News: Council claims cost of buying HQ Building in Chester could be repaid within three years

Dec 8 2009 Chester Chronicle

THE £18.8m cost of buying HQ Building could be repaid  within three years from the sale of redundant council buildings in and around Chester, according to a local authority report.

A report due before Wednesday’s Cheshire West and Chester Executive details all financial aspects of the of the £10.25m sale of County Hall to the University and move to the HQ building.

A vital factor in the regeneration of Chester, the move is also likely to claim significant year on year savings for the taxpayers of West Cheshire.

Noel O’Neill, Head of Facilities and Asset Management, outlines detailed employee, premises, facilities management and financing costs involved in three case scenarios:

Option One: the acquisition of County Hall from Cheshire East-part owners of the building-would have involved paying the latter at least £5.4 m but NOT achieve any of the required modernisation £1.762m a year or satisfied council requirements.

Option Two: Purchase of County Hall from Cheshire East and including subsequent modernisation would involve annual costs of £2.112 with work estimated at £7.5m or £2.642 at £15m.

Whilst consultant engaged by the former County Council had cost necessary improvements at £7.5m, the report had not included the price of major improvements like replacement of windows, roofing and heating systems, required in the near future and full refurbishment was estimated nearer to £15m.

Option Three: Purchase of HQ building and sale of County Hall results in annual costs of £1.796 with lower staff costs and premises costs due to layout and energy efficiency design of new building.

“The council will achieve annual savings of £670,000 by moving to the HQ building rather than trying to buy County Hall from Cheshire East and modernise the building to open and flexible office space with modern environmental and energy -efficient standards,” says the report.

“The case is further enhanced because the move allows the acceleration of office rationalisation across the borough, which brings further reduction in running costs and carbon output.

“And by establishing a city centre presence, the University is consolidating its position and we will see it increase its positive influence on the city’s economy.”

Added Mr O’Neill: “It is anticipated that accelerated office rationalisation will allow disposal of surplus properties around Chester and that receipts generated will at least repay the debt incurred in this transaction.

“A prudent view is that these receipts will be realised over the next three years, which will bring a further reduction in revenue costs.

“The costs of moving to HQ are comparable to buying County Hall from Cheshire East with no modernisation - an option that is not viable to the council.”

Council leader Mike Jones said: “ Whichever way you look at it the move represents good value the city and the taxpayers across West Cheshire.”

The University timeframe – completion in 2009 and vacation of County Hall in early 2010- had a major influence on council plans if the sale was to proceed.

The authority says new build options would not have been possible as they would take some 2-3 years to deliver.

“Therefore available, existing space was the only option,” said Mr O’Neill.

“There was limited suitable available space within Chester and HQ emerged as the only real possibility – dependent on the price.”

At the outset both councils jointly appointed the District Valuation Service to independently value County Hall. The report looked at the complexities of the market and potential uses of the site and valued the site at between £5m and £6m.

Cheshire West and Chester also sought legal advice about achieving best value under section 123 of the Local Government Act from an off market transaction which was satisfactory.

The council has acquired 83,000 square feet of space on six floors in the HQ building at a cost of £18.8m - an agreement underpinned by a professional valuation of £20.9m.

Four floors have been designated as office space, with the fifth floor devoted to members facilities and democratic services. The ground floor will feature rooms for committee meetings open to the public, a restaurant, and a training suite for the authority and its partners.