The mayor of Totana, Juan José Cánovas, has recently signed with the managing entity of the Official Credit Institute (ICO) the loan for the grouping of credits for the financing of a large part of the municipal debt for the next 20 years, which will allow planning its medium and long term reduction as well as the possibility of stabilizing finances in the future.
The mayor has informed the media of the characteristics of this agreement, which comes to comply with the plenary agreement of October 17, which approved the accession of this entity to the support measures recently approved by the Treasury.
In it, it was agreed to group all the loans formalized under the Local Entities Financing Fund into a single loan.
The loan amounts to 66,350,869.34 euros, including live capital plus the application of interest calculated by the ICO as of October 29, 2019), although interest rate conditions have improved, increasing to 0.245% , as stated by the mayor.
In addition, the amortization is at 20 years (its expiration is December 31, 2039) although with two of lack, to be paid as of December 31, 2022. In this way, the amortization will begin to advocate from the third life of the loan, unifying the current advances set by the Ministry, as of December 31, 2018,
In the year 2020, 190,541 euros of interest will be paid against the 582,390 euros that would have had to be paid if the operation had not been subscribed, as the mayor pointed out, who informed that it was also necessary to confirm the commitment to adopt the necessary measures to compliance with the Adjustment Plan, and where appropriate, those that may be required by the Ministry of Finance.
Precisely, the agreement was established, unanimously, with the exception of point number four referring to the confirmation of the commitment of the necessary measures to comply with the Adjustment Plan, and, where appropriate, approve those that may be required by the Ministry, in the case that there is a breach or risk of the latter, which was approved with the favorable votes of Ganar Totana-IU and the abstention of the rest of the municipal political groups, he recalled.
This agreement has made it possible to subscribe the grouping in a single loan of all the loans formalized from the compartments of the Fund of Financing to Local Entities, thus undoubtedly improving the financial conditions in the periods of repayment and lack, as the mayor stressed.
Under these measures approved by the Delegate Committee of the Government for Economic Affairs of the Ministry of Finance, the local entities have softened and lengthened the conditions of the loans, interest rates being severely cut to the local beneficiary corporations.
Support measures for local entities
The Mayor's proposal included requesting adherence to measure No. 4 established by the aforementioned Delegate Committee of the Government for Economic Affairs in such a way that a 10-year grace period would be applied to the financial operation resulting from the grouping of the measure n ° 3.
The green light was also given to formalize the extension of the 10-year amortization period in the financial operation resulting from the grouping calculated by the ICO on measure No. 3, applying the conditions established by the aforementioned ministerial agreement.
The measures are aimed at municipalities in a critical financial situation, such as Totana.
The agreement contemplated five measures of which the Totanero Consistory affected two, the 3rd and 4th: the third, mandatory and the fourth, optional prior approval of the 3rd.
At present, as of September 30, 2019, the official debt of the City Council (without contingencies or forecasts of judgments) amounts to 99,182,350 euros;
Of which, 28,500,000 euros is financial debt with private banks and approximately 70,500,000 euros with public banks or corresponding to the Management Funds.
The third measure was mandatory and consists of the unification and refinancing of all loans in force until December 31, 2012, which amount to 65,500,000 euros with varied interests, but with the most interest being 1,311%.
This amount represents 66% of the total official debt of the City Council.
The proposed operation would unify 65,500,000 euros in a single 10-year operation, with a fixed interest of 0.874% and two years of lack in which only interest would be paid.
As for the fourth measure, which was optional or voluntary - it would not make sense without the third, as it would be complementary - it consists in extending the operation for another 10 years, which means going from 10 years to 20, reducing capital amortization - when end the lack of 8,231,000 euros per year to 3,658,000 euros.
In this way, the City Council will pay 4,573,000 euros less per year for debt repayment, being an important relief for municipal budgets until 2039.
For this, the Ministry demanded the update of the debt by not modifying the Adjustment Plan that is currently approved and compliance to accompany a financial consolidation;
measures that are compatible with the possibility of availing of Payment Plans to Suppliers.
