Tory Cabinet member has a number of reservations about Knowle relocation costs

Councillor Ian Thomas states on his blog:

… Cabinet has resolved that EDDC should leave its aging premises at The Knowle in Sidmouth, for a new much smaller purpose built office in Honiton and refurbished Exmouth Town Hall. A move, I understand originally mooted in 2008 and more actively pursued since 2011, has taken a large step forward.

Tonight this was overwhelmingly supported by a joint meeting of the Overview & Scrutiny and Audit & Governance Committees

A final decision will now be made by Full Council on 25th March.

Knowle Update

Pegasus Life has been appointed as preferred developer for The Knowle at an offer price between £7M and £8M, they are looking to providing a residential development of retirement and extra care facilities.

Not all of the Knowle site is to be sold, only the existing built area of 1.1ha and a further 0.8ha around the current buildings. This will leave the remaining area of over 3.5ha available for transfer to Sidmouth Town Council, to be managed as parkland.

Finances

A detailed analysis, professionally audited and assessed, concluded that all options to leave The Knowle are better than staying. The most cost effective, twin Honiton and Exmouth sites.

A budget of £2.2M representing the capital costs, less the capital receipts, was agreed to build the new accommodation and refurbish the existing Town Hall in Exmouth.

Moving from The Knowle is expected to save the council £6M over 20 years. It will also move council jobs from Sidmouth to Honiton and Exmouth, with the economic effect of the council’s activities retained within East Devon.

Sidmouth will share in the economic benefit of the project, through construction of the Pegasus development and activity of subsequent residents, Honiton and Exmouth from new offices and refurbishment.

Risk

Short term borrowing will be required prior to receipt of proceeds from sale of the Knowle site.

Initially £9.2M, with an additional estimated interest of £0.3m. This represents a potential risk, in that if the council borrows this sum, but planning permission is not secured by Pegasus Life, then the sale of The Knowle would not progress or the Council potentially be left with large borrowing and a redundant Knowle site.

I was assured this risk would be minimised, in that no such short term borrowing would be entered into before a full, unconditional, contract between EDDC and Pegasus Life.

Once repayment of the short term loan has been completed, the Council will be left with a fixed interest loan of £2.1M over 20 years, which would attract interest of £0.6M.

Residual values

In the debate, I questioned how ‘residual values’ have been considered.

Using the construction estimate of £2,439/m2, and a building size of 2,776m2, overall construction costs at Honiton are expected to be £6.77M. However, the market value of the resulting premises is estimated to be only £3.25M. From an investment point of view, this indicates that there is an immediate deficit on the project, of £3.52M.

The senior financial officer explained ‘residual value’ had not been considered as part of the evaluation, as the project seeks to provide accommodation for the council to complete its own business, rather than as an investment.

A personal conclusion…

There is no doubt in my mind that current facilities at The Knowle are unsuitable to provide appropriate modern office accommodation for the authority over the next 20 years, as it remains essentially an aging converted hotel.

Considering the District with ‘fresh eyes’, there is clear logic in locating our main facilities in Honiton (geographic centre of the area) and Exmouth, as the main population centre.

Whilst the financial case in investment terms is not overly compelling, as a means of providing the appropriate accommodation in the right locations at a sensible cost, the proposed solution is attractive when compared to staying at The Knowle.

Papers presented to Cabinet and other Members recently are complex and extensive. Recognising that the relocation project has been in the stewardship of the Executive Group of just four senior Members since 2013, I proposed to Cabinet remaining Members should be invited to inspect the underlying model, figures and assumptions, in an informal session in advance of a final decision to be made by Full Council on the 25th March, to ensure that the best possible decision is reached.

I do hope that this invitation is taken up.

http://www.trinitymatters.co.uk/index.php/eddc-east-devon/item/1078-a-new-future-for-the-knowle-eddc-cabinet-resolves-to-leave-sidmouth

note: apparently, his Leader was rather irritated by his probing questions (see post below)

3 thoughts on “Tory Cabinet member has a number of reservations about Knowle relocation costs

  1. Pingback: EDDC Tories promise more ….. what exactly? | East Devon Watch
  2. All of what is going on at the Knowle has been long-winded and very hard for by-standers to understand what appears, some what trivial in the way it has been dealt with. But it has split the public’s vote down the middle.
    Surely it would be sensible to leave all big decisions such as selling the Knowle for Development, until after the Election.

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  3. One wonders whether councillors have ever been in or are aware of the purpose-built offices (1978-83) which form the main working areas at Knowle and which in themselves contain nearly all the space the Council now claims it needs.

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