Parish Rates - the States’ liability

STATES OF JERSEY

PARISH RATES: THE STATES' LIABILITY

Lodged au Greffe on 13th May 2008

by the Minister for Treasury and Resources

STATES GREFFE

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to m  eet the cost of Parish Rates on public buildings, which are currently exempt from both foncier and

occupier rates in accordance with Articles 17 and 18 (respectively) of the Rates (Jersey) Law 2005, and to increase the contribution by Parishes to the Island-Wide Rate by a commensurate sum, with effect from 2010.

MINISTER FOR TREASURY AND RESOURCES

Background

Proposition  P.40/2004: Machinery  of  Government:  Relationship  between  the  Parishes  and  the  Executive' required, amongst other things, the (then) Finance and Economics Committee to "...undertake a review of the States land and property portfolio in order to bring recommendations to the States regarding the States' liability to rates".

The Finance and Economics Committee duly undertook the review (reported in R.56/2005), but did not consider it appropriate to make firm recommendations, "...until the economic effects of the Fiscal Strategy are clearer and the Island-Wide Rate debated, accepted and implemented."

The   Connétable  of  St.  Helier  proposed  an  amendment  (No.  2)  to  P.40/2006:Strategic  Plan  2006 – 2011', requesting the Minister for Treasury and Resources to "bring forward firm recommendations on the possibility of the States paying rates on its properties in 2006".

The Minister for Treasury and Resources confirmed that a working group would be set up with a commitment that firm recommendations will be produced in 2007 [Jersey Hansard, 22nd June 2006 – reference 1.12.2].

A Working Party was set up under the Chairmanship of the Assistant Minister ( Deputy Le Fondré), comprising (initially) –

Connétable Crowcroft St.  Helier

Connétable Yates St.  Martin

Mr. C. Spears Chamber of Commerce Mr. D. Levitt Rates Assessor

which met on three occasions –

• 30th October 2006;

• 11th  December  2006  (where  Mr.  R.  Shead  represented  the  Chamber  of  Commerce  and Mr.  A. Pemberton, Finance Director for the Parish of St. Helier);

• 20th April 2007 (Mr.  A.  Pemberton attended; apologies were received from the Chamber of Commerc from whom a written submission was received);

and considered a number of draft reports, responding by e-mail and in writing.

The Working Party approved the report (tabled under separate cover attached as Appendix  A), with final approval being received on 8th February 2008.

The terms of reference for the Working Party were agreed as follows:

To consider and make recommendations as appropriate on the following items –

• whether there is merit in the States paying Parish and Island-Wide rates, or some equivalent payment, in respect of its properties;

• if so, what the financial impacts would be on the States;

• if the States should seek to defray these and, if so, how this could be achieved;

• the options for defraying these costs and the impact on parishes, ratepayers and/or taxpayers.

The Working Party recognised that a consensus may not be reached as to the recommended way forward.

The Minister for Treasury and Resources determined that to satisfy the amendment to the Strategic Plan, referred to above, a Report and Proposition should be prepared for lodging contemporaneously with the report of the

Working Party.

Working Party Rationale

The Working Party, having considered carefully a number of options, agreed that the States should, like other ratepayers, be liable for Parish and Island-Wide Rates (IWR) on all their properties.

The Working Party is of the opinion that this course of action is the correct one for the following reasons –

1. T h e Statesshouldpayratesonan equity basis

The States operates as a competitor with the private sector in the provision of certain services, for example office Facilities Management services, grounds maintenance, etc. By not including an equivalent to the rates charge met by a private sector organisation, the States' operations are artificially subsidised.

2. T h e Statesshouldrecognise the full cost ofoccupyingproperty for comparativepurposes

The lack of a rates charge skews comparisons with private sector service providers and public sector bodies in the UK when benchmarking on performance indicators.

3. T h e Statesshouldrecognise the full cost ofoccupyingproperty to improve strategic decision making

By not recording the full cost of occupying property, the States are hampered when making decisions on property usage.

4. T h e Statesshouldpayratestomeet the cost of parish service provision and theIsland-WideRate

Parishes incur costs associated with the occupation of buildings that are normally recovered through rates. In particular, the Parish of St.  Helier faces an opportunity cost of foregone rates when the States takes possession of a building that was in the private sector (e.g. Morier House), without any reduction in the Parish cost base.

A similar argument can be made in respect of the States not contributing to the IWR, which results in parishioners' contributions being higher than would otherwise be the case.

Counter position

Charging rates on States properties achieves no net efficiency gain to the wider public sector and has a marginal increase in overall administration costs. In the vast majority of cases the taxpayer and ratepayer are one and the same, so all things being equal there is a broadly net nil impact on the individual member of the public.

The current funding pressures identified to the Council of Ministers suggest that there is little scope to absorb a cost increase estimated at £1.65 million without impacting on service provision.

Assuming a compensatory taxation measure is required to offset the impact, there will be a relative benefit to St.  Helier ratepayers/taxpayers combined costs and a relative dis-benefit to other parish ratepayers/taxpayers costs. It is difficult to see how such a measure improves equity between these two groups.

The States continues to invest heavily in the Parish of St.  Helier. The most obvious example being the funding of reclamation sites resulting in new developments that yield a rates return to the parish that would not otherwise exist.

In addition to direct investment, the presence of government departments in St.  Helier provides a significant increase in town centre trade, which drives the local business base, enabling a higher level of rates take from small businesses than would otherwise be the case.

Cost to the States and Resource Impact

On the basis that the States contribution added to the parishioner's contribution (including the IWR element) amounts to the current total rates yield, the cost to the States will be in the order of £1.65 million per annum at a 2006 cost base.

The vast majority of the States contribution (around £1.1 million or 66%, depending on the method of apportionment adopted) will be received by the Parish of St. Helier, with a further£287,500 (17%) received by St. Saviour. No other parish would benefit by more than£100,000.

The Working Party considered that, as an overriding principle, total public sector revenue take (taxation and rates) should not increase. Application of rates to States properties would have a distributional effect but should not increase aggregate public sector expenditure above that required to provide the current level of services. However, it was recognised that each parish has the autonomy to determine whether the States contribution was reflected in full as a reduction in parish rates or employed to provide additional services.

In practice, individual parishes may seek to pass on some or none of the windfall' savings to ratepayers. If a commensurate saving is not made in States expenditure, this proposal could result in a marginal increase in public expenditure.

The Working Party considered that the States should seek to absorb the additional costs within its approved future funding envelope.

Proposal

The Minister broadly supports the Working Party's argument for the States to pay parish rates on its properties on an equity basis, but does not consider it feasible to absorb the cost within already pressured States spending limits.

The Minister also does not consider it efficient to raise additional tax to provide a rebate to ratepayers – the effect of which is distributional but has no overall benefit to the population as a whole.

The Minister, therefore, proposes a budget neutral' approach whereby the additional cost to the States of meeting Parish rates be offset by an equal increase in the contribution by all Parishes to the Island-Wide Rate (IWR), through an increase in the IWR levy.

The States would have to approve an amendment to the Rates (Jersey) Law 2005 to enable an increase in the IWR by more than the relevant RPI uplift. Should the States support the proposal, law drafting time will be sought either in 2008 or 2009, to enact the law change from January 2010.

If the proposal is accepted, the States will pay rates on its properties in full from 2010, subject to receiving a commensurate transfer from parishes into the IWR fund

Financial and manpower implications

The proposal will result in an increase in States spending estimated at £1.65 million and, if the proposal is approved the increased spending will need to be proposed in next year's Business Plan. Overall, the impact on the States financial position is neutral as the proposal requires an equivalent increase in States revenues from the Island-Wide Rate.

There will also be a resource implication for both the States and individual parishes in developing and implementing a single, simplified system of recharging. No detailed work has yet been undertaken to determine the likely one-off and ongoing resource implications, but these are not expected to be onerous.

There are no additional manpower implications arising from this proposal.

APPENDIX

REPORT OF THE WORKING PARTY TO EXAMINE ISSUES RELATING TO THE STATES' LIABILITY TO RATES ON THEIR PROPERTIES

Background

1. P ro position P.40/2004: Machinery of Government:Relationship between the Parishesand the Executive' required, amongstotherthings, the (then) Finance and Economics Committee to "...undertake a review of the States land and property portfolio in order to bring recommendations to the States regarding the States' liability to rates".
2. T h e Finance and Economics Committee duly undertook the review (reported in R.56/2005),but did not consider it  appropriate  to  make firm recommendations, "...until  the economic effects of the  Fiscal Strategy are clearer and theIsland-Wide Rate debated, accepted andimplemented."
3. In responsetoanamendment to the Strategic Plan 2006 – 2011 tabled by the Connétable ofSt. Helier (attached as Appendix  A), on22nd June 2006, the Minister for TreasuryandResourcesconfirmed that a working groupwouldbeset up with a commitment that firm recommendations will be produced in2007. [Jersey Hansard,22nd June 2006 – reference 1.12.2 et seq. – extract attached as Appendix B.]
4. A WorkingPartywasestablished and metfor the first time in October 2006.
5. T h isreport represents the findings andproposalsof the Working Party

2. W  o rking Party Composition and Terms of Reference

1. A Working Party  was established  under the Chairmanship  of the Assistant Minister, Treasury and Resources, Deputy John Le Fondré, comprising:

Connétable Crowcroft St. Helier

Connétable Yates St. Martin

Mr. C. Spears Chamber of Commerce Mr. D. Levitt Rates Assessor

2. T h e Working Party met on threeoccasions –

• 30th October 2006

• 11th  December  2006  (where  Mr.  R.  Shead  represented  the  Chamber  of  Commerce  and Mr.  A. Pemberton, Finance Director for the Parish of St. Helier).

• 20th April 2007 (Mr.  A.  Pemberton attended; apologies were received from the Chamber o Commerce from whom a written submission was received).

3. T h e terms of reference for the WorkingParty were agreed asfollows –

T o c o nsider and make recommendations as appropriate on the following items:

• whether there is merit in the States paying Parish and Island Wide rates, or some equivalent payment, in respect of its properties;

• if so, what the financial impacts would be on the States;

• if the States should seek to defray these and, if so, how this could be achieved;

• the options for defraying these costs and the impact on Parishes, ratepayers and/or taxpayers.

4. T h e workingparty recognised that a consensus might notbe reached as totherecommendedway forward.

3. C  u rrent Position andSummaryImpact of Change

1. T h e States donotnormallypay either occupieror foncier rates on theiroperationalproperties.
2. P u blic buildings are exempt from both foncier and occupier rates in accordancewithArticles 17 and18 respectively of the Rates (Jersey)Law 2005.
3. T h e States dopay rates on properties where a thirdparty is either owneror occupier.
4. If t he States were to payParishRatesthere would bemore quarters inevery Parish. This would mean that a Parish could –

• Lower the rate per quarter and raise the same amount as before;

• Keep the level of rate the same and raise more revenue, or;

• A combination of the above.

5. I f  the  States  were to pay  Island-Wide Rates (IWR) there would  be more Non-domestic quarters throughout the Island. This would makeitpossible to reduce the IWR payable onDomestic quarters, or Non-domesticquarters,oronboth.
6. H  owever, the impact would  depend upon  the  proportion  of the Annual Island  Wide Rates  Figure (AIWRF) tobemet from the Domestic or the Non-domesticIWR as set out in Regulations madebythe States asrecommendedbythe Connétable s.
7. S u ch a reduction would be outside the control of individual Parishes.AnyreductioninNon-domesticor Domestic IWR would apply equally acrossthe Island.

4. W  o rking Party Proposals

1. P r oposal 1 – that the States, like otherratepayers,shouldbe liable for both Parish Rates and Island Wide Rates on alltheirproperties.

(a) T h e Working Party is of the opinion that this course of action is the correct one for the following reasons:

• The States should pay rates on an equity basis.

T h e S tates operates as a competitor with the private sector in the provision of certain services, for example

office facilities, management services, grounds maintenance etc. By not including an equivalent to the rates charge met by a private sector organisation, the States' operations are artificially subsidised.

• The States should recognise the full cost of occupying property for comparative purposes.

T h e lack of a rates charge skews comparisons with private sector service providers and public sector

bodies in the UK when benchmarking on performance indicators.

• The  States  should  recognise the full  cost  of occupying property  to  improve strategic decision making.

B y n ot recording the full cost of occupying property, the States are hampered when making decisions on

property usage.

• The States should pay Parish rates to meet the cost of Parish service provision.

P a ri s hes incur costs associated with the occupation of buildings that are normally recovered through rates.

In particular, the Parish of St.  Helier faces an opportunity cost of foregone rates when the States takes possession of a building that was in the private sector (e.g. Morier House), without any reduction in the

Parish cost base.

• The States should pay their share of the Island Wide Rate.

T h e S tates, by not contributing to the IWR, requires a higher level of contribution from the parishioners of

all Parishes than would otherwise be the case. A commensurate States contribution would provide scope for a reduction in the rates demanded from all parishioners.

2. P r oposal 2 – that the additional cost to theStates in meeting their rates liability shouldbecontained within existing States budgets,except where suchcosts form partof a servicewhosecosts are recovered in the form ofcharges to endusers.

1. In the United Kingdom,localandnationalgovernment buildings are liable for National Non-Domestic Rates, subject to mandatory or discretionary relief, and the resulting costs are born bythose organisations as part of their annualbudgetaryrequirement.
2. T h e Working Party considered that, as an overriding principle, total public sectorrevenue take (taxation and rates) should notincrease and that the States should seek to absorb the additional costs within its approved future fundingenvelope.
3. T h e WorkingPartywasof the view that the Statescontribution should not be offset by a commensurate increase in the contribution to the IWR,which would have a neutral' impact onStatesfinances.
4. W  here thosecosts form the basis for the recharge of a service whose charge is limited to cost recovery (e.g. car parking, planning fees, etc.), such costsshould be passed onto the end user to maintain a level playing field' position whencomparing States services to comparable services provided by the private sector.
5. T h e proposal will have a distributional effect between ratepayers and taxpayers but it should notincrease aggregate public sector expenditure (i.e.  the combined expenditure of the States and all Parishes)above that required toprovidethecurrentlevelofservices.
6. T h e Working Party did, however,acknowledge that each Parish has the autonomytodetermine whether the States contributionwas reflected in full as a reduction in rates chargedto parishioners oremployedto provide additional services. Ultimately, this wouldbe for the relevant Parish Assemblyto decide.
7. T h e net total additional cost to the States will be in the orderof £1.65  million perannum at a 2006 cost base. This sum reflects theadjustment required to contributions by all ratepayers (including the States) to achieve theexistingtotalrates yield.
8. T h e vastmajorityof the States contribution to Parish rates (around £568,000) will bereceivedby the Parish of St.  Helier, with a further£120,000 received bySt. Saviour. Noother Parish would receive more than £38,000.
9. O  n the2006 rates base data, the estimated impact across ParishesoftheStatespayingParishratesisas follows –

T a b l e 1

E s ti m  ated Indicative States Contribution to Parish Rates by Parish

St. John 2,765 St. Lawrence 4,195 St. Martin 6,435 St. Mary 2,540

St Ouen 7,200 St Peter 29,785 St Saviour 119,975 Trinity 7,730

Estimated States Contribution to 804,610 Parish Rates

Note:

This table shows what the position would have been in 2006 if the States had paid Parish Rates on all its properties (excluding any contribution in respect of IWR).

This illustration should not be regarded as a prediction of the specific benefits to Ratepayers or Parishes if the States were to pay Rates.

10. P a r ishioners would also benefit bynot having to contribute a totalof £845,390to the IWRfund.
11. T h us, as notedabove, the amount payable by the States in respect ofParishRates is estimated to be £805,000. The States would also have to payanestimated £845,000 for its IWR contribution, resulting in a total cost of £1,650,000 based upon the2006ratesbasedata.
12. T h e above estimate assumes that the overall Parish revenue requirement and contribution to the IWR fund will remainconstant,as there isnoincrease in their operating costs, and the States contribution results in a pro-rata reduction to all ratepayers (including the States).
13. F urther detailed  work is  required to  analyse the split  between  ministerial departments, however, departments that have property hungry' services, such asHealth, Education andTransportandTechnical Services, will bear the vast majority of the costs, either directlyor through a recharge from Property Holdings.
14. T h e  Working Party  recognises  the  competing financial  pressures within the States.  The cost  of implementing these proposals is not included in the current States forward financial forecast, but the WorkingParty considers that this should not, initself,be a reason to delayimplementation.

3. P r oposal 3 – that the transaction process mustbe efficient and effective.

1. T h e Working Party considers that the transaction process should have the following characteristics –

• it must be simple to understand and operate;

• ongoing resource implications must be minimised for both the States and Parishes. It was recognised that the cost to set up the system would need to be quantified;

• the cost of implementation attributable to the Parishes should be allocated pro-rata to the respective Parish share of the States' contribution;

• once the basis for liability in terms of quarters has been established the schedule would only be updated for material changes (i.e. acquisition or disposal and significant change of use or size);

• to minimise resources and provide data assurance, data transfer between Parishes and the States should ideally be by standardised electronic media;

• Property Holdings will be the single interface with Parishes for all rates issues where the States are both owner and occupier.

2. A s part of its normal activity, Property Holdings will capture and record electronically material changes to

the States property portfolio. If a common electronic data transfer media can be introduced it is considered that

the cost of operating the billing process will not be significant for either the States or individual Parishes.

3. T o achieve the objectives detailed in the rationale, costs should be allocated to the occupiers of buildings. In practice, the foncier andoccupiers' rates would be allocated either directly, as a charge to occupiers, or indirectly through aninternal rental system.
4. T h e proposed relationship structure is illustrated in Figure1,below – Figure 1 – Proposed Relationship Model

Parishes

Harbours &

Airport Property

Holdings

Housing Department

States Non- States either

Trading Landlord or

Depts Tenant Transaction

Advice

5. F o r properties managedby Property Holdings,where the Statesis both owner and occupierthere will be a single invoice from eachParishtocoverboth foncier andoccupiers' rates. Property Holdings will work with Parishes to determinehow this can beachievedusing the existing Parish billing process.
6. P r operty Holdings will pay the Parish rates demandon behalf ofStatesnon-trading departments and recharge internally within the States to the relevant budgetholders, either directly or through the proposed internal rents system.
7. S e parate billing and administration by Property Holdings will continue asat present where a thirdpartyis involved (i.e. where the States iseither Landlord or Tenant).
8. T h e WorkingPartynoted that eightParishes run their ratesontheITEXsystemand four Parisheson the Cronussystem, but proposalstostandardiseon a single platform were currently beingconsidered.
9. S h o uld the proposals of the Working Party be adopted, a detailed project plan that includesfinancialand other resourcerequirements will need tobecompiled.

5. C  o nclusions and Recommendations

1. T h e WorkingPartyconcludes that the current positionof the States nothaving a general liability for rates on theirbuildingsisunsatisfactoryand should notpersist.
2. It r ecommends that that the States should, like other ratepayers, be liable for Parish Ratesand Island Wide Rates on all theirproperties.
3. T h e WorkingParty is firmly of the opinion that the States shouldseektoabsorbthe additional cost of meeting their rates liabilities from withinexistingbudget allocations, exceptwheresuchcosts form part

of a charge that is recovered by end users of services.

4. T h e WorkingPartydoesnotconsider the associated administrative cost tobe excessive butbelieves that the transactionprocessshouldbestreamlinedtominimisebothParishandStates' resources in order that it is both efficient and effective. In ordertoavoid duplication of effort, and subject to States approval, such additional work should be undertaken in conjunction with proposalstoimplement an internal rent charging mechanism.
5. T he difficulties associated with absorbing the additional unbudgeted costs should not delay implementation of the WorkingParty'srecommendations.
6. O t her than the matters outlinedabove, the Working Party alsoconsidered the following,whichitfelt to be outside its termsof reference, but were worthy of further consideration by the relevant body –

• All Parish properties should be liable for both Parish rates and IWR;

• There appeared to be potential for utilising the apportionment of the IWR between domestic and non-domestic ratepayers as a fiscal strategy device. It appeared possible that such a solution could

(by increasing the proportion payable for non-domestic (i.e. mainly corporate) rates, and decreasing the proportion payable for domestic (i.e. mainly individual) rates), be used as a variation on the so-called Blampied' proposals, although was unlikely to result in significant revenue being raised.

APPENDIX A

STATES OF JERSEY

r

STRATEGIC PLAN 2006 TO 2011 (P.40/2006): SECOND AMENDMENT

Presented to the States on 19th May 2006 by the Connétable of St. Helier

STATES GREFFE

2006 Price code: C P.40  Amd.(2)

STRATEGIC PLAN 2006 TO 2011 (P.40/2006): SECOND AMENDMENT ____________

After the word "Appendix" insert the words –

", except that,

(1) in Commitment Six, Outcome 6.1, after Action 6.1.3 insert the following action –

6 .1 . 4  Bring forward firm recommendations on the possibility of the States paying rates on its properties

in 2006 (T&R)".

CONNÉTABLE OF ST. HELIER

In 2004 I persuaded the Policy and Resources Committee to include in the landmark Report and Proposition Machinery of Government: Relationship between the Parishes and the Executive' (P.40/2004) the proposal to investigate the States' liability to rates (Appendix 1); the Committee agreed to lodge an amendment to their own proposition, which was subsequently accepted when P.40 was debated on 25th May 2004, that they should conclude their investigations by July 2005. The Finance and Economics Committee duly produced a report Parish Rates: the States' liability' (R.C.56/2005 – attached as Appendix 2) in which, although they shied away from firm recommendations, they did conclude that –

th e disproportionate location of States properties in St. Helier, St. Saviour and St. Peter create significant costs for those Parishes and the Committee would like to address this issue as a priority The Committee will undertake to provide firm recommendations with regard to the States Rates Liability when the Island-Wide Rate has been introduced and assessed and the economic effects of the Fiscal Strategy are more clear. The Committee anticipates that this will be possible during 2007.

On two occasions during Question Time earlier this year (Appendix 3) I sought assurances from the Minister of Treasury and Resources that this matter would be progressed and he agreed that it would be advisable to set up a working group to pursue this matter further if firm recommendations' were to be made next year.

This amendment seeks to ensure that the Council of Ministers gives this overdue matter the priority it deserves. There are no financial or manpower implications arising from the amendment.

The report and proposition of the Policy and Resources Committee on the relationship between the Parishes and the Executive was lodged "au Greffe" on 9th March 2004. The Committee has since received valuable feedback from the Connétable of St. Helier, and as a consequence it would like to propose an amendment to part (e) of the proposition relating to the proposed review of the States land and property portfolio.

In paragraph (e) it is proposed that"the Finance and Economics Committee should be charged to undertake a review of the States land and property portfolio in order to bring recommendations to the States regarding the States' liability to rates". The scale of this task should not be underestimated, but the Committee accepts that it would be helpful to set a deadline for these recommendations to be placed before the Assembly.

An assessment of the work involved in this review indicates that a deadline of July  2005 would be reasonable, as this will allow sufficient time for consultation with interested parties and for consideration of the various options referred to in paragraphs  65-69 of the Committee's report. It is anticipated that this will be a high-level review, during which a general assessment would be made as to the extent of the estimated States liability to rates, should the States ultimately decide to pursue this option. It is not felt that it would be appropriate at this stage for the review to make a detailed assessment of the rateable value of every States property, as this would be a costly and time-consuming exercise, and it would be premature to carry out such an exercise until such time that the States have had the opportunity to consider the recommendations of the review.

PARISH RATES: THE STATES' LIABILITY

Presented to the States on 19th July 2005 by the Finance and Economics Committee REPORT

1. P u r poseof this Report

P . 4 0 /2004: Relationship between the Parishes and the Executive charges the Finance and Economics

Committee to undertake a high level review of the States land and property portfolio in order to bring recommendations to the States regarding the States' liability to Parish rates.

T h e C  ommittee set its scope for the review as follows –

(a ) T o consult with the Comité des Connétable s with regard to their expectations as to a suitable rating

structure for States properties,

(b ) T o compare the current practice of other jurisdictions such as England and Guernsey, (c ) T o consider and recommend which properties are appropriate for rating,

(d ) T o obtain a high level estimate of the annual financial liability to Parish Rates arising from all

States Property,

(e ) T o calculate the ongoing administration resources required both for the States and the Parishes of

any given proposal, and

(f ) T o bring recommendations to the States regarding the States' liability to Parish rates. T h e f indings from these objectives are detailed in the paragraphs below.

2. E x e cutiveSummary

I n th e interests of achieving fairness and transparency within the rates system, the Finance and

Economics Committee supports the argument for the States being rateable on all its properties.

T h e Finance and Economics Committee also appreciates the inequity caused by the current

exemption, particularly within the Parishes of St.  Helier, St.  Saviour and St.  Peter, and will seek t address this in any future proposition.

If th  e States were to pay Parish Rates on all of its property, the additional cost to the States would

be £1.5 million based on 2003/04 rates, and estimated to be £2.2 million from 2006/07 after the inception of the Island-Wide Rate.

In r e cognition of the inequity caused by the current exemption and the severe financial constraints

faced by the States, the Committee puts forward its preferred option for funding its potential liability through the Island-Wide Rate system (detailed in Chapter 7).

T h e Committee believes it unwise to make a firm recommendation with regard to funding its

potential liability until the economic effects of the Fiscal Strategy are clearer and the Island-Wide Rate debated, accepted and implemented. However the Committee would like to issue this R.C. as a preliminary consultation document in respect of the way forward.

3. C  o nsultation

T o a ssist in the process of assessing the States' rates liability, the Finance and Economics Committee requested of the Environment and Public Services Committee that its Department of Property Services

consult upon the technical aspects of the review. The Comité des Connétable s subsequently established a

small steering group of Parish Rate Assessors to work with the Department of Property Services in this regard.

T h is process was extremely useful in providing the opportunity for consultation and negotiation as to how

each type of property is to be rated and the appropriate rateable value for the various properties in the portfolio.

T h e opportunity was also taken to use data and valuations provided by Drivers Jonas, Chartered

Surveyors, which were gathered during its work on an asset valuation of properties in the administration of Jersey Harbours.

A l l o ther measurement and valuation of property has been undertaken by the Department of Property

Services.

T h e v iew of the Assessors Steering Group was that the liability for rates should in the main be dictated by

both the Rates Law and the current practice in respect of all other property within the Island, i.e. that the same principles must be applied to States' property as are currently applied to rateable property in private sector ownership.

T h e view of the Assessors Steering Group was that there should be very few exemptions if the current

practice in assessing liability for payment of rates is applied.

E x e m ptions which have been considered appropriate to date include religious establishments, the

crematorium, sea walls, promenades, footpaths, bridleways, seating areas, traffic islands, the cenotaph and natural open land areas such as the headlands (Les Landes, Blanche Banques, etc.). No recommendations have been made in respect of the Bellozanne complex pending further research.

4. C  o mparisons with other jurisdictions

S o m e research has been undertaken into the U.K. and Guernsey rating systems; however it is apparent that

both these systems are complex, have developed on the basis of local and historic factors, and are themselves under review. They are not therefore considered indicative of a preferred solution or best practice.

T h e Jersey Parish system has no direct equivalent in the U.K. Where Parishes exist in the U.K., their

expenditure obligations are much lighter than those of a Jersey Parish. U.K. Parishes collect their income from a precept on local government council tax.

C e n t ral and local U.K. government are rated on all property. The collection of local government council

tax is passed to central government and reallocated back to local government on a needs basis.

M a n d atory relief from Council Tax is limited to religious establishments and buildings used by registered

charity organizations. Local authorities have the ability to reduce or waive non domestic rates on other buildings occupied for non profit making purposes.

W  it h regards to Guernsey, the Cadastre Committee is the rating authority for all property. All property is

assessed and a rateable value is calculated in accordance with the current assessment rules. Some property is rated at zero or a very nominal figure, as a consequence little or no tax is presently collectable by the cadastre or the parishes.

T h e C  adastre law provides for a few exceptions –

(a ) R e al property that is used exclusively as a place of public worship,

(b ) R e al property that is used as a cemetery for the internment of human remains, (c ) P u blic highways repairable in whole or part by the States of Guernsey.

T h e Cadastre, on behalf of the Treasury collects the tax on rateable values (TRV) from the owners of property except for those listed above. Property owned by the States of Guernsey is subject to the

payment of TRV, occupiers rates and where applicable refuse rates. Currently, there appears to be a sizeable

amount of States owned land that has a rateable value of nil and therefore no taxation is payable.

T h e p arishes collect their parochial occupiers and refuse rates based on the rateable values on all property

as set by the Cadastre. To that extent, Parishes only benefit from States property rates that have a higher than nil rateable value.

I t is understood that parish authorities do not collect rates from the exempted properties or from their

Douzaine' rooms or parish halls and therefore do not tax themselves. There are properties, however, that are owned by the parishes which historically are subject to parochial rates. An example of this which has been identified relates to an area which is leased by one of the parishes and used as a café/restaurant.

It s h o uld be noted that the States Cadastre is currently undertaking a complete review of the methodology

of rating in order to substantially simplify the process.

P a ri s hes of Guernsey fund similar Parish services to those of Jersey, however they do not fund welfare,

commercial  refuse  collection  or  road  costs. The  combined  rate  income  from  the  ten  Guernsey Parishes is approximately £3  million in contrast to£20  million in Jersey.

5. M  e asurementandvaluationof the States' potential liability

T h e Department of Property Services has, where possible or necessary, re-measured the larger buildings

and land areas, which are in the administration of Committees of the States, to ensure consistency in accordance with rules as set out by the Royal Institution of Chartered Surveyors (RICS). Land areas have mostly been determined either from already available survey information or a computer measurement calculation method using the Environment and Public Services Geographic Information System (GIS).

S im  il arly, the valuation of property, both by the Department and Drivers Jonas (in the case of the Jersey

Harbour properties) has been determined in accordance with the published rules of the RICS (the Red Book').

C u r re ntly, the parish assessors use a variety of methods for calculating rates dependant on the type of use

of the land or buildings. Buildings are measured using the gross internal area (square feet) whilst open land, farm land, playing fields, parks, reservoirs, reclamation and tipping sites, horticultural nurseries and the residual area of grounds (less footprint of building) are measured in vergées. Car parks are generally rated per parking space where spaces are marked or by area when not marked.

S l ip w ays, lighthouses, navigation and weather radar stations, towers (such as Seymour, Icho, Janvrin's

Tomb and Rocco) and other one-off' structures would be assessed and negotiated individually on the basis of a fixed range of quarters.

R o a d s could be assessed on the notional width for the particular class of road (A,  B,  C) multiplied by it

length. A similar method is being suggested for the Railway Walk.

6. E s t imate of the annualfinancial liability Existing rate payments

It s h o uld be remembered that the property administering Committees of the States already pay foncier and

occupier rates on housing and other leased or non-operational land and buildings.

F o r 2 004, the rates paid by Committees to the Parishes were £628,000. P o te n tial rate payments

T h e c alculation of the annual financial liability with all the various measures used is complex. In the case

of car parks, for example, the rate assessment is not only based on measurement but also includes the nature of the parking and whether it is for staff or customers, if there is a payment charge for parking and whether it is seasonal, long-stay, short-stay or multi-storey.

C e r ta in assumptions have been made by the Department of Property Services and a similar average area

has been used in the case of pumping stations and public toilets rather than individual measurement of each.

T h e one exception is the cavern' under Fort Regent which the assessors believe has to be rated on

capacity. How it is intended to identify an appropriate rate per square metre is unclear at present.

In e s timating the States' annual financial liability for rates, it has been necessary to reach agreement with

the Assessors Steering Group on the basis of assessment in respect of each type and use of the States property. Whilst there are some types which are still undecided, it has been possible to calculate to a reasonable accuracy the total rate which would be payable.

In s u mmary, the following table indicates the sum payable to each parish and the estimate of the total

States' annual financial liability using the individual 2004 parish rates. This is the figure in respect of the buildings currently used for a public purpose for which the States does not currently pay rates.

F r o m the valuations undertaken by the Department of Property Services the total number of additional

quarters is estimated at 87,678,146 which yields a total annual rate figure of £1,520,000 using 2004 rates.

U s in g the 2004 rate figures as the model, this would indicate a total annual financial liability for all States'

property in respect of both foncier and occupier parish rates of £2,148,000.

S u m m  ary of rateable value and rate payable for each Parish

N o t e : The above charges are calculated on the basis of the 2004 Parish Rates. The 2006 rate will

include  parochial  and  Island-Wide  elements  and  will  most  likely  result  in  a  higher  liability, depending on the proportion of the Island-Wide income agreed by the States to be funded from the commercial sector.

I f i t is assumed that the Commercial Island-Wide rate will be twice that of the Domestic, the

rateable value of the additional States quarters is estimated to be £2.2  million.

O n g o ing administration resources

D e s p ite a simplified rating system, States rates submissions are a continual and intensive process with

many new buildings being disposed of, acquired, built, lease/tenant changes, rent review details, changes in use

and appeals each year.

If it i s assumed that the rate which might be charged to the States' is to be based on individual property

schedule  returns,  valuations  and  assessment,  there  will  be  a  requirement  for  at  least  one  full  time professional post (est. £60,000 per annum) allocated to the task to submit schedules, maintain computer records, deal with parish assessors and handle appeals. This assumes that valuation will be maintained on a rolling program using qualified valuation surveyors from the States' own Property Department.

A s i mpler and less costly alternative in terms of administration might be to agree an annual one-off

payment in respect of the rates liability. This would still require manpower resource to monitor the addition of newly acquired or disposed property but at an administration level (est. £30,000 per annum).

7. S h o uld the States and the Parishes payrates?

T h e Committee accepts the principal argument for the States paying rates is to achieve fairness and

transparency within the rates system. This argument is put forward on the basis that a States property, just as a Parish, commercial or domestic property, benefits from the same services that are funded by Parish Rates (i.e. welfare payments, refuse collection and lighting, etc.).