Monday 3 August 2009

Developers' woes hit council funds

CASH-strapped local councils are owed millions of euro by developers who have gone bust or stalled building projects during the property crash.

Banks are not the only agencies circling the remains of their ill-timed building ventures. Some local authorities are going to court to recover "development levies" owed by builders while others are slapping enforcement orders on those who have yet to pay up.

Local authorities were able to rake in millions during the boom by charging a development levy for each new building. At its height, the revenue generated by the tax reached more than €670m.

Unsurprisingly, Dublin local authorities have been left nursing the biggest losses. South Dublin County Council has served enforcement orders against 51 builders who owe €3m in development fees. That is a fraction of the €33m the council was due to earn in levies over the next few years.

Fingal County Council in north Dublin is chasing €4m in development levies which are overdue. The council is due to earn €66m in phased payments in the coming years.

Dublin City Council was due to be paid €26m last year in levies but has been paid only a fraction of that sum. The city has started enforcement proceedings in 87 cases.

Several councils contacted by the Sunday Independent declined to name the developers they are chasing for legal reasons.

It has emerged that four companies linked to former Fianna Fail councillor Ger Killaly owe more than €1.7m in development levies to Offaly Co Council, which he once chaired.

The debt includes a €642,000 levy for a partially-built hotel complex, the building of which has since been abandoned. The estate agent and his business partner recently settled a legal action taken by former associates in a land deal and were sued by AIB for €15m.

In Roscommon, Laragan Developments, owned by local builder Alan Hanly, owes €500,000 in development levies to the local authority. The company also owes €200,000 to Dun Laoghaire/Rathdown Co Council and €44,000 to Leitrim.

Mr Hanly's company was placed in examinership earlier this year, leaving depositors who bought into a new apartment scheme high and dry. The developer, meanwhile, is currently building a mansion in Roscommon.

Around the country, Meath Co Council, which spawned a building phenomenon in the heart of the commuter belt zone, estimates that it is owed €39.5m in levies.

As the council reckons that half of those developments won't be finished, it plans to write off €20m in bad debts. Although it hasn't chased up the developers who have proceeded with enforcement orders, it is chasing them for the money in other ways.

Louth Co Council is owed €4.2m in development levies as of the end of June, has issued 33 enforcement notices, referred 66 for legal action and prosecuted six companies.

Limerick City Council is owed €2.7m in development levies and has so far issued one enforcement order to recover €587,125. The council has issued proceedings in the District Court to recover 21 other debts.

Galway Co Council is owed €8m to date and has issued enforcement proceedings to recover €188,000.

Usually developers pay the levies on a phased basis over time, with the last chunk due on completion of a property when a letter of compliance is issued. Since the property slump has left half-finished developments littering the country, some developers are unable or unwilling to pay huge fees for developments that they cannot sell. Several councils are now struggling to plug the gaping financial holes that have emerged as developments stall or go to the wall.

The construction industry has warned that levies will have to be reduced as the development sector can no longer afford them.

Irish Independent

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