A cautionary tale from Mid Devon – council dabbles in development

Owl was intrigued by the cryptic reference to “3 River development” from yesterday’s report on the latest “goings on” in Mid Devon. Here are the details.

Council’s development company 3 Rivers “a haemorrhage” to taxpayer funds

Lewis Clarke www.devonlive.com

Mid Devon District Council’s (MDDC) development company 3Rivers Development Ltd (3RDL) “will not be getting a green light to go forward” after questions were asked about its performance.

Leader of the Council, Councillor Bob Deed (Cadbury, Independent), blasted 3RDL following questions from a member of the public and a response from Deputy Chief Executive, Andrew Jarratt at the Full Council meeting held on Wednesday, July 1.

The discussion was held openly, prior to a private meeting held on Thursday, July 2, with councillors and 3RDL directors.

In a letter to the Council read at Democratic Period, Tiverton resident, Roger Davey questioned the current 3RDL construction behind Tiverton Town Hall. It was previous reported that the site, which is currently being transformed into 39 flats and houses, will overspend by around £757,000.

Mr Davey, a founder of the Angel Project, which aimed to turn the land into public recreational use, also pointed out that previous developers who attempted to develop the area Russell Harrison and McCarthy and Stone, had abandoned their schemes, as they could see “no profit.”

“Was a proper cost-profit analysis carried out by an independent consultancy, i.e., not the council or its architects?” he asked.

“Given that 3RDL was set up by the Council largely as a result of a report by a finance director to develop this and other sites and has not and is unlikely to make a profit, is it not time to liquidate 3RDL, go back to the drawing board and consult with groups like the Angel Project to try to salvage from this disaster a better scheme which improves the area and enhances the riverside?”

Mr Davey added that the estimated overspend was a “gross under-estimate.”

He added: “I believe that a £1,250,000 overspend is more realistic given the fact that despite nearly three years since start of work on this site, all of the groundworks are still not complete. What does the Council intend to do as a matter of urgency, to stop the haemorrhage of our, the council taxpayers money?”

He added: “Given that most of the discussions around 3RDL and this scheme have been held in secret, to, I believe, save embarrassment of the Council and some of the top-level management rather than any commercial considerations, when will the Council hold a proper open meeting to discuss this fiasco and the implications for services in the future given the debt that will be incurred?”

Deputy Chief Executive, Andrew Jarratt responded, and explained the process, and why Mid Devon had decided to develop the site themselves.

He said: “After a national advert to find an architect capable to deliver an exemplar scheme to fit such a prominent site in Tiverton, the Council instructed Randall Simmonds LLP (professional construction consultants) to provide a budget cost sum analysis for the scheme. This value was very close to the final tendered price received by 3RDL after entering into a negotiated contract with the current contractor.

“As many of you are aware, this scheme, designed by Mikhail Riches, a London based architect, has already won a national design award, Housing Design.

“This scheme was carefully selected by the Council in order to see the delivery of a project that would be of a very high design and build quality, maximising the site’s location and vistas and would help to add increased footfall to that area of the town centre. For clarification, 3RDL has already returned significant sums to the Council over the past two years and delivered its only completed scheme to date, on time and at its budgeted level of profit. I can confirm that the Council will continue to provide regular and diligent oversight on all current and future projects.”

Mr Jarratt said the Council was aware of a potential loss on development behind Tiverton Town Hall, but that it was working with its development company, in order to be assured that the project is completed without further budgetary implications of time delay.

“Clearly, the whole commercial property market has been significantly impacted by Covid19, but it is encouraging to see a return to “business as normal” for most areas of the construction industry,” Mr Jarratt added.

“The Council continues to work with its development company and maintains an ongoing level of support for its operations. It has recently commissioned some external reports into the ongoing governance and financial viability of the company and has made a number of recommendations that will be implemented at the earliest possible opportunity. If lessons need to be learned from this one specific development, rest assured we will learn from them and then move forwards.”

However, Leader of the Council, Bob Deed said it was time to “lift the veil” on the “considerable mystery around the performance of 3RDL and the oversight of the company by the responsible officers at the Council.”

He said: “You have heard in Mr Jarrett’s response that 3RDL has already returned significant sums to the Council over the past two years and delivered its only completed scheme to date on time at its level of profit.

“This is opaque speak in that, not one penny has been returned to the Council by 3RDL over the past two years, every penny of interest due from 3RDL to the Council has had to be lent by the Council to 3RDL and remains outstanding within its total loan figure due to the Council.

“With regard to the completed scheme, although 3RDL should have paid the profit on that scheme of around £100,000 to the Council, in fact, that sum was not repaid as it should have been, but was retained by 3RDL, effectively reducing their borrowing requirement by that amount.

“Also as part of the response, it has been said that a number of recommendations emanate from recent commissioned reports on the ongoing governance and financial viability of 3RDL will be implemented at the earliest possible opportunity.

“It is the view of myself, supported by the Cabinet, that where practicable, all of the recommendations, not just a number, will be implemented. In terms of the ongoing performance of 3RDL, we would trust that these recommendations will be implemented at the earliest possible opportunity as until they are, the company will not be getting a green light to go forward.”

His statement was criticised by Leader of the Conservative Party on MDDC, Councillor Bob Evans (Lower Culm, Conservative).

“I wasn’t aware that there was then an opportunity to make a speech,” he said. “That was public question time, not an opportunity for the leader of this Council to make another speech on a subject that has been the detail of many meetings in the last few weeks, and will be subject of future meetings.

“I think there is a right time and a right place, and I don’t think that was it.” 

However, Councillor Ashley Wilces (Independent, Cullompton North) criticised Council’s leadership for not being getting a handle on the situation earlier.

He said: “This administration has said many times that it wants to be open and transparent in its affairs, but I would say there remains significant room for improvement, especially in relation to the matters of 3RDL. To that end, I commend the Leader, for stating the questions publicly, rather than take to them to a private meeting.

“Transparency should always be the starting point and not secrecy. Will you commit to taking action to ensure that all future reports are presented to Council, in such a way that only information that is considered to be exempt from publication is withheld from the public, and not the entire context of those reports?

“Will you also commit to ensuring that the minutes of confidential meetings comply with the Local Government Act in that they provide the public with sufficient information as to know what business was transacted in private without releasing confidential information?”

Cllr Deed responded saying: “I can assure all members I will be in discussion with the monitoring officer to discuss how all future reports presented to Council can be more fulsome and transparent. It will mean discussions, whatever subject, can be held in Part I, and that Part II discussions can be held to the absolute minimum.

“The lack of open discussion at public meetings has lead to frustration on the part of both members and the public, and that feeds false rumours which cannot be of benefit to this Council or to the public’s perception in the way that this Council operates. I can assure members that my discussions with the monitoring officer will also cover the extent of minutes of confidential meetings and their compliance with the Local Government Act.”

Cllr Wilces continued to express his dismay following audit reports detailing governance issues with the running of 3RDL.

Addressing the Leader, he continued: “Such reports do not go into the detail of how and why these issues came about, nor who is responsible for them. This should not be taken to mean there has not been any mistakes made, nor deliberate act or omissions that gave rise to these issues.

“As yet, we don’t know why or how these things happened, because nobody has elected to provide that information, and so we’re obliged to carry out that further piece of work if we are to do our jobs properly.

“In doing so, we must be mindful that the actions of others have also had a deleterious effect on governance, such as the delegation of shareholder responsibility to the Chief Executive, by the previous Cabinet.

“I have also heard criticism that you have contributed the problem by not acting as swiftly as you might have once you became aware of these issues.”

“Ouch,” Cllr Deed responded.

“I would have thought that question would have come from the Conservative group, but never mind, it’s part of my own group.” 

Cllr Deed then explained what had happened during his time as Leader in regards to 3RDL to “set the record straight.”

He said: “On May 23 2019, the day after I was appointed as your Leader, I sat in the Chief Executive’s office and one of the topics discussed as you would expect, was 3RDL. I did request at that meeting that I wished to be told of any problems before the end of May 2019, and any such disclosures would be dealt with as appropriate on a non-blame basis. I could give no guarantees on how I would respond if problems came to light subsequently.

“Over the next five months, I regularly requested that an external report be commissioned in order that we might have an assessment of any remedial action which may be necessary to take in respect of 3RDL.

“Members, you will be aware, that over the previous 12 months, both the chair of Audit, Cllr Evans, myself, and many other members have had concern about the potential conflict of interest by individual directors. These conversations came to nothing until November 2019. At that point, it was admitted that it was thought it was only me, Cllr Bob Deed, was interested in finding out about 3RDL, and by definition, I did not have the support of my Cabinet.

“In November 2019, Anthony Collins Solicitors were commissioned to write the report that I wanted, except that when this was produced in December 2019, the report only addressed a question in relation to winding up 3RDL. That narrow commission did not reflect what I had been asking for in the previous six months.

“Anthony Collins Solicitors were then commissioned to review 3RDL in light of my constant request, i.e., what would the recommendation regarding the company to support continuing with 3RDL with the existing directors, continuing 3RDL with a new board of directors, winding down the company – that is to say, completing existing projects but not starting any new projects – and winding up the company.

“Members, you have seen the report of Anthony Collins Solicitors, which was produced in February 2020, and at their recommendation, a further report was commissioned from Bishop Flemming, which was received in May 2020.

“Unlike my previous life in the City of London in international banking, where matters such as 3RDL would have been dealt with within 13 days, in the local authority world it takes 13 months and counting.

“Tomorrow, you are all invited to discuss with the three existing directors of 3RDL, the company’s performance since its inception. I trust we can put this matter to bed as soon as possible and allow 3RDL to continue along the path that was originally envisaged for it.

“If members feel frustrated, and members of the public feel frustrated, your collective frustration is less than mine.”

He added that the 3RDL “debacle” was non-political.

“I don’t see any future in it becoming a political issue. With the support of my Cabinet, I have been trying to resolve the issue as quickly as possible. Without six months of delay, 3RDL would now be up and running, and we would all know how they were going to perform going forward.

“Unfortunately, not only has the delay held up 3RDL activity, but COVID-19 has not assisted. I am very sorry for that, but I will not accept any liability for this unconscionable delay.”

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