Paralimni Municipality's budget for 2014 will be in the red by €888,000, according to the town's mayor Theodoros Pyrillis.
This is to a large extent due to the significant amounts that the municipality pays to dispose of its refuse at the Lymbia site, budgeted at €1.3 million for next year, he said.
Pyrillis said that municipalities in Larnaca and the free Famagusta area were burdened with this charge without the right to pass it on to their residents.
Pyrillis said that despite various austerity measures, including cuts in personnel costs, the municipality has been unable to cover this sum.
He noted that because of the economic slowdown, Paralimni has lost some 90% of the revenue previously generated by the issue of building permits. More specifically, in 2013 it stands to raise only €100,000 compared to the €1m it made in previous years.
Paralimni Municipality has seen its state subsidy shrink by 40%, which combined with other factors has led to a huge problem.
"As a municipality we had some extra fat but we have got rid of it. Despite that we cannot cope.
"All the municipalities are in trouble. "The state must look to what is happening to local authorities," he concluded.
The mayor said the town faces a harsh winter ahead on the employment front, with many hotels closing down for the season.