Saturday, 10 November 2012

Booby traps

Roughly three years ago a friend who runs a small business in Llanelli was talking to a senior council officer about the council's plans for the new East Gate development. The plans included a lot of new office space, and my friend asked sceptically where the council expected to find tenants for the new offices.

Not a problem, came the reply, because if we can't find private sector takers, we'll take it on ourselves and move in council staff.

And lo and behold, that is exactly what has happened.

The subject came up at this week's meeting of the full council, and a number of councillors seemed to be surprised at just how deep the council had got itself into hock with the developers.

They shouldn't have been surprised, because the East Gate development follows a pattern which we have seen several times before, and the result is invariably that councillors, and more importantly the public, wake up to find that the future has been mortgaged as little clauses tucked away in the fine print of agreements are triggered when the council's optimistic projections turn out to have been far too optimistic.

In the case of East Gate, the people of Carmarthenshire are about to be hit with a double whammy, as we shall see.

The decision to redevelop a 5 acre site in the run-down centre of Llanelli crystallised in 2010, and a handful of senior officers, led by the Chief Executive, thrashed out a deal which went before the council's Executive Board in January 2011. The public and press were excluded from the meeting where the deal was rubber stamped.

The minutes tell us nothing other than that the deal was approved.

A month later the agreement went before the full council for final approval. Once again, the public and press were excluded.

The minutes note that while the public might have an interest in seeing that the council was managing its properties effectively and spending money wisely, those interests were outweighed by the commercial interests of the developers and the council's own need to keep information away from the public gaze.

Once again the minutes are sparse in the extreme. The deal was approved after a recorded vote in which all but two councillors (Siân Caiach and Arthur Davies) voted to accept the agreement. The minutes note, in true Carmarthenshire style, that:

In considering the report, members congratulated the Chief Executive, Leader of the Council, Head of Corporate Property and all other officers involved for their excellent work and commitment to ensuring the delivery of the scheme.

At least we know who was responsible for what was to come.

One thing we can be sure of is that councillors were not given copies of the actual agreement, but a much shorter summary.

On one occasion the public was given a unique glimpse of how this process works when the council decided at the last minute to allow the press and public to stay to watch councillors approve the deal with Towy Community Church.

The report put before the councillors did not actually contain any untruths, but it was certainly misleading. More important in these meetings, however, is not the paper report but the presentation of it. What we saw was a marketing operation worthy of the most experienced timeshare salesmen. The positive is emphasised, doubts are dismissed or ignored. A small group of the usual suspects who know where the bodies are buried put on a rehearsed show of verbal fireworks in which claims, misleading statements and contradictions are thrown up in rapid succession.

The deal will save money, councillors are told. It will not cost the tax payer a penny. It will bring huge benefits to the county. It will create jobs. In the case of Towy Community Church, the project was being managed so successfully that the church would no longer need to borrow as much as expected from its bankers, but it would need a hefty subsidised loan from the council instead.

All of this is helped along by the standing orders. Only a minority of councillors will ask questions, and only a minority within that minority will ask searching questions. They can expect evasive replies, and are forbidden from asking follow-up questions.

In due course, the deal will be approved, and councillors depart, dazed and confused by what they have heard.

The clock then starts to tick, and a year or so down the line the booby traps start to go off.

The few short lines contained in the two sets of minutes from January and February 2011 were all that the public was ever told about the deal on East Gate. Since then practically nothing has emerged apart from a PR offensive to advertise Ben and Jerry's ice cream, Costa Coffee, Nandos and the Odeon cinema.

Until this week when the Chief Executive told councillors, four members of the public and lone journalist that the council had underwritten the cost of the development, and that unfortunately efforts to attract private sector tenants for the office space had been unsuccessful, although there was one potential tenant who might be interested in taking part of the space. How much space, what they might be prepared to pay or even who this mystery company is could not be disclosed. For all we know, we could be talking about renting out a broom cupboard for a peppercorn rent.

In underwriting the cost of the development, the council took on risk, and Henry Davidson Developments Ltd found itself in the envious position of being a private sector operator in a largely or entirely risk-free project. The laws of risk and reward which are commonly supposed to operate in a free enterprise economy were once again suspended.

The council tax payer will now be forking out £250,000 per year for 20 years (£5 million) to rent office space in the hope that it can sublet at least part of the space to private sector clients. The chief executive remains optimistic, as always, that the council will find them.

In addition, the council is having to raid its reserves to find £450,000 to fund the refurbishment of the newly constructed offices.

Just as with the Towy Community Church project, councillors were given a rehearsed blitz of claims from the council's leadership.

The council's portfolio of office buildings was in need of rationalisation. Moving people out of council-owned property would not only increase footfall in East Gate, but it would enable the council to rationalise and save money.

As usual, no facts and no detail were submitted to back up these claims, but the upshot is that the council tax payer now faces a double whammy as we are tied into a 20-year lease, while council assets are emptied and then put up for sale in a very depressed market at what will probably be knock-down prices.

What other booby traps were built into the deal with Henry Davidson remains to be seen. What will happen to the retail element of the development if businesses cannot be found to fill the empty units? Did the council underwrite that part of the deal as well? And, as almost certainly is the case with the St Catherine's Walk development in Carmarthen, what inducements and sweeteners will the tax payer have to fund to attract the high street chains in to fill up the space?

As for the theory that a large, shiny new development will lift the rest of the ailing town centre, Llanelli residents only have to look at the sad and rather shabby King Street and Red Street in Carmarthen to see that this model does not work. And with so much real and political capital tied up in its new developments, it is not in the council's interest to do anything which will divert trade away from its show piece developments.

1 comment:

Anonymous said...

Britannia Construction and Henry Davidson Developments both convey the info that the East Gate offices have been constructed specifically for Carms CC. Did the councillors know that?