Updated - Adds Labour Party reaction - An investigation by the Audit Office into encroachment permits issued during the period immediately preceding the 2013 general election has found that an element of discretion in the fees that were charged, with some rates being fees being below the minimum threshold set for permits relating to particular categories.

The Audit Office also found there was ‘unwarranted intervention’ by the then Minister for Fair Competition, Small Business and Consumers in 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 Audit Office said.

The NAO established that the number of encroachment permits issued between 1 December 2012 and 8 March 2013 was 25. (Between December 2010 and March 2011, nine encroachment permits were issued.)

Although marginal, an increase was registered in the number of encroachment permits issued during the last two weeks of the period under consideration, that is, between 23 February and 8 March 2013.

“The NAO noted that an element of discretion was exercised in establishing encroachment fees. From the cases reviewed, it emerged that the Government property Division (GPD) at times, applied rates that were below the minimum threshold set for permits relating to particular categories.

“In the case of the stores at Ta’ Qali, although some element of justification for the granting 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.”

The Audit Office said that the fees charged, once established, remained unaltered despite successive renewals of the permit.

It urged the Property Division to implement a system whereby encroachment permit fees are subject to regular update, at least accounting for inflation adjustments.

“The Department’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. Moreover, the inexistence of a mechanism that automatically adjusts permit rates results in fees that are clearly not in line with current market considerations, rendered amply evident in the case of the Mellieħa kiosk that was charged a fee of €2.33 per annum that remained unchanged for nearly fifty years.”

NAO insisted all fees needed to be settled promptly, and consideration of a site’s importance should be considered when establishing fees. 

See report on pdf below.

FORMER MINISTER REACTS

In a reaction, former minister Jason Azzopardi recalled that Prime Minister Joseph Muscat in November 2013 had accused him of having issued more than 100 encroachment permits in the two months before the general election.

This report, however, proved that only 25 encroachment permits were issued between December 2012 and March 8, 2013, of which he, as minister, was only responsible for 13.

Furthermore there was no breach of the law.

"This report shows that what Dr Muscat said was not true. I did not issue 100 encroachment permits before the election, I only issued 13, all according to law," Dr Azzopardi said. The least Dr Muscat could now do was to apologize.

On the Sta Lucija garage, Dr Azzopardi said this involved a one car garage where a pensioner had asked for the encroachment permit to be issued, and he, as minister authorized that encroachment, in terms of the law. But, as the auditor confirmed, this was without prejudice to a public call for tenders. 

This pensioner up to a month ago was still using the encroachment of this garage, for which he was paying a commercial rate. "I was not minister for the past two-and-a-half years," Dr Azzopardi said.

In a reaction, the Labour Party said the audit report showed how then minister Jason Azzopardi had intervened for an encroachment permit to be issued on the eve of the general election in his electoral district. It also showed how public land for which Dr Azzopardi was responsible was transferred below market prices. 

Had this report condemned the Labour Party, Simon Busuttil would already be calling for resignations.  The PL said it would leave it up to the people to judge. However this report also confirmed what the prime minister had been saying about the need for a review of the way how the Property Division had operated, for years.