Estepona has announced it is giving residents more than €7million in tax breaks this year, just over a decade after being saddled with more than €300million of debt.

It is a remarkable turnaround for the Costa del Sol town, which in 2011 was among the most indebted municipalities in Spain.

At the time, its liabilities amounted to around €4,600 for every resident, while the enormous debt pile would ultimately require the equivalent of around €60,000 per day to clear.

Despite the fiscal nightmare, Estepona officially reached zero municipal debt in 2025, while its accounts for that year subsequently closed with a €40.29million surplus and more than €90million in the bank.

Now, money previously swallowed up by repayments is being redirected towards residents.

The Town Hall announced on Sunday that more than €7million is being used for tax reductions and discounts in 2026, primarily through cuts to IBI property tax and exemptions from the rubbish tax for vulnerable groups.

So how did Estepona go from owing more than €300million to having no debt at all?

The €300million problem

When the current administration took office in 2011, it inherited liabilities totalling approximately €304million.

According to Town Hall figures seen by the Spanish Eye, the debt included €60million owed to Social Security, €33million in previously unaccounted-for invoices, €18million owed to Spain’s Tax Agency and €6million connected to regional government grants.

There was also more than €90million associated with the government’s supplier-payment financing scheme, among other liabilities.

The scale of the problem put Estepona among Spain’s most indebted councils.

What followed was a debt-reduction programme lasting around 14 years.

€60,000 every day

The most straightforward explanation for how Estepona eliminated the debt is that it paid enormous amounts of it off, year after year.

The Town Hall calculates that an average equivalent to around €60,000 per day was directed towards the inherited liabilities from 2011 onwards.

That works out at almost €22million per year on average.

At the same time, the administration says it imposed tighter controls over spending and avoided accumulating a new debt pile while continuing to fund municipal projects.

Mayor Jose Maria Garcia Urbano credits ‘responsibility, efficiency, austerity and the good use of public resources’ for the turnaround.

The council also points to its decision in 2011 to eliminate municipal companies which the current administration claimed had previously allowed expenditure to escape the normal levels of administrative oversight.

Those explanations are the Town Hall’s own assessment of its financial record, but the reduction in the debt itself is stark.

By the end of 2024, more than 90% of the €304million had been repaid, leaving just €24million in outstanding inherited debt, all of it bank debt.

Big surpluses helped finish the job

Crucially, Estepona was also generating substantial budget surpluses towards the end of the process.

The council recorded a €37.8million surplus in 2023, followed by more than €45million in 2024.

In 2025, it made an early repayment of €25.37million, wiping out the remaining inherited debt and saving more than €3million in future interest, according to the council’s accounts.

By December 31, 2025, Estepona’s outstanding municipal debt officially stood at zero.

But perhaps the most striking part is that the Town Hall did not empty its coffers to get there.

The municipality finished 2025 with a €40.29million budget surplus and €90.1million in its bank accounts.

So where is the €7million going?

With the debt burden removed, Estepona has begun redirecting some of the money towards lower taxes.

The council says the average IBI property tax bill has now fallen by around 50% cumulatively since 2012.

Residents can also receive a further 3% reduction on IBI, the IAE business activity tax and the rubbish charge when the relevant bill is paid by direct debit within the voluntary payment period.

For individuals registered on the padron, the applicable IBI residency discount is applied automatically to the bill.

Meanwhile, pensioners and long-term unemployed residents registered in Estepona are exempt from the rubbish tax, benefiting around 1,812 bills.

Residents who make at least three qualifying trips to the municipal recycling centre each year can also receive a 3% reduction in their rubbish charge.

After reaching zero debt last year, the council approved €6.1million to subsidise IBI bills for 37,988 registered residents, with part of the funding coming from the previous year’s surplus and around €1.4million coming from money that had previously been earmarked for debt repayments.

Taxes down – but investment continues

The Town Hall insists the debt reduction and tax cuts have not come at the expense of investment.

Its 2026 investment programme totals €27.7million, while another €14.07million from treasury reserves has been allocated to continuing existing projects including the Parque Central boulevard, improvements in outlying neighbourhoods, resurfacing, parks, energy efficiency, the coastal path and underground parking.

Garcia Urbano said the council would continue supporting local families, particularly vulnerable residents, while maintaining its commitment not to increase taxes.

He added that the reductions had been achieved without cutting investment or public services.

Read more Andalucia news at the Spanish Eye.