Monday, 22 April 2019

Knowle relocation project: an overspend on loans

How much exactly has the relocation from the old District Council HQ cost?
Futures Forum: Knowle relocation project >>> a spanking new HQ for £5.6 million... or for £10.6 million?

How much exactly is the new HQ worth?
Futures Forum: Knowle relocation project: or, how a new HQ costing £8.7m is valued at £3.5m

What is clear is that a lot of money had to be borrowed:

Here is one estimate of the amount of money being spent on the relocation project:

= £10.5 million (+ new road) for the Honiton HQ + £1.5 million for refurbishment of the Exmouth Town Hall 

= £12 million for both sites

= £7.5 m for Knowle from PegasusLife

= £4.5 m to be financed by borrowing

Futures Forum: Knowle relocation project: ready to move, but at what cost...
Futures Forum: Knowle relocation project: financial profligacy in a time of austerity

And a 'twenty-year' window of borrowing is always fantasy in public administration:
Futures Forum: Knowle relocation project: fantasy 'cost savings over twenty years' are of no interest to people in East Devon

But, then, the District Council's ways with money always seem to be a fantasy beyond our ken:
Futures Forum: District Council's £20m investment fund: motion to debate the issue rejected

And public finance bodies are warning that things are going to get worse for councils:
Council tax increases in England | CIPFA
Running out of road: the councils using rainy day reserves | Public Finance

As reported across the country:
South Tyneside Council borrowing tops £630m - Shields Gazette
Mix 96 - News - Bucks County Council borrow £302 million
Figures show Redbridge Council more than £200m in debt as experts warn of risk | Politics | Ilford Recorder

Including in East Devon - and as noted by the EDW blog, this is not unconnected with its vanity project: 


22 APR 2019

EDDC blames the overspend on loans (see last paragraph below) on “the purchase of assets related to service delivery, these being assets required “for recycling and refuse collection”. Are we to believe that it has ALL been spent on waste contracts and NOT on the £10 MILLION on HQ relocation (originally described as “cost neutral”)?

Owl would be interested to see a breakdown of the costs (but bets they will be conveniently avoided under a “commercial confidentiality” clause with the contractor …

“More than £86.6million in outstanding loans is owed by East Devon District Council” | East Devon Watch

Here's the story from the Herald: 

District council has £86.8 million in outstanding loans to pay

PUBLISHED: 12:00 21 April 2019

Harriet Clugston

More than £86.6million in outstanding loans is owed by East Devon District Council (EDDC).

The amount the authority has borrowed has also increased by £3million in just one year.

Experts have warned councils are risking taking on too much debt while others say that councils are simply adapting to plug funding gaps made by Government cuts.

The Chartered Institute of Public Finance and Accountancy says delivery of public services could be put at risk by unsustainable borrowing, after debt among UK local authorities rose to more than £100 billion.

By the end of December, EDDC's outstanding loans stood at £86.6 million, according to figures from the Ministry of Housing, Communities and Local Government. This was a four per cent increase compared to a year ago, and one per cent higher than at the end of 2013-14. All the outstanding loans were long term advances, which last for more than one year and are used to finance large projects or purchases.

The Chartered Institute says many cash-strapped councils are taking out large loans to buy property, as the rent they collect can be higher than the interest they pay on the loans.

Funding for councils fell by almost half between 2010-11 and 2017-18, according to the National Audit Office.

The government's Public Works Loan Board was the sole lender to EDDC as of December. The loan board offers low-interest loans to councils, without requiring them to prove they can afford the repayments. There is no limit to the amount councils can borrow from it.

Don Peebles, head of policy at the Chartered Institute, said: “With government funding in decline, it is unsurprising councils are having to adapt and find alternatives. While councils are borrowing for a wide range of purposes, such as building houses and investing in major infrastructure, one trend which has been concerning is the growth in investment in commercial property - which exposes public finances to new risks.”

A spokeswoman for the MHCLG said: “Councils are responsible for managing their own finances and making the right decisions for the communities they serve – including making appropriate investments. Guidance on council investments was updated in April 2018 with new codes that strike the right balance between allowing councils to continue to be innovative while ensuring that taxpayers' money is properly protected.”

An EDDC spokesman said: “The annual increase in borrowing identified was used to finance the purchase of assets related to service delivery, these being assets required for recycling and refuse collection.”

East Devon District Council's has £86.8 million in outstanding loans to pay | Honiton, Axminster and Seaton news - Midweek Herald

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