Mr. Seamus McCarthy:

I thank the Chairman. The Valuation Office is responsible for the valuation of property to allow local authorities to levy commercial rates. The office also provides ad hocproperty valuation services to Departments and State agencies. The 2016 appropriation account for Vote 16 - Valuation Office recorded gross expenditure of €9.1 million. This comprised expenditure of €8.6 million on the provision of valuation services and approximately €500,000 on the Valuation Tribunal, which provides an appeal mechanism in cases where a property owner or a local authority is not satisfied with a valuation decision. Pay costs accounted for €6.5 million or a little over 70% of voted expenditure. In addition, €342,000 was paid in fees and expenses to Valuation Tribunal members. Other expenditure included €639,000 spent on national revaluation projects and a little in excess of €200,000 spent on legal fees and expenses. A little under €1.5 million was spent on non-pay administration costs.

Appropriations-in-aid amounted to a little more than €1.1 million. That consists mainly of €700,000 in valuation revision fee income and almost €300,000 on pension related deductions from staff salaries. Net voted expenditure in the year was 16% less than provided for in the Estimate, resulting in the surrender of the surplus of €1.5 million to the Exchequer at the year end.

Local authorities charge commercial rates by applying a locally determined rate to property valuations decided by the Valuation Office. Property valuations should reflect current market conditions for a defined area and, therefore, result in a fair distribution of the rates burden throughout that area. Periodic revaluations are required to ensure that the rates burden continues to be fairly distributed among the relevant businesses as market conditions evolve.

A cyclical programme of revaluations of all commercial properties was provided for in the Valuation Act 2001. However, progress in carrying out the revaluation programme has been slow. The first revaluation of properties under the 2001 Act commenced towards the end of 2005 in the South Dublin County Council area. When my report was being completed in September 2017, revaluations had been completed for only 15 local authority areas, accounting for 43% of all commercial and industrial properties in the State. The remaining 57% of commercial and industrial properties, in 16 local authority areas, were being charged rates based on valuations that reflected market conditions in 1988, almost 30 years previously.

The 2001 Act requires that, following the initial revaluation of property in a local authority area, further revaluations must be carried out at intervals of between five and ten years. Arising from this, a second revaluation of the South Dublin County Council area was completed in September 2017, before initial revaluations in many other areas. A second revaluation of Fingal County Council commenced in October 2017.

Up to 2015, the average time taken by the Valuation Office to complete the revaluation for a rating authority was almost 30 months. Following enabling legislation in 2015, new approaches to revaluation have been piloted to try to accelerate the programme. For example, the revaluations for Carlow and Kilkenny were carried out by private valuers on behalf of the Valuation Office and were completed in 12 months. A pilot project using an approach of self-assessment by rate payers is under way in Laois and is expected to be completed in ten months. The office has also shortened the time it takes to carry out revaluation projects using its own staff.

The core aim of the revaluation programme is to ensure that rates liabilities are distributed equitably based on current market conditions. A revaluation does not increase the amount to be collected by the relevant local authority. Instead, the required income is redistributed across ratepayers.

Overall, for the completed revaluations, the number of ratepayers who experienced reductions in rates payable has exceeded those who have experienced increases. Nevertheless, the changes in rates payable for an individual property can be substantial. In one case in Limerick, the annual rates bill increased from €16,000 to €490,000. For another property, the rates payable reduced by €558,000 to €2.4 million.

Apart from the direct cost of the revaluations that were contracted out, the costs of carrying out the revaluations are not known. The chapter recommends that the Valuation Office puts systems in place so that accurate costings of the various approaches are available.

As I mentioned previously, there is provision in the system for an appeal to the Valuation Tribunal of the valuation attributed to a property. There have been delays in the processing of appeals by the tribunal. The chapter recommends that the appeals process should be reviewed. A number of initiatives are under way to speed up appeals processing, about which the Accounting Officer will be able to update the Committee.