The Independent Authority for Fiscal Responsibility (AIReF) is categorical: the municipalities of Parla (Madrid), Jaén and Jerez de la Frontera (Cádiz) are in a “critical” economic situation with no possibility of becoming sustainable again.
This follows from the new sustainable development module that the community has integrated into its Local Corporations Observatory (CCLL)which allows us to assess the level of risk faced by local entities in Spain with more than 20,000 inhabitants. This new tool is also able to assess the ability of these companies to return to a sustainable situation.
AIReF takes into account various factors to determine the risk level of each municipal council. Specifically, it assesses the financial debt, the average payment period to suppliers, the remaining cash on current income, the time to return to a sustainable level of financial debt, the time to return to a sustainable net financial situation and the non-financial balance on current income.
As the authority explains, the position in the risk and sustainability ranking of each company is determined based on debt to income ratio and depending on the situation of the rest of the selection indicators.
In the new tool, AIReF identifies five major risk groups: the first of these is what is called “critical situation”where the return to a sustainable situation of the company is not estimated. The second of these is the “very high” riskwhere there is a possible return to sustainability within a period of between 40 and 100 years. The third value is “high” riskwhich establishes a possibility of returning to solvency between 20 and 40 years. Then, the fourth value established is that of “moderate” riskwhich has a return to normal of between 10 and 20 years. And finally, there is the “low” riskwhich implies a return to sustainability within a period equal to or less than 10 years.
Municipal councils in danger
Thus, according to the AIReF analysis taking into account the new tool, the Town Halls of Jaen, Jerez de la Frontera (Cadiz) and Parla (Madrid) They are at a “critical” risk level and there is therefore no possibility of getting out of bankruptcy.
Furthermore, Algeciras (Cadiz), Los Barrios (Cadiz) and Navalcarnero (Madrid) present a “very high” riskwhich implies a possible return to a stable economic situation within a period of between 40 and 100 years.
In “high” risk There are six municipal councils: Alcorcón, Arcos de la Frontera, Barbate, Gandía, Los Palacios and Villafranca and Totana.
