Orlaith explains what it will mean for businesses in Limerick and beyond.
Limerick is going through a revaluation process in terms of the valuations for commercial rates. This a national scheme ongoing at the moment. Dublin and Waterford are done and now its Limerick’s turn to get the revaluation process. So approximately seven thousand buildings are going through revaluation.
Businesses in Limerick would have gotten a letter explaining the situation and what is going to happen. Many people would have been surprised and thought that was the liability they were getting, but they need to realise that the multiplier from the councils still has to be set and that is the key to what businesses will end up paying for their commercial rates.
I think it needs to be both. There is an information gap between what businesses pay rates for and what they get in return. I think local authorities need to do more to explain to people the reasons why they pay what they pay on premises. Plus rental price, which is what this new revaluation will be based on, won’t take into consideration the finances of the businesses itself.
So, for example, some businesses could be in buildings that haven’t had revaluations done for decades and so may face contrasting bills to what they have had before. The premises that businesses are in is not an indicator of the business itself. It does not reflect the businesses’ financial status. So there does need to be greater measures to show the cost benefit to businesses and also to realise the businesses need a cost reduction in order plan for the future as well.
There are winners and losers in this new process. We estimate it in a 60/40 split: 60% will see drop in their valuations, while around 40% will see a rise. Some current valuations are based upon valuations that are outdated, some by decades. The new system will make it easier for rates to reflect the current economic climate. So through boom or bust it will make it easier for rates to be adjusted and measured towards the realities of the market, compared to what they are now. So, as rents rise or fall, the commercial rates will adjust every six to seven years to reflect that period. It’s a more flexible system based upon more transparency.
But it is still based upon the rental cost of the property which we would consider a crude way of determining how well business is actually doing.