When you are in a hole stop digging – or at least dig where the foundations need to be repaired
It appears, from a report being considered by the Councils Executive on 8th May, that the cost overrun on the Guildhall development project could have been as much as £6 million. That was what caused officials to pull the plug on a contract with Interserve to redevelop the Guildhall complex.
Taxpayers had already been asked to underwrite an estimated cost of over £12 million for the Council’s plan to establish a “business centre” in the building.
There was no way even the most optimistic estimates of income would have covered the extra £300,000 pa interest costs on the borrowing.
Incredibly Councillors are now being asked to tender the work again with minor changes. Amongst these are a plan to move all building materials through St Helens Square during the 18 months construction period (rather than via the river frontage).
Roof terraces and extensions would be abandoned
Despite these changes, the estimated total cost of the project is now estimated to be an additional “£4-5 million”
“Business case” March 2017
That will be a direct charge on taxpayers as there is no scope for additional income from rents in what will be a smaller than originally planned building.
Significantly, officials provide no update on the business case for the “business centre” which is now clearly nonviable.
It was highly marginal under the old plans (see right) and was therefore labelled as “highly risky” with no private sector partner prepared to become involved
The Councillors are not even being offered the obvious option which would be to put the site on the open market and allow experienced entrepreneurs to suggest viable uses..
The Council has admitted that it has already spent £1.5 million on the project.
If the Council does seek new tenders for the business centre project, they face a major delay – probably until after the next local elections (due in May 2019).
If Labour were to be successful in that poll, they would be left picking up the pieces of a project which started to go wrong during their last tenure in office. They had from 2011 to decide what to do with the Guildhall complex but dithered for four years before passing the buck on to the incoming administration in 2015.
The listed buildings continue to deteriorate.The report say,s “work has identified additional repair and maintenance work particularly relating to the structural weaknesses in the tower and the estimates have risen from £2.5m in the 2017 report to between £3-5 million”
With the annual maintenance bill continuing to grow, taxpayers will wonder just how they can now extract themselves from what has developed into a major financial black hole
If the market had been properly tested four years ago this crisis might have been averted.
Perhaps not surprisingly, the York Planning Committee is being recommended to approve major changes to the Guildhall complex in York.
The proposals involve alterations to, and the refurbishment of, the Guildhall complex to create conference rooms, meeting rooms and offices.
Guildhall project plans
The existing south range will be refurbished, and part rebuilt, to provide cafe and ancillary accommodation while an extension will be erected on the north side of complex to form a restaurant and office accommodation.
30 objections to the plans – including one from the York Conservation Trust – have been received. Only one letter of support has been lodged.
The proposal is controversial because of the risks to the public purse. The latest estimates suggest that Council taxpayers could be liable for around £12 million if the project flops. It is an investment – and risk – which could have been transferred to the private sector if a more flexible tendering system had been adopted.
Many of the proposed changes will be welcomed as they open up the river bank and will bring back into use an important historic building which has been largely empty for four years.
One issue to be resolved is the inclusion of units where alcohol will be served.
This – like several other recent proposals for the city centre – is directly in conflict with the cumulative impact policies of the Council and local Police. The policy seeks to limit the number of outlets in the City centre selling alcohol.
The York Council has now admitted that the project to create a business club and restaurant at the Guildhall will cost £780,000 a year in interest charges.
It says it can only recoup £500,000 a year from rentals, leaving taxpayers to pick up an annual bill for £430,000.
Part of the huge escalation in costs results from the deterioration in the condition of the historic building since it wasabandoned by the then Labour led authority nearly four years ago.
They had no idea what to do with the empty building so embarked on an expensive and time consuming international design competition in 2012.
The new coalition run Council had the option to take decisive action over a year ago but dithered. They had been strident, while in opposition, in criticising Labour’s £9.2 million plans for the building .
Originally, it had been intended to put the modern part of the complex on the open market with the intention of using the income to sustain the Listed building. The Council would have continued to use the historic part of the building.
The only justification for the project now seems to be a speculated increase in GVA (Gross Value Add) to the local economy of £66m. However, this would have occurred anyway with a private sector driven alternative.
The Council has already spent £750,000 on the project.
Potential support from regional organisations and the Heritage Lottery Fund has not materialised.
The Council now doesn’t expect the building to open before late 2018.
So why would seemingly intelligent representatives do a U turn on such risky venture?
Well it takes courage – and experience – to challenge Council officials and consultants. They have a vested interest in projects appearing to be a “success”. They will provide elected members with information which suits their version of events. They will not volunteer other choices (like testing the market with other use options).
A similar situation has occurred with the Stadium project.
We doubt if the Council’s Executive will step back from the brink at this stage
If they do so, they will be accused of wasting £750k of taxpayer’s money.
If they don’t, then costs will continue to escalate and taxpayers – and other public service standards – will suffer.
Senior York Councillors are being recommended to let York taxpayers bear the bulk of the risk in a new Guildhall office project.
click to enlarge
Although the redevelopment has shed its pretentious “media centre” label – attached by the last Labour administration as they adopted a £9 million development scheme – the new project seems to be a case of the “Mayors new clothes”.
Little has changed as the rookie administration is asked to plunge the City further into debt. Each York residents already owes £1326 each following previous Council decisions.
The Council have clearly failed to find a public sector partner who was willing to bear the financial risks involved in converting the complex into a “serviced office venue with virtual office and business club facilities”.
There is welcome news that the Councils traditional civic headquarters – the Guildhall itself and adjacent Council chamber – will continue to be publicly accessible. Officials project income of £80,000 a year from these facilities although this is likely to be dwarfed by ongoing maintenance, energy and caretaking costs.
The project also incorporates a restaurant and café/bar.
The main criticism, of the new Council approach is likely to be that it has failed to test the market for the site. While for many, retaining the historic building in public ownership was a “given”, the so called review process undertaken in the summer turned out to be little more than a cosmetic exercise. Despite the obvious access difficulties for commercial use, alternatives such as hotels or residential were neglected.
Apartments in the City centre are fetching astronomical prices and the offer of a river view would be irresistible for many. In Clifton Moor the owners of offices have found it impossible to let them. Ironically, many are now being converted into flats.
If the Council has to borrow £7 million to fund the scheme, then debt repayment costs of around £600k a year – for 30 years – will have to be paid. The recommended scheme generates only an estimated £362k in annual rental income and that assumes a high occupancy level.
The Heritage Lottery Fund has now formally turned down a request for a grant so that is one source of funding which has disappeared.
So York residents will be hoping that subsidies from the LEP and similar bodies will offset the burden.
Without them – and a lot of luck – the project could be a burden on generations of York taxpayers for decades to come.
Thanks to a huge public response to the archaeological excavation undertaken close to York Guildhall this summer, the first stage of the project is now complete and has unearthed artefacts from the Roman period.
The Council is apparently on the verge of signing a lease which will see the University of York take over the running of the York Guildhall. It was reported some time ago that they will try to establish a business club on the premises.
The Council has reserved a right to use the Council chamber for their meetings.
The hugely expensive (£21.7 million) renovation project has already run over budget. There are fears that further cost increases may be in the pipeline.
A report to a meeting taking place today, says
“The early project challenges associated with the underpinning, piling, high river levels and archaeology, which extended the contract period and costs were report last November, along with the agreed mitigation measures and budget support. There is ongoing budget pressure in relation to the projected contract out-turn and this will continue to be repeated through future monitoring reports. However, the project is on track to deliver the agreed outcomes and the lease agreement with University of York Science Park Ltd should be concluded in the next quarter, securing the agreed income generation”
The comment about the University lease has prompted some social media comment with conservation groups keen to ensure that public access is maintained at least for the key historic parts of the site (Guildhall, committee room 1, Council chamber).
The original hope had been that more access would be available to access previously “off limits” areas.
These include the historic battlement river frontage and the, now subterranean, “Common Hall Lane”
So far the Council has given no guarantees on this issue.
In turn “York Walls” has now tweeted saying that the Universities record on allowing public access to other historical buildings such as Kings Manor and Heslington Hall gives them cause of concern.
The report also reviews the future of the Castle Gateway and York Central projects. The former is currently “paused”. Given the parlous state of the councils finances the authority would be wise to freeze expenditure on this plan leaving things as they are for a while at least.
Opportunities may arise over the next few years to sell the Castle Mills and 17/21 Piccadilly sites as the economy improves
The key is to remain flexible if taxpayers interests are to be protected.
In the meantime parking revenue remains vital for the Councils budget while accessible car parking at Castle and (potentially) Castle Mills (surface level) and 17/21 Piccadilly could be an important part of the attempt to revive the City economy.
The Council has today issued a media release claiming that the £20 million Guildhall project, “has managed to progress whilst implementing government social distancing restrictions and the team has achieved 90% of all scheduled work on site in the last month”.
That is good news. Earlier in the year long delays had been forecast
The Councils performance in allowing the listed building to slip in a shocking state of disrepair was disappointing. The conservation work needed to be completed and the letting of a repairs contract, after so many delays, was broadly welcomed.
Unfortunately the Council also agreed to embark on, what some viewed as, a financially reckless bid to provide more offices and a “business club” on the site, with part of the work being paid from rent generated by a large restaurant. Last year the Council let a £16,000 contract aimed at attracting a restaurant operator
The mix of uses always looked risky. The private sector declined to take on any of that risk. The business case looks even less convincing in the light of the recession that will grip this country over the next few years.
Taxpayers already face paying a £574,000 a year subsidy – mostly for interest charges – on the project. Office rent income of £549,000 a year is assumed. If any of the latter doesn’t materialise, then the operating deficit will have to be paid for by cuts in other pubic services in the City.
In seeking to let the office and start up space, the Council will in effect be in competition with itself as there is spare accommodation at the Community Stadium, at the eco small business centreand, potentially, on Piccadilly.
Even the Councils own offices may soon have spare space as more staff find it possible (and desirable) to work from home – one of the possible positive benefits of the current health crisis. (To see other empty property click)
Against that background, residents would have expected the Council to undertake a “root and branch” reappraisal of all aspects of the project.
Instead they seem to be adopting an “it’ll be alright on the night” approach.
In this case, as with several other projects, it most certainly won’t be alright, unless the Council comes up with and implements a convincing economic recovery plan.
NB. Separately it appears that the new £700,000 City centre “direction signs” project is set to go ahead. 50% is being funded by the York BID.
Leaving aside the controversial appearance of the signs, this is surely expenditure that could have been delayed at least until an economic recovery is well underway and tourists are returning to the city in larger numbers.
A report to a meeting taking place next week highlights several issues which could delay the refurbishment of the Guildhall.
TheGuildhall project has a chequered history with plans for the use of the building conceived 10 years ago beset by delays, indecision and escalating costs. Even after the Council made the controversial (and expensive) decision to re purpose the use of the Listed building as a “business club” & restaurant, the first building contract had to be abandoned.
More recently, new contractors have been working on site. They have been using the river for access. Perhaps not surprisingly the recent floods have impeded operations but worryingly the report reveals several other issues which have caused delays.
The report concludes that overall the project is now regarded as “at risk”.
The biggest risk to taxpayers remains the end use of the site. The Council is borrowing heavily to fund the project and any delay could affect its – already marginal – viability. There is a real danger that the Guildhall project will go the way of the Community Stadium for which there is still no agreed opening date (it was to have been completed last summer).
It is further evidence that the York Council has exceeded its contract management capability.
Hopefully they will now pull back from taking on any further projects (like Castle/Piccadilly) and concentrate available resources on finishing what they have already started.