“Auditors find ‘significant weaknesses’ in record-breaking investment deal and slam Surrey council’s £1bn ‘property roulette’ “

“Auditors have slammed a district council in Surrey which undertook the most expensive property investment ever made by a local authority after it found “significant weaknesses” in its financial processes.

KPMG delivered a damning assessment of Spelthorne Borough Council’s purchase of a BP research centre in Sunbury for £385m in September 2016, one of a number of costly property investments in the authority’s £1bn portfolio.

The auditors found that the acquisition of the site was decided by council officers without any public scrutiny, and the decision-making process was conducted via email and was “generally poor and difficult to follow.”
This meant it was “difficult to identify whether all the risks associated with such a large and significant transaction had been fully considered and mitigated,” the auditor said.

KPMG said it found little evidence the council had properly considered legal advice which said the purchase, the largest of its kind by a local authority in England, may be “disproportionate” to the rest of its spending.
Most worryingly, the auditor failed to determine whether the council had considered the financial impact if BP had decided not to renew or change the terms of its 20-year lease of the site.

The council then took four months to publish its decision, leading the auditor to conclude that “we are not satisfied that, in all respects, Spelthorne Borough Council put in place proper arrangements.”

Spelthorne has been the biggest investor in property in local government and since 2016 has borrowed £1bn from the Public Works Loan for the takeover of BP’s business park – as well as the purchases of offices in Reading, Slough and Uxbridge for £285m and a number of other investments.

The authority told the Bureau of Investigative Journalism that the “adverse value for money conclusion does not mean that the auditors are saying the actual transaction does not represent value for money but that in their opinion some aspects of decision-making processes were not conducive to maximising value for money.”

Surrey County Council’s Robert Evans said he was surprised Spelthorne had not done due diligence around the deal, and said the authority seemed to be “playing property roulette with council taxpayer’s money.”

“If the climate is good that might be okay but with Brexit around the corner everything is uncertain and this is foolhardy at best and downright dangerous at worst.”

http://www.publicsectorexecutive.com/Public-Sector-News/auditors-find-significant-weaknesses-in-record-breaking-investment-deal-and-slam-surrey-councils-1bn-property-roulette

How to make very bad council decisions – leave them to clueless councillors!

Owl says: Do you think this applies to Tavistock? Dream on!

“Auditors have blown wide open failings in the way plans were cooked up for a sprawling Premier Inn development in a leafy Devon town.

West Devon council chiefs have been criticised for the way they led multi-million plan proposals to build over a key car park in the heart of Tavistock.

A damning new independent dossier reveals how Invest to Earn – a team of three councillors tasked with leading the project – lacked crucial knowledge of the property market and received no training to ensure they knew every risk before taking decisions.

A lack of communication between elected members about the gravity of the development, ‘hostility’ on social media and a failure to access key documents online all inevitably brought down what many deemed a pipe dream, the public file reveals. …”

[read on for more shocking information how bad decisions got worse]

https://www.plymouthherald.co.uk/news/plymouth-news/premier-inn-tavistock-report-findings-2665718

“The Mass Sell-Off Of Public Land Is Driving The Housing Crisis”

“A major new investigation by the Bureau Local and HuffPost UK revealed austerity’s dirty little secret: massive funding cuts have been, in part, offset by a mass sell-off of public land. But what’s not being examined is who is buying that land, and what they are building on it. If used appropriately, surplus public land could be an important first step towards solving the housing crisis, but the present fire sale is, if anything, making it worse.

The Bureau’s research uncovered 12,000 public spaces sold into private ownership since 2014/15, ranging from grand metropolitan libraries to small patches of scrub land. Guy Shrubsole and Anna Powell Smith, in mapping landownership in England, discovered that £100million worth of the land sold-off by councils between 2017 and 2018 went to offshore companies. Earlier this year, Brett Christophers revealed that 10% of the UK’s land has transferred from public to private hands since 1979. In 2016, our own work at NEF revealed an alarming spread of sales from central government departments in recent years. The government itself claims to have sold 25% of the ‘core’ property holdings government departments since 2010.

Why are we offloading land at all? Ostensibly it’s to meet the government’s target: 160,000 new homes on previously public land by 2020. But the murky reality is that local authorities, like other public bodies, are selling land to fill the vast funding gaps driven by austerity. And it’s because of this fact that selling public land won’t generate the affordable homes that we desperately need to solve the housing crisis.

Local government funding has been cut in half between 2010/11 and 2017/18, so when government policy dictates selling surplus land, it’s no wonder that councils are using their land assets to plug the holes in their budgets. Birmingham City Council has used £53million from asset sales to balance its books, more than any other local authority in England, with as much as £26million of that revenue used to fund redundancies (also a result of austerity) at the council.

As NEF have shown, a key driver of the housing crisis is the price of land. When the incentive in selling public land is to raise cash to keep vital services afloat, councils inevitably sell to the highest bidder, as quickly as possible. While local authorities are technically allowed to sell at slightly less than the highest value (although many don’t out of financial necessity), central government departments are actually prohibited from selling land at lower than the ‘best consideration reasonably obtainable’. Developers cannot both build affordable housing and make a profit, because the price of land is prohibitively high. Expensive land leads to expensive houses. In this upside-down system, the price paid for land ultimately dictates what gets built when it should be the other way round.

This theory is laid bare in the planning documents that sit behind the sites. In our research on the central government sell off, we’ve come across countless examples of developers securing planning permission with promises of affordable housing, only to wriggle out of their commitments a few months later by claiming they can’t afford to.

Take Runwell Hospital in Wickford. Chelmsford City Council’s affordable housing plan requires that 35% of homes on new developments are affordable. Yet the site’s initial planning permission required only 20% affordable housing provision. Even so, the developer later submitted an application to reduce this further to just 10% on the grounds of affordability – just 61 of 575 homes.

Our research in 2017 revealed that:

Only one is five of the new homes to be built on sold-off public land is likely to be classed as ‘affordable’ (which, at 80% of market rates, is still largely unaffordable to those who need it most).

As little as 6% of new homes are likely to be social housing, and in some cases developments comprise solely of luxury properties.

New homes on formerly public land are dramatically behind schedule. At the current rate, the government’s target of building 160,000 homes will take until 2032 to achieve, 12 years later than promised.

Releasing land into the private market is not delivering the quantity or quality of affordable homes we need. As more land is sold, there is less opportunity to reverse these trends.

The sell-off of public land for hole-plugging cash receipts is not only economically short-sighted and unsustainable, it’s also driving the housing crisis. There is a clear tension between disposing of land to plug funding gaps and developing high-quality, genuinely and permanently affordable housing and other infrastructure. This year we are continuing to get to grips with the effect of the public land sale on the housing crisis. First up is a close look at NHS sites sold in the last year, then in the coming months we will be bringing together central government and local authority land sales to get a truly national picture of the sell-off. Only then can we build a picture of an alternative to the fire sale of public land, that results in the supply of genuinely affordable homes.”

https://www.huffingtonpost.co.uk/entry/housing-crisis-public-land_uk_5c811055e4b0a135b5199d5d

Temporary Exmouth seafront attractions have already cost us £300,000

Owl says: imagine if other coastal towns in East Devon had this much spent on them …

“Under questioning from [Independent councillor Megan Armstrong at last week’s East Devon District Council meeting, Councillor Philip Skinner revealed that £285,305, was spent by the council for the first year of the new attractions in Queen’s Drive, Exmouth.

Cllr Skinner said that the costs included £155,000 on the new dinosaur-themed play park, as well as other costs on the beach bar seating area, the events stage and making the whole site safe.

He also said the council spent £22,850 putting on events such as free live screenings from the Royal Opera House.

Under questioning from councillor Megan Armstrong at last week’s East Devon District Council meeting, Councillor Philip Skinner revealed that £285,305, was spent by the council for the first year of the new attractions in Queen’s Drive, Exmouth.

Cllr Skinner said that the costs included £155,000 on the new dinosaur-themed play park, as well as other costs on the beach bar seating area, the events stage and making the whole site safe.

He also said the council spent £22,850 putting on events such as free live screenings from the Royal Opera House.

In response, Councillor Skinner said he didn’t expect to be facing criticism for investing money in Exmouth.

He said: “We are trying to get more people into the town, and to get them to spend more money there.

“It shouldn’t be a criticism that we are investing more in Exmouth and the town councillors should be chuffed to think we are investing in the town.

“We tried new things and people did like them.

“Some events didn’t go well, but others did.

“We made all of our revenue costs back and made a profit, and I expect to do so in future.

“We are continuing to invest in Exmouth’s seafront and have also been invited to a Stage 2 bid for Coastal Communities Fund that will further benefit the seafront.

“For 2019, our budget is £75,000, which includes staffing, event cost, equipment hire, maintenance, security and utility costs.

“We expect to secure income of between £30,000 and £40,000 this year, depending on sponsorship secured, and a further £12,000 for the big wheel.”

https://www.exmouthjournal.co.uk/news/seafront-attractions-cost-1-5917372

The great public asset sell-off

Public open spaces
https://www.huffingtonpost.co.uk/entry/sold-from-under-you-explainer_uk_5c796bdee4b033abd14b61c8

Land and buildings:
https://www.huffingtonpost.co.uk/entry/revealed-councils-are-selling-off-buildings-to-fund-more-council-cuts_uk_5c7cdc1be4b0e1f776539948

No-one goes into public service to do this:
https://www.huffingtonpost.co.uk/entry/council-funding-austerity_uk_5c794d31e4b0de0c3fc03024

That Knowle table … sold for £50?

Oh, er – been kicking off on Facebook page!

22 foot mahogany table with 8 foot extension (not sure if included in 22 foot or makes it 30 foot, but probably the latter). Rumour is it was “valued” and was sold for a winning bid of £50 (fifty pounds).

Most councils have a policy on this. Anyone seen East Devon”s?

“The public service gamble: Councils borrowing billions to play the property market”

New report from the Bureau of Investigative Journalism:

“In the last two years, the number of councils investing in property has doubled. In the past financial year alone, councils spent a total of £1.8 billion on investment properties, a six-fold increase from 2013-14.

Of biggest concern is the scale of debts accrued by four of the smallest local authorities in England – including Spelthorne Borough Council in Surrey, which says it is “heavily reliant on investment income” to fund the services it provides.

Spelthorne has so far borrowed £1 billion despite having a net annual budget of just £22 million – this equates to 46 times its spending power. Three other councils, Woking, Runnymede and Eastleigh, have borrowed more than ten times their budget.

The Bureau has obtained details of the property investments made by more than 100 local authorities. Today we have published the details in full, providing unprecedented insight into how councils are becoming property speculators – with additional details on the millions paid to property and finance consultants.

Properties bought by councils include a BP business park in Sunbury purchased by Spelthorne for £392 million; a Tesco Extra bought for £38.8 million by East Hampshire District Council; branches of Waitrose and Travelodge acquired by Runnymede District Council for £21.7 million and a B&Q store that is now owned by Dover District Council. Other acquisitions range from farmland and gyms to a Royal Mail depot and a solar farm.

Councils say they have been forced to find new ways to generate income given the steep cuts in central government funding, which the National Audit Office calculates has fallen by half in real terms since 2010.

But experts warn that commercial property investments are volatile, and the fact that councils are financing them through borrowing makes them even riskier. If anything goes wrong, the consequences for taxpayers could be severe.

“This is a risk that local authorities have never been exposed to before”
“If you look at the most extreme examples, there are public services used by vulnerable people which are dependent on how well rental income in the property market is doing,” said Don Peebles, Head of Policy for the Chartered Institute of Public Finance and Accountancy (CIPFA), which oversees council finance and publishes the guidelines local authorities are supposed to follow.

“This is a risk that local authorities have never been exposed to before and you have to ask whether they are equipped to handle that risk.”

Warnings unheeded

The spending spree has been made possible by councils’ easy access to low interest loans from the Public Works Loans Board (PWLB), a national government body. There are no limits to how much councils can borrow and they do not have to prove they can afford it – the PWLB leaves this up to councillors to decide. … “

https://www.thebureauinvestigates.com/stories/2018-12-04/councils-borrow-billions-to-buy-real-estate