PURPOSE

1. For the Audit and Performance Committee to note the ongoing work relating to the Property Capital Receipts Programme.

OUTCOMES

2. All capital receipts emanating from property disposals are paid into the corporate coffers in order to support the Council’s Corporate Strategy and to support the prioritised spending of the Council in respect of the delivery of services.

BACKGROUND

3. The Isle of Wight Council has, in accordance with Government guidance and the Council’s own capital requirements, been rationalising its property portfolio in order to generate capital receipts from property disposals.

4. The annual target for such capital receipts has, for several years, been in the order of £1.5 million.

5. As part of the emerging work following the approval of the Strategic Asset Management Plan this capital receipt target has increased and for the 2006/2007 year the target is just over £2 million, and this looks set to be achieved.

6. Earlier during the 2006/2007 financial year a Capital Receipts Programme (Appendix 1) was prepared indicating a list of properties that might become available during that year and the following years 2007/2008 and 2008/2009 detailing the reasons for sale, method of sale and the current situation. This Programme was presented to the Strategic Asset Management Group which indicated its approval.

7. A report should then have been written on behalf of the Cabinet Member for this programme to be approved by way of delegated decision. Unfortunately this report was not prepared.

8. Whilst the Capital Receipts Programme provides a list of potential and forthcoming sales, the Constitution requires that reports need to be written on individual properties when they are declared surplus to requirements in order that they can be offered to the market, and further reports need to be written in respect of each individual property once the sale has been agreed in principle giving recommendations regarding that proposed sale.

9. The reports relating to the declaration of being surplus to requirements and the subsequent reports relating to individual sales will be dealt with either as Officer delegated decisions, Cabinet Member delegated decisions or Cabinet decisions dependant upon the sale consideration. The parameters for these decisions are set out within the Constitution under the financial delegation framework.

10. Where sales relate to a special purchaser these have to be reported to Cabinet in advance, prior to the reporting procedures detailed above.

11. Property Management Group meets on a monthly basis with the Capital Accountant designated from Finance Services to review the capital receipts progress.

12. A capital receipts monthly summary is also prepared for the benefit of the Director of Finance and a copy of this is shown in Appendix 2.

13. When a potential property disposal has been identified the level of capital receipt is considered by the Property Management Group. In order to ensure best consideration can be achieved the opportunity is considered via the value adding process to ascertain what the property is worth in its current state, and what it might be worth once “improvement works “ are undertaken. This could mean physical works to the property, or a planning consent for an alternative use, or background reports such as ground condition, structural, or environmental reports being obtained. If a sensible case can be made then this value adding process is adopted.

14. The value adding process considers the current value, the value that could be achieved, and the cost of the value adding process. For example if a property is worth £100,000 now and £500,000 following this process, and the cost of improvement works is £100,000 then the uplift in value is £300,000 and this justifies the works being undertaken. If however it is worth £100,000 now, £250,000 when the works are done, and the cost of works is £100,000 then the uplift is only £50,000 and we would need to ascertain what the potential risks are to see whether the improvements are justifiable.

15. An example of the capital receipts analysis pro-forma is attached in Appendix 3 giving details of this process.

16. In addition to the documents referred to the Capital Receipts Programme is also now being reported quarterly on Corvu.

STRATEGIC CONTEXT

17. One of the five corporate objectives is being a high performing cost effective council and the Capital Receipts Programme falls within this objective, and as part of the delivery of the Strategic Asset Management Plan.

CONSULTATION

18. Consultation takes place in respect of individual property reports, whether for the declaration of being surplus to requirements or the actual disposal report itself. The consultation takes place with the Cabinet Member, the Ward Councillor, the relevant contacts within Legal, Risk, and Financial Services, and Officers within relevant service areas connected with the disposal and the report is copied to the Scrutiny Committee.

FINANCIAL/BUDGET IMPLICATIONS

19. When a report is being prepared for a property to be declared surplus to requirements the potential capital receipt is always treated as a confidential item in order to ensure that the release of this information does not prejudice the subsequent marketing of the property.

20. Reports for individual property disposals will state the consideration that has been achieved in principle and that is being recommended for approval.

21. The delivery of the Capital Receipts Programme is an important part of the Council’s Capital Strategy, and an essential plank of being a High Performing Cost Effective Council.

LEGAL IMPLICATIONS

22. The Council has the power to dispose of its property for best consideration under Section 123 of the Local Government Act 1972. Generally speaking best consideration is the highest financial offer made. In some circumstances however best consideration might also take into account community benefits or service delivery, which means that the financial figure may be reduced. In such circumstances Government guidance has been issued to take into account the “value” of these matters in order to assess whether the combination of the monetary receipt and community benefit are equal to best consideration.

EVALUATION

23. It must be noted that the Council has a finite number of properties and therefore any capital receipts programme cannot be continued indefinitely.

24. The wording of the current Constitution relating to the disposal of capital assets may need revisiting as, at present, in effect three reports are required on any property being disposed of. The first is the report relating to the Capital Receipts Programme, the second the report relating to the property being declared surplus to requirements, and the third relating to the actual disposal itself.

25. The capital receipts analysis pro-forma referred to above was produced by the Property Management Group, with assistance from the Capital Accountant, in response to concerns relating to expenditure against capital receipts. This is the first time that this document has been used and regrettably it took some three to four months for it to be approved and therefore the Capital Receipts Programme relating to the properties in question (approximately twenty) was put on hold for that period of time. This may have an impact upon the Capital Receipts target for the 2007/2008 year.

26. Property is generally illiquid in nature and there is therefore need for considerable planning in respect of a Capital Receipts Programme. This is undertaken as part of the Strategic Asset Management Plan and Operational Property High Impact Project.

27. The limited capacity of the Property Management Group is to be improved shortly with the recruitment of property specialists who will be appointed jointly by the Council, PCT and police to undertake a joint strategic property review. Ultimately this should identify further capital receipts.

28. It is important to acknowledge that capital receipts relating to non-residential properties are very much subject to the vagaries of the marketplace and also to the planning process, particularly in respect of the value adding process. Such matters can lead to delays in completing legal documentation and achieving the capital receipt.

29. Due to the, often, limited number of properties that might be offered to the market by the Council at any one time, it is probable that disposals might be completed legally at irregular intervals. For this reason it is recommended that reports are presented to the Audit and Performance Committee on a quarterly basis.

RISK MANAGEMENT

30. The principal manner of managing risk in respect of the disposal of property is good asset management, which requires sufficient resources and capacity to undertake. This matter has remained unaddressed for some years, until the new senior management team was appointed.

31. The need for resources has now been recognised and is being actioned.

32. The approved Strategic Asset Management Plan, which forms the backbone of Council asset management planning, has been risk assessed and it’s importance is now recognised resulting in its inclusion on the Strategic Risk Register.

RECOMMENDATIONS

THAT :

a. the Committee note the ongoing work related to the Property Capital Receipts Programme.

b. a report be received by the Committee on a quarterly basis.

APPENDICES

Appendix 1 – The Capital Receipts Programme

Appendix 2 – The Capital Receipts Monthly Summary

Appendix 3 – The Capital Receipts Analysis Pro-forma

Contact Point : Barry Cooke, Corporate Property Manager, tel: 01983 823266, email: [email protected]

JOE DUCKWORTH

Chief Executive

COUNCILLOR GEORGE BROWN

Cabinet Member for Assets, Planning and Housing

APPENDIX 1

Capital Receipts Programme

Year 1 - 2006 to 2007 and Years 2 and 3 – 2007 to 2009

As at March 2007

Description	Reason For Sale	Method of Sale	Current Position	Year
Chale – Fernside, Blythe Shute	Maximise capital receipt and release surplus asset.	Open Market	Sale agreed subject to Delegated Decision.	1
Chale – Recreation Ground off the Military Road	Maximise capital receipt and release surplus asset.	Special Purchaser	Sale agreed to Chale Parish Council at £44,000. Solicitors instructed.	1
Cowes – Moira House (see Ryde – Jellicoe House)	Maximise capital receipt, release surplus asset and support temporary housing.	Special Purchaser	Sale agreed on ground lease to Medina Housing for Moira House and Jellicoe House, Ryde, for £500,000. Completed.	1
East Cowes – Access off Whippingham Road to Kingston Site	Maximise capital receipt and enable development.	Special Purchaser	Negotiations concluded with developer pending planning consent. £1m paid with balance to follow.	1
Godshill – Access Over Car Park	Maximise capital receipt for right of way.	Special Purchaser	Contract completed with staged payments. Last payment of £115,000 due 29/09/06 now paid.	1
Newport – Carpenters Quay	Maximise capital receipt, release surplus asset and regeneration of Newport Harbour.	Open Market	Scheme being prepared in-house for outline planning application.	1
Ryde – Jellicoe House (see Cowes Moira House)	Maximise capital receipt, release surplus asset and support temporary housing.	Special Purchaser	See Cowes – Moira House. Completed.	1
Ryde – Green Street car park	Enable redevelopment of hostel accommodation in support of IWC Housing and Homeless Strategy	Special Purchaser	Proposed land swap, subject to planning, at nil consideration. On hold.	1
Seaview – Rope Walk Toilets	Maximise capital receipt, release asset and ensure provision of public toilets.	Open Market	Long leasehold sale concluded with building agreement in place. Completion 31/03/07. Sale proceeds £30,000.	1
Toilet Block Rationalisation (various)	Maximise capital receipts and release surplus assets via Civic Pride Agenda.	Open Market	Various sites to be inspected and alternative uses considered.	1
Newchurch – Sunnycrest Nursery Bungalow	Maximise capital receipt and release surplus asset.	Open Market	Awaiting instructions from new Director of Adult Services.	2
Newport - 17 Quay Street	Accommodation rationalisation and maximise capital receipt.	Open Market	Leisure Services to be relocated to the Guildhall.	2
Newport – St Johns Road	Maximise capital receipt and enable special needs housing.	Open Market	Agreement needs to be reached with Scout Group over rights of access and enabling works.	2
Newport – St Nicholas House	Maximise capital receipt and release surplus asset.	Open Market	Outline consent gained for 14 houses. Fire Service HQ to be relocated.	2
Newport – Parkhurst Road (former Library HQ)	Maximise capital receipt and release surplus asset.	Open Market	Joint scheme with Prison Service. Roadways still to be negotiated before planning application.	2
Newport – St Georges School (access)	Maximise capital receipt and enable development.	Special Purchaser	Negotiations in hand with adjacent landowner to improve access to residential scheme	2
Newport – Standen Heath Farmhouse	Maximise capital receipt and release surplus asset.	Open Market	Dilapidated and vacant. Not yet declared surplus to requirements.	2
Newport – South Street Car Park	Maximise capital receipt and enable retail development.	Open Market	Re-visit possible disposal of site for retail development.	2
Ryde – Wrafton House	Maximise capital receipt and release surplus asset.	Open Market	Currently on the market	2
Sandown – Woodview Cottage, Borthwood	Maximise capital receipt and release surplus asset.	Open Market	Sale agreed, subject to Delegated Decision	2
Shanklin – Spa Site	Maximise capital receipt, release surplus asset and enable redevelopment and regeneration.	Open Market	Agents instructed to commence marketing the site.	2
Shanklin – Sibden Hill Site	Maximise capital receipt, release asset and enable residential development.	Open Market	Scheme to be considered and outline planning application submitted prior to disposal.	2
Shanklin – Hillbury House	Maximise capital receipt and release surplus asset.	Open Market	Awaiting surrender of lease from Housing Association prior to marketing.	2
Totland – Suffolk House	Maximise capital receipt and release surplus asset.	Open Market	Awaiting surrender of lease from Housing Association prior to marketing.	2
Toilet Block Rationalisation (various)	Maximise capital receipts and release surplus assets via Civic Pride Agenda.	Open Market	Various sites to be inspected and alternative uses considered.	2
Ventnor – Signal House at Botanic Gardens	Maximise capital receipt and release surplus asset.	Open Market	Awaiting confirmation of declaration ‘surplus to requirements’.	2
Whippingham – Crematorium Lodge	Accommodation rationalisation, maximise capital receipt and release surplus asset.	Open Market	Declared surplus. Planning application for additional building plot to be submitted.	2
Cowes - Parklands	Maximise capital receipt and release asset to enable relocation of service.	Open Market	Opportunity to be investigated.	3
Cowes – St Andrew’s Community Hall	Enable redevelopment of hall for continued and expanded community usage	Special Purchaser	Preliminary discussions held with community group regarding continued community use of building pending possible redevelopment of purpose built facility.	3
East Cowes – Access off Whippingham Road to Kingston Site	Maximise capital receipt and enable development.	Special Purchaser	£1.3m balance to be paid in July 2008.	3
Newport – Blackhouse Quay	Maximise capital receipt, release surplus asset and regeneration of Newport Harbour.	Open Market	Collaboration Agreement in negotiation with two other landowners. Once signed a planning application is to be submitted.	3
Newport – County Hall and Newport Harbour	Maximise capital receipt, regeneration of Newport Harbour and County Hall sites and enable relocation of Council.	Open Market	Option appraisals currently being investigated.	3
Newport – Kitbridge School (access)	Maximise capital receipt and enable development.	Special Purchaser	In negotiations with developer for access over school field.	3
Newport – Pan Extension	Maximise capital receipt and enable residential and employment development.	Open Market	Enabling/background work in progress.	3
Residential Rationalisation	Maximise capital receipts and release surplus assets as residential tenants vacate.	Open Market	Awaiting tenants vacating properties.	3
Ryde Arena	Maximise capital receipt.	Special Purchaser	Ryde Arena wish to redevelop the ice rink to national standards to include hotel/conference facilities/residential.	3
Ryde – Business Park off Nicholson Road	Maximise capital receipt and support employment regeneration.	Open Market	Investigations on-going into feasibility of extending infrastructure to expand Ryde Business Park.	3
Sandown – Culver Parade	Maximise capital receipt, release asset and enable regeneration.	Open Market/ Special Purchaser	Possible Collaboration Agreement with other major landowner to bring scheme forward with sale to JV partner to follow.	3
Shanklin – Hope Road Promontory	Maximise capital receipt, release asset and enable regeneration.	Open Market	Awaiting research into possible marina off Hope Beach.	3
Whippingham – Community Centre, Alverstone Road	Maximise capital receipt and assist Community Association.	Special Purchaser	New ground lease offered. Awaiting response from Community Association.	3

APPENDIX 2

Capital Receipts Monthly Summary

February 2007

Capital Programme Year 1	No.	£	£
2006/07 Transactions Completed	7	868,532
Transactions Instructed	5	1,085,000
Terms Agreed	0	0
On Market	3	960,000

Potential Receipts			2,913,532
Less Slippage			760,000
Predicted Receipts			2,153,532
Receipts Target			2,150,000

Capital Programme Year 2 2007/08
Slippage From Year 1	2	760,000
Transactions Completed	0	0
Transactions Instructed	0	0
Terms Agreed	0	0
On Market	11	5,530,000

Potential Receipts			6,290,000
Less Slippage			2,350,000
Predicted Receipts			3,940,000
Receipts Target			3,900,000

Capital Programme Year 3 2008/09
Slippage From Year 2	3	1,450,000
Transactions Completed	0	0
Transactions Instructed	1	1,300,000
Terms Agreed	0	0
On Market	9	19,380,000

Potential Receipts			22,130,000
Less Slippage			4,600,000
Predicted Receipts			17,530,000
Receipts Target			17,000,000

Notes: The slippage reflects uncertainty surrounding some properties reflecting issues around availability, planning, timescales, etc.

More importantly the predicted receipts and receipts targets assume that the Property Management Group is adequately resourced with appropriate capacity to deliver the Capital Receipts Programme. At present this is not the case that there is every likelihood that considerably more slippage will occur that shown.