The Mayor of Portimão says she will have to shut up shop if the Tribunal de Contas does not approve an insurance contract. The city hall, satellite council offcies, council cars and vans, and the city's buses soon will be left without cover and unable legally to operate.
At issue is a new, three year insurance contract which Isilda Gomes’ team has renegotiated to cover all the council’s insurance obligations as required by law.
The Tribunal's judges say that the council should never have agreed the contract without the available funds with which to pay the bill. Isilda Gomes says that she is unable to run the council without insurance for employees and vehicles.
The Court has acted within its remit and according to the rules set out to control council spending and it is clear Portimão has no money with which to pay the insurance company.
This bill is slightly more than €673,000 for insurance for workplace accidents, personal injury, property, automobile and public liability for the next three years.
The socialist party’s mayor says that if she can’t have a guarantee that she can sign this insurance contract, then everything stops.
The Tribunal de Contas judges stated in their September musings that the municipality must "urgently find solutions to overcome these illegal situations - it is because of these illegalities that the council close to the edge –and persisting with a situation where their contracts frequently will be refused."
The council claims that it has not made a new agreement, which would need Tribunal authorisation, but that the contract replaces an old one, even though the proposed contract is with a different insurer.
The council says that the deal is a good one as the cost of insurance cover has dropped from €750,000 to €673,730, a saving of over €76,000.
The Tribunal judges were not impressed as the council at the time of applying for authorisation was in the red to the tune of €146,476,670.
The judges are correct in their interpretation of the Law for Compromissos e dos Pagamentos em Atraso which was drafted and approved to stop mayors and senior council staff from making commitments without prior guarantees that the money is available to pay the bill, "...political appointees, directors, and managers responsible for accounting cannot make commitments that exceed the funds available."
The judges did not agree with the council’s claim that the insurance payment is a legal expense, mandatory and unavoidable that the municipality cannot do without, under penalty of sanctioned for failing to meet another legal obligation to insure its property and cover its staff and the public in case of accidents.
The judges are not being helpful but are somewhat at a loss to suggest what exactly Gomes now can do. They suggest that councils "take the necessary measures" for compatibility in compliance with all legal requirements, "and not put themselves in the situation where one law is violating another, which is the current situation in Portimão - easy to say, hard to do.
Isilda Gomes says that the council is still open for business because she has appealed the judges' decision.
"If the appeal is not accepted, and we cannot make contracts as in the past, I have no alternative but to close the doors."
The mayor claims that council vehicles "will not be able to be driven without insurance and that staff must be protected at work." Without insurance, "not only the town hall will be shut down but also our schools will be without students as there will be no transport."
Gomes has been in contact with the Secretary of State for Local Government, António Leitão Amaro to inform him that with the rejection of the insurance contract by the Tribunal de Contas, she will be forced to shut down the council."
What has become clear is that Portimão council is in no better financial shape than when Gomes was elected over a year ago.
Central government has stuck to its ‘Support Programme for the Local Economy’ funding terms and therefore cannot help under the current rules.
Earlier this year Portimão council tried to borrow €94 million under the government's bailout scheme but the application was rejected by the judges. A request to banks for €39 million of refinancing was dependent on the council getting the government loan so this to was a non-starter.
Gomes’ chat with the Prime Minister in February promised much but has delivered zero. Portimão remains financially transfixed by the legacy of Manuel da Luz whose madcap extended spending splurge with no thought for future ratepayers has left Gomes with a situation that now seems beyond her capabilities.
The government must share the responsibility for Portimão's insolvency.
At the end of 2007 the council owed a manageable €30.5 million. After 5 years under the careful stewardship of mayor Manuel da Luz (pictured left) the council’s debt had risen to an incomprehensible €166.5 million and answers must be given from Lisbon as to how this council's financial situation was allowed to get so out of control, also as to how Manuel da Luz rose from relative obscurity to wealthy multiple property owner, all on a modest mayoral salary.
Doing business with Portimão council seems commercially pointless at this point in its colourful history as the settlement period being enjoyed by the council’s suppliers is five years and four months.
This delay makes the current insurance contract impasse seem rather ridiculous as the insurance company knows that under the existing payment programme it will have to wait until 2020 to get paid.
