Committee Reports > List of Committees > Dáil > 1991 > Committee of Public Accounts > Final Report - Appropriation Accounts 1988

APPENDIX 24

DEPARTMENT OF INDUSTRY AND COMMERCE

Submission on Industrial Land and Buildings

Contents

1. Introduction.

2. Role of the Department of Industry and Commerce.

3. Rationale for State Investment in Industrial Property.

4. Provision of Industrial Space in Wales and Scotland.

5. White Paper on Industrial Policy.

6. Factory Space.

7. Land Holdings.

8. IDA Expenditure on Industrial Property.

9. Level of recent acquisitions.

10. Private Sector Involvement.

11. Standard Accounting Policies.

12. SFADCo Operational Controls.

13. Disposals of property at Government direction.

14. Some general points on Government directed disposals.

Attachments

1. White Paper on Industrial Policy (Extract).

2. IDA Land and Factory Sales.

3. SFADCo Land and Factory Sales.

Industrial Land and Buildings

1. Introduction

1.1 The Comptroller and Auditor General’s report for 1988 highlighted losses which arose from the disposal of property by the IDA on foot of a Government decision that £5 million should be raised for the Exchequer from the disposal of land and factory space. During the course of the Public Accounts Committee’s examination of the Comptroller and Auditor General’s report the Department of Industry and Commerce was requested, in consultation with the Department of Finance, to provide a report to the Committee on the procedures for the control and management of IDA land and factory space and to provide details of the sites and factories sold and the costs and proceeds derived therefrom.

1.2 This submission illustrates the rationale for State investment in industrial property (in accordance with the overall requirements of the Oireachtas as set out in legislation), the levels of expenditure undertaken, the amount of property available, the procedures in place to implement the State’s role and details of the specific properties disposed of to raise revenue for the Exchequer.

2. Role of the Department of Industry and Commerce

2.1 Sections 11 and 16 of the Industrial Development Act, 1986 specifically attribute, inter alia, to the IDA the function and responsibility of providing, developing and administering industrial estates and factory buildings to encourage/facilitate the development of industry.

2.2 The Department’s role is to set out the broad industrial policy strategy under which the IDA and the various State agencies are to operate within the terms of the legislation adopted by the Oireachtas, to oversee the implementation of that policy and to agree in conjunction with the Department of Finance (and as approved by the Oireachtas), and oversee the spending of an appropriate budget for the relevant agency’s activities. It is the responsibility and function of the Boards and staff of the agencies to implement Government policy on a day to day basis.

2.3 The Department of Industry and Commerce in 1983 carried out a detailed review of the IDA’s role in the provision of industrial land and buildings and made certain recommendations which were incorporated into the White Paper on Industrial Policy (July 1984).

2.4 During the course of the preparation of the second Triennial Review of Industrial Performance, which it is hoped to publish shortly, the Department decided to initiate a further major review of the appropriate role for the State in providing industrial property to take account of the changes which have taken place in the interim and in particular the apparent greater willingness of the private sector to provide industrial space on a speculative basis.

3. Rationale for State Investment in Industrial Property.

3.1 The involvement of the State developmental agencies in the provision of factory space and in the development of industrial infrastructure is an accepted element of industrial development practice internationally (see section 4 below for examples of expenditure by competitor countries).

3.2 The rationale for State investment is threefold:

—it provides a positive stimulus to development, promoting new initiatives and developments which might not otherwise occur,

—it facilitates balanced regional development, and

—it influences project investment decisions, facilitating a higher and faster rate of project start-up, and significantly reduces the time horizon from the initial investment decision to production and actual job creation.

3.3 Government policy has evolved over the years: policy adopted now is to intervene only where private sector finance is not forthcoming or is inadequate and where State investment is likely to yield significant beneficial results by attracting job creating projects to areas of maximum need. The strategy, therefore, involves a two-pronged approach which seeks to maximise the private sector input, while complementing this, where necessary, with State support in essential areas. The level of State investment has dramatically reduced over the decade 1980-1990.

3.4 The availability of suitable serviced industrial land and advance factory space is especially important for the promotion of Inward Investment. IDA and SFADCo, to date, have been better able to compete for projects by developing high quality sites in strategic locations around the country, for instance at Clonshaugh and Snugborough in Dublin, Plassey in Limerick, Parkmore in Galway, Finisklin in Sligo, Little Island and the Business & Technology Park in Cork.

3.5 Companies are attracted to these parks because the proper environment has been created and the infrastructure, such as roads, water and drainage facilities, is already in place. This enables companies to concentrate more on the efficient design and completion of their buildings. Also the “lead” time required for the commencement of construction of a factory building is greatly reduced and the uncertainty for promoters of new projects is removed.

4. Provision of Industrial Space in Wales and Scotland

4.1 While it is a matter for each country to decide on its own appropriate strategy for industrial development taking account of its own needs and potential, the following figures are provided as an illustration of other countries’ involvement in industrial property and the competitive pressures this inevitably places on Ireland. According to data contained in their Annual Reports, in the year 1988/89 the Scottish Development Agency provided 555,000 sq. ft. of new space while the Welsh Development Agency completed 600,000 sq. ft. of advance factory space (1.1m sq. ft. of business space). At end March 1989 the WDA had a property portfolio valued at £248m and the SDA one valued at £174m.

5. White Paper on Industrial Policy

5.1 During the 1970’s the industrial promotion agencies incurred substantial annual expenditure on industrial property and by the early 1980’s had built up a large reserve of both land and buildings. Accordingly, the Government drew up guidelines for land acquisition and factory construction which were incorporated in the White Paper on Industrial Policy (July, 1984).

5.2 In particular the White Paper specified minimum/maximum levels of space that should be held by IDA. It required, inter alia, IDA to:

(a)reduce over a three year period the amount of available Advance Factory space that would be held at any one time to 2 million square feet. Two million sq. ft. was regarded at the time as the minimum amount necessary to meet anticipated demand;

(b)reduce over three years its available land holdings to 4,000 acres (excluding special sites at Ringaskiddy, Ballylongford and Castletownbere); and

(c)to prepare separate accounts for their building activities division each year.

5.3 An extract of the relevant section from the White Paper is contained in Appendix I.

5.4 The position at end 1989 in respect of IDA in relation to these specific requirements is as follows:

(a)the availability of IDA Advance Factory space at end 1989 was 0.7 million square feet; in addition IDA had a further 1.39 million sq. ft. of space reserved for specific projects;

(b)at end 1989 the IDA had 2,700 acres of land (excluding Ringaskiddy and Castletownbere); and

(c)separate accounts have been prepared and published in respect of IDA’s Property Division each year since 1985.

5.5 Sections 6 and 7 below show the total levels of land and factory space held by both IDA and SFADCo.

6. Factory Space

6.1 Table 1 below sets out the position in regard to the total level of factory space nationally including space held by SFADCo which was not incorporated in the White Paper targets.

TABLE 1

Total Factory Space Availability (end 1989)

7. Land Holdings

7.1 At the end of 1989 the IDA had 3,354 acres of land (including 654 acres in respect of the special sites at Ringaskiddy and Castletownbere) while SFADCo had 2,233 acres (including 610 acres in Ballylongford).

8. IDA Expenditure on Industrial Property

8.1 IDA’s Capital Building Budget has significantly reduced from a high of £77 million in 1981 as illustrated in Table 2 below. For the four years 1985-88 the Building Budget has been essentially funded from own resources.

TABLE 2

Funding for IDA Building Operations

Notes:

(1) £0.8 million was provided in 1986-87 for the construction of Bantry Enterprise Centre as part of the compensation package for the Whiddy oil disaster.

(2) In 1989 Grant-in-Aid of £3.5 million was provided specifically to develop the new industrial estate in Tallaght.

(3) In 1990 a net amount of £7 million grant-in-aid is being provided i.e. £11.5 million grant-in-aid less a contribution to the Exchequer of £4.5 million from ongoing disposals of property to industrial clients.

8.2 Under the Operational Programme for Industrial Development 1989-1993, 30 per cent of the cost of eligible expenditure on building operations is being funded from EC Structural Funds.

8.3 All acquisitions of property and disposals require the prior approval of either the IDA Main Board or of the Executive Board and take account of the views of the various Divisions within IDA on the likely level of demand and the knowledge and experience of the IDA’s Regional Managers and Property Division on the likely supply and availability of space.

8.4 The majority of existing land acquisitions were based on the officially published regional industrial plans. These identified regions/towns where there was a need for industrial sites in order to facilitate industrial development.

8.5 In many cases land was acquired from local authorities, generally at the prevailing Local Authority land price at the time.

8.6 Considerable professional expertise and experience has been built up within IDA Head Office and in the Regional Offices in regard to industrial land values throughout the country. External professional advice is sought where appropriate.

9. Level of recent acquisitions

9.1 Over the past five years few new sites have been acquired by the IDA as the following figures demonstrate:

10. Private Sector Involvement

10.1 As indicated in Section 3 above much greater emphasis is now given to having private developers undertake, at their own risk, the provision of advance factory space on sites owned and developed by the IDA. This new partnership approach has been extremely successful. By mid-1990 negotiations had been concluded with private developers to construct 23 buildings representing almost 500,000 sq. ft. of new space. Six of these buildings have already been taken up by new projects with negotiations continuing with developers to provide a further seven buildings.

11. Standard Accounting Policies

11.1 As previously mentioned the White Paper on Industrial Policy required IDA to prepare separate accounts for their Building Division each year.

11.2 The accounts are prepared in accordance with current accountancy practices in the property market and include information on the valuation of all properties and details of subsidies (rent reductions, deferred payments, etc.) provided.

11.3 Following the White Paper directive, IDA’s property portfolio, including land, was revalued in 1985 on a then current value basis. This resulted in the creation of a valuation reserve in the accounts of the Authority.

11.4 The writing back of the relevant portion of these reserves impacts on the reported profits/losses on property disposals. The effect of these revaluations is shown in the Tables Appended listing the various properties disposed of under Government direction.

11.5 From 1985 property has been depreciated on the following basis:

1.Factories over a 33 year period (i.e. 3 per cent per annum).

2.Unallocated site development on a 10 year period (i.e. 10 per cent per annum).

3.The valuation of unoccupied buildings is reviewed on an annual basis.

12. SFADCo Operational Controls

12.1 Essentially the same controls detailed above in respect of the IDA are operated by SFADCo including their building activities being separately accounted for in the Company’s Annual Report.

12.2 Company assets including factory buildings and land are managed by the Company’s Property function. Staff involved include Management and Technical people and each aspect of property management is handled by specialists e.g. Revenue Control, Maintenance, Lease Enforcement.

12.3 It is SFADCo policy to dispose of assets at the best possible price and independent valuations are obtained to support sale prices. Account of National policy is taken vis-à-vis the rest of the country and quarterly liaison meetings are held with IDA and Údarás to ensure uniform approach to such issues.

13. Disposals of Property at Government Direction

13.1 Appendices 2 and 3 contain full details of the properties disposed of by IDA and SFADCo in 1988 and 1989 to raise revenue for the Exchequer.

13.2 As can be seen from the figures set out in Table 3 below profits were made on normal IDA sales in three out of the last four years.

TABLE 3

Outturn on IDA Property Sales

13.3 Excluding the losses from the forced sale of land and factories, IDA showed a profit of £2.76m. on property sales over the last four years. The profit/loss figures shown above do not take into account rental income received and interest payments on deferred property purchases by industrial clients which average some £10m. a year (see Table 4 below).

TABLE 4

Income from Rent and Interest of Deferred Sales

13.4 Table 5 summarises the losses on IDA property disposed of to raise revenue for the Government showing both the loss on the original cost price and when account is taken of both revaluation and/or depreciation as outlined in Section 11 above.

TABLE 5

Summary of IDA Losses on Government Directed Sales

13.5 In the Comptroller and Auditor General’s report it was noted that based on information provided by SFADCo that a profit of £100,000 was realised from the sales undertaken by the company. It was however subsequently established that the original information understated the historical cost of the properties (part of which had been transferred over from IDA). The correct position is set out in Appendix 3. The balancing figure to achieve the required £700,000 was met from profits from other sales, reducing the overall loss to £250,000.

14. Some general points on Government directed disposals

14.1 Most of the forced disposals in early/mid 1988 took place prior to the general increase in property values.

14.2 Professionally qualified auctioneers/surveyors were employed and in each case the final sale price accepted by the IDA was based on their recommendations.

14.3 The majority of land acquisition by IDA is intended for the medium/long term needs of industrial development. As indicated above land banks are regarded as an important factor in industrial development since they enable industrial sites to be offered immediately to prospective industrialists thus eliminating the delays normally associated with land purchase.

14.4 There is a limited demand for industrial sites at any given time other than in the major cities. Thus to achieve industrial land prices, sites must be disposed of in a controlled fashion, often over a long number of years.

14.5 Where industrial land is offered for sale outside the major cities on a forced sale basis and where no demand exists at that time for industrial sites in the area it is inevitable that the land will only achieve agricultural prices which at the time of disposal were relatively depressed.

14.6 In computing historic costs of land no allowance was made for the differing qualities of plots within the one holding. In Ringaskiddy for example much of the land disposed of was in the less favoured areas and/or was affected by wayleaves effectively sterilising development. Yet the site cost and site development cost was apportioned evenly throughout Ringaskiddy. The entire historic land cost and site development costs at Ringaskiddy will be fully recouped under existing and future normal land sales.

14.7 Published details of the Annual Reports of various firms involved in the property market in the UK for example show the disastrous effects on profitability where firms are required to dispose of property in a difficult market situation.

ATTACHMENTS

WHITE PAPER ON INDUSTRIAL POLICY

Industrial Land and Buildings

5.42 The availability of industrial sites and factory buildings is a necessary part of industrial development strategy. During the 1970s, IDA and SFADCo built up a large reserve of both land and buildings. In recent years the supply of these facilities has outstripped demand. Accordingly the Government have decided on the following guidelines for land acquisition and advance factory construction:

(i)over the next three years IDA will reduce the amount of available advance factory space at any one time to 2 million sq. ft. This is equivalent to two years’ stock of factories;

(ii)IDA will investigate the possibility of reducing construction costs by building less elaborate units where possible, and by building smaller factories as starter units;

(iii)IDA special incentives to private investors for advance factory construction are being discontinued;

(iv)any private sector factory space available will be actively promoted by the Development agencies;

(v)over the next three years IDA will reduce its available land holdings to 4,000 acres (including the special sites at Ringaskiddy, Ballylongford and Castletownbere);

(vi)while recognising the fundamental difference between IDA and private developers, IDA will adopt, as far as possible, a commercial approach to their investment in land and buildings;

(vii)IDA will prepare separate accounts for its Building Operations Division each year, containing the following information:

—balance sheet

—funds flow statement

—organisation chart of IDA Building Operations Division and details of the administrative costs of the Division.

The accounts will be prepared in accordance with current accountancy practices in the property market and should include information on the valuation of all properties and details of subsidies (rent reductions, deferred payments, etc.) provided; and

(viii)the involvement of IDA in funding the construction of custom-built factories will be phased out as far as possible. In order to facilitate industrial promoters (particularly overseas promoters) who have a need for local expert advice, IDA will act on a consultancy basis to advise, negotiate with contractors and supervise the actual construction of special factories on the basis that the funding of the project would be a matter between the promoter and contractor. Any greater involvement should only arise where absolutely necessary to secure a particular project. The existing IDA policy of recovering the full cost of special factories (net of capital grant) together with agency fees (13 per cent) and interest will be continued.

ATTACHMENT 2

IDA SALES

1988 Government Sales (Land)

1988 Government Sales (Factories)

1989 FACTORY SALES (EXCHEQUER)

HISTORIC COST

1989 LAND SALES (EXCHEQUER)

HISTORIC COST

ATTACHMENT 3

SFADCo 1988 LAND SALES

SFADCo 1988 FACTORY SALES

Questions raised by the Committee of Public Accounts following submission of a report from the Department of Industry and Commerce

Sales of Land by Industrial Development Authority

1.Were local authorities approached to see what uses they might have for the land?

2.Were the planning authorities approached regarding a change from industrial use to other uses such as housing thus increasing the value of the properties?

3.Were any of the properties the subject of a subsequent change in planning permission or rezoning?

4.These properties were sold under the tender system. Was the possibility of an auction looked at, where one would have a reserve price?

5.Have any of these properties been resold by the purchasers? If yes, is it possible to indicate the sale price achieved?

6.Did any of the original owners of any of these properties tender for the lands in question?

7.What type of advertising (local or national papers) was undertaken when disposing these properties?

8.s there any evidence to suggest that the IDA paid over the odds for these lands — Vendors may have deliberately pitched their sale price high because the land was required by a Government Agency?

9.Did the IDA examine the possibility of selling the land on a gradual basis over the year rather than flooding the market when they did?

10.Can you provide a list of the outside firms involved in the disposals?

11.What outside bodies were involved in the 1985 revaluation of lands?

12.Is it conceivable that the IDA Properties Division may have revalued these properties incorrectly?

13.In looking at some of the re-valuations, in particular, a number of sales (raised by Deputy Taylor) — Ringaskiddy 82.8 acres and Dungarvan being two — what explanation is offered for the low sale price of the lands with substantial losses?

14.What explanation is offered on the sale of land at Ballyfermot, 70 acres purchased in 1979 for £1,957,970 and sold 10 years later for £250,000?

15.What consultations took place between the IDA and the Department on the reduction in Government demand for 5 million down to 3.8 million?

16.Can the Committee be assured that no member of the staff of the IDA former or present was involved in the purchase of any of these lands or buildings either individually or with a group of others?

17.What income, if any, was derived from the sites when in the hands of the IDA — i.e. grazing?

18.How is the financing of the purchase of the properties organised — with borrowed funds? If so, what was the actual cost to the State of acquisition, including financial costs?

Specific Questions raised by Members

INDUSTRIAL DEVELOPMENT AUTHORITY REPORT ON POLICY AND PROCEDURES FOR THE PURCHASE AND SALE OF PROPERTY

1.Background.

2.White Paper on Industrial Policy.

3.IDA Land Acquisition Procedures.

4.IDA Property Policies.

5.Property Valuation and Accounting Policy.

6.Government Directed Disposals.

7.Questions raised by Committee of Public Accounts.

Appendices

I.Section 11, Industrial Development Act, 1986.

II.Section 16, Industrial Development Act, 1986.

III.IDA Building Operations Division (1975).

IV.IDA Industrial Land and Buildings Budget.

V.Sample promotional material for property sales.

VI.Lisney Property Report, December, 1987.

VII.List of Auctioneers.

VIII.Format of Accounts.

IX.Extract from Lisney Letter.

X.List of Privately Financed Factories.

INDUSTRIAL DEVELOPMENT AUTHORITY REPORT ON POLICY AND PROCEDURES FOR THE PURCHASE AND SALE OF PROPERTY

1. Background

1.1 The Industrial Development Authority operates under and is controlled by the Industrial Development Act 1986, which consolidated with amendments the Industrial Development Acts, 1969 to 1981.

1.2 Fundamentally, IDA acts under the Minister for Industry and Commerce as an organisation having national responsibility for the implementation of industrial development policies. One of its primary functions is to foster the national objective of regional industrial development. (See Appendix I for extract from Section 11 of the Industrial Development Act, 1986). Among its many functions it is permitted to acquire, hold and dispose of land and to develop and construct industrial estates and advance factory buildings. (See Appendix II for Section 16 of the Industrial Development Act, 1986).

1.3 In the 1970’s IDA published strategies for industrial development, which had the endorsement of Government. The first, published in 1972 and entitled Regional Industrial Plans 1973-77, outlined the need for a balanced regional development. The strategy nominated town groupings dispersed throughout the eight regions of the country where industrial development was needed to provide job opportunities. The report endorsed the success of the industrial estates concept in influencing industrial growth and stated that if industry is to be attracted to any particular location it was essential that serviced industrial sites were available.

1.4 The report indicated that land should be suitable for factory construction and be serviced or readily accessible to servicing with water, sewerage and power facilities and that adequate road/communications were also essential.

1.5 The report identified land in Local Authority ownership which had been assessed by IDA as suitable for industry and indicated that IDA had initiated a programme of purchasing land suitable for industry in the locations specified in the Regional Plans. It also stated that advance factories provided a significant stimulus to industrial development at a particular location and noted that the first IDA programme of advance factories commenced in 1971.

1.6 The IDA Industrial Plan 1978-82 continued with the same strategy to promote industrial development and create jobs throughout the various regions. Furthermore, job targets for various town groupings were established. Emphasis was placed on a number of regions where insufficient development had taken place. It was also decided that industrial sites and advance factories were required in Dublin to counteract the high level of job loss and the growth in the population.

1.7 The second regional plan confirmed IDA’s intention to continue the programme of advance factory construction and it was decided to monitor the landbank and purchase further sites where necessary.

2. White Paper on Industrial Policy

2.1 The Government White Paper on Industrial Policy, published in 1984, inter alia, required IDA to:

(a)reduce over three years the amount of available advance factory space at any one time to two million sq. ft.

(b)reduce over three years its available land holdings to 4,000 acres (excluding special sites at Ringaskiddy, Ballylongford and Castletownbere) and

(c)prepare separate accounts for the Building Operations Division each year.

2.2 The position at the end of 1989 in respect of these requirements was as follows:

(a)The availability of IDA factory space at the end of 1989 was 0.7 m sq. ft. with a further 1.39 m sq. ft. of space reserved for potential projects,

(b)At the end of 1989 IDA had 2,700 acres of land excluding Ringaskiddy and Castletownbere, and

(c)Separate accounts had been prepared and published in respect of IDA’s Property Division each year since 1985.

3. IDA Land Acquisition Procedures

3.1 The strategy adopted by IDA in purchasing industrial land was to first approach the Local Authority to see if they had any suitable sites in the nominated towns in the regional plans. IDA would then negotiate the purchase of such sites from the Local Authorities. In the event of the Local Authority having no suitable sites for disposal, other suitable sites were jointly identified with Local Authorities for possible acquisition. Various methods were used to purchase these sites, in some instances the Local Authority bought them on behalf of IDA, others were purchased by local auctioneers and some were negotiated directly. The IDA set the following characteristics for land to be suitable for industrial development:

—Zoned industrial or capable of being rezoned for industrial use.

—Adequate supply of water for industry.

—Adequate capacity in foul sewers for industry.

—Good road structures for access by heavy goods vehicles.

—No adjoining incompatible users.

—Good level land.

—Close to the town in question.

Sites were purchased subject to trial holes and suitable planning permission.

3.2 In essence, therefore, IDA was acquiring land which was to comply with very stringent criteria. Whereas it was generally in agricultural use at the time of acquisition it is important to note that much of the land because of the characteristics outlined above had considerable development potential or “hope value”. This was particularly the case, due to the buoyancy of the development land market, in the 1970’s when most of the land was acquired.

3.3 It is IDA experience that in any given town there are few sites meeting the characteristics referred to above. Considerable difficulties were encountered in acquiring suitable sites. The land was not for sale in the open market but was acquired by negotiation from often unwilling vendors. In many cases a number of landowners were involved in the negotiations for site assembly.

3.4 While IDA has powers to compulsorily acquire land and buildings, we were reluctant to use these powers, although vendors were made aware of their existence. They were infrequently invoked for the following reasons:

(i)The use of C.P.O. powers would have resulted in long delays as land owners would have inevitably appealed the compulsory purchase order.

(ii)IDA has always sought to work with local community groups in fostering industrial development. The use of C.P.O. powers would have inevitably resulted in considerable local agitation which in turn might lead to vexatious objections to planning applications lodged by IDA or industrialists.

3.5 Considerble professional expertise and experience has been built up within IDA Head Office and in the Regional Offices in regard to appropriate industrial land values throughout the country. External professional advice is sought where appropriate.

3.6 In the early seventies a special department composed of property experts such as engineers and architects with a background in site acquisition and development was assembled to acquire sites throughout the country (see Appendix III attached for the structure of this Department). In addition, engineering or architectural specialists were and continue to be employed in each of the Regional Offices.

3.7 When negotiations had been concluded to acquire a parcel of land the site acquisition department referred the case to the IDA’s Executive Committee or to the main Board for approval. Every acquisition of property must have the prior approval of either of these Boards. There is no delegation of this authority.

3.8 Over the past 5 years few sites have been acquired by IDA as the following figures demonstrate:

4. IDA Property Policies

4.1 The basic philosophy/objective of IDA is to have a readily available supply of high-tech buildings, serviced sites and business parks, with a high standard of landscaping and working environment which will influence overseas mobile investment to select a particular location. In addition the availability of property facilitates faster start-up times and job creation.

4.2 The availability of suitable serviced industrial land and advance factory space is especially important for the promotion of Inward Investment. IDA and SFADCo, to date, have been better able to compete for projects by developing high quality sites in strategic locations around the country, for instance at Clonshaugh and Snugborough in Dublin, Plassey in Limerick, Parkmore in Galway, Finisklin in Sligo, Little Island and the Business & Technology Park in Cork.

4.3 Companies are attracted to these parks because the proper environment has been created and the infrastructure, such as roads, water and drainage facilities, is already in place. This enables companies to concentrate more on the efficient design and completion of their buildings. Also the “lead” time required for the commencement of construction of a factory building is greatly reduced and the uncertainty for promoters of new projects is removed.

4.4 Most of the major overseas projects which have been announced in the past few years have purchased IDA owned land or occupy IDA owned factories including:

—Motorola BV.

—Intel Ireland Limited.

—Fujitsu Isotec Limited.

—Sandoz Ringaskiddy Limited.

—Brother Industrial (Ireland) Limited.

—Stratus Computer Limited.

—Thermo-King Europe Limited.

4.5 Much greater emphasis is now given to having private developers undertake, at their own risk, the provision of advance factory space on sites owned and developed by the IDA. This new partnership approach has been extremely successful. Private developers have agreed to provide 25 new Private Sector buildings, 7 of which are complete, 7 under construction and 9 to commence construction in 1991. Of these 5 are occupied and 5 reserved. In addition to the above, negotiations are taking place for a further 5 factories to be constructed in the near future. (A full list of the properties is contained in Appendix X.)

4.6 Normally property disposals form part of a package of incentives to a grant-aided manufacturing or international services company the majority of which would be from overseas.

4.7 The price at which industrial land and buildings are disposed of is set by the IDA Board. The prices charged to industrialists presuppose that the properties are to be disposed of for industrial purposes in an orderly fashion over time. In setting such prices IDA would also have regard to the fact that it is operating in a highly competitive international market for mobile investment.

4.8 IDA does not function as a commercial property development company. The overall objective is to recoup the acquisition and development cost of land on a national basis over time. This naturally results in some sites being sold at a loss and others being sold which generate a surplus. The IDA does not publish details of losses or profits on individual sales as it would undermine its negotiations with prospective purchasers. Normal property sales (excluding Government directed sales) have resulted in profits of £2.76 million over the book value over the past four years.

4.9 It is IDA’s policy to maximise income from leased and vacant land and factories:

—Over the past four years income from rent and income from deferred sales has averaged £10.58 million per annum.

—Income from temporary lettings of buildings in 1989 was £350,000 (figures for previous years not separately available).

—Income from grazing/tillage lettings in the past four years has averaged £128,500 per annum.

5. Property valuation and accounting policy.

5.1 As previously mentioned the White Paper on Industrial Policy required IDA to prepare separate accounts for the Building Division each year. Following the White Paper directive IDA’s property portfolio, including land, was revalued in 1985 on a then current value basis. This resulted in the creation of a valuation reserve (i.e. write down in value) in the Accounts of the Authority. The writing back of the relevant portion of these reserves impacts on the reported profits/losses on property disposals.

5.2 From 1985, property has been depreciated on the following basis:

(i)Factories over a 33 year period (i.e. 3 per cent per annum).

(ii)Unallocated site development on a 10 year period (i.e. 10 per cent per annum).

(iii)The valuation of unoccupied buildings is reviewed on an annual basis.

(iv)There is no depreciation in respect of land holdings.

6. Government directed disposals.

6.1 As part of the Programme for National Recovery IDA’s capital building budget for 1988 was set at £8 million (down from a high of £77.2 million in 1981) to equate with anticipated capital income from own resources. Over recent years the building budget has been almost entirely funded from IDA’s own resources. (See Appendix IV).

6.2 In addition the Government directed IDA to generate a further £5 million from property disposals. This was subsequently reduced to £3.8 million following the transfer of IDA property in the Mid-West to SFADCo and the failure to secure a satisfactory price for the land at Ballylongford. (See response to Question No. 15 below.)

6.3 In compiling the list of properties for disposal the following criteria were used:

—Properties deemed by the Authority to be surplus to immediate needs and thereby minimising any negative effects on IDA’s job creation programme.

—Buildings which were generally empty for over 5 years.

—Sites which had incurred the least development costs.

—The need to have a regional balance in the disposals, so as to maintain an adequate supply of land throughout the country.

—The least attractive sites or portion of sites were selected.

6.4 Following discussions with the Department of Industry and Commerce it was decided to proceed with the sales. The IDA Board approved of the disposal programme to take place in three phases throughout the year.

6.5 As these sales were outside IDA’s normal business activity, i.e., direct sales to industry, it was decided to use Auctioneers to dispose of the lands. The criteria used in their selection was as follows:

—They were members of the Irish Auctioneers and Valuers Institute.

—They had well established practices in their area.

—They had either successfully acted for us in another capacity or were recommended by informed local sources.

—In general locally based Auctioneers were used on the basis that they were best positioned to know the value of the land, the likely bidders, and the full potential of the land.

6.6 Each of the properties was valued by the Auctioneers and a reserve price was set. The Auctioneer recommended the best method of sale, either Public Tender, Public Auction or Private Treaty. The properties were then widely advertised in both the local and national papers, as advised and arranged by the Auctioneers involved. Each Local Authority was advised in writing by IDA of the specific sites and buildings which it was proposed to sell in their area.

6.7 Consideration was given to the lodgement of applications for Planning Permission to develop some of the sites for alternative uses in order to maximise the sale prices. This was not pursued on the basis that this would have involved the preparation of plans and the lodging of Planning Applications and would have delayed the disposals and resulted in the target returns not being achieved. Each site’s potential for development was highlighted in the promotional material prepared by the Auctioneer handling the sale. (See Appendix V for an example).

6.8 Reserve prices were set following the recommendation of the Auctioneers involved. In the event of the reserve price not being achieved at Auction or Tender the property was withdrawn and was offered for sale by Private Treaty until such time as the reserve price had been achieved.

6.9 At the time of the disposals the property market was in a depressed state. (See Appendix VI for extract from the Lisney Report dated December 1987.) In the absence of development potential most of the sites reverted to agricultural value.

6.10 In the calculation of profits/losses on Government sales it is important to note the following:

(i)The least attractive portions of each site were disposed of (eg, areas affected by rights of way and to the rear of the sites). However, in computing the cost of land at each site the acquisition cost was apportioned equally over the entire site irrespective of the quality of the land being sold.

(ii)Similarly the development costs (roads, services, etc) were spread over the entire land even though the portion sold often did not benefit from the development works, being at the rear of the land holding.

6.11 When the accounting policies set out in Section 5 above are taken into account, the losses on Government directed sales can be restated as follows:

1988 — £4,297,165

1989 — £1,980,828

7. Questions raised by Committee of Public Accounts

1. Each Local Authority was advised in writing by IDA of the specific sites and buildings which it was proposed to sell in their area. Two of the sites were purchased by Local Authorities.

2. The Planning Authorities were not approached regarding a change of the use from industrial use to other uses. This is a lengthy process involving the preparation of plans and the lodging of a planning application. It would have delayed the disposals and would have resulted in the target returns not being achieved. Each site’s potential for development was highlighted in the promotional material prepared by the auctioneer handling the sale.

3. Having contacted all of the relevant Local Authorities we report as follows:

Re-Zoning:

The sites at Ballinasloe Lot 25 (1988), Tuam Lot 44 (1988) and Athenry Lot 28 (1988) were re-zoned for housing. Dungarvan Lot 23 (1988) was partly re-zoned recreational and part housing. Wexford Lot 30 (1988) was ze-zoned recreational.

Planning Permissions:

Planning Permissions were received as follows:

Lot 5 (1988) New Ross — Factory premises

Lot 10 (1988) Balbriggan — Outline planning permission for mixed developments on part of site.

Lot 12 (1988) Castleisland — Housing development

Lot 15 (1988) Carlow — Industrial premises

Lot 16 (1988) Enniscorthy — Small industrial premises

Lot 18 (1988) Ringaskiddy — Pump house and tank

Lot 22 (1988) Mitchelstown — Fabrication workshop and factory. This site was bought by Cork County Council

Lot 23 (1988) Dungarvan — Club house

Lot 28 (1988) Athenry — House

Lot 41 (1988) Edenderry — Factory premises

Lot 48 (1988) Buncrana — Extension to adjoining industrial unit.

It is important to note that in many of these cases only a small fraction of the lands sold were the subject of the planning application.

4. Each property was sold by either public tender, public auction or private treaty as recommended by the auctioneers handling the sales. The properties were valued by the auctioneers and a reserve price was set.

5. We have contacted all of the auctioneers involved in the sales and our Regional Offices. They informed us that to the best of their knowledge the following sites were re-sold.

Lot 24 (1988) East Wall Road (This site was purchased by company dealing in waste material. Following objection by local residents it was subsequently re-sold).

Lot 31 (1988) Dundalk (Portion of site).

Lot 33 (1988) Ringsend.

In addition Lot 4 (1989) at Ballyfermot is for sale.

When we made contact with the auctioneers who handled the subsequent disposals they were unwilling to divulge specific information on the sale prices as none of the properties were sold by public auction.

6. From examining our records, it would appear that in four cases the original owners repurchased all or portion of the land which they had originally sold to IDA, namely, Lot No. 1 (1988) — Letterkenny, Lot No. 9 (1988) — Ballisodare, Lot No. 13 (1988) — Sinnottstown, Co. Wexford, and Lot No. 42 (1988) — Carrick-on-Suir.

7. The properties were widely advertised in both local and national papers as advised and arranged by the auctioneers involved.

8. In our view there is no evidence to suggest that IDA paid over the odds for any of the subject properties. (See earlier section re land acquisition procedures).

9. A conscious decision was taken to dispose of the properties on a gradual phased basis spread throughout the country. The Authority was particularly careful to avoid flooding the market in any particular location.

10. Please find attached (Appendix VII) a list of the auctioneers involved in the disposals.

The criteria used to select the auctioneers was as follows:

—They were members of the Irish Auctioneers and Valuers Institute.

—They had well established practices.

—They had either successfully acted for us in another capacity or were recommended to us by informed local sources.

—In general locally based Auctioneers were used on the basis that they were best positioned to know the value of the land, the likely bidders and the full potential of the land.

11. & 12. Advice was taken from a firm of professional accountants in relation to the accounting requirements for the revaluation of property assets. A firm of professional valuers was consulted in relation to the appropriate basis for the valuation of property. In this connection, please find attached Appendix VIII, an extract from the 1985 IDA Annual Report headed “Format of Accounts.” In essence leased properties were valued at historic cost and property available for promotion was stated at the then current price at which the Authority were disposing of its sites and buildings.

13. Dungarvan

(i)IDA originally purchased 72 acres in one lot in 1977 at a cost of £251,000 (i.e. £3,480 per acre).

(ii)Site development costs (roads, water main, foul sewer, lighting, ESB contributions) of £400,000 were incurred (i.e. £5,550 per acre).

(iii)Prior to the Government directed disposal 12 acres were disposed of to industry, 15.45 acres to the Local Authority for road widening and an IDA cluster development used 0.75 acres.

(iv)Of the remaining 41.8 acres, 20 acres were sold under the Government directive (21.8 acres remain for promotion). The site was offered for sale by Public Tender by Harty & Co. in Dungarvan. It was extensively advertised (see Appendix V for a copy of one of the ads) as recommended and arranged by the Auctioneers. Due to the presence of a major industrial plant it was necessary to prohibit residential development on portion of the land adjoining the factory. The Auctioneers recommended the sale price of £85,500 for acceptance.

(v)The loss on the Government directed sales is calculated as follows:

Note: Although the site disposed under the Government Directive was only partly developed, it bore the full pro rata costs of site development at Dungarvan.

(vi)Following the Government sale 20.8 acres remained for disposal. When the remaining 20.8 acres are disposed of a surplus will be generated on the total site costs at Dungarvan.

Ringaskiddy — General Sales

(i)The IDA originally purchased 1,024 acres at an approximate cost of £4.28 million (i.e. £4,179.69 per acre). All land was negotiated by a local Auctioneer, on behalf of IDA. C.P.O. powers were used in one instance.

(ii)Site development costs (road, water mains, major foul sewer and ESB contributions) of £14.2 million approximately were incurred.

(iii)As with the purchase of most sites for industrial use, there is a certain element of the site which is not suitable for development, i.e., marsh land, boundary hedgerow, etc. The inclusion of such land in a site the size of Ringaskiddy is unavoidable.

(iv)When the IDA dispose of sites from a holding the size of Ringaskiddy, the non disposable acreage is removed from the equation when calculating the historical cost of the site and the non disposable acreage is deemed to have no value as it is not normally disposed of. Therefore the cost of acquiring and developing the holding is apportioned to the saleable acreage only and is recouped under normal sale arrangements.

(v)Prior to Government Directed Disposals 91 acres were disposed of.

(vi)Of the remaining 823 acres, 173.61 acres were sold under the Government Directive and 649.39 acres remain for promotion.

The sites at Ringaskiddy were put up for Public Auction by Cohalan Downing after extensive advertising. The sites which were selected for sale at Ringaskiddy were those which were either the poorest land, were affected by rights of way or wayleaves or were isolated from the main bulk of land.

(vii)The loss on the Government directed sales is calculated as follows:

Note: 30 acres of the Ringaskiddy Government directed disposals were marsh land and incapable of industrial development.

(viii)Following Government sales 649 acres remain for disposal, 152 acres have been agreed for sale but the actual sales have not yet closed, 149 acres are under option for sale, leaving 348 acres available for promotion.

(ix)When account is taken of (a) sales to date, (b) sales under negotiation, (c) land on option and (d) present selling price per acre in Ringaskiddy, a surplus, over and above the cost of site acquisition and site development, in the region of £2.5 million will be generated when the site is disposed of in its entirety.

Ringaskiddy — Sale No. 18

(i)In this case 30 of the 62.8 acres (due to a typographical error stated in previous report at 82.8 acres) being sold were deemed to be unsaleable. (See above).

(ii)Lot 18 (62.8 acres) was sold for £70,000 and the costs of acquiring and developing the site were apportioned to both the saleable and unsaleable elements. As stated previously the unsaleable acreage of a holding is not normally disposed of. It is written off when the holding is disposed of in its entirety and its original cost is written into the cost of the developed acreage.

(iii)The sale of lot 18 was unusual insofar as 50 per cent (approximately) of the land being sold was deemed unsaleable (i.e. marsh land). Because of the high proportion of unsaleable land the site being disposed of, it was decided to attribute a land cost to the whole of the site based on the original full cost of Ringaskiddy.

(iv)As stated previously the unsaleable element of a holding is not normally disposed of. It could be argued therefore that the unsaleable element on this sale (30 acres) should not have attracted any site development or acquisition costs as those costs would ordinarily be recouped on other disposals of saleable acreage.

14. The land at Ballyfermot was purchased in December 1979 from Semperit at a time when IDA was actively seeking to purchase land in the area. It was purchased at the prevailing market rate.

The land in question was zoned for industrial use and Dublin County Council had plans to carry out infrastructural improvements. However, Dublin County Council postponed its plans and as a result the area declined in attractiveness and was not favoured by a number of prospective clients.

The property was valued by Lisney and Son at £250,000 (see letter extract in Appendix VIII) and was put up for sale by means of Public Tender through Lisney and Son. It was extensively advertised and a sign board was erected on the site. Despite this no tenders were received on the appointed date. The property was subsequently sold at £250,000 which was recommended for acceptance by the Auctioneers.

15. Following the Government decision regarding IDA to raise £5 million in 1988 from the disposal of land and factory space the IDA carried out a detailed examination of its property holdings to identify those which could be disposed of with minimum disruption to its industrial promotion activities. Following discussions between the Department of Industry and Commerce and the IDA and SFADCo, it was agreed that the £5 million target would be reduced by £0.6 million to accommodate the transfer of IDA property in the Mid-West to SFADCo from the beginning of 1988 in respect of SFADCO’s extended remit. SFADCo were, therefore, required to raise £0.6 million of the £5 million total.

Among the properties earmarked for sale was a substantial portion of the Ballylongford site in North Kerry. This site, despite being promoted for many years, had failed to find a suitable user and was expected to raise a substantial element of the £5 million sought from IDA. When the tenders for this site were received it was decided not to dispose of it until a better offer could be secured. This meant that the full amount sought by the Exchequer could not be realised in 1988 representing a shortfall of £0.6 million. The IDA fully achieved the revised target of £3.8 million agreed with the Department of Industry and Commerce, which allowed for the non-disposal of Ballylongford. The Ballylongford site was subsequently transferred to SFADCo when they assumed responsibility for promoting North Kerry (from 1 July, 1989).

16. Auctioneers were instructed to ensure that the sales were conducted at arms’ length. As far as we are aware no member of staff of IDA former or present purchased any of the properties either individually or with a group of others. In the case of a site at Edenderry, an Architect who was formerly a member of IDA staff (resigned on 1 October 1976), acted for a company in purchasing a site.

17. In many cases only portions of sites were sold. It is therefore not possible to provide a detailed breakdown of income received at an individual site level. However, total income from grazing/tillage lettings for the years 1986-1989 is as follows:

1986 — £152,337

1987 — £141,399

1988 — £112,589

1989 — £107,666

18. IDA expenditure on building operations activities is funded through a mixture of own resources (derived from the sale of fixed assets) and Exchequer grant-in-aid. Funding from the Exchequer will obviously be derived either directly through taxation or through Exchequer borrowing. Insofar as funding is obtained through the latter manner there would be a financing cost to the Exchequer, as there is in respect of all Government expenditure.

Deputy Dennehy’s query

The buildings on the Technology Park in Model Farm Road were financed as follows:

International Services Building 1 (occupied by Boeing) — funded from IDA property budget.

Hi-Tech Unit 1 (occupied by Logitech who are currently extending building) — funded from IDA property budget.

Hi-Tech Building 2 (occupied by Burle Industries) — privately financed.

International Services Building 2 (occupied by G. C. Data) — privately financed.

Hi-Tech Building 3 (recently completed) — privately financed.

Hi-Tech Building 4 (under construction for owner occupation).

Hi-Tech Building 5 (under construction for owner occupation).

Deputy Flood’s query

IDA do not maintain accounting records showing a breakdown of the cost and maintenance over the years of the sites and buildings sold as part of the Government Directive.

In the IDA accounts for 1987 maintenance of all IDA vacant sites and buildings (excluding IDA enterprise centres) is stated at £1,270,043. The figures in respect of 1988 and 1989 were £1.41M and £1.49M respectively.

APPENDIX I

PART II

Industrial Development Authority

11.—(1) Subject to the provisions of this Act, the Authority shall be an autonomous body with the following functions:

(a)to act under the Minister as a body having national responsibility for the implementation of industrial development policies;

(b)to provide and administer such grants and other financial facilities for industry as it may be authorised by the Oireachtas to provide and to administer;

(c)to initiate proposals and schemes for submission to the Minister for the creation and development of industry and the provision and maintenance of industrial employment;

(d)to provide, develop, construct, alter, adapt, maintain and administer industrial estates and factory buildings together with the associated facilities of such estates and buildings;

(e)to foster the national objective of regional industrial development;

(f)to survey possibilities of further industrial development and advise the Minister thereon;

(g)to advise the Minister on steps necessary and desirable for establishing new industry and for the expansion and modernisation of existing industry;

(h)to give on request advice and guidance to persons contemplating starting new industry or expanding existing industry;

(i)to provide such assistance of a technical or advisory nature to developing countries as the Minister may consider appropriate; and

(j)to advise on any matter relating to industrial development referred to it by the Minister.

(2) The provisions of subsection (1), paragraphs (b) and (d) shall not apply to the Shannon Customs Free Airport.

(3) The Authority shall, in the exercise of its functions, act in accordance with policies set out for it from time to time by the Minister.

(4) The Authority may in the exercise of its functions have regard to the extent to which an industrial undertaking will serve to promote national objectives for regional development.

APPENDIX II

16.—(1) For the purpose of providing or facilitating the provision of sites or premises for the establishment, development or maintenance of an industrial undertaking the Authority may—

(a)acquire any land either permanently or temporarily and either by agreement or compulsorily;

(b) acquire (either permanently or temporarily and either by agreement or compulsorily) any easement, way-leave, water-right or other right whatsoever over or in respect of any land or water;

(c)terminate, restrict or otherwise interfere with (either permanently or temporarily and either by agreement or compulsorily) any easement, way-leave, water-right or other right whatsoever over or in respect of any land or water;

(d)construct, adapt and maintain buildings and other works;

(e)provide services and facilities in connection with land;

(f)sell, lease or otherwise dispose of land vested in it;

(g)make grants to aid persons to—

(i)acquire land,

(ii)construct and adapt buildings and other works, and

(iii)provide services and facilities in connection with land;

(h)do any act or thing which may be necessary for or incidental to the doing of anything which the Authority is by the preceding paragraphs authorised to do,

if the Authority—

(i)considers that industrial development will or is likely to occur as a result, and

(ii)is satisfied that the undertaking conforms or will conform to the criteria set out in subsections (3) and (4) of section 21 or section 25 (2).

(2) The provisions of the Second Schedule shall apply to the exercise by the Authority of its powers under this section.

(3) Nothing in subsection (1) shall be construed as affecting the operation of section 130 of the Transport Act, 1944.

APPENDIX VII

Dermot Rainey & Sons, Letterkenny, Co. Donegal.

Patrick Cleary & Sons, Mullingar, Co. Westmeath.

O’Shea O’Toole & Partners, Waterford.

O’Doherty & Son, Athy, Co. Kildare.

G. W. Warren Estates, Enniscorthy, Co. Wexford.

Purcell Properties, Waterford.

Brendan Toohy & Co., Westport, Co. Mayo.

Murphy & Son, Sligo.

Ganly Craig, Ashbourne, Co. Meath.

Raymond Corish & Co. Ltd., Wexford.

W. H. Giles & Co., Tralee, Co. Kerry.

Raymond Corish & Co. Ltd., Wexford.

E. Byrne & Sons, Edenderry.

Wm. Marsh, Cork.

Cohalan Downing, Cork.

Matt O’Sullivan, Clonakilty, Co. Cork.

Quinn Auctioneers, Longford.

Keane Mahoney & Smith, Cork.

Harty & Co., Dungarvan, Co. Waterford.

Hamilton Osborne King, Dublin.

Donal Hynes & Son, Athlone, Co. Westmeath.

W. Mansfield, Portlaoise, Co. Laois.

Toole & Co., Loughrea, Co. Galway.

P. B. Gunne, Dundalk, Co. Louth.

Shee & Hawe, Carrick-on-Suir, Co. Tipperary.

P. Smith & Sons, Navan, Co. Meath.

J. F. Smith & Co., Galway.

Seán Daly & Co. Ltd., Kenmare, Co. Kerry.

J. Robinson & Son, Letterkenny, Co. Donegal.

Seán Meehan & Sons, Bundoran, Co. Donegal.

J. E. Smith & Co., Galway.

P. Harty, Dungarvan, Co. Waterford.

Joseph G. Brady, Carrick-on-Shannon, Co. Leitrim.

J. Dowdall, Roscommon.

APPENDIX VIII

FORMAT OF ACCOUNTS

These accounts are presented in a new format. Professional accountants and valuers were retained to advise on matters relating to the format. The format has been approved by the Minister for Industry and Commerce, with the consent of the Minister for Finance in accordance with paragraph 7(2) of the First Schedule to the Industrial Development Act 1986. The new format of accounts has taken into consideration the guidelines set out in paragraph 5.42(vii) of the White Paper on Industrial Policy in regard to the preparation of separate accounts for the Authority’s Building Operations Division.

The financial period to which these accounts relate is the calendar year 1985 during which the Authority operated under the Industrial Development Acts 1969 to 1981, all of which Acts were repealed by the Industrial Development Act 1986; the references to relevant statutory provisions in the Accounts and notes thereto are to the provisions of the repealed legislation.

Certain changes in accounting policies have affected the comparative figures for 1985 as against 1984 as indicated in notes 6, 9, 10, 12 and 13.

Heretofore the Authority has valued its property at historical cost in its annual accounts. In the new format of accounts leased property continues to be valued at historical cost. Property available for promotion is stated at net current value which is the anticipated realisable value as stated in the Authority’s annual sale and leasing package. It has given rise to a revaluation of property by IR£47.7 million. This is mainly attributable to the Authority’s role in fostering regional development which requires the Authority to purchase land, build factories and develop sites throughout the country, frequently in areas not catered for by the private sector on commercial grounds.

In the accounts of Building Operations Division, property is classified as “rented” or “other industrial”. The latter category includes factories available for promotion, land and site development not yet allocated and work in progress.

The 1985 accounts are the first in which depreciation has been charged. Consequently, in addition to the charge for 1985, there is a special charge for previous years. Prior to 1985 depreciation was not charged in the accounts but was shown as “notional depreciation” by way of note.

Prior to 1984 capital expenditure by Building Operations Division was financed by grant-in-aid from the Exchequer. Since 1 January 1984 such expenditure has been financed from own resources by receipts from sales of properties.

All grants-in-aid received from the Exchequer are interest free. In 1985 the overall cost to the Exchequer of borrowing funds on the domestic gilt market was 12.5 per cent.

APPENDIX IX

While the eventual major road connection to this site is intended to be via the new Nangor Road, via a section of the Coldcut — Fox & Geese Road, involving a new bridge across the canal, the information available indicates that this is at least a medium term proposal, despite the fact that the development of the Nangor Road is being treated as priority, subject to funds.

The 1987 Dublin City Development Plan shows the improvement of Killeen Road at category 1. Inspection of the detailed plans indicated provision for a connection to the existing, sub-standard road which serves part of the southern boundary of the site. However as this road would require considerable improvement, probably at the expense of the developer, we suggested that application would be made for a road connection serving the site from the point on Killeen Road where there is road frontage at the eastern boundary of the site. Such a road connection did not appear to pose a problem for the Roads Department.

Assuming that a road connection is available directly from Killeen Road, and that the foul and storm water drains are readily available and that the Planning Department do not impose any other onerous conditions attached to a planning permission, then the potential of the site for development becomes much more of a practical possibility.

We are certain that no builder would contemplate the development of the site area under present market conditions, particularly in view of the availability of other fully serviced and more favourably located sites and it is much more likely that development would be phased over several years. Unfortunately the first phase, i.e. the section nearest to the Killeen Road, will involve an unusually large length of road construction, in view of the elongated nature of that portion on the site.

Taking all the factors into account, and making the best assumptions which are possible, we estimate that the current market value of the lands to be in the region of £250,000 (two hundred and fifty thousand pounds).

Returning now to the marketing of the property, as there is some uncertainty regarding the level which might be obtained, we would recommend offering the premises for sale by Public Tender. We do not feel that there would be sufficient competition to merit a sale by Public Auction, and we would not favour offering the site for sale by Private Treaty, as this would involve disclosing an asking price. We would propose offering the site as one lot, only resorting to considering subdivisions, phased payments or variants in the event that a satifactory tender is not received. We would suggest a tender date of approximately 8 weeks from receipt of your firm instruction, and after receiving confirmation from your solicitors that the tender documents will be available in good time.

To cover the erection of suitable “For Sale” boards on the property, the preparation of sale particulars, and the insertion of classified newspaper advertisements in the national newspapers, we would envisage an advertising expenditure of say £3,000 plus VAT. Our sales commission, which would be to your account would be at the rate of 2½ per cent of the capital sum achieved plus VAT, and together with the advertising expenditure mentioned above.

NEW PRIVATE SECTOR BUILDINGS

ALL CONSTRUCTED/TO BE CONSTRUCTED ON IDA OWNED SITES

15 February, 1991.

Mr. Gay Mitchell, TD

Chairman,

Committee of Public Accounts.

Dear Chairman,

During my appearance before the Committee on 22 November, 1990, I undertook to communicate to the Industrial Development Authority the Committee’s request for IDA documentation on the value of the property sold in 1988.

The Managing Director of the Industrial Development Authority, Mr. Kieran McGowan, has informed me that working papers and supporting documentation in relation to the land sales in question comprise over 100 files. The Authority considers that it would not be appropriate to make the papers in question available to the Committee.

In order to meet the Committee’s request for information regarding the reserve prices for the properties, information has been extracted in respect of the more important properties offered for sale, i.e. all properties where the sale price exceeded £100,000. This information is set out in the Schedule attached to this letter.

The Schedule shows the cost associated with each of the properties in question, the sale price and the profit or loss on book value from the sale. In addition, the Schedule shows the manner of sale, the initial guideline price from auctioneers, and the recommended price for sale. The guideline price represents the initial estimate of the value of the property provided by the auctioneers/valuers. The recommended price for sale is the valuers’ final view of what could be expected on the sale after advertising and taking account of the level of interest shown in the property. In the case of auctions this would normally be set as the reserve price. For properties put to tender or offered for sale by private treaty no formal reserve price was set; tenders and offers were examined and an assessment made as to whether or not the price offered should be accepted.

On the question of land being purchased as part of a rescue package for Semperit, which was raised by the Committee, Mr. McGowan has informed me that while the company invested the proceeds of the land sale in a re-equipment programme, designed to secure continued manufacturing operations and employment, there was no question of the IDA simply purchasing the land to facilitate the company in this regard. The Authority was fully satisfied that the purchase of the property was consistent with the IDA’s property needs at the time and that the price paid was not above then current property prices. Mr. McGowan has further advised that the purchase of land in the context of a “rescue” operation did not arise in this or any other case.

Yours sincerely,

JOHN DONLON,

Accounting Officer,

Department of Industry and Commerce.

* No revaluation/depreciation figure shown as land was revalued upwards.

* Office represents an international services building.