Thursday 28 November 2013

The Scarlets, the Red Room and some puce faces

If Carmarthenshire County Council were not already mired in enough scandals, it now seems that the council gifted the Scarlets around £600,000 of the £850,000 sale price of an overflow car park site next to Parc y Scarlets. While council leader Kevin Madge (Lab) was kept in the loop, and Cllr Jeff Edmunds (Lab) and some senior officers were directly involved in the decision, there are suggestions that other members of the ruling Executive Board may have been unaware of just how generous the council had been when they recently signed off the recent bailout package to reduce interest on the club's outstanding £2.6 million debt to the council.

It has taken a long time for this information to come out, with the council unsurprisingly vetoing a Freedom of Information request and a subsequent appeal from Cllr Siân Caiach. In a surprising turn of events, it was Cllr Edmunds himself who spilled the beans in the end despite last-minute attempts to stop him.

Why Cllr Edmunds decided to come clean is something that he himself will no doubt explain in due course.

The Executive Board gave outline approval for the sale of the land at a meeting in July 2012, with councillors delegating authority to negotiate a deal to the head of Corporate Property in consultation with the "appropriate Board Member" (Cllr Jeff Edmunds). The Board also agreed that an independent valuer should be appointed to determine an appropriate split of the proceeds.

In a written answer to Cllr Caiach in July 2013, the head of Corporate Property confirmed that a sum of £850,000 was paid for the land leased to the Scarlets under a 150 year lease. He added that following "normal negotiation and agreement of allowable costs etc", the remaining proceeds were shared equally between the Freeholder (the Council) and the long leaseholder (the Scarlets), as would be legally expected.

There was nothing normal about this transaction, however, not least the fact that the club has never actually paid for the lease from which it has benefitted so spectacularly.

The £850,000 sale price is understood to break down as follows (numbers rounded off):

Fees to agents and architects                      £50k
Allowable expenses to Scarlets                  £280k
Finders fee for buyer  to Scarlets                £30k
Compensation to club for loss of lease        £76k
Share of remainder :-             Scarlets  -     £220k
        Carmarthenshire County Council  -     £200k    

"Allowable expenses" were the costs of fitting out The Red Room, the Scarlets' new bar and shop in the private Llanelli Eastgate development, developed and owned by leasing company Henry Davidson. The Eastgate shops were supposed to be 70% let before the build, and the Scarlets were offered some units to make up this number, as there was difficulty getting commercial commitments to let. The club could not afford to fit out the shop and restaurant, and so were advanced the money by the landlords in order to make up the numbers.

It seems that the £280,000 in "allowable expenses" were subsequently used by the Scarlets to repay the temporary loan from Henry Davidson.

The officers' justification for this part of the deal was that the Scarlets shop would create jobs and increase footfall in the Eastgate development.

Readers may also recall that the council has been moving hundreds of its staff into an office block in the Eastgate development. The official explanation for this is that emptying council-owned buildings and paying rent to Henry Davidson will save the council money. It is understood that the council is paying £250,000 a year for the offices on a 20-year lease.

If you believe that the office deal is a cost saving measure, you will probably also believe the council's line that slashing interest on the Scarlets loan is a fantastic commercial deal, and that 4% is better than 7%. To quote the (highly misleading) minutes of the most recent meeting of the Executive Board, "The Board was also advised that the Council was now receiving a higher sum of interest on the loan than for each of the last three years".

The truth of the matter was that the council was receiving 7% interest, but with a sum equivalent to 4% being rolled up into the loan. In cash terms, the council is now very slightly better off as a result of the deal (about £8,000 a year at current rates), but overall the council will forfeit somewhere between £750,000 and £1 million of revenue over the remaining 10 years of the loan.

And finally, Cneifiwr was recently taken to task by a reader for publishing a transcript of Kevin Madge's recent rant on the subject of the Scarlets. Stripped of the waffle and meaningless platitudes, the transcript contains the following interesting sentences:

And I am proud of what has been achieved here, and what has been done with the Scarlets. They've asked us for a little bit of help here, and we've supported them.....So at the end of the day, Chairman, I think that those two decisions needed to be done. Again, we make the tough decisions. We are answerable here now. I've asked the legal, erm, Linda, to give the, erm, run-down on that, but I think we have got the power to do what we did.

Cneifiwr understands that several public spirited individuals have now asked the Wales Audit Office rather than Linda (the council's Head of Law) to give the legal run-down on one of Kev's tough decisions, and the council's own internal auditors have been asked to look into what happened.


Anonymous said...

I wonder what the Wales Audit office will make of this? Will they agree with Kevin Madge that funding the rugby region is more important than funding Council services?

Anonymous said...

What happened to investigative journalism? What happened to independent press?

If it weren't for you and Jacquie none of us would know what was going on nor where our money was being spent!

Keep going Carmarthenshire residents need you. Our elected councillors wouldn't be so informative that's for sure.

Anonymous said...

Scarlets a reality check not a blank cheque.