Chronic and chaotic failure of county and city councils to collect commercial water rates

The latest news about the collection of the Household Charge is that approximately 940,000, or approximately 56% of all active households in the country have paid the charge that fell due on 31st March and 44% have not.

Big Phil Hogan, Minister for the Environment, Community and Local Government has promised the full consequences of the law will follow Household Charge freeloaders, who want others to pay the cost of flushing their toilets and washing their hands.

The average person in Ireland is estimated to use 140M³ of water per year. This compares to an average of between 50M³ and 100M³ in other European countries, all of whom charge for water usage. It is estimated that 17% of the territory of the EU experiences water scarcity, while Ireland has the capacity to support industries in certain locations that are relatively water-intensive in their usage profile. An estimated 77% of Irish households are connected to public mains while the balance are connected to group water schemes. Sixty seven per cent of houses are served by public waste water infrastructure while the balance (418,000 homes) are dependent on septic tanks or other treatment sources.

During the past decade the State has invested in the region of €5.8 billion.  Each county is the recipient of substantial investment in water services. Co Cork has been the largest recipient (€485 million) and Leitrim, its population of 32,100 and a 12-year supply of vacant houses, has been the recipient of over €50 million in water investment.

The operating cost of providing the 1,000 water and sewerage services in the country costs approximately €60 million each month and commercial water rates ought to yield €199.7 million per annum towards this.

At the start of 2010 arrears of commercial water rates amounted to €151.7 million, a sum equivalent to 75% of what is billed in a full year.

The rate charged for commercial water is not regulated but ranges from €1.75 per M³ in Kildare to €3.04 per M³ in Wicklow.

Kildare had a revenue deficit of €3.9 million at the end of 2010. It collected 55% of the commercial rates billed that year and ended the year with arrears €460,000 higher at the end of the year notwithstanding the writing of arrears of €450,000 at the beginning 2010.

Wicklow had a revenue deficit of over €2 million at the end of 2010. It collected only 41% of the commercial rates billed in 2010 and ended the year with arrears of €2.5 million, some €300,000 less than at the start of 2010 having written off €166,727.

Commercial water charges in Ireland are competitive when compared when large population centres in Ireland are compared with large population centres in Europe.  But there is a lack of transparency as to how water is priced in Ireland for commercial use.

The best performing councils with respect to collecting commercial water rates accounted for 16% of the arrears (€25 million) and were the recipients of 22% of the capital investment in the past decade (€1.3 billion).  The include, in order of efficiency:

 

COUNCIL	ARREARS, Jan 2010	% 2010 Annual Commercial Water Rates	CAPITAL INVESTMENT 2000+
Louth	€1,229,063	18.1%	€58 M
South Tipperary	€614,978	21.2%	€95 M
Waterford	€459,742	23.2%	€182 M
Limerick	€2,085,419	28.1%	€113 M
Cork City	€1,636.204	28.5%	€56 M
Waterford City	€1,380,934	29.4%	€89 M
Kerry	€2,572,154	33.7%	€121 M
Limerick City	€3,016,409	42.3%	€58 M
North Tipperary	€1,517,791	46.6%	€118 M
Fingal	€7,195,551	48.3%	€224 M
Kilkenny	€2,345,612	49.4%	€127 M
Monaghan	€964,533	52.4%	€75 M
	€25,018,390		€1,321 M

 

The worst performing councils at collecting commercial water rates accounted for arrears in excess of €126 million but are recipients of €4.5 billion in capital investment:

 

COUNCIL	ARREARS Jan 2010	% 2010 Annual Commercial Water Rates	CAPITAL INVESTMENT, 2000+
Wexford	€11,368,930	328%	€178 M
Wicklow	€2,816,501	175%	€247 M
Carlow	€831,676	148%	€103 M
Donegal	€10,808,845	135%	€352 M
Meath	€5,088,552	134%	€295 M
Dun Laoghaire-Rathdown	€9,019,916	130%	€169 M
South Dublin	€8,763,741	116%	€108 M
Sligo	€3,364,804	112%	€89 M
Leitrim	€864,453	108%	€51 M
Mayo	€5,948,122	101%	€205 M
Galway	€4,542,483	96%	€464 M
Offaly	€2,360,511	90%	€131 M
Cavan	€1,903,905	82%	€107 M
Laois	€1,713,232	79%	€134 M
Galway City	€3,173,645	77%	€114 M
Dublin City	€21,373,541	77%	€418 M
Clare	€6,511,277	75%	€236 M
Westmeath	€2,640,106	74%	€218 M
Cork	€14,437,,859	73%	€485 M
Longford	€1,320,871	72%	€75 M
Kildare	€6,303,713	66%	€207 M
Roscommon	€1,571,007	63%	€138 M
	€126,727,690		€4,533 M

 

The average cost of a cubic metre of water for commercial use in Ireland is €2.08>

The following table compares the cost charged by the least efficient providers and the most efficient providers:

 

LEAST EFFICIENT	€/  M3	MOST EFFICIENT	€/ M3
Wexford	€2.71	Louth	€1.55
Wicklow	€2.45	South Tipperary	€2.70
Carlow	€2.30	Waterford	€2.12
Donegal	€2.41	Limerick	€2.60
Meath	€2.30	Cork City	€2.30
Dun Laoghaire-Rathdown	€2.24	Waterford City	€1.53
Sligo	€2.07	Kerry	€1.79

 

Apart from the non-payment of commercial water rates there is a huge issue about the inability to accurately account for water in Ireland and some of this arises from massive leakages in the infrastructure. It is estimated that 43% of treated potable water in major population centres is unaccounted for and lost before reaching designated users.

The provision of water and the treatment of waste water by 34 different local authorities impedes the development of an effective and coordinated water service and the outbreak of cryptosporidium in Galway City in 2007 did little to enhance public confidence.  Added to that is the gross incompetence of councils to collect lawful debt and you have the makings of a nightmare gridlock.

The immediate consequence of this is that the 940,000 householders who paid the Household Charge are also paying a further €96 million in other taxes to compensate for the parasites and freeloaders who do not pay commercial rates.

The slovenly and and the well managed housing renters among Irish local authorities?

Are you in the market for local authority housing?  If you also happen to be not so inclined to pay the rent you ought to rent a house from one of the more slovenly county or city councils whose debt debt collection competence is weak.  But if you are an on-time payer there are other housing providers that are likely to warmly welcome you.

There are two issues to be concerned about are:

Which councils will allow housing rent arrears to build up?

Which councils will most likely write-off arrears outstanding?

Ten Councils Most Tolerant of Rent Arrears

These ten allowed arrears of almost €35 million to build up at the start of 2010 – equivalent to more than 25% of the total housing rents collectible in 2010

 

JURISDICTION	ARREARS OF HOUSING RENT, to Jan 2010	ARREARS % HOUSING RENT ACCRUED  for 2010
Galway City	€1,855,044	31.5%
South Dublin	€5,981,156	27.5%
Dublin City	€19,526,762	26.5%
Mayo	€900,145	22.6%
Roscommon	€708,301	22.5%
Dun Laoghaire-Rathdown	€2,706,951	21.3%
Westmeath	€720,808	19.5%
Kildare	€2,706,951	18.0%
Waterford City	€1,144,964	17.8%
TOTAL	€34,957,620	25.4%

 

 

 

 

 

 

 

 

 

 

Ten Councils Least Tolerant of Rent Arrears

These ten collect what’s owing on time with little wriggle room for skiving and scrounging

 

JURISDICTION	ARREAR OF HOUSING RENT, to Jan 2010	ARREARS % HOUSING RENT ACCRUED  for 2010
Monaghan	€59,426	2.1%
Wicklow	€182,975	3.3%
North Tipperary	€87,774	3.5%
Fingal	€620,924	4.5%
Kerry	€272,898	4.6%
Wexford	€381,659	5.0%
South Tipperary	€153,327	5.3%
Laois	€240,193	5.4%
Carlow	€187,830	6.2%
Co Waterford	€183,596	6.7%
TOTAL	€2,370,637	4.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If you are unfortunate enough to incur a build-up of arrears then it is important to know which council is most likely to write off what is outstanding.

 

Councils Offering Most Generous Rent Write-Offs

 

JURISDICTION	HOUSING RENT ARREARS WRITTEN OFF IN 2010	MOST GENEROUS WRITE OFFS AND WAIVERS, IN 2010
Limerick City	€236,604	35.1%
Carlow	€35,839	19.1%
Monaghan	€10,358	17.4%
Westmeath	€116,732	16.2%
Waterford City	€185,119	16.2%
Roscommon	€112,733	15.9%
Wexford	€56,412	14.8%
Wicklow	€21,042	11.5%
Galway	€66,207	9.2%
Meath	€54,286	8.3%
TOTAL	€895,332	18.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Councils Offering the Least Generous Rent Write-Offs, or none

JURISDICTION	HOUSING RENT ARREARS WRITTEN OFF IN 2010	LEAST GENEROUS WRITE OFFS AND WAIVERS, IN 2010
Waterford	€0	0%
Fingal	€0	0%
Cork City	€0	0%
Offaly	€655	0.2%
Clare	€2,781	0.4%
North Tipperary	€786	0.9%
Sligo	€3,279	1.1%
Louth	€4,375	1.5%
Mayo	€14,682	1.6%
Longford	€10,654	1.7%
TOTAL	€96,812	0.2%

 

The award for the softest touch councils housing departments, based on allowing arrears build up and then offering generous write offs goes to Co Roscommon, Co Westmeath and Waterford City Councils.

If you pay rent and don’t accrue arrears you will be most welcomed by Fingal, and Waterford County Councils.

The chaotic, poorly-led Department of the Environment, Community & Local Government

There are no fewer than 124 local authorities in the State which have directly elected representation – 5 city councils, 29 county councils, 5 borough councils, 75 town councils, 8 regional authorities and 2 regional assemblies. While these ostensibly have an independent existence their mother ship, or spiritual temple, is the Department of Environment, Community and Local Government.

Big Phil Hogan and his predecessors, Éamon Ó Cuív, John Gormley, Dick Roche, Martin Cullen, Noel Dempsey and Padraig Flynn in the twice rebranded role of Minister for the Environment, Community and Local Government have an atrocious and inept record of effective political leadership. 

Despite, or perhaps as a consequence of it, a private members bill to bring the scrutiny of local authorities into the ambit of the Comptroller & Auditor General emerged and failed at the behest of the Government in Dáil Éireann on Friday 11 May 2012.

The Government, it seems, ‘supports the principle of greater scrutiny of public money – but only in the context of public sector reform’.  Virtue is a sun-bathed, idyllic resort located far away.

The audit of local authorities is carried out in Big Phil’s own department under his jurisdiction.  This begs the question of what happens to the audit findings advocated by local government auditors.

Going back to 1997 the jurisdictional landscape of this Department if littered with milestones and tombstones of disgrace that include:

• Dempsey’s inauguration of The Mahon Tribunal in 1997 without effective independent oversight of the cost implications or spending or accountability.
  
• Cullen’s escapade with electronic voting machines and his subversion of the purpose of the Planning and Development (Amendment) Act 2002 which allowed gobshite developers evade their statutory duty of providing 20% of development for social housing.
  
• Grossly inadequate oversight or control of the Dublin Dockland Development Authority whose buccaneering legacy has left taxpayers with a financial nightmare costing hundreds of millions of Euro – despite the Department being represented on this board at a senior level.
  
• The Building Societies Act 1989 sponsored by Flynn and successor legislation promoted by Roche at the behest of predatory building society executives out for a quick kill by abandoning mutual status, a stunt that eventually obliterated the sector at enormous public cost and scuppered the building society sector.
  
• Failure to rein in the exuberant planning permission zeal of gombeen local councillors whose legacy is a collapsed construction sector and a landscape pock-marked with ghost housing estates.  By the end of 2009 some 42,058 hectares of land was zoned for development – 450% of actual need. The land and development component of NAMA’s €31.78 billion portfolio includes land and development assets in Ireland listed with a value of €5.3 billion.
  
  Interestingly, housing completions in Ireland and Spain in 2007 were 18 per 1,000 citizens – more than twice the rate of housing construction elsewhere in Europe.  Mortgage debt increased from €47.2 billion (45% of GDP) in 2002 to €139.8 billion (74% of GDP) in 2007, an increase of 196%.
  
• Inaugurating a Household Charge and only collecting 58% of the target revenue.

The loss of sovereign economic independence in 2010 has resulted in a major tightening of local authorities State supported budgets – mainly on the capital side. 

The State provides these bodies with €4.45 billion per annum under a variety of labels from a diversity of government departments.  That sum is approximately €1 billion less than the sum thrown at them in 2007.

The principal source of the independent income of local authorities is derived from the commercial rates, commercial water rates, development contributions and various charges and borrowings.

Collectively their revenue expenditure in 2010 was €4.45 billion, a very modest drop of €62 million on peak spending in 2007.  Capital spending was pared from €6.2 billion in 2007 to €2.8 billion in 2010 but the population expanded by over 330,000 (8.2%) in this period. The losers as a result of the cut back in the capital budget were contractors and professional service providers.  Despite the downturn local authorities spent €1.9 billion on land between 2007 and 2010.

Their combined balance sheet includes fixed assets valued at over €90 billion, listed at cost of acquisition, not prevailing market value.  The fixed assets include land and housing valued at original cost of over €20 billion.  The local government auditor points to the need for an asset revaluation but when will this occur?  How can the accounts of local authorities be true and fair if the valuation of important assets ignores the collapse of the property market?

The next big test of Big Phil’s political virility will be reflected in how he controls spendthrift  councils.  Too many of them are running outrageous accumulated deficits and the financial position of Donegal and Sligo County Councils is beyond the pale.

 

LOCAL AUTHORITY JURISDICTION	ACCUMULATED REVENUE DEFICIT 2010	IMPROVEMENT /  DETERIORATION 2007-2010
Co Donegal	€12,704,598	-€434,780
Co Sligo	€9,981,616	€8,512,114
Meath	€8,329,809	€1,427,445
Co Waterford	€6,916,907	€32,230
Co Wexford	€6,365,810	€2,491,097
Co Kildare	€3,913,254	-€2,550,187
Mayo	€2,747,647	-€1,177,314
Co Wicklow	€2,092,176	€330,661
Westmeath	€2,046,872	€1,618,639
Offaly	€1,899,146	€1,834,156
Co Galway	€1,383,882	€2,147,187
Co Longford	€595,892	€2,095,687
Co Leitrim	€123,121	€363,739
Galway City	€67,743	€8,177,154
	Commercial Rates collected in 2010 as % Commercial Rates Billed in 2010	Commercial Water Rates collected in 2010 as % Billed Commercial Water Rates Billed in 2010
Co Donegal	64.3%	35.6%
Co Sligo	78.7%	48.1%
Meath	86.8%	39.5%
Co Waterford	73.2%	62.1%
Co Wexford	76.5%	37.4%
Co Kildare	80.6%	55.9%
Mayo	83.0%	50.7%
Co Wicklow	76.5%	41.1%
Westmeath	85.2%	36.1%
Offaly	93.4%	37.1%
Co Galway	78.2%	49.6%
Co Longford	85.3%	55.9%
Co Leitrim	78.0%	41.2%
Galway City	63.7%	55.9%
NATIONAL AVERAGE	80.5%	52.4%
	Available Houses, 2009	Potential Oversupply, or - Undersupply
Co Donegal	13,874	9,064
Co Sligo	5,436	3,727
Meath	9,179	610
Co Waterford	4,509	2,276
Co Wexford	9,419	3,757
Co Kildare	10,075	1,504
Mayo	9,875	6,104
Co Wicklow	5,486	914
Westmeath	5,571	2,393
Offaly	4,159	1,641
Co Galway	12,990	6,975
Co Longford	4,385	3,169
Co Leitrim	3,871	2,836
Galway City	3,087	-56
STATE	260,032	120,248

 

County and city councils heading for a painful financial nose dive

There are 29 county councils and 5 city councils in Ireland.  Local administration also includes 5 borough councils, 75 town councils, 8 regional authorities and 2 regional assemblies.

The largest component are county councils and the city councils and their financial position has taken a hammering over the past five years.

They collectively have a cumulative income for revenue purposes of €4.6 billion which has not materially changed between 2007 and 2010.  It is derived from rates (27.1%), State grants and subsidies (40.7%). goods and services (23.9%) and other sources and charges.

Their revenue spending is on roads, transportation and safety (19.7%), environmental services (17.5%), water (16.4%), housing (14.6%) with the balance on agriculture, education, recreation and amenities.

They also spent €2.8 billion on capital investment, down from a capital spend of €6.3 billion in 2007.  The largest item of expenditure in respect of capital are payments to contractors, although they amount spent on contractors has dropped from €3.2 billion to €1.3 billion in the downturn, Councils are substantial buyers of land spending €583 million in 2007 and, surprisingly, €308 million in 2010.  Fees are another major absorber of public funds with €410 million spent under this heading in 2007 and €188 million in 2010.  Expenditure on land and other assets in the four years came to €3.8 billion while €818 million was realised from land disposals, some of it no doubt attributable to McCreevy’s public sector decentralization fiasco.

A curious feature of local authorities is that they have fixed assets of over €90 billion, which includes land valued at €2.2 billion, housing valued at €17.9 billion as well as parks, other buildings, plant and machinery, roads and infrastructure, water and sewerage treatment and heritage assets.  But these assets are valued at their purchase price in the case of assets acquired since 2003, not at their prevailing market price.  A revaluation would surely have major implications for their capacity to carry debt.

Their financial position has grown very precarious.  Ten of them have €81.3 million in the bank while 24 of them owe the bank €62.6 million.

The accumulated surplus on the revenue accounts of the councils amounted to €34 million in 2007 but four years later this surplus had dropped to €18.7 million.  The most financially robust are the four Dublin councils and Cork Co Council, which between them had cash balances of €71.3 million at the end of 2010.

The most severe revenue deficits are in Donegal, Sligo, Meath, Waterford and Wexford whose combined population has increased by 58,000 to 623,000 in the 2011 Census.  Donegal Co Council saw its deficit rise to over €12.7 million – equivalent to over €78 for each resident of the county.  Sligo Co Council saw its revenue deficit increase from €1.4 million to €9.9 million in four years. The revenue deficit at Offaly Co Council by 2,822% since 2007, from €€64,990 to €1,899,146 in 2010. The population of the county expanded by 8.2% in that five-year period.

The main non State sources of cash-flow for councils are rates, housing rents, commercial water charges and repayments of housing loans.

The councils  started 2010 with arrears of rates and commercial water rates of  €404 million but they wrote off €83.7 million as non-recoverable with bad debts in respect of rates accounting for 80% of this write-off.  Billing from these sources in 2010 amounted to €2.1 billion but almost €500 million of this remained uncollected by the year end.  If the amount written off at the end of the year was consistent with the amount written off at the start of 2010, a further €100 million is likely to be written off.

Escalating bank debt, an inability to collect from debtors and overvalued assets are likely to combine and make the majority of the State’s 29 county councils and five city councils a financial basket case.