The budget pressures facing a group of Spanish municipalities have grown sharper. The Independent Authority for Fiscal Responsibility, Airef, has created a tool to assess sustainability risk for towns with more than 20,000 residents and to estimate how long a return to normal finances might take. Leading the critical category are Jaén, Jerez de la Frontera in Cadiz, and Parla in Madrid. In Parla, the sum of debt and treasury remnant relative to current revenues reaches 729 percent. Jaén shows the longest average payment period, at 608 days.
The analysis shows that these three are followed by Algeciras, Los Barrios in Cadiz, and Navalcarnero in Madrid, all showing very high risk. Under Airef’s method, a recovery to normal finances would take roughly forty to one hundred years. Among them, Los Barrios records the highest level of debt plus treasury remnant relative to current revenues, at 691 percent.
Six additional municipalities are placed in the high-risk group, with an estimated path back to normality between twenty and forty years: Alcorcón in Madrid, Arcos de la Frontera and Barbate in Cadiz, Gandía in Valencia, Los Palacios y Villafranca in Seville, and Totana in Murcia. Of these, Barbate has the longest average payment period, at 622 days.
Following are municipalities in the moderate risk tier, with an expected return to normality in ten to twenty years: Alboraya in Valencia, Aranjuez and Arganda del Rey in Madrid, Ayamonte in Huelva, and La Línea de la Concepción in Cadiz. Alboraya shows the weakest ratio of debt and treasury remnant to current revenues in this group, at 402 percent. Those presenting low risk, with a projected return in ten years or less, are Puerto Real in Cadiz and San Andrés de Rabanedo in León.
Debt on Current Revenues
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The main indicators Airef uses to detect sustainability risk are debt on current revenues, the average payment period to suppliers, the treasury remnant on current revenues, the time to return to a sustainable level of debt, the time to return to a sustainable net financial position, and the non-financial balance on current revenues.
These indicators use the most recent historical data published by the Ministry of Finance. For each indicator, thresholds categorize risk levels. A municipality’s ranking rests on debt over revenues as the primary measure of sustainability, supplemented by the status of the other selected indicators.
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The tool displays all entities based on sustainability position and risk level for each indicator through a traffic light scheme. Red marks high risk, yellow signals moderate risk, and green means no risk for that indicator.
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