Contact Officer: Alec Dubberley, Democratic Services Officer

Tel: (01865) 252402, email: adubberley@oxford.gov.uk

The Head of Law and Governance submitted a report (previously circulated, now appended) concerning the progress made to date on the Asset Management Plan. Lead Members on this item, Councillor Van Nooijen and Councillor Gotch, introduced this item to the Committee. Councillor Van Nooijen welcomed Steve Sprason (Head of Corporate Assets) and Richard Hawkes (Corporate Asset Manager) to the meeting. They would answer questions put to them by members of the Committee.

The following questions were then put, and answers given:-

Question 1: Was Steve Sprason pleased with the Asset Management Plan?

Answer: It has progressed well over the last 3 years. He did not believe that the organisation fully appreciated what was the state of its property portfolio three years ago, but it should now have more trust and confidence in the process and in the way in which property was managed.  The Council had maintained and improved its investments and income, had a good level of capital receipts, and employed high quality people within the Asset management team. He would, however, like more progress to be made with the investment portfolio.

Question 2: What is the current situation regarding maintenance backlogs?

Answer: Some progress has been made with this. There is a structured programme for investment in leisure facilities and there have been measurable improvements. The backlog has partly been reduced by the disposal of some assets, for example the office buildings at blue Boar Street, and by investment to improve such as that carried out on St Aldate’s Chambers. The Council had the sum of £7 million to spend over the next 5-6 years in order to reduce the maintenance backlog. There are example were some investment could result in an increase in rental income – for example, the Council owns an office block which would recoup an investment of £150,000 to carry out improvements quite quickly.

Question 3: What is the current strategy for the best use of car parks?

Answer: There was a desire to retain parking facilities (and thus parking income) but to try to develop around the site, for example at the St Clement’s Car Park. This would add value to an asset. There were other opportunities at Diamond Place and Worcester Street car parks, but the aim was to deal with the St Clement’s Car park first.

Question 4: What is the current position regarding maintenance on the Covered Market?

Answer: There is a maintenance backlog here, but last year the sum of £100,000 was invested in the Covered Market in order to improve decoration, lighting and other services here. Oxfordshire County Council provided half of this funding. A further amount out of the £7 million referred to above has been earmarked for the Covered Market.

Question 5 on specific corporate targets CA004 and CA006

Answer: Steve Sprason explained that tenants had not been asked about their level of satisfaction with the Council, but he wanted to carry this work out this year with City Centre tenants in order to establish a baseline figure. Similar consultation would take place with tenants from the Covered Market next year. Tenants would be asked what they thought of the Council as a landlord.

There had been a situation, in the past, where properties could be left without rent reviews for a long period, but this situation has now changed.  The Council holds properties in order to maximise its income and therefore seeks market rents. If occupiers fulfil a social need, they can obtain a grant towards their costs, but other than this the Council does not pay heed to any social need that the tenant may fulfil. The “tenant mix strategy” is part of this. Tenants are expected to pay a market rent, but at the same time the Council does not wish to see them bankrupted!

There are a number of renewals that fall due each year. Some leases are for a 5 year period and some for 7; all have their own renewal pattern. Rent review is a quasi-judicial process, and there is a need to serve proper notice in good time in order to protect the Council’s position.

Question 6: On risk: Is Ramsay House going to raise sufficient funds? Has the work on St Aldate’s Chambers and the Town Hall been carried out within budget?

Answer: Blue Boar Street was sold for £3.2million, which was more than expected. Negotiations about Ramsay House are still ongoing, but it is anticipated that the required sale price will be achieved. The aim is to vacate Ramsay House by late February/early March 2012.

St Aldate’s Chambers are currently on target, despite the fact that the first contractor went broke. Even so, there have been no increases in costs because of this, and it looks as if the project will come in under the budget of £4.3million.  The outturn is expected to be approximately £3.8million.

Question 7:  Swimming Pool and Westgate Development – does this still present a major risk to the Council? Has the potential loss because of delay to or stoppage of the project been estimated within the risks?

Answer: Unable to give details of any potential loss on the Westgate scheme at this time. However, the rental income fro9m Westgate fell by £100,000 over the last 2 to 3 years. The figure for the last 12 months is awaited. It is felt that uncertainty over the future of the project has led to a modest drop in income.

It is more likely than not that the Westgate scheme will proceed as planned. The current developers (Crown Estates and Land Securities) are premier developers who have carried out some significant work over the past few years. The Council would be in a position to instruct solicitors to prepare formal documents in a few weeks’ time. It was in discussions with Oxfordshire County Council about bus and transportation issues as well.

Steve Sprason indicted he would send details on the above to Councillors.

Regarding the swimming pool project, some work on service diversions had started here. The Council was seeking to resolve issues around the application for Town Green status on the land designated for the new pool in Blackbird Leys. Once that is resolved, work could begin quite quickly.

Question 8:     Does the corporate risk register adequately reflect the risks associated with the management of our assets? How big a risk is commercial property income to achieving a balanced budget? What is the situation concerning vacant properties?

Answer: Assets don’t normally merit an individual mention because the risk is bound in with the financial risk to the Council as a whole.

There are quite a few vacant properties around the City centre. Christmas 2009 was an especially bleak period as a few companies went into receivership then, losing up top £400,000 rental income. There are still a few void properties, but they are slowly being filled (for example 20 /24 St Michael Street has a conditional agreement for a new hotel there). Some properties have reverted to the Council in poor condition.

Although the Council does own some City centre property, it is not a major landlord. Some premises need considerable work on them, or require planning consent, or are politically complicated.  The capital receipts that the Council hoped for might be more difficult to achieve now.

Regarding rates of return on property, this all depends on what rate the Council wishes to achieve. Richard Hawkes indicated that he had put the sum of 5% in the Asset Plan as a placeholder.

Question 9: What are the implications of restrictive covenants?

Answer: The Council will enforce covenants. The Council does have the discretion to release or not, it can negotiate a release and can negotiate a payment for this

Resolved to:

(1)   Thank Steve Sprason and Richard Hawkes for their attendance at the meeting and useful input to the discussion;

(2)   Welcome the advance sight of the Asset Management Plan;

(3)   Establish a small group that will examine the Asset Management Plan in more detail. This group will comprise Councillor Fooks and Councillor Van Nooijen, with an invitation extended to Councillor Campbell. Other Councillors may wish to join as well and can be invited to do so;

(4)   Make the following recommendations to City Executive Board:-

Recommendation 1

That City Executive Board to agree to affirm their commitment to providing good and sustainable budgets to tackle the maintenance backlog and investment to provide for the most effective use of our assets.  To encourage all political parties on the Council to support this within their budget proposals. 

Recommendation 2

To welcome the discussion in concrete terms of rates of returns for our asset portfolio and to ask the City Executive Board to set  a target for this in the re-fresh of the Asset Framework of 5%.