COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 25 Jan 2018

Chapter 11: National Property Revaluation Programme

Mr. John O'Sullivan (Commissioner of Valuation and Chief Boundary Surveyor, Valuation Office) called and examined.

Chairman

We are dealing with the 2016 annual report of the Comptroller and Auditor General, chapter 11, national property revaluation programme, and the appropriation accounts for 2016, Vote 16 - Valuation Office. We are joined by officials from the Valuation Office, Mr. John O'Sullivan, Commissioner for Valuation and Accounting Officer for Vote 16, Mr. Declan Lavelle, head of valuation services, and Mary Smyth, personnel and finance officer. We are joined by Mr. Paul Lemass, assistant secretary, Department of Housing, Planning and Local Government

I wish to advise witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members of the committee are reminded of Standing Order 186, which provides that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister or the merits of the objectives of such policies.

I will call Mr. O'Sullivan to make his opening statement presently. First, I am seeking some information from Mr. Lemass. Which Department are you from?

Mr. Paul Lemass

The Department of Housing, Planning and Local Government.

Chairman

I understood that last year after a Cabinet reshuffle the Valuation Office had come under the Department of Justice and Equality.

Mr. Paul Lemass

Since 1 January this year, the office is under the aegis of the Department of Housing, Planning and Local Government.

Chairman

Up to 31 December it was under the Department of Justice and Equality. Is that correct?

Mr. Paul Lemass

That is correct.

Chairman

It has now transferred.

Mr. Paul Lemass

That is correct.

Chairman

Is that new? Is this the first time the Valuation Office has been under the aegis of the Department of Housing, Planning and Local Government?

Mr. Paul Lemass

That is my understanding, yes.

Chairman

Is Mr. Lemass in a position to say why it moved from the Department of Justice and Equality? It was linked with property registration and other property matters relating to the Department of Justice and Equality. I understood the logic of that.

Mr. Paul Lemass

No, I am not in a position to say. A Government decision was made last year to transfer the office over.

Chairman

If anyone chooses to follow up the matter by way of parliamentary question, as I did before, they will get a reply to the effect that the Taoiseach is not answerable to the Oireachtas for the allocation of portfolios and responsibilities under Ministers. Mr. Lemass is consistent on that point.

Mr. Seamus McCarthy

My understanding is that historically the Valuation Office was under the Department of Finance and that it was in recent years that it was transferred to the Department of Justice and Equality. That was in the context of an amalgamation with other bodies associated with the Department of Justice and Equality.

Chairman

Did that include Ordnance Survey Ireland?

Mr. Seamus McCarthy

Ordnance Survey Ireland has moved around as well.

Chairman

I think after the previous election it moved to the Department of Justice and Equality. It surprised me this morning to learn the Valuation Office is now under the Department of Housing, Planning and Local Government, but it is of no significance.

Deputy Alan Farrell

My recollection, if I am not mistaken, is that calls were made for the office to be moved.

Chairman

That is fine. It is simply that I was not aware of it. That is all. There is no issue. It is simply by way of information. I call the Comptroller and Auditor General to make his opening statement.

Mr. Seamus McCarthy

I thank the Chairman. The Valuation Office is responsible for the valuation of property to allow local authorities to levy commercial rates. The office also provides ad hoc property valuation services to Departments and State agencies. The 2016 appropriation account for Vote 16 - Valuation Office recorded gross expenditure of €9.1 million. This comprised expenditure of €8.6 million on the provision of valuation services and approximately €500,000 on the Valuation Tribunal, which provides an appeal mechanism in cases where a property owner or a local authority is not satisfied with a valuation decision. Pay costs accounted for €6.5 million or a little over 70% of voted expenditure. In addition, €342,000 was paid in fees and expenses to Valuation Tribunal members. Other expenditure included €639,000 spent on national revaluation projects and a little in excess of €200,000 spent on legal fees and expenses. A little under €1.5 million was spent on non-pay administration costs.

Appropriations-in-aid amounted to a little more than €1.1 million. That consists mainly of €700,000 in valuation revision fee income and almost €300,000 on pension related deductions from staff salaries. Net voted expenditure in the year was 16% less than provided for in the Estimate, resulting in the surrender of the surplus of €1.5 million to the Exchequer at the year end.

Local authorities charge commercial rates by applying a locally determined rate to property valuations decided by the Valuation Office. Property valuations should reflect current market conditions for a defined area and, therefore, result in a fair distribution of the rates burden throughout that area. Periodic revaluations are required to ensure that the rates burden continues to be fairly distributed among the relevant businesses as market conditions evolve.

A cyclical programme of revaluations of all commercial properties was provided for in the Valuation Act 2001. However, progress in carrying out the revaluation programme has been slow. The first revaluation of properties under the 2001 Act commenced towards the end of 2005 in the South Dublin County Council area. When my report was being completed in September 2017, revaluations had been completed for only 15 local authority areas, accounting for 43% of all commercial and industrial properties in the State. The remaining 57% of commercial and industrial properties, in 16 local authority areas, were being charged rates based on valuations that reflected market conditions in 1988, almost 30 years previously.

The 2001 Act requires that, following the initial revaluation of property in a local authority area, further revaluations must be carried out at intervals of between five and ten years. Arising from this, a second revaluation of the South Dublin County Council area was completed in September 2017, before initial revaluations in many other areas. A second revaluation of Fingal County Council commenced in October 2017.

Up to 2015, the average time taken by the Valuation Office to complete the revaluation for a rating authority was almost 30 months. Following enabling legislation in 2015, new approaches to revaluation have been piloted to try to accelerate the programme. For example, the revaluations for Carlow and Kilkenny were carried out by private valuers on behalf of the Valuation Office and were completed in 12 months. A pilot project using an approach of self-assessment by rate payers is under way in Laois and is expected to be completed in ten months. The office has also shortened the time it takes to carry out revaluation projects using its own staff.

The core aim of the revaluation programme is to ensure that rates liabilities are distributed equitably based on current market conditions. A revaluation does not increase the amount to be collected by the relevant local authority. Instead, the required income is redistributed across ratepayers.

Overall, for the completed revaluations, the number of ratepayers who experienced reductions in rates payable has exceeded those who have experienced increases. Nevertheless, the changes in rates payable for an individual property can be substantial. In one case in Limerick, the annual rates bill increased from €16,000 to €490,000. For another property, the rates payable reduced by €558,000 to €2.4 million.

Apart from the direct cost of the revaluations that were contracted out, the costs of carrying out the revaluations are not known. The chapter recommends that the Valuation Office puts systems in place so that accurate costings of the various approaches are available.

As I mentioned previously, there is provision in the system for an appeal to the Valuation Tribunal of the valuation attributed to a property. There have been delays in the processing of appeals by the tribunal. The chapter recommends that the appeals process should be reviewed. A number of initiatives are under way to speed up appeals processing, about which the Accounting Officer will be able to update the Committee.

Mr. John O'Sullivan

The committee will be aware that conducting a national revaluation programme - the first of its kind in over 160 years - has been a priority for Government since the enactment of the Valuation Act 2001. I can report that the programme has gained considerable momentum since June 2015, following the introduction of new legislation, and advancing the programme is a central element of the Valuation Office’s current strategic plan covering the period 2017 to 2019.

As indicated in the briefing material and the map forwarded to the committee last week, the current position is that the first revaluation of 15 local authorities is now complete and revaluation of an additional eight counties is currently under way. The final phase of the programme, involving six counties covering eight local authority areas, is scheduled to commence in 2019 and conclude in 2021.

The members of the committee will be aware that the purpose of revaluation is to improve transparency in the local authority rating system and to distribute the commercial rates burden more equitably between ratepayers. The value of property changes over time but not at the same level across categories, business sectors or locations. Hence, revaluation is a central feature of the rating system in similar jurisdictions as a revaluation programme is the only comprehensive way to address such movements. Following revaluation, some ratepayers obtain a reduction in rates while, inevitably, others experience an increase. However, based on the revaluations conducted to date, and as the Comptroller and Auditor General has outlined, the number of businesses receiving a reduction considerably exceeds the numbers experiencing an increase in their rates liability. I have provided further details in this regard on page seven of the briefing material.

The outcome of a revaluation in a particular local authority area depends on the market conditions in play in that area on or around the revaluation date. The particular mix of urban and rural properties and differences in the range of property types in the main business categories and sectors - retail, industrial, offices, hospitality, etc. - also has a major bearing.

Estimating the value of a property for rates purposes is an entirely evidence-based exercise. The primary sources of such evidence are information relating to lease transactions provided by the Revenue Commissioners and the Property Services Regulatory Authority and, of course, information obtained directly from ratepayers. For certain categories of property, trading information or construction costs may be used to assist in assessing the rental value of that property. During a revaluation, the Valuation Office conducts its analysis in accordance with best international practice as set out in published practice guidance notes and in line with well-established valuation principles and case law arising from the Valuation Tribunal and the higher courts.

When a revaluation is being conducted, we are very keen to ensure that the work we do is well understood and extensive supports are provided to ratepayers and other stakeholders. Thus, for example, detailed information packs are provided directly to ratepayers at key stages in the process. We engage with local media to increase the understanding of the work we are doing. We organise walk-in clinics for ratepayers at various locations within the local authority area. We hold frequent briefings of trade bodies and representative groups before, during and immediately after a revaluation. We organise briefings of elected members of local authorities at key stages in the process. We provide online access to an extensive set of guidance notes and other instructional material and we operate e-mail and telephone helplines throughout a revaluation. We also operate a joint forum with the Society of Chartered Surveyors Ireland, SCSI, which represents many of the professional advisers to ratepayers.

As committee members will be aware, chapter 11 of the Comptroller and Auditor General’s report on the national revaluation programme sets out two recommendations. It said that, "The office should review its approach to the recording of costs associated with the revaluation programme to ensure that accurate costings of the different elements of and approaches to revaluation are available”. It also said that, “A review of the appeals process with the Appeals Tribunal should be conducted in order to identify and address the causes of not dealing with appeals in a timely manner”. As Accounting Officer, I have accepted both recommendations and can confirm that substantial progress has been made in implementing measures required to address these recommendations. I have provided specific details in relation to these measures in the briefing material, on pages three to five.

In respect of the 2016 appropriation accounts for Vote 16, I can confirm that the Valuation Office has received a clean audit report from the Comptroller and Auditor General with no significant issues arising.

The enactment of the Valuation (Amendment) Act 2015 has represented a sea change in enabling the office to carry out the national revaluation programme. The Act introduced several new provisions with the objective of accelerating the programme. In particular, I draw the committee’s attention to elements of self-assessment by ratepayers, known as occupier assisted valuation. As the Comptroller and Auditor General indicated, piloting of this new process has recently commenced in Laois. Another new provision is the enabling of revaluation by external contractors to augment our internal resources. This approach has been used on a pilot basis to conduct the revaluation of Carlow and Kilkenny, which were completed in September 2017, an independent review of which will be undertaken shortly. The Act also sets out the streamlining of the appeals process. It provides for the wider application and use of statistical information, as has been the case in other countries for some time. It also contains new provisions in relation to improving the operations of the Valuation Tribunal, the independent body which determines appeals made against valuations from the Valuation Office.

The new Act also addressed a number of operational issues highlighted during the implementation of the 2001 Act. Supported by the changes brought about by the 2015 Act, acceleration of the national revaluation programme has involved a multi-faceted approach from the staff and management of the Valuation Office. As our current strategic plan demonstrates, we have concentrated on using a wider range of data sources to inform and validate our valuations, continual improvements in how we organise and carry out our work and developing innovative approaches to valuation, underpinned by the new legislation and new technology.

As a matter of information, the members of the committee will be aware that the Government is bringing about the merger of the Valuation Office, the Property Registration Authority and Ordnance Survey Ireland. The new organisation arising from the merger, known as Tailte Éireann, will have responsibility for several functions, including the State property registration system, the State mapping and surveying infrastructure, the State property valuation service and the development and maintenance of State geospatial information.

This merger requires primary legislation to establish the new entity, and publication of the Tailte Éireann Bill, which is being drafted, will represent the next major milestone. The committee is aware that the Government recently decided that the functions of the merging organisations should be transferred to operate under the aegis of the Department of Housing, Planning and Local Government as and from 1 January 2018.

The Valuation Office is very cognisant that commercial rates are a significant outlay for businesses. We exercise a range of legislative functions set out in the Valuation Acts 2001 to 2015 in an independent manner, and our overriding concern is to ensure that the valuations arrived at for rates purposes are correct, equitable and uniform. This is backed up by the presence of an extensive appeal process and the application of a wide body of internationally developed professional practice, procedures and case law.

The national revaluation programme has gained considerable momentum since June 2015 and the Valuation Office intends to maintain this momentum to the conclusion of the programme.

Chairman

I thank Mr. O'Sullivan. The lead speaker today is Deputy Cassells, who will have 20 minutes, followed by Deputy Connolly, who will have 15 minutes, and all other members will have ten minutes. Members have indicated in the following sequence: Deputies Catherine Murphy, Burke and Cullinane.

Deputy Shane Cassells

The witnesses are all very welcome and I thank them for their time and for coming before the committee. The amount of €1.5 billion is taken in commercial rates from the business operators and owners of this country each year. We are not dealing with small money in respect of the impact and the significance of the work of the Valuation Office. Very important debates are happening in the House in respect of health, education, housing, homelessness and abortion, and they are all dominating the national press. I am sure the witnesses are acutely aware that outside of the bubble of this place and at grassroots level, when the witnesses rock into towns and villages throughout Ireland, a very big issue that dominates the local press and, more pertinently, local council meetings is the revaluation process. The issue is the burden of commercial rates on businesses which make up the main spine of employment in this country and which, in many cases, have been crippled by increases in commercial rates. This is not just by virtue of the revaluation process but by increases by councils which, because they are underfunded by central government, increase the tax on the businesses that employ people and keep them in a job and keep this country ticking over. I have made this point previously to Mr. Lemass. It might not be the sexy story that grabs the headlines in here, but trust me when I say a huge swathe of people are interested in the witnesses' appearance here this morning, and even more so by the figures surrounding the revaluation process they are here to discuss, no more so than in my county of Meath, where I know the Valuation Office is heading to next.

If we start with the figures, since the establishment of the Valuation Office there has been a spend of €41 million. In recent years, the average spend has been €8 million to €9 million per annum. In his conclusions, the Comptroller and Auditor General made the point there has been painfully slow progress on the programme, and in the 15 years since the Valuation Act provided for a programme, only 43% of rateable properties have been revalued. We see an exception in terms of the speed because the average time taken by the office to complete revaluation prior to 2015 was 13 months, and I know Mr. O'Sullivan spoke about the enabling legislation which allowed it to speed things up. This has reduced since 2015. Interestingly, Mr. O'Sullivan referred to the pilot project in Carlow and Kilkenny, which was completed in 12 months and involved more than 5,000 properties, at a cost of €2.5 million for the contract and another €250,000 in contract costs. Again, this is not small money.

Why was the process so slow? I know what the Valuation Office has noted in terms of how it has speeded things up, but how, over the course of more than a decade, was the process so slow given what was at stake? There is now a requirement for all public bodies to be able to identify the costs associated with carrying out their work, and the Comptroller and Auditor General mentioned this interesting point. Obviously we can see the costs associated with the project in Carlow and Kilkenny, but we cannot find a comparable figure because the office does not have the costs. There is a requirement for all public bodies to have systems, practices and procedures in place to maximise the value of public money being spent, but in the absence of these costings we cannot make this adjudication. How can we compare value for money when we do not know how much it costs in the first place?

Mr. John O'Sullivan

I thank the Deputy for his questions. With regard to the pace of the revaluation programme, we have to go back to 2001 when the new Act was brought into force. That Act codified legislation from the mid-19th century and re-enacted a number of provisions. It specifically provided for revaluation for the first time. There were a number of difficulties in operating the statutory steps in the legislation and there is no doubt about this. The purpose of the 2015 Act was to pick up on these issues and streamline the processes. A major change made was to streamline the appeals process. Since 2015, the appeals process has an extended representations step, whereby our interaction with the ratepayer is front-loaded and we try to get it right before we ever publish the valuations.

Deputy Shane Cassells

I do want to get on to appeals, but Mr. O'Sullivan has skipped over my initial question. Why was the process so slow? Leaving aside the appeals, why was the process so slow in terms of the office having only accomplished 43% in the lead up to 2015?

Mr. John O'Sullivan

There were a number of issues. When the legislation was enacted, it took a number of years to get it off the ground. The report of the Comptroller and Auditor General refers to some industrial relations issues at the time, which went back to 2005. The organisation had also lost experienced staff. There was a learning process with running the first revaluations because the office had not done it previously. The opportunity was taken in 2015 when designing the new Act to deal with all of the operational issues we had encountered so we could speed up the process.

Deputy Shane Cassells

I want to nail this. We see the private firm to which the Carlow Kilkenny project was outsourced took 12 months. Is this correct?

Mr. John O'Sullivan

Yes, it was 12 months from the date of signing the contract. In fairness, I should indicate the entire project took two years. There was six months in-house preparation in terms of specifying the requirements. The procurement process also took six months. From beginning to end it was two years, but it was certainly one year from the time the contract was put in place.

We cannot get away from the fact that a number of the statutory steps set out have timelines associated with them in the legislation. Obviously, due process for ratepayers is a fundamental part of this. Therefore, the briefing material I have provided includes a diagram in appendix 2, which is in annex 11A of the Comptroller and Auditor General's report. A number of individual steps must be followed sequentially, with a time element associated with each of them. This is in line generally with the revaluation timelines in other jurisdictions. It takes that amount of time. Obviously, we are trying to shorten the steps all the time and accelerate the programme.

As I mentioned in my opening remarks, the 2015 Act has been a game changer as far as we are concerned. It has given us the wherewithal to accelerate the programme and deploy innovative and new means of accelerating it. We have an end date in mind, which is to finish the programme by 2021. The programme will be repeated on a cyclical basis every five to ten years so we never get into the situation again where we have long periods of time between revaluations.

Deputy Shane Cassells

Why was analysis not carried out prior to this on how much a revaluation process would cost in each local authority area?

Mr. John O'Sullivan

We would have costs. We have certainly costs for the revaluation. The difficulty adverted to, and we agree with this, in the Comptroller and Auditor General's report is that we are able to record costs based on an apportionment. The majority of the costs are to do with staff-related costs and some elements of technology as well. We can accurately assess what those are but not to the extent that we can base it on, for example, time and effort. This is because our valuers would not simply be working on one project at one point in time. They would also be working on revision work or appeal work, etc. We have identified that and we agree entirely that we should be able to do that. The method of doing that would be to implement it through information technology. We have a recommendation, in a recent strategy that was conducted for us, to actually go and acquire a system that would have that inherent workflow and case management type of technology associated with it. We do not have that currently in situ and that is something that we would very much like to have. We agree entirely with the recommendation.

Deputy Shane Cassells

I do not want to get bogged down on this matter. The Valuation Office will be able to achieve that even though the Commissioner has said he will have people working across multiple local authority areas at one particular time, that they are going to be able to create a cost base for each local authority area-----

Mr. John O'Sullivan

Yes.

Deputy Shane Cassells

-----as to how much it costs, and produce that. Okay.

Mr. John O'Sullivan

Modern systems have that type of functionality built into them. When we procure a new system with that functionality built in, it should be possible for us to track how much each step of the process is costing on a local authority by local authority basis.

Deputy Shane Cassells

The Comptroller and Auditor General concluded in respect of how, following revaluation, the change in the rates for a particular property can be, as he called it, "substantial." He put it mildly because he is a gentleman but I would say they are getting hammered. One can see the example that he gave in respect of Limerick where an annual rates bill increased from €16,000 to €490,000. Exactly this time last year, counties across the midlands were hit hard by the process. I met groups in here this time last year who made representations. I remember meeting business owners in Longford last year during my party's think-in in that town. I recall meeting one man who explained how he was hit by a fourfold increase in rates. He was publicly named and there is no problem with me doing so now. It was publican Andy Byrne who was hit by a fourfold increase. Where is the fairness in the system? There is a big difference, as outlined, between Dawson Street in Dublin and Main Street in Longford town.

Given the Comptroller and Auditor General's conclusion, I have a question. He outlined the process that the Valuation Office takes in the build up to the revaluation process and how it engages in x, y and z. What help do businesses receive when faced with a massive spike in their rates bill? Such hikes can put a guy out of business fairly sharpish. Mr. Andy Byrne said that had he been aware of the potential increase in rates it would have influenced the negotiation of the five-year lease for his particular premises. He also said that although the rate rise will not put him out of business it will limit his ability to hire staff. Of course, if we are in the game of job creation, the imposition of that spike has massive ramifications that people should be cognisant of. The Commissioner of the Valuation Office mentioned, when he concluded his statement, that his office is cognisant. I have highlighted the reality for people. How are businesses helped to face the massive hikes generated as result of the work of the Valuation Office? I ask the Commissioner to touch on the appeals process that he was going to talk about as well.

Mr. John O'Sullivan

Yes.

Deputy Shane Cassells

How many successful appeals have there been, on average? How quickly is the appeals process working?

Mr. John O'Sullivan

On the first question, the role of the Valuation Office is very much confined to the valuation exercise, and it is part of the overall local government rating process. The other side of it obviously is that the local multiplier on the pound, if one likes, the annual rate on valuation, is set by the elected members of the local authority.

Deputy Shane Cassells

I know because I spent 17 years on a local council.

Mr. John O'Sullivan

Yes.

Deputy Shane Cassells

Is the Commissioner saying to me that the extent of the work of his office is creating the actual valuation and that is it?

Mr. John O'Sullivan

Yes.

Deputy Shane Cassells

The product of such work results in a guy getting a fourfold increase that, potentially, can put him out of business. What frustrates the hell out of me, and I am not picking on the Commissioner, is he will tell me that his job is to do "X". I shall turn to Mr. Lemass in a second and he will tell me that his job is to do "Y". Everyone is going to tell me that this matter has nothing got to do with them, in terms of policy, and it is the responsibility of the Minister. The net result is that the business owner ends up getting screwed time after time.

Let me talk about the fear that exists. The Valuation Office issued letters to people in Meath before Christmas and the fear the letters generated is unbelievable.

I appreciate what the Commissioner has to do in his job. He has said that the office is cognisant of the impact of its work.

Mr. John O'Sullivan

Yes.

Deputy Shane Cassells

Given that fact, does the Commissioner liaise with Mr. Lemass and the Minister to discuss ways to provide help to people who are hit with a fourfold increase as a result of the revaluation process?

Mr. John O'Sullivan

The Valuation Office has no function whatsoever beyond that set out in the legislation, which is to do with establishing valuation for rates purposes. Beyond, in terms of the policy measures associated or coming downstream from that, the Valuation Office would have no role whatsoever in that. We are a creature of statute. We are a statutory body. What we are allowed do, and what our role is, are circumscribed by the Valuation Acts 2001 to 2015.

On the second question which I think has to do with appeals, generally speaking, after a revaluation, roughly 4% of cases end up being appealed to the Valuation Tribunal. I have some stats, which I think I have provided to the members of the committee. It varies from county to county. Of that 4%, roughly 70% to 80% of those cases do not actually go to a hearing. They are agreed, withdrawn or something else has happened.

Deputy Shane Cassells

Is it 70% to 80%?

Mr. John O'Sullivan

As much as 70% to 80% of the 4% do not actually go to a hearing. Roughly, it probably would be the order of 1% or 2% would typically go to a hearing before the tribunal.

On the outcome of appeals before the tribunal, it very much depends case-by-case, the size of the cases and the volume of the cases. The statistics I can give you, which would be from the two most recent revaluations that would have been before the tribunal, for Limerick and Waterford. The statistics associated with that are that at this stage a loss to the valuations for Limerick and Waterford would be as follows. For Limerick, looking at two-thirds of the outcomes, 0.3 of 1% would have been the reduction in the overall value of the Limerick City and County Council valuation list, as a result of the two-thirds of the appeals that were made. There were 68 appeals made. I am looking at stats here that show me the outcome of the first 45 of those. Waterford was quite similar. Seventy four cases appealed with three quarters of those being dealt with and 0.44 of 1% was the overall impact.

On the points made by the Deputy, we very much appreciate the impact that revaluation and rates have on local businesses. We meet ratepayers every day. We have met representative bodies as recently as yesterday morning when we had a meeting with one of the representative bodies.

The real problem here is that this is long overdue and we are seeing the more severe impact as a result of that. When we do second and subsequent revaluations we do not expect to see the same outcome as such at all. We would expect really that a lot of the difficulties here are being faced the first time around because, as the Deputy says, it has been 30 years since some of these have been looked at.

Deputy Shane Cassells

I will ask my question in a different manner. First, I acknowledge the positive engagement by the office as well-----

Mr. John O'Sullivan

Okay.

Deputy Shane Cassells

-----in actually being out there in the public. The Commissioner has said that the Valuation Office is a creature of the Acts. I am going back to a moral obligation as well. As I have said, it frustrates me that everyone says their limitation is "X" and we go no further. It is a fact that the work of the Valuation Office can have such a massive impact on the viability of a shop, pub or business. Let us remember that these guys depend on people to come in off the street to spend their money and put money in the till in order for the owners to make a living. Every single year I understood that pressure when I tried to strike a budget at county council level. If nobody goes into a premises and there is no money in their till but the rates bill still arrives the business owner must pay the bill. Given that fact, and given the fact that the Commissioner has said that he is very aware, having met people, about the impact of a revaluation, I must repeat my question. Does the Commissioner feel that there is an onus on him to consider the situation? Is there an onus on him to say to Mr. Lemass, the Minister of State, Deputy John Paul Phelan, and the Minister for Housing, Planning and Local Government, Deputy Eoghan Murphy, that revaluation has a very significant impact on businesses as a result of the work of the Valuation Office?

The work will now speed up as the office is progressing quickly in that regard. Will the question be asked as to whether there are alternative ways of doing business? This might be looking at the turnover of a premises rather than the 19th century model of taking into account the valuation of a business, as has been mentioned. Is that something that could be conveyed to the Department and the Minister? Will the witnesses alert people in the Department and at ministerial level of the hardship felt by people whom they contact? That is the difference between the witnesses and others as they meet the people. Are they conveying that hardship in real terms rather than just statistics to the people that could possibly change the system? The witnesses have said the limitations end at a certain point.

Mr. John O'Sullivan

The Deputy makes a number of points. The system we use for valuation is based on estimating the rental value of a property on or around the valuation date. That rental value is based on hypothesis and the legislation in place. The same system is in place throughout the common law world. Other methods would be policy decisions for Ministers and I do not have any role in them. The role of the Valuation Office is to give effect to the legislation as we find it. In association with that, we try to address many of the matters on the ground through information and walk-in clinics. There are different stages in the process but on at least three occasions during the life cycle of a revaluation, we operate walk-in clinics and workshops. The ratepayers can come in off the street and we can explain the process to them. Our role is very much associated with explaining the revaluation process, the information we need and what we do with it, as well as options open to people. Our website is very well equipped with information in that regard. We give every help we can and we understand exactly that it can be a difficult process for many people. It is at that stage where our statutory duty ends. We analyse the figures coming from particular sectors and the geography of different rating authority areas. We do not have a role in rates beyond the valuation of property.

Deputy Shane Cassells

I will turn to Mr. Lemass while he is here. I know the witnesses will return in March and I look forward to that. This matter is very important. The Association of Irish Local Government, AILG, was before the Oireachtas Joint Committee on Housing, Planning and Local Government last November. The witnesses may have been there as well. One of the key tenets of its presentation that day was the matter of commercial rates and the over-dependence of local government on this as an income strand. It indicated that over a period, especially over the past number of decades, local government has become massively overly dependent on those rates. Commercial rates accounted for 37% of overall local authority income in 2016. As I stated, that comes in at €1.5 billion.

There was a period during the crash when councils were trying to freeze rates to give people a chance when they were going out of business. Last year, for the first time, all the main cities - with the possible exception of Dublin - started to increase rates, and in some cases the increase was substantial. Some increased the rate by approximately 5%. As a result of the butchery of town councils, we now have an ongoing equalisation process. Towns that traditionally had a lower rate than the county are now being forced to put up their rates to match the county rate. Those people are getting hit twice.

Is there an acceptance by the Department that the revaluation process is having an exceptional impact on small and medium sized businesses, which still form the bedrock of employment in this country outside this city? Is the matter of commercial rates going to be addressed separately outside this revaluation process?

Mr. Paul Lemass

I will reply to the comments but I should first say that we fully support the ongoing revaluation process. It is an important part of the funding make-up for local authorities. It is difficult the first time it happens but it is very important this revaluation process happens and reoccurs on a regular basis thereafter. I was before the joint Oireachtas committee before Christmas to make a presentation on new legislation for commercial rates. The joint Oireachtas committee has decided not to undertake pre-legislative scrutiny but the proposals we are envisaging, which are currently being drafted into a Bill, would increase the power of a local authority to collect rates. We are very mindful of the fact that 84% of those liable for rates pay them but 16% do not.

Deputy Shane Cassells

That is an average and it varies between counties.

Mr. Paul Lemass

Yes. In some local authorities the figure is as low as 60% for those who pay rates, with 40% not doing so. It is a very significant concern for us and we want a system that is equitable and fair. Therefore, we want to empower local authorities and ensure they can collect rates from all liable ratepayers. That will be part of the revised legislation being drafted now and we hope to have it before the Houses of the Oireachtas in the first half of this year. It is on the list of priorities agreed with the Clerk of the Dáil.

We can also consider the impact of a revaluation. As the legislation currently stands, rates are payable in two moieties, typically one in January and one in July, when the bills go out. If a person has a rates bill, half of it must be paid upfront in January and half must be paid in July. That would be the expectation. The provisions in the new legislation will be that it would be spread out over the course of the year, making it much more manageable for businesses to spread the payments throughout the year. I also suggest that most local authorities of which I have experience would have chief executives and finance departments that are very willing to engage with ratepayers who have difficulty. In many cases, they would engage and agree schedules of payment to help or accommodate people who have experienced increases or who are having trading difficulties. That happened a lot during the downturn.

There are a couple of other points to be emphasised. When a revaluation occurs, the Minister generally signs a rates limitation order. The objective is not to increase the take in rates and it is about the distribution of the rates burden within the county. In the revaluations that took effect for 2018, rates limitation orders were issued to those local authorities. That means they are limited in any increase to the consumer price index and an increase for "buoyancy", which typically relates to new or extended properties. The individual valuation of one property relative to another might change but the overall take is not expected to change as a result of a valuation. The more frequent revaluation process will ensure that the spikes mentioned by the Deputy will be a thing of the past.

Before Christmas I also referred to section 66 of the 2001 Act. I am aware that some businesses require support and rates are not the only lever available to a local authority to provide for small to medium enterprises. Section 66 of the 2001 Act is available and being used by a number of local authorities to provide enterprise supports to small and medium businesses. I highlight the fact that the Department has written to local authorities in its most recent circular, asking them to exercise rates restraint. To be fair, although there were increases last year, in most cases there were no increases since 2008. Last year and in some cases the previous year saw a slight increase but we have to go back to 2008 for increases before that in many cases.

With respect to the overall funding model for local government, the Deputy is aware that the Minister for Finance, Deputy Donohoe, has announced a review of the local property tax. The Department will participate in the review to ensure it addresses, as much as possible, the matter of local government funding. With a collection rate of 84%, we are keen to take it up to a level comparable with the Revenue Commissioners, which has a rate of 96% or 97%. That would bring a significant increase to the amount of revenue coming to local authorities and help them in that regard.

We are aware that harmonisation is a challenge.

However, it has been set out in the legislation that this can take place over a period of ten years. It is matter at local level to choose how slow or fast to undertake that process. Some local authorities have completed it while others are taking a more steady-as-it-goes approach, taking it over multiple years. However, that is a matter of individual local authorities.

Deputy Shane Cassells

I am well aware that the chief executive officers are able to accommodate businesses and Mr. Lemass referred to a schedule of payments over years. Meath County Council did that a number of years ago as a pilot project before the Minister even considered it. We did that and included a business incentive discount. Mr. Lemass said the spikes will reduce but half the country still has to be covered. If someone in Meath is hit with a fourfold increase as the recovery is starting to pick up, that could hit him or her for six. It does not matter how often that person goes into Jackie Maguire or Fiona Lawless in Meath County Council. If the spike is of such significance, it does not matter what schedule of payments is put in place. This goes back again to my central theme of underfunding.

We can argue here all morning, but Mr. Lemass referred to rate restraint. That happened because there was no option given the economy had tanked. I was a member of the county council since 1999 and in the ten years prior to that, the pressure because of the massive development that was happening meant that when the local authority looked at its income, there was a hole in the budget every year and the people who picked up the tab every year were the ratepayers. This relates to the central deficiency in the funding of local authorities. There are two issues at play - the underfunding and the impact of the work of the Valuation Office - with nobody taking responsibility for the bill that ratepayers are subject to.

It is extremely worrying that in a reply to a question on underfunding, Mr. Lemass referred to the review of LPT by the Minister for Public Expenditure and Reform. I hope nobody thinks that is what will be used to plug holes and generate additional income. Mr. Cody from the Revenue Commissioners has been before the committee. Mr. Lemass referred to the exceptional uptake but there is not much more scope in this regard. I hope the Department is not looking at nailing homeowners to give more that they do not have.

Chairman

Before I call Deputy Connolly, I ask Mr. Lemass to elaborate on one comment he made. He said that generally when the office goes to a county under the revaluation process, there is no increase in the overall rates bill for that rating authority. I interpret that to mean there will be winners and losers. However, in a county where the population, business activity and number of businesses have been in decline for a long number of years, the reduced number of businesses will have to pay the same total that was always paid by the county even though there is less activity and a lower population. Does Mr. Lemass get my point?

Mr. Paul Lemass

I get the Chairman's point. The rates limitation order applies to the rate from the previous year and, therefore, it only goes back one year. It looks to the previous year and it provides that the rates for the following year will not be greater than that other than accounting for consumer price index increases. As I understand it, that is the provision at the moment. I will verify the precise operation of this but my understanding is that this just looks back to the previous year.

Chairman

So it is not based on value? Is the revaluation based on the rates take with the amount in euro or does the valuation change?

Mr. Paul Lemass

Sorry, I do not understand the question.

Chairman

Which changes - the valuation or the rate struck by the council - to achieve that?

Mr. John O'Sullivan

Both change immediately after revaluation. Typically, one would go from a relatively small valuation with a multiplier of 50 or 60 to a scenario, for example, where the valuation might be €4,000 and the multiplier might be 0.2.

Chairman

That is a big change.

Mr. John O'Sullivan

Yes, it is a complete reversal. The differences in how the rates bill will look is part of the outreach programme. It looks very different in how it is formulated following revaluation. Provision is made in section 56 of the Valuation Act for the rates limitation order but the statutory power is vested in the Minister for Housing, Planning and Local Government.

Chairman

Is there a separate statutory instrument for each local authority before the Valuation Office can commence?

Mr. John O'Sullivan

Yes, I believe so. The order is done per rating authority area.

Chairman

Will Mr. O'Sullivan forward to the committee a list of the dates they issued in respect of the revaluations done to date or currently under way? If there is a statutory instrument for each local authority, it would be useful to have the schedule.

Deputy Catherine Connolly

I welcome the witnesses and congratulate them on a clear audit. Issues have been raised regarding the revaluation programme and, therefore, I will zone in on questions. I apologise if I appear abrupt but I simply want to get questions in.

My first question relates to IT. The major theme of the Comptroller and Auditor General's chapter is the absence of mechanisms or procedures to identify the cost of the revaluation programme. Does Mr. O'Sullivan accept that?

Mr. John O'Sullivan

Yes.

Deputy Catherine Connolly

He replied to Deputy Cassells that the IT system will change that. I did not hear any timeline. When will that happen? Has it gone to procurement?

Mr. John O'Sullivan

I thank the Deputy for the question. We were aware of this and it was highlighted as well by the Comptroller and Auditor General-----

Deputy Catherine Connolly

When will it change?

Mr. John O'Sullivan

We have to put a business case to the Department of Public Expenditure and Reform. We will do that shortly.

Deputy Catherine Connolly

So no business case has been done yet.

Mr. John O'Sullivan

No. What has happened is that an external report was done which identified the need to do this. The need for this kind of functionality is just one of the recommendations in the report. There are systems out there that we would have to procure. Procurement, after we go to the market, typically takes six months. We hope to have this in place before we start the next batch of revaluations, which will be at the end of 2019. We are in train for a number at the moment.

We have significant ICT systems in place but they just do not have that particular costing functionality that we would very much like to have.

Deputy Catherine Connolly

Our purpose is to ensure value for money and an absence in this regard has been highlighted to us. The Valuation Office has not told us the cost of the revaluation programme. How then can we assess the pilot project in Kilkenny and Carlow that was outsourced? How can we be in a position to analyse the cost effectiveness of what is happening in-house as opposed to externally? I am absolutely opposed to outsourcing from an ideological perspective. I am not here to demonise a public body; I am here to try to establish whether there is value for money. Who is the cause of the delay in putting in an effective system, something that the Comptroller and Auditor General identified some time ago? Is it the Valuation Office, the Minister or politicians? When was the chapter published?

Chairman

On 30 September 2017.

Deputy Catherine Connolly

What was the urgent response to the Minister or whomever is over the Valuation Office in respect of procuring the IT system?

Mr. John O'Sullivan

First, it is not correct to say that we do not know the cost of revaluations. We cost revaluations all the time. However, there are limitations with the mechanism we use, which relates to apportioning the cost-----

Deputy Catherine Connolly

The breakdown. I accept that.

Mr. John O'Sullivan

We need to move from a situation where we apportion costs across salaries and other subheads to one where we can track them based on activity.

Deputy Catherine Connolly

We know that. When will that happen?

Mr. John O'Sullivan

The purpose of that is to go to the market after we secure the funding from the Department of Public Expenditure and Reform, which will be the subject of a business case.

Deputy Catherine Connolly

The business case has not gone to the Department.

Mr. John O'Sullivan

The business case is now being formulated and will go to the Department in the coming months.

Deputy Catherine Connolly

Who is working on it?

Mr. John O'Sullivan

Our office.

This happens entirely within the Valuation Office.

Deputy Catherine Connolly

When did that process start? When will it be completed?

Mr. John O'Sullivan

The process started with a review that was conducted for a new ICT strategy, which was happening at the same time as chapter 11 was being formulated. That strategy was published in December and then we started working on it.

Deputy Catherine Connolly

When will the business case be completed?

Mr. John O'Sullivan

We expect the business case to be completed by the end of February.

Deputy Catherine Connolly

Then it will be before the Minister.

Mr. John O'Sullivan

It will be before the Department of Public Expenditure and Reform too.

Deputy Catherine Connolly

So it will be out of the Valuation Office's hands and before the Department. What is the staff complement?

Mr. John O'Sullivan

Ms Smyth has all the figures.

Ms Mary Smyth

At the end of December, our staff complement was 128 people, with 125.25 full-time equivalents, FTEs.

Deputy Catherine Connolly

I just heard the figure of 128.

Ms Mary Smyth

There are 128 actual bodies and the whole-time equivalent, WTE, figure is 125.25.

Deputy Catherine Connolly

How many of those are valuers?

Ms Mary Smyth

Approximately 70.

Deputy Catherine Connolly

Does the office have enough valuers to enable it to carry out the revaluation project?

Mr. John O'Sullivan

We are currently recruiting additional valuers.

Deputy Catherine Connolly

Does the office have enough valuers or not?

Mr. John O'Sullivan

We are currently recruiting so we hope to have several more.

Deputy Catherine Connolly

Can I take it then that the office does not have enough valuers to carry out the project?

Mr. John O'Sullivan

One could always do with additional staff.

Deputy Catherine Connolly

This is very important. We have a report here. Deputy Cassells has already spoken about the money involved and this is important on every level, although it is difficult for us to read it when we are not experts. It is important to businesses paying the rents, to staff in the Valuation Office who have a statutory duty to act in a just way. I am paraphrasing the law here. There is an onerous responsibility on staff to produce certificates over which they can stand. The Valuation Office is less than halfway through the project. Some 180,000 premises have to be assessed and the Valuation Office has done 78,000. Is that right?

Mr. John O'Sullivan

The total number of properties before we do the revaluation would have been 180,000 but many of those would not have been rateable for a long time.

Deputy Catherine Connolly

I will come back to that because Mr. O'Sullivan expects it went up.

Mr. John O'Sullivan

We think it went to 160,000.

Deputy Catherine Connolly

Why is that?

Mr. John O'Sullivan

A revaluation has not been done heretofore in some counties. Some properties are still nominally on the list which are no longer rateable. Some would, for example, be elements of domestic premises that would have been rateable at one point.

Deputy Catherine Connolly

So there would be a reduction in that from 180,000 to 160,000?

Mr. John O'Sullivan

Yes.

Deputy Catherine Connolly

By September 2017, the Valuation Office had done 78,000. In other words, 43% had been completed. More than half still had to be done. What staff does the Valuation Office need to do that in light of the importance of this exercise?

Mr. John O'Sullivan

We identified staffing requirements in 2017 and we are very close to achieving those now. We hope to take on seven additional staff as a result of a competition we ran very recently. We have another competition on the way for a higher grade of staff. That is the staffing complement we intend to deploy. Much of what we do involves technology as well as staff. The Deputy rightly makes the point that having well trained staff who are professional at what they do is an absolute sine qua non.

Deputy Catherine Connolly

I am looking at the accounts. The chapter refers to restoring a credible service. On page 11 of the accounts for the Valuation Office, there is an explanation, under "Administration - pay", which states "A recruitment campaign for ten additional valuer staff was held early in 2016 but only four staff were ultimately appointed from that competition." The Valuation Office was looking for ten but only got four. There is clearly a big gap in the staff here. I will make a comment and then listen to Mr. O'Sullivan's answer. I read this with horror. I look at the number of premises that have to be assessed and see that only four additional staff when ten were sought to be recruited. The relevant chapter also states, "A further campaign is planned in early 2017." Will Mr. O'Sullivan give me an update on that? The chapter further states "There was provision in the estimate to pay €0.2 million for a restructuring of staffing levels to restore a credible structure." Will Mr. O'Sullivan deal with that? It is further stated, in a way that does not make sense to me, that "Due to protracted discussions with staff interests, no progress was made on this issue until late 2016. Both of these issues resulted in a significant variance from planned expenditure." Will Mr. O'Sullivan elaborate on that?

Mr. John O'Sullivan

Our structure changed from 2011 to 2016 and therefore we had to replenish it. Many people had left the organisation on foot of the various retirement programmes, etc. We had to replenish our capacity. As a result, we had an engagement with staff associations and unions which took longer than we had anticipated and this meant that the money earmarked for some changes in structure was not expended in that year. That was sorted by the end of the year and, throughout 2017, we ran a further recruitment programme. As a result of that, we have taken on additional staff. Ms Smyth will give us the details.

Deputy Catherine Connolly

How many additional staff did the Valuation Office take on?

Ms Mary Smyth

We took on nine staff from the second competition, so 13 came in during 2017. We have requested seven additional staff from a competition run by the Public Appointments Service.

Deputy Catherine Connolly

When was that?

Ms Mary Smyth

It concluded in this month, January.

Deputy Catherine Connolly

The Valuation Office made a request to approve the process of recruiting those staff.

Ms Mary Smyth

There are seven people in clearance at the moment.

Mr. John O'Sullivan

The competition has been run and the appointments offered.

Deputy Catherine Connolly

Go back to the original recruitment campaign when the Valuation Office only got four out of ten staff. Why was that?

Mr. John O'Sullivan

One factor would be that there is probably a shortage of graduates in the built environment sector at the moment.

Deputy Catherine Connolly

Is Mr. O'Sullivan telling me that they did not come forward?

Mr. John O'Sullivan

We were not in a position to make all the appointments we would like to make. We did not have the number of applicants we would like to have had who would have had the necessary qualifications. These were graduates positions at the grade of valuer grade III.

Deputy Catherine Connolly

Was the recruitment campaign at fault? The Valuation Office got the staff the second time around.

Mr. John O'Sullivan

There was probably a new cohort of people on the scene by the time we ran the second competition.

Deputy Catherine Connolly

It was the fact that people were available the second time around and nothing to do with the recruitment campaign or what the office looked for the first time.

Mr. John O'Sullivan

There was no problem with the recruitment process. The numbers just were not there. The market is very keen to recruit graduate valuers at the moment.

Deputy Catherine Connolly

I wish to clarify something. The Valuation Office has onerous duties. There is the revaluation programme, which is the chapter's subject. The office is constantly doing revisions if requested by the occupier, owner or local authority, so that is an ongoing programme. Separately, new or amalgamated buildings require a rating. Is that right? A building could be demolished and a new business could go up on the site. Would the new business require a rating?

Mr. John O'Sullivan

It would depend on circumstances. It could be an existing business' extension, or it could be a brand new one.

Deputy Catherine Connolly

So they require assessment as well. The Valuation Office has a separate role to do valuations for Government buildings. What is the office's total staff for all of that work?

Mr. John O'Sullivan

Some 128 at the moment.

Deputy Catherine Connolly

There are 128 staff. What will that rise to?

Mr. John O'Sullivan

It will rise to 135.

Deputy Catherine Connolly

Will that be the office's full complement?

Mr. John O'Sullivan

Our full complement would be of the order of 140.

Deputy Catherine Connolly

In order to carry out all of that work in an efficient, effective manner, in a just way, the office requires 140 staff. So it is short in that regard.

Mr. John O'Sullivan

We are a number short of it. I should outline that it is also a matter of optimising our processes and procedures, which we are doing at the moment as well.

Deputy Catherine Connolly

I hope that is going ahead in any event. I am trying to examine what I see. It is difficult and onerous for staff to carry out a task when there are not enough of them. I will address the matter of inspections and the job of the valuer again. How many go to inspect the site that they are putting a valuation on?

Mr. John O'Sullivan

I will ask Mr. Lavelle to go into some of the details here. To clarify the question, is it the percentage of properties inspected during a revaluation or otherwise?

Deputy Catherine Connolly

Mr. O'Sullivan is the expert. I asked about inspections and I hope he will enlighten me as to what properties are inspected.

Mr. John O'Sullivan

I ask Mr. Lavelle to go into the details.

Mr. Declan Lavelle

The Deputy referred to the three areas of our work, including revaluation, revision, whereby we bring valuations up to date-----

Deputy Catherine Connolly

I ask Mr. Lavelle to tell me about inspections.

Mr. Declan Lavelle

Within those three areas, when it comes to revision, where a new property comes on stream or an existing property is extended, our valuers inspect those properties to bring that data up to date.

Deputy Catherine Connolly

In that context of revisions, therefore, they are all inspected.

Mr. Declan Lavelle

Yes. In terms of the Government related work, in other words, the market valuations, which comprise the non-statutory function, again all those properties are inspected. When we conduct a revaluation in a particular rating authority area, we usually inspect approximately 25% of those properties. We are looking at rental information, rental transactions, verifying the details around those transactions and verifying the property to which those letting agreements relate. We do not inspect 100% of properties at revaluation because we already have a database that confirms the data we hold on those properties, so what we are trying to do is establish what we would call the valuation norms in a particular area by reference to a number of transactions. Generally speaking, to do that we inspect about 20% of properties-----

Deputy Catherine Connolly

Twenty per cent.

Mr. Declan Lavelle

Twenty per cent, at the revaluation stage, keeping in mind that every property on the valuation list has been inspected by our office at least once.

Deputy Catherine Connolly

I thank Mr. Lavelle for the clarifications. All revisions get inspections and all Government property gets inspections. Revaluation is at 20%, and the office relies on other sources of data to help it make its decision.

Mr. Declan Lavelle

No, sorry. We are inspecting the properties at revaluation because we have transactions on those properties, our trading data, and we are inspecting the property to confirm the relationship between that lease agreement and that particular property. We analyse those transactions and then the analysis of that is-----

Deputy Catherine Connolly

If I can interrupt Mr. Lavelle, where am I wrong on that? I appreciate he is giving me three clarifications, two of which we are not arguing about, and, we hope, we are not arguing about the third. I am simply seeking elucidation on it. Mr. Lavelle used the figure of 20% for the revaluations - the properties subject to revaluation. Twenty per cent have an on-site manual inspection.

Mr. Declan Lavelle

Yes.

Deputy Catherine Connolly

I am not misunderstanding that. That is to check out information the office has been given in terms of trading and all the other criteria it uses.

Mr. Declan Lavelle

Yes.

Deputy Catherine Connolly

What would be a good practice regarding the number of inspections?

Mr. Declan Lavelle

At revaluation?

Deputy Catherine Connolly

Yes.

Mr. Declan Lavelle

That would be pretty much in line with best international practice, probably a little bit beyond best international practice. In an ideal world we would hope that as we go through successive revaluations, that might come down to nearer 10%.

Deputy Catherine Connolly

Only 10% inspections. Will Mr. Lavelle spell out the criteria on which the office is relying?

Mr. Declan Lavelle

On that element of the project we are looking at lease information that we hold on certain properties and in some cases, for a certain class of property, we are looking at trading data because for certain properties it is not the size of the property that drives the value but the trading data that drives the value.

Deputy Catherine Connolly

Of those revaluations, how many have been appealed?

Mr. Declan Lavelle

Sorry?

Deputy Catherine Connolly

What is the appeal rate?

Mr. Declan Lavelle

Our appeal rate across the Reval 2017 projects is a little in excess of 4%.

Deputy Catherine Connolly

Has the office examined the errors made?

Mr. Declan Lavelle

If we look at the process, those appeals-----

Deputy Catherine Connolly

Has the office looked at the errors made?

Mr. Declan Lavelle

Yes.

Deputy Catherine Connolly

What are the themes emerging from that in terms of the type of errors being made in valuations?

Mr. Declan Lavelle

I am not too sure I would call it an error but, generally speaking, what we have is that the property has changed to some minor degree since the last time we looked at it. It is usually things of that nature or perhaps what has happened is that the particular lease transaction or letting agreement was not provided to us at the early stage of a project and that information is provided to us now. If we go back a step, during the revaluation process, after we do the initial analysis, we issue what we call proposed valuation certificates to all the ratepayers.

Deputy Catherine Connolly

There is a process.

Mr. Declan Lavelle

It is a process. Usually, at that stage ratepayers in some cases will give us information that we did not have heretofore. That will lead our valuers in some instances to recalibrate the valuation levels they have applied.

Deputy Catherine Connolly

Rather than it being an error, Mr. Lavelle is saying it is just lack of information.

Mr. Declan Lavelle

Yes.

Deputy Catherine Connolly

There were no errors made in assessing the size of the building being rated.

Mr. Declan Lavelle

That would be very rare. The building may have changed since the last time we were there, something very minor but not significant.

Deputy Catherine Connolly

I see the Chairman looking at me so I will move on. A total of 43% have been completed. First, where are we regarding Galway city and county? Second, an independent review is promised for the Carlow-Kilkenny one that was outsourced. Why is there a delay on that? Why has it not started? Third, will Mr. Lavelle provide clarification on the self-assessment? I believe the pilot project is in Laois, so the office will be following up on that.

Mr. John O'Sullivan

To confirm, in reverse order, Laois is the pilot county for the self-assessment. It is-----

Deputy Catherine Connolly

I will leave that for the Chairman.

Mr. John O'Sullivan

Yes, absolutely.

Deputy Catherine Connolly

I will use my time for the other two questions.

Mr. John O'Sullivan

The independent review not only considers Carlow and Kilkenny but also the other revaluation projects that were done in-house. When we say the project is done, it is done except for the appeals. There is still ongoing work associated with the revaluation, so the contractor that was contracted to carry out the Carlow-Kilkenny revaluation is still on board to pursue the appeals arising from that. It is incorrect to say it has left the project. It is still very much-----

Deputy Catherine Connolly

I am not incorrect. I am asking Mr. O'Sullivan about the review and the reason it is taking so long. He is clarifying now-----

Mr. John O'Sullivan

Now is the right time to have it.

Deputy Catherine Connolly

I ask Mr. O'Sullivan to just listen to me. I am asking a specific question about the reason a review has been delayed and Mr. O'Sullivan is saying it is not delayed. I accept that. When will the review start and when will it be completed so that he can go back to the kernel of what the chapter before us is about, namely, value for money?

Mr. John O'Sullivan

The review will be conducted before the end of March. It is part of our strategic plan. It is a commitment in that. We will commission an outside body to help us to write it, and it will include looking at factors like value for money and the costs associated with the various-----

Deputy Catherine Connolly

That will be done internally with the help of an outsider to write the report-----

Mr. John O'Sullivan

Yes.

Deputy Catherine Connolly

-----but the office is conducting the analysis.

Mr. John O'Sullivan

Yes. We will be giving the figures. Obviously, the contractor which did Carlow and Kilkenny will be feeding its figures into the equation as well.

Deputy Catherine Connolly

What about the city and county of Galway?

Mr. John O'Sullivan

Galway is part of what we call Reval 2021, starting in 2019 and ending in 2021. I provided a map-----

Deputy Catherine Connolly

Yes, and I have read all that, so when will it start in Galway?

Mr. John O'Sullivan

The plans will be October 2019.

Deputy Catherine Connolly

For the city and county.

Mr. John O'Sullivan

Yes. The intention would be to do six counties with eight local authorities. It would be down the western seaboard - Donegal, Mayo, the two Galway local authorities-----

Deputy Catherine Connolly

October 2019.

Mr. John O'Sullivan

Yes, and Clare, Kerry and Cork.

Deputy Catherine Connolly

I will come back in later. I thank the witnesses.

Chairman

The next speaker is Deputy Catherine Murphy who will be followed by Deputy Burke and Deputy Cullinane.

Deputy Catherine Murphy

The witnesses are very welcome. It strikes me that Richard Griffith did a fantastic job in being able to value every house, every piece of farmland and every business in 12 years between 1848 and 1860. I might be slightly wrong on that. What a remarkable job to do setting out on a horse, and here we are using valuations from 1988. It seems extraordinary, and that was an original valuation rather than a revaluation. I never quite understood that. I realise the area is more complex now in terms of types of businesses and so on, but we have the advantage of satellite mapping and IT systems that will multiply the value of an individual property. I accept that the job cannot be done without the people but it is extraordinary that in the 21st century it is taking longer to do than somebody who set out in the 19th century with such rudimentary assets.

I want to focus on my constituency of Kildare and use some of the experience of that because it is a fairly recent revaluation. I support what was set out in the previous legislation in that the revaluations are more regular. It is right that that does not fall off track because it stops and that we will not have the shocks when there is a big gap in the valuation timeline. From observation, however, I would have questions about some of the methodology. How does that change?

In the case of a retail premises, the front is valued at something, the middle is given another value and the back is valued at something else again. If it is a very big premises, the owner can get a greater value for that piece at the back that is given a lower valuation. Are the officials considering things like undermining main streets by virtue of the fact that there is a bigger portion of that more expensive piece to the front? It makes it difficult to absorb it. It was very difficult not to draw that conclusion when examining how the revaluation happened. There were big variations. For example, the equine sector was very heavily hit in places like Kildare, which was not the case in the past. Do the officials consider those in terms of the changes they will make when it comes to the revaluation?

Mr. John O'Sullivan

I will ask my colleague, Mr. Lavelle to go into some of the detail of the valuation methodologies we used. The Deputy made reference to particular sectors. We engaged very closely and specifically with them. One of the stages that is very important is called "representations". That is when we get feedback from the ratepayer after we give them our initial proposed valuation. We put a lot of time and effort into hearing the representations which were made with regard to that and other sectors. Every representation got due consideration, whether it was in retail or any of the other sectors associated with it. That feeds into the adjustments we make on foot of the representations before we publish the final valuations. To give the Deputy a snapshot before I hand over to Mr. Lavelle-----

Deputy Catherine Murphy

I need to get short questions because I only have ten minutes.

Mr. John O'Sullivan

The overall appeal rate in Kildare is 4.45% to the valuation tribunal.

Deputy Catherine Murphy

Yes, I saw that.

Mr. John O'Sullivan

I will ask Mr. Lavelle to go into the valuation methodology. Essentially with retail, there is a technique called zoning that is used. It is an international methodology for dealing with that.

Mr. Declan Lavelle

Essentially what we are doing at any stage in a revaluation project is analysing the market and looking at the rental transactions. One of the key tools the valuation offices and all surveyors throughout the developed world use for retail properties is the concept of zoning. The theory is that the first 20 ft or 6.1 m back from the street is twice as valuable as the next and so on.

Deputy Catherine Murphy

We are looking at value for money. What we do not want is the benefit to go to out-of-town multiples that have free car parking, for example. That could undermine or reduce the income that might come to a local authority from a vibrant town centre. I question the methodology.

We often hear people saying it is almost a disadvantage to upgrade a premises. Presumably that is something the officials will examine. They say it is neutral when they do the revaluations and that people can look for a revaluation at an interim point. How does it impact on that neutrality if there are significant revaluations in the interim and if there is not buoyancy with new commercial properties?

Mr. John O'Sullivan

There are two concepts. Revision is the term used to change the valuation of a property between revaluations. Revaluation is a new valuation of every property in a local authority area at the same time, from the ground up and from first principles. Under the definition in our legislation, in order to bring about a revision, there has to be what is known as a material change of circumstances to the premises. It is a technical definition but would mainly refer to physical changes such as an extension or perhaps closing down and separately sectioning off part of the unit.

In a revaluation, we are very much looking at the rental value of the property. We are examining the transactions and applying our analysis of that to all the other properties that do not have a specific rental transaction around the valuation date. That is why we inspect some of those properties as well. An improvement can affect the revaluation to the extent that it would reflect the rental value of the property. That is how it would translate.

Deputy Catherine Murphy

We do not want to disadvantage people.

Mr. John O'Sullivan

No. There is a lot of evidence. Revaluation is the tool through which we can pick up on things. We all know of towns in which a street that was very prosperous at one time is not so prosperous any more. Perhaps the mart that was at the back of it has now moved two miles out the road. The street now has a lot of properties to let and a lot of vacancy. We expect to pick all of that up in a revaluation. We would expect the rental levels to have come down a lot. That feeds back into the actual valuations. We should not lose sight of the fact that over 60% of ratepayers achieve a benefit in their rates bill from the revaluation.

Deputy Catherine Murphy

Do the officials consider things like pay parking as opposed to the multiples with large car parks in respect of retail?

Mr. John O'Sullivan

What we are looking at all the time is rental values. We would often see a premium for the car parking built into the rent. That would be reflected in the valuation.

Deputy Catherine Murphy

I presume it is all satellite mapping at this stage?

Mr. John O'Sullivan

It is all digital mapping, yes. We have a mapping database, which uses the Ordnance Survey Ireland data as the base data, and we have our own data overlaid on top of that.

Deputy Catherine Murphy

It is five years since the announcement of the merger. It seems logical to merge the Valuation Office, the Property Registration Authority and Ordnance Survey Ireland. Some of the mergers were not that logical. Is that impacting on the office's own resources in respect of staff? Why is it taking so long? Is it dependent on legislation?

Mr. John O'Sullivan

It is depending on legislation. A general scheme of a Tailte Éireann Bill was published some time back. My understanding is that the Bill itself, as distinct from the heads, is with the Office of the Attorney General for drafting. The merger does not have any impact on the staff of the Valuation Office at present. Two of the merging bodies would be a corporate entity in their own right; legislation established them and changes have to be made to that.

Deputy Catherine Murphy

The Comptroller and Auditor General has given us a pretty graphic description of some of the changes. Limerick was used as an example. Supposing there is a big revision in the middle, not a revaluation where it is possible to control its neutrality. If there was a revision in respect of one or two big entities and there is no buoyancy, one would not have such neutrality. Are there examples of that impacting on the income of the local authority?

Mr. John O'Sullivan

Yes, if, for example, a very large premises or new entity was set up in a town, the local authority would list that for revision with us. We would do the revision and that is added to the valuation list. The local authority gets a certain buoyancy from that for its rates and overall budget. As Mr. Lemass indicated earlier, it is different in a revaluation whereby we are doing all of the properties at the same time. There is a specific statutory cap put on the amount, that is, the overall rates take, that the particular local authority can operate in the year immediately after a revaluation. New properties coming on stream have a beneficial effect on the finances of a local authority.

Deputy Catherine Murphy

How are new premises captured?

Mr. John O'Sullivan

They normally would be listed by the local authority for revision to us. There is an online system.

Deputy Catherine Murphy

They notify the Valuation Office after planning permission, commencement notices and things like that.

Mr. John O'Sullivan

Yes, the normal thing is when it comes into beneficial occupation, which is effectively when it starts being used.

Deputy Catherine Murphy

The map is quite extraordinary. There is nothing as graphic as a map like this to show how we are moving to the west. After the obvious ones in which there has been large growth such as Dublin and its surrounding counties, I would have thought that Galway and Cork would have been the next two on the office's target.

I am surprised at the way the process of conducting valuations is structured. Why did Mr. O'Sullivan structure it in this way?

Mr. John O'Sullivan

At the beginning of the programme, the initial decision was to deal with the larger Dublin local authorities. Waterford and Limerick were next because we wanted to perfect our technique of dealing with counties that had a mix of urban and rural. There was concern that we would ensure that we would not have disparities between contiguous counties. As Deputy Catherine Murphy states, it is very much about having whole sweeps of counties done around the same valuation date. We also have to have an eye to the future, to the second and subsequent revaluations because we want to group larger counties together so that they can be done. One cannot do it perfectly because there are towns sitting on the edges of county boundaries but we try to take that into account.

We have colour coded the map. Everything shaded in purple has been done, blue is under way and green is the final stage of the programme. The western seaboard counties have certain elements in common, for example they would have a tourism and leisure sector but some of the businesses in those areas would be seasonal. We would think that may be reflected in the revaluation as well.

Deputy Catherine Murphy

Under statute, the Valuation Office is required to have an ongoing process of revaluation. Is the future-proofing of the revaluation work captured in the staff complement that is recruited?

Mr. John O'Sullivan

Yes. We have already done a second revaluation of south Dublin and Fingal is undergoing its second revaluation. That is part of the cycle and as we move through the gears, so to speak, when we finish the first one, there will be more counties done at the same time.

Deputy Catherine Murphy

Institution memory is not retained when outsourcing occurs. I presume that outsourcing might happen occasionally but it should not be the pattern.

Mr. John O'Sullivan

The outsourcing project was a pilot study in counties Carlow and Kilkenny. The vast majority of the work done on revaluations in 2017 was carried out by in-house staff.

Deputy Catherine Murphy

How are the pilot projects evaluated?

Mr. John O'Sullivan

We are about to appoint a contractor to help us to do post-analysis on the work in both counties Carlow and Kilkenny and the projects that we completed last September.

Deputy Catherine Murphy

When does Mr. O'Sullivan expect that will be completed?

Mr. John O'Sullivan

That should be completed by the end of quarter 1.

Deputy Catherine Murphy

I have visited the Valuation Office in the Irish Life mall to buy maps and look at the council valuation books, which I understand have now been transferred to the National Archives. That generated an income but obviously there was a cost to facilitate it. Where does the matter stand at this stage?

Mr. John O'Sullivan

We have a programme to digitise all our historical records. They are an unique source, dating from the mid-1850s up to the current most extant early census. We are probably the main source for genealogical research in the country. Obviously, these are working documents but they are also archive documents. We have made a great deal of progress digitising them in recent years. The next stage will be to publish them online and index them in a way whereby they can be useful. A large group of people doing genealogical research on an ongoing basis would attend the office. We have some figures on that. There is not a great deal of money collected from those doing research but we think it is an important part of what we do and dates back to Griffith's Valuation.

Deputy Catherine Murphy

When I first looked at the Griffith's valuations, I thought Ireland was one of the most industrious countries because every house had an office. However, I then discovered that the "office" was the toilet. It was quite extraordinary.

Deputy Peter Burke

I thank the witnesses for attending. Does Mr. O'Sullivan think the Valuation Office operates the valuation process efficiently?

Mr. John O'Sullivan

We are always seeking to improve how we work and we look critically at our processes. We liaise with our peer organisations in Northern Ireland, England Wales and Scotland and internationally. We commissioned a study by two of the leading international organisations, the International Property Tax Institute and the Institute of Revenues Rating and Valuation to assist us in modelling our business processes and that was done at the end of 2016. They identified a couple of areas to work on. Some of the recommendations would have to do with the better use of field technology. It is always an ongoing process. We like to think we are continuously getting better at it but there is no place for complacency.

Deputy Peter Burke

Would Mr. O'Sullivan be prepared to say "Yes"?

Mr. John O'Sullivan

I am quite optimistic about what we are doing but it is continuous improvement. The technology is changing all the time.

Deputy Peter Burke

I would say that part of the reason is that Mr. O'Sullivan does not know because the office has not got the systems and cost centres to see how much each valuation costs. As of September 2017, the Valuation Office has completed 43% of the valuation process and has completed valuations on 78,000 out of 180,000 properties. Does Mr. O'Sullivan think the staff in the organisation recognise the urgency attaching to the process?

Mr. John O'Sullivan

Yes, they do. It is part of our business planning for our strategic plan every year. Let me give the Deputy an update on the figures. The figure of 180,000 properties is based on an historic figure but we think the true figure is 160,000 and we will be removing many properties that are no longer rateable from the list. The figure of 43% or 44% of the total number of properties were revalued by September but there is another statistic we always look at, that is the percentage of the valuation base that represents in monetary terms. That figure is 72%. With the latest batch of valuations - the areas on the map to which Deputy Catherine Murphy referred and which are shaded blue - when those eight counties are completed, 82% of the base, in monetary terms, will have been revalued. In numerical terms, it is 62%.

The Deputy is absolutely correct, a lot of work remains to be done. There is a sense of urgency associated with it.

Deputy Peter Burke

There is a significant amount of work to be done, considering that some counties will not examined until 2021. Let me draw attention No. 5 on page 14 of the Vote, which relates to employee numbers and pay. There are 117 full-time equivalents. I am perplexed that only six of the 117 full- time equivalents availed of overtime and that the maximum payment in 2016 was €3,578, which would indicate that one person used 90% of the overtime budget. If Mr. O'Sullivan is telling me that the staff know that the task is urgent, why is nobody doing overtime?

Mr. John O'Sullivan

I will ask Ms Smyth to explain the detail of that.

Ms Mary Smyth

I will deal with the question of overtime. Our valuer staff are a graduate grade and they start at administrative officer level. As a result, they do not come within the terms of the overtime. They are expected to work whatever hours it takes to get the job done.

Deputy Peter Burke

What percentage of staff at graduate level come under that contract?

Ms Mary Smyth

The entry level is at administrative officer level which is graduate valuer grade III, the equivalent for valuer grade II and valuer grade I is assistant principle level.

Deputy Peter Burke

What percentage of staff is at the valuer grade III entry level?

Ms Mary Smyth

Of our valuers, approximately 50% would be at entry level.

Deputy Peter Burke

So can the other 50% of staff do overtime?

Ms Mary Smyth

The overtime is mainly confined to the administration staff or to the officers who open the building early and close it late at night.

Deputy Peter Burke

Is Ms Smyth telling me that if one had to value a property in one of the counties in question, no officer valuing that property can claim overtime and that the time is built into his or her initial contract?

Ms Mary Smyth

That is correct.

Deputy Peter Burke

In terms of the complement of 50% of staff that can do overtime, am I correct in thinking that the number of valuers is 70?

Ms Mary Smyth

There are 70 valuation staff.

Deputy Peter Burke

Did Ms Smyth say that 50% are not on the initial contract?

That does not really add up.

Ms Mary Smyth

None of our valuer staff does overtime. Overtime is confined to administration staff and those who are not at AO level but, rather, clerical or administration level.

Deputy Peter Burke

There is no appetite at administration level to get applications processed, as evidenced by the 50% of staff who are not doing overtime. Is there a reason for that? I note the Valuation Office returned a surplus of €1.5 million to the Exchequer. Why is that money being returned when there is a massive urgency to get parity and fairness throughout the system and ensure businesses are revalued?

Ms Mary Smyth

In general, administration staff are involved in support services such as HR, finance, ICT, public office and archives and do not work day to day on the valuation process. Some administration staff work with the valuation services.

Deputy Peter Burke

On ICT, the issue of how far behind the cost centres are and there not even being a business case to present to the Department in that regard has been raised. Do the witnesses not think it unusual, bearing in mind how far behind the business case is, that of a full-time equivalent staff of 117, and even allowing that only 50% of staff qualify for overtime, one person used up 90% of the available overtime and only six people in the entire organisation did overtime?

Mr. John O'Sullivan

The key point is that none of the valuer staff is entitled to overtime.

Deputy Peter Burke

I understand that but I am referring to the 50% who are eligible for overtime, such as ICT staff, bearing in mind the need to get the cost centres together, or other staff dealing with administration such as paperwork within the office.

Mr. John O'Sullivan

Those staff have standard flexible working hours. The requirement for overtime does not arise in those areas. People sometimes work remotely at weekends.

Deputy Peter Burke

There is a demand for overtime in those areas. I do not agree that a business case that is not there has to be forwarded to the Department. There is demand for overtime because Mr. O'Sullivan cannot be 100% sure the office is operating efficiently, as evidenced by his inability to answer "yes" to my question in that regard. There is, therefore, a demand to improve the systems and I find it unusual that is not being done.

Mr. John O'Sullivan

It is for Ms Smyth, the head of ICT and me to formulate the business case.

Deputy Peter Burke

Mr. O'Sullivan and Ms Smyth will use up the overtime allowance.

Mr. John O'Sullivan

I do not think that will be the case.

Deputy Peter Burke

On efficiency, I note the slow pace of valuation. How does Mr. O'Sullivan justify that a business in Limerick or Westmeath may have had a 400% increase in rates but an equivalent property in a place such as Cork or Wicklow might have to wait seven years more before it is revalued? The initial revaluation in some counties was carried out during the deep recessionary period, and that was the case for many midland counties, yet no revaluation was carried out in certain other counties during that period and businesses there are, in theory, operating off a lower rate, as some are, and will be revalued in 2021 when the recovery gathers pace. How is that fair?

Mr. John O'Sullivan

The Deputy has put his finger on the need to complete the first revaluation and then continue undertaking cyclical revaluations. The difficulty in this regard is that no revaluation has been carried out to date. Most of the extreme cases are identified at the first revaluation.

Deputy Peter Burke

I am missing Mr. O'Sullivan's point. His office has returned some €1.5 million to the Department but it is not getting through the revaluation at a fast pace. Some businesses in certain categories want a clear reason why they have experienced a 400% increase yet businesses in other counties may have to wait almost a decade for an increase, which is of particular relevance against the current economic backdrop. It does not appear that Mr. O'Sullivan is trying to push this forward, recognise that a huge injustice is being done to businesses in certain areas, and demand the necessary resources from the Department. Is he knocking down the Department's door to highlight the unfairness in this regard? The issue I am raising is that the Valuation Office has returned money to the Department.

Mr. John O'Sullivan

That return of funds related to a time when we experienced difficulties. We were putting a new structure in place and there were delays in negotiating it with the staff associations. That was immediately corrected in 2017. We secured an additional €750,000 from the Minister in the 2017 Estimates to increase our staffing level in order to deal with the urgency of the matters outlined by Deputy Burke.

Deputy Peter Burke

That will give no solace to a business faced with a big increase during a recessionary period while businesses in other counties receive no increase. The matrix provided indicates that businesses in several counties will not be revalued until 2021. Some might consider such businesses lucky. There seems to be some disparity as retailers have to shoulder a bigger increase than industrial units or businesses in IDA parks etc. Our town team did figures in that respect for Mullingar, where approximately 56% of retailers in some instances but only 16% of industrial units experienced increases. The matrix is strange. At a time when retailers are under severe pressure, they seem to be targeted in some counties. How are they selected? It is evident that Dublin, which has a huge number of businesses, was first to be revalued but the valuers did not go near Cork, which has over 20,000 units. How does the office select which county to revalue? How did it select, for example, Westmeath over Wicklow or Cavan?

Mr. John O'Sullivan

Every county has to be revalued within the life cycle of the project------

Deputy Peter Burke

Which could take 20 years, judging by how things are going.

Mr. John O'Sullivan

No, 2021 is the end date for the programme. We select groups of neighbouring counties that have much in common. It is mainly based on geographical considerations. The first batch of local authorities revalued were in Dublin because they were high value. We then moved to Limerick and Waterford because they had a blend of urban and rural and we wanted to test the------

Deputy Peter Burke

Wicklow is not very far from Dublin.

Mr. John O'Sullivan

It is not. Wicklow is part of the batch currently being revalued.

Deputy Peter Burke

I am trying to highlight how much things have changed since 2014. I am not clear about the selection process because as regards the quantity of businesses, a huge amount of money is tied up in Cork city rateable valuations. As regards geographical reasons for selection, the matrix shows that some neighbouring counties have not been revalued and are getting a pass, with Wicklow not to be revalued until 2021. I cannot return to my constituency and tell people this system is fair.

Mr. John O'Sullivan

Wicklow will be revalued in 2019.

Deputy Peter Burke

Does Mr. O'Sullivan think the system is fair?

Mr. John O'Sullivan

We would prefer if it could be done more quickly------

Deputy Peter Burke

He does not think it is fair.

Mr. John O'Sullivan

------but we have to phase it and cannot do the entire country in one go. Our ultimate objective is to be able to do that. We must manage the situation while we complete the first revaluation. To clarify, the counties shown in blue, namely, Meath, Louth, Monaghan, Cavan, Tipperary and Laois, are currently under way to be-------

Deputy Peter Burke

Does Mr. O'Sullivan think it is fair?

Mr. John O'Sullivan

It would be far better if we could revalue all counties at the same time. We are dealing with legacy issues that are not easy to overcome. This revaluation is the first of its kind in 160 years and much has to be done. We are trying to carry out the exercise as quickly as we can.

Deputy Peter Burke

Mr. O'Sullivan can appreciate that a business may find the system very unfair.

Mr. John O'Sullivan

I appreciate that a business may find it unsatisfactory and we often pick up on that when we are on the-------

Deputy Peter Burke

A business may find it unsatisfactory or unfair. As regards Mr. O'Sullivan not being prepared to say the Valuation Office operates efficiently, is the €41 million referenced by the Comptroller and Auditor General as having been spent by the office on this process to the end of 2016 reflective of the phase 1 valuation of south Dublin, Fingal, Dún Laoghaire, Dublin city, Waterford, Cork county and Limerick city and county? Is that €41 million related to those revaluations?

Mr. John O'Sullivan

I will ask Ms Smyth, who has the figures, to address that. We will also bring the Deputy up to date with what we believe the-------

Deputy Peter Burke

I want to know to which counties that €41 million relates.

Ms Mary Smyth

The updated figure is €44 million------

Deputy Peter Burke

I want to deal with the €41 million, not the updated figure. I have------

Ms Mary Smyth

It is for the revaluation for all counties up to Reval 2017------

Deputy Peter Burke

The €41 million was-------

Ms Mary Smyth

------which covers the ones we have just finished. It relates to everything except the revaluations currently under way and Reval 2021.

Mr. John O'Sullivan

It relates to the four Dublin local authorities, Limerick, Waterford and the batch of counties we completed last September.

Deputy Peter Burke

September 2017.

Mr. John O'Sullivan

Yes.

Deputy Peter Burke

The Comptroller and Auditor General today stated that related to 2016.

I would like clarity on that date.

Ms Mary Smyth

The figure of €41 million refers to the end of 2016.

Mr. John O'Sullivan

We have a figure to bring the committee up to date for the end of-----

Deputy Peter Burke

Does the figure of €41 million encompass only phase 1 of the revaluation process in the counties I listed?

Mr. John O'Sullivan

It refers to phase 1 and the bulk of the work on phase 2, which ended up being published a few months later in 2017.

Deputy Peter Burke

If someone is doing the numbers, in the case of outsourcing in Carlow, the cost appears to be approximately €535 per property. The Comptroller and Auditor General has done the work on the total cost involved. Based on this figure, it appears that the figure of €41 million will be significantly exceeded. Does Mr. O'Sullivan agree?

Mr. John O'Sullivan

I do not believe so; no. We will calculate the figures in detail as part of the review before the end of quarter one. We have some associated costs also. There is an estimate of just under €400 per case.

Deputy Peter Burke

Does the Department have systems in place that will show this?

Mr. John O'Sullivan

This is based on apportioning the costs we have incurred throughout the organisation and attributing a percentage of them.

Deputy Peter Burke

Does the figure includes wages, salaries, overheads and every other cost?

Mr. John O'Sullivan

Yes.

Deputy Peter Burke

The Department is already able to do this.

Mr. John O'Sullivan

Yes, but what we are lacking - the Comptroller and Auditor General has correctly pointed this out - is an activity based costing model in our systems. If I complete three elements of work today, we cannot say precisely how much was spent on the revaluation versus revision work or some of the other work we were doing.

Deputy Peter Burke

It is hard to have confidence in that figure if the Department cannot do as Mr. O'Sullivan described. The core of activity based costing is giving a result in terms of how much something cost. If the Department cannot figure out the cost of a revaluation or other work associated with it, it is very difficult to have confidence in the figure Mr. O'Sullivan has provided.

Mr. John O'Sullivan

It is pointed out in chapter 11 that this is an essential tool to have, now that there are multiple options for how a revaluation can be done. We accept that and are well on the way to addressing the issue.

Deputy Peter Burke

If a local authority advises the Valuation Office that a new building has been constructed and seeks a valuation for it, how long will it take the office to provide the valuation?

Mr. John O'Sullivan

In the counties in which we are doing revaluations, we deal with all of the revisions before we do revaluations.

Deputy Peter Burke

What is the position in counties in which the office is not doing revaluations?

Mr. John O'Sullivan

It depends on the information made available to us. We try to encourage doing as much of this as possible online. We have some figures.

Deputy Peter Burke

For argument's sake, let us say a large supermarket is opened in Cavan and the local authority advises Mr. O'Sullivan's office that it needs to be rated. How long will it take the office to provide the valuation?

Mr. John O'Sullivan

We will have it within six months.

Deputy Peter Burke

I am sure a case I recall from my time as a councillor could be applied throughout the country. As it occurred before the revaluation process commenced, I am not sure what the position is now. It involved a major supermarket which had been opened in my county. The council was doing its budget at the time and took a long time to rate the supermarket which had a potential rates bill of €100,000. The case led me to believe that while we were pushing small retailers hard and ramming revaluations down their throats, a number of new entrants to the system got away with not paying rates for a significant period because the Valuation Office's systems were not sharp enough to get back to local authorities.

Mr. John O'Sullivan

First, the issue of capacity to value a property only arises when it is capable of beneficial occupation, which is a legal definition.

Deputy Peter Burke

The supermarket in question had been open for more than ten months, yet nothing had been done.

Mr. John O'Sullivan

We would definitely have been endeavouring to do them very quickly. The other factor built into it is that there is a process associated with it. For example, the ratepayer has 40 days to make representations when it receives the initial certificate from us. There are time periods built into the process. I know that this is a source of dissatisfaction.

Deputy Peter Burke

There is huge dissatisfaction with it.

Mr. John O'Sullivan

I think there are some proposals made in the rates legislation.

Deputy Peter Burke

Naturally, a new business will not come running to be rated, especially when it is part of a major chain. The critical issue is that the rating cannot be backdated because the legislation provides that a rating cannot be backdated when a property has not been rated.

Mr. John O'Sullivan

I appreciate the Deputy's point.

Deputy Peter Burke

The critical issue is that the smaller guys are being pushed hard, while some of the bigger guys are getting away.

Mr. John O'Sullivan

With the permission of the Chairman, I will ask Mr. Lemass to address the issue raised by the Deputy. There are some proposals in that regard.

Mr. Paul Lemass

One of the proposals included in the new rates Bill which is being drafted is to empower a local authority to conduct a preliminary valuation to cater exactly for the situation the Deputy has highlighted. If, for instance, a new supermarket is opened in a town and there is concern that there may be a delay in obtaining a valuation through the Valuation Office, the local authority would be empowered and given guidance on how to conduct a preliminary valuation. It would be able to levy a charge on the premises based on the preliminary valuation until such time as it was formally valued by the Valuation Office.

Deputy Peter Burke

Is that power in place?

Mr. Paul Lemass

The legislation is being drafted by the Office of the Parliamentary Counsel and we hope to have it before the-----

Deputy Peter Burke

Why is it necessary to do that? It is the job of the Valuation Office. Why can it not do it?

Mr. Paul Lemass

Given that there is a backlog, we think this is an appropriate response to address the immediate problem. Once we are in a steady run rate, we expect we will not need to do it that much. However, cases such as the one the Deputy has highlighted happen from time to time. We will put this provision in place to ensure someone will pay rates from the day he or she open the doors.

Mr. John O'Sullivan

There is an inevitable delay as part of the process because to allow due process, the ratepayer has to be given periods of time. In effect, it has to take its course. The proposal made in the Bill addresses that issue.

Chairman

Before we proceed, it sounds as if the Valuation Office is not able to do its job in a timely manner. The local authorities will be given the power to move quickly, which will allow the Valuation Office to drag its feet as it will take the view that there is no loss to the local authority because it has done the job. It would be far more effective to have one agency doing the job properly, rather than giving the same powers to a second agency because the first is too busy to do the work. Having two sets of powers is the definition of inefficiency. It would be far more efficient and a better use of taxpayers' money to have one body with responsibility for making valuations in a timely manner, rather than having a back door, as this would remove the incentive on the Valuation Office not to do anything in a timely manner. The office has been in place for 150 years, yet Mr. Lemass referred to getting a clean run at it. Does he get my point?

Mr. Paul Lemass

I do.

Chairman

I assume the new power will be put before the Dáil and that it will not be for the Committee of Public Accounts to make a decision on the matter.

Mr. Paul Lemass

Yes. I fully understand the point the Chairman is making. The attraction of empowering the local authority is that it is on the spot and can react immediately. There will be a finite amount of time for the Valuation Office to get to cases. However, I fully accept the point that in the longer term one would not expect to use this facility as a default. I also make the case, on behalf of the Valuation Office, that while it is digesting a major revaluation programme, there are challenges in its pipeline. However, once it is on a steady run rate, with 31 local authorities to be dealt with in a ten-year cycle, or around three or four per year-----

Chairman

At the risk of upsetting some people, if the Valuation Office receives a request such as the one it received from Carlow-Kilkenny and is unable to do the job, should it not be done by a regional or provincial panel of pre-approved valuers who have tendered for the positions? We do not need to have legislation passed to allow a local authority to value a property. We need to work the legislation we have available.

Mr. John O'Sullivan

I understand the point the Chairman is making. We should not lose sight of the fact that the real factor in time elapsing is the period of 40 days the ratepayer must be allowed to make representations once the initial valuation is received from us.

Chairman

The rate can only be levied from the date on which the final decision is made.

Mr. John O'Sullivan

Yes; that is part of the process. As this is a policy matter, it is not my area, but I can understand how a measure such as that described by Mr. Lemass could help out in that scenario.

Chairman

There may be a non-legislative way of dealing with it in the public service by getting someone to do it on behalf of the Valuation Office if it is too busy to do so. I suggest that would be a simpler approach to take

Deputy Pat Deering

I welcome the witnesses, for whom I have a few brief questions. On the theme addressed by Deputy Peter Burke, namely, the selection of the authorities, it seems strange that economically vibrant counties such as Cork and Galway have been left behind, if I can phrase it in that way, in the revaluation process and placed in the blue zone. One would have expect these counties to have been a priority alongside Dublin.

Mr. John O'Sullivan

The decision affecting Dublin had very much to do with the size of the local authorities.

The situation is that when one does one, one has to be very conscious of the counties touching upon it so that one does not create disparity in economic terms between the two areas. Consideration was given to each county but we decided we needed to do counties with a rural and urban mix and Limerick and Waterford fitted that bill. We could have taken Cork and Waterford. That decision was made back in 2010. I am not particularly sure what the rationale was but a decision was made. Therefore, we then decided that we would concentrate very much on doing a swathe through the midlands. Our current iteration is closing off all of that loop.

Deputy Pat Deering

Does it still create an inequality in terms of focusing on areas that are seen to be perhaps moving ahead at a greater pace than counties in the midlands?

Mr. John O'Sullivan

I take Deputy Deering's point. Perhaps if we were revisiting it again, going back to 2008 we would have looked at it differently. The decision made at the time was based on logical criteria but with the benefit of hindsight perhaps there is merit in what the Deputy says.

Deputy Pat Deering

When properties are being revalued in various counties how are empty properties addressed? Parts of Carlow have one of the highest proportions of empty commercial properties in the country. At what stage is it decided that such properties are no longer rateable?

Mr. John O'Sullivan

I will ask Mr. Lavelle to deal with the issue of rateability and vacancy. It is a very good question. The purpose of a revaluation is to pick up very much on those things and to reflect them in the valuation list on which rates are subsequently levied.

Mr. Declan Lavelle

As long as a building continues to be capable of beneficial occupation we value it and we put it on the valuation list. In relation to properties that are vacant or where we are looking at a particular street with a high vacancy rate, what one will normally see on such a street is that the valuation levels are quite depressed because there is an imbalance of supply and demand. Generally speaking, what we see in revaluation projects is that the areas where there are high vacancy rates have lower valuations.

When one looks at the lifecycle of a building it goes from development stage and is maintained over a period and then perhaps for economic reasons it starts to fall into disrepair and it gets to a stage of disrepair where it is no longer capable of being occupied for that particular purpose and at that stage it becomes not rateable and it is struck off the valuation list.

Deputy Pat Deering

What kind of a timespan are we talking about?

Mr. Declan Lavelle

It depends. We can see from time to time what one might call relatively modern buildings that were built perhaps in the 1970s and 1980s that are now derelict and are not capable of beneficial occupation but then we can see buildings in most of the towns and villages that have been there for 100 years and are still capable of beneficial occupation. Generally speaking, it depends on the economic vibrancy that exists in that particular location.

Deputy Pat Deering

Does it create a false picture in the event there was a business in a certain commercial unit where activity had ceased six or seven years ago during the depression and it is still rateable? The Valuation Office is rating it for X amount and a local authority is in theory liable to collect the money but there is no business being carried out.

Mr. Declan Lavelle

We understand that might be an issue but we are required to rate whatever is rateable and put it on the valuation list. I do not want to repeat myself but as long as a commercial building that is vacant is capable of being used for that purpose it continues to be rateable and we must put it on the valuation list. We are required to do so under the Valuation Acts.

Deputy Pat Deering

Charity shops are an issue in certain parts of the country. Are they rateable?

Mr. Declan Lavelle

Yes.

Mr. John O'Sullivan

Yes.

Deputy Pat Deering

Do they all pay?

Mr. John O'Sullivan

I do not know what the situation is with payment because we do not have any role in the collection of rates. To clarify, it is an area where there is quite a lot of confusion from time to time. Under the Valuation Act, for a charity to claim the exemption under the Act, it has to satisfy two criteria; one is that it is a charity and it satisfies that by being registered on the charities register and, second, the particular property on which the exemption is being claimed would have to be used exclusively for charitable purposes. We take the view, which is backed up by the tribunal and otherwise by the courts, that a retail activity carried out by a charity is regarded as retail as distinct from a charitable purpose even though all of the funds may be put to a charitable purpose.

Deputy Pat Deering

If one takes St. Vincent de Paul, for example, which does a lot of very valuable work, and has charity shops in most towns around the country, all the resources it raises are for charitable purposes so it defeats the purpose to a certain extent for it to be collecting money, most likely for the local community, to do the work Departments should be doing or are not capable of doing for one reason or another, and we are taking a valuable part of its funding stream by making it liable to pay a certain portion of its income that could be used for a better purpose.

Mr. John O'Sullivan

I take Deputy Deering's point but that is a policy matter. As the law stands, the shops are rateable. The way the Valuation Act is structured, all properties are liable for rates unless they are exempted and the exemption is set out in one of the schedules to the Act. It is quite precise in stating that the purpose for which the property is operated has to be exclusively for charitable purposes and we have case law surrounding that so therefore as Mr. Lavelle said, our obligation is to rate charity shops for commercial rates.

Deputy Pat Deering

Could Mr. O'Sullivan take me through the appeals process? Before he does that could he indicate how many applications are appealed and what is the success rate?

Mr. John O'Sullivan

I will speak briefly on terminology first. There are two terms, namely, representations and appeals. Representations are what a ratepayer can make after he or she gets a first initial valuation – the proposed valuation – from us. It is a very informal process and it can be done online. People can take issue and give us extra information. That is a form of appeal without it being a formal appeal. During a revaluation we make a considerable amount of adjustments. In the batch of counties we finished in September representations were made in 17% of all cases. Of those, we made an adjustment in many cases and we also made an adjustment of similar properties that did not make a representation but appeared to us to be in the same boat – to be similarly circumstanced. This is all about getting it right. There is no impact on the local authority as there is no new list at that stage. The rates are being collected on the old list. It is a form of appeal but it is a form of perfecting the valuation list. Representations must be made within 40 days of the issue of notice. We will consider point by point every representation that is made to us and make the changes that we deem necessary then in respect of the properties. A classic example, if one were to take a street in Carlow, would be where we deem there to be two different valuation levels on the shops in that street and then during the representations we get in three new rents that suggest we are a little bit high. In that case we would then take down all of the valuations on that street that appear to us to fall into the same boat. That is an important part of perfecting the valuation list before we publish it.

The second appeal is the formal appeal. That is made to the independent body, namely, the valuation tribunal. It was set up in 1988 and continued under the 2001 Act. It is entirely separate although I am the Accounting Officer for it.

Deputy Pat Deering

What percentage of valuations were appealed?

Mr. John O'Sullivan

The overall figure for appeals to the valuation tribunal was 4.37%. Of the appeals that go to the tribunal we continue to be in dialogue with either the ratepayer or his or her representative throughout the process. Based on the statistics we have approximately 70% to 80% of the 4.37% of cases would not go to a hearing before the tribunal. In other words, we will agree it or the case will be withdrawn or something will happen that will not merit the case being heard.

Deputy Pat Deering

Is there a cost to go to the tribunal?

Mr. John O'Sullivan

There is. There is a sliding scale of fees associated with it. Ms Smyth will get the figures. It depends on the valuation level that is set on the property. Appealing to the tribunal is a formal process. I will not say it is adversarial as it is not but it is quite formal. The commissioner is the respondent in all the cases that go to the hearing. As a public official my duty there is to defend the valuations on behalf of the other ratepayers who have not appealed. That is an important part of the process. The fees of the valuation tribunal for revaluation appeals are as follows.

There are four bands in total. If the valuation is under €20,000, the fee is €95. For a valuation between €20,000 and €50,000, the fee is €125; for a valuation between €50,000 and €250,000, the fee is €300; and for anything over €250,000, it is €500.

Deputy Pat Deering

That is a modest enough charge but there is no point in any individual or business going to a tribunal unless they have additional resources. An industry has been created around the tribunal process. Ms Smyth spoke of the difficulty in employing valuers. Valuers have set themselves up to defend and help businesses when they are before a tribunal. They do not come cheap and the company has to employ them as there is no point in going on their own.

Mr. John O'Sullivan

We will treat a ratepayer exactly the same whether or not they are represented professionally by an agent. That is their right as a citizen and ratepayer. We give them every assistance but once they come through the door we are on opposite sides. We are contending for one value and they for a different one. In practice, many people handle their own case and we have seen this in Waterford and Limerick. The Deputy is right, however, that there are several professional agents operating in this area, many of whom are members of the Society of Chartered Surveyors, while others are members of IPAV. It is an important part of the overall process as it enforces the credibility of the work we do.

I was asked about outcomes and I can give the statistics for Limerick and Waterford. In Limerick, 0.3% of the value of the valuation list has decreased.

Deputy Pat Deering

How long does the tribunal process take?

Mr. John O'Sullivan

It endeavours to deal with cases within six months but as the report of the Comptroller and Auditor General showed, there have been a number of difficulties in that regard. The briefing material shows that a number of steps are under way and one of the things it has done is to roll out a call-over process, which allows it to assign cases to dates much earlier in the process. There was a major change in the 2015 Act which allowed the tribunal to sit as a division of one person, where previously it had to sit as a three-person division. The tribunal has up to 28 members with a chairperson, who is a lawyer, and up to eight deputy chairpersons while the rest are ordinary members. The tribunal can also determine cases without an oral hearing and the tribunal is piloting work in this area as it is keen to pursue it. These measures are aimed at the backlogs. Many cases are heard within six months and the tribunal is already hearing cases from the 2017 batch. We accepted the recommendation in the report of the Comptroller and Auditor General in this regard. The tribunal is also improving its website to allow more online services.

Deputy Pat Deering

Has Mr. O'Sullivan noticed a trend, such as an increase or a decrease in valuations of different properties and businesses?

Mr. John O'Sullivan

It can be very county-specific and local authority-specific. In general terms, the properties that have developed considerably since 1988, that is, which had a small presence in 1988, would experience increases under a revaluation as they would be very different types of property now. Their rental values are arrived at by reference to their trading figures. As for the urban-rural divide, many rural pubs would have experienced a decrease but there may be exceptions to that and a pub may be doing very well against the trend. The trading figures will reveal that.

Deputy Pat Deering

Does the office use the trading figures in all situations?

Mr. John O'Sullivan

We do so in the cases of pubs, hotels, nursing homes and service stations. Rental evidence is the best evidence and the Act mandates us to look for that.

Deputy Pat Deering

There could be false figures too. A rural pub could be rented for a certain amount but only open two or three evenings a week.

Mr. John O'Sullivan

We would look at the trade figures and would expect to see the rental evidence reflected in the trade figures. We would not just take the rental level at face value but would delve deeper. Industrial premises such as factories, workshops, warehouses, etc., have not gone up in value over the 30-year period to anything like the same extent as some other sectors. Some of them are experiencing a decrease in rates after the new valuations. In any particular county, the outcome is down to the mix of businesses. In towns, good quality retail will have a bearing. The cake is always in the local authority area and we try to determine how much everybody contributes to it but the slice of the cake is determined locally. The general trend is that industrial premises are coming down. Retail would be very mixed and we have seen examples of streets that once did well but now are not doing well at all and have high vacancy rates.

Deputy Catherine Connolly

Are walk-in clinics only for revaluations or are they for revisions as well?

Mr. John O'Sullivan

They apply to revaluations only. There is always an opportunity to discuss a revision case face to face, however, because we always visit a property and meet the ratepayer.

Deputy Catherine Connolly

I am concerned about the note I read about staffing. Have all the problems been sorted out? The witnesses spoke of the industrial situation and I want to ask about extra staff, with which I could not imagine the staff would have a problem. Mr. O'Sullivan, however, put down in a note that it was a problem.

Mr. John O'Sullivan

The problem related to negotiating the new grading structure we wanted to implement and the job specification at the time. It was resolved at the end of 2016 and there are no ongoing difficulties.

Deputy Catherine Connolly

On resignations, what is the turnover of staff now? It was high previously but what has it been in the past few years? Can a witness also comment on the appeals backlog?

Ms Mary Smyth

Between 2016 and 2017 we lost 45 staff from retirements, resignations and career breaks.

Deputy Catherine Connolly

What about without the retirements?

Ms Mary Smyth

There were 35 resignations.

Deputy Catherine Connolly

Was that in one year or two years?

Ms Mary Smyth

It was in two years, 2016 and 2017.

Deputy Catherine Connolly

There were 35 resignations in two years.

Ms Mary Smyth

Yes, and nine of those were valuers. The figure for resignations also includes people who move to other Departments on promotion, who are deemed to have resigned.

Deputy Catherine Connolly

These are staff with valuable experience.

Mr. John O'Sullivan

Yes.

Deputy Catherine Connolly

Has the Valuation Office examined that internally? I do not want to tread on staff issues but the Valuation Office raised this. The staff turnover has been raised. That is why-----

Mr. John O'Sullivan

In many instances, these would be people pursuing a new career opportunity.

Deputy Catherine Connolly

No. Listen to me, now. I am just asking whether the Valuation Office has analysed the high turnover of staff in order that it can learn lessons so it holds on to its experienced staff? Has it carried out an analysis?

Mr. John O'Sullivan

We have looked at that. That is not necessarily a very high turnover.

Deputy Catherine Connolly

Is it not?

Mr. John O'Sullivan

That is part of the market that we operate in. We and the private sector are drawing from the same pool of graduates, essentially. In our recent recruitment process, we had many applications for the posts. I do not believe there is a difficulty here.

Deputy Catherine Connolly

The rate certainly seems high to me. I will leave it at that for the moment.

I want to proceed to the appeals. With regard to the outsourcing for Kilkenny, Mr. O'Sullivan said something very significant. Staff of the Valuation Office prepared for the outsourcing for two years. That has to be taken into account in any cost analysis, I presume, when the Valuation Office is reviewing the matter.

Mr. John O'Sullivan

It was one year of preparation. To clarify-----

Deputy Catherine Connolly

Mr. O'Sullivan said two years.

Mr. John O'Sullivan

The whole project took two years. One year involved preparing for it, six months of which involved specifying the requirements and what the contractor had to do.

Deputy Catherine Connolly

It is using Valuation Office staff.

Mr. John O'Sullivan

Our staff would have done that.

Deputy Catherine Connolly

They were fully occupied in relation to putting something out to the private sector.

Mr. John O'Sullivan

Yes. The second six months involved the procurement exercise. There would not have been a lot of effort involved in that. That just took its course.

Deputy Catherine Connolly

The issue of the walk-in clinics has been clarified. That does not apply to Galway because Galway has not come under the revaluation yet.

My final point is on the backlog for the appeals. Let me get this clear. There was an old appeals system and there is a backlog from that. What is the position on that?

Mr. John O'Sullivan

That is cleared, in effect.

Deputy Catherine Connolly

Therefore, that appeal system does not apply any more under the new arrangement, and one goes straight to the tribunal.

Mr. John O'Sullivan

Exactly.

Deputy Catherine Connolly

What is the current backlog?

Mr. John O'Sullivan

The latest data, based on the tribunal figures, indicate that 1,271 cases were appealed out of the 29,000 or so that were revalued in September. I can give a breakdown county by county but the average, I think, is that 4.37% of all the cases were appealed to the tribunal. Of the 1,271 cases, we would, as I mentioned earlier, continue to discuss them with the ratepayers and people representing them. We would expect 70% to 80% of those not to proceed to a hearing. Therefore, the tribunal will not actually have to hold a hearing on them.

Deputy Catherine Connolly

That is okay but there are 1,271 appeals pending.

Mr. John O'Sullivan

From the revaluation, yes.

Deputy Catherine Connolly

From the revaluation.

Mr. John O'Sullivan

As we speak, some of them are under way. It is always in a state of flux.

Deputy Catherine Connolly

What is the period of the delay?

Mr. John O'Sullivan

We should look at how many of those are likely to go to the tribunal and require a hearing. I am suggesting the number is an awful lot smaller. Those concerned endeavour to deal with them within six months. However, as the Comptroller and Auditor General has pointed out in the report, there are issues associated with that, but six or seven new measures have been put in place to help to address that.

Deputy Catherine Connolly

I saw that. I am conscious that the Chairman wants to contribute.

Mr. John O'Sullivan

I should have dealt earlier with a matter raised by Deputy Deering. One of the other measures being implemented is the appointment of additional members of the tribunal. I understand this is well advanced. The tribunal will have its full complement very shortly.

Deputy Catherine Connolly

I thank Mr. O'Sullivan.

Chairman

I want to ask a few questions to follow up on the issue. On the exact point made, Mr. O'Sullivan said about 4% of the 1,200 cases were appealed and that 70% to 80%, or three quarters, do not proceed to a hearing. Therefore, one quarter of the 4% go to a hearing. Therefore, 1% end up in a hearing. I believe I saw a figure today indicating the cases proceeding to appeals represented a reduction of only about 0.4% in the rates bill of the relevant authority. Am I right? It is something like that.

Mr. John O'Sullivan

To clarify-----

Chairman

Mr. O'Sullivan does not explain it properly.

Mr. John O'Sullivan

I did not, probably. Regarding Waterford and Limerick, the two most recent ones, I will get the associated figures if the Chairman gives me a moment.

Chairman

The briefing note Mr. O'Sullivan gave us states that, regarding the cases that go to a hearing, the outcome varies from case to case. It states further recent analysis of the appeals tribunal was conducted resulting from the revaluations for Waterford and Limerick and that the analysis reveals the cases determined by the tribunal had, up to that point, resulted in overall reductions of 0.44% and 0.3%, respectively.

Mr. John O'Sullivan

That is of the valuation base. That is of the whole value of the valuation lists concerning Limerick and Waterford, respectively.

Chairman

That is a disingenuous figure, if Mr. O'Sullivan does not mind my saying so. Given that only 1%, or one in 100, went to a hearing, and there was a reduction of 0.4%, it means there is a massive reduction concerning each of those that went. Mr. O'Sullivan compared the number that proceeded to an appeal with the 99 that did not. That is not relevant. I am interested in the cases that went to appeal. For each of the two counties, what was the valuation going into the tribunal? What was the valuation that came out at the far end in respect of them? What was the difference? That is the only obvious question.

Mr. John O'Sullivan

First, in terms of the way that statistic is phrased, that would be the international way of comparing with peer groups. I refer to the loss to the valuation list from the local authority perspective as a result of-----

Chairman

That is looking at the overall 100%.

Mr. John O'Sullivan

Yes.

Chairman

Now let us talk about the ones that went to the tribunal. What was the outcome in respect of those?

Mr. John O'Sullivan

It depends very much on the case.

Chairman

Give us the overall figures.

Mr. John O'Sullivan

I will probably have to retrieve that from some of our records. I can certainly follow up and give the Chairman an associated table. I have some statistics-----

Chairman

Mr. O'Sullivan must have some information.

Mr. John O'Sullivan

I have, yes.

Chairman

Only 1% went to the tribunal.

Mr. John O'Sullivan

To a hearing.

Chairman

Mr. O'Sullivan gives the impression that this resulted in a 0.4% reduction in the total bill for the whole county.

Mr. John O'Sullivan

In the total base for the whole county.

Chairman

That means 1% of cases resulted in a half-percent reduction. That would imply-----

Mr. John O'Sullivan

I suppose the figure-----

Chairman

I would not think that is the case.

Mr. John O'Sullivan

That is the case based on Limerick and Waterford. Those were just the examples we were giving.

Figure 11.7 in the report of the Comptroller and Auditor General shows the analysis of the appeals to the tribunal in the period 2012 to 2016. There is a figure available for the outcome.

Mr. Seamus McCarthy

Figure 11.9 is probably more relevant.

Chairman

What page?

Mr. Seamus McCarthy

I refer to page 164. If one just takes Waterford, for instance, one sees the total number of appeals received was 74. Twenty three of them were determined. Ten of them upheld the valuation that was imposed. Thirteen of them changed, so that is kind of half and half. Obviously, what is not here is the cash value relative to the valuation that was placed.

Chairman

Surprise, surprise; that is the bit I am interested in.

Mr. Seamus McCarthy

I share the Chairman's concern that the statistic quoted in the briefing is overly diluting the impact.

Chairman

It is. It is PR.

Mr. John O'Sullivan

I apologise if that is the way it has come across.

Chairman

If valuations that would yield €1 million in revenue went in, what came out? That is all I want to know.

Mr. John O'Sullivan

It very much depends on the case or the size of the valuation.

Chairman

I need the total.

Mr. John O'Sullivan

We will do some analysis on this, and I will provide it to the committee. What I can do is take figures-----

Chairman

Based on the chart on page 164, 68% of the valuations were upheld in the appeals, and 231 valuations were changed. Regarding the approximately 300, what was their valuation going into the appeal and what was their valuation coming out?

Mr. John O'Sullivan

We can definitely do that.

Chairman

Mr. O'Sullivan can understand that.

Mr. John O'Sullivan

Absolutely.

Chairman

That has been puzzling me here all day.

Mr. John O'Sullivan

Unfortunately, I cannot answer the question here. I apologise if I appeared to be diluting the figure. These are the statistics for the individual cases.

Chairman

We do not need any individual case.

Mr. John O'Sullivan

The Chairman is looking for the figures for before and after.

Chairman

I just want the global figure. If he wants to provide it based on the local authorities in the chart, that will be fine.

Second, Mr. O'Sullivan put a lot of emphasis in his presentation on leases giving the real worth of a property in the market. A significant number of premises must be owner-occupied, however. Obviously, there will not be a lease. I know the Valuation Office compares the value to the value of the property up or down the street. How does Mr. O'Sullivan deal with that? He never mentioned an owner-occupied building in this context here today. What percentage of the properties revalued have leases?

Mr. John O'Sullivan

First, whether the properties are owner-occupied or let, the procedure is exactly the same.

Chairman

That is fine.

Mr. John O'Sullivan

The skill is to extrapolate the value of the owner occupied properties from those that are actually leased. That is why, when we pick up on a lease from the Revenue Commissioners, the Property Services Regulatory Authority, PSRA, or directly from the occupier, we analyse that lease in great detail and we go and look at the property. Our main method of assigning valuations is by comparison. We are always looking to treat like properties alike, which is only possible where we have hard evidence that we have analysed down.

In terms of the percentage of properties that are leased, that depends on the activity out in the market. The PSRA probably knows and I could get a figure from it.

Mr. Declan Lavelle

Something north of 20% of properties are leased.

Chairman

Is Mr. Lavelle saying that 80% of businesses out there are owned rather than leased?

Mr. Declan Lavelle

Yes, in terms of the rents that we would look at but in somewhere like Dublin, the scenario would be different. The more commercialised an area is, the more leased properties there are, as in places like Galway city for example. If one looks at Grafton Street or Henry Street, for example, every property is let. However, when one starts to move into rural and provincial Ireland, the balance shifts quite significantly. It has been changing in more recent times but from a revaluation point of view, we have a valuation date and are trying to get picture of what the market is like at a point in time. Some rents are of no interest to us because they are too far removed from that valuation date or are too historical. Generally speaking, we are going to finish up with around 10% of the properties or property transactions out there. As I said earlier, we started looking at around 20% to 25% of rental transactions. Some of those will be related parties of one sort or another. We would normally distil it down to around 10%. As the commissioner said, we then extrapolate from that and apply those valuation levels to other properties that we believe are similarly circumstanced.

Chairman

Is Mr. Lavelle saying that around 20% of the properties are rented?

Mr. Declan Lavelle

I am thinking about this in the context of our starting point, which is looking at 20% of properties with rents. The number in that category is probably higher than that but I do not have the exact figure. We could probably try to get a figure from-----

Chairman

Let us say the Valuation Office goes to a more established town, where a lot of the properties are family-owned and there are not too many being rented out. I know every circumstance is different, but how does the Valuation Office deal with that?

Mr. Declan Lavelle

That is a challenge for our valuers but they are quite skilled at doing their work. We look at urban and rural areas, as well as other factors that we think would affect the value in those areas and we extrapolate from that.

Chairman

As a rule of thumb, but subject to every case being different, when the Valuation Office looks at the lease value of a property, which is X amount per annum, what valuation would it place on it? There must be some formula. What is the average ratio between the rates bill and the rent?

Mr. John O'Sullivan

Typically-----

Chairman

I know there are variations on a case by case basis-----

Mr. John O'Sullivan

Yes, and they also vary by local authority but of the cases that we finished in September, the ARV or the multiplier that was applied locally to determine the rates varied from under 0.2 to 0.27.

Chairman

What does that mean?

Mr. John O'Sullivan

That means that of the valuations that we put on those properties, the rates bill was multiplied by 0.18 or thereabouts. As a rule of thumb, we would generally say-----

Chairman

Mr. O'Sullivan is saying that the rates bill would normally be 50% of the rent. Is that right?

Mr. John O'Sullivan

No, the rates bill would typically be about 20% to 25% of the rent. That is a ball park figure.

Chairman

Okay. I am going to ask an obvious question now. Why does the Valuation Office not just get the data on rents? Why do we need revaluations if that is the general rule of thumb all over the country? Why not have valuations based on rents? I know the witnesses will probably refer to policy and legislation but why can a business paying €1,000 per week in rent not have a rates bill of €250? I am talking here about a self-assessment system. I am probably straying into policy here, which is not the responsibility of the witnesses.

Mr. John O'Sullivan

The Chairman is dealing with policy but-----

Chairman

I am sure Mr. O'Sullivan understands what I am asking. It begs the question as to why the Valuation Office has to do all of this work when it has done thousands of valuations and a rule of thumb has been established.

Mr. John O'Sullivan

I understand the point being made. Obviously, I am keen not to stray into the policy area but there are two requirements in the legislation to which we must give effect. One is correctness of valuation and the other is equity and uniformity. It is not just the rent of one particular property that will determine the rates bill. The rent of other similar properties in that area will also have a bearing. There are lots of checks and balances associated with it and that is the way the legislation is framed.

Chairman

I ask Mr. O'Sullivan to send us some information about the value of what went into the tribunal-----

Mr. John O'Sullivan

Yes, of the outcome in value terms of the-----

Deputy Catherine Connolly

Is Mr. O'Sullivan confirming that the rates generally are 20% to 25% of the rent?

Mr. John O'Sullivan

Yes, on average.

Deputy Catherine Connolly

I thought I saw 10% to 20% somewhere in the documentation supplied to the committee. Is Mr. O'Sullivan saying that it is 20% to 25%?

Mr. John O'Sullivan

The ARV would depend on the local authority .

Deputy Catherine Connolly

Okay but Mr. O'Sullivan is saying that generally, it is 20% to 25%.

Mr. John O'Sullivan

Yes, as a kind of guide for people-----

Deputy Catherine Connolly

Thanks.

Chairman

The Valuation Office will send on the documentation to which I have referred. The witnesses have said that the office has done 43% of the properties but 70% to 80% of what it is supposed to do.

Mr. John O'Sullivan

Yes.

Chairman

Will the witnesses send us a chart outlining the rateable valuations by local authority? Obviously, the Dublin ones are the biggest but the office must have that data.

Mr. John O'Sullivan

Is the Chairman referring to the ARVs?

Chairman

Yes.

Mr. John O'Sullivan

Yes, we can do that.

Chairman

We want to be able to see it on a county by county basis. Obviously Dublin City Council and Fingal County Council will be at the top of the list, which will work its way down to Leitrim.

Mr. John O'Sullivan

Does the Chairman just want data for the counties we have revalued?

Chairman

No, for all counties. Some will be based on revaluations while others will be based on the current valuation.

Mr. John O'Sullivan

Yes, that is no problem.

Chairman

That will give us a picture of the situation as it is today or as it was on 31 December 2017.

The next issue I want to raise is global valuations. I will not dwell on it for long because we have been over this previously but I am talking here about valuations for the likes of ESB, EirGrid, Vodafone and so on. Do I take it that they are excluded from this process?

Mr. John O'Sullivan

Yes, they are excluded from the process but they are revalued separately every five years..

Chairman

I have tabled parliamentary questions on this and have seen schedules and the Valuation Office has done those revaluations. In terms of the revaluations being done in a particular area, those companies covered by global valuations in that area are dealt with separately.

Mr. John O'Sullivan

Yes, they are dealt with separately and the globals kick in at that stage.

Chairman

Yes and they are based on things like population, if there is a facility belonging to the company-----

Mr. John O'Sullivan

Exactly, or if they have part of their network-----

Chairman

There might be counties where EirGrid does not have a pylon and that is dealt with separately.

Deputy Connolly mentioned something earlier about the Valuation Office's role in valuing Government Buildings. What is that about?

Mr. John O'Sullivan

This is a non-statutory role. It is an ad hoc role and is done on the basis of requests. Mr. Lavelle will give the committee an outline of what is involved. We operate in a number of areas in that regard.

Mr. Declan Lavelle

We do various capital valuations for certain public bodies and advise them on rental levels. The clients we have include the Department of Agriculture, Food and the Marine, for example. We value the fisheries harbours. The Department has properties on those harbours that it lets from time to time. When those leases come up for renewal, the Department asks us for advice on the current letting value of those properties. We also do work for the Department of Housing, Planning and Local Government, which looks after the foreshore. We do a significant number of foreshore leases every year, advising on a fair rental value for those properties. We also do a number of what we call asset valuations for accounting purposes for various public bodies.

We also do work connected with the Department of Public Expenditure and Reform's circular of 11/15 dealing with the interest rate transfer of property between one body and another. We do a number of valuations on those at-----

Chairman

When a property is going from one public body to another?

Mr. John O'Sullivan

Yes.

Chairman

It could be going from a local authority to the IDA, or vice versa, for example.

Mr. Seamus McCarthy

Harold's Cross would be the example that was mentioned at the committee previously.

Mr. John O'Sullivan

We do those according to what we call red book valuations based on the Royal Institute of Chartered Surveyors.

Chairman

Is some of that valuation work done by the Office of Public Works, OPW, or does the Valuation Office work with the OPW?

Mr. Declan Lavelle

We do some of the work for the OPW.

Chairman

Okay. The Valuation Office does not value schools, public hospitals and so on. Is that right?

Mr. John O'Sullivan

We value them-----

Mr. Declan Lavelle

We would value them for asset purposes if requested.

Chairman

I am talking about for rates purposes.

Mr. John O'Sullivan

No.

Chairman

The Valuation Office values private nursing homes but not hospitals. Is that correct?

Mr. John O'Sullivan

Yes. Public hospitals are exempt from rates.

Chairman

Government offices, schools and so forth are also exempt, as are the constituency offices of Deputies. I must put it on record that there is a logical reason for the latter exemption. A Deputy who has a constituency office in Leinster House does not pay rates so those of us who have our constituency offices in our constituencies must be treated equally. That is the reason for that particular exemption.

The last issue relates to County Laois and self-assessment. I will ask some of the commissioner's senior officials to attend a public meeting. We receive requests all the time on this issue and I said I would arrange a meeting which will be attended by officials from the Valuation Office.

Mr. John O'Sullivan

Absolutely. We will be happy to do so.

Chairman

Mr. O'Sullivan will know who to send. We will arrange the meeting separately when this meeting concludes. Will he explain the self-assessment process?

Mr. John O'Sullivan

First, I will give some headline figures and dates associated with the process.

Chairman

I hope Midlands 103 is tuned into this meeting.

Mr. John O'Sullivan

The Minister made regulations on 21 December and I signed the valuation order for County Laois on 22 December. There is, therefore, a statutory process associated with it. This was only made possible under the 2015 Act. A new Part was inserted, but effectively on 26 February a lot will be seen because by that stage we will have written to and contacted every ratepayer in County Laois. In advance of that happening, we will have a considerable outreach programme with anybody who wishes to engage with us. Throughout the process we will have walk-in clinics in the county; they will be held one day a week or as often as is required. We have had many discussions and will have many more in the coming weeks with the representative bodies, one of which we met yesterday. We have briefed the local authority staff. We will do whatever it takes to get this right because this is the first time it has been done. It is generating a great deal of interest internationally, including in the International Property Tax Institute and similar bodies, because if it works well, it could result in us being able to conduct ongoing valuation cycles more quickly. We have developed a new website for it, but it is not live yet. We have made a number of videos to instruct ratepayers on how to, for example, measure their retail unit. We ask them to fill in a form online. We give an indicative valuation and the floor area to most ratepayers to help them along the way and they can either choose to accept or go against it. If the floor area is incorrect, they are shown how to remeasure it and correct us in that regard.

There is a small category. Trading data obviously drive many of the valuations. We are doing it a little differently, but they are relatively small numbers. The message very much is that ratepayers will see the first fruits towards the end of February. We propose to issue first draft certificates on or around 12 July which is the other key date. They will have a period in which to make representations to us and we would prefer if they made them online. The cut-off date is 21 August. They will have up to 50 days if they make the representations online. We will issue the final certificates on or around 12 October. We intend to publish the new valuation list for County Laois on 26 October.

Chairman

Will it be effective next year?

Mr. John O'Sullivan

Yes.

Chairman

Will Mr. O'Sullivan give us a copy of the note?

Mr. John O'Sullivan

Absolutely.

Chairman

I am sorry, but it is relevant. It will be a learning process.

Mr. John O'Sullivan

Yes. We are working closely with all of the representative bodies to get the message out. We will no doubt also learn a lot from it.

Chairman

I thank Mr. O'Sullivan. Is it agreed to dispose of chapter 11, Valuation Office, and Vote 16 of the appropriation accounts? Agreed.

On behalf of the committee, I thank the witnesses and the Comptroller and Auditor General and his staff. At our next meeting at 9 a.m. on 1 February we will meet officials from the National Shared Services Office to discuss the management of salary overpayments and Vote 18 of the appropriation accounts for that office.

The committee adjourned at 1.15 p.m. until 9 a.m. on Thursday, 1 February 2017.