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Seanad Éireann debate -
Thursday, 14 Dec 2006

Vol. 185 No. 16

Local Government (Business Improvement Districts) Bill 2006 [Seanad Bill amended by the Dáil]: Report and Final Stages.

I welcome the Minister for the Environment, Heritage and Local Government, Deputy Roche, to the House.

This is a Seanad Bill which has been amended by the Dáil. In accordance with Standing Order 103, it is deemed to have passed its First, Second and Third Stages in the Seanad and is placed on the Order Paper for Report Stage. On the question, "That the Bill be received for final consideration", the Minister may explain the purpose of the amendments made by the Dáil. This is looked upon as the report of the Dáil amendments to the Seanad. For Senators' convenience, I have arranged for the printing and circulation of the amendments and groupings of amendments. The Minister will deal separately with the subject matter of each related group of amendments. Senators may speak only once on each grouping. I remind Senators that the only matters, therefore, which may be discussed are the amendments made by the Dáil.

Question proposed: "That the Bill be received for final consideration."

I welcome the opportunity to discuss this important legislation introduced in the Seanad by my colleague, Minister of State, Deputy Bat O'Keeffe, in June 2006. Senators present for that debate will recall that the main purpose of the Bill is to introduce a statutory basis for the operation of the business improvement district schemes in Ireland. I will now address the amendments made in the Dáil last week.

Group 1, which comprises amendments Nos. 1, 2 and 3, provides for the enhancement of the role of audit committees in local authorities and for the inclusion of outside expertise membership on such committees. Given the close relationship between local government and Seanad Éireann I have no doubt Senators will be particularly interested in this.

Local authorities are now spending in excess of €9 billion per annum on their current and capital programmes, a significant sum which has grown dramatically in recently years. The reality is that this level of expenditure requires an enhanced financial management system. I am keen to enhance the existing financial management and audit control systems in local authorities to ensure we obtain full value for this level of expenditure and, particularly, to ensure the principles of transparency and accountability are fully observed.

It is interesting to note, having spoken during the past two years to councillors from all sides, that one of the most common complaints is the difficulty in dealing with the complex issue of local finance. In light of developments in corporate governance since the introduction of the Local Government Act 2001, I consider it is appropriate, therefore, that we examine the issue of audit committees. I considered in particular that the remit and composition of the audit committees, which could have been established under section 122 of the Act, was far too narrow. Most councillors and people with experience in councils would agree with me on this.

Under this legislation, the remit of audit committee was limited to considering the local authority's audited financial statement and the auditor's report or special report. Councils were not obliged to establish such committees. The extraordinary reality is that very few local authorities have audit committees, an adjudication I take to be councillors' value or lack of value of existing structures. The amendment, therefore, replaces section 122 of the Local Government Act 2001 and sets out in broad terms the functions of an audit committee, namely, to review the financial and budgetary reporting practises and procedures within a local authority, to foster the development of best practice in the internal audit function, to review any auditor's report or auditor's special report and to assess the follow-up actions by management, to assess and promote efficiency and value for money, to assist in the review of risk management systems and to make such recommendations as the committee considers appropriate in regard to the above matters.

Senators who have been members of local authorities will realise this will bring real value to councillors and will give them a real opportunity of making a strong input in terms of the control and efficiency of the management and finances of local authorities. In addition, the new provisions contain an enabling provision under which I am empowered to set out the regulations and detail in regard to membership of the audit committees, the holding of meetings, reporting by an audit committee, performance and functions of the audit committees and procedures to be followed in regard to that performance. Under the current provisions, membership of audit committees is confined to council members and does not allow councillors to have, for example, outside assistance or expertise. Best practice and development in corporate governance in the public and private sector strongly support the inclusion of people outside the system to assist the audit system. It is a reality that one cannot be a judge in one's own case. Therefore, it is a reality that the best one can do is assist the local councils in this regard by bringing in somebody with the required expertise and knowledge.

In recent years local government has made significant progress in the area of value for money, as acknowledged in the Indecon report. Many initiatives are in place in the local government sector to support efficiency and value for money, including the new financial management systems, five-year multi-annual investment programmes and value for money auditing of expenditure and e-enactment. The local authorities are not behind the door when it comes to introducing innovations. I recently attended the launch of an accounting system for a number of local authorities in Wexford, which was the best I have ever seen and I suggest that the world of business should consider it. Local authorities have been good in this regard.

The Department is working with local authorities on the development of a costing system for the local government sector. This will deliver enhanced management information, especially on unit costs, and will facilitate local authorities in assessing their full unit costs over time. It will be greatly helpful to local authority members in making comparisons between local authorities. In the wider public service, local authorities were the first to introduce financial management systems based on accrual accounting principles. The reporting by local authorities on performance in 42 different service indicators is another indication that the local government sector is willing to step up to the plate and bat.

The Government's drive to pursue a value for money agenda across the public service will be assisted by the introduction of a stronger audit function in local authorities. Most important is the real interest that local authority members have. People who are serious about local government and ensuring we have efficiency will be greatly assisted by this change. Amendments Nos. 1 and 2 are consequential on the introduction of the enhanced audit provision and I recommend the amendments to the House.

I welcome the Minister to the House and I thank the Clerk for clarifying the amendments for me. Like any successful scheme, this business improvement districts scheme cannot operate without adequate funding. Public representatives have brought to my attention the inadequate funding of local government for specific projects, etc. Many local authorities are forced to take a piecemeal approach. For example, a local authority may start to construct a new footpath and might only have sufficient funding for half the street. The remainder of the street is left in a mess for two, three or four months until further funding is allocated by the Department. If an authority has a shortfall when carrying out a specific development, the Department should have some process to allow the authority to draw down funds rather than leaving it in a dangerous state that is potentially liable to insurance claims, etc.

There is no co-ordinated approach by bodies such as the ESB, Eircom, the service sections of local authorities and other bodies that might need to carry out work underground. These bodies should have a more orderly approach to work in the vicinity of footpaths in towns. The Minister should take the lead and advise local authorities in this regard.

Local authorities urgently need greater democratic accountability at local level. Many authorities are cash starved and many powers are still vested in national Government. I would like a transfer of powers from national Government back to the local authorities. More funding is needed for tidy towns committees.

That is not related to these amendments, which are about auditing.

It relates to the amendments. The tidy towns scheme is a wonderful scheme that has been in operation for more than 40 years and is still under-funded. Greater encouragement should be given to villages and towns to participate. I hope the BID scheme initiative will lead to greater involvement. To attract towns and villages to become involved in tidy towns scheme etc., more funding needs to be allocated. The funding has stagnated in recent years.

While I appreciate the Senator's concern, we are dealing with audit committees.

I am dealing with audit committees as well. However, we have insufficient elected public representatives——

The Senator cannot deal with it.

Insufficient public representatives are involved and we need more elected members on BID committees. I highlighted the issue when we spoke on it previously. I am disappointed it is not addressed in the amendments before us today.

These amendments are crucial for local authorities. In effect, each authority is now a major business and is like a private company. Dublin City Council is involved in public private partnerships and can raise significant revenue. The previous speaker referred to the funding for local government. In 1997 the local government fund was €339 million. In 2007 it will be €947 million. While inflation in the period was 30%, the fund increased by 180%. Each local authority has responsibility for spending and raising its own money. The councillors have an input in the process when framing their budgets at the end of the year. I speak to councillors regularly. If they have an issue with funding, they speak to officials involved and make suggestions on how the funding might be raised.

On auditing, when dealing with such large amounts of money, it is crucial to have some control. In recent years we have heard much about value for money and ensuring that the State gets value for every cent it spends. It is essential that local authorities have the same control and these amendments will certainly help in that regard.

I thank the Senators. Senator Brady made his point well. Local government is now big business. Close on €1 billion will be transferred under the heading of the general purposes grant from central government. The local authorities will raise approximately €600 million in development levies. It is important that councillors know exactly what they receive. Between current and capital expenditure, local authorities will spend approximately €9 billion. It is important to bring a much greater sense of professionalism to the process. It is also important for local authority members to have information on value they regard as helpful in their deliberations. I attended a meeting today with representatives of the County and City Managers Association where I made the point that the existence of effective audit committees represents a win-win situation. They are positive for public representatives and management and, most importantly, for the taxpayer.

Senator Bannon expressed concerns about the membership of audit committees. They will comprise representatives and nominees of the businesses involved in addition to their local authority membership. The reality is that local government is big business — a vastly expanding business which touches on the lives of every citizen. In the context of an overall budget of €9 billion, it is critically important that local government secures good value for every euro it spends. Local authority members to whom I have spoken welcome the enhanced role of audit committees as a positive move forward, and it has also received a positive response from the local authority managers to whom I spoke today. I am confident we will make progress on this issue. I thank Senators for their contributions on this group of amendments.

Group 2 relates to submissions on the business improvement districts, BID, proposals. This is the subject matter of amendment No. 4.

This amendment requires the rating authority to prepare a report on the submissions received by it following consultation on the business proposal under section 129(e). The objective of this amendment is to ensure reports are available to the public and members of the local authority. A key to the ultimate success of any BID proposal will be the extent to which there is meaningful engagement with the public in the area. I am sure Members will support this.

The Bill sets out a comprehensive framework for such consultation. Following publication of a BID proposal, the rating authority must, by way of a public notice, invite submissions from the public on the proposal. The public must be afforded at least 30 days for the making of submissions. The amendment inserts a formal requirement for a report on the submissions received to be furnished to the elected members of the local authority. In addition, the report must be made available on request to members of the public.

I thank the Minister for clarifying this amendment. Business improvement districts comprise a working partnership formed between businesses, ratepayers, property owners, tenants, residents and local authorities. It is important that all parties come on board. It is of little use if 80% of those involved co-operate but an absentee landlord, for example, does not.

Will the Minister assure the House that no additional charges or expenses associated with these proposals will be imposed on the ratepayers of a particular district, area or town? Ratepayers are already hard pressed as a consequence of existing legislation. Laws on drink driving and so on are important but they mean that people are more curtailed than they were in the past. Many people in rural areas, for example, no longer drive to the nearest town for a drink because of the random breath-testing measures. Some are even afraid to drive their car the next morning. As a result, many business people, especially publicans, find their coffers are not swelled to the same extent as heretofore. The mindset change on the part of the public means we will see many pubs coming up for sale after Christmas.

Ratepayers make payments based on the valuation of their premises. Something should be done for those businesses whose income has dropped appreciably. A scheme is in place in County Longford, for instance, where a reduction is given to those who can prove they are not making the same profit they did in the past or that the income from their business is substantially reduced. With increasing numbers of superstores appearing in major towns and cities, many people in rural areas prefer to travel rather than shop locally. I encourage people to shop locally at Christmas and support local businesses in rural areas. They are part of the fabric of rural communities and are deserving of support. Shopping in superstores does not necessarily result in savings for consumers because they may end up making purchases they neither need nor want. The Government should encourage measures that ensure everyone has a fair slice of the cake.

Senator Bannon made several good points. I agree that shopping locally makes good sense for a variety reasons. In addition to the argument put forth by Senator Bannon, it makes psychological sense because it means one does not drive oneself daft looking for a parking space. It is also better from an environmental perspective.

Senator Bannon expressed particular concern that these proposals might result in some further imposition on businesses in the context of dramatic changes in the business environment in recent years. Business improvement district schemes involve groups of businesses coming together to work for enhanced services. This endeavour involves joint decisions on the budget required to secure those services and the contribution process that will operate. The only way in which the local authority will be involved is in the collection of this self-imposed contribution. Businesses will decide what they are willing to pay for the additional services.

At the initiation of a business improvement district scheme, a benchmarking process will be initiated to outline the delivery of existing services to ensure that substantial additionality is achieved. The first schemes put into operation will send out the message for everybody else in terms of what is required in regard to enhanced services. If they are seen to be fair and equitable and to deliver good value, business improvement district schemes will be initiated throughout the State. There is great interest in these proposals among local business communities and I am delighted with the positive reaction of chambers of commerce in all areas. The latter are beginning to engage far more closely with local authorities. To the great credit of local government, they have put in place a range of means by which local businesses can express their views. If that model were applied throughout Irish life, we would be a better and richer nation. We would be also be much more content with the way we do our business.

Group 3 relates to the commencement of certain sections. This is the subject matter of amendment No. 5.

This is a technical amendment which provides for the commencement of section 1, which is necessary for section 5 of the Bill, as passed by the Seanad, to come into effect. Section 5 provides that newly erected properties will be liable to pay a levy to local authorities from the date the properties are entered into. This ends the existing rating holiday whereby it is possible for a new business to take advantage of the lag between the occupation of a business premises and the commencement of business, at which point the premises is valued and rated. The cost of this rating holiday is carried by all other businesses in the area which pay rates. This is not equitable.

From the time a premises is built, it should be entered on the valuation list and rate contributions should be payable immediately. It is only fair and reasonable to other businesses that it should be so. The rating holiday that existed because of the inflexibility in the current arrangements increases the burden on existing businesses. A situation could arise, for example, where small business must pay more while a large firm that is commencing operations pays nothing for a period. It is only reasonable that as soon as a property is completed and the valuation process undertaken, the contribution of that business to local funding should commence. Reference is made to a levy in the legislation because it cannot be called a rate for technical reasons.

I detect from the Minister's reply that there will be an extra cost on ratepayers. Will provision be made for a hardship fund to help a business overcome when it is hit by hard times or a natural calamity? Many public houses and food outlets in small towns and villages are hit by these charges. These traders claim their incomes are down considerably on what they were five years ago because of a changing entertainment culture in rural areas. Rural areas do not have the same volume of taxis as urban areas to transport people from public houses and restaurants. In many areas, people have to wait up to four hours for a taxi. This needs to be addressed.

Will Senator Bannon keep his remarks to the section?

I always like to raise other issues. The midlands faces a serious situation with flooding along the Shannon. Is there any relief for the hard-pressed farmers, especially those in counties Longford and Westmeath, in the Shannon catchment area who may lose their livelihoods——

Senator Bannon is pushing the limit.

Some relief fund must be put in place to help out those affected. Many of them have contacted me about this.

Senator Bannon, that is beyond the scope of the Bill. It could have been raised on the Adjournment.

We live in a booming economy. Whether in rural or urban areas, small businesses have burgeoned over recent years. The budget highlights how the Government supports small business to the hilt. The business improvement districts scheme is voluntary and a small business can contribute to it if it is interested in improving its business. The benefits will be not only for the community but also for business.

I have sympathy for those affected by the floods in the midlands. I have indicated to colleagues in the Lower House that I will assist in any way possible. On last night's Adjournment it was inquired whether the Army might be available to assist farmers with distributing fodder. Deputy Finneran was engaged with the Minister for Defence on this. I thank Senator Bannon for raising it even though he is chancing his arm. That is what makes politics interesting.

The contributions from business are voluntary so it is not an additional charge. The distribution of the business improvement districts contribution will be related to valuations which themselves are a reflection of the volume of business. Small businesses, although they will have an equal vote in the scheme's process, will not have to carry an equal burden. The Bill provides for circumstances where a property is unoccupied or demolished. Waiver systems are allowed in the local authority rates system. They require the authorisation of the Minister for the Environment, Heritage and Local Government but no requests have been made by any local authority for many years.

Question put and agreed to.
Question proposed: "That the Bill do now pass."

I thank Senator Bannon and Senator Brady for their co-operation with this legislation. It was unfortunate that the time allocated for the Bill in the Lower House was less than that allocated in this House. It is hoped to get the scheme up and running quickly. I took on board some Opposition amendments because this is a good project. In future, the business community will look back on this as progressive legislation.

I thank the staff of the House for the courtesy they have shown over the year. I wish them all a happy Christmas and a prosperous new year.

The Bill will lead to improvements throughout the country. I wish to pay particular tribute to Mr. Tom Coffey and the Dublin City Business Association for putting much work into the legislation. It is a welcome scheme that will be successful.

I thank the Minister and his officials for facilitating the passage of the Bill. The business improvement districts scheme has been in operation in the US and Canada for some time. There are 400 business improvement districts throughout Europe which are all working well. I believe it will have more success in Ireland because we still have a greater sense of community. It is important for politicians to encourage and support the establishment of these schemes.

I wish the Minister, his staff, Senator Brady and Members on his side of the House and mine, the Leas-Chathaoirleach and the staff of the Seanad a happy, peaceful Christmas and prosperous new year.

I wish the Minister and his staff a happy Christmas and prosperous new year.

Question put and agreed to.
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