Seán Kyne (Galway West, Fine Gael)
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1061. To ask the Minister for Environment, Community and Local Government further to Parliamentary Question No. 240 of 21 October 2014 to the Minister for Finance the stage discussions are at between his Department and the local authorities, particularly Galway, with regard to the level of exposure to development bonds entered into by Irish Bank Resolution Corporation; when it is envisaged this may be completed; and if he will make a statement on the matter. [42078/14]

Alan Kelly (Tipperary North, Labour)
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The Irish Bank Resolution Corporation Act 2013 was enacted on 7 February 2013, appointing joint Special Liquidators to the Irish Bank Resolution Corporation (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 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 the Special Liquidators 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 their development in accordance with the plans and particulars, the conditions of planning and relevant codes and regulations.

The IBRC had, in the past, issued bonds to local authorities in relation to loans outstanding to the institution.  It should be noted that it is most likely that any liabilities which may arise in relation to any bonds/guarantees/indemnities under these arrangements will 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.

There are issues facing local authorities, and in particular in relation to unfinished housing developments, as a result of developers not complying with the terms of their planning permissions. The Special Liquidators are working with the Department of Finance and my Department in relation to this matter.  A process of validation and calibration between the Special Liquidators and Local Authorities in order to realise the possible level of exposure has been assessed. Local Authorities are following the legal process by ensuring that claims are made on the IBRC bonds.  Each local authority needs to submit a valid claim in the liquidation process in order to rank as an unsecured creditor and to have any possibility of recovery.

The City & County Management Association (CCMA) has been responsible for examining information received from each local authority in order to quantify the overall ‘real’ exposure in relation to unfinished housing developments. Thirteen developments categorised as ‘Unfinished Housing Developments’ have IBRC bonds in place.  The work of the Special Liquidator will result in the sale of loans, which in many cases will see specific projects re-launched by new investors who will have to address legacy issues and requirements for new planning securities.

My Department is in discussion with the Department of Finance regarding the position of the work of the Special Liquidator and the unsecured debts of the Local Authorities in the form of IBRC bonds. This matter will be progressed as part of the overall resolution of Unfinished Housing Developments.