Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I would not be happy not to have an opportunity to respond because there is quite a lot in that. Deputy Fleming and I possibly disagree on the national versus local approach. I have a different perspective, as does the Local Government Reform Act 2014, in terms of giving more powers for revenue raising to locally elected members of the Deputy's party, my party, every other party and Independents to have a say in how they want to run their community. We have now empowered local authority members to make decisions on the local property tax, regardless of one's view on it. The multiplier level is also decided by councillors in every local authority. I believe that when we elect people to local government, we give them the tools to run their county and local government structures. That is by the by, but I think it is quite important.

I have sympathy for Deputy Sean Fleming's point of view. He has made the point that businesses have gone through a difficult number of years and that while many bills have reduced, the one bill that is largely fixed is the rates bill. I am not unsympathetic to that view, nor is Government. It is question of how to rectify it.

The purpose of a valuation Bill is purely to attach a value. The most helpful thing the Government can do is in the quickest manner possible to give the Valuation Office every tool possible in its kit to carry out revaluation, something that has never been done in the history of the State, in order to revalue every property, bearing in mind the economic conditions at a more relevant and realistic point in time than that at which it might have been valued previously.

If we adjust a business's valuation mid-valuation cycle on the basis of economic activity, we would pit the chemist against the butcher and the newsagent. If the pharmacy is doing well then that business will pay more rates. It creates huge instability and fluctuation. It would end up choking the Valuation Office rather than getting on with the job of work we need to do.

Should there be a broader discussion on how to fund local government? Between now and the next general election it would be very welcome to have a very honest debate about everybody's proposals on how to fund local government. I do not direct this comment at Deputy Fleming, who has been very constructive and sincere on this, but some people in this House do not believe in the property tax and want to get rid of rates. However, services have to be paid for and we need to have that honest debate.

There could be an unintended consequence of basing it purely on economic activity at a time when we are trying to encourage SMEs to grow. Last year two thirds of new jobs were created by SMEs. If a business does well economically and decides to expand and hire more people, it could then find it is slapped with an extra rates bill mid-valuation cycle. That could be a disincentive.

I am glad the Deputy raised the issue of wind energy. I have received a considerable amount of correspondence and my officials met representatives of the IWEA last week. Since taking the Bill through the Seanad and up to now, I have been very strong in holding the line that this cannot be a Bill that decides policy in a range of other departmental areas. I approach the Bill from the basis that a business that generates a profit or is established for the purpose of generating profit should pay rates. In the small tweaking I have done, exemptions in the Bill have been targeted at not-for-profit organisations.

I know the Deputy has a subsequent amendment on this matter. For example, a child care entity that is set up for profit will pay rates whereas one that is not set up for profit is different. A sports club running a bar that is in competition with a bar across the road will pay a rate. It is rated on that; it has a rateable value. However, the other parts of the club are not rateable. That is the approach I have taken by differentiating between organisations set up for profit and not set up for profit.

Wind energy is not being treated differently from any other business here. The Bill does not endeavour to undermine in any way shape or form the wind energy sector. If a wind energy company is doing worse than it was previously, it could benefit from revaluation. If it is going up, it is based on the economic reality of that scenario.

I have quite an extensive note and it would be useful to read it into the record. Wind farms have been revalued as part of the revaluation of all commercial property in Limerick. This revaluation has led to large increases in the valuation of wind farms and, subject to appeal, many of their rates will rise. A revaluation distributes the rate burden based on contemporary property values. A revaluation can cause significant shifts in rates liability between different sectors, particularly where a considerable period has elapsed since the last similar exercise.

From experience of revaluations to date, up to 65% of ratepayers in general can see a reduction in their rates. Given that the total revenue from rates is capped after a revaluation, the reductions enjoyed by the 65% will result in an increase for the other 35%. Those that experience an increase are in sectors or locations that are performing well relative to others. That is an obvious logic of the system we have. While a rates increase is clearly not welcome, it is often an indicator of the health of a sector or the health of a location. The increases experienced by wind farms as a category of rateable property are on the higher end of the scale across the board. In recent revaluations, some individual properties in certain categories, such as nursing homes, multi-storey car parks and service stations, have also experienced some rate increases.

Limerick is the first revalued rating authority with a significant number of wind farms. The ten Limerick wind farms recently revalued under Part 5 of the Valuation Act 2001 are very modern, have large generating capacity and date from approximately 2008 onwards. They comprise some of the latest technology in a rapidly developing area. During the revaluation, detailed financial information was provided on a number of these properties, allowing valuations to be assessed on current, up-to-date financial and economic evidence. This information was analysed and a new valuation scheme was derived from it, leading to the net annual values placed on the individual properties.

This contrasts with the position heretofore. The first wind farm valued by the Valuation Office was developed in the early 1990s in County Mayo. The valuation assessed on that first wind farm in County Mayo was subsequently relied upon as a basis for valuing all other wind farms, including the Limerick wind farms before the revaluation process that came on stream, all of which were valued under the revision provisions set out in Part 6 of the Valuation Act 2001. This reflected the state of wind energy technology in the early 1990s and the financial and economic conditions in this country that prevailed in the late 1980s.

The valuations now assessed in Limerick are taking a view of the current state of the wind energy industry and the economic conditions that prevailed in late 2012. This is what is required by Part 5 of the Act in carrying out a revaluation. The approach adopted by the Valuation Office to the valuation of wind farms in Limerick and the conclusions drawn from the economic and other evidence provided to the office is now subject to an appeal to the Commissioner of Valuation and is very likely to be tested through that process, including, one would imagine, before the independent Valuation Tribunal.

The Commissioner of Valuation is independent in the exercise of his function and the Valuation Act does not accord the Minister any function in the valuation of a property or in an appeal. The legislation provides for a number of avenues of appeal. There is an appeal to the Commissioner of Valuation, a subsequent appeal to the Valuation Tribunal and an appeal to the High Court on a point of law. It is important to allow for the independent process of valuation and appeal to take its course without any knee-jerk reactions before it concludes.

The Deputy is correct that wind energy representatives are calling for some form of exemption for wind energy facilities. As a rule, rates exemptions are only given by exception and almost exclusively to those who operate on a not-for-profit basis, as I outlined. A rates exemption is a crude policy instrument as it is difficult to predict the type of subsidy that it gives and it will change over time for many reasons, including the value of other property and the annual rate and valuation set by individual local authorities, and therefore may not be uniform throughout the country. It could undershoot or overshoot the level of support intended for the sector.

It also raises expectations in other sectors, or other sectors feel aggrieved as they cannot benefit from similar favourable treatment. This is an important point.

The issue of wind energy is a matter for the Department of Communications, Energy and Natural Resources. I will relay the sentiments, as requested by Deputy Barry, to the Minister for Communications, Energy and Natural Resources. However, that is my thinking on the matter. My officials are due to meet some other representative groups between now and Report Stage. I am open to hearing views and amendments. However, I think it will be accepted that the absence of amendments today demonstrates the difficulty in framing them and the potential unintended consequences of supporting one sector over another, or, as the Deputy and I both recognise, passing on an additional rates burden to one sector to compensate another. It is quite a tricky area, and that is where the position lies.