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We now understand that Willow House – which was advertised for sale with Sanderson Weatherall – has been withdrawn from the market.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.

£20 million contract signed for the conversion of the Guildhall into a business club

Almost comatose leadership has allowed the York Council to slip into a £20.2 million project which will see the Guildhall and neighbouring development site converted into a business club and restaurant.

Weed infested, stonework stained, windows caked with dirt. The neglect of the Guildhall since 2012

Neglect of the Listed building since 2012 means that some of the money will be needed to underpin parts of the old building while an new roof will also be necessary.

On even the most optimistic of income estimates, York Council taxpayers will be left with an annual bill of £574,000. Most of this is interest charges on additional borrowings of £16 million.

The York Councils PR department has been busy working on a, very awkward looking, video seeking to justify the £20 million scheme. Their time might have been better spent updating residents on what is being done to address failings with the bin emptying service, overgrown paths etc.

There have been numerous occasions over the last 8 years where decisive leadership interventions could have reduced the risk to taxpayers. (click)

2011

2012

2013

2014

2015

2016

2017

2018

2019

So now we move on to managing the contract and subsequently letting the newly created space.

The Council has committed itself to a £20 million cost envelope and an opening date in “spring 2021”.

The Councils record on major capital projects has not been good in recent years. The £42 million Community Stadium costs escalated from an original plan to invest £16 million and, 3 years after its target completion date, it is still not open.

Taxpayers will be monitoring progress on the Guildhall project with anxiety. Even after completion the authority will be faced with the task of renting out the new office space for £595,000 per annum. Failure to do so would mean an increased subsidy from taxpayers.

 Ironically the Council may then find that it is in competition with itself as some of he office space being built at the Community Stadium site has still not found an occupier.