Belfius: Flemish municipalities have weathered crises 'surprisingly well'

Despite several crises during the last legislative period, Flemish cities and municipalities have come through them financially "surprisingly well", according to Belfius. "The financial balance was never in danger," the state-owned bank and insurance company said on Thursday when presenting its latest study on local governments.

Crises such as the Covid-19 pandemic, the Russian invasion of Ukraine, high energy bills and rising inflation led to "unprecedented" spending by Flemish municipalities. This was offset by higher revenues, without increasing tax rates for residents, Belfius said in its report.

Expenditure increased by an average of 5.1 per cent per year, compared to 1.9 per cent in the previous legislature. Staff costs account for almost half of total expenditure and increased by an average of 6.5 per cent per year. Local governments also faced higher energy bills, increased construction costs and the reception of Ukrainian refugees.

Higher revenues

However, these costs were offset by higher revenues. For example, higher wages led to higher tax revenues, while revenue from fines also increased. Cities and municipalities received increased financial support from the federal and Flemish governments during the crises.

Thanks to these sources of income, tax rates for residents barely increased and the investment rate remained at the same level. "Despite this adversity, the municipalities managed to stand firm, continue to invest in tomorrow's society and keep their finances in balance," says Belfius board member Dirk Gyselinck.

Future challenges

The positive results do not mean there are no future challenges. The pension burden, which already costs the municipalities 1 billion euros, is expected to rise to 1.3 billion euros by 2028. Other challenges include the cost of the energy transition and the rising cost of police and fire services.

In order to maintain a positive balance sheet, most municipalities want to control expenditure, such as personnel costs and investment projects. Raising taxes does not seem to be on the cards for the majority of Flanders, with only 8 per cent of municipalities saying they are considering raising or introducing new taxes.

^{#FlandersNewsService | The city hall of Jabbeke, West Flanders © BELGA PHOTO THIERRY ROGE}