Eugene Regan (Fine Gael)
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This issue is raised in the context of the general economy. It is the issue of the fixing of development levies that apply to residential developments and businesses. Sections 48 and 49 of the Planning and Development Act 2000, which commenced on 11 March 2002, provide for general, special and supplementary development contributions. These levies, which are chargeable by local authorities, were introduced during the Celtic tiger years. In a sense they were introduced at the height of the economic property bubble. Now that there is a significant reduction in property prices, the question arises as to whether the levels of these levies are now sustainable.

In Dún Laoghaire-Rathdown the contributions are €14,933.94 per unit of residential class development and €129.87 per sq. m. for industrial and commercial developments. This has evolved. Local authorities have discretion in the fixing of these levies and their usage. They draw up a development contribution scheme. Without question these levies have transformed the finances of local authorities. The manner in which these levies are used to fund community developments, parks developments, road infrastructure and water drainage infrastructure has been vital.

There is a more general issue that we need to face, which is the sustainability of the costs in the economy. The recent report of the National Competitiveness Council makes it clear that it is Government controlled prices. It can be rates, development levies and utility costs such as gas and electricity that contribute significantly not only to inflation but also to a level of cost in the economy, which has destroyed our competitiveness and, unless arrested, prevents us getting back to once again being a competitive economy. The other example is increasing our VAT rates while other countries are reducing theirs.

There is a general issue of local authority funding. The evolution of the development levies to an unsustainable level at present needs to be reviewed by the Government if we are to provide any stimulus to the economy and the construction sector. We need to restore competitiveness, which must start with the Government taking responsibility for those charges that are within its competence to determine. The purpose of my motion is to request an examination of the framework provided by the legislation and a review of the level of development levies. I want to establish whether the Minister believes they are sustainable. We need to start the process of restoring competitiveness and this is an area in which the Government can make a contribution.

Michael Kitt (Galway East, Fianna Fail)
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I thank the Senator for raising this issue. He has made some very interesting points in his contribution. The Planning and Development Act 2000 provided for a radical overhaul of the development contribution system. One of the central tenets of the reforms under the Act was to introduce greater transparency in the way in which development contributions were levied and applied. Under section 48 of the Act, elected members were given the powers to make, amend or reject the development contribution scheme proposed by the manager following a public consultation process. Therefore, the elected members have the central role in overseeing the level of contributions being sought and the way in which these contributions are spent by the local authority.

The policy guidance framework set out by the Department of the Environment, Heritage and Local Government is clearly designed to draw the attention of local authorities to their obligations under the legislation, while also recognising that the adoption of development contribution schemes remains a reserved function.

Section 135 of the Local Government Act 2001 requires managers, before the start of each financial year, to prepare and submit to the council a report indicating the programme of capital projects proposed for the forthcoming and following two years. The development contributions collected by local authorities are ring-fenced and committed to fund a planned capital programme as set out in the development contribution scheme adopted by the elected members. Equally, it is important to acknowledge that, in line with their reserved function, a number of local authorities have already responded to the economic climate by amending their respective development contribution schemes to reduce the contribution rates.

Local authorities are now witnessing a steep decline in revenues from these schemes and it is highly likely that development contributions income will continue to decrease significantly while expenditure will increase. It is appropriate for the legislative framework to continue to ring-fence development contributions for investment in long-term capital projects which reflect the local community gain associated with the contributions.

While respecting the reserved function of locally elected officials in this area, I expect that local authorities will consider reducing development contribution rates at this time. In their deliberations, county managers will continue to have regard to the overall funding position of their authority, any existing contractual commitments and the importance of supporting local employment through projects funded through development contributions. Given that development contribution schemes are adopted by the locally elected members, county managers will no doubt consult each council on this matter.

Eugene Regan (Fine Gael)
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I thank the Minister of State for his response. While I appreciate that he anticipates local authorities will revise downwards the level of development levies, I would have hoped for some guidelines and initiative from the Minister in regard to local authorities. I fully understand it is a reserved function as set out in the legislation but the local authorities are bound by guidelines issued by the Minister in many areas. The Minister could take an initiative in highlighting the obstacle which high development levies pose, not only to any stimulus to the residential property market but also to businesses. I appreciate the Minister of State's response and I thank him for coming to the House.