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COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 11 Mar 2004

2002 Annual Report of the Comptroller and Auditor General and Appropriation Accounts.

Mr. J. Purcell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

Department of Justice, Equality and Law Reform — Vote 22 Courts Service
Chapter 5.1 — Refurbishment of Cork Courthouse.
Mr. P. J. Fitzpatrick (CEO, Courts Service) called and examined.

Witnesses should be made aware that they do not enjoy absolute privilege and should be apprised as follows: Members' and witnesses' attention is drawn to the fact that from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons who are identified in the course of the committee's proceedings. These rights include the right to give evidence, the right to produce or send documents to the committee, the right to appear before the committee either in person or through a representative, the right to make a written and oral submission, the right to request the committee to direct the attendance of witnesses and the production of documents and the right to cross-examine witnesses.

For the most part, these rights may only be exercised with the consent of the committee. Persons invited before the committee are made aware of these rights and any person identified in the course of proceedings, who is not present, may have to be made aware of these rights and provided with the transcript of the relevant part of the committee's proceedings if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in legislation, I remind members of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House, or an official, either by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions of Standing Order 156 that the committee should also refrain from inquiring into the merits of a policy or policies of the Government, or a Minister of the Government, or the merits or objectives of such policies.

I welcome Mr. Fitzpatrick, CEO of the Courts Service, and ask him to introduce his officials.

Mr. P. J. Fitzpatrick

Thank you Chairman. On my right is Mr. Sean Quigley, Director of Finance, Mr. Diarmuid MacDiarmada, director of operations for the offices of the Circuit and District Courts, Mr. Shay Kirk from the estates and buildings unit of the Courts Service, and Nuala McLoughlin, the director of operations for the High Court and the Supreme Court.

Thank you. Will the officials from the Department of Justice, Equality and Law Reform introduce themselves?

Mr. John Cronin

I am the principal officer of the courts policy division of the Department of Justice, Equality and Law Reform and Mr. Denis Byrne is the assistant principal officer.

Thank you. Will the officials from the Department of Finance please introduce themselves?

Mr. Fred Foster

I am the principal officer in the public expenditure division of the Department of Finance and Ms. Patricia Purtill is assistant principal officer in the Vote controls section.

Chapter 5.1 of the Report of the Comptroller and Auditor General reads:

Introduction

Under the Courthouses (Provision and Maintenance) Act, 1935, local authorities were obliged to make premises available to the Department of Justice, Equality and Law Reform for the conduct of Court business.

With effect from 9 November 1999, the provisions of that Act were repealed and responsibility for the provision and maintenance of court buildings and facilities was conferred by the Courts Service Act, 1998 on the new Courts Service.

The capital cost of acquiring new premises, or expanding, refurbishing or improving existing court buildings and the cost of their maintenance and equipping are borne on the Courts Service Vote.

Refurbishment Project

In 1995, the Department commenced a process of refurbishment of Cork Courthouse, Washington Street, Cork, which housed Courts staff and the Cork City and County Sheriffs and their staff. Refurbishment of the exterior stonework of the building referred to as Phase I was approved by the Department in June 1995. Cork City Council (the Council) placed the contract for the work which was completed in 1999 at a cost of €3.8m which was borne on the Department's Vote.

Around the same time in 1995, the Council submitted plans to the Department for Phase II — internal refurbishment of the building. The Department was concerned to ensure that all aspects of the refurbishment and, in particular, project management and the architectural heritage aspects of the development were properly managed. Accordingly, the Department considered that: An architectural competition be instigated for the works, administered by the Royal Institute of Architects of Ireland and OPW be involved in the process of appointing the design team consultants.

However, the Department did not progress these objectives at that time and design work continued under the control of the Council.

By July 2001, the scale and projected cost of the project had escalated from an estimated €6.35m to over €20m. The original plans were revamped to provide additional accommodation including incorporating the original basement areas. According to the Accounting Officer, the alternative, because of the increasing demand for the rapidly expanding Cork area, would have required abandoning the existing courthouse and providing a new courthouse on a new site.

In October 2001, the OPW was asked to nominate a project manager to ensure timely and within budget delivery of the project. OPW appointed a project manager in February 2002.

A contract for the refurbishment was awarded to the lowest bidder on 29 April 2003. The Phase II project contract is to be completed within 18 months for the sum of €26.5m (including design team fees, furniture and equipment costs amounting to €6m).

As I was concerned about the delays in getting the project underway and the financial impact of midstream changes in the overall management of the project I sought the views of the Accounting Officer.

The Accounting Officer informed me that in his opinion it was not within the power of the Department to organise an architectural competition or the involvement of OPW in the project without the agreement of the owners (the Council). It appeared to him that such agreement might not have been forthcoming. However the position changed with the passing of the Courts Service Act, 1998 which gave statutory responsibility to the Service for the provision and maintenance of court buildings. It was possible to involve OPW after November 1999.

The Accounting Officer also informed me that the original design team was retained as it was prepared to take instructions from the Courts Service on requirements for the project, given the changed statutory role which the Courts Service then had in the provision of court facilities. They were also prepared to consult with all court users in conjunction with the staff of the Courts Service Estate and Buildings Directorate.

With regard to the escalation in cost of the project, the Accounting Officer observed that the estimated cost of €6.35m referred to was a very provisional cost and, as far as he was aware, was not based on actual plans. Construction inflation between 1995 and 2003 would have accounted for a 60% increase and would have raised the provisional cost to €10.16m. The original estimate also did not include the cost of consultancy fees, capital contributions, site investigations, furniture, fittings and equipment and contingencies totalling €6m.

With regard to the delay, from 1995 to 2003, in proceeding with Phase II of the refurbishment project, the Accounting Officer stated that it had been necessary to review the draft plans in existence when the Courts Service was established. The Courts Service was not satisfied with the plans which it had inherited from the Council. There had been no consultation with court users regarding requirements, and the plans fell far short of the accommodation and facilities required for a city of the size and population of Cork. In addition the plans did not take account of future needs in terms of office accommodation for court facilities or the need to ensure proper arrangements for holding and transferring prisoners to Court.

The Accounting Officer added that the Project Manager appointed in February 2002 reviewed the plans and costings for each element of the work, prior to tenders being sought. He stated that the revised plans bore very little resemblance to what was originally envisaged in 1995 and that the substantial changes and improvements to the original plan also contributed to the higher costs.

In all the circumstances, it was necessary for the Courts Service to undertake an extensive consultation and needs assessment examination. Although the Accounting Officer does not believe that there was an inordinate delay in having the planning completed, he acknowledged that there was a delay in obtaining approval for the financial arrangements to enable the project to proceed.

Funding the Project

It has been the practice since the establishment of the Courts Service in 1999 to fund capital expenditure on courthouses directly from the provision in Subhead B of the Courts Service Vote. The Courts Service considered having this project carried out under the Public Private Partnership (PPP) model. However this did not occur. Following negotiations between the Courts Service and the Council, it was agreed that the Council (which remains the owner of the building) would finance the project by means of a commercial loan arranged by the Council. The Courts Service agreed to rent the courthouse at an annual rental of approximately €2m from the Council over 20 years — the term of the loan.

The Accounting Officer stated that the total cost of this project could not be met from the Courts Service capital budget. The proposal to have the project carried out under the PPP model was not proceeded with because sanction was not obtained to do so. The Accounting Officer attributes this to considerations which emerged in connection with the impact of PPP schools projects on the General Government Balance. In addition, the plans had already been prepared and there would have been significant further delays if the project were to be undertaken by way of PPP.

The Department of Finance approval which was obtained for this proposal in February 2003 noted that any recourse by the Council to borrowing to finance the improvement works would be included in the calculation of the General Government Balance.

Additional Costs of Providing Interim Accommodation

Up to the time that the Courts Service Act, 1998 became law, responsibility lay with local authorities to provide accommodation for court purposes. Therefore, the burden of rent was borne by them. With effect from November 1999, the Courts Service became responsible for the cost of such rentals.

The Courts Service rents properties mostly from the private sector in order to facilitate court business. Such properties include community halls and hotels. The total annual rental charges for all rental accommodation runs to approximately €5.2m, with a negligible proportion of this being in respect of local authority premises.

Department of Finance sanction was sought by the Department of Justice, Equality and Law Reform in 1998 to enter into an agreement under which the Council would rent and adapt alternative accommodation for the Courts Service arising from the need to fully vacate the Washington Street premises for the duration of the refurbishment works. These were then expected to take up to two years. The expected total cost for a two-year period was €1.5m approximately (made up of €500,000 rental and €1m for necessary adaptation works). This was to be borne by the Department (50%) and by the two Cork local authorities.

As it seemed that rental accommodation was acquired earlier than necessary and subsequently leased for a period well beyond the anticipated completion date for the refurbishment works and at a substantially increased rental cost, I asked the Accounting Officer to provide details of the leases concluded and the costs associated with these leases. As the Courts Service assumed responsibility for providing accommodation for the staff of Cork City and County Sheriffs' Offices who had been housed in the Washington Street Courthouse premises until October 2002, I also sought details of these arrangements.

The Accounting Officer informed me that the Council leased accommodation at Camden Quay in the city for court facilities with effect from 1 May 1999 for a two-year period at a cost of €761,843 per annum (including rental and necessary refurbishment costs). As agreed, the Department met half of the cost.

After the Courts had been using the premises for some months a number of shortcomings were identified which required additional works. These works ultimately cost the Courts Service a further €565,033 leading to total Exchequer expenditure under this lease of €1,326,876 as against €750,000 originally estimated as the cost of the interim accommodation. Notwithstanding the initial expenditure on adapting the premises to the court's needs it was noted from papers, dated February 2003, that substantial remedial work would now be necessary to deal with serious health and safety issues associated with these premises. However, the Accounting Officer informed me that these works would only have been necessary had the refurbishment not proceeded. The users of the premises, judges, staff practitioners and others are prepared to work within the constraints and deficiencies of the building.

Because of the delays in getting the project underway OPW was asked to negotiate a new lease on behalf of the Courts Service on the expiry of the original arrangement in May 2001. The landlord had been unwilling to sell the property. The minimum lease period that could be negotiated was 9 years and 11 months with a break option after five years subject to nine months penalty rent. The rental agreed was €761,842 per annum. This is a threefold increase on the rental element of the lease agreed two years earlier. The Courts Service has the option to assign the lease to another State Agency when it vacates these premises at Camden Quay.

The Accounting Officer also stated that the Courts Service has now rented accommodation for the Sheriffs. The alternative would have been a lengthy dispute with the Sheriffs, which would have frustrated and delayed the commencement of the refurbishment and possibly resulted in costly litigation. The Accounting Officer said that the arrangements in respect of the leases for the Sheriffs are personal to them and do not confer any entitlements to their successors. The annual cost of these leases is €39,489.

Mr. John Purcell

Chapter 5.1 reflects the results of an examination of the project to refurbish Cork courthouse and the arrangements to accommodate the court elsewhere during the refurbishment period. In 1995 the Department of Justice, Equality and Law Reform gave the green light to phase one of the project, which was the refurbishment of the exterior stonework of the building. Cork City Council placed a contract for the work which was completed in 1999 at a cost of €3.8 million. That cost was met by the Exchequer under arrangements agreed some years earlier. The normal work of the court continued in the building during the course of this contract. The internal fabric of the building also required extensive refurbishment and the council submitted plans for this work to the Department, tentatively estimated at €6.3 million.

Statutory responsibility for the provision and maintenance of court buildings and facilities was transferred to the newly formed Courts Service, with effect from 9 November 1999. The Courts Service took responsibility for the project from that time. It was not satisfied that the design proposed by the council met the existing and future needs of the users of the court. After extensive consultation and a needs assessment, a substantially revised plan for the internal refurbishment was drawn up. The Courts Service also arranged for the Office of Public Works to appoint a project manager to ensure timely delivery of the work within budget. The refurbishment contract was eventually awarded to the lowest bidder on 29 April 2003. It is expected that the project will be completed by the end of this year at a total cost of €26.5 million, which includes professional fees, furniture and equipment costs and so on. After much deliberation it was decided to fund the project through a loan taken out by the council. It would then lease the building to the Courts Service over a 20 year period at a rent estimated at €2 million per annum.

As early as 1998, the Department of Justice, Equality and Law Reform had sought and obtained the approval of the Department of Finance to contribute to the cost of renting and adapting alternative accommodation for the Courts Service while the courthouse was being revamped. This work was expected to take up to two years. The council leased premises at Camden Quay in the city for court facilities with effect from 1 May 1999 for a two year period at a cost of €761,842 per annum. It is important to note that this was to cover both rental and necessary adaptation costs. The rent element was approximately €254,000 per annum. Soon after moving in, additional work to the value of €565,000 was commissioned to meeting shortcomings in the rented accommodation. As work had not even started on Cork courthouse when the two year lease of the rented premises had expired, the OPW was asked to negotiate a new lease on behalf of the Courts Service from May 2001. The landlord was not prepared to grant a short lease and the minimum lease period that could be negotiated was nine years and 11 months. The yearly rental was agreed at €761,842 which was equivalent to three times the rental element of the lease agreed two years earlier.

With regard to protecting the public purse, there are a number of areas of concern with the overall management of the project. I will confine myself to the most glaring. First, premises were rented and adapted to facilitate the operation of the court four years before the contract for the refurbishment of the courthouse was signed. Second, a two year lease was entered into for temporary accommodation, incurring the cost of fit-out works to a value of almost €1.6 million without any apparent attempt to secure future credit for this investment. Third, the temporary premises, which was upgraded with public money, was then leased to the Courts Service for a further nine years and 11 months at an annual rental three times the previous rent. As I understand it, the rental agreed in 2001 was significantly higher than the market rate at the time. Frankly, I find it difficult to comprehend the circumstances which gave rise to the financial position in which the State finds itself in this case. Hopefully, today's proceedings will shed further light on events.

I call Mr. Fitzpatrick to make his opening statement.

Mr. Fitzpatrick

I have sent the committee a fairly lengthy briefing note. I will pick up on the main points. I would not dispute anything in the report of the Comptroller and Auditor General.

Can we publish your opening statement?

Mr. Fitzpatrick

Yes. The statement was prepared for members and may be published. I wish to explain some of the context of this matter as briefly as I can. My first point is that this building in Cork is an important and prestigious one on Washington Street in the centre of the city. For those not familiar with Cork city, this building is of equivalent importance to the city as the Custom House or Four Courts are to Dublin city. It is a building of particular architectural and historical significance.

Cork is a very busy venue. On any day, four Circuit Courts and two High Courts sit in the city. When there was refurbishment of other county town courts, for example, Sligo or Portlaoise, court business was transferred to the adjoining county town. It was simply not possible for a city the size of Cork to transfer its court business to an adjoining county town. To put this in context, while there had been difficulties with this project, since our establishment four years ago we have refurbished over 30 projects within budget and on time.

The Comptroller and Auditor General pointed out that responsibility for provision of courthouse buildings and their maintenance rests with the local authorities. This changed when the Courts Service was established in 1999. At that time, plans existed for the refurbishment of Cork courthouse. A consultation was carried out with court users, as well as a needs assessment. The plans which existed at that time would not have met existing, not to mention future, needs. To have proceeded on the basis of the plans we inherited from Cork City Council would have been folly because we would have been back in the market seeking to build a second courthouse within a couple of years, if not before the refurbishment was finished. In addition, there was no provision in the plans for IT and we are involved in a major upgrade in all of our courts in regard to computerisation, information technology, video conferencing and video links with prisons. For these reasons, the plans which went to tender had been substantially revised and bore no resemblance to the original plans when we inherited them.

On the movement in cost, while the original estimate was a guesstimate of €6.3 million, made as I understand it in 1995, the plans bore no resemblance to that figure. Even taking the original figure, construction inflation between 1995 and 2003 was approximately 60%. In addition, as the Comptroller and Auditor General pointed out, there was some €6 million or more for furniture, fittings, technology, equipment, design team fees and so on.

Cork courthouse is second in size only to the Four Courts. For example, it is well over twice the size of a typical county town courthouse. Castlebar courthouse has just been refurbished and that cost approximately €13 million. Cork courthouse is more than twice its size and will cost €26 million. The contract went to public tender and the lowest tender was accepted. The tenders which came in were €2 million less than the cost estimated by the design team.

As the Comptroller and Auditor General said, the temporary accommodation was negotiated for two years initially and there was considerable investment in fitting it out. The job in Cork was about to start as the lease ran out so there was no option but to renew it. The original lease agreement stated that the rent was £600,000 per annum, and we now know that a fit-out element was included in that. While there was an initial contribution by the two local authorities in Cork, because of their obligations, and the Department of Justice, Equality and Law Reform, the entire cost of the rent fell on the Courts Service. In any event, the lease was renewed at the rent rate in the lease agreement because there was no other option. It was not possible to find another building and fit it out to a point where it could accommodate three or four courts every day.

I do not want to comment on the situation before the Courts Service was established but, in retrospect, the initial lease of two years was too short and probably should have been much longer to start with, with appropriate break clauses. However, although we were obliged to take the lease for nine years, we managed to get a break clause after five years. The lease will be broken and we have already put the owners on notice that the lease will be terminated in April 2006. We will leave the temporary accommodation in January or February of 2005. The intention is to have the court building ready for the European City of Culture year, for which Cork has been designated in 2005. This was a major factor in regard to the Courts Service being assisted with funding by the city council to try to carry out this flagship project.

The building will be vacant for close to a year to 15 months. There is a clause whereby we must pay nine months rent if we terminate the lease and, obviously, that nine months will be part of the 15 months. If the Courts Service, OPW or the city council can find another tenant, the accommodation can be used but we have the option to exercise the break clause, which we intend to do in April 2006. In a worst case scenario, the building will not be occupied for approximately 15 months, of which nine months rent must be paid to terminate the lease in any case.

We appreciate that the committee and the Comptroller and Auditor General have legitimate concerns about value for money. The document I circulated shows that the Courts Service considered the total cost of the temporary accommodation incurred by the city council, the Department — before our establishment — and the Courts Service. The cost per square foot was worked out over the period of the lease. Taking the April 2005 date, this calculates at about €23 per square foot whereas we understand that office rental rates in Cork are currently about €25 to €30 per square foot. Moreover, this is not a typical office but is fitted out with four courtrooms.

To sum up, the new building will be state of the art and will meet the court requirements of Cork well into the future — as long as any of us will be around and beyond that. It would not have been possible to progress it without the assistance of the city council in regard to the funding mechanism because no funding was available. The city council has not imposed any administrative charge. The rental repayment arrangements made by us are simply the cost to the city council of borrowing, and we know from the council that it was able to borrow at a very competitive rate.

On the temporary accommodation issue, there is no doubt, with hindsight, that the building should have been leased for a longer period at the beginning. The situation in which we found ourselves was that we had to keep a temporary court in operation in Cork. We could not move it to Clonmel or Tralee because it is too busy and too big. We had that option in other towns, but it did not exist in this case. For example, in Ennis, where we are finishing the refurbishment work at the moment, we were able to move the business to Kilrush. There was no way that we could have moved four busy courts and two High Courts from Cork to any other town, so there had to be a temporary facility. We would be happy to try to answer any questions that Members may wish to ask.

Does Mr. Fitzpatrick agree that there was a certain amount of rip-off in the management of the deal for the alternative property? The rent was quadrupled and the Courts Service had to spend a significant amount of money on the upgrade. Moreover, the Health and Safety Authority has major concerns about the fact that, as the report has established, if the property were to be vacated at present, the health and safety work that has not been carried out would run into hundreds of thousands of euro. Mr. Fitzpatrick said that €2 million will be paid in rent per annum for the next 20 years for the current building. My concern is not with the investment in the courthouse but the rip-off on the temporary accommodation.

Mr. Fitzpatrick

On the permanent arrangement for the courthouse, Cork City Council has borrowed the money at the rate at which local authorities are able to borrow. The repayments are just that; there is no other charge.

Mr. Fitzpatrick should check that out. The €2 million repayment on €40 million did not impress me as value for money.

Mr. Fitzpatrick

That was the only funding mechanism that was available. As the Chairman knows, there was a lot of criticism of the delay in the project. It was an eyesore in the city. We put the only funding mechanism that was available to the Minister for Justice, Equality and Law Reform and the Minister for Finance. It was approved on the basis of the city council borrowing the money and us repaying that money to it over a period, following which the building would obviously revert to our ownership.

With interest rates being as low as they are at present, it works out as exceptionally high. My real question is about the rip-off on the alternative accommodation. The Courts Service has a long-term lease which was signed for nine years when it was well known that the completion date for the permanent accommodation would be 2004 or 2005.

Mr. Fitzpatrick

As I said earlier, we found ourselves inheriting temporary accommodation which had been leased two years and fitted out. Courts are not like ordinary offices. It is not possible to move different clients in and out of them. Courts must be designed and fitted out with courtrooms. There were two options: to negotiate a new lease for the existing temporary premises or to try to find other premises and fit those out and lease them.

We negotiated the best lease we could. There is no doubt that our bargaining position was not the strongest. It was the only building available to us. The Office of Public Works sought to negotiate on our behalf and, on our instruction, a lease for the shortest possible period, and we managed to get a break clause. The excess on the lease beyond our requirement is a year and three months because we will exercise the break clause in the new lease.

Does the break clause not involve stacked-up costs? If Mr. Fitzpatrick goes through the contract, he will see that he will pay considerably for that clause. He will also need a large amount of funding for the work that has been deemed necessary for health and safety.

Mr. Fitzpatrick

We have sought to spend little money on the existing building apart from the initial work that Cork City Council did when the building was prepared as a temporary venue in the first place. The fact that the permanent building was going ahead was a major factor in judges, staff, lawyers and others who use the court accepting that there was not much point in spending money on a building that we were going to vacate in a couple of years' time. The minimum has been done. There has been no extensive expenditure on the building over the past couple of years, nor will there be if we can avoid it. Everybody is prepared to tolerate a certain, quite high level of unsuitability now that they see that the new building is being done and the work is well under way.

I cannot read the nameplates of the officials from the Department of Finance. I presume that they represent the Office of Public Works.

Mr. Fred Foster

No, I am from the public expenditure division in the section that deals with the Justice, Equality and Law Reform group of Votes. There is no representative from the Office of Public Works. Ms. Patricia Purtill is from the administrative budget side.

I think Mr. Fitzpatrick named the Office of Public Works as the principal negotiator in the rather curious leasing arrangement on Camden Quay. In the absence of an official from the Office of Public Works, I presume that he is able to handle all questions that relate to the Office of Public Works.

Mr. Fitzpatrick

We are not a Department and are therefore not obliged to use the Office of Public Works, but in practice we do. Anything that it did, it did at our request. It was not a question of the Office of Public Works going off on its own. I would not like any impression to go abroad that it did anything other than act on our instructions, so we will try to answer any questions.

There is probably a reason why the Office of Public Works was not invited.

Mr. Fitzpatrick

We asked it to renegotiate the lease, but we do that for most of our leases. We also asked it earlier to appoint a project manager to bring the building project in on time and on budget.

I thought that, because the Office of Public Works is mentioned throughout the Comptroller and Auditor General's report and Mr. Fitzpatrick's report. It would be present.

I note that the committee did not invite the Office of Public Works and I take Deputy Noonan's point on board.

I am not pursuing the point; I only want to establish who is here. I have a cutting that was circulated to us in correspondence today. It is dated Thursday, 16 January 2003 and looks like it comes from the Irish Examiner, although that is not stated. The cutting states:

Visiting High Court Judge Mr Justice Vivian Lavan said that that the building was unworthy for the administration of justice, adding that it was inappropriate that the work of the courts should be carried out in a garden centre, a reference to the building's previous function. The incoming president of the Southern Law Association, Fiona Twomey, agreed with his comments saying that they were run out of Washington Street three and a half years ago with the promise that work on the building would begin immediately, however work was no closer to starting today that it was back in 1999.

That is about 14 months ago. What is the situation now with phase two of Washington Street?

Mr. Fitzpatrick

The contract started last summer and is on target to be completed in September or October at the latest. It will take about three months to fit it out, and we plan to re-open the building for 1 January next year. We are confident of that.

The courts will be in Washington Street on 1 January.

Mr. Fitzpatrick

Absolutely. The building is on target.

Is Mr. Fitzpatrick firm on that commitment?

Mr. Fitzpatrick

Unless there is a builders' strike or something similar. We have an excellent project manager who was provided to us by the OPW. We know that the project is on target and the contractor is very reputable. Barring the contractor going bust or some major industrial action on the part of the contractor's staff, as of today, the building is on target for completion in September or October this year. It will take about three months to fit it out with furniture. Unlike other types of facilities, there are no extra revenue costs with such buildings. We are simply putting the same staff back in, so we do not need extra money on the current side to reopen the building, which might be a problem in other areas of work.

The contract is on time. Is it on tender price?

Mr. Fitzpatrick

I quoted from the figures. It was almost €2 million less. The quantity surveyor had estimated the cost of the plans that went to tender at €28.39 million and that was reduced to €26.5 million when the tenders came in.

Does that include fit-out?

Mr. Fitzpatrick

It does. That is the total cost. The construction cost is around €20 million.

Could Mr. Fitzpatrick describe to me in a little more detail how this was funded through Cork City Council?

Mr. Fitzpatrick

There was a problem regarding the courthouse in Cork. Nobody would suggest that the present temporary courthouse in Cork is suitable. It was the best that could be got at the time. It was originally a garden centre and much work was done on converting it. When the plans were ready, it was obvious that this would be by far the biggest capital project upon which the Courts Service had ever embarked. We did not have the money in our own budget. If we had funded it many other projects that were ongoing at the time or that were about to start would have gone to the wall because that project would have taken up our whole budget for a couple of years. This was not the only courthouse we inherited. We inherited courts the length and breadth of the country that were falling apart, many of them closed because ceilings had fallen down. Funding was an issue. We had discussions with the new city manager at the city council and it offered to fund the project at its normal borrowing rate. The National Development Finance Agency advised it as well. That was the only funding mechanism available.

It is borrowing the €26 million.

Mr. Fitzpatrick

Yes.

Does the city council have access to local loans funds for this or is it obtaining it commercially?

Mr. Fitzpatrick

We understand that half will be borrowed from the EIB and half locally.

What does Mr. Fitzpatrick mean by "half locally"?

Mr. Fitzpatrick

The NDFA is advising the city council on tendering for it through the commercial banks.

It is getting €13 million from the AIB.

Mr. Fitzpatrick

It is getting €13 million from the European Investment Bank and the other half locally.

I am sorry, I thought Mr. Fitzpatrick said the AIB.

Mr. Fitzpatrick

It is the European Investment Bank, EIB.

The city council is getting the other half through the commercial banks here.

Mr. Fitzpatrick

Yes. The NDFA is advising it on the tendering for that.

The city council is obviously gearing it over a 20 year period and then returning it to the Courts Service.

Mr. Fitzpatrick

Technically, the building would come to us anyhow at some stage because, under the Act, the buildings would be vested in the Courts Service. It will revert to the Courts Service at the end of 20 years.

Are the annual repayments fixed or variable?

Mr. Fitzpatrick

I am not sure. We can check that and come back to the committee. The figures we have at the moment are indicative.

What are they?

Mr. Fitzpatrick

The estimated figure was €2 million per annum. That will depend on the rate the city council gets when it goes to tender and the package it comes back to the Courts Service with.

A total of €2 million on €26 million is one thirteenth. That is high.

Mr. Fitzpatrick

That was the estimate. We had to have an estimate from before we went for a sanction. We will have the precise figure as soon as the tendering and procurement process has been gone through.

Is Mr. Fitzpatrick saying that it is being built out of overdraft and that the loan arrangements are not yet made?

Mr. Fitzpatrick

It is going out to tender at the moment for the second 50%.

The city council is working off the first 50%.

Mr. Fitzpatrick

It may be working from its own cash. I am not sure.

What is the European Investment Bank charging?

Mr. Fitzpatrick

We do not know. The city council has not come back to us. It has to come back to us with the full package when it has negotiated with the NDFA and the European Investment Bank.

A contract is proceeding which will ultimately cost the State or the local authority €26 million.

Mr. Fitzpatrick

It will not cost the local authority anything. It will certainly cost the State €26 million. The local authority repayments will be met in full by the Courts Service, and it is funded directly by the State.

The arrangements are not yet made.

Mr. Fitzpatrick

They are, within the broad parameters that I mentioned.

Who is paying the contractor at the moment?

Mr. Fitzpatrick

The city council is.

Out of what?

Mr. Fitzpatrick

Out of its own working capital.

In the 1960s there were rather nice railings around the building in Washington Street. Are they being put back up? That would be phase one — outside refurbishment. There is hoarding around it at present.

Mr. Fitzpatrick

The hoarding has been around it for a long time, which was an eyesore. It was there to protect the building while the contractors were working. If it has not yet been taken down, it will be taken down as soon as the building can be secured.

As I understand it, phase one, which commenced in 1995, was effectively restoring the stonework on the facade and the roof.

Mr. Fitzpatrick

Yes.

Prior to that, until the 1960s, there were ornamental iron railings around the building which were part of the facade of the building. Mr. Fitzpatrick put it in the context of Cork being the European City of Culture 2005 and having everything ready by January 2005. Are the railings part of the contract?

Mr. Fitzpatrick

I did not know there were railings but I do not think they are part of the present contract. Whether they can be included at a later date or not, I do not know. It is something we would have to look at.

Can Mr. Fitzpatrick explain the circumstances which led to the delay? This was first mooted in 1995. Phase two was to follow phase one and, by 2003, it still had not started. It did not start until May 2003. That was a long delay.

Mr. Fitzpatrick

When the Courts Service was established in 1999, we inherited plans that had been drawn up. We consulted the local judges and the local users of the courts. We looked at the workloads and the number of courts sitting there. We looked at population trends in the greater Cork area. It was clear to us that the existing plans would not have met the requirements of Cork by the time the building was completed and it seemed fruitless to proceed with plans that would not meet current requirements, not to mention future requirements. For that reason we had to do a needs assessment. When we did that we found that we needed six courtrooms, not the number provided in the original plans.

Cork has a very busy court. There are four Circuit Courts there most days and two High Courts regularly. The Court of Criminal Appeal may sit there in future. The coroner sits there. The county registrar's court is there. We had to go back to the drawing board with the plans. That took time. Then we had to get the funding approved. There were two issues. One was the length of time it took to get the revised plans done. The problem for us was that we could have gone ahead with the original plans but we would have had to buy a site and build a second court building in Cork, which would have cost much more. We would have lost all the benefits of having everything on the one site. There was a whole basement area which was not being maximised that we were able to use.

Another issue was accommodation for prisoners so that they could be got in and out without being photographed in handcuffs, which is a serious issue now. I can say with certainty that, had we gone ahead with the original plans, we would now be sitting down to plan another court building in Cork.

Leaving that aside, once a decision was taken effectively to start a new project with more extensive accommodation, it still seems to have proceeded very slowly. It seems to have been slower than the Courts Service expected.

Mr. Fitzpatrick

Funding became the next issue. Once the plans were done, there was obviously a much more expensive project than the original one.

Can Mr. Fitzpatrick describe the circumstances? Obviously he decided to go with a radically altered plan for good and valid reasons which he stated. Around the same time, under his direction, Cork City Council acquired substitute accommodation on Camden Quay.

Mr. Fitzpatrick

No. Before we were established, the local authorities had legal responsibility in law under the 1935 Act for providing and maintaining court buildings. The city council would have acquired the temporary accommodation in Camden Quay before we were established in anticipation of having to relocate the courts out of Washington Street when the work was being done.

It would have done it on the recommendation of the Department of Justice, Equality and Law Reform.

Mr. Fitzpatrick

I cannot speak for it. It would have had the legal and the statutory responsibility.

I understand that, but when the decision was made to have a refurbished courthouse in Cork, phase one proceeded. Phase two, which was the inside the building, was delayed. There was a seamless transfer of responsibility in 1999, not only from local authorities to the Courts Service, in terms of who had responsibility for court building——

Mr. Fitzpatrick

Yes.

——but around the same time there was a seamless transfer from the Department of Justice, Equality and Law Reform to the Courts Service for overall responsibility for the courts services.

Mr. Fitzpatrick

It was slightly different because the 1998 Act conferred the responsibility for maintaining and providing court buildings to us. There was an unusual situation before our establishment in that the Department had no statutory requirement to provide or maintain court buildings. As I understand it, the Department got a Government decision in 1990 to give some money to local authorities to do up court buildings because a number of mandamus proceedings had been brought in the High Court by local solicitors against the Minister. The local authorities were not able to do it as they did not have the funding. The Department sought and obtained Government approval to make some funding available for some refurbishment of court buildings.

What transferred to us in 1999 were two separate things. The management administration of the courts came to us from the Department of Justice, Equality and Law Reform and the management and provision of court buildings came to us from the local authorities. All this came down on the one agency in 1999 whereas before that it was separate. It was only by way of a Government decision to provide funding that the Department was able to give some——

Before the Courts Service became statutorily responsible for the provision and maintenance of court buildings——

Mr. Fitzpatrick

Yes.

——Mr. Fitzpatrick is indicating that Cork City Council had already acquired the temporary accommodation.

Mr. Fitzpatrick

Yes. It acquired it anticipation of phase two.

Can Mr. Fitzpatrick summarise briefly, as the Comptroller and Auditor General did, the terms of the lease which Cork City Council entered into?

Mr. Fitzpatrick

The two year lease was a short one.

I am not asking Mr. Fitzpatrick to evaluate it, simply to reprise the terms of the lease. What were the conditions of the two year lease?

Mr. Fitzpatrick

The lease was for a term of two years. I have the lease, a copy of which I can circulate to the committee. The terms were in the second schedule. It was a standard lease. The most important items in the second schedule were that the term was for two years, definite from the date possession was given; the rent was £600,000 per annum; and the manner in which it was payable was quarterly in advance. That was the actual lease.

At the time it was taken over, it was a warehouse and was rented for £600,000. The £600,000 applies to the rent of a warehouse. What agreement was made then for the refurbishment to bring it up to office accommodation at that point?

Mr. Fitzpatrick

As I understand it, there was the rent and the fit-out. It appears now that the actual rent was £200,000 at the time and that the fit-out was almost £1 million in total. It would have been £800,000 or almost €1 million for the fit-out which would not have been unusual because it is a big building.

I am just trying to get the facts. I am not asking Mr. Fitzpatrick to evaluate it. There is a lease which said that Cork City Council could have a warehouse on Camden Quay for two years at a rent of £600,000. Is that correct?

Mr. Fitzpatrick

Yes.

Is Mr. Fitzpatrick saying that was not the position and that the rent was £200,000?

Mr. Fitzpatrick

Yes. When this issue was raised by the Comptroller and Auditor General with us and we went back over the old files, it appears that the rent was £200,000 and that the refurbishment was about £800,000. There was a contribution of one third each initially from the city council, the county council and the Department of Justice, Equality and Law Reform.

The owners of the building paid nothing.

Mr. Fitzpatrick

The owners of the building rented the building and the refurbishment costs were carried by the State.

By the State?

Mr. Fitzpatrick

Yes.

The best way to look at it is in terms of £200,000 in rent each year——

Mr. Fitzpatrick

Yes.

——and a fit-out at a cost of £800,000, which is €1.2 million, which is twice £600,000. Is that correct?

Mr. Fitzpatrick

Yes.

We have a high shock threshold here because there is a different story every day and they are always bad stories. It is hard to surprise us. What I cannot understand is that the Office of Public Works went back in to renegotiate the lease when the two years were up. At that point, obviously the temporary accommodation was still necessary because the work on Washington Street had not started——

Mr. Fitzpatrick

Correct.

——and would not start for another couple of years.

Mr. Fitzpatrick

Yes.

Even though the State, Cork County Council, Cork City Council and the Department of Justice, Equality and Law Reform between them put up £800,000 for refurbishing a warehouse when the Office of Public Works negotiated on behalf of the Courts Service, it did so on the basis of renting office accommodation. It was State money that turned the warehouse into office accommodation. That is the crazy aspect to this report. That is the absolutely daft issue which jumps off the page at me.

Mr. Fitzpatrick

There are two issues here. The position is as the Deputy has described. The property was not in State ownership but in the ownership of the landlord. It had been fitted out to accommodate courts which had particular requirements which would not be typical in an office. The lease was up. There were two options: to seek alternative temporary accommodation or to seek to renew the lease on the existing one.

Mr. Fitzpatrick's report states that one of the explanations for the increase in the rent was that the original rental was of a warehouse but the subsequent rental by the Office of Public Works was of office quality accommodation.

Mr. Fitzpatrick

The initial rental was of a warehouse cum garden centre which was then upgraded to a court facility.

Not by the owner.

Mr. Fitzpatrick

No, not by the owner.

It was the taxpayer who upgraded it.

Mr. Fitzpatrick

Absolutely.

As a reward for upgrading it and increasing the capital cost of the building, the taxpayer pays three times the rent two years later.

Mr. Fitzpatrick

That is what happened.

I wish to ask the Comptroller and Auditor General if I am correct.

Mr. Purcell

There is some confusion. I can understand the Accounting Officer's confusion because we had to sort it out with his help before we finalised the report. I was as incredulous as the Deputy because the memorandum of agreement of the two year lease says nothing about refurbishment. It merely refers to £600,000 rent per annum. What confused us at the time was that did not correspond with other correspondence we saw, for instance, correspondence between the Department of Justice, Equality and Law Reform and the Department of Finance which referred to a rent of £200,000 and the rest being the refurbishment cost. What I think happened is that when the OPW was negotiating on behalf of the Courts Service to renew the lease, it was under the impression that the rent was already £600.000, when in reality it was only £200.000. As far as I can see, the Courts Service believed this also and the initial reply from the Accounting Officer was to the effect that they renewed it for the same rent. That did not correspond with our understanding of the situation. I think we all agree now that the real position was that the rent was £200,000 and that the rest was to meet the refurbishment costs.

It appears to me, therefore, that the Courts Service, through the OPW, went into the negotiations for renewal of the lease in the mistaken belief that it was only paying the same rent, even though that would be a highly inflated rent for an empty warehouse premises. That appears to be the position, as strange as it may sound.

It would have been useful if someone from the OPW could have been present to confirm that our interpretation is correct.

On that point, it is hoped that we can get someone to attend at another meeting.

Mr. Fitzpatrick

I can confirm that what the Comptroller and Auditor General said is correct. I would not suggest——

When the OPW, on Mr. Fitzpatrick's direction, went to renegotiate the lease, it did so on the false assumption that it was renegotiating the rent of the building which it thought was £600,000 when the rent was £200,000.

Mr. Fitzpatrick

Yes, and that is the rent which we——

Is it possible to get that——

Mr. Fitzpatrick

Yes, we have a spare copy.

This comes back to the original negotiation for the two year rental of Camden Quay done by Cork City Council. While the council was responsible for the provision and maintenance of courthouses in its area at the time, the Department of Justice, Equality and Law Reform also had an input. Could someone from the Department of Justice, Equality and Law Reform describe the input? The Courts Service did not exist. The OPW was not involved. Cork City Council would not have acted unilaterally.

Mr. Cronin

As described earlier, until the Courts Service came into operation in November 1999, the local authorities were responsible for the provision of courthouse accommodation under the 1935 Act. The refurbishment of Cork courthouse, which began in 1995 with the refurbishment of the exterior and plans for the interior, was led by Cork City Council. It was the body responsible for providing the accommodation. It provided the plans and it was the lead organisation. It would seem that, coming up to the end of 1998, Cork City Council felt it would be in a position in the near future to seek tenders for the refurbishment of the courthouse on the basis of the plans as they were at that stage. It sought alternative accommodation. We were not involved, nor was the OPW, in looking for alternative accommodation to house the court staff and the courts while the courthouse was being refurbished. I understand that, after a considerable period and with great difficulty, it found these premises on Camden Quay. It negotiated the lease of those premises on the basis that the Department would contribute, together with Cork County Council, towards the cost of the lease. The Department was not involved in negotiating that lease with the landlord, nor indeed was the OPW. Cork County Council came to us with the terms which have been negotiated which, from our files, would appear to be a rental of £200,000 per annum and an overall fit-out cost of £800,000.

The lease referred to was not in existence at that stage and does not seem to have come into existence for some considerable time later. I do not know why the figure for the rental was expressed as £600,000. Obviously, following the acquiring of the premises in Camden Quay, the project on refurbishing the interior of the courthouse as we know did not proceed in the timescale envisaged by Cork City Council. As to the reason the city council did not originally negotiate a longer lease for Camden Quay, I do not know that. It may have been that the landlord was only prepared to let the building for that period of time. There is some suggestion that he had development intentions for the particular premises. That is the only light I can shed on it.

There is enough information on the Department of Justice, Equality and Law Reform file to indicate that the Department was in contact with Cork City Council at about the time of the provision of alternative accommodation at Camden Quay.

Mr. Cronin

Yes. Cork County Council located this accommodation and came to the Department, explained the terms on which it was being acquired and asked for a contribution towards it which the Department gave with Department of Finance approval.

Did Mr. Cronin give it the full rent?

Mr. Cronin

We gave it the full contribution, which was one third of the overall cost.

I thought that was the refurbishment. Are we talking about one third——

Mr. Cronin

No. It was the overall cost of rent and refurbishment.

Mr. Cronin gave it €400,000.

Mr. Cronin

Yes.

And Cork City Council provided €400,000.

Mr. Cronin

Yes.

But it was one third of the total, refurbishment plus rent.

Mr. Cronin

I will correct that, Deputy. I understand the Department provided half of the total — €600,000.

Is there a breakdown between rent and refurbishment on that?

Mr. Cronin

Our understanding was that we were paying €200,000 towards rent and €400,000 towards refurbishment.

When it came to the renegotiation of the lease by the Office of Public Works subsequently, did the OPW not contact Mr. Cronin?

Mr. Cronin

No. We were not involved in the negotiation of the second lease.

Would the final relevant section in the Department of Justice, Equality and Law Reform not have become the property of the Courts Service?

Mr. Cronin

Yes. I think that would have been the case.

Would there have been a transfer of all the files?

Mr. Cronin

Yes.

So Mr. Cronin's file, which now is a Courts Service file, would show that the rent was €200,000, not €600,000, at the point of renegotiation.

Mr. Cronin

Yes. I presume the correspondence on the file would show that.

How could the Office of Public Works have been operating on the misunderstanding that the rent was €600,000 when the file which Mr. Cronin had in the Courts Service, which came from the Department of Justice, Equality and Law Reform, showed that the rent was £200,000?

Mr. Cronin

I cannot comment on that. As I said, we were not involved in the——

Mr. Fitzpatrick

When we requested the OPW to renegotiate, we took the starting point as the existing lease, which seemed very straightforward. I was given a copy of it and it appeared to be very straightforward. It was only when the Office of the Comptroller and Auditor General raised this issue that we went back through the old files and found a letter which suggested the rent was €200,000, and then——

Did Mr. Fitzpatrick check the old file at the point when he engaged the OPW?

Mr. Fitzpatrick

No, because we had a lease which seemed very straightforward. We had understood that the lease and the rent was what it said, and that is what we understood we were paying. It became our responsibility to pay it from 1999 when we were established.

We have to be clear about what happened, whether it is credible or incredible. It is fairly clear, and Mr. Fitzpatrick is giving us straight answers and establishing exactly what happened. We are now at 2001 and Cork City Council is no longer the body negotiating with the landlord; it is OPW and part of the Courts Service. At that point the owners of the building, the landlord, who had been getting a rent of €200,000 a year will, for the foreseeable future, get a rent of €600,000 a year. As well as that, he has got the State to pay for the refurbishment of a warehouse to turn it into what Mr. Fitzpatrick described as office-type accommodation after the city council had been involved for two years. Is that not the position as of 2001?

Mr. Fitzpatrick

That is the position. The rent was renewed at €600,000, which we thought was the rent per the original lease. That was the nearest approximation I could find. When we vacate that building, he will not find another client who will use it because all the court furniture will have to come out. It is not the type of layout one could use. The benefit for him — I am not defending him or anyone else — may not be as great as if it had been rented and fitted out as an office, for example, where it could be let to someone else without any modification. However, that cannot happen in this case. We will be taking the court furniture out and using it because it was put in by the State. We have done that before. There will be a recovery on the benches and the furniture. It will be a shell when it is given back to the developer because of the nature of the work we have been doing. There are no clients looking for a building with courtrooms in it. The other point he made — I am not here to defend him — was that there were tax breaks on the site, which he will lose because we were in occupation.

I saw in the report that he might have intended to develop it as a hotel, but the tax law relating to hotels was changed in the previous Finance Act. An amendment was tabled yesterday which might have restored that. I understand how that issue would weigh as well. The Courts Service found itself in a cleft stick when it had to renegotiate. Washington Street had not started, although the hoarding was up, which meant the court could not go back there; no other suitable accommodation was available; the court has been in Camden Quay for two years; and the Courts Service was in a weak negotiating position. Apart from the rent, which was arguably based on a misunderstanding so that the OPW did not drive as hard a bargain as it might, there was an increase of 300% over a two year period. The Courts Service got nailed on the lease because the landlord would not accept anything less than nine years and 11 months, although he knew the Courts Service was pushing to have Washington Street finished as quickly as possible. The best it got was a break clause. It was €600,000 a year for five years, plus a break clause of €800,000.

Mr. Fitzpatrick

The cost of the break clause is nine months. The five years will come one year and three months beyond our need to occupy it. Assuming a worse case scenario where it is not possible to reassign it, we will have to pay rent for a year and three months. However, that will include the nine months.

I thought there were additional costs. If the Courts Service is looking after an unoccupied building for a year and three months, it will be beyond usage. There are health, safety and public liability insurance costs.

Mr. Fitzpatrick

We are covered by the State. The same insurance arrangements apply to us as apply to other Departments in that we carry the risk. However, there is no doubt the building would have to be secured and protected for as long as is necessary.

Would the insurance indemnity for Camden Quay revert to Washington Street when the Courts Service occupies it?

Mr. Fitzpatrick

We do not have commercial insurance.

The reason the State is indemnifying it at present is that it is being used as a courthouse.

Mr. Fitzpatrick

Yes.

When it is no longer used as a courthouse, the State will indemnify the refurbished courthouse in Washington Street. There is an additional insurance cost arising from a vacant building in Camden Quay or a building the Courts Service no longer uses but on which it pays rent. Where does the State's responsibility arise there because the court is now in Washington Street?

Mr. Fitzpatrick

It will still be in our ownership and all buildings in our ownership are covered by the State indemnity scheme, whether they are being used or not. I take the point that it must be secured, kept heated and whatever else needs to be done to ensure it does not fall into total disrepair.

Is there general agreement among the public, the legal profession and the judges that the job being done in Washington Street is good and that there will be a fine facility in Cork?

Mr. Fitzpatrick

I hope so because it was probably the most extensive consultation we have ever undertaken. We do extensive consultation with the legal profession and the judges. It will be a modern, state-of-the-art facility with full information technology, modern communications systems and video conferencing. We have done buildings throughout the country. The more buildings we design, the more we learn about how to design them better. We learned at the beginning about what worked well and what did not. All the buildings are magnificent, particularly those in Dundalk, Sligo, Trim, Limerick, Ennis and Castlebar, which is virtually finished. We have had nothing but praise for the buildings.

Given that we inherit all the old buildings, we do not automatically decide to refurbish them. The first thing we do is determine our requirements and the second thing is to assess whether the building available to us is capable of meeting our requirements. If it is not, we will go to the market. That is what we are doing in Wexford at present. The building there is not capable of meeting our requirements, so we will go to the market to build an entirely new building. These are magnificent buildings, architecturally and historically. If we can accommodate our requirements, we will stay in those buildings. We also accept that, for many towns and cities, these buildings are the only buildings of significant civic importance and we make them available for civic functions, etc. They are pivotal buildings in towns. We do not go blind; we only stay with the building if it is big enough.

The Courts Service has done a fine job with the buildings and I congratulate it on that. I wish Mr. Fitzpatrick every success in the future and thank him for attending.

Mr. Fitzpatrick

I thank the Deputy.

I appreciate Mr. Fitzpatrick's comments that this is a major project and as significant as the renovations of the Four Courts after the Civil War in 1920. However, the people of Cork are concerned that it is a fiasco. I confess I was a member of Cork City Council during this period and at least one other member of this committee was in a similar position. We may or may not be responsible for some elements of it. This is probably the second most important building in the city after City Hall. It has been boarded up since 1995 and unusable since 1999. That is unacceptable.

I will ask questions about a number of areas. We seemed to get bogged down about the longer lease, which does not suit anyone. Three hotels have commenced construction in the city, including one not too far away from this building. A long lease does not suit the owner, the users, as outlined by one of the judges, or the taxpayer. The need for the second lease arose from mismanagement, as far as I am concerned. Mr. Fitzpatrick said that, with hindsight, a longer lease would have been needed. Perhaps Mr. Fitzpatrick could comment on the lack of evaluation of future needs and of proper costing in 1995. Was a quantity surveyor involved at that time or was it just the technical staff of Cork City Council? Perhaps he might also comment on the failure to achieve a practical timeframe for the entire work programme.

The committee spends much time trying to establish, as far as possible, who was responsible for matters that go wrong in the public service. Our primary objective in that regard is to avoid any recurrence of such events. What lessons has the Courts Service learned from this fiasco and where would Mr. Fitzpatrick lay the responsibility for it? Up to now, most commentators have taken the easy option by blaming the Government of the day. I would like to tease that matter out somewhat because the finger of suspicion would probably point to the technical staff of Cork City Council. I would like to hear Mr. Fitzpatrick's comments on that. I have quite a number of questions and for obvious reasons, Chairman, I have a particular interest in this matter, which certainly is a fiasco when one looks at it. Even trying to be fair to everybody involved, it is a fiasco, given the ten-year period for the work. I will have more specific questions to pose later but I would appreciate Mr. Fitzpatrick's comments on the points I have raised.

Mr. Fitzpatrick

First of all, the long lease certainly does not suit the State or the users, but it was the owner who insisted on it. Therefore, I am not sure we could accept that it does not suit the owner.

I am sorry, Chairman, but perhaps I should have phrased that differently. I should have said that the decision to move on from a two-year lease — to take a further lease — at that point would probably have suited the owner. Obviously, they were caught in a bind and may have been held up somewhat with it.

Mr. Fitzpatrick

I am sorry I misunderstood the point — I thought it was about the length of the new lease. The first thing we did when we were established was to carry out a future needs assessment. Cork was growing and everybody we met was telling us we needed to look at the plans again as they would not meet the requirements of Cork into the future. The city and its suburbs were growing and the population was growing rapidly at the time. We engaged in full consultation and carried out a needs analysis and the position became clear to us. We did a comprehensive evaluation which led to the original plans not going ahead.

Second, the original estimate in 1995, as I understand it, was more of a guesstimate at the time and certainly did not involve quantity surveyors or technical input. Part of the difficulty was the confusion over who funded existing courthouses. Cork City Council has been very helpful to us and I certainly do not want to suggest otherwise. Without the initiative from the new city manager, this project might still not have commenced. That is the reality so I would not like the impression to be conveyed that Cork City Council had not been helpful and co-operative. It was the council's agreement to the funding arrangement that enabled the project to proceed, however belatedly, but at least it did proceed. The lease can be broken at the end of the five-year breakout, rather than waiting for the nine years and ten months. One of the difficulties concerning the delay is that the Department of Justice, Equality and Law Reform had limited funding for courthouses because the statutory responsibility rested with local authorities, including county councils. On the other hand, local authorities had other pressing requirements and courts were not their core business.

Part of the difficulty was that on the one hand, local authorities were hard pressed with their own services and were not able to fund these court refurbishment projects, while the Department of Justice, Equality and Law Reform had obtained a Government decision to make some money available. That was part of the difficulty that went on through the 1990s. The mandamus proceedings were being taken then in the courts, which were directing the Minister. As I said at the outset, since we were established, we have done over 30 capital projects, ranging from very small to very big. We have brought in every one of those on time and within budget, without exception. One of the first things we did back in 2000 was to develop a seven-year building plan. We identified projects individually on the basis of those that were going ahead and the order in which they would proceed. Currently, therefore, we do not start projects or look for alternative accommodation unless the funding is secure and unless we know that we can meet them. That is the lesson for anybody in this respect. We have a seven-year building programme and so we know that this year, for example, we can start Longford, Nenagh, and later in the year, Tullamore, as well as a few smaller ones such as Belmullet. We also know that next year we are hoping to reach places such as Kilkenny. We have four county towns left so we are working to a plan.

When we were doing Sligo, Ennis and Castlebar, we moved the courts temporarily to adjoining towns. We moved Castlebar to Westport, Ennis to Kilrush, Sligo to Carrick-on-Shannon, and Portlaoise to Tullamore. The trouble is that when one has a big court building, such as the Four Courts, one cannot do that. There was nowhere to move them except Dublin and as that would not be practical or possible, there was a real dilemma. The difficulty arose from the different responsibilities for funding and it went on longer than planned. No doubt, we added to it when we decided to look at the plans, but we had to do so because had we gone ahead we would be back here trying to explain to the committee why we had to build a second courthouse in Cork immediately.

I accept those points. When we criticise any aspect of any Department's services, there is a danger that we may overlook all the good work that is going on, although that is not the intention. It is unfortunate that the Comptroller and Auditor General is only empowered to highlight the bad decisions. In that context, however, I appreciate fully that Mr. Fitzpatrick has a two-page list of areas in which excellent work has been done.

One good aspect coming out of this is that the project will be completed for Cork's period as the European City of Culture. I wanted to put that on the record because the public might not have been aware of it. There would have been a second civil war had the Courts Service attempted to move the courthouse to Dublin.

I compliment Cork City Council and the city manager for endorsing the rent-back arrangement. It was innovative back in 1975 when that city council was the first to lease back a high-rise car park. Having said that, there is a danger that we will overlook the real problem which is that someone or other made a shambles of this. I still do not know who to blame for it. I appreciate that Mr. Fitzpatrick only came on the scene in 1999 but we do not have the opt-out of not blaming anybody; we must find out what went wrong. The difficulty is that in 1995, the city council submitted its plans to, I presume, the Department of Justice, Equality and Law Reform, for phase two — we will forget phase one for the moment — which was the internal renovation. Due to its importance, everybody in the Department was concerned to ensure that all aspects of the refurbishment, and in particular the architectural heritage, were looked after. They put up two considerations — an architectural competition initially and the OPW's involvement in appointing the design team. The important aspect here is that the Department did not progress these objectives at that time, and the design work continued under the control of the council. Would Mr. Fitzpatrick agree when I respectfully suggest that Cork City Council's professional staff simply did not have the ability to establish the future needs of courts for the legal profession in Cork? Would Mr. Fitzpatrick accept that?

Mr. Fitzpatrick

I am conscious that I do not enjoy privilege here.

I want to make it clear to Mr. Fitzpatrick and everyone else that this would be totally outside their brief. They would find it almost impossible to carry out the evaluation or have the awareness required to do this kind of work for the Department of Justice, Equality and Law Reform. I am talking about future trends, new requirements and new technology, of which Mr. Fitzpatrick is aware. Cork City Council, as such, could not have done that. Perhaps I am trying to apportion blame, which might not be part of our brief. I look back at that decision of 1995 not to have the then Department of Justice involved at a high level in this prestigious project as being where it fell down.

Mr. Fitzpatrick

The first issue is that the city council would have had statutory responsibility for this at that time. My understanding was that there was a very keen desire on the part of the city architect to do this project and to do these plans. That is my understanding, rightly or wrongly. He did the plans and I think they are now quite good.

We appointed a project manager for the very good reason that this was a big project. As I understand it, there certainly was a strong desire on the part of the city architect to retain the design of that particular project.

I accept that the plans were quite good but am I correct in saying that they are costing four times as much as the estimated cost? If the plans were good, they have been modified quite a bit according to Mr. Fitzpatrick. He explained €10 million of the overrun.

Mr. Fitzpatrick

The original price, adapted for inflation, would have worked out at around €10 million. That was with the original plan for construction only. That original estimate did not include furniture, fit-out and so on. The comparison is €10 million to €20 million, but there are twice as many courtrooms in the building. Although the building is not bigger, it has to do with the use of space and incorporation of the basement, etc.

I am just trying to pin down matters. I have a difficulty with what Mr. Fitzpatrick is telling me in that the original plans were good and yet are so modified.

Mr. Fitzpatrick

I did not say the original plans were good. I said the original plans were not sufficient in terms of meeting the requirements of the number of courtrooms, the provision for victim support, the provision for all the facilities, technology and so on.

What was the source of the two plans?

Mr. Fitzpatrick

They were both done by the city architect but the second set of plans was done in accordance with our instructions following consultation.

I hope those railings will not be put back there. We took a policy decision to open up the courts but I do not know what Deputy Noonan was thinking of. We are trying to open up buildings rather than fence them in.

These are slightly technical questions. Much work was done on the roof but there was also a great deal of external work. Unless I am mistaken, there was a great deal of work on lower access points at street level — Mr. Fitzpatrick described the basement where they are putting the staff. Were any changes made to the work that was carried out under phase one because of the alterations under phase two? Did they have to rip out anything?

Mr. Fitzpatrick

No, I do not think so. In fact, that price would be fairly consistent with that of external work we did on other court buildings, which were much smaller than those in Cork. That price would have been fairly consistent with the price of doing the stone work and the roof in Ennis or Dundalk, for example. Given the size of court, it was fairly consistent. It was about double the price of other county town venues which would be less than half the size.

The primary issue the Comptroller and Auditor General would highlight is the delay in getting the project under way. This is similar to what is happening with the Cork School of Music. I think that project started out costing €6.9 million — it was a modest figure in single figures at any rate — and they are now talking about a figure of the order of €120 million, although they may get away with €64 million. Mr. Foster may wish to comment on this. Are we learning anything about pricing? What process are we using to evaluate the price of projects because we are taking the knocks for prices increasing fourfold?

Mr. Fitzpatrick

The original price was a very rough estimate and it was not done on foot of a brief or by quantity surveyors. When the plans were revised, the scale of the project bore no relationship to the original set of plans. By this stage, there was a full design team and a project manager. The OPW, on our behalf, engaged a very competent and professionally well-proven project manager. At that stage, the estimated cost, including furniture, fittings and fees, was €28.5 million. The actual price that came in was €26 million, of which the construction element accounted for almost €20 million.

The estimate in 1995 was more than €5 million. Taking account of inflation — it was 60% for the period — that figure increases to €10 million. The actual construction cost of the plans now being done is €20 million because the furniture and fittings were never included. The real comparison is €10 million versus €20 million but, in fairness, the size of the current project bears no relation to the original one. They are almost two separate projects.

Somebody must cry halt. This applies to any local authority although I just happen to be a member of this particular one. I represent the people in Cork South/Central and obviously, as a member of the city council, all of the people of Cork. We have taken flak from everyone on this. Everyone is blaming us. We need to employ better practice for projects such as courthouses. Mr. Fitzpatrick is only involved in courthouses but Mr. Foster might like to comment on projects in general.

Mr. Foster

I take the Deputy's point. I will mention three initiatives. We in the Department of Finance are concerned about overruns and in that regard we are moving to a fixed price type tendering basis for public construction. Second, we have moved to a capital envelope allocation over the period to 2008 which will give more certainty going forward on the specific projects that can be accommodated and improve planning. Third, we are reviewing the capital appraisal guidelines which give guidance to individual agencies on the appropriate procedures that they should implement.

That is something we need to learn. It gives us no joy to come in here blaming anybody, particularly about something that happened nine or ten years ago, but the public is demanding answers. There have been local radio debates and so forth on this matter. The finger of suspicion is pointed at Cork City Council and everybody blames the Government. I would find myself defending both bodies, as it happens, but somebody has delayed matters for ten years.

Traditionally one of the big difficulties around this area has been car parking. This is a city centre location surrounded by a one-way system in the vicinity of Courthouse Street. Traditionally the practice has been that people involved in court were permitted to park in the vicinity, disregarding double-yellow lines and public safety. I did not approve of this because it is the manifestation of a lack of law and order. Has a facility for dealing with car parking been reached?

Mr. Fitzpatrick

This is an issue in many towns because many court buildings are in the centre of towns. In some places, fortuitously, the county council or others have developed car parks close to the courthouse. Castlebar is a good example of this where there is a big car park being built at the back of the new courthouse. The reality is that we cannot provide car-parking for the public, the solicitors or anybody else using the courthouses.

It is a matter of the enforcement of the by-laws of the city council. We certainly would not condone illegal parking in the environs of the courthouse. We cannot undertake to provide car parking for the hundreds of people who go to court in various towns. There is no point in even suggesting that we do so. It is a bonus if, as is the case in Waterford, there happens to be a large car park. The answer is that we are not providing any special car parking. We will try to accommodate judges and staff to the extent that we can. In Dublin, most staff do not have access to car parking facilities because we do not have the spaces. We certainly could not start renting spaces.

We are conscious of the need to manage budgets and of the public concern in this regard. We have, in four years, brought in over 30 projects on budget and within time. There were particular difficulties with this project with which we were obliged to deal. We accept that Members will be criticised where there are situations where that does not appear to be happening.

Cork would, traditionally, be somewhat different. I assure Mr. Fitzpatrick that the car parking facilities would not be for use by members of the public. They are strictly prohibited from using them. Such facilities are for the use of those who are above ordinary members of the public.

I welcome the fact that detailed consultations were carried out with all court users etc. Were there any consultations with members of staff, such as paper carriers, ushers and so on, in respect of this matter?

Mr. Fitzpatrick

Yes, there were meetings with all the staff. There was initially some concern. What was perceived to be a basement is not a basement at all. In fairness to the city architect, it was a very clever design. As the Deputy is probably aware, he brought the light down through the atrium. It was very well-designed and I think it will be successful. He had already done something similar and successful in another building in Cork. It was not an untried approach. The accommodation will be good. There was consultation and some concern initially about the area to which the staff were going.

We are obliged to send details of our deliberations to anybody mentioned here who can be identified. However, I am sure the Cork city architect, Mr. Hegarty, will not mind me adding to the compliments paid to him. The individual in question has done a fine job on this. I am just sorry that the difficulty about future usage was not dealt with. However, that would be beyond his brief. That is why there should have been more interaction at State level, rather than it being stated that it was somebody else's problem. I welcome the capital funding that has been made available and the changes made. However, this matter gave rise to a great number of difficulties.

With regard to the lease, as the Chairman said, the Courts Service was caught in a no-win situation. It may not have suited those people involved who thought it would be there for two years and they would then build their hotel. Cork is booming and, when the courthouse is up and running, I hope we will have a great future.

I am still concerned that we should learn some lessons from this matter. Mr. Fitzpatrick will state that he has had a great deal of responsibility during the past two years. The courts do not get involved. They might pay 25%, 30% or 50%, in some instances, to help matters along. Matters were left to the local authority, which has had the responsibility since 1935, but no real support was provided. There must be a co-ordination of effort and I am glad Mr. Foster stated that this is being considered. That is the lesson we should learn.

I am not as familiar with Cork as is Deputy Dennehy. I have been a member of the committee for two years and each Thursday we hear some sort of disaster story of one description or another. I have no idea who is involved in this case, but I do not understand how private enterprise was able to outfox three Departments. This is a serious matter and everybody appears to be trying to shift attention away from themselves. Representatives of the OPW, which had a hands-on involvement in this matter, should be present to indicate why a rent of £200,000 was listed on a legal lease at £600,000. What happened is evidence of a gross inability to do a professional job.

I understand that the property on Camden Street was a gardening centre. There is no doubt that the people who owned it previously certainly earned more out of the law than they did out of shrubs. As Mr. Fitzpatrick stated, it may not be regarded as an office by the time the Courts Service is finished with it but it will certainly be something better than a gardening centre.

I am curious about the furniture being removed from the premises. Where will that end up and what value will be placed on it? There is a system of write-offs involved and it may never go anywhere.

With regard to the original €3.8 million spent on the refurbishment of the courthouse, I take it that this project was completed.

Mr. Fitzpatrick

Yes.

Was full value for money obtained in respect of that €3.8 million?

Mr. Fitzpatrick

The €3.8 million relates to phase one, which was entirely separate. The project went out to tender and was completed. The building in question is entirely comprised of stonework, which, along with the roof, had to be repaired. It was, therefore, the exterior of the building that had to be refurbished. We have done the same in other towns where the exterior has been refurbished before work proceeded on the interior. It was entirely separate.

So there was no cross-over between that project and the one under discussion. In other words, that would have had to have been done in any event.

Mr. Fitzpatrick

Yes. If the money had been available, I am sure the whole thing might have been done as one project. However, it was done in two phases. That is not unusual. The outside can be done without any inconvenience or any disruption in terms of the work being done inside. If the money had been available, the entire job might have been done.

Would it have cost less to do it that way?

Mr. Fitzpatrick

It might have proved so but we could have been back here building a second courthouse. That is the other side of the coin.

I am familiar with some of the courthouses that the Courts Service has built. I wish to be associated with Deputy Dennehy's comments about the tremendous workmanship involved and the fact that these structures were built within budget and on time. However, I am not sure that a lesson has been learned in respect of the matter under discussion.

I am aware that the Courts Service has overall responsibility. If ever there was a case for giving overall responsibility to a group, this is it. The decision to grant such responsibility was well-founded, especially in light of the service's record to date. In effect, this problem has nothing to do with the Courts Service. However, I do not understand why a monitoring system was not in place in the Departments of Finance and Justice, Equality and Law Reform or Cork City Council. I assume that huge legal costs were incurred about which we have not spoken. I am sure the lease was not drawn up free of charge. There are also other incidental costs to which no one has referred. I do not understand why somebody did not see what was going on. Are people prepared to sign their names on anything that is prepared for them?

Mr. Fitzpatrick

The OPW was not involved in the original lease.

Mr. Fitzpatrick

That was done by the city council because, at that time, it had responsibility for court buildings. The OPW had no involvement whatsoever in the original lease.

The only legal costs I am aware of would have been the cost of preparing what were pretty standard leases. I do not think legal costs would have been a significant issue. There were no court proceedings so there were no significant legal costs.

Who was involved in the negotiation of the second lease?

Mr. Fitzpatrick

We were in existence when the lease came up for renewal and we were responsible for providing and maintaining court buildings. We took the existing lease and asked the OPW to renegotiate the best deal it could and for the shortest period of time to enable us to complete the Washington Street project. The OPW acted on the lease, which it took in good faith, to be fair to the OPW. The lease was fairly straightforward——

I find it hard to hear Mr. Fitzpatrick speak of being fair to OPW. Some £600,000 was involved. Surely bells rang. A sum of €750,000 was being paid for something that was only worth £200,000. A major maintenance and building job could be done for that amount. We are talking about a significant amount of money. When Mr. Fitzpatrick asks us to be fair, to whom is he asking us to be fair?

Mr. Fitzpatrick

I meant that we gave the OPW the original lease, which we had got from Cork City Council. The OPW would have assumed that what was said on the lease was what the rent was.

Had the Department of Justice, Equality and Law Reform any hand, act or part in this business? Did it see the lease?

Mr. Fitzpatrick

I presume it would have seen the original lease at the time.

Did Mr. Cronin see the lease?

Mr. Cronin

I was not personally involved in this area at the time but——

This is always the problem with our committee. In the two years I have been a member of the Committee of Public Accounts, I have never met anyone who was in situ at a given time when something happened. Who saw it?

Mr. Cronin

As far as I can see from the file, the lease turned up much later than the original agreement. In other words, the city council reached an agreement with the landlord on the Camden Quay site, work on the development took place, the staff moved in and the formal lease was signed later. It is quite obvious that there is a discrepancy now between the figure which appeared as rental in the formal lease and the original agreement which was explained to the Department and sanctioned by the Department of Finance. This was for an annual rent of £200,000 and an overall fit-out cost of £800,000, of which the Department agreed to refund Cork City Council 50%; in other words, £600,000.

Was it decided to refund because it became so expensive?

Mr. Cronin

Prior to 1990, the local authorities had to entirely fund the cost of courthouse accommodation, both capital costs, if they arose, and maintenance. Obviously, it was not a high priority and courthouse accommodation simply was not being looked after. In 1990, the Government decided to provide capital funding to the Department to disburse the local authorities to assist in this area, so the Department had funding available to it. It would appear that the Department agreed to provide 50% of the cost of providing the alternative accommodation.

Did this come across Mr. Foster's desk at any stage?

Mr. Foster

I hesitate to answer as I have only been on the Justice Vote since January.

So Mr. Foster was not there either?

Mr. Foster

I have invigilated the file. We were not aware of the issue of £200,000 and £600,000 and the actual level of the lease payment until it emerged in this context.

Let us go back to the present lease and the break clause, which was the only way out of the agreement. When all this is over and the asset value of the premises which the landlord will own and have access to is assessed, will this deal not be seen as an outstanding achievement by him, especially when he pressurised the Courts Service into taking a ten year lease when it knew it only wanted the premises for a few years?

Mr. Fitzpatrick

Even though the lease was for nearly ten years we managed to get a break clause so that we could terminate the lease after five years.

Under no circumstances would this landlord agree to a fewer number of years?

Mr. Fitzpatrick

No.

Was he pushed on that?

Mr. Fitzpatrick

Absolutely. That was a big issue for us because we knew we did not need it for ten years.

In other words, he knew he had the Courts Service over a barrel.

Mr. Fitzpatrick

We were over a barrel. The best we could get was a five year break, which was critical to us because we knew we were not going to need the building for more than about four years. We knew that five years was going to take us outside our needs.

I am not a valuer so I am reluctant to comment on the value of the building. However, I am not sure the value of the building is that much enhanced. It has been set out as a court building but it is not a very good one.

By all accounts, the people who use it do not think so.

Mr. Fitzpatrick

It is not. We have all seen it. We have used furniture before. While we were doing the Dundalk courthouse, we had to use a temporary courthouse. The furniture was taken out of it at the end and re-used, because it is re-usable. I am talking about benches and seating.

Can we take it that the furniture——

Mr. Fitzpatrick

We have done it.

——that comes out of this place will be used somewhere?

Mr. Fitzpatrick

We will certainly take it out.

I know that but——

Mr. Fitzpatrick

We have used it before. We have taken furniture from temporary courthouses before and put it into other courthouses. There is no reason some of this furniture cannot be re-used. The building will be pretty much a shell when we leave. It is not likely to be valuable at all at the end.

Mr. Fitzpatrick mentioned €2 million repayments on a 20 year loan.

Mr. Fitzpatrick

That is the estimated figure.

That is €40 million, by the time the building is paid for.

Mr. Fitzpatrick

That is subject to the tendering process the city council is involved in now.

Instead of the €20 million plus €6 million for refurbishment, the building will cost €40 million.

Mr. Fitzpatrick

Or thereabouts. It could be somewhat shorter. That is the arrangement which has been approved for us to proceed with. It is not unusual. Local authorities regularly do lease purchase arrangements.

I know that. Are some of the newer courthouses of which Mr. Fitzpatrick has spoken funded under the same system?

Mr. Fitzpatrick

Their costs are much less. They average between €2 million and €3 million. The bulk of them are in the €10 million to €14 million area. They have been funded by the ordinary capital grant.

That is what I am coming back to.

Mr. Fitzpatrick

At the moment we are in discussions with the Departments of Justice, Equality and Law Reform and Finance about a new criminal court complex for Dublin. The intention is that it will be done by way of public private partnership. This is different from the Cork arrangement but is not the conventional capital method. It is Government policy that more capital projects within the public sector will be done by way of public private partnership in the future.

I have not studied this aspect of the matter. This is the first time I have heard about it. It might be an expensive way to fund the courthouse in Cork, compared with other courthouses.

Mr. Fitzpatrick

It was the only option available to us. It was the option approved by the Minister for Justice, Equality and Law Reform and the Minister for Finance. It is not an unusual situation. There are many public bodies which run projects.

I know that well. It is not what I am coming at. I am talking about comparable buildings which are built at the same time through this system. The project in Cork might still stand out as an expensive building due to the loan.

Mr. Fitzpatrick

We do not have a comparable building. All our other projects have been carried out through the ordinary capital grant fund.

I mean one should relate their building to this one.

Mr. Fitzpatrick

One cannot as they are not comparable. They are different.

They all cost a certain amount to complete. At issue is the difference between the two figures.

Mr. Fitzpatrick

Absolutely

That is something which should be examined.

While we are criticising the city council, it is worth noting that, on the lease alone, Cork City Council subscribed €760,000 to support the enactment of justice. The real problem is to figure out the magnitude of the original plan and what is happening. Would the fact that the original city council plan was based on funding by the council itself have affected the entire project? Would the council have designed what it could afford to pay for? The plan was originally made under the old methodology in 1995. Would that have been a material issue given that, at that point, the council would have been funding the subvention from the Department of Justice, Equality and Law Reform?

Mr. Fitzpatrick

I doubt it. At that stage it was quite clear that the Department intended to fund whatever was planned.

Does that apply to the original plans?

Mr. Fitzpatrick

The Department had already funded phase one.

That does not arise then.

Mr. Fitzpatrick

The more significant factor was the fact that the original plan involved a refurbishment of existing structures. When we were established, expectations became higher and facilities as they existed were not considered to suffice. These included the number of courtrooms and facilities for victims and jurors. One need only consider recent events in that regard.

I accept all that. The idea just came to me.

Mr. Fitzpatrick

The plan would not have been influenced as the Deputy outlined because the Department was to fund it. A more significant factor was the intention to upgrade the existing courthouse rather than to try to redesign it.

I apologise for popping in and out of the meeting. I am trying to cover Report Stage of the Social Welfare (Miscellaneous Provisions) Bill in the Dáil. I have been following both meetings on the monitors and attending each where possible.

While many questions have already been asked, I wish to pose a few to point to my concerns about the nature of this project. I am an elected representative for the Cork area and I was a member of Cork City Council and Cork Corporation as it was from 1995 to 2002. I am conscious of the funding arrangements for maintenance and of the council's role as the lead body involved in the renovation of court buildings. Despite the change of rules, there continues to be a negative effect on the provision of local services due to the drain on resources represented by the costs involved.

Does Mr. Fitzpatrick feel the stop-start nature of the development work has been the most significant factor in the cost overruns? In several instances, work which was already done has been recontracted, particularly on the roof of the courthouse building. While the Courts Service was not in place and Mr. Fitzpatrick was not its chief executive officer at the time in question, the manner in which the Department of Justice, Equality and Law Reform handled the most important courts building in Ireland after the Four Courts is indicative of a disdain for provincialism. I do not know if Mr. Fitzpatrick can comment on that, but it has been a factor in allowing this controversy to arise.

Mr. Fitzpatrick

There is absolutely no requirement on local authorities to contribute anything to the provision and maintenance of court buildings. There are a number of local authorities which have very kindly agreed to continue to carry out some maintenance for us, but we pay for it on an agreed basis. That is a contractual arrangement between us and them. To be fair to the local authorities, they have facilitated us by ensuring a smooth transition. Had they walked away the day we were established, we could have had chaos around the country.

There were two separate phases in the project in question. The first involved the roof and the external walls and it was carried out at a cost of €3.8 million. It was a contract in itself. The stop-start nature of the process was the result of the fact that the original plans called for a refurbishment of the existing courthouse. When our service was established, we carried out a needs assessment which clearly demonstrated that the requirements for Cork were significantly in excess of the existing facilities. We engaged in a great deal of consultation with the people who used and worked in the courts and had to redraft the plans. A new plan emerged. That process was carried out reasonably quickly at which point funding became an issue which was discussed for over a year.

Eventually the issue was resolved with the proposal by Cork City Council. The proposal was made to facilitate completion of this and the School of Music project, to which Deputy Dennehy referred earlier, before the European year of culture. The process was started when the funding arrangements were approved by the Ministers.

Is it not a fact that the roof had to be done twice because of the delay?

Mr. Fitzpatrick

I am certainly not aware that the roof had to be done twice.

At local level, I have been informed that was the case.

Mr. Fitzpatrick

We will double check that but, to the best of my knowledge, the roof has not had to be done twice. It was done the first time.

Elements of the roof might have had to be done twice.

Mr. Fitzpatrick

I am not sure if it may have been the case that internal work resulted in disturbance of the roof. I will double check and get back to the committee on the matter.

I have been hearing questions raised about the ongoing rental costs of the current Circuit Court building in Cork, which is known as the Atkins building. When it eventually ceases to be a court building and Washington Street is back in use, what will happen with the works which have been carried out by the Courts Service? Will the building be left as it is?

Mr. Fitzpatrick

The work has been done to facilitate the use of the building by courts. Courtrooms do not have a use outside of the courts system. In other towns, we have taken the furniture from such buildings and used it again elsewhere. The court furniture, which is the most expensive element of the building, will be used elsewhere. We do not have a shortage of venues in need of furniture.

There is a break clause in the lease which will be exercised in April 2006 and Washington Street will be ready to resume court sittings next January unless the builder is bankrupted or something dramatic happens. The project is on target.

In terms of the lease and the value of the building, the owner will now be in possession of a multi-use structure whereas before it was a seed warehouse.

Mr. Fitzpatrick

He will certainly have an improved building but, once the furniture is removed, I am not sure it will not have to be gutted and redesigned no matter who the next tenant is. The building is designed for court use, which means it cannot simply be converted to office space.

I may be wrong, but is not the building at the edge of a designated area?

Mr. Fitzpatrick

It is a tax designated area.

That means the owner of the building received tax designation for carrying out preliminary renovation work while the State paid additional money for renovations it carried out. Eventually, the State will be handing over a building on which much rent has been paid and which has multifunctional potential.

Mr. Fitzpatrick

As the refurbishment was entirely funded by the State, the owner would not have provided any major funding.

Was tax relief available on the rent the State paid to the owner in the designated area?

Mr. Fitzpatrick

I do not know. I am not certain if the area in question was tax designated although I presume it was. I am not an expert in this area because it is not within our remit. My understanding is that the tax designation applied when a person who provided a building recovered the cost of constructing it. As I am not sure of the position with regard to rents, my answer to the Deputy's question is that I do not know the tax arrangement of the owner.

Will the Chairman obtain information on whether tax relief was made available on the rents received by the owner from the State for the building?

Is the €26 million cost of the project arising from the arrangement between the Courts Service and Cork City Council for building, rebuilding or refurbishing the building in Washington Street off or on the balance sheet in terms of the Government's accounts?

Mr. Fitzpatrick

My understanding is that it is on the balance sheet. The limits imposed under the Maastricht treaty were a big problem at the time we were seeking the funding. I am not certain whether the recent changes in EUROSTAT rules will result in the figure being taken off the balance sheet. My understanding is that the figure, as a cost incurred by the local authority, is on the balance sheet. It may have changed, however, as a result of the recent EUROSTAT changes.

Will Mr. Fitzpatrick make inquiries in that regard and inform the committee of the outcome?

Mr. Fitzpatrick

Yes.

Mr. Foster

The new EUROSTAT determination relates to how one treats public private partnerships. In this context, local authorities and central Government are both within the category of general Government so the expenditure would still be within the general Government accounts.

The property in question was used from May 1999 until the summer of 2003. Why did the building on Washington Street have to be vacated when the contract was not signed until the summer of 2003? This appears to have been of real benefit to the landlord of the rented property which had been boarded up. Could the property on Washington Street not have been used?

Mr. Fitzpatrick

At that point, the temporary accommodation had been rented and the project was expected to go ahead sooner than was eventually the case. The building on Washington Street was not a palace either. The reason it had to be refurbished was that the working conditions in the building were very poor. This was not unusual as court buildings throughout the country were in a terrible condition.

I compliment the Courts Service on the great work it carried out in Sligo. The town now has a fantastic court building after years in which it was in dire condition. The facts in this case, however, were that the courthouse building in Cork could have been used right up to the signing of the contract, and there were considerable safety concerns about the property which was leased.

Mr. Fitzpatrick

In retrospect, those are the facts. However, at the time, the city council was trying to ensure it had an alternative court facility available when the contract was ready to start.

It was a cushion of comfort.

Mr. Fitzpatrick

At that stage, the city council was hoping the project would proceed much more quickly than it did. It is very difficult to find suitable buildings for courts. For example, we have been looking for a court building in one big town for the past three years and have been unable to find a suitable one. I presume the reason the building was leased at the time was that it was anticipated that the project would start reasonably soon and the council wanted to ensure that, when the building work was ready to begin, a building was available in which to locate the courts.

Deputy Noonan referred to the extraordinary circumstances regarding rent. In the private sector, rental income would not increase from £200,000 to £600,000 through a misunderstanding. The landlord must have felt he had won the lotto when he calculated his final dividend in the sense that the refurbishment was built into the price and was not fully analysed when the lease was renewed. His income quadrupled.

Mr. Fitzpatrick

I have explained how that happened and what the lease stated.

That was not fully explained.

Mr. Fitzpatrick

It would be wrong to assume that the rent would be renewed at the same rate. It was never a possibility that the landlord would renew the lease at £200,000 per annum.

Deputy Noonan's point was that the added State investment benefited the landlord as the rent changed from a commercial rent to an office rent but no credit was given for the State investment in the upgrade.

Mr. Fitzpatrick

We can only speculate as to what the rent might have been if everything we now know had been known at the time. It would be true to state, however, that it would certainly not have been £200,000, although it may not have been at the other end of the scale either and possibly would have been somewhere in between.

While I am aware that Mr. Fitzpatrick has given the best explanation possible, it is difficult to explain the matter in terms of the commercial world. As time is pressing, we will not proceed to address the Vote today. We will reflect on the discussion today before deciding how to proceed. I thank everybody for attending.

The next meeting will deal with the 2002 annual report of the Comptroller and Auditor General — Office of the Revenue Commissioners: update on chapters 2.1 to 2.6, inclusive, 2.8 and 2.9; chapter 2.7, prosecutions for serious tax evasion; and chapter 2.10, environmental levy.

The witnesses withdrew.

The committee adjourned at 2.50 p.m. until11 a.m. on Thursday, 25 March 2004.

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