Starters of urban change (9) Municipalities

Municipalities can be a powerful starter of urban change… or of inertia, depending on their ability to create positive dynamics on their territory. This is related to their accounts, and that is interesting in this year in which we will go vote for municipal councils in Spain and France. In the US the local administration system differs from state to state, so the only rational way to compare would be to take any given state in the US and compare to a given European country.

What follows is a (primary) analysis of data from the Virtual Office for the financial coordination with local entities (http://serviciosweb.meh.es/apps/EntidadesLocales/), which aggregates data from over 8.000 Spanish municipalities and Diputaciones and other organs classified as Local Entities. These are data from closed fiscal years with real accounting results, in a series running between 2003 and 2013 (last available year). Data are in thousands of euros for each year (inflation is not accounted for). For those out of Spain, most of urbanism and housing expenditure has been private for decades. Local administrations get resources in that field through taxation and a compulsory free cession that builders must deliver when they execute an operation, consisting in a percentage of building rights and the lots where it sits (the sale of these lots is often most of the “land lots sold” item).

As a result of that analysis, three charts show matters that are somehow linked to urban planning and related matters.

Income in Spanish local entities, selected items

Income in Spanish local entities, selected items

Income: local governments got to an all-time high for income in 2009; as of 2013 they were slightly under the 2006 level. The tax on urban real estate (data before 2009 make no difference between urban and non-urban) changes from 15% of total income in 2003 to 25% in 2013, while lot sales were reduced from 3,4% to 0,34% (in 2006 they reached 6%). The privative use of public domains went from 1,5% to 3,1%, as it is clearly apparent in the public space with sidewalk café and restaurant terraces, at least in part as a response to tobacco laws. The tax on urban land value increases has only grown from 2,9% to 3,6%, with quite reduced oscillations.

Investment in Spanish local entities, selected items

Investment in Spanish local entities, selected items

Investment: the investment on new infrastructure and general use goods was almost 7% in 2003, and it has gone down to 2,2% in 2013. When it comes to maintain these infrastructure and goods we have gone from 3,4 to 1,6% over the same period, and new/maintenance costs for operational services have followed a similar pattern.

Investment in Spanish local entities, selected items

Investment in Spanish local entities, selected items

Detailed investment: the real investment (not taking into account personnel costs and other elements) of the Spanish municipalities has followed a more complex curve. Up to 2010 this real investment was over 25% of the total expenditure, but since then they have lost weight (9,4% in 2013). Urbanism and housing were around a third of real investment up to 2010, and since they have increased to reach 44% in 2013, even if the absolute figure is half that of 2003. To give an order of magnitude, education (in which local administrations have a limited role) went down from 4% to 3% over that period, and its absolute value was reduced to a third of the 2003 figure.

Overall, the evolution of income and expenditure has been somewhat balanced (added figures for the whole period show more income than expenditure), but there have been relevant changes in relative weights. Land lots sold, whose expansion was related to the real estate bubble, have reduced substantially, while real estate taxes have increased. Investment in new infrastructure have reduced nearing those concerning infrastructure maintenance. Real investment in housing and urbanism has increased its weight in the overall real investment. But as in absolute terms this investment has been strongly reduced, today it is limited to solve previous deficits

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