Monday, 20 February 2012

Cricket Fans to Subsidise Council Tax

Rose Bowl: Cash Cow or White Elephant? 
Debate rumbles on  - mainly in the letters page of The Echo -   about Eastleigh Borough Council's controversial December decision to purchase the Rose Bowl in West End.  Ex West End Councillor Martin Kyrle has been defending the Lib Dems' position, provoking a response from West End residents who would like to see Council Leader and Hedge End Councillor Keith House come to the crease himself to answer questions about the bail-out.

Trying to cut through all the bluster and short-pitched bowling from hotel owners who are worried about competition, and political parties who will oppose it just because the Lib Dems are proposing it, the kernel of fact is that the Council will borrow money at a certain rate of interest to buy a piece of real estate which they can lease to a cricket club at a rent higher than the interest on their loan.  The surplus will go towards financing council services, filling part of the funding gap caused by the Lib Dem's long term policy of keeping council tax increases below inflation.

What's not to like?  Cricket fans, golfers and people who like expensive spa hotels will in effect be helping to keep Eastleigh's council tax down and services running.  In common with other councils, Eastleigh already manages a property portfolio, admittedly on a smaller, less spectacular scale.  The Rose Bowl deal is an ambitious extension of something the Council has already shown that it is competent to do.

The Council will not be spending taxpayers' money in any real sense, because the money will have to be borrowed, and they can only borrow for projects that have a positive business case.  As long as the income line remains higher than the expenditure line, then the council tax payers of Eastleigh will not be subsidising the Rose Bowl.

That said, it is a bail-out despite the protestations of some Lib Dem Councillors that it is not.  But it is a bail-out that benefits both parties.  The Rose Bowl gets to proceed with its amibitious plans for Hampshire, and the Council gets both the financial surplus and the harder to quantify benefits to the local economy.

Rose Bowl Boss Leaves

Council had already agreed in 2009 to borrow in order to finance the building of the Rose Bowl hotel.  The implementation of that decision was delayed by a judicial review instigated by rival hoteliers, leading to a review of the business case and a repeat of the extensive due diligence process which involved consultation with a dozen legal and commercial experts.  In the intervening two years some of the risks involved in the project have come into focus: the UK economy with George Osborne and Danny Alexander at the helm looks decidedly shaky, and the plans of Rose Bowl plc have taken blows with both the failure to secure an Australia test match and relegation to the second division.  It has now been reported that their MD for the last six years has left.

Nine Lib Dem councillors were absent for December's debate - including three of Hedge End's seven representatives - and  the debate and voting split on party lines.  All councillors will have read the same reports and documents and attended the same briefings and seminars, but all the Conservatives decided to oppose the purchase and only the Lib Dems supported it.   Unless those absentee Lib Dems were dissenters kept away from the debate to preserve party unity...

Was Report "Sexed Up"? 

Independent Cllr Glynn Davies-Dear accused the administration of "sexing up" the Rose Bowl report by inflating the likely new jobs to be generated by the project.  He claimed that a newly built, similarly sized, hotel in Reading was only employing 70 people, not the 500 hoped for in West End. 

He may well prove to be correct, but even 70 jobs are not to be sniffed at as the UK lurches towards three million unemployed under the Conservative / Lib Dem Coalition, and the number of jobs is not critical to the business case.  The important thing, as pointed out in the conclusion of the report, and alluded to by the Conservative Leader, Cllr Godfrey Olson, is:  "This is not a risk free project and Members do need to understand and consider the risks involved."

A succcession of Lib Dem councillors got to their feet on 15th December to state that "the benefits outweigh the risks".  When so many come out with exactly the same wording it looks likely that that is the party line, the sound bite that the leadership wanted to be reported.  Parroting the words dictated by their leader, those councillors did not convince that they had themselves, personally, considered and understood the risks.

Luckily for Hedge End, we have the chance to question our borough councillors at the town council meeting each month and Cllr Louise Bloom subsequently made clear that owning the ground is fundamental to managing the risks that might impact the income stream from the Rose Bowl.

2000 Houses?

Councillors have not been explicit on how ownership of the land would provide a plan B in the event of the income stream failing.  Presumably the Council would have to sell it and use the revenue to pay off what is left of the loan to avoid a massive and unsustainable increase in Council Tax.

It's easy to see that the Council could grant planning permission for 2000 or so houses on the 167 acre site and more than recoup any losses by selling it as building land, thus digging itself out of a financial hole and coincidentally relieving pressure on green field sites in the Hedge End and Botley countryside.   It would require a major change to the Lib Dems' Local Plan, though, as currently it only allows for five hundred new houses to be built in West End between now and 2029 (compared to nearly 4,000 in Hedge End and Botley).

Nobody wants Rose Bowl plc to fail and the Hampshire cricket team to be made homeless, but the question remains: In the worst case scenario, would the Council have the ruthlessness and courage to carry out its plan B? 






4 comments:

  1. A good blog Keith.

    I can see the golf course not making a profit to the extent that the land it occupies could be turned over to housing. A common ploy used by councils across the land!!

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  2. I've said previously that I'm supportive of the idea of the Rose Bowl Hotel generating income that will help keep Council Tax down. Provided that is actually what happens, provided that the project is managed properly, I don't have a problem with that principle.

    Borrowing money to buy the Rose Bowl is riskier. For instance the idea that the Council will borrow money at a certain rate of interest to buy a piece of real estate which they can lease to a cricket club at a rent higher than the interest on their loan. is fine whilst interest rates are low and fixed, but there is plenty of scope for that plan to go horribly wrong...

    Excellent blog BTW.

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  3. Good blog, but would you take on a tenant who's always in the red year after year? I wouldn't. BTW, Glenn Delve left in October last year. (Good ol' Daily Echo - first with the news!) Anyone know why he left?http://www.rosebowlplc.com/news/managing-director-glenn-delve-leaves-the-rose-bowl
    I wonder if Plan B is really Plan A.........

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