Written answers

Tuesday, 30 June 2015

Department of Public Expenditure and Reform

Commercial Rates Calculations

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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282. To ask the Minister for Public Expenditure and Reform if he will confirm that the revaluation method for commercial rates for wind farms as applied in County Limerick, namely revenue and expenditure, is different from the method used for the commercial rates for generating stations using fossil fuels, contractor's method; that this change arose only after the submission of representations by some of the wind farm owners in County Limerick causing an approximate 50% increase in some of their valuations in order that the result has been a net annual value per megawatt for Hunstown Station in Finglas of approximately €28,000 per megawatt, while wind farms in County Limerick face a NAV/MW of €80,000 on average and some over €90,000; and if he will confirm that the Valuations Office was fully aware from meetings with the Commission for Energy Regulation that this would cause rates increases exceeding the total profitability of the wind farms. [26179/15]

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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283. To ask the Minister for Public Expenditure and Reform if he will provide the detailed basis, market information and specific assumptions used in the revaluation of wind farms; if he will recommend that the Government legislate for the application of a 50% state of industry allowance to at least partly offset these disparities (details supplied); and if he will make a statement on the matter. [26180/15]

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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284. To ask the Minister for Public Expenditure and Reform if he will provide the actual basis used to establish the theoretical rent applied to wind farms, and the providence of the quotation. [26181/15]

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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285. To ask the Minister for Public Expenditure and Reform if he will confirm that the figure taken for the long-term revenue of a plant has been adjusted to the market price when the renewable energy feed in tariff programme lapses after 15 years. [26182/15]

Photo of Brendan HowlinBrendan Howlin (Wexford, Labour)
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I propose to take Questions Nos. 282 to 285, inclusive, together.

These questions all relate to the methodology used in the valuation of wind farms.

The Valuation Office, as part of a programme that will see the valuation of all commercial properties in the State brought up to date, by reference to modern property values, and maintained on a rolling 5-10 year cycle of revaluations as provided for in the Valuation Act 2001, has recently revalued all commercial properties in the rating authority area of Limerick City and County Council by reference to a valuation date of 1 March 2012. The Commissioner of Valuation is independent in the exercise of his functions and I as Minister have no function in the valuation of property for rates purposes, or in any appeal against a valuation. The purpose of a revaluation of commercial properties in a local authority area is the redistribution of the rates burden with each ratepayer's liability reflecting up-to-date property rental values. 

I am aware that the Limerick revaluation as it has applied to wind farms may, subject to appeal, see the rates liability of those facilities increase significantly. Wind farms in other counties are not directly impacted by the Limerick revaluation.

The Valuation Act, 2001 provides for an appeal to the Commissioner of Valuation, a subsequent appeal to the independent Valuation Tribunal and an appeal to the High Court on a point of law, for all valuations carried out under that Act. I understand that the valuations of all the Limerick wind farms have been appealed to the Commissioner of Valuation and that those appeals will be decided in the coming weeks.

The basis of rateable valuation for all property is net annual value, as set out in Part 11 of the Valuation Act, 2001. Net annual value is the rent for which, one year with another, the property might, in its actual state, be reasonably expected to let from year to year, on the assumption that the probable average annual cost of repairs, insurance and other expenses (if any) that would be necessary to maintain the property in that state, and all rates and other taxes and charges (if any) payable by or under any enactment in respect of the property, are borne by the tenant of the property.

In accordance with well-established valuation principles and case law, various methodologies may be used in estimating the Net Annual Value of a property. One commonly used method is known as the Receipts and Expenditure method of valuation where trading accounts relating to the use of a particular property are analysed to arrive at the Net Annual Value.  Another method of valuation used from time to time, depending on the particular circumstances and type of property involved, is the Contractor's method where the annual equivalent of the cost of construction, allowing for depreciation as appropriate, and the value of the site, is used to arrive at the Net Annual Value. 

I understand that as regards the Limerick wind farms the Valuation Office sought information on construction and development costs and detailed trading information for each facility and that this information was used in drawing up the valuation scheme for the Limerick wind farms. The correctness or otherwise of the valuation approach taken is now being considered as part of the appeals process.

All the assumptions made in the carrying out of the valuation of wind farms in the Limerick City and County Council rating authority area are those set out in Section 48 of the Valuation Act, 2001. What has to be decided in a revaluation is the most appropriate method of valuation to arrive at the Net Annual Value for a particular property type. Regarding the reference by the Deputy to the profitability of wind farms and the relationship to rates, the concept of profitability, as understood by the occupier or operator of a wind farm or indeed any other commercial property, can vary significantly from the concept as understood and used in a Receipts and Expenditure valuation to determine a valuation in accordance with section 48 of the Act.

As already stated, the valuation date for Limerick City and County Council area revaluation is 1 March 2012. I am advised by the Valuation office that the oldest wind farms in Limerick date from c. 2008. As a result, no adjustment was made to revenues to reflect market price after 15 years to take account of REFIT. Furthermore, section 25 of the Act also provides that once a rating authority area has been revalued, not less than 5 years and no more than 10 years, must elapse before the next revaluation takes place. Therefore all rateable property in the rating authority area of Limerick City and County Council area will be revalued again between 2019 and 2024.

While the Receipts and Expenditure method of valuation was considered the most appropriate method of valuation to value the Limerick wind farms as well as some other categories of property, the Contractor's method of valuation was used to value the Huntstown power station in Finglas. However the Fingal revaluation, which was published in 2009, had a September 2005 valuation date in contrast with Limerick which has a valuation date of 1 March 2012. While the figures of net annual value per MW quoted by the Deputy are accurate, and net annual value per MW as a unit of comparison between wind farms in the same rating authority area may be valid, it is not a valid form of comparison to use with a fossil fuel electricity generating facility. Such a comparison is further compounded when the facilities are located in different rating authority areas with different valuation dates.

The Deputy is asking if legislative change will be made for the wind farm industry. I and my colleague the Minister for Communications, Energy and Natural Resources are aware of the concerns raised by the sector but we are also conscious of the need to respect the appeals processes that are provided and not to pre-judge the outcome of those procedures. This was made clear in the Dáil at Committee and Report Stages and when Minister Harris stated in conclusion at Report Stage on 31 March 2015. "We should allow the appeals process to take its course. A number of appeals are under active consideration. Let us see what arises from them and fully assess the impact. If there is a need for a policy change, let us consider it". When the outcome to the appeals process is known my Department will communicate with the Department of Communications,  Energy and Natural Resources in relation to any issues that might arise for energy policy.

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