Wednesday, 11 December 2019

Ceisteanna (37)

Eoin Ó Broin


37. Deputy Eoin Ó Broin asked the Minister for Housing, Planning and Local Government the engagement he has had with the eight local authorities that have seen a combined loss of revenue of €20.9 million arising from the revaluation of commercial rates to Irish Water; and if additional funding will be provided from within his Department to mitigate the loss of the revenue to the councils. [52148/19]

Amharc ar fhreagra

Freagraí ó Béal (8 píosaí cainte) (Ceist ar Housing)

As the Minister is aware, the recalculation of the Irish Water rates compensation for local authorities has resulted in eight local authorities losing a significant amount of revenue for this year. Among others, Dublin City Council has lost almost €9 million, my own local authority area of South Dublin County Council has lost more than €4 million and Waterford City and County Council has lost €3.5 million. Could the Minister outline the rationale behind the revaluation and reassessment of the compensation but also tell us what contact he has had with the local authorities in question to try to address this issue so that the cuts do not result in a loss of services?

I thank Deputy Ó Broin for his very pertinent question. In the past four years, since 2015, the revenue of local authorities has increased by 25%, from €4 billion to €5 billion. I suspect it is a much bigger figure than is widely known. This mainly comprises income from goods and services, commercial rates, Government grants and local property tax.

Between 2015 and 2019, Irish Water was not liable for commercial rates and approximately €47 million per annum was paid to local authorities to compensate them for the water services-related rates income they would have previously received. The local government sector itself, through the CCMA, then sought to have Irish Water globally valued and that process finished recently. Having regard to a recommendation from that sector that the exemption be removed, commercial rates will be imposed instead of the compensation that existed since 2015. Irish Water will pay commercial rates directly to individual local authorities, following the global valuation process undertaken by the Commissioner of Valuation, in a similar arrangement as applies to other utilities. The majority of local authorities will see an increase in their rates income arising from this process.

Of course, this is just one of a number of variables that feed into local authority budgets. For example, there have also been revaluations of other utilities and all of the local authorities likely to lose rates income from the Irish Water valuation would be likely to see their rates income increase from the ESB revaluation. In addition, funding is made available from the Local Government Fund, LGF, and Exchequer funding of €156 million, which is being made available through the LGF on a like-for-like basis, will see local authorities receive €23 million more in Exchequer funding in 2020 when compared to 2019.

The Department has kept the anticipated financial impact of the changed approach to the rating of Irish Water under review. Senior officials have liaised directly with sectoral representatives, including in the most impacted authorities, some of which the Deputy has referred to. Taking account of other expected changes in incomes and the financial positions, Waterford City and County Council and Wicklow County Council were identified as facing significant challenges and did not have other sources of income to offset the loss. For that reason the Minister, Deputy Eoghan Murphy and I agreed to a once-off compensatory payment in both of those cases.

I thank the Minister of State for his response and the clarification. I accept that the valuation process is fully independent and the consequences for the local authorities arise from that. What contacts have there been between the Minister of State and all of the eight local authorities that are going to experience a significant loss of revenue arising from the revaluation?

Could the Minister of State provide more information in terms of the once-off compensatory payment for the two local authorities? To put this in context, if one looks at Dublin City Council, for example, it has lost almost half of what would have been the compensation fund of €14 million previously only to get €5 million now. South Dublin County Council is losing two thirds of what it had received. It is losing €4 million and it will only get €2 million of what was previously €6 million. The neighbouring local authority of the Minister of State, Waterford City and County Council, is losing €3.5 million, which is a significant loss of revenue for a relatively small local authority with a low rates base and income source. Could the Minister of State provide more detail in terms of his contacts with all eight local authorities and more information about the once-off compensatory payments to the two local authorities he mentioned?

Most of the contact was with Waterford City and County Council. In fact, there was even a delegation from the councils last week on which Deputy Ó Broin's party and mine were represented. The other councils did have contact with the Department. In light of recent decisions by Dublin City Council to back a white-water rafting initiative on the quays, it was felt that the authority and some of the other Dublin local authorities had the financial wherewithal to be able to cope with the changes. The reality of the global revaluation of Irish Water is that there is a strong argument to be made that the compensatory system was over compensating the four Dublin local authorities, Waterford City and County Council, Wicklow County Council and Kildare County Council prior to the new valuations base.

I re-emphasise, however, that this was sought by the sector, and the payments for Waterford City and County Council and Wicklow County Council reflect the available funds, which are more than one third of what is discretionary in the local government section, going to both councils next year. That will be reviewed again by whoever is in my position in 12 months' time, who I hope will be me.

As I am sure the Minister of State will be aware, the vast majority of the funding for the white-water rafting facility in Dublin City Council will come from central government-----

-----and his party colleagues, as well as my party colleagues, supported the scheme. I do not know much about the background to the matter, however, and will leave it where it is.

One of the difficulties with the revaluation process, although it is unique because of the nature of Irish Water, is that if there is too long a gap between revaluations, there can be significant anomalies. What assurance can the Minister of State give that future revaluations will take place in a shortened timeframe in order that there will be less disruptive effects?

I am not clear on what the Minister of State stated in respect of compensatory payments for Waterford City and County Council and Wicklow County Council. Will they get an additional compensatory payment above what is detailed in the information I have or have I misunderstood that point?

The compensation for Waterford City and County Council will be €2 million, while for Wicklow County Council it will be €300,000. It reflects the shortfalls in both cases and their lack of alternative sources of revenue. It is open to whosoever in the future to consider compensation. Waterford City and County Council is in quite straitened financial circumstances. It has a budget of approximately €130 million and is the only local authority that has not yet approved this year's budget. Its debts are €117 million and, therefore, it has a 90:10 debt-to-revenue ratio. I gave a commitment last week that officials from the local government sector, representatives of the National Treasury Management Agency and the European Investment Bank, as well as other relevant stakeholders and I will visit the local authority in Waterford in early January to determine how to manage the debt in the future.

One of the problems identified for local authorities is the delay in appeals against commercial rates. We will invest additional staff and physical space in the appeals process, although that, too, is separate from the Department. There is a lag that needs to be addressed in order that local authorities will not have a shortfall resulting from it, and that is being addressed as we speak.