Wednesday, 8 June 2016

Knowle relocation project: Cabinet meeting 8th June >>> "Cost neutrality" = increased costs and 'more financial risk'

There have been questions for some time about how 'cost neutral' the relocation project really is:
Futures Forum: Knowle relocation project: comparing the Sidmouth and Honiton/Exmouth options
Futures Forum: When is a development 'viable' or not?
Futures Forum: Knowle relocation project: Scrutiny Cttee to consider report on "cost for refurbishment": Thursday 22nd January

According to the agenda of tonight's Cabinet meeting, the relocation project will now require almost £6 million in borrowing:

7.3 Future Borrowing 
There are plans for the Council to borrow £13,262,782 to fund its capital programme in 2016/17. This borrowing may be from internal resources, PWLB, or from the market, the most cost effective method being selected at the time the funds are required. The 2016/17 borrowing requirement is made up as follows: 
£400,000 LED (not drawn in 2015/16 as planned) 
£750,000 Queen’s Drive Exmouth 
£5,990,000 Office Relocation 
£4,900,557 Refuse Fleet (actual figure, £6,000,000 per budget) 
£290,000 Refinancing of Beer CLT loan (agreed since budget set) £932,225 
Borrowing required to fund the balance on various smaller projects included within the Capital Programme. This requirement has increased since the budget was set due to slippage in the capital programme from prior years. 


In July 2013, the cost of borrowing was £4.8million:

The option to move would use capital receipts from the sale of the Knowle and, if required, prudential borrowing up to a maximum of £4.8M (the calculated savings on running costs over the 20 years following the move). 

Futures Forum: Knowle: relocation... costs of borrowing...?

Although the 'savings' have also mysteriously increased, as the latest April Moving and Improving pages tell us:

The detailed analysis also shows that in direct comparisons of operational expenditure between staying at Knowle (with no repairs) and moving to Honiton/Exmouth offices, there are savings of £6m over a 20 year period if the council moves.

Moving and Improving: all you need to know about the office relocation - What are the main reasons for relocating? - East Devon

With comment from the East Devon Watch blog:
Knowle relocation cost neutral? Knock that one on the head! £6m loan and counting | East Devon Watch

As the EDW also points out, in the Cabinet agenda from April 's meeting, total costs are now almost £10million:
Knowle relocation: cost now approaching £10 million | East Devon Watch

Looking at the agenda from that meeting in detail, there was promise of more details about the Honiton and Exmouth sites:

Part A matters for key decision
11: Relocation update (pages 32-49) This update is to advise on progress of the relocation plans and seek Cabinet agreement to further key actions.
Appendix 1 – Floor plans Honiton HQ and Exmouth Town Hall refurbishment
Appendix 2 – Pegasus Life plan for Knowle Site buildings footprint
Appendix 3 – Service Delivery and Office Relocation Survey results summary

In item 11, Cabinet promised to 'bring Members up to speed on project progress':

Report to: Cabinet 6 April 2016 (page 32)
Agenda item: 11 
Subject: Relocation and Transformation Update Purpose of report:
This is an update for Cabinet to advise on progress of relocation plans and seek Cabinet agreement to further key actions. This report is to both to bring Members up to speed on project progress and the management of multiple tasks under the authority of the Relocation Executive Group and Deputy Chief Executive and to consider recommendations for project changes that arise as the relocation plan moves forward.

And hidden in the opening paragraphs is some interesting financial information:

Financial implications: 
Spend to date is £ 943,000 which is within budget for this stage of the project and within overall budget of £9.7m. 
Detailed cost plans are being prepared on the basis of decisions made to date on design, these final cost plans will be compared against the budget and presented for members’ approval before building or refurbishment works are commenced. 
There is more financial risk with costs associated with Exmouth Town Hall as this is a refurbishment project and the condition of the building appears to worse than expected, but as stated details will be presented back to members when the final position is known. 
A separate request is made within the report, outside of the Relocation project, but linked to the Council’s transformation agenda for the need of additional resources to complete the process of transferring our services to using the Electronic Data Management System. 
A request is made for two additional staff for 12 months on a part time basis at a total cost of £35,900 (suitable individuals have been identified) and for £11,140 to train staff and consultancy for advice on mobile working and how best to proceed with certain aspects of the document storage. It is proposed that this supplementary estimate of £47,040 is met from the Council’s Transformation Fund which currently stands at £174,170


In fact, things looked rather confusing at the Extra Ordinary meeting of Council in June 2015 - what is the total borrowing required and what are the total costs exactly?

11. A net project budget of £2,221,445 be noted and agreed, (the target being to achieve a break even position) , this being the estimated cost for a new build office accommodation in Honiton (BREEAM very good option) and for the modernisation of Exmouth Town Hall as identified in the table in paragraph D5.6 (of the Cabinet and combined meeting report) less the Capital Receipt for the Knowle. 
In addition, a budget of £900,630 is required to meet loan interest costs relating to short term and long term funding. 
Short term cash flow funding will be required totalling £9.2m to meet design and build costs prior to receiving the sale proceeds of £7-8m from the Knowle (financial risks are mitigated by Gateway 7 process detailed in the report). 
Once the capital receipt is received, the balance of funding required is £2.1m to be funded from a long-term loan over a 20-year period. 

Agenda for an Extra Ordinary meeting of CouncilWednesday, 3 June 2015; 6.30pm
Futures Forum: Knowle relocation project: extraordinary District Council meeting >>> Wednesday 3rd June

Meanwhile, staffing levels are increasing - which means more increased costs, as pointed out by the EDW blog in April this year:

27 APR 2016
The employee statistics for EDDC make very interesting reading. It can be hard to work out what is going on, as structural changes such as the creation of Strata, or the transfer of traffic wardens to DCC, can distort the numbers.
However, between May 2015 and March 2016, the number of staff measured by full-time equivalent has increased by 23. And the number of new starters exceeds staff leavers by a whopping 34.
The cost of 23 full-time staff, when all the extras are taken into account could be of the order of £1 million per annum. Has this been budgeted for?
And, of course, the new HQ at Honiton is going to have to be substantially bigger, and therefore more expensive, to accommodate all those extra people.
Since relocation was first proposed, and the HQ space needs assessed, the number of full-time equivalent staff appears to have risen by about 50.

Austerity – not at East Devon District Council! | East Devon Watch

Although of course, the main motive for moving was 'savings' - again from the latest Moving and Improving pages from April:

What are the main reasons for relocating?
The financial imperative for the council to move was a fundamental consideration in the decision taken by members. Like all public bodies, the council has a duty to live within its means, protect frontline services in so far as possible and ensure best value for council tax payers. The council recognises the need to operate from buildings which are affordable and cost efficient and the modelling demonstrates that the council will be much better off if it relocates and saving money from Day 1 of the move.
The detailed analysis also shows that in direct comparisons of operational expenditure between staying at Knowle (with no repairs) and moving to Honiton/Exmouth offices, there are savings of £6m over a 20 year period if the council moves.
Knowle is much bigger than the council needs and this ex hotel can only offer office accommodation/facilities which are outdated and not conducive to the way we work. Our new and refurbished office space will reflect our new ways of working and will include functional and usable areas with fully accessible, modern reception areas for our customers and visitors. There will be better facilities for our members including a fully functional council chamber better equipped with audio/visual equipment to support council business and the democratic process.
The decision to relocate to both Honiton and Exmouth provides the council with a unique opportunity to operate from its two largest towns.

Moving and Improving: all you need to know about the office relocation - What are the main reasons for relocating? - East Devon

The problem is that it is very difficult to get 'up to speed' on where we're at with costs for the Honiton and Exmouth sites:
Specs for Honiton and Exmouth HQs - a Freedom of Information request to East Devon District Council - WhatDoTheyKnow

But the District Council is confident that it's timeline will allow for full financial probity to happen:

December 2016
Cabinet and Council (separately) will take the opportunity to review the Project. This is known as Gateway 7 which is to note satisfaction of the financial requirements and restrictions of the Final Design, confirmation of Contractors Project Costs, advice regarding Planning Application for EDDC at Heathpark and for Pegasus Life Ltd at Knowle.

Moving and Improving: all you need to know about the office relocation - Project timeline - key dates - East Devon

And we will all live happily ever after...

See also:
Quart into pint pot at new EDDC offices? | East Devon Watch

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