As Senators will be aware, the Bill is the first comprehensive valuation legislation introduced since the 1850s. It is designed to modernise, streamline and improve the operation of the valuation system, which was the basis for the collection of slightly more than £450 million in local authority rates in 2000.
The legislation will remove deficiencies that have built up over the years in the valuation system, bring the system into line with the contemporary commercial environment and make it more transparent and equitable for the ratepayer. A key motivation for introducing the legislation is to allow a valuation of commercial and industrial properties to take place in all rating authority areas over a period of years; a national valuation has not been undertaken since the middle of the 19th century. By this means, a uniform and equitable valuation base will be established and anomalies will be removed. There will be a return to the use of full net annual values, rather than the confusing fractions arrangement that is operated at present.
Provision is being made in the Bill for periodic valuations to be undertaken in all local authority areas on a five to ten year basis. This will ensure that valuations are kept in line with changes in market values and provide for fairness and equity between ratepayers.
Increasing local authorities' rates income through a valuation is not the purpose of the new legislation. To put this beyond doubt, provision is made for the capping of the increase in the overall rates income of a rating authority area in the year in which the first valuation is used for rating purposes, to a percentage not greater than the increase in the consumer price index.
I am glad the new legislation will enhance the opportunities for ratepayers to be involved in the valuation process from an early stage. In addition to retaining the existing multi-tiered appeals system, it introduces, at the initial stage of the valuation process, a new consultative phase. The consultative phase means that in future ratepayers will be notified of the Valuation Office's proposed determination in respect of their property before it becomes effective for rating purposes. The ratepayers will then be given an opportunity of making a submission to the Valuation Office, if they so wish, about that determination. The Valuation Office will be required to take into account any such submissions received before the valuation certificate is issues and valuation list amended or published.
The Bill is comprehensive legislation which provides for the repeal of existing valuation legislation and its replacement by modern legislation for those elements of the current valuation system it is proposed to retain; a valuation of all rateable property in the country on a rolling basis – this means the valuation of individual rating authorities in a planned sequential manner, it is planned that the whole country will be valued over a period of five years and that there will be subsequent valuations at regular intervals thereafter; the continued use of net annual value – NAV – as the basis of valuation and a return to the use of full NAV; and the continued exemption from rates of a wide range of properties currently exempt from rates. Such properties include domestic property, agricultural land and non-residential farm buildings; land developed for forestry, horticulture or sport; State-occupied property; certain properties of a cultural nature such as non-commercial art galleries, museums, libraries, national monuments and legally designated national cultural institutions; property used by charitable organisations exclusively in a non-commercial manner for charitable purposes and property occupied by An Taisce; and bed and breakfast accommodation and self-catering accommodation. However, I am ensuring that aparthotels will be subject to rates.
The main changes proposed in the rates are the extension of the current exempt status enjoyed by most schools on the basis that they are not established or conducted for profit and-or are State-funded to those universities or other third level institutions on the same basis which are not already exempted from rates; confirming the rateability of VEC offices and the rating of those non-commercial State-sponsored bodies and agencies not already paying rates, such as An Bord Pleanála; the rating of the administrative offices of the health boards and Teagasc; the full rating of all harbours, except those in State occupation; the current fixed-term relief from rates for the mining and land based petroleum extraction industries is being abolished; repealing the existing arrangements for valuing Irish Rail and allowing for the option of globally valuing that organisation; and an exemption from rates for property used to breed and rear fish is being applied.
In addition the Bill provides for the streamlining of the valuation process and providing ratepayers with a formal opportunity to be heard in the process of determining rateable valuations; new, or revised, valuations to be effective for rates purposes immediately from the date of being put on the valuation list rather than, as currently, from the beginning of the following rating year; enhanced powers for the Valuation Office to obtain information relevant to the valuation process and to obtain access to property for valuation purposes; the continued use and updating of existing valuation lists until such time as new valuation lists are made available from the initial valuation proposed in the Bill; and giving the Minister for the Environment and Local Government the power to specify the maximum rates income for local authorities in the first year in which a revaluation is effective for rating purposes. Furthermore, the Bill re-enacts various provisions relating to the Commissioner of Valuation and the Valuation Tribunal.
The Bill has been in gestation for a number of years. In 1995, an interdepartmental review of the rateable valuation system was undertaken by the Department of Finance, the then Department of the Environment and the Valuation Office. This review was prompted by the need to carry out a thorough study of the valuation system and to consider options for improving it before any work commenced on comprehensive valuation legislation. The findings and the recommendations of the review group have significantly influenced the drawing up of the Valuation Bill.
The existing valuation legislation provides for the valuation of all fixed property, including land and buildings. Valued also is incorporeal property, defined as property with no physical existence, such as tolls, easements, fishery rights and other rights over property. The Valuation Office has responsibility for the valuation system. Rates are no longer collected on domestic property, as a result of the provisions of the 1978 Local Government (Financial Provisions) Act, or on agricultural land, as a consequence of a 1984 Supreme Court decision, although both of these categories of property are still included in the valuation lists. Therefore, the commercial and industrial sectors now effectively constitute the rateable valuation base.
The basis of assessment for valuation purposes is the net annual value of a property. The NAV of a property is equivalent to the annual rent, exclusive of all payments in respect of rates, taxes, repairs and insurance, which a property could reasonably be expected to command. The rateable occupier, the person who has to pay the rates, is the person in the immediate use and enjoyment of the property, that is the tenant or the owner in certain cases. Rating authorities and ratepayers have the option of having a property listed for revision. As no national valuation has been carried out in the last century and a half, this revision process is effectively the only way in which the valuation lists have been changed in the intervening years.
The principal recommendation made by the interdepartmental review group was that a valuation of all rateable property should be undertaken. The primary objectives of such a valuation are to remove anomalies in the valuation lists, to establish a uniform and equitable valuation base and to lessen the risk of any eventual challenge to the valuation system. Anomalies are widespread in the valuation lists. This is principally because no national valuation has been carried out since the national valuation of all property between 1852 and 1865. The rateable valuation of a property had been intended to be equivalent to its net annual value, but over time the rateable valuation increasingly represented a smaller and smaller fraction of the net annual value. It is necessary to update the valuation lists to eliminate any anomalies as they form the base on which a substantial part of locally raised revenue for local government is levied. This will be done through a national valuation based on the new legislation.
The proposed valuation, the first general valuation since the middle of the 19th century, will be a significant undertaking. Accordingly, the Bill provides that the valuation be carried out on a rolling basis. This means that each rating authority area will be separately valued as part of a planned sequential valuation of the whole country. The sequence will depend on the judgment of the commissioner of valuation, who will decide which rating authorities are most in need of a valuation. Each rating authority area will have its own base date, by reference to which valuations will be determined.
Uniformity between valuations will be established on a rating authority basis, whereby all valuations in a rating area will be uniform relative to one another instead of having a national uniformity, whereby all valuations in the State would be required to be uniform with one another. Between valuations, uniformity will be maintained on a rating authority basis. Such rating authority uniformity will be much easier to establish and maintain than a national uniformity, thus making it easier to ensure that ratepayers will be treated equitably. It is estimated that the valuation will be completed in about five years and will be more easily and safely managed under the approach of a rolling valuation, which was also favoured by the interdepartmental review group.
Using this approach, the commissioner of valuation will have the power to make an order for the valuation of a particular rating authority area. The base date, by reference to which valuations will be determined, will be designated in the commissioner's order and will be specific to that rating authority area.
A valuation will impact on ratepayers in two ways. First, the rateable valuation of a ratepayer's property will no longer be expressed in terms of a fraction of the property's net annual value, but will be expressed in terms of the property's full NAV. Second, the rateable valuation base is likely to be redistributed within the rating area, with some ratepayers' bills increasing and some ratepayers' bills decreasing.
A return to full NAV was recommended by the interdepartmental review group as a means of improving the ease of comprehension and transparency of the valuation system and as the most appropriate basis of valuation for commercial and industrial property. The concept of NAV has been used since the inception of the valuation system in both Ireland and Great Britain. When the valuation system was reformed in England, Scotland and Northern Ireland, NAV was retained as the basis of valuation. The continued use of annual values has several advantages as both ratepayers and valuation practitioners are familiar with the concept and use of NAV in determining rateable valuations. The concept and use of NAV are familiar also to the courts and there is readily available evidence on which NAV can be based. Annual values are generally sufficiently stable to provide a predictable and reliable revenue base for rating authorities.
It is considered that a return to using full NAV may cause the level of rateable valuations to increase on average by the order of three hundredfold or so, although the increase on individual properties will vary considerably. Consequently, the rate in the pound charged by local authorities will be reduced sufficiently to offset the increase in rateable valuation and hence deliver a revenue neutral outcome, subject to some adjustment for inflation. Therefore, provision is being made for a cap to be placed by the Minister for the Environment and Local Government on the increase allowed in overall rates income of a rating authority area in the year in which the first valuation is used for rating purposes, to the increase in CPI.
A valuation, however, will lead to a redistribution of the rates burden between ratepayers, reflecting changes in the property market that have taken place over the years. Because of the multiplicity of relevant factors involved, the precise effect of a valuation on individual ratepayers' rates bills cannot be indicated before the valuation has been completed.
The Valuation Act, 1988, provided for the option of assessing public utilities within the framework of a global valuation. In essence a global valuation involves a simultaneous nationwide valuation of a public utility's total property as opposed to the separate valuation at different times of a public utility's individual properties. In the Bill, the global valuation provisions have been retained essentially unchanged. However, the prescribed method of valuation currently applicable to all global valuations has been removed. Public utility undertakings assessed under the global valuation provisions will be valued on the same basis as all other property, that is on the basis of NAV.
It is intended that after the completion of the first national valuation, subsequent valuations of rating authorities will be carried out at regular intervals to ensure that the valuation base is kept up to date. Accordingly, the Bill requires the commissioner to complete a valuation of a rating authority area no earlier than five years and no later than ten years after the previous valuation of that authority area was completed.
The current valuation system has a revision process whereby ratepayers and rating authorities can apply for the revision of the valuation lists to take account of any change in circumstances of a property. Such a change in circumstances would include a change in use, an extension or contraction of a property and any other factor that might have relevance to its rateable valuation or for its rateable status. The Bill provides that a revision process will be retained in the new valuation system. It would obviously be unfair to a ratepayer to have to wait until a valuation takes account of any change in the circumstances of a property and any lower rates bill that would result from a consequently lower rateable valuation. Similarly, a rating authority should be able to charge rates on any increased value of a property and on a new property without having to wait until a valuation is made.
Under the current valuation system, a ratepayer or a rating authority can appeal a determination by the Valuation Office, first to the commissioner of valuation and, second, if dissatisfied with the commissioner's decision, to the valuation tribunal. Both of these appeal provisions are being retained, as is the option of an appeal to the High Court or Supreme Court on a point of law. However, the Bill augments the formal appeal process with an earlier phase, called the consultative phase, during which the ratepayer will be notified of the Valuation Office's proposed determination before it becomes effective for rating purposes, and will be given an opportunity of making a submission to the Valuation Office, if he or she so wishes, about that determination. The ratepayer will have 28 days within which to make such a submission to the Valuation Office before the valuation certificate is issued and the valuation list is amended or published.
The time period for appeal to the commissioner against a valuation certificate issued by the Valuation Office is also being increased from the current position of 28 days to 40 days. The time limits for appeals to the valuation tribunal at 28 days and to the High Court at 21 days remain unchanged. Therefore, under the Bill the time period from when the ratepayer becomes aware that a valuation or revision is being undertaken to the date by which he or she has to appeal to the commissioner will be considerably increased compared to the present position.
The Bill also provides that an individual applying for a revision or appealing a Valuation Office decision will now apply directly to the commissioner on the matter rather than going through the relevant local authority as at present. Appeals to the valuation tribunal will continue to be made directly to the tribunal.
The Bill provides that State-occupied property will continue to be exempt from rates, that is, Government offices, Garda stations, Army barracks, prisons, State-occupied harbours and canals occupied by the Minister for Arts, Heritage, Gaeltacht and the Islands. The commercial sector, in particular IBEC and the Dublin regional business alliance, has made representations that State-occupied property should be made subject to rates. While having some sym pathy for that viewpoint, I would point out that rates have never been levied on property occupied by the State but that a contribution in lieu of rates was paid to local authorities from the 1870s until 1987. The contribution was then subsumed into the rates support grant, or, as it has been known since 1999, the local government fund.
Making State-occupied property subject to rates would have to be on the basis of "clawback" measures from the local government fund being put in place to compensate for the significant rates income that certain local authorities would derive from State-occupied property. It must also be recognised that the local government fund has increased considerably in recent years. Rating State-occupied property, with "clawback" measures from the fund being put in place would almost certainly result in no reduction in the rates paid by current ratepayers.
I should stress that the Valuation Bill, while continuing to exempt State-occupied property from rates, provides for the commissioner of valuation to value these properties in the first revaluation following enactment. This will allow for rates to be collected in respect of these properties should Government decide at a later date to pursue that course of action.
I will now turn briefly to the individual parts of the Valuation Bill. The Bill consists of 13 Parts and five Schedules. Part 1 contains provisions of a general nature, including the interpretation section, and issues such as fees and expenses. Part 2 sets out the terms and conditions of office of the commissioner of valuation, the delegation by the Minister to the commissioner of certain functions and the procedures concerning the delegation of functions by the commissioner. Part 3 refers primarily to Schedule 2 which sets out the terms under which the valuation tribunal will continue to operate.
Part 4 deals with property to be valued. It provides for the definition of relevant property to be valued and the categories of relevant property that will and will not be rateable under this Act. It sets the time from which the Act will become effective and the discretion the commissioner has to value contiguous relevant properties occupied by one occupier as one unit or in valuing one relevant property capable of being occupied separately.
Part 5 provides for the valuation process and contains provisions relating to the valuation order to be made by the commissioner to undertake the valuation of a rating authority area. It also contains provisions relating to the subsequent publication of the valuation list and the issuing of the valuation certificate to each occupier prior to the publication of the valuation list to allow for submissions to be made to the valuation manager, who will be charged with the responsibility of overseeing the valuation process. The process of allowing the occupier to make submissions regarding the proposed value of his or her property, which have to be taken into account before the final value of the property is set, is, as I have already mentioned, commonly referred to as the consultative stage.
Part 6 of the Bill makes provision for the revision of a valuation list in respect of a particular property or properties between valuations of the relevant rating authority area. It also provides that the revision officer, who is deemed responsible for undertaking the revision, will issue a valuation certificate or written notification of his or her decision within six months of appointment. This Part provides again for the consultative stage to be part of the revision process, as in the case of the valuation of a rating authority area.
Part 7, which is a reasonably long Part, provides for an extensive appeals process to which I already referred earlier. The Part provides that the occupier of the property in question, an occupier of other relevant property in the same rating area, a rating authority or an interested third party can appeal in writing to the commissioner in respect of a property's valuation. This also applies in respect of determinations by revision officers. The appellant must specify the grounds on which he or she considers the rateable valuation as determined is incorrect and what the rateable valuation should be in his or her opinion. This Part also provides that an occupier must be informed if his or her property is the subject of an appeal by some other person.
The commissioner of valuation is required to make a decision within six months of receipt of an appeal. A further appeal against the commissioner's decision can be made in writing to the Valuation Tribunal. The tribunal is again required to issue its decision within six months of receipt of an appeal. There is a subsequent right of appeal to the High Court and Supreme Court on a point of law. This Part also provides that in relation to decisions by either the tribunal, High Court or Supreme Court in connection with a property, the valuation list will be amended as appropriate, and this will extend to similarly circumstanced properties if so required.
Part 8 requires the commissioner to produce an annual report to the Minister for Finance in connection with the exercise of his or her functions, and for the Minister to cause copies of the report to be laid before each House of the Oireachtas. It also requires public bodies to supply information to the commissioner if they believe such information would lead to an amendment of a valuation list in respect of a particular property. This will apply primarily in the case of rating authorities, and where State-occupied property, which is not subject to rates, is vacated.
Part 9 gives statutory authority to existing valuation lists as it will be some time before they are all replaced as a result of the valuation of every rating authority area. The revision and appeals process outlined in the previous Parts will also apply to existing valuation lists.
Part 10 provides for certain ancillary powers to be granted to the commissioner of valuation and his or her officers. These include that information as requested from an occupier of property must be supplied, if so requested, and must be updated by the occupier as appropriate. It also repeats the power to enter property for the purpose of carrying out the valuation function.
Part 11 provides for and defines the net annual value basis of valuation. It also provides that if, in determining the NAV of a property, a method of valuation relying on the notional cost of constructing or providing the property is used, then NAV shall be an amount equal to 5% of the aggregate of the replacement cost, depreciated where appropriate, of the property and the site value of the property. This Part also provides for the global valuation of public utility undertakings.
Part 12 provides for a cap to be placed by the Minister for the Environment and Local Government on the increase allowed in overall rates income of a rating authority area in the year in which the first valuation is used for rating purposes to the increase in CPI. Part 13 includes various miscellaneous and transitional provisions. It also removes the anomaly whereby mines and rights to drill for and extract petroleum become rateable only seven years after opening or commencing in the case of mines, and 20 years in the case of petroleum. It provides in certain circumstances for prosecutions and penalties. It also provides for a procedure whereby a valuation can be determined in respect of a property, even if it is listed in Schedule 4, that is, relevant property not rateable, if such a valuation is required for legal reasons relating to enjoyment or entitlement of that property.
There are five Schedules to the Bill. Schedule 1 sets out the enactments to be repealed as a result of the amendment and consolidation of the existing valuation code. Schedule 2 deals with the construction, membership, terms and conditions of office, staffing, powers and procedures of the Valuation Tribunal to be established under section 12. It broadly repeats the conditions applying to the current tribunal. Schedule 3 lists the categories of relevant property which will be valued and which, in most cases, will be subject to rates. Schedule 4 lists categories of relevant properties which are not to be rated. Schedule 5 lists the categories of plant to be valued as part of a property.
The Bill is the first comprehensive valuation legislation introduced since the 1850s. It is designed to modernise the operation of the valuation system, to remove deficiencies that have built up over the years to bring it more into line with the contemporary commercial environment and to make the system more transparent and equitable for the ratepayer. It will allow a valuation throughout the country to take place, the first since the middle of the 19th century. Such a valuation will enable a uniform and equitable valuation base to be established and anomalies to be removed. It will also allow a return to full net annual values. Provision is made for regular valuations every five to ten years to prevent the system from becoming outdated to such an extent in the future. It enhances the appeals process and provides the opportunity for ratepayers to be involved in the valuation process from an early stage.
I must again stress that the Bill is not designed to increase the rates income of local authorities and, therefore, provides for a cap in the overall rates income in the year in which the revaluation takes effect. I commend the Bill to the House.