8 July 2011

Choices for Grahame Park Ltd - Choices for Councillors

At the end of the Cabinet Resources Committee on 29 June 2011 the public had to leave the gallery for the final item as there was an exempt report. The item was the Grahame Park Area Regeneration Project. 

Mr Mustard is not quite sure why the Council feel the need to hide information about building a housing estate as their partners in the project have to publish fairly detailed Accounts in any event. But it's a Catch 22 as it's only by seeing the exempt report that Mr Mustard could know if it really ought to be exempt or not ! Perhaps a copy will find its confidential way into Mr Mustard's inbox.

What do we know ? This is from the report prepared by the Assistant Project Manager (Regeneration Service).

Summary : This report seeks approval for the deferment of historic costs owed to the Council from the Council’s developer partner for the regeneration of the Grahame Park Estate ‘Choices for Grahame Park (CfGP) Limited’ until 1st July 2012 in response to revised funding criteria imposed by the scheme’s principal funder. Deferring the payments would allow CfGP to fund these costs from receipts rather than borrowing the money from their funder and CfGP’s parent company Genesis Housing Association.
6.1 The proposal to defer historic costs owed to the Council from CfGP in response to revised funding criteria imposed by the scheme’s funders will require budget cover of approximately £1.21 million from the Council for items which have already been expended. This includes internal and external expenditure associated with the making of a Compulsory Purchase Order (CPO), internal and external costs associated with the Grahame Park PDA and Home Loss and Disturbance payments. A breakdown of this figure is detailed as Appendix 1 to the exempt report. Under the terms of the PDA and the CPO Indemnity Agreement the historic costs would have been paid to the Council in 2009. Under the deferment proposal the Council will be paid on 1st July 2012.
6.2 The Council will receive interest on these historic costs as per the definitions in the PDA and the CPO Indemnity Agreement. Actual and projected interest is also detailed in Appendix 1 to the exempt report.
So these costs fell due in 2009 and have only now been brought in front of the Committee. Look at the amount of them - £1.21million. That is an odd figure as during the recent inspection of Barnet's Accounts a figure was requested from the Chief Finance Officer for this and the answer was £902,000 ( part of the difference may be VAT but not all of it ). Given that Barnet Council is short of money Mr Mustard is not all all sure that Councillors should be so free with his money and that of other Council Tax Payers. So interest will be paid but at what rate ?

9.3 The scheme is being developed by CfGP, a subsidiary of Genesis Housing Association.
CfGP = Choices for Grahame Park Ltd. The latest published Accounts of CfGP, to 31 March 2010 show that it is worth (£69,138) i.e. it is insolvent and supported by parent Company Paddington Churches Housing Association Ltd which is now part of Genesis Housing Group Ltd. Were the Councillors told that they were extending a large amount of credit to a Company that not long ago was insolvent ( the current position is not public information - Accounts are filed within 9 months of the year end. ) Is there a signed parent Company guarantee in place ?

9.4 The scheme is primarily funded from an external source. In response to the re-evaluation of risks in the financial sector in 2009, the principal funder made fundamental changes to the terms of the draft agreement with CfGP, the details of which are outlined in the exempt report. Introducing some flexibility in the timing of the payment of the Council’s historic costs enabled the scheme to be funded at a time when very few developments were awarded finance. The Council was in principle supportive of this deferment request to bring forward the regeneration of Grahame Park.

The scheme was funded by a loan facility from Lloyds Bank of up to £35million and equity invested by Paddington Churches Housing Association ("PCHA") of £6m. The estimated peak debt was estimated to be £26million so there was plenty of funding available.

At 31 March 2010 PCHA were owed £6,866,978 and Bank loans ( presumably from Lloyds ) were £3million. The bank loans were repayable over 5 or more years.

So it would seem that Lloyds Bank have changed their mind about lending so much money to CfGP and the Council have decided to step in instead. Mr Mustard questions the wisdom of a Council stepping into the shoes of a bank that has a very extensive highly experienced risk management arm and letting Councillors make this lending decision when it isn't clear that they had all of the relevant facts.

Mr Mustard wonders if the Councillors were told of the financial viability of the parent Company, Genesis. Mr Mustard has seen their 80 page Accounts as at 31 March 2010. Here are some interesting figures :-
Turnover : £279million
Surplus ( profit )  : £12,700,000
Housing stock value £2.8 billion, yes billion.
Credit rating : A1 
Cash at bank : £27,900,000

So why not let CfGP borrow the money from their cash rich parent company Genesis rather than lend them the cash of Mr Mustard and other Council Tax Payers.

Mr Mustard thinks that you are too free and easy with money which is not yours Councillors. Did you ask enough questions about the exempt item or did you opt for an early departure ? Mr Mustard notes that he left the Committee Room at 7.22pm. He sees from the minutes that the meeting closed at 7.24pm so £1.21 million was blithely lent out in a show of hands in 2 minutes. Hardly time for a single question was there ?

Buck your ideas up please Councillors. Read reports, ask searching questions of Officers, challenge assumptions, think outside of the box or just Think; what if it was your money you were risking, not mine.

Yours frugally

Mr Mustard

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