Cork City Council’s compensation payments to the county are ‘unsustainable’, debate hears

By Peter McCarthy, Corkman

Cork city councillors have voiced their unhappiness with the scale of the annual compensation payment that Cork City Council is required to make to Cork County Council as part of the 2019 boundary extension agreement, arguing that inflation is making the cost skyrocket.

A motion brought before this week’s meeting of the city council by Cllr Joe Lynch called on the minister for housing, local government and heritage to urgently set out a process to ensure that the annual contribution payments are capped at an appropriate level. He also asked that “a process to ensure their orderly ending in 2029 is set out over the next 12 months.”

The Local Government Act 2019 established that between 2020 and 2029 Cork City Council would make an annual contribution to Cork County Council or for "such longer period as may be prescribed by order of the minister.” Currently, it’s unclear whether the payments will continue after 2029.

Cllr Lynch said he is “appealing to people to raise the issue with government ministers in the hope of rectifying what is now a serious problem in terms of the council's finances. The Local Government Act is very clear in terms of the mechanism remaining in place until 2029, but if it isn't resolved by then, it will simply roll over.”

“Ultimately this will be a political decision in terms of the manner in which the 2019 Local Government Act is unwound and how that mechanism is rectified into the future,” the Sinn Fein councillor for the South-West Ward said.

Because the annual contribution is index-linked it rises with inflation. The base figure for 2026 is €13.5m and the city council has said it is in negotiations with the department in relation to the indexation amount.

In 2024 the then chief executive of the city council, Ann Doherty, told councillors that the index-linked figure for the year would exceed €15.4m and index-linking could add an extra €22m to the bill over ten years. The current chief executive, Valerie O’Sullivan, has described the current payment level as “wholly unsustainable” and likely to drive the city council’s budget into deficit.

Cllr John Maher (Labour/North-East Ward) agreed with Cllr Lynch’s motion and called for engagement with the finance minister and the local government minister. “I think it's incumbent on the sitting council to do all we can on our side to ensure that this is addressed by 2029 so that the incoming council of 2029 onwards aren't left with this. I'm done with ‘we know somebody up there’ or ‘we know the people from Cork’ – that hasn't worked and we now need those people [the ministers] to come down and meet the senior management and members of the finance committee and to address this once and for all.”

Cllr Shane O’Callaghan said Fine Gael have been “beating that drum for quite a while at this stage. I hope that Minister James Browne, who's the current minister for housing and local government, pays more attention to our pleas than Minister Darragh O'Brien did because he certainly didn't give it any attention at all from what I can see.”

“To be fair, I know people like [Cllr] Sean Martin have been working on it as well behind the scenes and I acknowledge that. But it does need to be done. It should never have been index-linked, it's unsustainable in the medium to long term and I think that’s something that everyone on this council can agree,” the Fine Gael councillor for the South-Central Ward said.

Cllr Peter Horgan (Labour/South-East Ward) also agreed with the motion, saying “I want to back the idea that I don't think we should pay the indexation. I think it's mad. I don't think we should be doing it.”

Cllr Sean Martin (Fianna Fáil/South-Central Ward) said that no-one in the city council is satisfied with the current deal. “I'm not happy with the agreement. The [city] manager's not happy with the agreement. Nobody here is. But we entered an agreement with the [county] council and I think no-one looked at the index linked part of it then.”

“I just think we need to step back a small bit. We did enter into an agreement, there was no-one putting a gun to our head, but we agreed to it. Circumstances have changed and I just think we need to work within the political system to try get that sorted by the next three years,” he said.