29 September 2008

The ratepayer pays ..............

I think that I've said it before but events in Somerton, where the Town Council are concerned, rarely fail to amaze me and the STC's recent press release, dated 23rd September '08, about Etsome Terrace and Cary Court is yet another fire-cracker. When I read it first I thought it must be some sort of elaborate practical joke but, the further I went, the more I realised that it was, amazingly, perfectly serious.

In summary, after owning the Etsome Terrace site for 5 years, and having done nothing with it, the Town Council agreed in December of 2007 to sell it for £950,000 to Edgar Homes as a development site. That sale has only just been completed but not quite in the way that might have been expected. Today, some 9 months after that agreement, the Town Council have further agreed, with some of the self-same individuals, to buy the Edgar Builders headquarters building for £700,00. Of the balance of £250,00, the Council's press release states, the Council has received a cheque for a little less than £130,00 which means that fees and a contamination clean-up at Etsome have consumed another £120,000.

So, in simple terms, the Council entered into an asset swap where it got Unit 8 Cary Court and a cheque for £130,000 in return for the Etsome Terrace site. But a more considered review of the balance sheet shows this 'deal' to embody a real loss to the taxpayers of Somerton:

Cost of Etsome Terrace site (2002) £220,000.00p
Cost of borrowing for 5 years (estimated at 5% pa) £55,000.00p
Sale price of Etsome £950,000.00p
Cost of sale and clean-up at Etsome £120,000.00p
Cost of Unit 8 Cary Court £700,000.00p

Total costs to Somerton Town Council £1,105,000.00p
Total receipts from both transactions £950,000.00p

Loss incurred by Somerton Town Council £155,000.00p

On top of this realised loss of £155k, Somerton's ratepayers will now have to shoulder the burden of the fit out and I doubt anyone knows how much that will cost. But, as I said last time, because this remodelling is being done to an industrial building, it is fair to propose that no-one will ever want to buy the 'added value' back so any investment in that structure, on that site, is likely to be a total loss.

Now its fair to ask if this deal represents 'best value' for the ratepayers of Somerton who are, afterall, funding this joyride. The Town Council have already said that this is a fabulous opportunity and, frankly, what else can they say? They are not about to say, "Well, we didn't have any choice. If we didn't accept the building in payment then the deal was off." So, to me, it looks like nothing more nor less than face-saving. The Council publishes their 'press release' crowing about their skill at delivering such a fantastic deal when the figures tell completely the opposite story. And what the figures don't tell the taxpayer is just how much its going to cost to heat, light, insure and maintain this building and all of that before the taxpayer funds the significant alterations which will be needed if the building is ever to support the user groups whose needs were considered by the Steering Group (and entirely ignored by Somerton Town Council).

On the other side of the equation, what's in it for the purchasers of the Etsome Terrace site who are, in large part, the vendors of Cary Court? Well that is actually harder to imagine. Edgar Builders, the owners/occupants of Unit 8, clearly wanted shot of the building, probably because they couldn't justify owning it. I have no idea how much it was costing them in terms of borrowings, maintenance and running costs but, in the economic climate of today I can imagine that it was killing them.

But why would they want to complete a transaction on land which, on the face of it, looks seriously overvalued today? That's equally hard to understand but maybe they are just taking a punt on some sort of recovery in the housing market. Without the millstone of Unit 8 around their necks, they can afford to hold the land for a few years and then make money on the housing development when the economy recovers. Of course, any development will be at a greater density than that supported by Somerton Town Council prior to the land being sold to Edgar Homes.

But there is also a third element to be considered in this complicated web of interconnected interests and that is the impact that the Cary Court deal will have on perceptions of property value on the Bancombe Road Industrial Estate. I don't think that anyone with a brain is going to say that the property market, commercial or residential, is in anything but free-fall right now. So how do you throw down a marker which says that property on the Bancombe Road Trading Estate is actually holding up well. The answer is simple - do an asset swap like the one just completed which will mean that the Land Registry will note a really good value achieved at Unit 8 Cary Court and that will increase confidence in the site as a whole.

So this deal is good news for Edgar Builders who get shot of a financial millstone and its good news for property prices on the Bancombe Road Trading Estate. And, in common with taxpayers here and in the states, the ratepayers of Somerton will have to wait a little time to find out just how bad the news is for them.

As I think I've said before, you really couldn't make this up.

Till next time.

Niall

21 September 2008

Evidently the band is booked and you're paying.

After a long hiatus it feels like its time to return to commenting on events in Somerton but maybe I should give at least passing mention to recent events in the economy. Last year, when the first ripples started to appear, I wonder who knew just how far they would reach. I certainly didn't have a clue but I am beginning to suspect that our friends in Downing St and the Square Mile had a bloody good idea.

What we all know, but very quickly forget, is that the economy is all about confidence. You can cut that statement many ways to say that your own economy is about your confidence in yourself whereas 'our' economy is all about our confidence in 'us'. The economy, contradicting the concept that many economists and politicians propose, doesn't exist as a separate entity but is, in fact, joined at our hip. It is us and us are it. And this idea really undermines the idea of an economic model which subjugates the populace because, if only they'd wake up long enough to realise it, the populace are the economy.

But the system that we suffer under is one where we, the populace, have been convinced by our 'elders and betters' that they must run the economy and that we are subject to its vagaries. Now, if you look closely you will realise that this is actually a coded way of saying, "we, your elders and betters, can get our snouts deeply into the trough and you can have what's left over, if there is any".

In recent times we have good examples of this behaviour, the best of which was Enron, where the crooks at the top were skimming the cream right up until the last minute when the whole pack of cards folded. Didn't one chap say something about not being able to remember if he cashed in $50M in shares just before the failure? But the message, peddled by Saint Margaret of Thatcher, was that everyone should own a house, have investments and be an entrepreneur. That way, the load was spread as widely as possible and it left the suckers on the ground floor holding the baby. And so it is today. Investment banks go belly up and the taxpayer foots the bill. Saint Margaret's banner should have read, 'Privatise the profit and nationalise the debt'.

And I wonder if just a little of that Thatcherism is trickling down to the good burgers of Somerton with this wicked new deal to locate the community hall in a ............................ wait for it .................................... industrial shed. Now forgive me for observing that industrial sheds are, well, industrial. In case any of our Town Councillors haven't noticed, industrial sheds aren't nice, touchy-feely type buildings. In fact, when you think about it, an industrial shed looks a lot like a tin dunny, not at all what the much missed 'steering committee' had in mind.

But anyway, the deal, we understand, is all but done and the good burgers of Somerton are now responsible for the upkeep of a rather tacky looking tin box stuck out in the further reaches of the Bancombe Trading Estate. Gosh, doesn't it fill you with excitement. Not only can we be bored rigid by Council meetings but we can be bored rigid in the most god-forsaken place in Christendom. But, contrary to the general perception that the Town Council couldn't find a light-switch if they were given instructions, they do have a plan. This surprised me when I first heard it but, on careful consideration, their cunning plan does make sense. Here's the scoop:

The idea is that the Town Council have absolutely no confidence that anyone will want their tin shed on the edge of civilisation so, worried that it might turn into a white (or a dark blue) elephant, the idea is that they can always sell it again if its not needed. Now doesn't that fill you with confidence? But here's the thing. This is all just too convenient and I think that there is more to this than meets the eye.

Lets imagine that the Town Council finalise the sale and buy this unlovely tin box, what are they going to do with it next? Well, thanks to the previous owners who were thoughtful enough to vary the original specification and make the first floor suitable for disabled access (now there's a co-incidence) the Town Council will have groovy offices where they can have their meetings. Granted, the view out of the windows isn't exactly spectacular but our Town Councillors seem to be quite happy with 'ugly' and they'll have plenty of that at Bancombe.

That leaves the rest of the tin box and Somerton's taxpayers will have to fit this structure out to satisfy some sort of community need. Now I guess is that this fit-out won't be cheap and a big part of that fit-out will have to be insulation otherwise it'll have to be renamed the 'community cold-store'. So the community forks-out for the fit-out and everything in the garden is rosy, or is it? Because the continuing question is whether or not anyone is going to bother to drag themselves out to Bancombe to use this unlovely tin box. And what happens if the structure becomes the feared white-elephant. No-one is going to want to buy a community hall botched-up out of an old industrial unit. So it'll be sold off to the highest (or lowest) bidder and, in the economic climate of the next few years, that sale could mean a significant loss for Somerton's taxpayers and some lucky person's bargain of the century.

To say that this project is half-baked is a compliment and the problem continues to be that some of Somerton's Councillors want to play at being property developers. Now I don't mind if they do that with their own money but I do object to them playing fast and loose with public funds.

Somerton's Town Council managed to avoid doing anything vaguely creative with the land at Etsome Terrace which was, in case none of them noticed, a very central and convenient site for a community building. They did manage to carve off a few bits, squandering (or should that have been disguising) the site's true potential and then, finally, they sell it off to create a housing development. In the meantime they continue to faff about with the doctors surgery and generally behave exactly as property professionals don't. Now, with all that lovely (taxpayers) money from Etsome Terrace (assuming that it has arrived in the bank) they are going to start throwing money about at the furthest edge of an industrial estate converting a tin dunny into a 'community tin dunny'.

I'm speechless, but only till next time.

Niall