December 2021
The commune’s financial situation and trends
When you placed your trust in us in 2018, it was clearly to carry out work, including infrastructure work, that had been outstanding for too long. We are therefore focusing on the projects that are part of our Pro Kraainem / Kraainem-Unie majority program, and which have largely been included in the municipality’s 2020-2025 multi-year plan. Of course, all this has to happen without jeopardizing the commune’s financial equilibrium.
Margin trends (expected)
self-financing
As we have already mentioned on several occasions, the financial results according to the annual accounts have so far been better than those announced in the budgets, and in particular at the 2nd annual budget amendment in December. Not because financial services aren’t doing their job properly, but because they have to take a whole series of safety margins.
Practical example: in order to hire the people the commune needs to carry out our projects, all the corresponding budgets must be included in the multi-year plan or in the half-yearly budget modifications.
However, experience shows that the net balance of people joining the commune is lower than the theoretical estimate, and actual personnel costs are therefore lower than those announced in the budget. The graph below shows the difference since 2014 between the announced cash flow (in red) and that validated in the annual financial statements (in green).
For the year 2021, it is estimated in the 2nd budget amendment at -562,498 euros; in practice it should be positive and probably higher than 500,000 euros (in orange), which we will be able to verify in a few months’ time when the 2021 annual accounts are drawn up. But let’s be cautious about the future: the very generous cash flow margins we’ve enjoyed in recent years are no guarantee of what’s in store for the future – see our commentary on inflation below.
Source: budget amendments and annual accounts
Cumulative budget result
or the commune’s “reserves
We must also take into account the commune’s reserves, which must always remain positive. Investment projects must all be budgeted for, otherwise they may not be activated when the timing makes it possible. The COVID crisis, which has been putting obstacles in our way since March 2020, and the shortage of staff (3) mean that many of them have had to be postponed, with consequences for the commune’s reserves, which in reality are also higher than those announced in the budgets. They were 14.4 million euros in 2020 (annual accounts) and are estimated at 9 million for 2021 (2nd budget amendment of 2021). In practice, they should amount to at least 11 million euros, which will also have to be verified on the basis of the annual accounts for 2021.
More cash flow and higher-than-expected reserves mean less borrowing is required in the short term to implement the announced plan as effectively as possible. This is very important, as we don’t know at this troubled time how interest rates will evolve, and we want to keep any borrowing to a minimum. Even if interest rates remain low, the sharp rise in inflation (due to the shortage of raw materials, but not only) will obviously have a significant impact on personnel costs, among other things, and therefore also on our ability to repay future debts.
We will convene a Finance Committee meeting in March 2022 to evaluate any new borrowings, so as to have a clear picture of the situation before the first budget amendment in June 2022. There’s no question of passing on the hot potato to future generations…
Investments :
what happens to your money?
Here is the chart of investments for the 2014-2020 period (excluding equity interests and financial sales), based on the annual accounts for the corresponding year:
Source: annual financial statements
Of the 4.8 million euros in 2018, 3.6 million correspond to the purchase of Vivaqua’s water distribution network, and therefore do not represent work carried out. We await the 2021 accounts to complete this chart, but we already know that this year will not have been a vintage one for investments. Several of these had to be postponed, mainly because of the COVID crisis and the staff shortages already mentioned on several occasions. We hope 2022 will be a better year, and we’ll be doing our utmost to complete as many projects as possible.
Obviously, the aim is not to spend as much as possible on capital expenditure, but to achieve the objectives set as effectively as possible. In this spirit, the installation of fiber optics in the commune has given us a fantastic opportunity to properly redo the sidewalks (without completely renewing them), for a limited budget (redoing all the sidewalks completely would have cost at least 5x as much and taken 5x longer), and it’s in this spirit of seeking maximum synergies that we’re looking at future projects.