CORPORATE GOVERNANCE SCRUTINY COMMITTEE - 20 MAY 2004

REVIEW OF PROPERTY ASSETS

Report by Director for Resources

1. On 27 January 2004 the Executive resolved that the Scrutiny Committee be invited to consider and comment on the proposals arising from the Review of Property Assets. On 4 March 2004 the Committee considered the findings of reviews of traveller sites, smallholdings, leasing policy and composite sites. Some observations on these reports were made by the Committee and will be incorporated in the report to Executive on 6 July 2004. An interim report on staff housing was also considered and the conclusions of that work are given in this report.
2. The Committee agreed to consider a report on the proposed strategy arising from the Review of Property Assets at this meeting.
3. The purpose of this report is to explain the further work which has been done and for the committee to:

• consider and comment to the Director for Resources on the proposed strategy
• comment on the proposals for staff housing
• note the work being carried out on the Learning & Development Review.

4. The report to the Executive in January 2004 concluded that the best way to achieve the project success criteria (given in Annex 1) could be to reduce the number of offices and provide a network of office hubs, smaller satellite offices and touchdown facilities at a local level and to cluster services on fewer sites, where appropriate with the office hubs and satellites.
5. The Executive accepted this conclusion and resolved that further work should be undertaken to test the idea of office hubs and service clustering specifically in the northern part of the County, to assess the extent to which the success criteria are met under different arrangements of hubs and clusters, to reach a conclusion about an appropriate way forward and to carry out a financial appraisal of the preferred arrangement.

Work Undertaken

6. Since January 2004 the following work has been undertaken to test the idea of hubs and clusters:

• Data collection on the number, location and way of working of office staff in the northern area
• Establishing which property uses are compatible for sharing
• Questionnaires and interviews with officers to gain information on ways of working, travel patterns and views on options for reorganising property
• Costing of the proposed options and comparing the long term costs of the current property provision, with the proposed provision
• An assessment of how the success criteria are met

7. As well as considering the northern area, work has also been undertaken to:

• Consider if the strategy developed for the northern part of the County can be extended to the south and Oxford City
• Review the Oxford headquarters function
• Review the accommodation provided at the Cricket Road Centre
• Consider ways of providing improved learning and development training facilities
• Review staff housing
• Consider ways of improving the condition of the Council’s property and the costs of this

8. The conclusion of the work on the northern area is that the principle of providing hubs and clusters is effective in meeting the success criteria. This approach amounts to a strategy to move towards the co-location of property in a way that allows effective service delivery and best meets the project success criteria. Which properties would be co-located would depend on the particular circumstances in each area. Some hubs could include offices, a library and a day centre; others may just be offices. This strategy should form the basis of a long term property strategy, with an implementation plan to achieve a substantial change in the medium term, and should inform and guide property decisions.
9. With this strategy in mind, four options were looked at for the northern area. These were:

Option 1 – A hub in Banbury for approximately 280 office staff and incorporating service uses and partners if opportunities allow. These could be for example an elderly day centre or a family centre. There could also be opportunities for the co-location of other property in other parts of Banbury.

Option 2 – A hub in Banbury and a hub in Witney for approximately 200 office staff in Banbury and 70 in Witney both incorporating service uses and partners where opportunities allow. This could include a library in the Witney hub.

Option 3 – A hub in Banbury and in Witney, with a satellite in Bicester for approximately 165 office staff in Banbury, 70 in Witney and 35 in Bicester all incorporating service uses and partners where opportunities allow. The Bicester satellite could be combined with a new library at Bicester for example.

Option 4 – A hub in Banbury and in Witney with satellites in Bicester and Chipping Norton. This option would allow for a small Social & Healthcare office presence in Chipping Norton.

10. In all options opportunities for co-location of other uses not included in hubs and satellites and in all other towns will be sought. This includes sharing with partners.
11. Table 1 shows how these options meet the success criteria. Option 2 best meets the success criteria overall, however the difference between the options is very small. In terms of service delivery, option 4 is preferable and for that reason it is the recommended option, although it must be noted that it has the highest implementation cost.
12. It is proposed as a next step that a series of area based seminars are held with officers responsible for service delivery to allow a more localised input in to the proposals and to try to identify more opportunities for co-location. These would be followed by seminars for local members and key partners. These meetings would need to consider opportunities for sharing, how the public would access services, including the need for one stop shops and council access points (linking in to the Customer Services Strategy) and Human Resource issues.
13. The proposed move to hubs and satellites in the northern area would generate capital receipts from the disposal of offices of approximately £2.5 million and also savings on running costs estimated at £500,000. The cost of providing new-build offices for option 4 would be approximately £4 million, excluding land costs. The capital receipts, costs of re-provision and potential savings on service properties can be calculated when specific opportunities are identified.

The Southern Area

14. Although a full analysis of the southern area has not yet taken place, the same strategy of co-location can be applied to the southern part of the County. To some extent a hub will be established with the new Social & Healthcare offices at Foxcombe Court, Abingdon. This involves the co-location of S&HC offices including those at Abingdon, Berinsfield and Didcot. The move was needed to address immediate accommodation pressures and it was not therefore possible to carry out the same kind of analysis as in the northern area. This means that Foxcombe Court will be predominantly a S&HC office, not incorporating other services, Directorates or partners. Foxcombe Court will be leased for 10 years. There may be opportunities for Foxcombe Court to be used for a modern workstyle touchdown office and it may be possible to enlarge the hub if further space becomes available for leasing in the future.
15. The work undertaken so far indicates that in addition to the Abingdon office there may be a need for satellites at Henley, Thame and Wantage to ensure sufficient geographical coverage of the area.. Further work will be required to identify specific opportunities for co-location.

Oxford City

16. A review of the headquarters offices has concluded that there are no strong financial or operational reasons, or desire, to move large numbers of staff from central Oxford and that a move to the edge of Oxford or other parts of the County would increase travel by car and property costs. The conclusion is therefore that although there are arguments for moving out of central Oxford there are stronger reasons for remaining in the centre, including access to public transport, cost and visibility. It is proposed that work should continue to consider how the headquarters can be used more effectively, thereby allowing a reduction in overall floor area and a more appropriate HQ. It would be possible for headquarters staff to work in the hubs and satellites when necessary.
17. An initial review of the Cricket Road Centre was undertaken to review the current use of the accommodation, how effectively it is used, whether the accommodation should be retained and if so the most appropriate way to use it in the future. The conclusion of the review is that the potential savings on lease costs would not fund the provision of a replacement facility, that despite its shortcomings it provides good value for money and that operationally the property works reasonably well. Therefore work should be done to ensure that the building is used effectively, that its condition is improved, corporate uses such as a learning and development facility are considered and a longer term lease is sought.
18. Yarnton House is fully occupied, the site is not as effectively used as it could be and the present accommodation is not wholly suitable for its purpose. A review of the current and possible alternative uses should be undertaken and a site development plan prepared.

Learning and Development

19. In response to the report to the Best Value Committee in December 2003 entitled ‘Best Value Review of Training & Development’, the Learning & Development Network is looking at how the Council can achieve a corporate approach to learning and development. The Project Team has been tasked to carry out an audit of the current provision of learning and development functions, to draft a corporate learning & development strategy and to create an implementation plan that clearly indicates how to create a corporate learning & development unit.
20. The objectives for the review are as follows:

• To facilitate working corporately and to enhance efficiency, effectiveness and economy;
• To ensure equal access to learning and development facilities for all staff;
• To support the achievement of corporate priorities;
• To value our staff through the provision of high quality learning and development facilities to support a variety of needs and requirements;
• To raise the profile of learning and development across the organization; and
• To create a centre of excellence for information and training resources.

21. The work being undertaken as part of the ‘Review of Assets’ will consider the property implications arising from this. Currently, training is delivered using some internal training accommodation, but there is a substantial amount delivered through the use of numerous external venues. The Review of Assets will assess the cost, quality and suitability of the venues used and will consider the most appropriate property options for helping to deliver the learning and development strategy.
22. The L&D Project Team will report its conclusions to the Best Value Committee on 23 June 2004. The work for the Review of Assets is being carried out in conjunction with the work of the Project Team and it is intended that the conclusions of the property work can be reported to the meeting of the Executive in July 2004.

Staff Housing

23. Progress on the review of staff housing was reported to this committee in March. The committee agreed that further work be done to consider the possibility of transferring some staff housing to a Housing Association and that this should assess the advantages, disadvantages and financial implications.

• Transfer of the freehold with the retention of nomination rights in perpetuity
• Granting of long leases with the retention of nomination rights in perpetuity
• A contract for management only for all staff housing

24. The overall advantages and disadvantages of transferring the portfolio and the specific advantages and disadvantages of the three approaches listed above are given in Annex 2 (download as .doc file).
25. The conclusions are:

• that there is not at this stage a clear enough financial or service benefit to the Council to justify transfer of the housing stock
• that a transfer may not represent good value for money in the medium term and would reduce the Council’s flexibility in dealing with its property and
• that there are some obstacles to a transfer, such as:

• the need to transfer tenants to a housing association on assured shorthold tenancies, when the majority are currently service tenancies
• the need to allow housing associations to let properties to their tenants if the Council could not identify a tenant. If the house is within an operational site this may not be acceptable to the Council

26. The recommendation is therefore that at this stage staff housing should not be transferred to a housing association and that:

• more emphasis should be given to the strategic management of staff housing with more clarity about the reasons for holding the housing and the purpose it should serve

• operational management arrangements for staff housing should be reviewed to achieve more strategic, co-ordinated and proactive management
• a review of provision of housing for caretakers should be undertaken with Learning & Culture and schools

• five staff housing sites that have been identified through this review as potentially suitable for redevelopment should be pursued and where appropriate schemes should include replacement staff housing and/or key worker housing
• the possibility of a transfer are re-considered when the review of caretaker housing has been undertaken

27. The project success criteria include the need to address the Council’s maintenance backlog and to improve working conditions. The Council’s current assessed need for non-delegated maintenance work is £52.5m million, with a further £24.5 million needing to be spent on delegated repairs.
28. The strategy of co-location set out above would address the condition of those properties affected by a reorganisation (about 10% in the northern area), but would not address the remainder of property, including schools.
29. This issue has been addressed by:

• Considering the implications of carrying on with the current approach to and current levels of expenditure on repair and maintenance work
• Considering what approach should be taken to address the maintenance backlog

30. The current approach is to assess and prioritise R&M needs annually. This assessment is based on a short term outlook (up to 5 years but focussing on years 1 and 2). The priority for the programme is based on planning to avoid any event which would have a health and safety implication or would seriously impact on the wind and water tightness or operational use of a building. This approach is taken because the annual budget is only sufficient to address these short term needs.
31. The R&M budget is split between planned works and urgent works. In most years the urgent works budget overspends, which means that less can be spent on planned maintenance. For example in 2002/3 the intention was to spend 84% of the repairs and maintenance budget on planned works and 16% on reactive works. In fact the split was 62% to 38%. The worst ratio was 46% to 53% in 1998/99. It is far more cost effective to spend on planned maintenance.
32. The research carried out for this review (based on 55 non-school properties in the northern area) has concluded that this short term approach has been successful in keeping buildings operational and could continue to do this for another five years. However this approach means that major repair and replacement works, such as replacement of ceilings, roofs and mechanical and electrical works are repeatedly delayed and temporary repairs undertaken. This is more costly in the long run and means that many of the items are now approaching the end of their life.
33. The analysis of the 55 properties in the northern area shows that if spending on those buildings continues at the current level of £470,000 for the next five years, then an additional £1.6 million a year will need to be spent on those 55 buildings for the following five years to carry out major repairs and replacements. If these figures are broadly applicable across the whole estate then the consequence is that the repair and maintenance budget would need to be increased to £20 million for 5 years from 2009/10 to avoid major disruption to services.
34. The analysis also shows that the repair and maintenance budget should be increased by 25% (compared with the average budget over the last 5 years) to prevent reactive works compromising the planned works programme.
35. It is estimated that the co-location of property proposed earlier in the report would reduce the assessed need on the main properties in the northern area by about 12%. This does not significantly address the repair and maintenance issue.
36. The conclusions of the work are that in the absence of any other solution it would be necessary to:

• increase expenditure on repairs and maintenance by 25% a year immediately
• increase expenditure on repairs and maintenance by approximately 300% in 5 years time, for a five year period to address major replacement work

37. Building schools for the future could provide a solution to a significant part of thios if funding is provided. However there is clearly a need to continue to treat the maintenance of our buildings as an urgent and high priority and to plan for increased costs.

Financing

38. The continuing work required on the Review of Property Assets can be funded from existing budgets. The implementation plan to be developed for the September meeting will address financing issues. The most likely sources of funding are capital receipts, PFI/PPP funding for library based projects (these would include other uses) and Prudential Guidelines if sufficient savings could be found to pay for financing costs. As explained above, there are significant budget implications arising from the need to spend significant additional sums to address the repairs and maintenance backlog.

RECOMMENDATIONS

39. The Director for Resources is proposing to make the following recommendations to the Executive:
40. The Executive is RECOMMENDED to approve:

1. the strategy to co-locate property in a way that allows effective service delivery and best meets the project success criteria;
2. further work for the southern and City areas (based on the work undertaken for the northern area) to be reported to the Corporate Governance Scrutiny Committee in September and the Executive in November 2004;
3. a series of seminars based on local areas with officers, members and partners to allow local input to the proposals and to identify further opportunities for co-location, the findings to be reported to the Corporate Governance Scrutiny Committee in September and the Executive in November 2004;
4. work to undertake a detailed review to ensure the effective use of the Cricket Road Centre, to consider ways to improve its condition and commence negotiations to secure a long term lease;
5. a review of uses and preparation of a site development plan for Yarnton House setting out how the site can be most effectively used;
6. the recommendations on staff housing as set out in the report (more effective strategic and operational management, a review of the provision for caretaker housing and the redevelopment/disposal of appropriate sites); and
7. the preparation of an implementation plan for the strategy to be reported to the Corporate Governance Scrutiny Committee in September and the Executive in November 2004 and that this is used to inform the asset management plan and capital strategy.

JOHN JACKSON
Director for Resources

Background Papers: Nil

Contact Officer: Mark Tailby, Projects Officer (01865) 816012

May 2004

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