Three-quarters of the 342 Dutch municipalities expect to have a financial deficit in the next four years, rising to a combined 5.2 billion euros.
Accounting firm BDO warns about this annual review of municipal finances. The accountant looked at the 2023 annual accounts and the multi-year budgets from 2024 to 2028 of all municipalities and noted “uncertainty, increasing costs and lack of clarity from The Hague”.
At first glance, the map of the Netherlands in the report looks green and therefore positive, said Marc Steehouwer, partner at BDO Accountants & Adviseurs, on Tuesday morning. The equity of municipalities has risen to 41 billion euros, on average solvency rose to a total surplus of 1.7 billion euros, and municipalities had less debt in 2023.
That’s important, he said. Municipalities face major social challenges, such as housing construction, energy transition and various tasks that the government has assigned to local government, such as youth care.
‘Ravine Year’
But the map with the future image turns red. According to Steehouwer, “75 to 80 percent of municipalities see increasing shortages.” Only 76 of the 342 municipalities expect to have a surplus. In 2026, the way in which the government finances municipalities will change, resulting in cuts of more than 2 billion euros. That year is described by local politicians as the ‘ravine year’. Negotiations between municipalities and the cabinet are still ongoing about additional resources. Last week, the Senate demanded additional information from the Minister of the Interior about the impact of the ravine year and the relationship between tasks and money.
It is clear that new tasks will be added; Municipalities will be responsible for improving debt assistance, making homes natural gas-free, and the government wants, among other things, to accelerate permit procedures to facilitate the construction of new homes. At the same time, costs are rising because wages and prices are rising. “Compensation has not yet been forthcoming,” BDO notes.
About 70 percent of municipal income comes from the government, and many expenses – such as benefits – are legally fixed. The “freedom of movement of municipalities is limited,” says Steehouwer. “Youth care has been difficult for years in terms of cost control, but it is also a legal task. That’s almost a blank check.”
Cutbacks and tax increases
Municipalities can make cuts in areas such as culture or sports. The accountant sees that a quarter of the municipalities have started to do so, or to increase property tax, parking rates and costs for passports or applying for permits. “We see that impoverishment is increasing, we see that subsidies are being reversed,” said Steehouwer. “While at the same time residents, companies and visitors are confronted with higher costs.”
Not all municipalities are already taking measures, some are waiting to see whether the government will actually make cuts, or assume a surplus. BDO warns them: “When the government only comes with money late in the year, it is more difficult to spend it. You must have the manpower, the resources and the permits.” BDO also calls the postponement of, for example, replacing roads, school buildings or renovating greenery worrying: “That may lead to even higher costs later.” The accountant advises municipalities to use their reserves.
BDO also made another ranking of all municipalities. The least financially healthy are Alkmaar, Midden-Groningen, Castricum and Hattem. The healthiest are Rotterdam, Oss, Best and Valkenburg aan de Geul. This is the seventh time that the accounting firm has investigated all municipalities.
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