Ms Geraldine Tallon:

As requested by the committee, I provided a briefing paper in advance of this meeting. Therefore, I will keep my opening comments short. Chapter 6 of the Comptroller and Auditor General's annual report for 2011 addresses financial commitments under public private partnerships. As far as the Department of the Environment, Community and Local Government is concerned, PPP procurement is used in the water services sector where it is clearly established that the approach provides the best value for money overall. Water services authorities are required to examine all procurement options in an even-handed manner and to undertake a public sector benchmark assessment before a decision is taken to progress to PPP procurement. The initial assessment is based on securing the best value for money from a whole-life perspective, including the operation and maintenance costs in the post-construction phase. If it is concluded that a water services scheme should be advanced as a PPP, the design, build, operate and maintain model, which is known as the DBOM model, is the preferred procurement route for new and upgraded water services treatment facilities on the basis of positive local and international experience and the high cost of traditional procurement in this area.

Chapter 6 of the Comptroller and Auditor General's annual report refers to the value for money review of the water services investment programme, which was carried out in 2010. The value for money report supports the view that, based on experience to date, the DBOM model offers a number of advantages for projects involving the provision of water services infrastructure. For example, it incentivises private sector contractors to optimise the whole-life cost of the project and to provide reliable treatment processes and technologies and associated mechanical and electrical equipment through single-point responsibility for design, construction, operation and maintenance. It also leads to a better allocation of risk, resulting in greater certainty of final capital cost. It encourages contractors to use newer technologies with associated technical and economic advantages. It involves contractually guaranteed performance and maintenance standards over the 20-year operational phase. Overall, the DBOM model ensures that the risks inevitably associated with large-scale infrastructure procurement are appropriately borne by the relevant stakeholders and the exposure of the Exchequer and the taxpayer to increased costs is minimised. The data available to the Department continue to reinforce the position that for larger contracts, the DBOM model provides a significant reduction in capital and whole-life costs. Chapter 6 gives details on 20 water services projects costing €20 million or more which the Department is funding using the PPP approach. They include two new projects - the Letterkenny wastewater treatment plant and the River Barrow water treatment plant - which reached contract stage in 2011. The briefing paper we provided for this meeting gives an updated schedule of expenditure and commitments in relation to these 20 PPP projects.

Chapter 16 of the Comptroller and Auditor General's report, which concerns central government funding of local authorities, details the range of expenditure programmes for which local authorities are responsible. It also draws attention to the reliance of local authorities on the Exchequer for funding through the Votes of a number of Departments, as well as other central sources. Such funding amounted to €3.5 billion in 2011, compared with €4.4 billion in 2010. The chapter also addresses performance measures in relation to urban wastewater treatment. This material is based on reports published by the Environmental Protection Agency earlier this year, which set out the results of local authority compliance with the urban wastewater treatment directive and information on the licensing and authorisation regime introduced by the Waste Water (Discharge Authorisation) Regulations 2007-10. The reports illustrate a number of areas where new infrastructure is required to ensure compliance with statutory limits. This infrastructure is being provided through the Department's water services investment programme. Irish Water will, over time, take over responsibility for investment in wastewater infrastructure and its operation.

The report also provides an update on housing issues. As the committee is aware, the land aggregation scheme concerns land acquired for social and affordable housing purposes that can no longer be utilised in the manner originally envisaged in light of current economic circumstances and the evolution of more flexible housing supply models. The Department, the Housing Finance Agency and the Housing and Sustainable Communities Agency are taking a structured approach to the unwinding of the overall liability - some €500 million at the end of 2011 - over a reasonable period of time. We made some changes to the operation of the scheme recently. Up to this year, funding to redeem relevant loans was made available from the Department and HSC Limited was then responsible for the management and maintenance of lands transferred under the scheme. Following a review of the scheme in 2012, the manner of loan redemption has been altered. Instead of using capital moneys to pay off the loans of some authorities, all of the eligible matured loans will now be converted into mortgages of up to 25 years, with interest and capital payments being made by the housing authority to the Housing Finance Agency and the amount recouped by the Department. The revised terms of the scheme were notified to local authorities in June 2012.

Applications totalling €287 million from 28 housing authorities and the National Building Agency have been received by the Department under the scheme. By the end of October 2012, 63 sites had been approved for inclusion in the scheme, representing some 206 ha. and just under €132.5 million in Housing Finance Agency loans. Further details are in the briefing paper circulated to the committee. I have also in recent days provided material requested by the committee on the Dublin waste to energy facility at Poolbeg and allowances in the local government sector.

The chapters before us from the Comptroller and Auditor General's 2011 report provide useful summaries of aspects of the water services and housing areas within the remit of my Department and local authorities and in respect of central Government funding of local authorities.