(Secretary General, Department of the Environment, Heritage and Local Government) called and examined.
Local Authority Housing Vacancies Bundling of Water Schemes
Ms Geraldine Tallon
I welcome everybody to the meeting. Before we open proceedings, witnesses should be aware that they do not enjoy absolute privilege. Members and witnesses' attention is drawn to the fact that as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons who are identified in the course of the committee's proceedings. These rights include: the right to give evidence; to produce or send documents to the committee; to appear before the committee either in person or through a representative; to make a written and oral submission; to request the committee to direct the attendance of witnesses and the production of documents; and the right to cross-examine witnesses. For the most part, these rights may only be exercised with the consent of the committee.
Persons invited before the committee are made aware of these rights and any persons identified in the course of proceedings who are not present may need to be made aware of these rights and provided with a transcript of the relevant part of the committee's proceedings if the committee considers it appropriate in the interests of justice.
Notwithstanding this provision in the legislation, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official, by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions within Standing Order 158 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or of a Minister, or the merits of the objectives of such policies.
Having said that I welcome Ms Geraldine Tallon, Secretary General, Department of the Environment, Heritage and Local Government, and ask her to introduce her officials.
Ms Geraldine Tallon
I am accompanied this morning by Mr. Peter McCann, finance officer in the Department, Mr. John McCarthy assistant secretary in the housing division, Mr. George Burke, principal officer in the planning division and Mr. Terry Allen, principal officer, water services.
Mr. Jimmy Doyle
I am from the central policy division of the Department of Finance.
I now ask the Comptroller and Auditor General, Mr. John Buckley, to introduce Chapter 7.1, Development Contributions Schemes, Local Authority Housing Vacancies and the Bundling of Water Schemes. The full text of the chapter can be found in the annual report of the Comptroller and Auditor General or on the website of the Comptroller and Auditor General at www.audgen.gov.ie.
Mr. John Buckley
The Department of the Environment, Heritage and Local Government is responsible for the policy framework relating to development levies. However, the adoption of schemes is a reserve function of local authorities. Development contributions have been a feature of planning permission since 1964. A change occurred in 2000, however, when it was decided to reform the operation of these levies, which by then were regarded as haphazard, unevenly applied and lacking in transparency.
Contributions envisaged by the Planning and Development Act 2000 fall into three categories: general development levies in respect of public infrastructure, which benefits the area of the local authority; specific development contributions in respect of infrastructure that benefits the proposed development; and supplementary development contributions that relate to particular projects or public infrastructure. The figures quoted in the report refer to all three.
By 2004, the date set in the legislation for the adoption of general development schemes, all local authorities had done so. Essentially, local authorities now determine how contributions will be levied, and applied. An inevitable consequence of these types of arrangements is that different amounts may be levied for the same type of development in different local authorities. I do not audit the accounts of local authorities. That function is performed by the Local Government Audit Service. However, the Department collates information on the operation of these schemes and in response to my queries has informed me that €1.2 billion had built up in unexpended levies by the end of 2006.
In regard to where the money goes, the vast bulk of the funds that have been applied since 2001, has been spent on water services, roads, car parks and traffic infrastructure. The delay in spending the levies has been put down to the fact that public consultation is necessary and design work has to be done. Since they are long-term capital projects, they take time to procure and execute. At the time there were also issues of market capacity.
The Accounting Officer signalled that the accumulating balances are likely to reduce significantly in future years, something that will no doubt be accelerated in the current economic climate. To some extent the gathering of information on these levies has been hampered by the arrangements for data capture and accounting. Amounts collectable were recorded outside the formal accounting system until recently. In addition, the available information does not yet distinguish between the different types of levy, something that is desirable if there is to be accurate information for monitoring, planning and decision making. The quality of the information should improve in the coming years and most 2007 accounts of local authorities should record a reasonably comprehensive figure for overall levy income. However, as long as levies are not captured in the accounts at the point of decision, that is to say, when planning permission is granted, and the collection activity is not driven by levies being recorded as debts in the accounts, there will always be a risk that not all income will be brought to account. To address this concern, a project to link the local authority accounting systems with their planning systems began in 2004. It was delayed somewhat due to a change in the pilot site and the fact that enhancements were necessary for other related systems. The new system is being piloted by Laois County Council and will be validated by Kilkenny and Galway county councils. The expected nationwide roll-out of the interface systems is scheduled for 2009. The Accounting Officer has tabled a summary of the balances of development levies available to individual local authorities.
I thank Mr. Buckley. I invite Ms Tallon to make her opening statement.
Ms Geraldine Tallon
I thank the Chairman very much for providing me with the opportunity to make a brief introductory statement on the matters to be addressed. I will address them in the order set out in the written invitation to me.
From a policy point of view, the issue of vacancies in local authority housing is important to my Department in terms of our objective to secure a high quality, well managed public housing stock. From a delivery point of view, we rely on local authorities, given that social housing management and maintenance are statutorily and operationally matters for each individual authority. This is an area of considerable challenge for local authorities. Whether it is framing regeneration-based responses to the legacy of the past or more contemporary issues such as maintenance standards, tenant expectations or anti-social behaviour, the challenges are many and multifaceted. My Department's role centres on ensuring appropriate housing policy, funding and legislative frameworks are in place to support local authorities in their housing functions.
The comprehensive new housing policy framework, Delivering Homes, Sustaining Communities, published in February 2007, provides a platform for ensuring we build vibrant, people-centred places in which to live. Within this policy framework, considerable emphasis is placed on the issues of housing and neighbourhood renewal and managing and maintaining social housing. Practical guidance has been provided for local authorities, ranging from new design guidance, which aims to design out potential problems at the outset, to best practice guidance on regeneration, as well as guidance on the monitoring, repair and allocation of vacant dwellings. In drawing up guidance, we call on the experience of local housing practitioners to ensure best practice is developed across the board. In the last few years the Department has strongly encouraged local authorities to develop planned maintenance programmes to upgrade dwellings in terms of central heating, the provision of insulation, the replacement of doors and windows, as well as precinct improvements.
In line with responsibility for these functions resting at local authority level, new funding arrangements were introduced from 2007. Under these arrangements, local authorities can apply the revenue received from house sales to programmes of remedial works and planned maintenance. Previously, the bulk of these receipts used to be applied to the housing construction programme, but now that programme is almost entirely funded by the Exchequer.
One of the key roles of the Department is to ensure appropriate legislative frameworks are in place. Robust processes are essential for the efficient planning and allocation of local authority homes. The Housing (Miscellaneous Provisions) Bill 2008, currently before the Seanad, includes new provisions governing both the identification of need and the allocation of housing. The aim is to achieve an approach to lettings which strikes a balance between the expression of preferences by applicants and the need to address refusals of reasonable offers of accommodation. This is seen by local authorities as a significant contributory cause to delays in reletting houses available for occupation.
In the light of the increased activity levels in developing planned maintenance programmes using the proceeds of house sales, we are strengthening oversight of the discharge of management and maintenance functions. Provision in the Bill will require the preparation of housing services plans to be introduced at local level. Local authorities will be required to address a wide range of quality-related issues relating to their stock, including their management and maintenance policies. The Bill also contains important related provisions under which local authorities will be required to prepare a strategy to address anti-social behaviour issues within their housing stock.
Given the evolving policy, financial and legislative frameworks, it is important that there is a mechanism under which the performance of individual local authorities can be assessed. This was recognised in Delivering Homes, Sustaining Communities which envisaged the setting up of an incentivised system to encourage best practice on the part of housing authorities. The local government sector has already taken a public sector lead in having a comprehensive suite of service indicators in place since 2004. In that context, we have worked with local authorities to include a range of indicators in relation to housing matters.
Now that we have data for a number of years with which to work, it is important to take stock of the results. In particular, while there are a number of valid reasons for vacancies, there is an essential business requirement to make dwellings available for letting as quickly as possible. However, it is important to use the data to help improve performance nationally and achieve a more uniform performance across local authorities. There will always be local factors that may legitimately affect the position from one area to another.
Given its role in overseeing the financial operation of local authorities, the Local Government Audit Service has been requested to undertake a value for money study of local authority housing management and maintenance functions. The service indicator data are a useful input to that study, assisting in identifying factors which adversely affect performance in certain areas, while also highlighting areas of strong performance by individual local authorities from which others could learn. It will also be important to learn from best practice elsewhere. Any recommendations from the audit service will be utilised by my Department in continuing to address the housing management policy, legislative and funding frameworks for which we are responsible.
I would like to turn to the issue of development contributions. The Planning and Development Act 2000 provided for a radical overhaul of the development contribution system. One of the central tenets of the reforms under the Act was to introduce transparency in the way in which development contributions were levied and applied. Under section 48 of the Act, elected members were given the powers to make, amend or reject the development contribution scheme proposed by the manager following a public consultation process. Therefore, the elected members have the central role in overseeing the level of contributions being sought and the way in which these contributions are spent by the local authority. The policy guidance framework set out by the Department is clearly designed to draw the attention of local authorities to their obligations under the legislation, while also recognising that the adoption of development contribution schemes remains a reserved function.
Section 135 of the Local Government Act 2001 requires managers, before the start of each financial year, to prepare and submit to the council a report indicating the programme of capital projects proposed for the forthcoming and following two years. It is the Department's advice that such reports should include estimates of the levies to be collected, the balance of levies on hand and an indicative list of the council's proposals to utilise these balances. This should be done to enable elected members to consider their budgets in the widest possible context. Ultimately, it is a matter for elected members to ensure sufficient information is provided for them through the reports provided under section 135.
As the members are aware, development contributions form part of the local government accounts audited by the Local Government Audit Service. The Comptroller and Auditor General, in reviewing material made available to him from the Local Government Audit Service, has referred to a number of issues in regard to development contribution schemes, and I have responded to these in detail for the purposes of chapter 7 of his report.
I wish to re-state briefly the following key points: the moneys held by local authorities are ring-fenced and committed to fund a planned capital programme as set out in the development contribution scheme adopted by the elected members; local authorities commenced accounting for development contributions on an accrual basis as and from 1 January 2007; and the Local Government Computer Services Board has developed an integrated planning and financial computer system to assist in accounting for moneys derived from the local authority development contribution schemes. The roll-out of the system has commenced and is expected to be completed in 2009. I should add that no loss of funds has been identified in the audit reports prepared by the Local Government Audit Service for the period in question.
In light of the downturn in the construction sector it is to be expected that development contributions income will decrease significantly in the coming years while expenditure will increase. It is clear that the period under review in the Comptroller and Auditor General's chapter represents the peak in the construction cycle and income derived from development contributions. Local authorities are now witnessing a steep decline in revenues from these schemes and it is highly unlikely that the levels of income achieved in 2006 will be generated for the foreseeable future.
Importantly, development contributions are being invested in long-term capital projects which reflect the community gain associated with the contributions. I am satisfied that a robust governance and policy framework is in place to enable the elected members of each local authority to account for and provide information on their development contributions schemes. I am also satisfied that local authorities are deploying these resources on locally required capital works and significant progress is being made with these contributions.
I wish to address the matter of water scheme bundles. Under the water services investment programme, bundling is usually employed as a means of procuring a number of new water or waste water treatment plants under a single contract. Pipe networks are generally procured through separate traditional contracts, as they do not provide the same potential for economies of scale or innovative solutions as exist with treatment works.
There are 955 schemes in the Water Services Investment Programme 2007-09. Some 286 of these schemes are being progressed through 60 bundled projects of varying scale. In financial terms, the overall value of bundled schemes, including the associated traditional contracts in respect of pipework, account for about 14% of the total value of the investment programme, which is €5.8 billion. The bundle schemes form an important but relatively small element of the overall programme.
Bundling of treatment plants for a number of schemes has become a feature of the water services investment programme since it began to address the needs of smaller towns and villages in more recent years. The Department has endorsed local authority proposals to bundle smaller schemes and to progress them as a single package in order to benefit from economies of scale and to secure best value for money. The bundling approach has the benefit of reducing consultancy costs since only one consultant is appointed and there is only one competition for consultancy services. The larger scale of bundled projects also secures greater market interest in the works contracts, better quality proposals and optimum prices. Without bundling, some individual schemes would not be financially viable.
The reality of the market so far has been that the smaller the project, the less likely it is that the small number of process contractors capable of constructing a treatment plant will be interested in tendering, not least due to the cost of drawing up complex and expensive tender proposals for small single treatment plants. These treatment plants are outside the competence of general civil contractors who undertake standard construction activities but do not have expertise in treatment process technologies. Since bundling is combined with design, build, operate, DBO, procurement, the same contractor will also be operating the treatment plants for the local authority. Overall running costs will, therefore, also be much lower as the fixed costs can be spread over all the plants in the bundle.
Bundling itself does not cause delays. If a particular scheme is holding up the others, it can be taken out of the bundle and progressed separately. This has happened and the Department will facilitate any local authority that makes a sustainable case for doing so.
Grouped DBO projects have been particularly helpful in addressing water quality in the group water sector and account for most of the expenditure incurred annually under the rural water programme. The upgrading of group water scheme quality through bundled DBO-procured water treatment plants will have the single biggest impact on bringing drinking water which meets statutory quality standards to the greatest number of rural consumers. Of the 728 schemes identified for upgrading under the action plan for the improvement of rural water supplies, 227 schemes, serving 41,100 households, are currently being provided with new or improved treatment plants through bundled DBO projects. This approach has the full support of the group scheme sector.
May we publish Ms Tallon's report?
Ms Geraldine Tallon
Yes.
I welcome Ms Tallon and her team to the committee to deal with the very important matters arising. The report states that in August 2006, the Local Government Audit Service noted that the accounting system was unsatisfactory in most local authorities, including with regard to an inability to report contributions on an income basis in some local authorities. Will the Department outline what progress has been made in this area and to what extent contributions are now being reported on an accruals basis?
Ms Geraldine Tallon
With regard to accounting for development contributions, the transition to accrual accounting began in 2004. A new accounting code of practice was issued by the Department in 2004 setting out required standards for presentation of accounts and financial statements in each local authority. However, it was necessary to implement a transition to full accrual accounting on a gradual basis in local authorities so as to maintain full accounting continuity over the period.
A number of priority models were identified, developed and applied initially. These priority models covered accounting for income, including loans, and tenant purchase. An additional model was developed at the time to cover development contributions but it was not implemented initially because of a variety of difficulties that were identified at the time in this new scheme. The first of the new development contribution schemes which came into effect under the 2000 Act were being prepared for 2004. In the following period, the general accounts working group in the Department, the Local Government Audit Service and the local authorities agreed that local authorities should move to full accrual accounting in respect of development contributions in two stages.
The position now is that local authorities are accounting for their development contributions on an accrual basis from the beginning of 2007. The preliminary, unaudited annual financial statements for 2007 provide the evidence to support that. The financial statements for 2008 will also be on an accruals basis. This allows for the inclusion of all historic debtors in the system. The audit service will carry out a full and independent audit of the 2008 statements in the period 2009-10 and issue reports to the Department and the local authorities in respect of each account.
My next question is also somewhat historical. The chapter reports that at the end of 2004, there were significant sums due in respect of unpaid contributions. How many authorities were holding postdated cheques? By the end of 2006, the accumulated sum owed by debtors was €131.9 million. Were these moneys collected in 2007? What was the position in regard to unpaid levies at the end of 2007?
Ms Geraldine Tallon
We currently have only the unaudited annual financial statements for 2007. We will publish planning statistics for 2007 shortly. That will include information on the quantity of the development levies. I emphasise that the 2007 annual financial statements are in the process of being audited by the Local Government Audit Service. Those financial statements provide, in each case, for opening and closing balances and all movements in the development contribution accounts to be recorded. As I said in my opening statement, the development contributions are ring-fenced and accounted for separately within a development contribution account.
What is the Department's policy on holding postdated cheques, especially in the current economic climate?
To clarify, is the Secretary General saying that although there is almost €132 million owed to local authorities and the Department, there is no ongoing monitoring and she cannot tell us the current situation regarding unpaid contributions?
Ms Geraldine Tallon
I can tell the committee that, in so far as local authorities are concerned, development contributions are provided for as conditions of planning applications. Those conditions are recorded under a computerised planning system within the local authorities. When the commencement notice for a development is issued, the development contributions then fall due. The contributions are accounted for under the financial management system, Agresso, in the local authorities.
The issue that arose and to which the Comptroller and Auditor General adverted was the need for a well joined-up process between the planning system and the financial management system in local authorities. The local government computer services board has worked on the development of a computerised system to ensure there is close linkage between the planning and financial control systems in local authorities. That is currently being put in place.
The Department does not hold detailed information on the movement of contributions within the local authority capital accounts for development contributions. As I said, they are required to be covered in the annual financial statements of the local authorities and are subject to audit by the Local Government Audit Service. In all reporting to date, the service has not identified any areas of loss to the public purse.
For Ms Tallon's information, some members were obliged to leave to attend a vote in the Dáil. They are not rushing out because of a lack of interest.
What is the Department's policy on postdated cheques? Has the Department any concerns about moneys owed on these cheques?
The Secretary General may introduce one of her officials to answer the Deputy's question if she so wishes.
Ms Geraldine Tallon
Will the Deputy clarify his question?
I understand some, if not all, local authorities are holding postdated cheques. In other words, cheques which the debtor has issued which cannot be cashed until a future date. That is a dangerous practice for any private individual, let alone a local authority .
Ms Geraldine Tallon
I am not aware of that being a common practice in local government. If, on the basis of its knowledge of local government accounting practice, the committee is concerned about this issue, I will bring it to the attention of the Local Government Audit Service. However, I am not aware of it as a significant issue.
Is it a matter for the local government auditor to report back on that issue and include a note in the accounts?
Ms Geraldine Tallon
The local government auditor reviews the accounting practice and the annual financial profile of every local authority and presents a report to the manager. The annual financial statements are published with the audit report and the manager's response in every case. Those reports are then the subject of discussion at local authority level. In the future, they will be presented to the new audit committees which have been put in place in local government.
Does the Department know the position in regard to unpaid levies at the end of 2007? Why is the audit so late? We are in the tenth month of the current year and the audit for last year is not complete.
To clarify, the review findings section in the Comptroller and Auditor General's report includes the statement:
The issue of unpaid development contributions was highlighted by reference to two large local authorities where unpaid contributions at the end of 2004 were €37m and €138m respectively. The former figure included €15m in respect of phases not yet commenced and €12m under deferred payments i.e. instalments and post-dated cheques; the €138m included €60m under deferred agreements.
This is the reference to postdated cheques to which Deputy O'Keeffe referred.
Ms Geraldine Tallon
It is often the case that a development, once it commences, is undertaken in phases. Development contributions would be phased accordingly as the development is undertaken. It would not necessarily be the case that all development contributions fall due once a development commences. There may be a period of years over which the development contributions stream applicable to a particular development flows.
In regard to the development contributions, Ms Tallon says she is satisfied there is no loss to the public purse and that all development levies are being collected. The most up-to-date figure we have is the €1.2 billion at the end of December 2006. The report indicates that 50% of contributions collected since 2001 have not been spent. Does the Department have any input into ensuring the money is spent? What is the reason for the delay? Are some local authority areas lacking facilities while €1.2 billion is sitting in bank accounts?
Ms Geraldine Tallon
The €1.2 billion probably constitutes the peak, certainly for 2006, which was the peak of the construction cycle in any event. It is not particularly surprising that the balance was as high as €1.2 billion in 2006, given there were more than 92,000 planning applications in the system that year, as well as more than 93,000 housing completions. The highest level of planning and construction activity was recorded in 2006.
Will the figures for 2007 be significantly lower in such a way that there will not be as much money on account?
Ms Geraldine Tallon
The income from development contributions already was beginning to show a reduction in 2007. More than €700 million of the 2006 balance of €1.2 billion actually was income in the year 2006. The level of income——
Has that money been spent or has it been allocated to infrastructure projects?
Ms Geraldine Tallon
That money has been allocated. As I stated at the outset, elected members at local authority level approve development contribution schemes, which must identify the basis on which the money is to be spent, as well as the capital areas of investment.
Does the Department monitor whether such contributions are spent where they should have been?
Ms Geraldine Tallon
We expect to see such movement in the annual accounts of the local authorities. We are well aware of where the money is being spent by local authorities. There is provision, for example, for the development contributions to be identified and shown in the national development plan. The general schemes of which we are aware identify roads, water services and amenities as the key investment areas. We have details on the types of infrastructure on which development contributions are being spent. However, such spending is not subject to a consent system by the Department and is not subject to explicit oversight by the Department.
However, it is being spent.
Ms Geraldine Tallon
Yes.
On a question of detail, I was involved in a local authority that prepared such development contributions. There was a list of infrastructural projects for which the estimated cost of the development contributions was based on the cost per square metre or square foot. Many of the items on the list, such as railway lines or roads, would fall under the remit of the Department of Transport. Does this money go to the Department of Transport for these specific projects? I refer in particular to the Midleton railway line, as heavier loading applies to any development in Cork along the Midleton railway line. Does such additional loading go to the Department of transport? Does Ms Tallon appreciate the kind of detail to which I refer?
Ms Geraldine Tallon
The development contribution money never appears in the accounts of either my Department or the Department of Transport. I am not the Accounting Officer in respect of development contributions. As the Comptroller and Auditor General noted, they do not cross his desk either by virtue of his——
I understand. However, the point is money is paid by a developer and ultimately whoever is——
Ms Geraldine Tallon
It is paid by the developer to the local authority.
Such money is contributed for a Midleton railway line. How does it get from the local authority to the Department of Transport?
Ms Geraldine Tallon
It is paid by the local authority as its contribution to that contract. It is a direct payment.
Is such funding monitored and tracked?
Ms Geraldine Tallon
Yes.
Is the position similar in respect of individual contributions for flyovers or road bypasses?
Ms Geraldine Tallon
Yes. The initial determination on the projects to which development contributions are to be applied is made by the local authority. This is part of the function of the elected members. They see the development contribution scheme and in the capital report by the manager to which I referred, they see the capital assets to which the contributions are to be applied. They also agree on and adopt the level of contributions to be raised in each local authority area. All this is a function of the application of the planning legislation at local authority level.
As I noted, there is a range of types of infrastructure project. For example, I am aware of the Midleton northern relief road, a Kilkenny inner relief road, as well as an outer ring road from Lucan to Kingswood. There have been many developments of that kind. Projects such as port access roads, drainage schemes and leisure centres come under the general——
Some of them may never happen. Does Ms Tallon have evidence of double charging in cases in which local area plans obtain within county development plans? I refer to a scenario in which one built at a location for which a local area plan existed, as well as being obliged to contribute to a county development for infrastructural projects.
Ms Geraldine Tallon
I am not aware of any instances of double contributions. One could have special contributions in respect of a particular development in which there were specific and exceptional costs that were not covered by the overall contribution scheme. There is provision in the legislation for a special development contribution in certain circumstances. For example, in certain areas a specific access road to a particular development might be covered by a special development contribution over and above the application of the general contribution scheme.
I understand. Are there differences between adjoining local authorities? Do adjoining local authorities seek different levels of contributions? While I understand they all operate on different levels, do significant differences exist? Is Ms Tallon aware of or have an opinion on, such differences?
Ms Geraldine Tallon
There is a significant range of development contributions. They tend to reflect the prevailing development costs in different localities. However, as I noted, it is a function of the elected members of a local authority to adopt the development scheme and to determine the level of the contribution applying under the scheme.
I will turn to vacant houses.
Before that, may I make a point? I apologise to Deputy Clune. The first schemes were due for review during 2008. How many reviews has the Department received?
Ms Geraldine Tallon
We have received quite a number of them at this stage. If the Deputy gives me a moment I can confirm the figure for him. We have received 24 such reviews.
From how many local authorities?
Ms Geraldine Tallon
From 34 local authorities.
Mr. George Burke
A total of 24 schemes have been revised by 24 local authorities.
Is the Department satisfied with the proposals in the reviews? Has it sent any back for further information or detail?
Ms Geraldine Tallon
In general, we examine them to ensure they are consistent overall with the legislation. We introduced some refinements as a result of the work of an interdepartmental committee in 2006. For example, it is important in local development terms that there should be as much transparency as possible in respect of the development and definition of contribution schemes. An additional request was made, as part of updated guidance to local authorities, that draft development contribution schemes should be submitted for discussion and consultation by county development boards. We tend to look at the draft schemes that come in to ascertain, for example, whether there is evidence that they have been subject to such a level of consultation.
Do the witnesses have a list of projects that have been completed in that review?
Ms Geraldine Tallon
The review covers the development contribution schemes. Some 24 of 34 local authorities are in the review process. The legislation places no limit on the lifetime of a scheme. It is administrative advice from the Department to local authorities to the effect that it is important to keep the schemes up to date through reviews every three to four years.
Have any reviews been completed?
Ms Geraldine Tallon
Yes. It is for the elected members of local authorities to adopt the scheme following consultation and consideration at local level.
Is there any input from the Department of the Environment, Heritage and Local Government?
Ms Geraldine Tallon
No. We have no statutory role in the adoption of development contribution schemes.
Does the Department not issue guidelines?
Ms Geraldine Tallon
The Minister may comment on a draft scheme and we have an interest in ensuring that appropriate consultation is carried out at local level and that the statutory requirements are adhered to, but we do not have a formal role in the approval of development contribution schemes.
Of the 24 under investigation, is the Department satisfied with the reviews? There is not much point in gathering the information if it is not going to be examined and commented on.
Ms Geraldine Tallon
In general, yes. We raised questions in a number of instances concerning the level of consultation on the schemes' development, but they are not subject to our consent.
I wish to refer to vacant housing. The Secretary General's opening statement outlined new funding arrangements whereby local authorities can apply the revenue received from house sales to programmes of remedial work and planned maintenance. Previously, most of the funding came from the housing construction programme. We have the figure for the number of vacancies across the local authorities. Does the statement imply that a funding issue contributed to the delay? In some areas, a large number of houses have been left vacant.
Ms Geraldine Tallon
Traditionally, local authorities relied on their general revenue for the ongoing management and maintenance of the housing stock apart from specific refurbishment schemes funded by the Department. The new arrangement, which was introduced in 2007, is a significant improvement. Through it, local authorities should apply internal capital receipts to their management of the housing stock. Authorities have approximately €150 million to spend on management and maintenance. We recognised that there was an issue within the management and maintenance capacity of local authorities.
The Department should see an improvement.
Ms Geraldine Tallon
While lack of money was not the only reason for the vacancy levels, we should see an improvement in the quality and condition of local authority housing stock.
According to the figures, the number of housing vacancies in some local authorities can be significant. I consider two as being similar in that they have similar housing stocks. Cork City Council and South Dublin County Council both have approximately 8,200 houses. However, the latter has a 1% vacancy rate whereas the former's rate is almost 6%, that is, 480 units. It is a significant number.
The Secretary General's statement referred to how some local authorities could learn from others, but is this in the context of staff allocation or funding? After reading the submission of the city and county managers, I understand that there can be various issues. However, the figures we have describe 480 vacant houses in Cork city and almost 2,700 among Dublin City Council's housing stock of 26,000.
Ms Geraldine Tallon
It is partly a facet of the relative age of stock in different areas. Cork city's housing stock tends to be older than the stock in south County Dublin. The former's stock is also subject to large-scale regeneration initiatives in a number of areas, accounting for its relatively high level of vacancies compared to, for example, south County Dublin.
Does the Department have performance indicators for local authorities, such as the minimum and maximum times that a house should be vacant, given certain parameters?
Ms Geraldine Tallon
Our service indicators are the first approach to performance indicators in the local government system. In a sense, the information we have supplied to the committee includes performance information.
It is an important matter for the future and there will be a policy evolution through the provisions of the Housing (Miscellaneous Provisions) Act, including the adoption of housing services plans by elected members of local authorities. The relative performance of local authorities and the need for the dissemination of best practice are issues within the local government housing management function. They are part of the reason we have asked the Local Government Audit Service to examine management and maintenance practice in the housing sector. When we have the results, we will be in a better position to consider what type of performance benchmarks should be set.
When does the Department expect the results?
Ms Geraldine Tallon
We expect them in 2009.
Anyone dealing with the public regularly meets people looking for housing. For example, one is told of a house that has been vacant for a certain time but, when one inquires with a local authority, one is told that the windows must be replaced because, despite being double-glazed, they do not have a vent. Is it a cumbersome system? With a lick of paint, plenty of houses could be occupied tomorrow. Were they in the private rented sector, they might not even get that lick of paint.
Sometimes, one gets the impression that standards are too high. If they were not, there might be a faster turnaround. Despite such issues as ventilation and the condition of a kitchen, a house could be habitable and have people living in it. Houses in the private sector might not meet half of the same standards, but there is no intervention. Will Ms Tallon comment on whether the standards are onerous and, thus, delaying the turnover in housing?
Ms Geraldine Tallon
I hope not. We have given best practice guidance to local authorities on managing vacant houses. They must take into account a number of factors. They have a strong duty of care to local authority tenants. They are bound by building regulations and health and safety standards. Sometimes, it can appear that perfectly good fixtures, fittings, windows, etc., are being removed, but this is being done for a reason associated with health and safety standards or compliance with building standards. We are conscious of the standards in the private rented sector compared to——
I would not want to see those standards lowered.
Ms Geraldine Tallon
Of course not. As part of policy development, the Minister of State with responsibility for housing has been working on new housing standards for the private rented sector. We are at quite an advanced stage in terms of new regulations to improve standards in the private sector.
I compliment the Department on the central heating programme, which is making an enormous difference to people. The focus in my area is on the elderly and there are have been great improvements in recent years.
Ms Geraldine Tallon
I thank the Deputy. That is an important example of a planned and programmed approach to maintenance in the local government sector.
I agree with Deputy Clune. The planned maintenance programme in my area of Cork city has improved the situation considerably for people. People who have maintenance requirements have a certainty about the matter and have a timetable as to when the work will be carried out. Until recently, it was a case of tomorrow or maybe next year. I have noticed a more efficient approach of late. Having said all that, there are still enormous problem areas. For example, I know of one house that has been vacant for 12 years in Cork city. That is unacceptable.
The local government auditor pinpointed two areas where local authorities have spent development levies which should be earmarked for capital projects on their revenue accounts. I know the Department issued a circular in 2007 reminding local authorities that they should apply the monies gathered through development levies to capital projects only. Apart from issuing that circular, what has the Department done to ensure that in these difficult times, when budgets are being tightened, the temptation to slip funding from the capital purse to the revenue purse will not be succumbed to?
Ms Geraldine Tallon
As the Deputy points out, the local government audit service brings these matters to the attention of the relevant local authority. Once an issue like that is identified, it puts down a marker to watch out for that practice on future occasions. We issued updated policy guidance to restate that capital funds secured under the development contribution scheme must be used for capital purposes only. We have looked at the unaudited annual financial statements for 2007. We are compiling planning statistics for publication. Those statements indicate that transfers to revenue equated to approximately 1.5% of the opening balance. It is a relatively rare practice but is one that we are on top of. In the level of engagement we and local government audit service have with local government, we are satisfied that it is a practice that is very closely monitored.
Regarding the consistency rate across local authorities in the application of development levies, where local authorities are under pressure, naturally the temptation is to inflate the development levies to keep capital projects going. Is there any concern within the Department about the lack of uniformity in the application of development levies across the board?
Given that building contractors are under pressure, in the context of our earlier discussion on unpaid levies, is there any evidence of defaulting by developers, in the form of postdated cheques and so forth? What steps are being taken to safeguard the taxpayer against defaulting?
Ms Geraldine Tallon
On whether there is a propensity to inflate development levies, the Department and the local authorities are very aware of the need to maintain local competitiveness and to achieve a good balance between the necessary funding decisions that have to be made and the need to provide attractive locations for investment. I am not really concerned that profiteering is taking place because local authorities and local elected members are very conscious of the need to maintain competitiveness and of the relative competitiveness of different parts of the country. In the context of development contributions, there is a range of different levies relating to prevailing development costs in different parts of the country. I am satisfied that while there is not consistency, the levies are a reasonable match for development costs in different areas.
I do not have any indication of defaulting as far as levies are concerned. Clearly there is flexibility within the legislation and within practice to allow for contributions to be phased as development is undertaken. What one might fear more, perhaps, in the future would be that development which has received planning permission and for which development contributions have been set will not go ahead at all. In that situation, we could see a significant decline in the income of local authorities.
On the point just made by Ms Tallon regarding the development levy scheme and the time that planning permission is granted until it is taken up, most local authorities had an indexation clause in the schemes, of which I am sure Ms Tallon is aware. My experience in this matter centres around a discussion at a regular monthly meeting of Limerick County Council. There was no item on the agenda relating to the development contribution scheme. The discussion just strayed into the area of indexation and one member proposed its suspension. Another member, from a different political party, seconded that proposal. That was it. Nobody else had any interest or involvement in the matter. Approximately six months later I was informed by the director of service that all indexation had been suspended on foot of that meeting.
I queried this because I viewed it as a material amendment to the scheme, which had not gone on public display. I am aware that Ms Tallon would not have any prior knowledge of this issue but what is her view on it? Should the suspension of the indexation of development levies been advertised and open to public consultation?
Ms Geraldine Tallon
I have no prior knowledge ——
I know, but has Ms Tallon experience of a similar situation arising in any other local authority? What is her view on the matter? If she would like to look into it further and revert to us at a future date, that is fine.
Ms Geraldine Tallon
I have no prior knowledge of the instance raised by the Deputy, nor is it an issue that has been the subject of any intense assessment, to my knowledge, by the Department. We are conscious that with regard to the schemes, local authorities determine whether, and the circumstances in which, indexation applies at local level. The question raised by the Deputy is a fair one. This is an area which is the subject of study by the local government audit service at the moment. It may be appropriate that the issue raised by Deputy Collins should be brought to the attention of that service.
I took issue with the decision because it will cause a significant loss to the public, ultimately. It will affect the larger contributions forwarded by developers for large development projects. It would benefit the person building a one-off house in a rural area because he or she would have an issue with the levy anyway. The person building a one-off house out in the countryside is paying for lights and footpaths that he or she will never see. That is the flip side of it. I had a problem with it at the time because I believed something like that should have gone on public display. Ms Tallon might have an opinion on the matter.
Ms Geraldine Tallon
As a general principle, the adoption and content of schemes are local matters. The Department would have to respect the decisions taken by a local authority in those circumstances. My main concern is to ensure that any initiative taken at local authority level comes within the scope of the scheme. The points raised by the Deputy are legitimate in that regard and, as part of our audit of performance in this area, I will investigate the issue.
The schemes are relatively similar for all local authority areas. I have encountered two cases in which levies were incorrectly applied. I understand that mistakes are made. Permission was granted in two cases where the levy was incorrectly applied but, in fairness to the local authority, it conducted a review and admitted to the mistake. In the most recent example I encountered, the local authority agreed that the condition pertaining to the development levy was incorrectly calculated and it issued a letter of comfort to clarify the situation. However, the architect was adamant that new permission would have to be secured because any condition pertaining to planning permission was ultimately enforceable under the Planning and Development Act. What is Ms Tallon's view of the matter and would the Act need to be amended to take account of such instances?
Ms Geraldine Tallon
That is a matter of interpretation of the legislation. It would difficult for me to give an answer in these circumstances. I do not know the details of the case and have not had an opportunity to reflect. If a condition was subject to significant change, my instinct suggests that new permission would be appropriate. That is an interpretation of the law, however, and I do not want to proceed in that direction.
I was struck by a question asked by Deputy Clune in regard to the transparency of development levies. I am also aware of instances in which planning applications were submitted which took account of conditions, development levies, contributions towards provision of a rail link and other services. What mechanisms are in place to ensure the moneys collected for services which are not administered by local government reach their targets? Perhaps the Department of Finance has an opinion on this.
Mr. Jimmy Doyle
I will have to investigate the matter. I do not have an answer for the Chairman at present.
Does the Department not carry out monitoring in this area?
Mr. Jimmy Doyle
I am sure it is carried out but it is not done in my side of the house. I will consult the division concerned and revert to the committee.
Ms Geraldine Tallon
We are aware of such instances. My colleague, Mr. Peter McCann, described to me a case in which Dún Laoghaire-Rathdown County Council was invoiced by the RPA for moneys which directly accrued from development contributions ring-fenced for an extension to the Luas.
Mr. Peter McCann
The agencies to whom the amounts are due keep track because they are anxious to get their hands on the money.
Ms Geraldine Tallon
There is significant interest in the use of special development contribution and supplementary schemes for specific transport developments. Practice is evolving in the use and absorption of development contributions for transport. Supplementary schemes have been developed for the Sandyford-Cherrywood Luas line, Cork suburban rail, the Navan-Dublin line, metro north and Iarnród Éireann's Kildare route project.
Has Deputy Collins a question on the bundling of sewerage schemes?
I raised this issue previously. Has it been monitored by the Department? Each time it is raised locally, we are told about a flow of documents between the Department and the local authorities. As we are not local authority members, this is the only forum in which we can raise the issue. Unfortunately for Ms Tallon, this is our sole opportunity to ask questions about local authorities. It seems that little progress has been made on the bundling of sewerage schemes.
Does the Department monitor the scheduling of schemes? I am aware of a recent initiative which reduced the number of stages from six to four.
Ms Geraldine Tallon
We are interested in the bundling schemes because it offers significant advantages and capacity for streamlining. We can also reach small areas that would not be viable as individual schemes. A group of schemes can spread costs by making use of a single consultant and contractor.
Concerns have been expressed that individual schemes might be delayed in the overall progress of a bundle. Issues arise which can delay one or two schemes in a bundle despites everyone's best efforts. One such example arose in Patrickswell in Limerick, in which regard land acquisition in Adare has proven prolonged and problematic. Similar delays have been experienced in the Clare bundle because of foreshore licensing obligations in respect of some of the schemes. Where there are genuine reasons, we are satisfied that schemes can be removed from a bundle to allow the remainder to progress. However, without genuine cause, the economic advantages of a bundle are such that we would be slow to move away from this process unless we see tender prices ease back significantly over a period. Our experience thus far is that bundled schemes tend to cost 15% to 20% less than pre-tender estimates. The advantage is significant, therefore.
All the schemes are delayed where one part of the bundle runs into obstacles due to landowner consent or other reasons. In my part of the country, many of the smaller, stand alone schemes were delivered in a short enough timeframe to allow development of the areas they served. The net point was that whereas the tender price came in at 15% or 20% less, there was still a time factor which compensated because of inflation in costs anyway. They are beginning to come out at the far end of the tunnel at this stage.
Ms Geraldine Tallon
We have a build-up of experience and we are closely involved in the development of water schemes and their funding. I am conscious that we must keep very close oversight on the area. I understand the point being made by the Deputy in terms of delay. Equally, in the kind of market we have had, some of the schemes we can provide by way of bundle would not have attracted any interest from qualified contractors over recent years because of their size. Notwithstanding the issues of difficulty and delay identified by the Deputy, there has still been a value in having the schemes within a bundle to the greatest extent possible. Not only does this achieve good tender price overall but it makes those smaller schemes viable for the appropriate level of contractor with a capacity to provide for treatment processes.
What level of monitoring of the use of consultants does the Department apply to the local authorities? We have had boom years in the construction sector and local authorities in certain areas were under pressure, particularly the sections dealing with roads, planning or sanitary services. They bought in many consultancy services and staff numbers across the local authority sector increased quite significantly.
In light of current circumstances, how does the Department monitor use in this regard? I am aware of a couple of local authorities that bring in outside consultants when drawing up local area plans. One would imagine that in the current climate, where there is a fall in the level of planning applications, for example, there would be spare capacity in-house as an alternative to purchasing the services of planning consultants.
Ms Geraldine Tallon
It is an area that should be watched. There is a Government discipline associated with employment of consultancy and the level of spending on it. One should remember that over the past seven, eight or ten years, the extent of infrastructure has expanded quite considerably in the water services area.
I contest the Deputy's comments on the extent to which local authority staff numbers have grown. They have not grown significantly. There is a much higher operation, maintenance and supervision overhead involved from the local authority staffing perspective. It would always remain the case in the development of major capital works that specialist consultancy would be inevitable for the design and preparation of contract and tender documentation and so on.
I accept the point with regard to specialists but there is spare capacity in-house in many local authorities now.
Ms Geraldine Tallon
The Deputy can rest assured that with overall control on payroll and the requirements of Government in terms of payroll reduction, managers are very seized of what must be done in terms of their future capacity.
Unfortunately, the whole process has been disrupted and there have been around four votes so far in the Dáil. At this stage, rather than stringing things out, I will ask Mr. Buckley to make his final comments. We have had many questions on the three topics addressed today.
Mr. John Buckley
In all these areas — housing, sanitary services or development levies — the policy framework is clearly set by the Department of the Environment, Heritage and Local Government. The detail is audited by the local government audit service. Our interest is in the implementation of policy rather than policy itself, whether that is monitored and so on.
One welcome development is the emergence of the suite of indicators which will allow us take an overall view of the pattern on the ground. We will probably place more audit emphasis on that in future.
With regard to development levies, considerable work has been done to integrate the iPlan system with Agresso, or the planning permission system with the accounting and so on. The challenge in the future is to get more refined information from this, not just on the totality of contributions but on each type of contribution. There should be more information on supplementary contributions in future. That is the next inevitable step in the development of the process, on which we will have dialogue with the Department in future audits.
I have no other particular comment.
Is it agreed the committee now dispose of Chapter 7.1 on development contributions schemes? Agreed. There is no other business. We have agreed the agenda for next week's meeting, Special Report No. 10 of the Comptroller and Auditor General, General Matters arising on Audits: Non-Commercial State Sponsored Bodies, Health Sector Bodies, Vocational Educational Committees. We will look at Chapter 7, Beaumont Hospital and accounts 2006; and Chapter 5, the Irish Blood Transfusion Board and accounts 2006. I thank Ms Tallon and her staff, as well as the representatives from the Department of Finance, for coming in this morning, and the Comptroller and Auditor General and his staff for their support and advice. I also thank the committee staff.
The witnesses withdrew.
The committee adjourned at 11.50 a.m. until 10 a.m. on Thursday, 23 October 2008.