As the council prepares to make major savings in the wake of declaring bankruptcy it will be looking back on financial decisions made in the past few years.
Tara O’Connor www.mylondon.news
These include property deals, made with the intention of making money for the cash-strapped council.
The Croydon Park Hotel was bought in August 2018 with the aim of bringing in £1 million profit a year for the council.
But the hotel in Altyre Road went into administration in June this year and is currently being used as temporary accommodation for homeless people while the council decides what to do with it.
The decision to buy the hotel was highlighted by auditors Grant Thornton in a report in the public interest, published last month, which recommended that the purchase be reviewed.
It was a ‘leader decision’ by then council leader Tony Newman and not reviewed by cabinet and the overview and scrutiny commission until a month later.
The auditors report will be discussed at an extraordinary council meeting on Thursday (November 19).
The council’s medium-term financial strategy (2018-2022) established what it called an ‘asset acquisition fund’ of £100 million to invest in property as an ongoing income stream.
This fund was increased to £200 million in December 2019.
The Colonnades Retail Park, Purley Way, was the first purchase after the asset acquisition fund was approved.
The council bought it in November 2018 for £53 million, at the time it hoped that it would provide an annual income of £1.4 million. Auditors noted that the income of the retail park had been badly hit by the Covid-19 pandemic.
In December 2019 Croydon Council announced it had bought two more properties.
These were builders’ merchants Selco in Imperial Way, Waddon, and medical supplies specialist Alliance Healthcare at Vulcan Way in New Addington – at a combined cost of £14 million.
At the time it was thought the annual income from the tenants, which employed 300 people, would be £330,000.
But a damning report into the financial state of the council, published by Grant Thornton, deemed the investments “inherently flawed”.
It said: “The investments in The Colonnades and Croydon Park Hotel were not
grounded in a sufficient understanding of the retail and leisure market and have again illustrated that the council’s strategy to invest its way out of financial challenge rather than pay attention to controlling expenditure on core services was inherently flawed.”
Croydon Council has commissioned an independent review into properties the authority has bought which is expected to be published this month.
Recommendations off the back of this report will be presented alongside a budget review in February 2021.
Council leader councillor Hamida Ali said: “As a council we are fully committed to implementing the changes and improvements to address the recommendations made by the auditor as swiftly as we can, and to learn from our mistakes.
“First we must come together as a whole council, to address the serious criticisms contained within the auditors’ report and agree a way forward to ensure that this can never happen again. It will be an extremely important step on our improvement journey.”