The revaluation process in Dublin is a redistribution of the overall burden of rates between office, retail, industrial and other commercial occupiers

MOST RATEPAYERS at this stage will be aware that Dublin City Council is being revalued for rates purposes. Currently the intention is that proposed valuation certificates will be issued in October of this year. Negotiations will begin with the Valuation Office in earnest from this point, and new assessments will apply from January 1st, 2014.

The main question on every ratepayers’ mind is, of course, “how is this revaluation going to affect my rates bill?”

The first thing to emphasise, and something which has not always been understood to date, is that Dublin City Council will not increase its revenues as a result of this revaluation.

The annual rates take for Dublin city is just under €300 million, and this will be the same the year after revaluation. So from the council’s point of view the exercise should be revenue neutral. It is individual ratepayers who will see their rates bills go up or down.

There has been a much-publicised backlash in relation to previous revaluations, namely Fingal and Dún Laoghaire-Rathdown. This was a result of two main factors. The first being the choice of valuation date, i.e. September 2005, with ratepayers perceiving they were being reassessed based on peak-of-market rental levels long after the market had turned.

The other being the legitimate questions businesses have concerning the level of rates costs which are imposed and which they have no input into; and what are they actually getting from their local authority for these rates. Many other costs have fallen or have been cut since the downturn, but rates generally have not, and this is a source of considerable frustration for businesses.

The revaluation process is essentially a redistribution of the overall burden of rates between office, retail, industrial and other categories of commercial occupiers. The Dublin city valuation base date is April 2011, so assessments will be based on current market rents.

The change in any individual’s rates bill will reflect how their commercial sector and location grew relative to the rest of the property market between 1988 (when the last partial revaluation of Dublin city was undertaken) and 2011.

The previous revaluations have given us some insight into how we can expect Dublin city to impact occupiers. Although the council or the Valuation Office cannot tell us what the new rates multiplier is going to be until after the revaluation exercise is completed, from my initial research it is clear that retailers on both Grafton Street and Henry Street can expect pretty severe rates increases.

According to the recently published SCSI Annual Property Survey, prime zone A rents are in the region of €39 per sq m (€421 per sq ft). The local authorities which have been revalued now have rates multipliers of between 0.15 to 0.17 based on an assessment date of 2005. If we assume that on average rents have halved from 2005 to 2011 then this would suggest a potential multiplier of about 0.3 for Dublin city. That would equate to a rates bill of €11.80 per sq m (€127 per sq ft) zone A for prime retail.

An exercise which we have carried out on a small sample of properties on Grafton Street showed their rates bills increasing by more than 50 per cent.

Any calculations at this point are only estimates and a lot will depend on the final multiplier, but it is clear traders should brace themselves for a significant increase in their rates. This will be a further unwelcome development for a retail sector that has already experienced considerable difficulties since the downturn began, and will also cause severe collection problems for Dublin city.

One way of addressing this would be to introduce a system whereby any reductions or increases are phased in over say a three- or five-year period. This would cost the local authority nothing but would give those businesses which are going to see large increases an opportunity to adjust to the new rates levels.

The revaluation process brought in by the Valuation Act 2001 will ultimately make rates assessments fairer and more transparent. The adjustments that takes place on first revaluation should never be as severe again because the legislation now provides for regular revaluations every five to 10 years.

Once a property has been valued for rates in general, its assessment will not be looked at again by the Valuation Office until the next revaluation. Therefore it is important for businesses to take the opportunity to challenge their new valuation and ensure that their assessment is fair.

Brian Bagnall is a chartered surveyor and principal of Bagnall Associates who specialise in providing advice to commercial occupiers, including business rates consultancy