A report to a Council meeting next week offers a limited insight into the York Councils property dealings. It comes at an opportune time with various other Councils having been badly burnt recent by injudicious investments in land and property. Croydon and the Cambridgeshire County Council are both heading for the local government equivalent of bankruptcy.
Against that background taxpayers might would hope for York Councillors to now to adopt a more measured approach to investment. The commercial property market is likely – in the wake of the pandemic – to remain depressed for some time. It is not a good time to sell assets.
Instead we find a plan to borrow an additional £4 million on top of the £384 million already committed. That is a debt of nearly £2000 for every man, woman, and child in the City. 20% of tax payments will have to go towards paying interest charges.
So what is happening to these assets?
Oakhaven Elderly Persons Home.
This has remained empty since occupants were moved out – prematurely as it turned out – in 2016. The sale for a new care home to Ashley House fell through in early 2017. No attempt was made to find even a temporary use for the site which occupies a prime location near to local amenities and good transport links. Maintenance expenditure on the empty building continued to fall on taxpayers. Now the council is proposing an “off-market” sale to regional care home operator, Burlington Care Limited. The size of the offer has not been revealed. Ironically, the officer report admits “An open market exercise may be impacted by COVID 19 suppressing property values. The council budget has been significantly impacted by COVID and there is a need to realise value from vacant assets in the near future”
Another former care home, which has been empty for nearly 5 years, is Willow House. It is on a prime site located next to the city walls. The site was nearly sold for student housing in 2017 but ran into planning difficulties. Other offers were ignored by the Council and an offer from a company which utilises empty residential accommodation to accommodate the homeless in return for caretaking and security duties, was spurned. Now it seems that the Council intends to build 40 apartments on the site and will probably use its own “Shape” development company to manage the investment. The site is worth more than £2.3 million.
Morrell House
An elderly person’s home empty since early 2018. No use has been found for the site. It is to be considered for use by “self-builders” but if that is not successful it will be sold on the open market.
Moor Lane car park
This is the site currently in use as a flu vaccination centre. It has mostly been empty for the last 4 years. There has been a lot of developer interest in building on the site. The Council has decided not to include it in the Council house building programme and may therefore sell it on. On the open market – even in these depressed times – it is likely to be worth less per acre than the Willow House site.
The sale of this home to private care home operator “Yorkare” has stalled. COVID is blamed
& the strange ones
Generally, taxpayers have benefited in the long run when the Council has bought land and buildings in the City. There have been exceptions. For example, when the authority impulsively sold the site now occupied by the Hiscox insurance company on Peasholme Green. Had it included a betterment clause in the sale then taxpayers rather than shareholders would have benefited from the subsequent increase in land values.
Knapton Forest
It looks increasingly likely that the purchase of good quality agricultural land near Knapton, with the intention of planting trees on it, may go into the same ill-considered category. When wooded, the area will not have a resale option but will involve an ongoing maintenance liability. 180 acres will support 50,000 broadleaf trees making a, carbon sequestration, contribution to the £1.2 trillion additional trees which would be required on the planet to reverse climate change! The £1 million project is also hailed as a major new passive leisure option for residents although, in truth, it is poorly positioned to make up for the open space lost in recent years to building operations in the City’s poorer areas.
The major issue remains the lack of an environmental impact assessment. The land currently contributes to the local food supply chain. If the land is lost to food production, imports may increase resulting in longer transport chains and – critically – higher carbon emission levels. Storing carbon – like burying nuclear waste – simply pushes a problem onto the next generation.
The key to improving the environment is to reduce carbon emissions. Even the government seemed to recognise this, with its initiative yesterday aimed at replacing gas boilers with heat pumps and other benign energy sources.
Eco centre
The Eco centre is the small business facility at Clifton Moor which was promoted by the Council some 15 years ago. It was provided via a “design and build” contract on Council owned land.
Occupation levels have been encouraging although usually reflecting the general state of the economy. There are 63 individual units there. The Council currently leases back the centre and has managed the facility since 2015. The rent paid by tenant contributions is claimed to offset the current running costs.
Now officials are recommending that the Council spends £3.9 million buying out the interests of the owner of the building. The Council is not revealing how its business case figures stack up, but it claims that it may generate additional income by fitting PV (solar) panels on the roof.
Judged against the current economic volatility this looks like a high-risk strategy.
The plans for the non-listed section of the Guildhall have been an economic “basket case” for several years. The opportunity to sell part of the building for residential, retail or hotel use represented the least risk option and should have been pursued in 2012 when the building first became empty.
Instead, against a background of neglect and rapidly increasing repair costs, the Council opted for a risky plan to establish a hi tech small business start-up centre. The overall viability of the plan depended on letting part of the space as a high-end restaurant. The Council said it would run the unit itself.
£20 million of taxpayers money is at risk.
Now York University, via its Science City offshoot, has apparently offered to lease the business centre space at the Guildhall. Some civic and community use would continue. Science City has a generally good reputation and the offer to get the Council off its, self-inflicted, hook would seem to be an attractive one.
It is unclear how the success of the new enterprise would be judged. It is even less clear how the demand for City centre “incubator” space will mature in the wake of the pandemic.
The restaurant shell building will remain empty awaiting a resurgence of the local visitor economy.
The Council currently has a 9.2% minority stake in York Science Park Ltd. which it would sell.
The lease deal would be “off market” raising once again accusations of a “family and friends” approach to commercial dealings.
“Town and Gown” relations are already stressed in the wake of the pandemic and a perceived lack of accessibility for residents and visitors to the historic Kings Manor buildings in the City centre, which are currently occupied by the University.
The Council has pointedly not published updated business case figures which reflect the new offer being made as well as ongoing concerns about the cost of the renovation project..
Risk Management
On what must be one of the most risky approaches to the financial management of Council owned property, the Risk Management assessment included in the report amounts to only 7 lines of text and concentrates entirely on the planned bid for the Eco centre.
