Knowle relocation project: Audit and Scrutiny Cttees consider Cabinet proposals: reports

Earlier in the week the Audit, Overview and Scrutiny Committees met in joint session to look at the latest plans from the District Council's political leadership:
Futures Forum: Knowle relocation project: Audit and Scrutiny Cttees to consider Cabinet proposals: Tuesday 18th April >>> "If the sale of the Knowle did not happen, the Council would be required to pay for the project costs"

This is the report from the Herald:

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And this is taken from the District Council's website:

EAST DEVON DISTRICT COUNCIL 

Minutes of a joint meeting of the Audit and Governance, Overview, and Scrutiny Committees 

held at Knowle, Sidmouth on 18 April 2017

Relocation report 

The relocation report submitted to Cabinet on the 5 April 2017 was the subject of discussion by the three committees. 

Financial modelling 

Questions and discussion from the three committees included: 

 Had a sensitivity analysis on an energy crisis been undertaken, as this had a bearing on the assumptions in energy costs, which in turn formed part of the betterment calculations – in response, it was reported that sensitivity analysis had been undertaken. If energy prices increase, betterment would improve because of the wider gap to the “do nothing” option, and if there are energy price decreases, there are still savings to be made in relocation. Operating costs could increase up to 32% with the Pegasus option before betterment disappeared; if Pegasus was delayed, this could increase up to 37%; 

 Had actual maintenance costs been factored into calculations even though no ongoing maintenance had been undertaken to the Knowle building for some time – in response, it was reported that this had been included in the calculations; 

 Why was there no reference to the potential income from the newly agreed East Devon Homes organisation in the calculations – in response this new company was not a relevant consideration in the matter before the committees; 

 Why was there no reference in the report or calculations to mitigating the negative impact that an open plan office environment would have, in terms of decreased productivity and increased sickness absence, as evidenced by some information located online – in response, there were a number of positive and negative comments online about open plan office environments, but research had been undertaken with other councils who had already adopted open plan offices with positive results; 

 What had been factored into the calculations to take account of any delays – in response, the model showed a two year delay with the interest only loan of £94K with betterment of £164K in the new building. If this exceeded over the two year period it would still be in a positive situation; 

 Had the potential CIL receipt been factored into the calculations if Pegasus were successful – in response, the committees were reminded that discussion on a planning application was not within their remit. As per the terms of the contract with Pegasus, if C2 use or C3 use impacts on the purchase price, the contract permits the Council to go back to the market with the site. If Pegasus cannot pay the agreed price in the contract, it is up to the Council as landowners to decide if to re-negotiate or to terminate the contract and go back to the market; 

 Views expressed by some Members that it was too high a risk to proceed now when the appeal result was not known – in response, option one gave the Council the opportunity to mitigate the planning risks; 

 Had any consideration been given in the independent modelling, being over a twenty year period, that the Council may not be in existence in that time. This was based on previous experience of government directives to pursue local government reform – in response, this had not been included in the remit for Grant Thornton. Financial modelling could only be carried out on what information was known and on assumptions for future changes such as inflation or interest rates; 

 The risk assessment set out in the report was challenged as being assessed too low at “medium” – in response, the relocation project was re-iterated as not being about risk avoidance, but about mitigation of risk; the South West Audit Partnership had also undertaken a review of the risks involved which outlined the controls for mitigating strategic risk; 

 Inflation had been included in the financial modelling based on the current rate of 2%; option one allowed the Council to lock down construction and operating costs, as well as secure a fixed low rate on borrowing based on current loan rates.

Other issues relating to relocation 

Questions and discussion from the three committees included: 

 Challenges to costs stated for repair and refurbishment to the existing Knowle site of the old hotel and the 1970/80s office addition – in response these costs covered the gutting of the building and replacing the interior floors and walls to create a workspace that meets present day office requirements (within the constraints of the building composition) only; 

 Separation of the hotel element and the office add-on had been explored previously when originally marketing the site – there was no interest expressed in partial development whilst the Council remained and refurbished the other part. The site also needed adequate office space for staff as well as meeting rooms and a Council Chamber, which was not possible to squeeze into either section of the site; 

 Enquiry whether the value of the land at Honiton to be used as a new HQ had been taken into account in the process; it was worth considerably less than the Knowle land value. It would not be viable to sell the Honiton site to pay for refurbishment of the Knowle site. 

RECOMMENDED by the Audit and Governance Committee, Overview Committee, and the Scrutiny Committee to Council that; 

1. i. Option 1, as detailed in the Cabinet report of 5 April 2017, be adopted and that the Council proceeds with the construction of a new HQ building at Honiton Heathpark, and 

ii. The Deputy Chief Executive – Development, Regeneration and Partnerships be granted delegated authority; in consultation with the Office Accommodation Executive Group, to commence works and deliver the new HQ building. 

iii. A budget be agreed of £8,692,000 to provide a new HQ building at Honiton Heathpark, which when added to the approved Exmouth Town Hall refurbishment budget of £1,669,000 gave a total gross budget of £10,361,000.

2. a further sum of £225,000 be allocated to fund the addition of a direct access road to the new HQ building past the East Devon Business Centre. This was a more direct approach to the building rather than bringing traffic through the Heathpark Business Park south of the building and did not affect the conclusions in the report, in relation to viability and ranking of options for the sale of the Knowle site. 

Minutes of a joint meeting of the Audit and Governance, Overview, andScrutiny Committees held at Knowle, Sidmouth on 18 April 2017 
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