Agenda item

            The Director of Corporate Services stated that, in basic terms, there were two key factors in relation to the setting of the rate.  These included:

·         the level of net expenditure which the Council needed in order to deliver its priorities – this was information which was collected from within the Council; and

·         an estimate of what income the Council would receive from the rates – that estimate was provided by Land and Property Services.

            It was therefore critical that the Members were provided with an estimate of the rates income which was as accurate as possible as an overestimation might lead to a shortfall in income and an underestimation might lead to an unnecessary high rate being set.

            He explained that in its report the Institute of Revenue, Rating and Valuation had suggested that the rates estimate, that is, the estimated Penny Rate Product was not a true estimate because it took no account of potential changes to the rate base in the year in which the estimate was provided.  This had resulted in large variances between estimated and actual rates income in previous years:

            The Director pointed out that from the years 2001/02 till 2005/06 there had been a significant underestimation of what the rates would yield.  However, in 2006/07 and 2007/08 the position had been reversed and, accordingly, the Council had owed money to the Department of Finance and Personnel.  While it was acknowledged that the figures were only an estimate, this had shown that the Members were not being provided with a reasonable estimate of rates income.  For example, in 2005/06 if the Members had had a more accurate estimation they could have decided to set the rate between 3 and 4% lower than they had done or, alternatively, it could have been decided to set the same level of rate and use the additional income to deliver on more priorities.

            For the 2008/09 rate setting process the Council, through the work of the Building Control Section, had identified a number of key business properties which had not been included on the valuation list but it had been known that they would become rateable during 2008/09.  The Land and Property Services had agreed to include those properties into the estimated rate income calculation and as a result the rate yield had improved by 3%.  The Institute of Revenue, Rating and Valuation had indicated that that approach was a step in the right direction but did not go far enough.  As indicated earlier, there was a need for the Council to work with Land and Property Services to develop a new estimating model for the calculation of the estimated rate income and for the forecasting of the outturn of the actual rate income.  Another key issue in this regard was that, once the rate had been set in February of each year, the Council had to wait a further 20 months to find out the actual level of rates collected.  The Institute had recommended that the Agency should provide a monthly update to the Council on the actual rates position.

            The Director explained that the Rates Regulations (Northern Ireland) 2007 did not include a specific requirement on the Department of Finance and Personnel to provide Local Authorities with an estimate of rate income.  Also, Councils were not obliged to use the estimate which was provided by the Land and Property Services agency.  Accordingly, the consultant’s report had recommended that the Council should lobby the Minister to amend the regulations to include the aforementioned specific requirement.  In addition, the Department should have a duty to undertake revised calculations during the year and to notify local authorities of any major variations to the estimated rate income, whether higher or lower than the estimate, which were likely to occur.  With regards to the final outturn figure for the actual rating, it had been recommended that the regulations should be amended to require notification to be given to local authorities by 30th June following the end of the financial year.  That date was in line with the statutory timetable for completing the Council’s annual accounts.

Noted.