Spotlight

Officers’ Silence is Golden

Nigel October 26, 2021 Scarborough Borough Council

Officers’ Silence is Golden

– an “In My View” article by NIGEL WARD, sharing some informed and well-sourced opinions on the trajectory of the ARGOS saga.

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Once again, I must apologise in advance for the great length and detail of this, my examination of (i) some of my many reasons for believing that the Council’s proposal to ‘regenerate’ the former ARGOS building in Scarborough is irrational, and (ii) my concerns about the Council’s Budget; I excuse this on account of the immense potential cost to the town and the Borough – both culturally and financially.

I beg you, please invest some time in considering the whole of this article. Thank you.

In offering the following interpretations, I must acknowledge the remarkable work accomplished by Mr James CORRIGAN and his team, whose Public Questions to Council set me on a voyage of discovery, starting here:

The Scarborough Borough Council Disclosure Log lists the Council’s formal responses to Freedom of Information requests.

In keeping with the Council’s affection for secrecy, the Disclosure Log is not easy to navigate in pursuit of a specific Response, insofar as Responses are not listed either chronologically or numerically. Nevertheless, I like to browse from time to time in search of possible dissimulation in the Responses. Here follows an interesting and entertaining example.

It is interest to note that the FOI Response (which follows, shortly) is not fully “open and transparent” in that it does not include the terms of the Request.

However, the title of the Request/Response rang a bell in my memory. Ting-a-ling!

I recalled an email containing an FOIA Request being forwarded to me by a serving Councillor back on 31st August 2020. Note the Response date – 29th September 2020. Gadzooks! A FOIA Response from SBC within the statutory time-frame.

Here follows the text of the Request – not included, remember, in the Response (as is indicated in the ICO Guidance):

Please confirm in relation to the three Scarborough Borough Council Directors – Nicholas Edwards, Lisa Dixon and Richard Bradley the following information:

The names of any Professional Bodies that give them any specific qualification specifying separately for each Director.
The names of any other organisations that any of the three Directors are members of specifying separately for each Director.
The amount of subscriptions paid by Scarborough Borough Council for each of the last three financial years in relation to each body or organisation, specifying each year separately.
Details of any courses in the period since 1 April 2014, seminars or conferences for Continuing Professional Education or otherwise in connection with property investment or property development attended by any of the three Directors that have been organised by or the attendance paid for by Scarborough Borough Council. In each case specify the date and title of the Course and provide the names of the speakers/lecturers and the fee paid for attendance.
The titles of any professional journals or magazines that are subscribed for by or on behalf of the three Directors and paid for by Scarborough Borough Council with relevance to property investment or development. Please specify the annual cost of each subscription for the latest subscription paid.

I then recalled that I had covered this FOIA Request and Response before, in an article entitled “An Unqualified Disaster” (pub. 18/10/20), in which I revealed that the Commercial Director, Mr Richard BRADLEY (dubbed “The Brighton Binman” by Alderman Norman MURPHY and others, on account of his previous position as Director of Waste Management at Brighton Council) appeared to have no professional credentials of any kind to justify his appointment as Commercial Director with delegated authority to spend up to £30 million of ratepayers’ money in pursuit of the Council’s so-called Commercial Property Investment Strategy (CPIS).

Here is the Council’s response to FOI7518:

Allow me to quote from my own article:

“It appears that Mr BRADLEY holds no special qualifications in relation to commercial property acquisition/management, his sole declared business experience is delegated directorial membership of the universally unpopular Yorkshire Coast Bid Ltd, but at least (we are told) he reads various journals (Private Eye?) – even if he cannot quote the name of his prime source (Property Week – not ‘Weekly’) correctly!”

Property Week, for those unfamiliar with that august publication, offers comprehensive coverage of such matters as fluctuations and trends in High Street retail rentals. It is arguably the best guide to how much rent is likely to be forthcoming from retail units such as those comprising the ground-floor of the proposed ‘regenerated’ ARGOS building (the upper floors are intended to house 210+ CU students and NHS trainee nurses/doctors, though other purposes have been proposed, including summer holiday accommodation).

In plain terms, Mr Richard BRADLEY’s prime declared sources of knowledge on commercial property investment – Property Week – would, had he troubled to to consult them, have informed him about what has been happening to the likely rent revenue returns on the three large ARGOS ground-floor retail units, since July 2019 (when this Council first committed to the project) until September 2021, when I attended the ‘live’ meeting of Full Council held at Scarborough Spa on Monday 6th September 2021.

I noted the presence of Mr Richard BRADLEY, both before and during the meeting, up until my departure following the conclusion of the pantomime vote on Councillor Heather PHILLIPS’ motion (seconded by Councillor David JEFFELS [Con.]):

NB: “a full review of the business case” – “good value for money” – “increased costs” – “hoped for return”.

[I see that the s.151 Finance Officer’s Report to theCommittee does address the construction costs, but not – and this is hugely significant (and I hope that members are fully alert to this) – the “hoped for returns” via rental revenues, without which the business case would be fatally flawed].

I conclude, therefore, that throughout that fractious and fiercely-argued Council debate on the prudence of examining afresh the business case for continuing with the project, Mr BRADLEY did not feel it appropriate or necessary to inform Councillors that the business case regarding both construction costs and the retail unit rent returns has somewhat gone down the tubes – High Street retail rents are falling rapidly, as can be seen from the following graph, published by market analysts Cushman & Wakefield in August 2021:

We do not need a crystal ball to see where that graph is heading.

And now this.

Construction costs (materials/labour/transport) have been going UP by 25-30%, while rental revenues have been going DOWN by 25-30% – a 50-60% swing.

We certainly do not need a crystal ball to see where that graph is heading.

Please note, SBC Legal Director & Monitoring Officer, Mrs Lisa DIXON, is on record as stating that there has been “no material change” in circumstances. Not much!

Yet we heard not one single word from Mr BRADLEY (who “Participates in Continuous Prefessional Development” and keeps abreast of “Statutory guidance on Local Government Investments” – or so FOI 7518 assures us) to summarise his extensive knowledge of escalations in construction costs (materials/labour/transport, etc) or the downward trend in retail rent revenues, as gleaned from his declared sources of up-to-date professional information. Mr BRADLEY withheld the information that I have set out above.

To say that Mr BRADLEY was merely disingenuous in holding his tongue (or even “economical with the truth”), given the gravity of the issue (the borrowing of approaching £30 million over 40 years, to be repaid by the ratepayer), would, in my view, be too charitable by half.

In my opinion, it could be closer to the mark to speculate that Mr BRADLEY’s silence amounted to “lying by omission”:

Thus does the tail wag the dog?

The fact is that, in the 105 issues of Property Week between the Council giving the ARGOS ‘regeneration’ project the green light (in July 2019) and the date of the September ’21 meeting of Full Council, there have been any number of reports cataloguing a steady decline in rental returns.

Moreover, even a cursory recourse to Google quickly reveals commentary such as this cautionary quote from the Shawbrook Bank:

“Commercial properties in the retail sector have come under pressure with total returns turning negative towards the end of last year. Additional difficulties in the sector stem from increasing costs and the advancement of e-commerce and online sales, which rival stores on the high street.”

[my emphasis in bold]

Only last week, specialist property site LandlordZONE filed the following report:

. . . “attracting rents as low as 50% of what they were pre-pandemic” . . .

Again according to Property Week, high street vacancy rates are rising while rents are falling – and this despite easing in the COVID-19 regulations.

Rents are plummetting and vacancies are rising. Are the members of the Overview & Scrutiny Committee aware of that? Are the members of the Audit Committee?

These are not, perhaps, the most auspicious times in which to be investing in retail rental space.

With universities anticipating an accelerating trend towards ‘remote learning’, neither are they the most auspicious times to be investing in student accommodation – even with the altruistic support of a local business owner by no means reluctant to have 200+ potential customers virtually squatting on his doorstep.

But one does not need to delve into specialist publications or websites like Property Week, LandlordZone, Shawbrook’s or Cushman & Wakefield (with whom the Council has a business relationship) to confirm that building materials are now at a premium, with prices rising 20% in September alone – and still on the up. Some materials are even likely to be rationed.

This information is not esoteric; it does not need a £75K per annum Commercial Director to unearth it. Is freely available, even in the mainstream media – as this Guardian article confirms:

Clearly, these are not auspicious times in which to be throwing millions at a building project, especially for rental purposes. Why did Mr BRADLEY not draw these ominous trends to the attention of those present at the 6th September Full Council meeting? I think we should be told.

Surely it would now be appropriate for Mr BRADLEY to share (even so belatedly) this crucial information with members (especially those who sit on the Planning & Development Committee (meets 4th November 2021) and the ‘Places and Futures’ Overview & Scrutiny Committee (meets 27th October 2021) and the Audit Committee (meets 28th October 2021), who may otherwise feel that they have been deprived of the necessary knowledge-base from which to arrive at an informed and responsible decision regarding the viability of the ARGOS ‘regeneration’ project, particularly in consequence of Mr BRADLEY’s omission – in my view, a “continuing misrepresentation”.

I call upon him to do so.

For a small fraction of the £22 million plus investment, the Council could honour its two-decade old commitment to the “Scarborough Renaissance Charter” (also known, as ‘Kissing Sleeping Beauty’). The Charter is available to read and download, here.

It should be remembered that residents of Castle Ward – i.e. those whose lives will be most blighted by this incomprehensible ARGOS ‘regeneration’ proposal – have voted unanimously NO CONFIDENCE in the scheme and NO CONFIDENCE in their Ward Councillors, who are pushing for it against the will of the people.

Set that against the hundreds (by now perhaps thousands) who have expressed boundless enthusiasm for the alternative proposal – a proper Town Square that would make Scarborough the envy of every self-respecting seaside town in the country:

In contrast to this open (and transparent?) vista, Councillor SIDDONS’ flagship proposal would create a“sunlight exclusion zone” – and that is precisely where he should stick it; where the sun don’t shine.

That view is shared by former SBC Chief Planning Officer Jonathan ALLISON, as told to the Yorkshire Post:

THERE IS MORE . . .

Further to the matter of Officers’ silence on matters of key importance, readers may recall reading, in my a article entirled “A Voice of Reason” (Open Letter to SBC CEO Mike GREENE), a rather cryptic line for the attention of Mr Nick EDWARDS, s.151 Finance Director:

“I have three letters for Mr EDWARDS; MRP.”

Mr EDWARDS certainly understands my meaning.

MRP stands for “MINIMUM REVENUE PROVISION“.

Capital expenditure is generally expenditure on assets which have a life expectancy of more than one year e.g. buildings, vehicles, machinery, plant, etc. The Council can finance such expenditure over several years in order to try to match the years over which such assets continue to benefit the local community throughout their useful life.

The manner of spreading these costs is through an annual charge known as Minimum Revenue Provision (MRP), which is determined by the Council under guidance. This is the accounting methodology which Councils are legally required to adopt to account for the capital cost of assets over time. It is very similar to the principal of depreciation. This is a difficult concept to grasp, so forgive me for labouring this. It is useful to provide a comparable ‘real life’ situation to illustrate the point.

Everyone knows that if one buys a brand new vehicle for, say, £10,500, the greatest proportion of depreciation (about 35%) occurs in the first year of ownership

It is unrealistic to calculate, for example, that the vehicle will last for (say) 10 years and have a residual or salvage (scrap) value of, say, £500 – thereby suggesting that the depreciation will be only £1,000 per annum when spread equally over each of the 10 years of the ‘life’ of the vehicle. The reality (as many will have experienced for themselves) is that the value of the new vehicle, priced at £10,500 on the day of purchase, will have dropped by the end of the first year to around £7,000. This technique of showing an asset realistically worth only £7,000 as an asset nominally worth £9,500 is known as “fudging”.

The above example demonstrates a risk to the Council’s accounts in that, by under-charging depreciation, the accounts are “fudged” to over-state the value of the Council’s assets. The consequence of this is that, in the future, the depreciation charges will inevitably be higher (i.e. the true value will be lower), thereby negatively impacting the funds available to benefit public services generally. The same principles apply if the Council under-charges its MRP or, more seriously, tries to amend the Policy and back-date the change for 6 years, so that the extent of the previously depreciated values is reduced and thereby brought back in as assets.

My conclusion, based on my interpretation of the draft government Guidance to Councils, is that, by underestimating the naturally occurring depreciation in value of Council assets, the Council’s Budget may become perilously compromised. For Councils, a balanced Budget is a legal requirement. This is the responsibility of the s.151 Officer.

That this should arise at a time when the accountancy of the revenue-stream from the Whitby Harbour Undertaking (which also throws the balance of the Council’s Budget into question) is under the purview of the Court, demands a clear and unequivocal explanation from s.151 Officer – Mr Nick EDWARDS.

Now consider this Public Question submitted by Mr CORRIGAN to the Audit Committee (meets Thursday 28th Oct.), Chaired by Councillor Andrew BACKHOUSE (now-unaffiliated), and shared with me by a number of deeply concerned opposition Councillors: