Updated | ‘Election’ encroachment permits issued at ‘cut-price rates’ – NAO

The National Audit Office has identified an unfair application of rates for encroachments issued by the Government Property Department in the run-up to the 2013 election, with establishments bearing similar characteristics and requesting similar permits being charged significantly different rates, merely due to the date when the permit was first issued.

On 25 August 2014, the Auditor General was requested to investigate the encroachment permits issued during the period immediately preceding the 2013 general election.

The press had back then reported that 100 permits were issued during the last two months of the previous administration, when government usually issued 150 permits on an annual basis.

The term ‘encroachment’ refers to a permit granted for the occupancy of public land for a specific period and for a paticular purpose or use. An encroachment permit authorises the grantee to construct approved facilities, conduct specific activities or make use of government-owned land or property for a period not exceeding 12 months. On the expiry of this period, an encroachment permit may be renewed for a similar interval; in fact, such permits must be renewed annually.

Encroachments are invariably granted ‘at the pleasure of Government’ and are therefore of a precarious nature where the entitlement of the grantee is tenuous.

“An element of discretion was exercised in establishing encroachment fees, with the GPD, at times, applying rates that were below the minimum threshold set for permits relating to particular categories. Fees charged, once established, remain unaltered despite successive renewals of the permit.

“The GPD’s failure to address this matter inevitably results in the unfair application of rates, with establishments bearing similar characteristics and requesting similar permits being charged significantly different rates, merely due to the date when the permit was first issued,” the NAO said.

In the case of permits issued for the placing of tables and chairs, the NAO had reservations about the standard rate applied, as it failed to take into consideration various factors that determine the profitability, or otherwise, of the site. The GPD charged a flat rate of €23 per metre squared per annum. Furthermore, although applicants were required to submit MEPA clearance with respect to particular permits, the GPD issued the relevant permits even in cases when such approval was not provided.

In the case of the stores at Ta’ Qali, although some element of justification for the granting of of the permit was provided, the Department failed to substantiate why the rate charged, that is, €1,000 per annum, diverged from the applicable minimum standard rate of €3,241 per annum.

Another notable divergence between the applied rate and the standard rate was that of the kiosk situated in a playground in Mellieħa. Here, the fee established by the GPD was €6,950; yet, this should have been at least €14,000 per annum had the standard rates been applied.

Although the Department cited various factors that bore impact on the fee established, the NAO maintains an element of reservation regarding the rate charged.

Of particular note was the discretion exercised by the then minister for fair competition, small business and consumers Jason Azzopardi on the allocation of a garage in Santa Luċija.

“Despite the fact that the minister indicated that this allocation was to be on a temporary basis and was not to prejudice the public call for tenders, the NAO deems the intervention as unwarranted. This assumes particular relevance when one considers that three other persons had preceded the grantee in expressing an interest in acquiring the premises. This Office is of the opinion that intervention at this level should be avoided.”

The NAO analysed the frequency of permits issued during the period 1 December 2012 to 8 March 2013 by comparison with other periods, as well as the regularity of such permits.

It established that the number of permits issued between December 2012 and March 2013 was 25. The approval of encroachments was contingent on the nature of the permit requested and in this context, the NAO noted that, out of the 25 permits issued, 13 were authorised by the then Minister for Fair Competition, Small Business and Consumers, while the remaining 12 were sanctioned by the Government Property Department (GPD) and other public sector entities. Eleven permits were issued between 23 February and 8 March 2013, with seven permits issued between 4 March and 8 March 2013. Out of these eleven permits, eight were authorised by the Minister.

Drawing comparisons with other periods, the NAO established that nine permits were issued between December 2010 and March 2011, 20 permits in the corresponding 2011/2012 months, and six in 2013/2014, as against the 25 permits issued in 2012/2013.

Labour reaction

In a reaction, the Labour Party said the Auditor General’s report was “a condemnation” of the leadership of the Lands Department under then lands minister Jason Azzopardi and Simon Busuttil, who was PN deputy leader at the time.

“This is a confirmation of direct political intervention by Jason Azzopardi for an enchorachment in his own district, on the eve of the election. He was responsible of the Lands Department, which issued permits at cut-prices rates,” the PL said.

It added that Busuttil would defend Azzopardi because he has to defend himself. “If this report was a condemnation of the Labour government, Busuttil would already be calling for resignations. The Labour Party will leave it up to the people to judge.”

The PL added that the report simply went on to confirm what the Prime Minister has long been calling for: a reform within the Lands Department that has been wanting for years.

“The government will implement this reform,” it said.

PN reaction

In a reaction, the PN said that the NAO report showed that allegations made against then lands minister Jason Azzopardi had been belied.

“In November 2013, Joseph Muscat accused Azzopardi of having issued over 100 encroachment permits in the two months before the elections. It turns out that Azzopardi signed 13, of which none were found to be illegal by the NAO… that number itself is of a normal rate for the period in question.”

The PN said the report confirmed how Muscat was hitting back at the former PN administration every time he finds his back to the wall on allegations of corruption. “His only choice is to stop being stubborn and to tack action on the factual scandals he has before him.”