Seán Fleming (Laois-Offaly, Fianna Fail)
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I welcome the opportunity to raise the question of the financial bonds issued by the Irish Bank Resolution Corporation, IBRC, in respect of various building developments, particularly housing estates, throughout the country. Some of the estates in question are unfinished. A difficulty has arisen, in that, as a result of the emergency legislation passed by the Oireachtas earlier this year, IBRC has been put into special liquidation. We are only now learning of the legislation's impact on housing estates that have been left unfinished by developers who have gone to the wall.

Developers take out financial bonds to ensure that housing estates can be finished if they go out of business before the job is completed. Many insurance companies issue these bonds. All of the major companies have been involved. Some might have provided loans to developers or underwritten bonds. The difficulty lies in the fact that the bonds issued by the liquidated IBRC are not being paid. Instead, they have been placed at the bottom of the list.

Some local authorities face the impossible choice of leaving estates unfinished or taking money from other services to pay for finishing roads, footpaths, drainage, sewerage and street lighting in certain estates. The Minister was aware of this choice when introducing the legislation. I am aware of four housing estates in County Laois that have not been finished. In the normal course of events, the financial bond is called in when a builder is gone. I will cite a practical comparison from a few years ago when Quinn Insurance went into liquidation, that of large estates in County Laois, called Barrowvale and the Vale, in Graiguecullen near the Carlow boundary. Several hundred thousand euro was paid by the administrator on foot of that bond. Now that IBRC is in liquidation, however, it is telling local authorities to get lost and to join the bottom of the list of unsecured creditors.

The bonds issued by IBRC in respect of four estates in County Laois - Foxborough in Portlaoise, Graigavern in Ballybrittas, the Village in Ballylynan, which I am sure the Acting Chairman is aware of, and Radharc na Sleibhte in Mountrath - range from €87,000 to €354,000 in value. The works needed to complete those estates might not require the full bonds or might require more, but access to those bonds is necessary.

This situation is arising all over Ireland, as the Minister and the Department of the Environment, Community and Local Government know. More importantly, the Minister was aware of it when he drafted the legislation at this time last year. KPMG had been on site since last November. While the legislation sat in the Minister's top drawer last December waiting to be produced early this year, the Government introduced a local property tax. The Minister knew that the tax would be applied to certain housing estates in respect of which bonds would not be honoured as a result of an action he was about to take by liquidating IBRC in a few short months' time. However, he did not make it known at the time, causing further difficulty.

Will the Minister arrange for his Department and the Department of the Environment, Community and Local Government to supply a list of all of the estates affected by this issue on a county-by-county basis and the amount of bonds in issue so that we might have a reasonable understanding of the scale of the problem? Both Departments were aware of it, but it is only now coming to light at local level.

Michael Noonan (Limerick City, Fine Gael)
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On 7 February 2013, the Oireachtas passed the Irish Bank Resolution Corporation Act 2013, appointing joint special liquidators to the IBRC with immediate effect to wind up its business and operations. Under the IBRC Act the special liquidators are obliged to independently value all the assets of the IBRC and to engage in a sales process which will maximise the return for its creditors including the State. The matter of development bonds issued by the bank is one of a number of important issues that they must consider in exercising their statutory duties under the Act. Development bonds have traditionally been required as a condition of planning permission by local authorities. The developer must provide a bond, set out as a planning condition, which is then called upon in the event that the developer does not complete his or her development in accordance with the plans and particulars, the conditions of planning and relevant codes and regulations.

I understand that the IBRC had in the past issued such bonds to local authorities in regard to loans outstanding to the institution and I am advised that there are a number of development bonds in favour of the various county councils or local authorities which are in place with the IBRC in special liquidation. It should be noted that it is likely that any liabilities which may arise in regard to any bonds, guarantees or indemnities under these arrangements will most likely rank as unsecured claims in the special liquidation. However, it must be stressed that these bonds are contingent liabilities and therefore will only be called upon where developers breach planning conditions and are not in a position to meet any liability that arises as a result.

I am aware of the problems facing local authorities, and in particular with regard to unfinished housing estates, as a result of developers not complying with the terms of their planning permissions. Both the special liquidators and officials from my Department have, as a matter of concern, recently met with the Department of the Environment, Community and Local Government, local authorities and the Housing Agency concerning this issue.

While it is likely that there will be some level of exposure for local authorities as a result of this issue, the Department has confirmed that they are not yet in a position to confirm what the full extent of the exposure may be. It was agreed that work currently being conducted to confirm the actual level of exposure should be continued. It was also agreed that each local authority should consider if, following a cost-benefit analysis, a claim should be submitted to the special liquidators in order to rank as an unsecured creditor for the purposes of the liquidation. It is understood that the Department of the Environment, Community and Local Government will consider an appropriate response for local authorities who are faced with the problem of unfinished housing estates once the full extent of that exposure is known.

Throughout the liquidation process it has been acknowledged that there are, unfortunately, unavoidable costs which are associated with the agreement in regard to the promissory notes and the subsequent liquidation of the IBRC. The Deputy has identified just one category of possible creditor that may become unsecured creditors through the liquidation process.

There are amounts owed by the IBRC to a range of creditors, including contractors, trade creditors and other service providers, many of which are unsecured. The proceeds from the disposal of the IBRC's assets will be used to repay creditors in accordance with normal Companies Acts priorities and, consequently, preferred creditors will be paid first and then the debt which NAMA will have purchased from the Central Bank will be paid. If there are proceeds available after repayment in full of the NAMA debt, these proceeds will be applied to remaining unsecured creditors.

The Government is aware of the difficulties the liquidation may cause for unsecured creditors, including local authorities. However, it is important to remember the overall benefits to the State from eliminating the cost of the annual promissory note. We have reduced the State's cash borrowing requirement by €20 billion over the next ten years; we have brought the State €1 billion closer to meeting our deficit targets; and Anglo Irish Bank and Irish Nationwide have been consigned to history.

I would advise any local authority to contact the business management team, the IBRC, Grand Parade, Dublin 6, directly in respect of any claims as they are established. It must be stressed that these bonds are contingent liabilities and therefore will only be called upon where developers breach planning conditions and are not in a position to meet any liability should it arise.

Seán Fleming (Laois-Offaly, Fianna Fail)
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The bad news the Minister has just given will be of no comfort to people in housing estates throughout the country. The Minister should ask the liquidator to publish a list, or make it available to us, of all the estates that are potentially affected by this matter.

These planning permission conditions were granted by the local authority, which is an arm of the State. One of the conditions was that a bond should be in place. By its actions, however, the central Government has decided not to honour planning permission conditions. By removing the bond, the Government is saying that they can go to the bottom of the unsecured creditors' list when everything is transferred to NAMA.

Before the IRBC loan book is transferred to NAMA, the Minister should make provision for these bonds to be honoured. He showed a way of dealing with it himself when he said that approximately €1 billion had been saved as a result of re-financing of the promissory note. Part of that sum should be used for these purposes. I do not particularly mind whether it comes from the special liquidator, NAMA or the Department of Finance. It is not fair that people in housing estates who are paying the local property tax should be singled out to carry an additional burden by not having footpaths or public lighting installed in such estates. It is wrong for an arm of the State to undermine local authorities by taking action which will prevent councils from carrying out work in estates, which is a normal condition for a local authority.

The Minister spent months drafting this legislation and he knew it was a logical follow-on but that was not made clear to people at the time. It is only emerging now. The choice for local authorities will be simple - the work will not be done unless somebody pays for it. I am asking the Minister to come up with the balance required to complete these estates.

Michael Noonan (Limerick City, Fine Gael)
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I thank the Deputy for bringing this matter to my attention. The liquidation will proceed in accordance with the legislation which was passed by the Houses of the Oireachtas. The order of creditor preference will be in accordance with what is normal under company law. Unsecured creditors will be considered for any residual resources that are available after the preferred creditors and the NAMA situation has been paid.

As I said in my reply, meetings have been taking place between officials in my Department, officials in the Department of the Environment, Community and Local Government, and the liquidator. The Department of the Environment, Community and Local Government is now setting out to establish what is the full liability which will be suffered by local authorities around the country. When it has established what the full liability of all local authorities might be, it will then have the authority to come up with a programme to deal with this.