforms, it was revealed that Muro town hall was one of the island’s authorities that had overseen a massive increase in its spending on personnel since the turn of the century. A 152% rise on town hall employees, which include the police. And this rise was set to become higher because of pay increases for staff from the start of this year.

The mayor, Martí Fornés, sought opinion from the regional government as to these increases which had been previously approved by all parties at the town hall, including that of the mayor before he assumed office. This all-party agreement was emphasised by the spokesperson for the opposition socialist group who admitted that the increases of around 5% were illegal in that they contravened a law which was allowing for only 0.3% increases. He pointed out that everyone knew they were illegal, but still approved them for employees who were in any event earning less than their counterparts in neighbouring towns.

The government ruled unsurprisingly that the increases were indeed illegal and so, commencing with salary payments from October, insisted that the money be paid back, be it through monthly deductions, a one-off deduction or through the withholding of at least part of the Christmas bonus. Also unsurprisingly the news didn’t go down well with the opposition and especially the employees.

To make the point that there was dissatisfaction, town hall employees staged a protest during Muro’s fair over the weekend of 13-14 November, confronting the mayor with their grievance. The town hall has now announced that it will look at disciplinary procedures against three employees for abandoning their places of work in order to make the protest.

That no one appears to dispute the illegality of the salary increases might make you wonder what the fuss is about. But try telling that to the employees, faced with lower pay packets in the lead-up to Christmas. It doesn’t do much for morale, and this leads us back to the police and their uniforms and to the boats and their security as well as to security in a resort with high numbers of unattended holiday and second homes and a town which has suffered like others from the noise and mess of the botellón.

Pay increases may have to be in line with government stipulations, but a wider issue lies with priorities in public spending. Sure it’s a different budget, but was it wholly appropriate that in March Muro town hall should have spent getting on for half a million euros in purchasing the town’s bullring from Grup Balaña? This stages one fight a year. The town hall has spoken about other events being held, but what are they and who would be paying for them?

The town hall was also faced, having acquired the bullring, with spending more in order that it should meet health and safety requirements so that the bullfight could be put on. Heritage is one thing, but when money is tight it might be argued that employees such as the police deserve greater priority, to which one might add the contractor for rubbish collection which, as it was being reported in early October, had outstanding invoices for the first eight months of the year.

Town hall finances, not just in Muro, are in a mess. Partly this may be due to staffing levels; Muro’s 152% increase in personnel spend over the last decade is not solely down to salaries. But as important is that what money there is is spent wisely. Yes, Muro’s employees have been paid money they shouldn’t have been, but you can understand their being upset and their being prepared to voice this. Disciplining them is not the answer, as the bigger question should relate to sound financial management and not morale-sapping personnel management.

Chinese Tourism
My thanks to Alastair for pointing out that I missed a bit of a trick where Chinese tourists were concerned, namely … gambling. I should have been more on the ball, roulette or otherwise, in recalling that some while ago there was discussion in Alcúdia as to what Chinese workers do with themselves when not working. The answer was, of course, that they are pumping coins into slot machines. With this in mind, therefore, the opening of several more casinos in Mallorca is what is needed to secure a Chinese tourism future. Or else, they’ll all be off to the multi-casino, multi-theme park “Gran Scala” near Zaragoza.

Any comments to andrew@thealcudiaguide.com please.

The Modern World – Reality at the town halls

Hard on the heels of the report into the growth in town hall spends on personnel over the past decade, comes evidence that, when it comes to paying suppliers, Mallorca’s town halls are far less willing to splash the cash; cash they owe against invoices raised for work done. While staffing levels have risen – in some instances by some astonishing amounts – and have clearly eaten into town halls’ revenues, companies over which some of this staff have supervision are being left unpaid. And in certain instances, especially construction companies, they have gone out of business or maybe are about to. Work that has been funded by central government is being paid for, but other work – ostensibly paid for by the town halls – is not.

The suppliers are caught in the vicious credit circle. Several town halls have had to seek bank money, but the banks of course are unwilling to part with it, or not all that is being sought. Pity the poor suppliers to the likes of Pollensa and Muro town halls, where considerable debts are sloshing around and where budgets are seemingly neither supported by tax and other revenues nor by lines of credit. Pollensa’s budgets for this year were described by the opposition as “science fiction”; Muro’s financial situation has been portrayed as being “frightening”. Pollensa was denied all the bank lending it wanted, and Muro faces a similar reluctance. Good luck, frankly, to anyone putting in an invoice to a town hall. The chances of it being paid are … who knows?

This is not a new situation. Many town halls have reputations as being lousy payers, and have had for years. Even an administration that is relatively flush, such as Alcúdia, can take ages to cough up, with all the frustration to say nothing of harmful effects for cash flows that this can cause. Chances are, as well, that unless invoices are pro forma, the supplier has had to declare those invoices and been obliged to pay tax and IVA, despite not having received a remittance. The situation has been exacerbated by the current lack of credit. Companies, though, have taken the risk, in all probability having to seek their own credit, which may not actually be available. Without doing so, and given the importance of public building projects, local economies would all have but ground to a halt. They may yet still do so, if suppliers keep going out of business.

The president of the federation of local authorities, in an interview with “The Diario”, has admitted that the town halls are causing serious problems for businesses. Joan Ferrà, himself the mayor of Puigpunyent, points out that town hall revenues are down by as much as 40%. While tax revenues are part of the story, Ferrà refers also to non-payments to the town halls and of course to the banks. He talks, vaguely, about the need for greater efficiency and effectiveness and about “good practice” when it comes to setting budgets and seeking cost cuts. To this end, he mentions fiestas and sports facilities as two areas that will have reduced spending, while staff will have to make do without using mobiles.

So, I guess our hearts should bleed for Vodafone and Movistar, as they will have reduced town hall contracts. Efficiency and effectiveness – where have we heard these words before? They were at the heart of the drive towards value for money in British public administration of the early Thatcher years. The town halls needed to increase staffing levels as they were operating from too low a basis of service, but one wonders as to how much attention has been paid to working practices. Staffs have grown like topsy, making town halls major employers, thanks to the spending frenzy of the Spanish boom years. More personnel was needed, but so also was more professionalism in terms of operational management, to which one can add factors such as inefficient working hours and departmental duplication in the governmental mini-me’s that are the town halls.

So, fiestas are to be more “austere”. Some already are. Pollensa cut its budget in 2009, for example. Trapped in a cycle of the traditional colliding with the modern, and in the social fabric of which the fiestas are integral, the town halls barely dare to question their fiesta spends. But the town halls have been, and remain, wasteful in this regard. Back in 2008, I asked, in the context of Can Picafort’s summer fiesta, just how sustainable the fiesta was. And this was before the real impact of the crisis kicked in. The amount of money going up in flames seemed grotesque, and was made even more so when Santa Margalida town hall announced that some 300,000 more euros were to be allocated to fiestas. It was madness. Here was a town hall willing to fork out on bread and circuses while the benighted village of Son Serra lacks a decent police presence and has a vandalised sports centre. There again, sports facilities are to be deprived of money, aren’t they.

The town halls are the Spanish economy in microcosm. Easy money was thrown at beefing up administrations and at creating projects. Much of this was necessary, but was approved by politicians – locally and nationally – overtaken by the thrills of growth but lacking a vision of sustainability. The national government now has its programme of economic sustainability, one that is long overdue and born out of the economic crisis. If it is to work, then different levels of government, including the town halls, are going to have get used to reduced spends, as are residents of the towns. More fundamentally, they – the town halls – are going to have to appraise their practices and priorities, as I said on 11 January. They cannot continue to operate way beyond their means, because the consequence is that suppliers don’t get paid. But whether some of these suppliers should have been engaged in the first place is another question, as some of the projects have been of such deeply questionable value – like Can Ramis in Alcúdia. Ah yes, value. Value for money – efficiency and effectiveness. Welcome to the modern world.

Any comments to andrew@thealcudiaguide.com please.

Town Hall Spends

When there is talk about the difficulties facing the two main industries in Mallorca – tourism and construction – it is perhaps easy to overlook a sector of the economy that has enjoyed significant growth since the turn of the century. Whether it should have enjoyed such growth is open to debate, for that sector is public administration, and nowhere has this growth been more evident than at the island’s town halls.

Since 1999, the spend on town hall personnel has doubled, and in “The Diario” yesterday the percentage increases in terms of this spend were set out – municipality by municipality. In the northern area, some of these increases appear staggering – 252% in Búger for example – but one has to bear in mind from what base these figures are calculated. Nevertheless, 152% in Muro, 175% in Sa Pobla, 154% in Pollensa all sound like a lot. Only Alcúdia has not broken the 100 barrier, by a mere 0.4 of a per cent. Sound like a lot but not by comparison with some of the smaller towns – Santa Eugènia has experienced a rise of 2,700 per cent. There again, it used to spend the equivalent of a mere 14,300 euros in 1999.

The explanation for the increases lies, partly, with an improvement – a necessary improvement – in the provision of local services such as sanitation and education. One cannot dismiss all the rises as extravagance. Generally, the largest rises have occurred at the town halls of the smaller municipalities. The figures for Pollensa and Alcúdia might strike one as being excessive, but they are lower than elsewhere.

Nevertheless, there are reasons to be concerned by these figures. Firstly, the financing of greater town hall spends was a feature of what is referred to as the “years of economic bonanza”, the period of a dash for growth echoed across Spain in both the private and public sectors, but one that relied to no small extent on European benevolence and easy credit. Rather as the entire Spanish and Mallorcan economies have been exposed as shaky in their sustainability, because of loose credit and a lack of diversification, so the public sector town halls now face unsustainability in terms of further growth in personnel numbers and spend.

Secondly, there are issues as to priorities and to what can seem like duplication of departmental responsibilities that mirror levels of government higher up the public administration food chain – the Council of Mallorca and regional government. Not all town halls in Mallorca are faced with a dual economy, one that deals both with needs of residents and of tourists, but many are. While services like police, rubbish collection, street cleaning are essential for both sets of needs, there is also the frontline provision of assistance to tourists – i.e. the tourist offices. In Alcúdia, for instance, it has long been the case that the department is under-resourced, resulting in offices not being manned as long as they should be. In Playa de Muro and Can Picafort, the offices make do with minimal staffing, while Playa de Muro could do with a satellite office in Alcúdia Pins and Can Picafort with two, neither of them the current one that is located in no-tourist land between Son Bauló and the main centre of Can Picafort. Where the police are concerned, the lack of coverage in Son Serra de Marina has been well-publicised, while Alcúdia would benefit from greater numbers to tackle some of the stuff that happens on the streets and for which by-laws exist yet are often flouted.

Local myth would have it that the town halls are in fact over-staffed, reflecting a culture of excessive bureaucracy and jobsworthing. To an extent, this may be true – hence my initial point as to how debatably sensible some of the personnel growth has been. Yet it is the apparent duplication that raises most questions. A case in point is that of Alcúdia and its canals, bridges and lakes, all environmental features but the responsibility not of the town hall’s environment department but the central Costas authority.

The wider issue is, or should be, public administration in its totality. In other words, the interaction between the different levels of government and the allocation of responsibilities. It is this total bureaucracy that can be excessive, bloated and time-consuming, such as in the case of the convoluted process of granting hotel building licences that involves local and central departments and which leads to so much work being undertaken without a licence or with one pending; and this despite the loosening of regulations recently.

The town hall spends may or may not be too high, but with the federation of local authorities admitting that current levels cannot be sustained, it is time for a fundamental appraisal of the island’s public provision – at all levels.