Relocation: the sums just don’t add up

So Mark Williams says that ‘We have an asset that will appreciate in value’.

First of all, it may not, but more importantly, the increasing value of the Knowle as an asset has always been excluded from EDDC’s calculations.

Finally, after seven or eight years, EDDC have recognised that the Knowle is a capital asset that is likely to increase in value.

Even when the figures were manipulated to show the move as ‘cost neutral’, that façade was only maintained because the value of the Knowle (at least £7.5 million) was equated to the value of the new HQ at Honiton (valued by JLL at £2-3 million). Since then, of course, ‘cost neutral’ has gone out of the window.

So we now have the proceeds of sale = £7.5 million – possibly, assuming in these trying times a sale is even possible.

Cost of replacement buildings = £10 million (Honiton) + Exmouth £1.7 million + Manstone £1 million = £12.7 million.

Net loss £5.2 million.

Plus new road at Honiton = £225,000.

Plus admin costs to date = £2 million.

Plus costs of moving = say £3 million. (New equipment, staff compensation, etc.

Plus loss of asset value = £7.5 million – £2.5 million = £5 million.

Total loss is now in this scenario about £15.5 million.

This is all to achieve gains in running costs. However, estimates for Manstone were never included. The cost of running three HQs rather than one will be higher because of increased travelling, and commuting between sites.

Were Option 3 to be pursued, and the modern buildings improved at a cost of £1 million to £1.5 million, then the ‘new’ Knowle would be a very cheaply run building.

The £2 million already spent on admin cannot be recovered, so that is a sunk cost.

So pursuing Option 3 would cost £12 million less, and almost certainly reduce running costs. And leave EDDC with a far nicer building than a cheap and uninspiring shed of offices on an industrial estate at Honiton.

The above assumes that EDDC’s numbers are correct, but we all know that the cost of relocating will rise as the scheme is pursued, and we no longer have the guarantee of Pegasus money coming through. Plus, of course, EDDC may feel the need to employ even more consultants!

So, we will not see any change out of £20 million. And there will be no savings as to running costs compared to Option 3.

All this at a time of local government reorganisation.

Real numbers: not EDDC’s strongest point …