Orihuela, a town in Alicante province, on the Costa Blanca, has seen its construction-related tax revenues plunge this year as the recession in Spain’s construction sector bites.
Orihuela’s budget for 2008 forecasts 7.3 million Euros of income from construction sources such as building licences. By the end of June the town council had only raised 2.2 million Euros from housing-related taxes.
At this rate Orihuela is on course to raise just 3.6 million Euros by year end, less than half of the budgeted amount.
It’s a similar story for municipal budgets up and down the Spanish coast, where town halls will be forced to slash their spending. The central government has so far resisted calls to allow town councils to borrow more, whilst also refusing to increase central transfers to Spain’s municipalities.
What this means for home owners in many parts of the Spanish coast is deteriorating municipal services, which many complain were sub-standard to begin with. It also means that municipalities are turning to other sources of revenue, such as increased property taxes and traffic fines, to try and cover their funding shortfall.