Risks, delays & cost increases as York Council struggles to manage its commercial portfolio

York Guildhall

Yesterday’s announcement that more than £15 million of infrastructure schemes had been secured in North Yorkshire over the next 18 months – with £300,000 of funding going towards the York Guildhall offices project – will have been welcomed by many.

The money comes from the Government’s “Getting Building Fund” which “aims to boost economic recovery from Covid-19”.

According to a Council spokesman, the funding will now be used “for internal fit-out works” on the business club which will occupy much of the building.

That will come as a surprise to those who thought that the agreed £20.18 million budget included all costs.  Indeed, the option approved by the Council in February 2019, specifically identified £300,000 for “fixtures, fittings and furniture”.

Council report 2019. Option 1 was agreed

It seems that the only change is that this expenditure will now be funded from general taxation.

Even with this subsidy, and assuming that all offices and the on site restaurant, are all occupied, York Council taxpayers still face an annual bill of over £500,000.

An Executive meeting which took place last week was told in an update on the Guildhall project that “additional delays have meant that it is presently considered that these additional costs cannot be contained within the agreed contingency”.

The scale of the over expenditure was not revealed.

The Guildhall is not the only commercial portfolio project to come under scrutiny.

Some independent commentators are sceptical about the timing of the Councils £2.8 million acquisition of 25/27 Coney Street. Rent levels are now dropping and with them property valuations in some high streets. Coney Street is struggling more than most.

Meanwhile large numbers of Council owned properties remain empty and unused.

These include Ashbank (empty for 8 years), 29 Castlegate (3 years), Oakhaven (4 years) and Willow House (4 years 6 months).

Willow House stands abandoned with no sign of redevelopment work starting.

We now understand that Willow House – which was advertised for sale with Sanderson Weatherall – has been withdrawn from the market. The Council turned down a £3 million offer for the prime site shortly after it became available.

None of these properties are accommodating anyone.

All are incurring maintenance and security costs for taxpayers, while at the same time attracting no Business Rates or rent income.

At a time when local authorities are on their knees financially, poor resource management is  a matter of concern.

Council urges Government to ‘Back York’ and enable the city to lead recovery in the region

money GIF

With the Council continuing to face significant financial challenges, City of York Council has stepped up its regional and national lobbying efforts.

The lobbying will urge the Government to seize the opportunities that are unique to York and make the city an ‘exemplar’ of driving recovery.

Since the pandemic was declared, the Council has seen demand for services increase, whilst at the same time, income has considerably fallen.  Early indications suggest that the Council is facing a £23 million* shortfall in its budget.  Over recent months, in addition to Government support, the Council has prioritised resources to support the most vulnerable in the city, as well as invested over £2 million to create local emergency funds to support the city’s businesses and residents facing financial hardship.

There are opportunities unique to York that if taken will help kick-start the economic recovery of the region. Recently it was agreed that the Council, with its partners, would develop a 10-year City Plan to enable York and the region to build back better by drawing on the city’s strengths; from utilising the biotech industry in the city, to seizing the once in a lifetime regeneration opportunity in York Central.  It is clear that, with further funding, York can go far in driving the recovery of our city and region.

That is why to truly build back better, City of York Council is urging the Government to make York an exemplar of how to lead ‘recovery’ in the North of England and the funding needed to unlock York’s potential and build on the work already taking place in the city.  With additional funding, City of York Council could:

  • Make £25 million available to further support local businesses in adapting to the crisis;
  • Enhance York’s world-renowned culture, creativity and heritage by making extra funding available to support local museums, libraries, arts and more;
  • Scale up the support on offer to residents facing financial hardship, particularly through the use of the York Financial Assistance Scheme;
  • Provide much needed funding for small charities and voluntary sector organisations who do not have the resources to fundraise themselves;
  • Speed up the delivery of critical regeneration projects and citywide infrastructure schemes, from York Central, to the dualling of York Outer Ring Road.

The campaign will support and link up with the work of other organisations and Councils who are lobbying for further funding for local authorities, including the Local Government Association, the Association of Directors of Adult Social Services, IPPR North, the Association of Directors of Children’s Services and more. As part of the campaign, City of York Council will also be producing a submission to the Government’s Comprehensive Spending Review, outlining the financial challenges for the Council, and highlighting the opportunities to invest in the city in partnership with the Government.

*The Council has not updated its budget forecast. Most of the speculative income loss relates to lower Council Tax and Business Rate income, although car parking income is down (and likely to remain so as long as parts of popular car parks remain bollarded off). The Council still intends to borrow increasing amounts of money and has made no announcements regarding any savings strategy.

Lowfields – new homes not ready for occupation until next year

This Lowfields site will include 140 mixed tenure homes of which 56 will be affordable homes. The contractor has been on site since December 2019 and the Council says that it is “progressing well” with significant progress on “infrastructure work along with substructures”.

However the first 34 homes are now not due to be completed until early in 2021.

The Council decided to develop the site itself at a meeting held in July 2018

It later formed a company called Shape homes and said it would recruit staff to work with it. The latest financial report suggest that this had not progressed by the end of the financial year with over £1.2 million of the available budget slipping into the current year.

The Council also failed to invest £1.9 million of the budget that it set aside for the repair and modernisation of existing homes.

Football pitches

Meanwhile the football pitch project on Sim Balk Lane has stalled. The pitches were nominally supposed to replace those lost at Lowfields as a result of development, albeit they are 3 miles away. The land near London Bridge became waterlogged over the winter and is only now beginning to grass over.This image has an empty alt attribute; its file name is New-football-pitches-Sim-Balk-Lane-4-4th-Aug-2019-858x1024.jpg

The biggest problem though is the expensive “pavilion” which incorporates changing rooms.

A report to a meeting being held today says, “The construction of the pavilion / changing rooms has been put on hold due to the Covid-19 restrictions and it is not known when the work will be able to restart. The final procurement for the access road has also been put on hold”.

We wish that project well, but would have preferred to see some of the £850,000 cost (to taxpayers) invested in outdoor sports/leisure facilities in the Westfield area.

Huge £1.8 million overspend by Council on James House project

The conversion of James House from offices to 57 self-contained apartments for temporary homeless accommodation was completed on 14th April 2020, fifteen months behind schedule.

The Council says, “For homeless households the self-contained apartments will offer safe, secure and comfortable accommodation before permanent housing can be found for them. James House was open to residents in June 2020”.

The Council now admits that, as well as being 15 months behind schedule, the final costs are currently £1.782m above the agreed budget of £12.4m.

The council says that they have appointed independent experts to review the programming, delay, and quantity surveying aspects of the project.

York Council spent £4.5 million on buying commercial property last year including £2.8 million on 25/27 Coney Street

Community Stadium not completed, Guildhall business club costs rising

The Council has revealed, in the small print of a report to a meeting taking place this week, that “as part of the council’s response to the COVID_19 pandemic all major procurements are on hold in the short term”. This comes as no surprise with the Castle/Piccadilly development one of these projects now shelved

Council progress report July 2020

The Council has expected to recover its investment there using “long term revenue from commercial space”. Speculative building of that sort looks to be that thing of the past for a few years at least.

The same report reveals for the first time that, late last year, the Council purchased 25-27 Coney Street for just under £2.85 million This is the block containing the Holland and Barrett store. Just how the rent freeze during the health scare will affect income from this and similar commercial property investments is not explained in the Council report. Generally speaking, in the long run, the City has always benefited from civic investment in land and property ownership. Values in the past have always risen faster than inflation. In the short term, though, such purchases may place additional burdens on taxpayers.

25-27 Coney Street

There may be a bigger issue emerging at the Guildhall where delays have caused an escalation in the cost of the £20 million renovation and remodelling project. The report is, however, still claiming that the hugely expensive project will provide “a comprehensively refurbished and renewed Guildhall complex to provide a contemporary business venue for the City, the works include a green energy solution and dramatically improved facilities for community, civic and council use, with a riverside restaurant unit alongside”. Time will tell.

The report confirms that the “Community Stadium” is still a “live building site”.  “All certification and testing will only recommence once Government allows the gathering of people to resume, but only at that point. When all contractors and partners are able to return safely to the site to fully complete the works, they will. Only at that point can the Stadium look to hold test events required and open thereafter”. There is no comment in the report about the commercial and community uses planned for the site or the likely timescales for bringing all spaces into use.

Anyone’s guess when the Community Stadium complex will be fully occupied

Without test events being possible, it now seems unlikely that the football or rugby clubs will be able to play at the stadium from September (the likely start of the National League football season) .

York Council breaks even, but only after calling on £1.9 million from reserves

The York Council exceeded its expenditure budget during the last financial year by nearly £2 million..

Road repair programme failed last year

It was able to fill the gap by drawing on £1/2 million from its contingency allocation. It also raided its reserves to find an additional £1.4 million which it had previously earmarked for pay and pensioners liabilities. The final £309,000, held to repay unlawfully issued fines connected to the Lendal Bridge closure, was also utilised.

While this juggling of funds allowed the authority to emerge with a £128,000 surplus on its 2019/20 £123 million budget, the moves camouflaged large overspends on Education and Social Care. Promised efficiencies there failed to materialise.

The £1.5 million overspend by the Education department will no doubt result in a renewed focus on inessential expenditure. One trenchant “citizen auditor” has reported finding that the department apparently spent £10,000 renting rooms at a luxury hotel and golf complex in Humberside last year. The nature of the activity is being investigated.

Clearly the Council will now need to clamp down on anything other than essential expenditure.

The Council faces a new multi-million pound shortfall on its income this year as a result of the Coronavirus epidemic. It will not be able to call on the above reserves again but does have a buffer provided by the £7.4 million held in general reserves.

A meeting to discuss the report takes place on Thursday

Quality of Public Services in York

The Council has also released some information on public service quality. Unfortunately, many of the figures are not up to date. There is likely to be some cynicism about some of the results with only 20% of road surfaces in the City classified as “poor” or “very poor” by Council officials!

York Council performance indicators

Council net debts mount to £289 million.

The Councils net debts increased to £289 million in the year up to April 2020. 

That was an increase of £43.4 million over 12 months.

The figures are revealed in a report to a meeting taking place this week.

The Council net debts are forecast to increase to £452.4 million within the next 5 years.

This will mean that nearly 25% of Council Tax income will be spent on interest and redemption charges.

The figures don’t take into account the toll that Coronavirus has had on finances over the last 4 months.

Although interest rates are at historically low levels, the Councils income steams have been badly hit. In turn this affects the authorities ability to service its debt charges.

Projects which depend on asset sales for funding are also facing challenges. The commercial property market may be depressed for several years.

The report fails to provide an update on the assumptions made about commercial letting returns.

 As well as an expanded shops portfolio, the Council has embarked on a  series of projects, like the Community stadium and the Guildhall renovation, which depend partly on rent income from office and commercial space to pay for the investment.  

Empty offices at Monks Cross

Several Council owned offices are currently empty.

The Council, is particularly reluctant to say whether the speculative offices, which it agreed to underwrite at Monks Cross, have yet found a tenant.

How many will lose their jobs in York?

Post COVID-19 economic recovery plans

The Council has revealed that its forecast financial deficit for the current year is around £3.9 million. However, the biggest potential hit on its finances comes from a forecast £16 million loss of Business Rate and Council Tax income. This would be the result of businesses closing and unemployment rising.

The Council has still not identified how expenditure savings may be made nor has it attempted to reduce interest charge payments by trimming its capital programme.

The  York Council economic development  report says how it plans to help the York economy recover from the ravages of lock-down. It updates a previous plan which was criticised for a lack of identified actions, targets, and milestones.

The report says that the impact of the COVID lock down has varied across sectors but is most significant where “serving customers face-to-face is at the heart of the business model – retail, hospitality, cultural attractions and personal services”.

One aspect to the report which may cause concern is the lack of clarity on the medium-term impact on unemployment in the City. It highlights the view of the Local Enterprise Partnership which forecasts the loss of “17,500 jobs, including 6,500 in tourism and 2,400 in retail”. If true, then York would go from having almost full employment to a record 15% level.

The report says that around 15,000 people currently work in the care sector in York.

An alternative forecast, from Oxford Economics, says that if a vaccine is rolled out in 2020 then there will be a  swift return to full employment. A core (more likely) forecast, based on re-openings on the current timetable and gradual lifting of all restrictions, suggests that employment will continue to grow in York despite the impact of the pandemic.

Only a second wave, and renewed lockdowns in autumn 2020, would result in permanent losses of around 3900 jobs.

So it seems, like the population as a whole, the Council doesn’t know what will happen next. The report concludes “What we are already seeing is sharp increases in benefits claims, and we need to plan for at least a short-term spike in job losses”.

Against that background it is possible to have some sympathy for the Council as they decide their short term economic recovery strategy.

One of the few measurable actions arising from the report is a request to central government for a business support grant of £15 million (possibly £10 million depending on which paragraph of the report you read, 51 or 60).

The council will also ask for £10 million for skills training.

Mostly the 1 year plan though is “talking”, “developing”, “working with”, “lobbying” and “facilitating”.

NB. The Council has revealed details of some of its visitor marketing plans. . As reported yesterday, £100,000 will be spent on marketing over the next 5 months.

York Council’s visitor economy plans

Audit report raises concerns about York Council data security

A report due to be considered by a Council committee next week reveals continuing concerns about the security of personal data held by the Council.

The auditor says,

Whilst good progress continues to be made (on Information Security & GDPR) , further improvements are required to ensure compliance with the council’s policies for handling and storing personal and confidential information. There are also a number of issues still outstanding, relating to actions agreed in July 2019, following a GDPR readiness audit. These actions relate to policies, guidance, contract clauses; the information asset register; privacy notices; mandatory data protection training; management information on data security incidents”.

No further details are provided and the level of vulnerability of Council customers to data breaches is not explored.

On the impact of Coronavirus on the Councils activities the auditor is similarly vague. He says,

This opinion is however qualified, in light of the current coronavirus pandemic and the impact of this on the council. The opinion is based on internal audit work undertaken, and substantially completed, prior to emergency measures being implemented as a result of the pandemic.

These measures have resulted in a significant level of strain being placed on normal procedures and control arrangements. The level of impact is also changing as the situation develops.

 It is therefore not possible to quantify the additional risk arising from the current short term measures or the overall impact on the framework of governance, risk management and control”.

NB. Another report, to the same meeting, claims to address the impact of the health crisis on the Councils activities. Unfortunately, it adds little to what has already been published and singularly fails to quantify the exposure that the Councils projects and revenue finance actually face.

Over 5,500 York residents to get council tax support

What is Council Tax Support? | Incommunities Website

Nearly 6,000 York residents are set to receive reduced council tax bills this week, as the council continues to provide support to residents facing financial hardship during the coronavirus pandemic.

Those who are eligible for council tax support will receive a £150 reduction on their account, spread over the remainder of the year, utilising a government grant awarded to the council.

The grant was announced in March

The grant totals over £950,000, with £868,000 already being allocated. The remaining money will be available for new customers until 31 March 2021.

Executive Member for Finance and Performance, Cllr Nigel Ayre, said:

“The coronavirus pandemic has posed significant financial challenges for many residents and that is why we are investing further funding to help support those who need it the most during this difficult time

This council tax support grants will help people who may be worrying about their financial situation.  It is also another way in which we are helping the most vulnerable people in York, which has been one of our key priorities throughout the pandemic.

I would encourage anyone facing financial difficulties to access the help and support that is on offer by calling 01904 551550 or emailing COVID19help@york.gov.uk.”

Help is available if you are struggling to pay Council Tax, due to Covid-19 or other reasons

  • You can ask for any payments missed since April 2020 to be spread across the rest of the year up to March 2021 by e-mailing tax@york.gov.uk or calling 01904 551556
  • If your income has changed please let us know so we can update your Council Tax Support. You may be entitled to an increased amount. Please complete the change of circumstances form at york.gov.uk/benefits/change-circumstances-benefits
  • You may be eligible for more help by applying to the discretionary council tax reduction scheme at york.gov.uk/TaxReductionScheme.
  • Advice and support services in the City can help you stem the tide and get the right support for you. Please see a helpful list of contacts overleaf for those who can help you.
  • Y

City of York Council’s Statement of Accounts

City of York Council will open its unaudited accounts for public inspection from Wednesday 1 July to Tuesday 11th August.

The annual inspection gives members of the public and local government electors certain rights in the audit process.

Any person may inspect the accounts of the council for the year ended 31 March 2020 on the City of York Council website at https://www.york.gov.uk/StatementOfAccounts, and on reasonable notice, can request access to certain related documents (comprising books, deeds, contracts, bills, vouchers and receipts) or a printed copy of the accounts.

Application should be made initially to Debbie.Mitchell@york.gov.uk

The council’s accounts are subject to external audit by Mazars LLP. For the same period Wednesday 1st July to Tuesday 11th August electors can question the auditor about, or make objections to, the accounts before they are signed off by the Audit & Governance Committee on 14th September 2020.

Further details of the inspection process, elector rights and contact details can be found in the inspection notice on the council’s website at https://www.york.gov.uk/StatementOfAccounts