Levallois-Perret The high debt

The commune of UMP Patrick Balkany, a friend of Nicolas Sarkozy, has the double privilege of having luxurious facilities and the biggest slate of all the cities of France.

To please his voters, Patrick Balkany does not disdain the sycophancy. “Madam, your smile illuminates the Rue Henri-Barbusse,” he whispers in the ears of women aged 15 to 95 that he crosses the market of Levallois-Perret. When he makes politics more seriously, the Mayor UMP of this common Hauts-de-Seine bordering Paris, a friend of Nicolas Sarkozy, put his flattery to speak in marketing language. “When a taxpayer [Levallois-Perret, editor’s note] pays 150 euros in local taxes, he receives nine times more in municipal services,” trumpet the city and its relatives, to nail their critics. Patrick Balkany’s conclusion: “People are satisfied, the proof, they vote for me.”

Indeed in Levallois-Perret, the inhabitants are very caring. School trips abroad (Canada, Scotland and England …) for primary and secondary school students at unbeatable prices, sports and cultural care of children after class highly appreciated by working parents, municipal holidays lavish, dusting of paramunicipal associations of all kinds and for all ages, municipal amenities worthy of a capital: aquatic center of high standing with solarium, spa and “cardio training rooms”, conservatory of music with the corrugated glass facade inaugurated conveniently shortly before the municipal elections of March 2008. And it’s not over. The day after tomorrow, the mayor will cut the ribbon of a 2 000 m 2 media library in Eiffel style architecture with a cinema room in the basement. Cost: 10 million euros.

Nothing is too good for Levallois-Perret, the most indebted town in France. It breaks all records with 725 million euros of loans, for a population of 65,000 souls, which is 11 153 euros of debt per capita, including infants. The average for municipalities of similar size is 1,405 euros according to the Observatoire des finances locales. The difference is colossal.

At the town hall, we want to be reassuring. “The city has the means of its debt,” swear Didier Boix, deputy director of services. Translate: the commune is rich thanks to the taxes paid by the numerous companies which are installed there. Levallois-Perret has as many jobs as inhabitants. “The debt burden [capital and interest that must be repaid each year, ed] remains reasonable compared to current revenue of the city,” says Didier Boix.

A warning to the cantonal

The rating agency Fitch, responsible for monitoring Levallois-Perret from 2004 to 2009, is not as optimistic. In February 2009, she had downgraded the rating from the town of AA- to A-, the last step before falling into class B. Fitch indicated that the schedules of some refunds could be problematic. Then, the agency stopped its surveillance, the municipality having stopped raising funds on the financial markets by issuing commercial paper. For over two years, the city has resorted to bank loans. In December 2008, it obtained a loan of € 100 million from Caisse des Dépôts.

These evolutions do not seem to disturb Levalloisiens pampered by their mayor. In the 2008 municipal elections, they reelected him in the first round with 51.5% of the votes against four lists: PS, PCF, Modem and various right.

But times are changing. Isabelle Balkany, Patrick’s wife, and first deputy mayor were brutally beaten in the townships in March, in the canton of Levallois-Sud, although sociologically very far right. “Even a donkey with a UMP label would be elected,” says an advisor general sector. The seat was won by the various right candidate, Arnaud de Courson. “She was sure she was going to be elected in the first round. She had a bad campaign, consider the latter. She focused everything on her internal war against UMP Hauts-de-Seine against Patrick Devedjian. She already saw herself as president of the general counsel in her place. ” Missed. The voters thwarted all the plans of the Balkany husband and wife, in politics as in the city. “People told them that they were not the instruments of their power intrigues and that the city does not belong to them,” analyzes Anne-Eugénie Faure, PS city councilor.

Sometimes, the Balkany couple actually gives the impression of taking Levallois-Perret for his lordship. During the municipal elections of 2008, Patrick and Isabelle had organized a reception committee very hostile to Ségolène Royal – cries, vociferations, jostling – because it had dared to encroach on their lands by coming to support socialist candidate Thierry David.

But at a time when Greece, Ireland, Portugal are forced to austerity to repay their debt, the swagger passes less well. “People are starting to worry about the level of debt. The financial situation of the town is calamitous “, considers Anne-Eugénie Faure. Since 2001, date of the return to business Balkany couple, the debt of the municipality has grown from year to year: 160 million euros in 2001; $ 449 million in 2005; 725 million in 2010. It makes you dizzy. This infernal growth in debt is due in particular to cash advances that Levallois-Perret makes to Semarelp. This municipal mixed economy society is the city’s armed wing for urban planning operations. It buys land or old buildings it demolishes to clear land. Then she develops and cuts the parcels she sells to the developers to build offices or housing.

The big flop of the twin towers

Obviously, there is a gap between the dates of acquisition and resale of land. Sometimes you have to go through very long expropriation procedures. In addition, buyers of plots do not jostle, office real estate is in crisis. So here is the city forced to advance money to Semarelp to allow him to hold until better days. Of the 725 million euros of debts recorded on the counter of the municipality, 315 million was subscribed for the municipal company, which will have to repay as soon as possible. Which is not won in advance as demonstrated by the episode of “Twin Towers”.

It was 2010. Patrick Balkany, who loves everything that shines, had organized with great pomp the sale of building land to Mohammed bin Issa al-Jaber. This businessman related to the Saudi royal family claimed to build two towers of 164 meters high office use on the front of the Seine. Nothing had been neglected for the signing of the sale which was to yield 243 million euros: red carpet at the town hall, ballet of limousines and Christine Lagarde as guest-star. “The population was very flattered, recalls Anne-Eugénie Faure. The Minister of Economy had made the trip to Levallois-Perret! ” But the businessman will not keep his promises. He will parade when paying. Trial. Cancellation of the sale. “For Balkany who had lathered all that, the setback was all the harder,” laughs the opponent PS.

This abortive real estate transaction has shaken the confidence of residents. Some have become aware of the risks represented by Semarelp’s activities. What had also pointed in February 2009, the agency Fitch when it had degraded the rating of Levallois-Perret. “The schedule of repayments of advances [made by the municipality to Semarelp, ed] is a key factor in the medium-term solvency of the city.” In other words, the municipality would be in trouble if the Semarelp failed to pay.

Residents taxed to pay back

Nevertheless, the Levalloisians really stressed by the state of the local finances are not numerous. “People know that we are highly indebted, says a lady, a real estate executive. But here, we are so pampered, there is so much equipment that they do the ostrich. ” According to her, because of the debt, the people feared even change of mayor. “People are saying that if they elect someone else, they will want to clean up the situation and raise taxes by taking advantage of the inheritance.”

For the year 2011, Levallois-Perret will have to repay 37.7 million euros to banks (capital and interest). To smooth the rise in debt load, the city has extended its loans. It has also created from scratch a sweep fee that will bring in 4.5 million euros. One way to raise taxes without saying it. All of this shows that the debt is putting pressure on municipal finances. But Patrick Balkany and his entourage always hold a reassuring speech. “They tell people:” All these equipment, all these services, you do not pay them. They are financed by taxes paid by companies “, decrypts Olivier de Chazeaux, former mayor of Levallois-Perret.

In reality, just over half of the municipality’s tax revenues come from businesses (54%) and the rest (46%) from households through their property tax and housing tax. But despite the abundant revenues (178.1 million euros in 2011), the city gets into debt each year more because it spends more than it receives. A bit like a household that would force on the loan to live and equip itself luxuriously.

Olivier de Chazeaux, who had delighted the mayor of Patrick Balkany for one term (1995-2001) before getting it back, believes that Levallois-Perret is “a municipality built around political consumption”. Patrick Balkany considers “that he is not only an elected but also a service provider”, reports the former mayor who does not exclude to represent himself in Levallois-Perret after turning his back on politics.

When he arrived in business in 1995 after two terms already held by Patrick Balkany, he had found a very poor financial situation. “The banks were beginning to say” stop one does not lend anymore “and the perfect planned to put the municipality under guardianship.” To improve the financial situation, it then increases taxes by 20% and lifts the foot on the expenses. At the end of his mandate in 2001, he had restored the cash flow of the municipality and reduced its debt to 160 million euros- Gazzettinotropea. But the citizens had thought a little too austere this mayor and his policy. Exit Olivier de Chazeaux and Patrick Balkany’s comeback who hastened to reopen the floodgates, in grand style, for his very dear Levalloisiens.