Rate my business
Retailers nowadays are increasingly being forced to deal with unyielding amounts of bureaucratic red tape which has taken them away from the shop floor.
Print16 March 2011
Retailers have been lamenting the issue of the high cost of rents and rates for some time now. The cost of commercial rates seriously irks business owners as they feel that they don’t receive benefits comparable to what they are forced to pay. Every business is subjected to paying rates to its local council no matter what state the business is in, putting retailers who are under financial pressure, under even more stress. Retail Ireland director Torlach Denihan has said that the key challenge facing the incoming government was to restore consumer confidence: “To safeguard jobs in the retail sector urgent reform is needed to reduce key business costs, such as rent, labour costs and commercial rates, and improve access to credit,” he says.
Change is needed says RGDATA
Tara Buckley, director general of RGDATA has been engaging with all of the political parties in recent months to brief them on the most pertinent issues facing the industry today.
“There seem to be no incentives for small businesses and the independents are finding it hardest,” she says.
“We need to reduce the burden of regulation in the sector. Turnover is down by 5% to 30% in most cases. Retailers need to be able to buy right and manage the bottom line meticulously.”
Tara Buckley, director general of RGDATA: “We need to reduce the burden of regulation in the sector”
Many small retailers are hurting very badly and unable to process the amount of legislation and payments that are required of them. Many have closed their doors already and others are on the verge of doing so. Retailers are complaining that the councils are demanding rates that are totally out of sync with the times. Many rates were calculated at the height of the boom in 2005. The amount of red tape and bureaucracy has exceeded what many retailers have the capacity to manage and they are exhausted trying to stay on top of it all.
The cost and time involved with processing permits and licences is behind many of the thousands of retail jobs that have been lost in recent years. According to the National Federation of Retail Newsagents (NFRN), an ordinary retailer can be subject to up to 18 different licences and 17 separate inspections each year at a cost of around €5,436. For a small retailer this burden can be too much to bear.
Talking to the councils
Rates have become such a contentious issue that we wanted to talk to a few councils around the country to get some answers as to what rates revenue is actually used for.
We rang Galway County Council twice and got no answer either time. We rang a staggering six numbers in Donegal County Council and got no answer from any of them. All were rung within stated business hours.
Finally we rang Dun Laoghaire/Rathdown County Council and got through. We were passed on to the communications manager Lynda Fox who answered the following questions for us.
How much money was collected in commercial rates for 2010?
Total rates collectable in 2010 was €100.8 million.
How is this money spent?
Local authority funding and commercial rates are used for services such as housing and roads maintenance, public lighting, traffic improvements, street cleansing, litter enforcement, libraries, playgrounds, parks, sports, community, heritage and arts programmes.
How many staff work in Dun Laoghaire/Rathdown County Council?
The number of staff employed by the Council as of 31 December 2010 is 1,164. There has been an 18% reduction in the number of Council staff over the last seven years, mainly through voluntary redundancy and retirement, with the largest decline in staff numbers occurring in 2010. The associated decline in payroll has assisted the Council in responding to the budgetary challenges it currently faces.
How are commercial rates calculated?
The commercial rate is calculated by multiplying the valuation of a property by what is known as the annual rate on valuation (ARV).
Who determines the valuation of a property?
The commissioner of valuation. The local authority does not determine the valuation of any property. Valuations are periodically reviewed by the commissioner in a revaluation process, which happened in Dún Laoghaire-Rathdown in 2010. Every local authority in the country will be subject to a similar revaluation process in the coming years.
Who sets the annual rate on valuation (ARV)?
The annual rate on valuation (ARV) is set by the Council at its annual budget meeting. The Council adopted a 2% reduction in the ARV in their budget for 2011.
Why did some ratepayers end up paying more in 2011?
As with any revaluation process certain categories of ratepayers will enjoy a net gain, others will not. The recent revaluation in Dún Laoghaire-Rathdown resulted in 56% of ratepayers in the County enjoying decreased rate bills, 4% seeing no change and 40% unfortunately having an increased bill.
Were rate payers able to appeal their revaluation if they were not happy with the outcome?
Yes. Any ratepayer affected by the revaluation was able to appeal the outcome to the Valuation Office/Valuation Tribunal before 8 February.
If a ratepayer is experiencing difficulty paying their rates what should they do?
The Council is very conscious of the economic environment that businesses are operating in at this time. Ratepayers in financial difficulty are advised to contact their rate collector to discuss the matter and agree a timescale for payment of any outstanding amount.
Has the revaluation process affected the Council’s budgetary position for 2011?
Unfortunately yes. In an attempt to lessen the revaluation impact for some businesses, the Council reduced the annual rate on valuation (ARV) by 2%. This represents a reduction of €1.8m in Council income for 2011. In anticipation of a number of successful appeals to the Valuation Office, the Council also had to make further provision for an additional reduction in income of €3.5m.
How does the Council propose to deal with this estimated loss of revenue?
Budgetary savings have been made across all Council areas for 2011. Staff in all departments will be working hard throughout the year to deliver further operational efficiencies and to offer improved value for money in all services and programmes run by Dún Laoghaire-Rathdown.
The ARV in 2010 was €69.20. This year it is €0.170. Why such a difference?
The reason for this is due to the revaluation process. In 2010 the total rateable valuation of all property in the Dún Laoghaire–Rathdown area was approximately €1,287,000. The Council’s required rates income for the year was €89,060,500 giving an ARV (multiplier) of €69.20 (€89,060,500/ €1,287,000 = €69.20).
Under revaluation all valuations increased to reflect open market rental values in September 2005. This means that in 2011 the total valuation of all properties in the Dún Laoghaire–Rathdown area is €523,206,100. The Council’s required rates income for the year is €88,899,100 giving an ARV (multiplier) of €0.170 (€88,899,100/ €523,206,100 = €0.170).
Case studies
Thomas Boyle from Ardara, Co Donegal
Thomas Boyle’s shop was opened by his father in 1939 and Thomas worked with him from the age of 16 eventually taking over the running of the shop. He made the truly painful decision to close his doors for good in February because he just couldn’t sustain a living from it anymore.
Thomas would have liked to have passed the business on to his son as the shop has been at the heart of community for so long.
He expanded the shop a few years ago to reach 2,000 sq ft and had included a deli and a coffee dock. For the last two years, he worked 14 hours a day but struggled with the business resulting in him feeling very demoralised. He tried to keep going until one day he woke up and said, “I can’t do this anymore”. High wage costs, rates and a barrage of administration crippled his business. Due to his expansion, his rates skyrocketed from €1,100 to €11,500.
Other factors that affected his business were the Post Office moving to the other end of town and a new forecourt opening nearby. The closure has also made 10 local people redundant.
Darren Grant, The Organic Supermarket, Blackrock, Co Dublin
Although business is up 22% since last year, Darren Grant is very angry about the financial burden small businesses are under. He feels that commercial property rates for Blackrock are totally out of line with the amount of business in the area and has been sorely disappointed to see a continual stream of stores closing on the main street over the past two years.
Although he pays his rates religiously he finds that the council does nothing to help his business but rather hinders it in many ways. One example of this was when he put a board advertising his store outside his shop. The council confiscated it under the Street Furniture Act and fined him E150.
Grant says that his rates have tripled since he opened business three years ago. The valuation for the properties was done in 2005 when property prices were at their peak. Now 36 shops have closed in the Dun Laoghaire/Rathdown area.
“It breaks my heart to see businesses close,” he says. “There are six or seven vacant units in Blackrock now”.
The issue of credit is one that has hit him very hard. He went to AIB late last year looking for one week’s turnover. “They put me through hoops”, he says. “They wanted three years’ cash projections. After 81 days of waiting for an answer I was refused but I appealed it and it was found that AIB were in breech of lending laws. Within 24 hours I received the credit I needed but the whole process caused me terrible stress,” he says.
Breda Cahill, Ballinteer, Dublin
Breda Cahill runs three Centra stores in the South of Dublin, situated in Ballinteer, Blackglen and Marley Park. She has been in business around 20 years but has found herself under considerable pressure for the past few years with rates increasing while business has decreased. She says the council provides no services for her businesses so she can’t actually see where her money goes. She feels there is no accountability for the money collected. “You can negotiate with the bank, landlords and suppliers but not the council. The sheriff has more power than gardaí,” she says.
Cahill once had 122 staff between the three stores but now only employs 74. She is currently paying the Dun Laoghaire/Rathdown County Council €1,000 a week in rates yet receives little to no benefit for this money.
“We need to see some transparency in the councils,” she says.
The Marley Park store is 3,800 sq ft and she pays €26,000 a year in rates for this store.
The Ballinteer store is 1,950 sq ft and rates for this store are €7.5k/year. It’s in a small shopping centre with parking available but despite asking the council repeatedly to install meters it hasn’t happened and people are parking there while using nearby Dundrum Town Centre so there is no space for her customers.
The Blackglen store is 2,400 sq ft retail space and rates due are €16,000/year. There is no lighting on the street and they are paying their own water and waste charges. Over the bad weather the Blackglen road (leading to her shop) was closed and rather than receive any help from the council she had to hire a tractor to clear the road for her staff and customers to reach the shop.
“The government is too busy bailing out banks and developers to worry about regulating the councils,” she says.
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