near GroningenIs Groningen a wealthy municipality, or do the mayor and aldermen have to turn every proverbial dime?
Accountancy firm BDO conducted research into the financial health of Dutch municipalities. This shows that many municipalities do not have their money matters completely in order.
For example, in some municipalities more money is being spent than is coming in. As a result, little or no investment is made in projects that are focused on the future. But what about in the municipality of Groningen?
Municipality of Groningen income
First of all, where does the money come from? Municipalities receive money from all sides, but the main source of income is the central government. This is where 69.1 percent of the income in Groningen comes from. The largest contribution from the government comes through the municipal fund.
That amount is determined by all kinds of factors, such as the number of inhabitants, young and old, low incomes, land and water surface and the number of city and village centres. A municipality can largely decide for itself how it spends that money.
Benefits and Taxes
The municipality receives other income from benefits and taxes. The municipality also receives the benefits from the government. That money goes directly to facilities for people with a low income, such as social assistance and, for example, discounts on sports and museums.
Another form of income comes from municipal taxes. Of all the taxes that citizens pay, the municipality makes the most of homeowners’ property taxes and waste levies. In Groningen, this is about 4.5 percent and 4.4 percent of tax revenue, respectively. Of course there are also other sources of income, such as proceeds from land sold, taxes to companies and possibly savings.
Score from Groningen
Is the municipality of Groningen in good or bad shape financially? The score that Groningen receives is a 5. This puts our municipality in 31st place out of 32 municipalities with more than 100,000 inhabitants. This means that there is room for improvement in our municipality.
To measure the financial health of a municipality, five different characteristics were looked at: debt, own money, investments, fixed income and taxes.
Below you can read how Groningen scores on those five points:
Debt: The debt in Groningen is 106 percent of the annual income. That should no longer be the case, because the higher the debt, the more difficult it becomes to pay it off. From a debt percentage of 130 percent, this is seen as a risk.
Own money: Of all assets and money in the bank account, only 8 percent belongs to the municipality itself, the rest is borrowed. With less than 50 percent of its own assets, the municipality is in the danger zone. If it falls below 20 percent, the municipality is at real risk.
Investments: The more money a municipality has invested in land, the more risk it runs. You have to invest first and see if you earn back with land sales. To determine the risk, accountants use an ‘exploitation ratio’, which is 32 percent in Groningen. From 35 percent, the municipality runs the most risk, accountants prefer to see this number lower than 20 percent.
Fixed income: The fixed income in Groningen is higher than the fixed costs, so the municipality has enough money to pay the fixed costs.
taxes: The taxes in Groningen are 116.2 percent of the national average. It is therefore already higher than in the rest of the country, where the municipality cannot get extra money from financial setbacks.
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