The proposal to join the Local Economy Support Program (PAEL) and the respective Financial Adjustment Plan of the Municipality of Lagos were approved at the Chamber Meeting and at the yesterday's extraordinary session of the Municipal Assembly convened for this purpose.
The City Council decided, at its meeting on September 28, to approve the proposal to join the PAEL and submit to the Municipal Assembly the approval of the respective Financial Adjustment Plan and the express authorization to contract a loan to be concluded for 14 years, until the end of the period. maximum amount of 10.862.321,81 euros.
This approval was received yesterday, the 3rd, in a session that the Municipal Assembly convened specifically for this purpose.
Today, the last day of the deadline, the application was submitted (all under the terms of Law nº 43/2012, of 28/08; and Ordinance nº 281-A/2012, of 14 September).
The PAEL can cover all Portuguese municipalities with late payments (which represent more than 75% of the universe of 308 Portuguese municipalities), whose revenues fell sharply due to the crisis that took place as of 2008.
Its main objective is the settlement of debts overdue for more than 90 days, registered with the General Directorate of Local Authorities, on March 31, 2012.
As the name of the program indicates, this extraordinary financing is intended to inject financial resources into local companies and families, honoring the municipalities' past due commitments to their service providers and suppliers.
The government opened this program by providing a budget of one billion euros and includes municipalities in two programs, with Program I, for municipalities in structural imbalance that have to apply for 100% financing of the registered debt, for the period 20 years old.
Lagos will apply for Program II, which corresponds to a loan contract with a maximum term of 14 years without deferring the start of the amortization period, financing between 50 and 90% of the eligible amount, at an interest rate applicable to 2,69% (according to the latest data provided by the National Association of Portuguese Municipalities).
The loan amount for which the municipality is applying represents only 1% of the overall national amount.
This program and the financing that it institutes has the advantage of providing the municipality with the financial means to cover its treasury liabilities, at an interest rate lower than that practiced by commercial financial institutions, and much lower than the default interest on the debts to suppliers and service providers.
On the other hand, short-term debt, overdue and payable, is converted into long-term debt, alleviating the municipal treasury in these times of crisis and increased difficulties in which the Chamber has to face an increased and growing number of requests.
In this context, and taking into account that it is an imposition for adhesion to the PAEL, the municipality prepared a Financial Adjustment Plan with a duration equivalent to the duration of the medium and long-term loan agreement, which is expected to be signed for 14 years .
The Chamber will apply for the maximum amount of funding that the law allows (90% of the eligible amount), which in the specific case of the municipality corresponds to a maximum amount of 10.862.321,81 euros.
Municipalities that apply for this Program and for this financing from the State are obliged to scrupulously comply with the measures to reduce expenses and optimize revenue that are contained in the Financial Adjustment Plan and in a set of mandatory tables.
It should be noted that the Municipality of Lagos had already started its program of containment measures and revision of municipal fees and tariffs with a view to the municipality's financial recovery, still in the 2008 economic year.
In relation to this Financial Adjustment Plan, it can be said that a conservative perspective was taken, both in terms of revenue and in terms of expenditure, with the main concern to ensure the minimization of negative impacts on the quality of services provided to the population.
In this study and in the period established here for the recovery of the financial situation of the municipality of Lagos, the main conclusions:
– revenue (3%), in the first years of application of the PAF, will grow at a faster rate than expenditure (2%), which will make it possible to re-establish the municipal financial balance;
- the measures taken by the executive will, according to the anticipated scenario, be sufficient to reverse the financial situation, all pointing to the possibility of achieving a shorter recovery period, with the possibility of relaunching new investment programs significantly starting the 2018 economic year;
– the Chamber will recover its investment capacity, basing, for the time being, its financing, almost exclusively, on the mobilization of internal financial resources (self-financing). It is also likely that conditions for accessing external financing will improve, in particular with regard to community support;
– the Chamber will be able to fully honor its obligations arising from the loans taken out. The accumulated debt will tend to show a decrease, reaching values, from which it will be acceptable to assume as viable the execution of new loan contracts (so that the conditions of the financial market will allow it).
The application to join the PAEL, as well as the financing contract that will be signed between the Municipality and the State will be mandatorily published on the municipal website on the internet ( www.cm-lagos.com ) including all attached documents, namely the Financial Adjustment Plan and the tables that comprise it, namely the inventory of all late payments to be paid with the financial means to be made available, as well as the main set of measures to be adopted by the municipality, during the program period.
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