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Asset Mis-Selling?

Asset Mis-Selling?You've probably heard our legendary (but true) tales of Fylde's financial and business incompetence, well now they're off to new pastures. The Commissar and his Politburo Cabinet were so pleased with themselves, they're branching out into the real estate business and the property ladder.

First off is a site known as CVMU (Stands for Central Vehicle Maintenance Unit) on the corner of Heeley Road and St David's Road North. This land became 'redundant' after the Politburo Cabinet decided it would be more efficient to have the bin lorries repaired from depots in Poulton and Thornton rather than St Annes. They closed the CVMU workshop and moved the staff and lorries out to Wyre

(We hear gossip at the moment that, having had both their bin lorries and the Politburo's financial fingers burned in a £609,000 fireball fiasco, they are now planning to move vehicle maintenance back to this area - but they still plan to sell the vehicle maintenance workshop here before they get back)

Anyway, The CVMU site was bundled in with another half dozen sites (See the Great January Sale) to be sold off for housing to raise the £7 million to pay for the new White Elephant Town Hall.

Having cocked up their fledgling trading-company plans (FBC Solutions Ltd) which they established to repair private sector vehicles (and lost £100,000 of expected income in the process), they're now planning to get into property speculation and development - just as Barratt, and Wimpey, and more or less every other housebuilder is getting wiped off the financial map after the sub-prime credit crunch has made homebuyers vanish into thin air.

Freebie Borough CouncilAt the last Politburo Cabinet meeting, the Commissar and his minions discussed their (secret) plan to sell off the CVMU site.

This plan was so secret, they daren't even put the name of the site being discussed on the agenda paper, it was just called 'Asset Disposal'.

They also made it an 'exempt item' to be discussed with press and public excluded so no one would know how much they were going to sell it for.

Now, regular readers will remember from earlier reports, the idea was to sell it to a company called the Muir Group to create an eleven unit hostel for the transient homeless.

Regular readers will also remember the planning application (Hostel Plan Approved) with its 6 foot metal security fence around the perimeter; and wardens - sorry 'support workers' - running the show. Well that scheme seems to be still on track - much to the upset of local folk (which doesn't augur too well for subsequent community relations).

So how much is the land worth, and what are they going to sell it for?

Well, back in July 2004, some land across the road, and land that joins the Heeley Road CVMU site near the railway (the Fairways Garage site) was sold.

The Land Registry record for this transaction shows the price paid was £750,000. This plot is bigger than the CVMU site, but if you do a cost per square metre comparison using the actual 'Fairways' sale price, it puts the value of the CVMU site at £416,000.

That's four years ago of course, and land values have been going up pretty dramatically over the years (although we all know they've not been doing that for the last few months).

For another view on the land value, we spoke with a nice man in some posh offices in Lancaster who values land for the Government. Mostly his work is to establish the rateable value so you can be taxed on it - Business rates and Council Tax values are his speciality, and he deals with appeals against what people think are unfair rates and so on.

This Valuations Office in Lancaster knows its stuff about valuing land. Every six months they publish something called the 'Property Market Report' which details land valuations for a variety of purposes (The value of land depends quite a lot on what it can be used for). We checked with them and they said their most recent report at the time, (Jan 08) showed what they describe as 'bulk land' - that is land for residential use, that would accommodate 5 or more houses - was worth £3 million per hectare in St Annes. This price assumes a greenfield site that you can drive onto, so the CVMU site might need a bit of a reduction for demolishing the existing buildings and clearing up any contamination from spilled diesel and so on, but translated out, the bulk land value for the area of the CVMU site is £510,000.

If you want further evidence of value, Kays in Blackpool currently have land with planning permission for use as offices on the Whitehills site near B&Q, and if that value is applied pro-rata, the CVMU site would be worth £346,000 as offices (and we figure residential land is more valuable).

So all told, the CVMU site (which the Politburo Cabinet hold on our behalf because our forebears that paid for it through their taxes) is probably worth around £400,000 to £500,000 depending on the cost of demolition and cleaning up.

Heeley Road land sale protest

So what are they going to sell it for?

Well, the logical way would be to sell it by auction - or better still by tender, where you invite sealed bids by a set date.

But that's not what the financially challenged Commissar has in mind.

He's had someone estimate the value of the land, and he plans to sell it based on that price.

OK, fair enough you might say. The man from Lancaster is well in tune with the market and it would be OK to take his word wouldn't it?

Well, it might be if he was the one who had been asked. But he wasn't. The Commissar went to a nice man from the County Council and asked him to look at how much it was worth.

Back in 2006 there was an 'Asset Review' (which is a bit out of date by now). As FBC's Chief Exec reported at the time "The council's property surveyor (from Lancashire County Council) informed the group of the differences that can occur between valuations and actual tenders received. As this was not an exact science and is subject to the vagaries of the market he emphasised the need for caution..."

You can see from the report how the nice man from County is nervous about the valuations he is estimating anyway.

It doesn't improve matters when the Commissar himself said only last week to the Gazette. "It was valued as part of the Asset Review that we carried out. The land will be sold at the value we put on it at the time. The deal has been done to get this affordable housing put there"

This is one of the ways this Commissar has deeply damaged the institution of Local Government.

Public Administration shouldn't be doing 'deals.'

We don't expect the brown envelope and the commercial arm-twisting that goes with 'deals'.

Fylde Council should be an instrument of governance, not a tawdry (and in this case incompetent) speculator. But again we're digressing. Back to the plot.

So his value probably wrong, and he's using an unreliable process to sell the land anyway.

Doing quite well in his new property developing business isn't he?

But that's not all. His original plan, (as recommended to the Politburo Cabinet) was to sell it as though the land would all be used for 'affordable housing'. Now this doesn't mean what you think it might. It's actually a technical term for social rented housing (at one time it would have been called 'Council Housing') and the like.

This would be a very low value, and although the report was supposed to be secret, and we're not supposed to know what was in it, we wouldn't be surprised if the sale price for affordable housing land recommended to the Politburo was, well, maybe, say, £171,400

We think the Politburo would also have been told in the same report that the 'best consideration obtainable' which most people would call the 'market value' of the land, was somewhere in the region of, lets guess at: £285,400

But you have to remember there are two things that make the "full market value" we have estimated above less than it really is.

Firstly, it is a value that might be out of date, and secondly even the 'Full Market Value' (as the Commissar knows full well) is probably depressed because there was a requirement to build 60% of all new developments as 'affordable housing'. (Another of his reports says "The above valuations are based on a total of 60% affordable housing").

This situation has changed, and the price no longer needs to be depressed by this draconian 60% demand.

So why would the Commissar want to sell the land for a pittance?

Well, no-one knows for sure, but if he'd have asked the Politburo to sell land worth probably £400,000 to £500,000 for around £170,000 it's quite possible even some of them might have jibbed.

Perhaps the reason is that he needs to have what is called an 'affordable element' within the planning permissions for his £7 million Town Hall scheme (we think it's more White Elephant than Affordable Element, but there we are).

Protestors kept out of the meeting

Before the Politburo considered the 'Asset Disposal' report, there had already been some questions raised by the Heeley Road Hostel Group about the land values. We understand the HRH group sent a letter to MEP's alleging possible breaches of EU competition and state aid regulations. So it wasn't altogether a surprise when a nervous Politburo member suggested they should sell it for what they had been told was the 'full market value' rather than the knockdown price.



His argument held sway we hear, and the higher figure was used. But the Politburo was still so nervous about this transaction that they didn't even dare publish the sum they had agreed to sell the land for in the minutes of their decision (as former Councils would have done).

This sort of information management and control is a feature of all tyrannical regimes that can't stand the light of truth to shine on what they are doing.

But it gets even better.

Not content with recommending selling the land at a depressed value, they went on to say they would give the purchaser a grant equal to the purchase price so they can afford buy it from the Council.

We also believe they chose Muir as their preferred developer on this scheme without any proper sort of competition in the process, and this conflicts with EU law. If we're right here, heads might need to roll to save the Commissar's neck

So in practice, as things stand at present, Muir will be asked to pay a sum (which we think will be around £285,400) from money that the Commissar and his financially incompetent Politburo Cabinet will have already given to them!

"Freebies R Us in Fylde"       as the less grammatically inclined might say.

This is the same Commissar and Politburo that presided over the £609,000 overspend by just one department they were responsible for; the same Politburo that raided its reserves to nick £1.2 million to cover an overspend that arose because they hadn't done proper financial monitoring of their accounts between April and December last year and they simply didn't know how much they had spent - but kept on spending. They didn't even manage to reconcile their accounting to the bank statements for that whole period. Then they decided to close the swimming pools supposedly to save money (but we wouldn't be surprised if it wasn't to asset strip them for their redevelopment value), and well, the list just goes on and on.

They are not fit to run a booze up in a brewery, let alone our finances.

Now they want to give away half a million poundsworth of our land for free.

It's not surprising that the HRH Group asked other Councillors to challenge the Cabinet decision. And it's even less surprising that fourteen of them have signed a call-in request led by former Council Leader Paul Hayhurst to have the matter examined by a Scrutiny Committee. That call in request recommends the matter be referred to the full council meeting for determination, with a recommendation that the land is sold by tender.

Interestingly but perhaps not surprisingly, that meeting is also being held behind closed doors, so the public still won't get to know what is going on (unless they read counterbalance).

Chairing the Scrutiny Committee was the Meteoric Councillor Karen Buckley who also represents people in St Leonard's ward where the hostel is proposed.

She is standing for election to the County Council next year (because the Conservative group forcibly de-selected their long serving stalwart Colin Walton and decided to put her in his place). Like we said, the rise of this lady is truly meteoric. She'll soon be heading for Parliament at this rate.

But we wonder if she might be in a bit of trouble over this matter. So far, she seems to have positioned herself across both sides of the fence, with comments on her blog website like "Our view is that we acknowledge the Council's duty to provide temporary housing for local people in need but this must be done in such a way as not to compromise the safety and security of residents living nearby." It may be that her electorate will expect her to come off the fence on the matter of whether, and for how much, the land should be sold.

We understand posters and literally thousands of leaflets went through doors in the Heeley Road area asking people to turn up on the Town Hall car park from 6:30pm tonight (22nd July) when the Scrutiny Committee met to debate the matter in secret. The aim of the protest was to demonstrate opposition to the unwillingness of the Politburo to listen to the people of the area, and to their continuing financial incompetence as property speculators.

It will seem strange to many folk that Mrs Buckley's Committee - which is specifically charged with scrutinising and holding the Cabinet to account - held its meeting in secret.

What is not strange at all is that the Politburo member for the gloriously named portfolio of - 'Finance and Efficiency' - Cllr Paul Rigby told a huge porky to the Gazette on 14 July when he said that "...Fylde Council can't afford to give the land to Muir Housing Association because the council is strapped for cash." Without a shadow of a doubt the Politburo decision he was part of includes giving a grant equal to the purchase price to Muir.

He went on to say "The council has got full market value for that piece of land. This scheme is not at nil cost to Muir Group Housing Association. They are contributing significantly to the capital costs of the build, and the scheme will also lever further investment and employment into the borough."

Wrong almost all the way, Mr Finance and Efficiency.

Your own minute of the meeting says "That the Cabinet agrees to the disposal of 0.177 hectares of land at Heeley Road St Annes (former CVMU site) shown for identification purposes on the plan attached to the report on the terms outlined at "full market consideration" and the Cabinet agrees to the same amount being released from retained section 106 monies to facilitate the purchase."

He must also think an estimated value artificially depressed by anything up to 60% is the same as the real 'Full Market Value' that would come from selling the site by tender.

So much for finance. So much for efficiency. So much for competence.

Is it any wonder this rag, tag, and bobtail administration are in cloud-cuckoo land when it comes to managing our money.

Just for the record, he is also wrong about Muir having to pay for building the scheme.

The Housing Corporation says the total cost of the Heeley Road scheme is estimated £1,542,873 They have given a grant of £1,120,000 for the construction.

The Politburo Cabinet wants to give the land to Muir for free.

We understand the County Council is also planning a £130,000 a year payment toward staffing costs at the hostel.

So all Muir would have to pay for is things like the planning application, architect's fees and the like.

They can pay for these out of the rents they draw from homeless tenants who quite possibly, because of their circumstances, will be funded by Council Tax benefit and Housing Benefit originating from taxation.

So all told, apart from a bit of admin cost and building repairs, Muir will get the property more or less for free, the staff cost paid, and it can spend the rest of its rental income on its own office staff / admin costs, safe in the knowledge that almost all its money is being provided by taxpayers.

No wonder they were keen to get this site! It's more or less a licence to print money for them.

In fact, when you think about it, although they are a commercial company, they are acting like a branch of Government except there is no democratic accountability and no right for public scrutiny of their accounts.

counterbalance thinks most of us could run a successful business when most of our capital and revenue costs are met from taxation.

What Price Democracy?Well, the scrutiny Committee chaired by Councillor Mrs Buckley met this evening and debated the matter behind closed doors from 7pm to about 8:30pm.

About 250 members of the public with placards, whistles and bells made their views known through the windows of the meeting that had - in our view quite unnecessarily -  excluded them.

After the meeting we spoke to people who had been inside. We understand that Councillor Hayhurst spoke strongly about the improper process and inadequate financial arrangements being proposed, and said these were producing bad value for Fylde's taxpayers.

We understand after his onslaught, there was a damage limitation move by Politburo Member for Finance and Efficiency - Paul Rigby-  who said he accepted there was a problem and the matter should be referred back to the Politburo Cabinet.

We also understand that even some of the Conservative councillors were aghast when Councillor Hayhurst gave the valuations that had been provided to him by the Heeley Road Hostel Group (the same valuations they passed to us and we have quoted here). One conservative member is reputed to have made an impassioned plea that this was a mess, and they didn't want to get into this sort of a mess again, and had to get out of this one as quickly as possible.

When it came to voting time there were two votes taken. The first was that the matter should be referred back to the Cabinet. This vote was lost 7 votes to zero with the Chairman Councillor Karen Buckley and the Vice Chairman 'Gentleman' Councillor John Prestwich abstaining.*(Update to this information : See below)

The second was a vote to refer the matter to full council with a recommendation that the land be sold on tender.

We understand the voting on this was as follows

Those for referring it to full Council, Councillors:
Saint Barbara Pagett
Maxine Chew
Howard Henshaw
Bill Thompson
Thomas Threlfall

Those against referring it to Full Council, Councillors
Karen Buckley
Dawn Prestwich
John Prestwich
Fabian Craig Wilson

This means the matter will now be debated by Full Council, possibly as early as next Monday 28th July.

There is already an argument developing about whether the full Council can make a decision on the matter itself, or whether they are only allowed to refer it back to the same bunch of incompetents that made the decision in the first place.

Either way, they are now probably going to have to put right what they should have done right in the first place.

We think there will be another article on this shortly.

UPDATE
* See "And there's More" for a correction and more information.

Dated:  22 July 2008 


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