JOINT COMMITTEE ON THE ENVIRONMENT, HERITAGE AND LOCAL GOVERNMENT debate -
Tuesday, 1 Dec 2009

Annual Report 2008: Discussion with Dublin Docklands Development Authority.

Chairman

We will now move on to No. 4 on our agenda, the 2008 annual report from the Dublin Docklands Development Authority, DDDA. I welcome the representatives from the DDDA, Professor Niamh Brennan, chairperson, and Mr. Gerry Kelly, acting chief executive, who are here to discuss their 2008 annual report and accounts. The meeting will commence with a presentation from the delegates, followed by a question and answer session.

Before they begin, I draw witnesses attention to the fact that members of the committee have absolute privilege, but this same legal privilege does not apply to witnesses appearing before the committee. Members of the committee are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the Houses, or an official, by name or in such a way as to make him or her identifiable. I now invite Professor Brennan to proceed.

Professor Niamh Brennan

I thank the Chairman and members of the committee for giving Mr. Kelly and me the opportunity to brief them on the annual report of the Dublin Docklands Development Authority. I will summarise some of the financial highlights for the committee.

I am sorry to have to say that the picture from our accounts is not a very happy one. We made an operating loss in 2008 of €27 million, in comparison with a surplus the previous year of €3 million. In addition, we wrote down our assets considerably, reflecting current market conditions. This resulted in a further write-down of €186 million. This included our 26% investment in the Irish Glass Bottle site through the company called Becbay Limited. The extent to which we wrote down our properties reflects a prudent view of these properties. The valuations are extremely prudent and we believe no further write-downs will be required.

The operating loss, combined with the property write-downs resulted in a consolidated deficit of €213 million. This compares with a surplus the previous year of €3.7 million. In our balance sheet, the authority, in its own account, had net assets of €26 million. This compares with net assets the previous year of €177 million. The consolidated balance sheet, which includes the investment in Becbay Ltd., the Irish Glass Bottle site investment, shows net liabilities of €48.5 million. This compares with net assets the previous year of €177 million. It would be only fair to say that these financial highlights reflect the difficult financial challenges facing the authority.

I would like committee members to know that the board and management are responding to these challenges in the most aggressive and robust way possible. The Government moratorium on fixed-term contracts has had a significant effect on staffing of the authority, because most of its staff are employed on that basis. Staff numbers have been reduced and will be reduced further as a result of the moratorium and as fixed-term contracts expire. All overheads have been cut as much as possible. Our discretionary spending has also been reined in extensively. However, the authority is very proud of the social regeneration work that has been done and where we are engaging in discretionary spending, it is focused on the social regeneration remit of the authority, particularly projects in education, etc.

The DDDA board has set itself the objective of bringing the authority back to a break-even situation as soon as possible. However, this will not happen overnight. We have made significant inroads and expect to report an operating deficit in 2009 in the high single digits, in comparison with the 2008 figure of €27 million.

Chairman

Will it be under €10 million?

Professor Niamh Brennan

Exactly, we expect it to be under €10 million. We have significantly retrenched on our cost base, but we need to go further in order to bring the authority back to a break-even situation. The purchase of a share in the Irish Glass Bottle site at the height of the property bubble has had a significant impact on the authority's financial position and our finances are in a fragile state. We are engaging in dialogue with the Department and the Department of Finance and examining all options available to the authority with regard to the Irish Glass Bottle site investment. The position of NAMA will be relevant to how we come out of this problem in due course.

The investment in Becbay Limited in the Irish Glass Bottle Company site in our accounts is written down to nil but nonetheless we have liabilities arising from that transaction. Our consolidated accounts show net liabilities with regard to the Becbay Limited investment of €75 million. It is important to note that those borrowings were made on a non-recourse basis and in strict legal terms, we have guaranteed those borrowings to approximately €35 million. While we are showing a deficit in the consolidated accounts of €75 million, the guarantee to the banks is significantly less at only €35 million because so much of the borrowing was non-recourse.

At the time those borrowings were made, both of the banks were private entities where the non-recourse arrangement did not have any further implications for the taxpayer. Now one of those banks has been nationalised so the non-recourse nature of the borrowings has moral issues because it is one State company owing money to another State company and I wish to acknowledge this fact.

In addition to these difficult financial circumstances, the authority has also suffered extensively with regard to issues of public confidence. People have asked questions about the objectivity of the authority and about its integrity. Some of these questions have been raised arising from systematic conflicts of interest within the authority and in particular with regard to its association with Anglo Irish Bank, through common directors. Unfortunately, this has cast a question mark over very good work carried out in the past by the authority and this has been very difficult for the staff to deal with. The objective of the board and the management of the authority is to take the necessary steps to restore the authority to public confidence.

The Minister requested the board to review corporate governance in the authority. The board decided it would be appropriate to have two separate reviews, one to look at the financial and administrative sides of the organisation and the other to look at the planning side because the authority is a planning body. These reports are close to being finalised and when finalised they will be submitted to the Minister. This committee suggested that the Comptroller and Auditor General be involved in auditing the activities of the authority. However, the board, in doing these two reviews, has done work which would stand up to the high standards of the Comptroller and Auditor General. The quality of the two reports is such that there can be confidence in the nature of the review done.

I thank the committee for its attention to my remarks.

Chairman

I thank Professor Brennan for her attendance. The committee accepts that her appointment as chairperson of the board of Dublin Docklands Development Authority has brought clarity and transparency to the situation and this is appreciated. The committee met the authority twice earlier in the year and we visited the docklands area in April. It is striking the difference in the subject of our conversation just seven or eight months' later.

Professor Brennan referred to the losses incurred during the year such as operational losses and writing down various financial assets. The consolidated balance sheet showed a surplus of €177 million on 1 January and a deficit of €48.5 million at the end of the year, a loss of €226 million over the year. She now forecasts losses of something less than €10 million for 2009. The consolidated balance sheet will have a deficit of close to €58 million at the end of the financial year in December. Is this a reasonable assumption?

Professor Niamh Brennan

That sounds about right, yes. This would be on a consolidated basis.

Chairman

I am talking about the overall total.

Professor Niamh Brennan

The consolidated accounts are a somewhat artificial view of the authority's activities. The authority's balance sheet has net assets currently of €26 million.

Chairman

I was referring to the consolidated accounts. A big question which Professor Brennan and the board needed to address before signing off the accounts at the end of October was whether the Dublin Docklands Development Authority was a going concern. I note the existence of an extensive note accompanying the financial statements on the thinking and rationale. Note No. 1, page 55, to the financial statements deals with significant uncertainties affected going concern and property evaluations. It states that having regard to the basis of the preparation and assumptions underlying the cash flow projections together with assessing the current status of negotiations with the lender and assuming that sufficient bank facilities will remain in place, the executive board has reached a conclusion that there is a reasonable expectation that the authority will be able to meet its liabilities as they fall due for the foreseeable future. Therefore, the accounts have been prepared on a going concern basis. There are many ifs, buts and assumptions and reasonable expectations involved. In arriving at that assumption I see the board is depending on the key assumption of sufficient banking facilities being made available by National Irish Bank. Another assumption is that the authority will receive a significant final schedule payment on a key development site. Did this happen during 2009 as this is one of the key assumptions allowing the board to regard the authority as a going concern? It is four weeks to the end of 2009 and these accounts are 11 months' old, although only published recently. Did the key development site schedule payment arrive?

Professor Niamh Brennan

First, we have a renewal of banking facilities from National Irish Bank. Our banking position is a little more certain now than it was at the time when that report was prepared. Second, with regard to the single payment, that payment is not due until September 2010. We have to wait until that date to receive that payment but in this environment it would be inappropriate not to mention the extent to which we are dependent on that single payment.

Chairman

That is significant. On this point, Professor Brennan mentioned a deficit for 2009, she is projecting some deficit for 2010 and is hoping to break even for 2011, at which stage there will be something like a €60 million deficit in the consolidated accounts. It is all well and good to stop the haemorrhaging but when will the authority be in a position to make good that deficit?

Professor Niamh Brennan

The board believes that although the authority's finances are extremely fragile, we are capable of working our way through this problem. It will take time and very robust measures on the part of the board and the management but we are confident we can get through this. There is no deficit in the balance sheet of the authority in its own right. The asset values are written down to a level that is probably as low as they could possibly be written down. Those values will increase over time. The authority's biggest challenge is how to handle the Becbay investment in the Irish Glass Bottle site. If the banks were to call in our guarantee of approximately €35 million today, the authority would need assistance. At the moment, the authority could not deal with it of its own right.

Chairman

It has often been legitimately commented that Oireachtas committees do not carry out sufficient oversight of organisations within their remit. In view of the serious financial situation, why should this committee not recommend that the Dublin Docklands Development Authority be dissolved and wound up?

Professor Niamh Brennan

The authority is facing a number of serious problems, including the Becbay investment, which have been covered in the media. Those challenges will not disappear if the authority is discontinued or buried in another organisation. The ability of the current board and management to bring the authority through these problems is as good as, or maybe better than, the ability of any other group of people to do so. I am not convinced that any other body could do a better or more robust job in the circumstances. We are devoting an extraordinary amount of time and attention to the authority, to enable it to overcome these problems. These challenges will not go away merely by burying the authority in some other organisation. I wish to mention two of the advantages of maintaining the authority as a single entity. Our annual accounts allow people to see how things are progressing. More importantly, we would like to have an opportunity to finish the fantastic project in the docklands.

Deputy Phil Hogan

I thank the Chairman and members of the committee for the indulgence they have shown in respect of this issue over the last year. I do not think very many members were aware of what was going on in the docklands. They now have more facts on the implications of these issues, which are very important for taxpayers, shareholders and those interested in corporate governance. We have gone a long way from the mission statement that was originally produced with a view to regenerating the docklands to allow for employment, education and housing. Much good work has been done in this area but, unfortunately, as the chairman said in her annual report, a property development agency was also established. Professor Brennan is a former director of Ulster Bank. Will that lead to any conflict of interest in dealing with these matters?

Professor Niamh Brennan

I thank the Deputy for that question. I left the board of Ulster Bank when I completed my term of office in June 2009. On my appointment as chairman of this authority, the chief executive of the bank shared with me information on transactions financed by Ulster Bank in the docklands area. There were relatively few. The extent of financing in the docklands area by Ulster Bank was very small. I have left the board of Ulster Bank. I was not directly involved in negotiating any of the individual transactions. My remuneration on the board of Ulster Bank was a fixed fee for non-executive director. Personally, I did not gain or lose through any transactions entered into by Ulster Bank in the docklands area.

Deputy Phil Hogan

I thank Professor Brennan for her reply. I have confidence in her ability as chairman of the authority and have no difficulty with her explanation. Is there any precedent for submitting an annual report on one day and an annual set of accounts two months later?

Professor Niamh Brennan

My knowledge of public procedures is such that I am not aware of a precedent. The wording of the legislation allowed for the submission of an annual report. In light of the financial challenges we were facing, our annual report was not accompanied by a set of accounts. I acknowledge fully that it was an exceptional step to take. I would have preferred if the board and management did not have to take such an action. In the circumstances, it was necessary in light of the difficulties in valuing the authority's significant property portfolio.

Chairman

Will Deputy Hogan clarify his question? Not everyone will understand it.

Deputy Phil Hogan

The annual report of the Dublin Docklands Development Authority for 2008 was published and made available in July 2009.

Chairman

The legislation requires it to be produced by 30 June.

Deputy Phil Hogan

I understand that. I found it unusual that no set of accounts was signed off on as part of the annual report. I had never come across it before. The chairman of the authority is breaking new ground. I hope it is not repeated by the authority or any other State agency. We would like the financial position of any organisation we are dealing with to be set out at the same time as the annual report. I am sure Professor Brennan would not like to see it repeated either.

Professor Niamh Brennan

I agree completely with Deputy Hogan in the concerns he has expressed. It was not an easy decision to come to.

Deputy Phil Hogan

We may come to some of the reasons later in the discussion.

Professor Niamh Brennan

The reason was pretty straightforward — it was the problem in valuing the property portfolio of the authority.

Deputy Phil Hogan

In these accounts, does the authority value the property according to the NAMA method or according to current market value?

Professor Niamh Brennan

The valuations are based on market values at the end of December 2008. However, they would have been influenced extensively by market conditions when the valuations were carried out, which was in the middle of 2009. We obtained a NAMA valuation, based on long-term economic value, of the Irish Glass Bottle site. We chose to reflect in the accounts according to the lower valuation, which was the market valuation obtained originally from Lisney.

Deputy Phil Hogan

I understand the delay in submitting the accounts was because the authority was waiting to see the valuation methodology to be established in the legislation setting up NAMA. I am glad that Ms Brennan has clarified that the authority used the lower of the two valuations — the one based on current market value. When Ms Brennan became chairman of the authority, what aspects of its culture did she find unacceptable?

Professor Niamh Brennan

It took me a while to get my feet under the desk. I am still not fully aware of, or fully on top of, certain aspects of the authority's past activities. My first reaction was that the authority's finances were in a dire state. Although cost-cutting measures were under way when I became chairman, it was clear that the robustness of those measures was not adequate. I remember saying at one of my first board meetings that the circumstances required us to slam on the breaks, rather than to stop very gently. We had to cut our overheads and expenditure levels drastically to get the organisation back on an even keel where it could break even. That was my first insight into the organisation.

Over time, I began to find out a little more about its pro-developer culture. The authority has two distinct functions — to support development in the docklands area and to serve as a public planning body with quasi-judicial adjudicative functions. There was an extensive focus on the development side. Planning was used to promote and encourage development, rather than being executed independently from the development remit. They are conflicting functions. It is possible to carry out both sets of functions at the same time but very careful processes and procedures need to be in place to protect the quasi-judicial planning functions from inappropriate influence from the development side of the house.

Chairman

I have the impression that Professor Brennan does not believe it is a good idea for the Dublin Docklands Development Authority to have a planning function because it creates a conflict.

Professor Niamh Brennan

If I gave that impression, that was not my intention. My intention was to acknowledge that there were conflicts between the two functions which, if not managed properly, could compromise the integrity of the planning side. As Deputies and Senators will know, the authority suffered an adverse judgment in the High Court in October 2008. However, out of bad comes good because this judgment resulted in significant improvements in the manner in which we go about our planning activities. Significant changes have been made to our processes and procedures and changes continue to be made. It is the aspiration of the board and management that we will, from a planning point of view, very quickly become best in class.

Deputy Phil Hogan

Professor Brennan stated in a recent media interview that the Dublin Docklands Development Authority had become very close to Anglo Irish Bank and the culture of the bank had begun to permeate the authority. What did she mean by that comment?

Professor Niamh Brennan

What I meant was that Anglo Irish Bank had done an extensive amount of business with developers and that these relationships with developers had led to the Dublin Docklands Development Authority having a pro-developer perspective and approach to its activities, with less attention being paid to the planning side, other than to use planning as a mechanism to promote development.

Deputy Phil Hogan

The State has a responsibility to try to appoint the best people to the boards of State organisations such as the Dublin Docklands Development Authority. When individuals in the financial community are approached, we are told they are the crème de la crème as a pool from which to make appointments. Professor Brennan has found that the cross-directorships which applied in the Dublin Docklands Development Authority and Anglo Irish Bank were far from satisfactory in terms of the culture in the authority. The decisions the authority made are proof of this.

Professor Niamh Brennan

When Mr. Bradshaw was appointed the first chairman of the Dublin Docklands Development Authority — we should identify who we are talking about — he was not a director of Anglo Irish Bank. About one year later, Mr. FitzPatrick was appointed to the board of the authority and subsequently Mr. Bradshaw was invited to join the board of Anglo Irish Bank. Initially one had two independent directors who, by virtue of sitting on each others' boards, so to speak, became cross-directors and their independence, or at least the appearance of independence, was compromised as a result.

The retirement of Mr. FitzPatrick and Mr. Bradshaw from the board of the Dublin Docklands Development Authority presented an opportunity for the authority to move from that sphere of influence. However, within months of Mr. O'Connor's appointment to the board of the authority he was invited to join the board of Anglo Irish Bank. The association with Anglo Irish Bank by board members of the Dublin Docklands Development Authority happened after they had been appointed to the board, obviously with the exception of Mr. FitzPatrick's appointment.

Deputy Phil Hogan

The result is a €213 million deficit arising from the stewardship of the Dublin Docklands Development Authority by some of the individuals in question and an infiltration of the authority, of which the sole shareholder is the Minister for the Environment, Heritage and Local Government, by what is now a State bank. Is that correct?

Professor Niamh Brennan

The cause and effect relationship is——

Deputy Phil Hogan

Will Professor Brennan tell me where I was wrong?

Professor Niamh Brennan

Life is not that simple. If those influences were not on the board of the authority, it is possible that the authority may not have engaged in the particular investment to which the Deputy refers.

Deputy Phil Hogan

Professor Brennan is a lady with the highest reputation in corporate governance. Will she tell us exactly what she thinks about this relationship and the cross-directorships between Anglo Irish Bank and the Dublin Docklands Development Authority? A €213 million deficit which the taxpayer must meet arose as a result of the representation on the boards of the bank and the authority. As Professor Brennan noted, the latter evolved into a property development company. As an excellent and expert witness on corporate governance, she obviously cannot say whether she agrees with that statement. Do serving members of the board of the Dublin Docklands Development Authority have conflicts of interest?

Professor Niamh Brennan

The association between Anglo Irish Bank and the Dublin Docklands Development Authority has not served the authority well. It has, unfortunately, blemished some very good work which has taken place in the docklands, which is an absolute shame because some fantastic things have happened. It is very sad to see a State organisation being subject to commercial influences that in the long run have not served the authority well.

Deputy Phil Hogan

Professor Brennan stated in a speech she made to members of the legal profession yesterday that the role of management and shareholder was very important. In this case, we have a sole shareholder, namely, the Minister for the Environment, Heritage and Local Government, in other words, the taxpayer. Does Professor Brennan accept in respect of the Dublin Docklands Development Authority that a number of its directors, namely, Mr. Bradshaw and Mr. FitzPatrick, were not acting as referees — that was the context of her remarks yesterday — but effectively as ace strikers for Anglo Irish Bank?

Professor Niamh Brennan

It is absolutely clear that there were systematic conflicts of interest between the Dublin Docklands Development Authority and Anglo Irish Bank by virtue of those common directors. There are questions about whether, as directors of the authority, the individuals in question owed their duty solely to the good of the authority or whether the authority was engaging in transactions influenced by their outside interests.

Deputy Phil Hogan

We know precisely what practices some of the individuals in question were involved in. I received minutes under the Freedom of Information Act and also know Mr. FitzPatrick, chairman of Anglo Irish Bank, was also chairman of a remuneration or audit committee in the Dublin Docklands Development Authority. We agree this is not acceptable. What means are available to Professor Brennan to ensure redress by the individuals in question for the manner in which they made the relevant decisions? If redress is available, has she made any reports to the Director of Corporate Enforcement, the Revenue Commissioners or the fraud squad on some of the decisions taken?

Professor Niamh Brennan

As I indicated, on the instructions of the Minister, we have had two reviews conducted based on the internal documentary evidence in the authority. These reports will go to the Minister who will take whatever action he considers to be appropriate arising from what is contained in the reports.

Deputy Phil Hogan

Do any other directors of the Dublin Docklands Development Authority have a conflict of interest?

Professor Niamh Brennan

On any board there will always be conflicts of interest and occasions when, for example, in relation to one transaction a director possibly has a conflict. This is not a problem, particularly if the conflict is handled appropriately. It becomes a problem when the conflict relates not only to one transaction but is systematic and pervasive and many transactions by one agency are in conflict with those of another. I do not believe any member of the board has a conflict of interest which falls into the category of being systematic, but, of course, on occasion conflicts will arise.

Deputy Phil Hogan

We are dealing with an organisation that was doing excellent work, but that has been brought to its knees financially as a result of the activities of a few. Perception might be as important as reality. One of the directors of the authority, Ms Mullarkey, is a former Anglo Irish Bank executive. Mr. Coveney, who is a director of Ernst & Young, which provided services to Anglo Irish Bank until recently, is also a member of the board of the authority. While I accept Professor Brennan's comment that they have to leave board meetings when certain decisions are being made if there is a possible conflict of interest, there is a perception that Anglo Irish Bank is still involved in the authority. I note that another member of the board is involved with Arup, which provides engineering services in relation to the Irish Glass Bottle Company site. Does Professor Brennan accept that is unwise in the context of good corporate governance? Such a judgment can be made on the basis of what has gone on in the organisation.

Professor Niamh Brennan

It is a normal part of business that, on occasion, conflicts of interest may arise in respect of a single transaction. If we are to get experienced people to serve on the boards of State organisations, it is inevitable that conflicts will arise from time to time. If we are to avoid ever having a conflict of interest, we will have to appoint to State boards people who have never done anything that might give rise to——

Deputy Phil Hogan

As the foremost expert on corporate governance, surely Professor Brennan is not saying to this committee that there is nobody whose appointment would avoid a conflict of interest with regard to the work of the Dublin Docklands Development Authority?

Professor Niamh Brennan

As a corporate governance expert, I think it is unrealistic to expect that in a small country like Ireland, where people are related to other people and all the rest——

Deputy Phil Hogan

Maybe part of the problem was that there were so many relationships between people in the authority and people in Anglo Irish Bank, in particular. I am trying to help the authority to overcome that.

Professor Niamh Brennan

The problem resided in a very small number of individuals.

Deputy Phil Hogan

I would like to ask about the Irish Glass Bottle Company site, with the indulgence of the Chairman.

Chairman

I will make one last point on this aspect of the matter. Did the executive board have to clear the invitations for Mr. Bradshaw and Mr. O'Connor to take up directorships with Anglo Irish Bank? Was it brought to the attention of the Dublin Docklands Development Authority that they had been invited on to the board of Anglo Irish Bank? What would have been the procedure? Most big organisations will know if one of their senior people is invited to become a director of another organisation. There should have been some protocol. Were they free to do their own thing? Was it discussed or minuted? Did they inform their colleagues? I am really asking whether clearance was given by the other members.

Professor Niamh Brennan

As I was not there at the time, I will ask my colleague, Mr. Kelly, to answer that question.

Mr. Gerry Kelly

The board was informed on both occasions, when both gentlemen were invited to join the board of Anglo Irish Bank.

Chairman

Did the board give its consent?

Mr. Gerry Kelly

It was informed of the matter. Both gentlemen indicated at the time that they did not see it as a position of conflict of interest. The board accepted that. They moved to Anglo Irish Bank on the understanding that they would leave the room when any issues that could cause a conflict of interest arose.

Professor Niamh Brennan

Can I clarify something?

Chairman

Yes, but you know the point I am making.

Professor Niamh Brennan

The board does not make the appointments. It is the shareholder who appoints the directors. If there are issues concerning the membership of a State board, therefore, those issues are not resolved by the board itself. They are resolved at ministerial level. Ministers make appointments to State boards. The boards do not make such appointments themselves.

Chairman

I will take it on to the next logical step. Did the then representative of the Minister for the Environment, Heritage and Local Government on the executive board relay that information back to the Minister so the Minister would be aware of this potential?

Professor Niamh Brennan

We would not be aware of the information exchange going on within the Department.

Chairman

In Professor Brennan's opinion, should the then board director, who was appointed by virtue of being a senior official in the Department of the Environment, Heritage and Local Government, have reported to the Minister?

Professor Niamh Brennan

The Department would have been fully aware of what was happening within the authority. In any event, the appointments were announced in the public press. There was no secret about it. Everybody with an interest would have known about it.

Deputy Phil Hogan

Would Professor Brennan have difficulty accepting a director of a bank proposed by the Minister if there were any conflict of interest? Has the chairman a role in this regard?

Professor Niamh Brennan

The chairman of a State board does not have a role. It is a matter for the Minister to make the appointments to the board of a State company.

Deputy Phil Hogan

Since Professor Brennan's appointment, has she reached any conclusion on why the authority got involved with the Irish Glass Bottle Company site?

Professor Niamh Brennan

I find that question hard to answer. I have seen quite an amount of documentation concerning the transaction but I am not fully clear as to what was going on behind the scenes that led to the transaction.

Deputy Phil Hogan

At the time, Dublin Docklands Development Authority put up €32 million in cash to secure the deal. Two financial institutions were involved, Anglo Irish Bank and Allied Irish Banks. Was departmental approval required for the borrowings in respect of the Becbay-Irish Glass Bottle Company site? Would the Minister for Finance or the Environment, Heritage and Local Government not have to sign off on borrowings to allow for the purchase of the site?

Professor Niamh Brennan

Deputy Hogan said that cash was put up, which is true. That would not have required departmental approval. The borrowing transaction was approved by both Departments. The only evidence I have seen of it is a letter from the Department of Finance, but that would never have come to the authority without having been seen by the Department of the Environment, Heritage and Local Government.

Deputy Phil Hogan

Both Ministers would have to have signed off on it and given their consent. When Mr. Maloney, the former chief executive, was here last February, he made a big virtue of the fact that he got involved in this deal because getting 26% of the action would give his organisation some clout in terms of what would be developed on the site.

Professor Niamh Brennan

Regarding the Ministers signing off on the borrowing transaction, I have no evidence the transaction would have been brought to the attention of the then Minister. It does not follow that, because the authority received a letter from a Department, it was signed off by the then Minister.

Deputy Phil Hogan

Would he not have to sign off on the transaction, as required by the legislation, if borrowings were required?

Professor Niamh Brennan

I do not know because I do not know the processes within the two Departments. I would not assume, without there being evidence, that an individual Minister signed off on the letter. I do not know.

Deputy Phil Hogan

When we were questioning Mr. Maloney here last February about the Irish Glass Bottle Company site, he was quite ambiguous on the financing of the site. Will Professor Brennan give us a full picture of how and by whom the site was financed?

Professor Niamh Brennan

It is my understanding that the site was part financed by the shareholders and the greater part of the finances came from the banks. Initially, it was intended that the financing would be by Anglo Irish Bank but subsequently the deal was financed on a 50:50 basis by both Allied Irish Banks and Anglo Irish Bank.

Deputy Phil Hogan

Allied Irish Banks was, therefore, as much involved in providing the loan capital as Anglo Irish Bank.

Professor Niamh Brennan

My understanding is the financing of Becbay is shared 50:50 between Anglo Irish Bank and AIB.

Deputy Phil Hogan

Some 11 people came together through Davy Stockbrokers as nominees. Who are they?

Professor Niamh Brennan

This was an arrangement entered into by Mr. McNamara to raise finance for his share of the deal. To my knowledge, his arrangements were not known to the authority at the time that the transaction took place. How he funded the transaction personally was not something that the authority would have known.

Deputy Phil Hogan

Were any former board members of the DDDA part of the Davy Stockbrokers nominees' shareholding?

Professor Niamh Brennan

I do not know.

Deputy Phil Hogan

What is the DDDA's current liability to the banks regarding this particular site? Is it €35 million as mentioned earlier? What is the total liability?

Professor Niamh Brennan

The total liability in Becbay is over €500 million and the authority's share of that liability would be 26%. The borrowings were obtained on a non-recourse basis. From a strict legal point of view, our liability, in the event Becbay is put into liquidation, is in or around €35 million.

Deputy Phil Hogan

What are the financial implications of ongoing cases in the commercial courts where Mr. McNamara is suing DDDA and the Davy nominees are suing Mr. McNamara?

Professor Niamh Brennan

Mr. McNamara provided personal guarantees to the Davy investors. He has defaulted on those guarantees, as a result of which the Davy investors are pursuing him for his personal guarantees. In turn, Mr. McNamara is suing the authority on the back of his problems with his own investors. The DDDA will robustly defend those legal proceedings. Mr. McNamara was a very experienced man in the property business. He went into this transaction with his eyes wide open. The authority, on behalf of the taxpayer, will vigorously defend that litigation.

Deputy Phil Hogan

Many property transactions were entered into during this time such as the North Lotts site and the U2 tower competition. Did these issues culminate in the board having to call in Mr. Maloney in July 2009 to have a serious conversation about his future? What was the remuneration package he was offered to vacate his appointment before June 2010?

Professor Niamh Brennan

The position was that Mr. Maloney had a contract with the authority which was due to end in 2010. In light of the different commercial environment in which the authority was operating, the board was of the opinion that it would not renew Mr. Maloney's contract and that it was in the best interest of the authority to pay Mr. Maloney, in lieu of the authority's contractual obligations under his contract, such that he retired from the authority in July 2009.

The authority paid its contractual obligations which was the salary of Mr. Maloney up to the end of his contract date. No other payments outside the salary contractual commitments to Mr. Maloney have been paid.

Deputy Phil Hogan

I appreciate he was not given a golden handshake like other State agencies have to others, but what are the details of his financial and retirement package?

Professor Niamh Brennan

It was a straight salary. His salary was determined by the review group on higher remuneration in the public sector. We paid ten months of that to Mr. Maloney, which was full payment in lieu of his contract to June 2010.

Deputy Phil Hogan

Did Mr. Maloney retire or was he sacked?

Professor Niamh Brennan

Mr. Maloney's contract was paid up to the end of his contract date.

Deputy Phil Hogan

Is Professor Brennan not going to answer the question?

Professor Niamh Brennan

The fact is Mr. Maloney's contract was paid up to the end of his contract date.

Chairman

Would there be a pension contribution in respect of the unexpired year?

Professor Niamh Brennan

We paid whatever the amount obligated on the authority under his contract which I am informed by Mr. Kelly included a pension element. That was a contractual obligation.

Chairman

I understand it would be. Was there anything else like a company car?

Professor Niamh Brennan

Absolutely nothing else. On top of that, in order to be certain that the amount of the calculation was absolutely accurate, we obtained the services of PricewaterhouseCoopers to double-check that our calculations were correct.

Deputy Phil Hogan

Professor Brennan will be aware that in recent court cases eminent financial institutions have had their figures described as fanciful by Mr. Justice Peter Kelly. Mentioning names like PricewaterhouseCoopers does not engender any confidence in this committee, particularly when one of the partners of that company, Mr. O'Connor, now a chairman of a bank, was chairman of the DDDA. That one will not wash with us.

Chairman

As there is a division in the Dáil I propose we suspend the meeting for 15 minutes. Is that agreed? Agreed.

Sitting suspended at 4.45 p.m. and resumed at 5.05 p.m.

Chairman

I call on Deputy Phil Hogan who was in possession.

Deputy Phil Hogan

Professor Brennan will be glad to know I just have three more questions. Are there losses on any properties other than Irish Glass Bottle site that we should be aware of?

Professor Niamh Brennan

Yes, we have extensively written down the entire property portfolio.

Deputy Phil Hogan

Could Professor Brennan let us have the principal items in that regard, or is it not possible for the committee to get that information?

Professor Niamh Brennan

I think that probably the appropriate amount of detail concerning that issue is in the accounts. The reason I am hesitating is I am somewhat concerned that it would possibly not be wise for a State company to give the committee a full list of all the assets and write-downs. In a market such as this, the Deputy can appreciate, there will be business predators circling around State assets and trying to get them on the cheap.

Deputy Phil Hogan

I appreciate that. Will Professor Brennan say what is the situation regarding the headquarters of Anglo Irish Bank?

Professor Niamh Brennan

As Deputy Hogan is aware that is the property which resulted in the authority being brought to court and losing a court action. The section 25 certificate issued by the authority was found by the court to be null and void, if I may put it like that. As a result, the developer had to apply to Dublin City Council for retention of that building. Dublin City Council approved retention, but that was appealed and it is now with An Bord Pleanála, which has not given a final decision on that application.

Deputy Phil Hogan

What is the position regarding the pension funds?

Professor Niamh Brennan

That is a good question. If the Deputy looks at the consolidated balance sheet, on page 52 of the accounts, it shows that we have net pension liabilities of €6.5 million.

Deputy Phil Hogan

That is in deficit.

Professor Niamh Brennan

It is one of the few good news items in the accounts that is less of a deficit than in the previous year, when the figure was €7.3 million.

Deputy Phil Hogan

Professor Brennan mentioned earlier that the best organisation to resolve the situation was the Dublin Docklands Development Authority. We find it difficult to believe that this should be the case, given the litany of woes we have spoken about, and I am sure Professor Brennan will respect that.

I had suggested the role of the Comptroller and Auditor General should be extended, not just to the Dublin Docklands Development Authority, but to all State-sponsored bodies. I do not see, if involvement in a property vehicle has largely led to the authority's problems, why this should not be done. The IDA, for example, is under the control of the Comptroller and Auditor General. With respect, I would ask, in the light of the authority's experience, notwithstanding Professor Brennan's efforts to resolve them, to consider again and perhaps advocate such a role for the Comptroller and Auditor General with the Minister along with the primary legislation to facilitate such a course.

Professor Niamh Brennan

That is a question which is not for my colleagues on the board nor I to answer. That is a decision to be made at a different level. However, I believe, as I said earlier, that were the Comptroller and Auditor General to look at the two reviews conducted recently within the authority, he would find them to be of the highest standards, consistent with the high standards that his office would apply in its own right.

Deputy Phil Hogan

I shall have to take Professor Brennan's word for that. However, in the light of experience I find it hard to believe. I am not disputing her bona fides in relation to this matter, but in the light of the experience this committee has had in trying to get information from the former chief executive, Professor Brennan must anticipate that we would take that with a pinch of salt.

Will she publish those reports or allow the committee access to them in order to allay those concerns?

Professor Niamh Brennan

Those reports were requested from the authority by the Minister. They will go back to the Minister who will then make decisions on what to do with the reports.

I should like to assure Deputy Hogan that I believe the culture and approach within the authority now is radically different to what it was in the past. I believe there is a significantly more realistic approach to managing and directing the organisation. The board and management recognise the serious financial position of the authority and understand the tough work that has to be done to try to get it back on track. I believe that with time, effort, commitment and focus we can get it back on track. To manage expectations, it will not happen overnight. There is no magic wand. I will be back here in months to come and members will ask me questions, but I will not have happy answers to give them. That will take time. However, we can recover the authority over time and get it back on track to complete the project in the docklands area.

Deputy Phil Hogan

The authority was set up for a particular purpose and it largely did that work well in terms of social regeneration, employment, housing and so on. It was the irresponsible property transactions that have led to the financial precariousness of the organisation. We are sorry to report that, and I am sure Professor Brennan is equally of the same view. I thank her for her co-operation.

Professor Niamh Brennan

I would like to correct some loose language that I used earlier on in this session. I stated that Mr. Bernard McNamara had defaulted on his guarantees. There is a case under way at the moment which will decide whether that did or did not happen. I would like to correct the record and say that there is a legal action on whether or not Mr. McNamara defaulted on his guarantees.

Chairman

Thank you for that. I had written a note to get back to you on it.

Deputy Joe Costello

I am pleased to have the opportunity to ask a few questions. I must declare an interest as I engaged in discussion on the annual report last year. I was a member of the council for a number of years until 2003. My wife, Ms Emer Costello, is currently a member of the council.

Deputy Hogan queried the conflict of interest of some of the people on the board. When Professor Brennan became chairperson, did she ask the members if they had such a conflict? Major problems that arose prior to her appointment were due to a conflict of interest involving Mr. FitzPatrick and Mr. Bradshaw. Was Professor Brennan satisfied that there was no conflict of interest?

Professor Niamh Brennan

The authority keeps a register of conflicts and I requested sight of that register from the secretary. I reviewed the entries in the register. I have worked very closely with my fellow board members. The board dynamic is quite different now than it might have been in the past. It is engaged in the work of the authority and the time commitment is unbelievable. The authority needs that time commitment because it has some serious problems.

I have had one-to-one discussions with certain board members, which they initiated because they were looking for advice from me as chairperson. While there are some conflicts, I believe that they are not so systematic and do not result in financial benefits to board members such that they are problematic. I do not believe that the board currently has conflicts of interest that are causing problems. In fact, I believe the reverse. The work and the commitment of the board is such that the authority is benefiting hugely from the expertise it is bringing to bear to the organisation's problems.

Deputy Joe Costello

So Professor Brennan had access to the register and is satisfied that there was no serious conflict.

Professor Niamh Brennan

Yes.

Deputy Joe Costello

Did she discuss this issue at all with the advisory council?

Professor Niamh Brennan

No.

Deputy Joe Costello

Were any of these issues in the public arena brought to the attention of the council at any stage?

Professor Niamh Brennan

The council members are free to ask any question they like at council meetings.

Deputy Joe Costello

That is not my question. Did the agenda ever include an item on the current situation in respect of the authority?

Professor Niamh Brennan

The financial position of the authority was brought to the attention of the council. It is of great concern to the council——

Deputy Joe Costello

I am not talking about the financial difficulties, but rather whether there were conflicts or irregularities on planning or funding.

Professor Niamh Brennan

When I became chairperson, these were a matter of the past. They were not on my agenda because I do not believe we have a problem with conflicts of interest in the authority.

Deputy Joe Costello

Were they brought up prior to Professor Brennan's appointment?

Mr. Gerry Kelly

Not to the best of my knowledge.

Deputy Joe Costello

I would like to look at the social regeneration as opposed to the development. Let us look at page 25 of the report. If a total of 811 social and affordable units had been certified under section 25, how come less than half of those were built in the last 12 years?

Mr. Gerry Kelly

I would have to check each of the section 25 certificates to identify exactly which sites were not built. The main site which has not been developed yet would be the social and affordable units at Spencer Dock. That is still under consideration and discussion with the board. The bulk of the units identified by the Deputy would be close to 180, and if we add those to the numbers that have been built, then we are close to the final figure.

Deputy Joe Costello

It is six years since I was on the council. At that time, one of the major issues of debate was the Spencer Dock social and affordable housing scheme and why no action had been taken to construct it.

Mr. Gerry Kelly

I fully agree with the Deputy. Since the chairperson has come to office, blocks M and N are very high on the authority's agenda to ensure that those units are developed in accordance with the section 25 certificate, which the developers were granted at the time. I would be confident that we would come to some decision on the development of the social and affordable units in accordance with the certificate which was granted.

Deputy Joe Costello

Am I right in saying that the number of social units made available for letting on the north side over 12 years amount to 37 on Clarion Quay?

Mr. Gerry Kelly

Yes.

Deputy Joe Costello

Does Mr. Kelly agree that this does not fulfil the social regeneration aspect that is outlined in the mission statement?

Mr. Gerry Kelly

If I was to look at social regeneration solely in the area of social and affordable housing, it would disappoint me greatly. It is something that the authority must address and is something that the Deputy and I have discussed over the years. I hope that it will be addressed, but the Deputy is right to say that the majority of the social units developed to date has been on the south side.

Deputy Joe Costello

The authority sold 33 affordable homes in 2008 in Longboat Quay, Hanover Quay, Butler's Court and Forbes Quay. Is that accurate?

Mr. Gerry Kelly

If it is in the annual report, I stand over the figures for 2008. In 2009, 58 units were sold and it is our target to sell 42 units in 2010.

Deputy Joe Costello

What about social units? There is no reference to the social units that were made available in Longboat Quay and Hanover Quay.

Mr. Gerry Kelly

In 2009, 27 social units were allocated, but I cannot provide the figure for 2008.

Deputy Joe Costello

I understand, having dealt with the housing department, that in the region of 60 social units were available in 2008 and something similar in Hanover Quay, and that, in all, more than 150 social units on the south side became available last year. Is that not a significant matter that should be included in the annual report?

Mr. Gerry Kelly

Is it that the social units were on the south side, not the north side? If so, I agree fully with the Deputy.

Deputy Joe Costello

The report——

Mr. Gerry Kelly

It would be something that I would correct in this current year, namely, when we report on social regeneration, we would report on both sides of the river as we move forward.

Deputy Joe Costello

Did the authority draw down Department of the Environment, Heritage and Local Government funding for those units?

Mr. Gerry Kelly

Did we draw down funding?

Deputy Joe Costello

How did the authority acquire those units?

Mr. Gerry Kelly

Some of those units came to the authority in lieu, where we had a joint venture agreement with the developers. Rather than taking a payment in return for our land, we took units instead so we could fulfil the remit of the authority in the area of social and affordable housing. Where the authority was not in a joint venture, the management companies of those units would have paid the authority for the units concerned, and they would have drawn down the grants from Dublin City Council.

Deputy Joe Costello

Am I correct in stating all cases except that of Butler's Court were joint ventures where the land was owned by the authority, so that all the units coming to the authority were free gratis?

Mr. Gerry Kelly

I will not answer that question because I am not sure of the facts and I would not like to mislead the committee.

Deputy Joe Costello

In the case of Longboat Quay, Hanover Quay and Forbes Quay, were applications made to the Department of the Environment, Heritage and Local Government for funding for well in excess of 100 units, even though the units were available free to the authority?

Mr. Gerry Kelly

If they were social units——

Deputy Joe Costello

They were social but it was a joint venture, as I understand it.

Mr. Gerry Kelly

I would have to check that. I am not aware of that.

Deputy Joe Costello

If that is the case and funds have come into the finances of the authority, where has that money gone and how is it registered in the accounts?

Mr. Gerry Kelly

If that money has come into the authority, it would be registered in the accounts and would go back into the funding of the authority for other social regeneration projects or for running the authority. While I am not saying that has happened because I am not aware of it, I will definitely follow up on it.

Deputy Joe Costello

We are talking about serious money here, in excess of €50 million, yet Mr. Kelly is not in a position to tell me whether the authority got that money and what happened to it.

Mr. Gerry Kelly

To the best of my knowledge, the authority has only received funding from the Department for units where management companies were involved, received funding and purchased the units from the authority. That is what I am honestly telling the Deputy.

Deputy Joe Costello

For all of these units, apart from Butler's Court, the land belonged to the authority. The units came back to the authority free of charge. Therefore, the funding either did or did not come from the Department of the Environment, Heritage and Local Government. I understand it did.

Mr. Gerry Kelly

We had to sell them in any case.

Deputy Joe Costello

No, this is social housing.

Mr. Gerry Kelly

Yes. They were in our ownership and they would have been purchased by the management companies.

Deputy Joe Costello

The reference here is to the 43 affordable units. Did the authority sell these affordable homes even though it got them for free?

Mr. Gerry Kelly

We did not get them for free. It was part of our ownership of the land. We owned the land. In our joint venture, we could have entered into an agreement with the developer to be paid for the land. That would have been our take on the land. What we did was to say that rather than taking funding——

Deputy Joe Costello

Are we speculating here with regard to "we could have"? I want to know what actually happened.

Mr. Gerry Kelly

I am telling the Deputy what actually happened——

Deputy Joe Costello

Is Mr. Kelly telling me he does not know what happened?

Mr. Gerry Kelly

No, I am not. I am saying that, to the best of my knowledge, in all cases where we owned the land, rather than taking funding from the developer for the development of the buildings on the site, we took units instead so we could ensure that we could provide social and affordable housing. In that instance, we then sold the affordable units and we took funding for that so we could put further funds into other areas of social regeneration.

Deputy Joe Costello

Did the authority also draw down the funding for those units from the Department of the Environment, Heritage and Local Government?

Mr. Gerry Kelly

Not for the affordable units——

Deputy Joe Costello

What about the social housing?

Mr. Gerry Kelly

As far as I am aware, the only funding we received through the Department was for units which were put into the ownership of the management companies which drew down that funding and passed it on to us because they were taking our units from us. They were units the authority had no income from otherwise.

Deputy Joe Costello

I do not understand Mr. Kelly's point. There was a joint venture between the authority and the developer. In that joint venture, the deal was that so many of the units would come back to the authority free gratis. In other words, they would be given to the authority. The authority supplied the land and they got the benefit of large numbers of——

Mr. Gerry Kelly

Yes, that was our contribution.

Deputy Joe Costello

It is pretty clear. The question is whether, as well as getting the units, the authority also sought funding from the Department of the Environment, Heritage and Local Government to buy something that was passed on to the authority by the developer for free, because that was the deal it had with the developer. While Mr. Kelly might not want to answer now, he might come back with the information.

Mr. Gerry Kelly

I am definite that we sold on the affordable units.

Deputy Joe Costello

There are many units, perhaps 150, which do not appear in the authority's accounts but which should appear there. Where the funding came from and where it went does not appear in the accounts. That is a serious matter and the accounts and the annual report need to be amended to clarify this.

Chairman

The Deputy might explain to us the subtlety of the point. The authority did not get anything free gratis if it provided the site. I do not understand the point. If the authority provided the site——

Senator Paudie Coffey

It was in lieu of the land.

Chairman

It got nothing free gratis if it was providing the site, which was very valuable. I do not understand the point on it being free gratis. Part of the arrangement would have been that the authority provided the site free of charge and the developer built the units. Instead of selling the developer the site and buying the units back——

Deputy Joe Costello

The point is——

Chairman

I missed the point.

Deputy Joe Costello

The land was available to and belonged to the authority, so it cost it nothing.

Mr. Gerry Kelly

The authority had purchased the land.

Deputy Joe Costello

No, it had not.

Mr. Gerry Kelly

Sorry, Deputy——

Deputy Joe Costello

The State had purchased the land.

Mr. Gerry Kelly

No, the authority purchased the land. It was the Bord Gáis site which the authority originally purchased, and it then remediated the site. There had been an outlay by the authority on the purchase and remediation of the land of in excess of €70 million.

Deputy Joe Costello

Did the authority draw down any of that funding from the Government?

Mr. Gerry Kelly

No, we did not.

Deputy Joe Costello

None of it.

Mr. Gerry Kelly

None of that €70 million was drawn down from the Government. As a matter of fact, everybody knows the authority has drawn down no funding from the Government since it was first put in place.

Deputy Joe Costello

Is Mr. Kelly clear on the point made that the gasometer site——

Mr. Gerry Kelly

I am clear that we have never gone to the Government for Exchequer funding.

Deputy Joe Costello

——was purchased and remediated by the Dublin Docklands Development Authority?

Mr. Gerry Kelly

It was purchased and remediated by the authority.

Deputy Joe Costello

Without any funding from the Government?

Mr. Gerry Kelly

Without any funding for the purchase of the site or its remediation.

Deputy Joe Costello

Certainly that would clarify the point. Nevertheless, there is no reference whatsoever to the approximately 150 social units in Hanover Quay, Longboat Quay, Forbes Quay and Butler's Court to which reference should have been made.

Chairman

Is Deputy Costello stating that it is an off-balance sheet transaction and that the action took place but did not form part of the accounts?

Deputy Joe Costello

The accounts do not even refer to——

Chairman

Yes.

Deputy Joe Costello

In other words, they are omitted from the accounts.

The next matter I wish to discuss is that a number of units are available in Castleforbes. I understand the Department of the Environment, Heritage and Local Government has contributed €4.5 million for the purchase of 21 of these.

Mr. Gerry Kelly

It has made funding available.

Deputy Joe Costello

That funding has been available for some time. People in the East Wall and north dock area, which is part of the regeneration area, are crying out for housing. Only 37 units have been made available in 12 years on the north side. We now have 21 social housing units available and money has been made available by the Department. Has the Dublin Docklands Development Authority begun the process of drawing it down and if not why not?

Mr. Gerry Kelly

We have not commenced that process for the plain and simple reason that we are examining the cost of the units and the original cost of the units put to the authority. We are examining whether they would be value for money and whether they could be purchased at a cheaper cost in the near future. If that is not to be the case then the authority will most certainly proceed but we did not think it would be prudent to proceed given the costs involved in the current climate. That is what we are examining.

Deputy Joe Costello

Is that likely to——

Mr. Gerry Kelly

I hope that we will be able to bottom that out very early in the new year.

Deputy Joe Costello

Would Mr. Kelly not let the local authority conduct the transactions? Dublin City Council is the channel for the funding.

Mr. Gerry Kelly

If Dublin City Council came to us and was prepared to draw down the funding at the current cost, I would most certainly speak to it. The authority should be prudent if it can get a better transaction for the Department.

Deputy Joe Costello

After having only 37 units over that period at last we have 21 units. People are crying out for units and we would like to see some action. Another 30 units are in the same vicinity. Perhaps this might be a priority.

Deputy Chris Andrews

On that issue, is a court case pending on those units?

Deputy Joe Costello

Are they caught up in NAMA?

Mr. Gerry Kelly

They probably will be caught up in NAMA but there is no court case.

Deputy Joe Costello

I wish to ask about the media reports on the security contract for €150,000 over the past ten years. It was renegotiated to €15,000 per annum. Will Mr. Kelly outline what procurement mechanism was used for that security contract considering that everything over €50,000 must be properly procured? Why did it continue at such an exorbitant price for so long?

Mr. Gerry Kelly

The contract was procured almost 11 years ago when the site was being developed by the authority for the only purpose-built community training workshop in the country. At the time, the contractor put the particular security company in place. That contract was continued by the management of the community training centre when it opened. The authority agreed to pay the contract for the workshop and centre because we owned the building. The contract was for 24 hour, round the clock, seven days a week, 52 weeks of the year security. It worked out at approximately €14 per hour. The contract currently in place, which the authority also pays for, is for two to three hours per day so it is not measuring like with like when one compares the original contract and that which is in place at present. The reason the contract was renegotiated earlier this year was because the authority was not in a position to continue funding the contract to the level at which had been in place over the years.

Deputy Joe Costello

Were proper procurement procedures followed in the first instance?

Mr. Gerry Kelly

The contract was put in place by the contractors and continued by training centre management. The authority did not renegotiate or procure a new contract in the intervening years.

Deputy Joe Costello

Is Mr. Kelly in a position to comment on whether the personnel who had the contract were involved in criminal activity?

Mr. Gerry Kelly

I am not in a position to comment on that except to state that at a meeting earlier this year, the Garda Síochána indicated to us that a member of the security company was being investigated by CAB.

Deputy Joe Costello

What is the number of staff employed at present and the cost of this? From where does the funding for paying the staff come? Is it borrowed money or does it come from the authority's resources?

Mr. Gerry Kelly

In 2008, the number of staff in the authority peaked at more than 60. At present, the authority has a staff of less than 40. It is the intention of the authority to downsize the number of staff to 26 by the end of 2010. At the start of the year, the salary costs were estimated to be approximately €4 million. By the end of 2010, with reduced staffing and management I envisage that we will halve that cost to approximately €2 million. As the chairman indicated, we have a lending facility in place at present with NIB. As was indicated in the accounts, we had a €27 million overspend in 2008, which will be reduced to single figures in 2009.

Deputy Joe Costello

Does it come from capital funds or current flow?

Mr. Gerry Kelly

It comes from current funds. The lending facility is divided into two separate portions for capital and operating.

Deputy Joe Costello

Page 25 of the report mentions the objective of maximising employment opportunities for docklanders. Does Mr. Kelly know the number of local people employed over the 12-year period?

Mr. Gerry Kelly

Not across the board but as the Deputy will recall, when the authority was established not one young person in the docklands was working in the IFSC. Today, more than 300 young docklanders work in the IFSC with not one in cleaning, security or catering. They all work on the trading floors and in administration. This does not include the number of young people who secured jobs in other sectors around the docklands, including construction. It is not as high as we would like but we are always striving. We have a full-time local labour officer in the authority who works with the various groups in the area and we have put a local labour forum in place to work on local labour, and it is now representative of all of the groups and agencies in the docklands. It is an ambition of the authority to constantly increase the number of young people working in the area. The one figure I do not have is for the multiplier effect of how many other locals the almost 300 young people who secured employment through the docklands and the agencies in the area have brought into employment.

Deputy Costello will recall that more than 12 years ago, when we worked together on the issue, 35% of all young docklanders left education for good at the age of 11, 65% left school at 15 and 1% continued to further education after sitting the leaving certificate exam. These figures have increased significantly and almost 60% of young docklanders sat the leaving certificate exam two years ago. Through the docklands scholarship programme, almost 300 young docklanders are attending universities and third level colleges. The authority's work with the education sector and community groups has achieved a substantial level of educational attainment and employment opportunities. This is a first-class example of how community representatives and groups can work with State agencies to improve quality of life and opportunity.

Deputy Joe Costello

I cannot allow this opportunity to pass without commending the DDDA on its commitment to the local community in terms of education, community development and amenities. Mr. Kelly was closely involved in these matters.

We have not had the best of luck with the regeneration projects for O'Devaney Gardens, Dominick Street, Seán McDermott Street or Croke Villas. Problems have also arisen in regard to planning in the docklands. How many planning applications has the authority received in 2008 and 2009 and have any been transferred to Dublin City Council? Do the witnesses think the council is better positioned to deal with future planning applications?

Mr. Gerry Kelly

I do not think so. I have the board's agreement to separate the planning process from development and property management because, as Professor Brennan indicated, we found that planning was coming second to development. Planning matters are now being reported directly to me as a separate function and the same will apply in respect of architecture in the near future. The independence of the planning process and its adjudicative nature will be complete. The purpose for which the authority was established can and will be robust, especially in regard to planning. I do not see any reason for the area to lose its fast-track planning facility, therefore.

Deputy Joe Costello

What is the present volume of applications?

Mr. Gerry Kelly

As one would expect, the volume decreased in 2009. We will be reporting on the figures in our end of year review.

Deputy Chris Andrews

I declare an interest as a former member of Dublin City Council. I have consistently been a strong supporter of the DDDA because, as Deputy Costello acknowledged, it transformed a derelict site into a vibrant and interesting place. That work is almost complete.

Questions have been asked about why the DDDA decided to expand to the Poolbeg Peninsula. The authority has had a clear impact on the lives of people who were living in abysmal council accommodation in the north and south inner city. These people felt a sense of hope for their homes and environment once they were connected to mainstream society. There was nowhere else for this process to go other than the large tract of land on the peninsula, which remains attractive for further development. I am regularly asked when the much needed additional housing for the area will be developed. In hindsight we will say the authority got involved in property speculation but if the success in the docklands had been repeated in the peninsula we would have been queuing up to open new housing schemes. The authority consults widely with community representatives and has made a big difference. I understand the sense behind the decision to explore other sites, although questions clearly arise over the intricacies of the matter.

In regard to operating expenses, legal fees increased from zero in 2007 to €5.5 million in 2008. Does the authority expect similar legal costs next year? I acknowledge Mr. Kelly's estimate that remuneration will drop to approximately €2 million next year but what reductions will be made to other operating costs?

I appreciate that the witnesses would prefer the authority to remain as a single entity but has a merger with Dublin City Council been considered? The Lord Mayor, city manager and several local authority members sit on the council of the DDDA. A merger would offer savings in legal, publicity and marketing costs. I wish the witnesses the best of luck in the difficult challenges that lie ahead of them.

Professor Niamh Brennan

Deputy Chris Andrews has referred to an item in the accounts which is of great concern, namely, our €5 million expenditure on legal costs. Those legal costs would not change if the authority was subsumed into Dublin City Council because the litigation would still have to be fought.

It does not necessarily follow that subsuming the authority into the council would save the other costs identified by the Deputy. Unfortunately, marketing expenditure has been whittled down to the bare bones. Our costs in 2009 are significantly lower than the figures set out in the 2008 accounts. The only area which is difficult to prune is legal costs.

Deputy Chris Andrews

There were no bad and doubtful debts in 2007 but there are some now. Does Professor Brennan expect more bad and doubtful debts to arise?

Professor Niamh Brennan

In these market conditions, collecting debts by any business in any area of the economy is very difficult. We have written down our receivables extensively but we have also flagged where it is possible that some items we are currently showing as receivable may not ultimately come in. It is a judgment and only time will tell if our judgment is right. Maybe we have written down our receivables too much or too little. Unfortunately, although accounting looks very precise, it is the product of extensive subjective judgment, and that area in this economy is particularly tricky.

Deputy Chris Andrews

Has the authority had discussions with Dublin City Council about transferral? Has it been considered in a meaningful way?

Professor Niamh Brennan

This is not something that will be decided by the Dublin Docklands Development Authority. It will be decided by others so it is not a matter for us to consider. We are putting the case to the committee today that we believe we have the ability, commitment, drive and energy to see the authority through its current problems, get it back on track and get the project going again to completion.

Deputy Chris Andrews

Is there a time on that completion? I know it is difficult.

Professor Niamh Brennan

The time line will probably be longer than might have been thought two years ago. There is very little happening in the property market at the moment. The time line is certainly slower than would have been expected in the past.

Deputy Chris Andrews

Will it be five years or longer?

Professor Niamh Brennan

The report of an bord snip nua — Colm McCarthy's report — indicated that the authority should be continued to complete its remit. The report indicated a period of five years. I do not know if the report, if it was being compiled at this time, would still indicate five years.

Deputy Phil Hogan

It might be three.

Professor Niamh Brennan

No.

Senator Paudie Coffey

I will be brief as most of my questions have already been asked. I have listened carefully to all that has been said. The general public would be horrified with much of what has been disclosed today and to learn of some of the transactions and practices that have been exposed within the Dublin Docklands Development Authority. The principle of the authority seemed very positive at the outset and I acknowledge that much good work has been done on the ground with social and community facilities and their dividends.

It is a great shame that this has been overshadowed by the incestuous relationship spoken about involving board members and their property speculation under the authority's umbrella. It has brought the project into disrepute and threatens its future viability. It is a massive exposure for the taxpayer.

Has AIB any involvement currently with the Irish Glass Bottle Company site? It was mentioned earlier how the funding was geared initially for that — it was 50% each between Anglo Irish Bank and AIB, and there was a shareholder involvement as well. Will the witness clarify that?

The fundamentals of any planning process are based on impartiality, objectivity and integrity. We have heard that this has not been the case to date, as evidenced by some of the material we have seen and heard before the committee. What measures are being taken to ensure the integrity of the planning process within the Dublin Docklands Development Authority and display objectivity and impartiality? What are the tangible measures which have been taken and how will they work in practice?

Why does Mr. Kelly think that handing the planning process to the local authority would not improve the issue and restore the integrity which has been lost to some degree by what we have heard today? Deputy Costello has already raised that matter. Would it not help the Dublin Docklands Development Authority to regain much of that integrity by handing over the planning process and allowing the authority to manage the docklands as a regeneration project in tandem with Dublin City Council? Would that not be a positive move to restore things and bring about better assistance in dealing with planning applications?

Professor Niamh Brennan

Initially, the financing of the Irish Glass Bottle Company site transaction was to be 100% from Anglo Irish Bank. It subsequently shared the financing with AIB on a 50:50 basis, so that is the current position.

Deputy Joe Costello

What is the interest at present on an annual basis?

Professor Niamh Brennan

Our interest bill annually is a little below €5 million. That is our share of the interest on the borrowing. We must resolve that issue as the authority cannot continue supporting that level of interest charge on an annual basis.

Chairman

That is being rolled up.

Professor Niamh Brennan

Yes, but we are reflecting the charge in our accounts. The cash payment of it is being rolled up.

Chairman

The authority will not be in a position to negotiate the rate until it is in the position to make some repayments.

Professor Niamh Brennan

We are not in a position to negotiate anything with the banks because the NAMA legislation precludes any negotiations taking place at this interregnum before NAMA is established.

The Senator's second question related to planning. Following the Finlay Geoghegan judgment in the Mountbrook litigation we have very significantly enhanced our planning processes. There is detailed documentation of the process enhancements; these are not public documents and the Senator would not particularly enjoy reading the mind-numbing detail of processes and procedures around planning.

Deputy Phil Hogan

He is reading The Bankers by Shane Ross at the moment.

Senator Paudie Coffey

I am finding it mind-numbing as well.

Professor Niamh Brennan

The planning report commissioned by the board has found and acknowledges that very significant improvements have already been made. There is room for further improvement. It is the objective of the board and management that out of bad comes good. We will be best in class on the planning side and will learn from our mistakes so as to conduct our business with impartiality and objectivity in a quasi-judicial way. The board members must behave almost like judges so we must be careful not to be seen to do anything suggesting we act with bias

For example, we do not hob-nob with developers and so on, as that would create the perception of bias. We must be very careful, just as a judge must be careful not to be seen to do anything that could suggest a compromise of objectivity.

Senator Paudie Coffey

Are there guidelines or terms of reference in that regard? What measures are being taken? The delegate has explained the matter but what mechanisms are being put in place within the authority? Are clear terms of reference being given to board members?

Professor Niamh Brennan

The new planning processes are working but are being continuously enhanced nonetheless. On the governance side, such as board behaviour, we are working on a new code of governance for the authority which will be significantly more comprehensive than the previous version and which will address these kinds of issues. That work has not been completed but I can tell the committee that board members are very careful not to do anything that might result in an accusation we were engaging in relationships which could lead to an accusation of bias. The board is absolutely aware that we must behave as if we were judges. That means we do not attend social functions or have personal relationships with those who might be submitting planning applications to the authority.

Senator Paudie Coffey

I thank Professor Brennan for that answer. I have a follow-on question about the integrity of the planning process. In situations that concern local authorities, for example, councillors must sign documented declarations of interest. Is there a similar system in place in the Dublin Docklands Development Authority, whereby those connected with the planning authority and under its umbrella are required to sign documented declarations of interest prior to taking up positions?

Professor Niamh Brennan

As I said, there is a declaration of interests which board members are required to complete on their appointment under the code of practice for State bodies. Like Members of the Oireachtas, we are required to comply with the requirements of public office legislation and declare our interests. We do this on an annual basis and there is a register of interests. Occasionally, a matter might arise when a board member realises there might be a possible conflict. He or she would then absent himself or herself from that part of the meeting and take no part in the discussion or decision.

Deputy Phil Hogan

We used to cover conflicts of interests in a big way with regard to the professor's organisation. Decisions were made by conference call. In the past I referred to the Irish Glass Bottle site and hope that practice has been brought to an end. We would not wish to deprive anybody of the opportunity to engage in social activity or socialising in Dublin but, according to Professor Brennan, the board is very restrictive with regard to opportunities for people to meet one other, even though they may be living in a small part of town.

Professor Niamh Brennan

I have to say being a judge is very constraining. One actually has to go out of one's way not to engage in social activities with persons on whose activities one might be called upon to judge. On my own situation, many invitations have been received in the Dublin Docklands Development Authority to attend various functions, many of which I have declined. One reason for declining them is that I might end up being compromised or there might be the appearance that I was being compromised. To be honest, I do not think anyone could compromise me, but it could make it look as if I was.

Deputy Phil Hogan

I now know why Professor Brennan's husband is not interested in the Judiciary. I have a final question. NAMA is a very interesting concept which has come to pass since the authority's annual accounts for 2008 were presented. Has the authority made an assessment of the number of properties that are likely to be transferred to NAMA?

Professor Niamh Brennan

The authority has an overdraft facility with National Irish Bank. Since it was recently renewed, I do not think it is moving in the direction of NAMA. The Irish Glass Bottle site transaction is potentially one that may end up with NAMA. I am not an expert on NAMA but if this transaction ends up with it, it will be by reference to the two lending institutions involved and will be something that will happen without the involvement of the authority.

Deputy Phil Hogan

I thank Professor Brennan.

Deputy Joe Costello

Let me make a special plea on the matters with which I started? It seems there has been a clear breach of that aspect of the social contract under which the authority operates, namely, the construction and allocation of units of social housing. I ask that the authority urgently direct its attention towards rectifying that matter. There are units available for letting. There are also units that should have been constructed but have not been. I ask that this matter receive priority in the coming year.

Chairman

I thank Professor Brennan and Mr. Kelly for attending so late into the day. We had to suspend the sitting for a while because of votes in the Dáil Chamber. Everybody has found the meeting informative and beneficial. We thank Professor Brennan, as the new chairperson of the authority, for her openness and frankness. She has cast some light on the issues raised. I do not wish to take away from work done previously but there has been a difficult period and it probably took somebody to come in and look and work with a fresh pair of eyes and hands to bring the authority to its current position. Notwithstanding this, it is still a difficult one.

The joint committee adjourned at 6.20 p.m. until 3.30 p.m. on Tuesday, 15 December 2009.