Batt O'Keeffe (Cork South Central, Fianna Fail)

I am pleased to have the opportunity to open the debate in this House on the Local Government (Business Improvement Districts) Bill 2006. The primary purpose of the Bill is to provide the legislative framework for the operation in Ireland of business improvement district schemes, or BIDS as they are more commonly known. The Bill also proposes to make two technical amendments to the rating and valuation systems which will terminate an anomaly between these two codes and introduce more equity into the rating system.

Some Senators will be aware of business improvement district schemes in operation in other countries such as the USA and Canada. A BID scheme can be described as an organisational and financing mechanism with legal backing through which businesses can develop and implement initiatives in defined areas to improve those areas for the betterment of the trading environment. Essentially, in a BID scheme, a group of businesses come together and decide that they want improved services, a wider range of services, or new facilities or activities in the area in which they operate and that they are willing to pay for it. A specially established BID company is charged with responsibility for implementing the provisions of the BID scheme and the local authority levies and collects the annual BID contributions from businesses on behalf of the scheme.

A wide range of activities can be carried out in a business improvement district scheme, ranging from cleaning, hospitality, promotions and special events to physical improvements, such as the provision of street furniture, signage and special lighting. The extent and type of possible activities is limited only by business needs and the imagination and determination of the business community.

A fundamental feature of the legislation is that the geographical boundary of a business improvement district and the range of services and improvements carried out in the district are determined and developed by the business community. Thus, the private sector — the business community — rather than central or local government is the driving force behind these schemes. It is, therefore, a self-help, bottom-up and collaborative approach by business. The BIDS concept turns the traditional relationship between businesses and local authorities on its head. Traditionally, businesses encouraged local authorities to reduce charges and rates but, with BIDS, businesses encourage local authorities to levy and collect more money.

The initiative for this Bill came from the private sector. Work on the Bill followed a request from the Dublin City Business Association, DCBA. Originating in Toronto, Canada in 1971, business improvement district schemes are now in operation in many cities and towns throughout the world. It is estimated that more than 400 BID type schemes are currently in operation in Canada and the United States of America. European countries are also becoming increasingly involved in these schemes, including Austria, Belgium, Denmark, France, Germany, Holland and Portugal. More recently, a legislative framework has been put in place in the United Kingdom for the operation of these schemes. I do not want to overstate the potential dividends of BIDS but it strikes me that most of the countries I referred to are doing very well in the World Cup. Research on the operation of business improvement districts in the USA has indicated that they provide a vehicle for innovative and proactive management of an area and yield significant positive impacts on the economic vitality and viability of cities and towns.

In developing the provisions of the Bill, extensive consultation was carried out with interested bodies, including local authorities, the DCBA and Chambers Ireland which, in general, welcome the introduction of BIDS legislation. Great enthusiasm has been expressed for this Bill in the business community and a number of well attended information seminars and conferences on BIDS have been organised in anticipation of the legislation. DCBA and Dublin City Council have already committed resources to prepare for the introduction of BIDS.

No two BIDS will be exactly the same. The improvements made will depend ultimately on the needs of a particular area. The planting of trees, shrubs and other landscaping may be a priority for one business improvement district so as to improve the visual attractiveness of the area, whereas another BID may decide on the erection of suitable street lighting and the installation of CCTV for security reasons. In some cases, the promotion of the area through marketing literature, posters or special street events may be the spark needed to boost commercial activity.

Litter is an issue close to my heart. As Senators will be aware, litter is a constant challenge to our environment, and the urban environment in particular. We are making progress in that respect. The recipe for success in tackling litter is to foster a public attitude that looks upon littering as unacceptable behaviour. The eradication of litter pollution will only be achieved through a partnership approach in which all sectors, including businesses, community groups, residents associations, schools and individuals, play their part. Recent examples of this partnership approach in action include the recent agreement with the chewing gum industry and the ongoing negotiations with banks and the fast food industry. BIDS have the potential to be an important added initiative in tackling the litter problem. Supplemental cleaning services can be carried out in a BID area, including additional street sweeping and cleaning, bin emptying, the removal of chewing gum from footpaths and the removal of graffiti from buildings. This has been a prominent and popular feature of schemes operating in other countries.

I would like to set out for the House the main elements involved in business improvement district schemes and the principal issues in developing, running and financing a scheme. Given its link with local government, the Bill provides that the legislative framework for BIDS will be incorporated into the Local Government Act 2001. Section 4 of the Bill inserts a new Part 13A into that Act, consisting of new sections 129A to 129T. For ease of reference in discussing the Bill, I will refer to the new sections in the Local Government Act 2001 because they are set out clearly in the Bill as initiated and in the explanatory memorandum.

The first step in initiating a business district scheme is a recognition by the business community that a BID scheme is appropriate to a particular location and an agreement on the types of services, works or other projects desired. Section 129C provides that people wishing to start a business improvement district may submit a proposal to the local authority for approval. The section sets out the elements that must be included in a BID proposal, such as details of the initiatives to be carried out, the boundary of the proposed BID, estimates of the BID contributions to be paid by business and the timeframe for the scheme. In practice, the development of this plan will require the BID proponents and the local authority to work together in a partnership approach.

All investment made through BIDS will be additional and complementary to existing services in the area and will ensure enhanced impacts on the social and economic vitality in the chosen area. It is critical to underline that the services in a BID add to, and do not substitute for, those already provided by the local authority. The level of services provided by the local authority is benchmarked as part of the process under section 129B.

A key to the ultimate success of business improvement districts will be the extent to which there is meaningful engagement with the public and business in an area. The Bill sets out a framework for such comprehensive consultation. In the first instance, a BID proposal submitted to a local authority must be made available to the public under section 129D and the rating authority must, by way of public notice, invite submissions from the public on the proposal.

Section 129F provides that if the rating authority is of the opinion, based on the submissions received, that the BID proposal is inconsistent with the interests of the local community, it shall notify the BID proponents of the nature of the inconsistency and require them to consider the issue further. A local authority cannot approve a BID scheme if it believes it conflicts with the interests of the community.

A BID scheme involves payment of a contribution by business to finance the works planned. It is vital, therefore, that all businesses in a proposed business improvement district have a formal say on whether a BID is to proceed. To that end, section 129G makes it mandatory that, before a scheme can proceed, a formal plebiscite will be held by ratepayers in the area, that is, among those who would ultimately be responsible for financing the scheme. The plebiscite is organised by the local authority. In the BID plebiscite, each business will have a vote of equal value irrespective of the size of the business. The corner shop's vote is as valuable as that of the major department store. This is important because a BID must have widespread and popular approval before it can proceed and cannot be organised and rammed through by a small number of big businesses. Once there is a majority vote in the plebiscite, the BID scheme can be proposed for approval to the local authority.

The Bill provides for a comprehensive and necessary consultation process with appropriate approvals and checks and balances. It is important that BID proposals do not suffer paralysis by analysis. The Bill strikes the correct balance between prior consultation and progression.

Having developed the proposals and secured a majority in a plebiscite to proceed, the business community does not hand over the running of the scheme to the local authority. As this is an independently organised and funded initiative, the private sector controls and manages implementation through a specially established company. Under section 129 the company must be limited by guarantee and formed and registered under the Companies Act. The board of directors of the company will be made up of businesses and their representative associations and some nominees of the local authority. At least two thirds of the directors must be ratepayers or their representatives. This company partnership will steer through the implementation of the BID plan over its possible five-year term.

A key element of the Bill, which will be of particular interest to businesses, is how the annual BID contribution levy is to be calculated. The process begins with the BID company adopting a budget for the forthcoming year which will identify the income necessary to carry out the elements planned in the scheme. On the basis of this budget, the company will determine the amount of money needed to be raised by imposing BID levies on businesses in the area. When the company determines how much it will need, the local authority collects the required contribution from businesses. The amount of the levy on an individual business is determined by the rateable valuation of that business.

In designing the BID legislative framework, an important consideration was that it would not require complicated new systems or structures. We were largely assisted in this regard by the existence of the tried and trusted independent valuation system and under section 129N, BID contributions will be determined on an individual basis having regard to this system.

Liability for the BID levy will fall on the occupiers of commercial property in the area or the owners of commercial property where the property is vacant. We did not have to reinvent the wheel and introduce complex systems of determining liability because we are fortunate to have a rating system that operates on this basis.

Following the rating law framework, contributions by businesses will be proportionate to the relative valuations of their properties. Businesses with low valuations will pay less than those with high valuations. Rateable valuation of property is determined by the independent Valuation Office. There is a right of appeal to the Commissioner of Valuation, the Valuation Tribunal and to the courts. The Valuation Office is in the process of revaluing all property in the country to ensure that the system is as equitable as possible. A national revaluation has not been undertaken since the middle of the 19th century and many changes have taken place since then. The revaluation will allow a uniform and equitable valuation base to be established and for the removal of any anomalies that may have developed.

The Bill provides relief of 50% of the amount payable in cases where a property is unoccupied for the execution of alterations or repairs, if the owner of the property is unable to obtain a suitable tenant or if the premises is vacant pending a redevelopment. Refunds of BID contributions are also available where properties are demolished or destroyed.

As well as providing the legal framework for the introduction of business districts, the Bill also contains two provisions that will deal with anomalous situations arising in rating and valuation law. Section 6 of the Bill provides for an amendment to the Valuation Act 2001. At the time of the drafting of the Valuation Act 2001 steps were taken to ensure that the revaluation process could not lead to disproportionate gains in rates income by local authorities in the year following a revaluation. Section 56 of that Act included a provision to limit the amount of income a local authority could raise through rates in the year following a revaluation to the amount of rates levied in the previous year, adjusted by the consumer price index for inflation.

However, that section, as enacted, would have cut off rates buoyancy to local authorities that would not be in a position to gain rates income from new properties coming on stream in the year following a revaluation. This could cost local authorities approximately €30 million annually. Section 6 of the Bill deals with this and provides for the amendment of section 56 of the Valuation Act 2001 to provide that the rates payable in the year following a revaluation will include the buoyancy that would otherwise be excluded by virtue of section 56 as enacted. Other than this buoyancy element, the safeguard of the consumer price index cap will remain in place in respect of all existing ratepayers and ensure there are no disproportionate gains in rates income for local authorities. This proposal will ensure that all commercial ratepayers will pay their fair share. Chambers Ireland has indicated its support for this proposal.

Section 5 of the Bill will deal with an anomaly between existing valuation law and local government rating law. Section 5 provides that newly-erected properties will be liable to pay a contribution to local authorities from the date the properties are entered on the valuation list. The anomaly is technical in nature but I will briefly set out the detail for the House. Section 28(14) of the Valuation Act 2001 provides an enabling power to allow rates to be charged on properties with effect from the date of their valuation. However, the provision cannot come into effect because of a conflict with existing rating legislation. Section 29(1) of the Local Government Act 1946, as inserted by section 45 of the Local Government Act 1994, provides that local authorities are only entitled to charge rates for the following year on those properties that are entered on the valuation list at the time of the adoption of a local authority budget.

At present, when a valuation of a property is placed on a valuation list by the commissioner of valuation after the date on which a local authority has adopted its budget, a local authority cannot derive any rates income from that property until after the commencement of the subsequent year. The property gets a potential rates holiday of up to one year. This rates holiday is inequitable as the shortfall in funding that arises may have to be made up by existing ratepayers or it could have the effect of increasing other charges for services to the public.

Section 5 will remove the anomaly for newly-constructed properties and thereby help both to generate much-needed funding for local authorities and to introduce equity into the rating system so that all ratepayers pay their fair share without some enjoying a shelter at the expense of others.

This is an important Bill. As well as dealing with the critical valuation and rating issues I have just discussed, it provides the legislative framework to enable business improvement district schemes to operate in Ireland. While I cannot say that Ireland will do well in the next World Cup if we introduce BIDS, as seems to be the case with other countries that have them, I have no doubt that they will have a major, positive impact on our towns. The provisions in the Bill will facilitate further investment in our urban areas and will be of benefit to the business community and those who live and work in these areas. BIDS have been tested internationally for the past 25 years and are now accepted as beneficial elements in urban regeneration and revitalisation.

I look forward to hearing the views of Senators on the Bill and I am sure we will engage in constructive debate over the course of its journey through the House.