The case of the Council’s customer service centre; How £16,000 became £6.5 million or if it’s too good to be true it probably is.

8th June, 2013

 

Not all scrutiny takes place in meetings. Here is an example of scrutiny undertaken simply by asking questions of the council and the executive.

The council has decided to move the customer service centre from its current location at New Walk Centre to the former Poundstretcher shop on Granby St. See the Leicester Mercury

I asked why we were doing this when we had bought the former Post Office on Bishop St to convert it to a customer service centre. See Leicester Mercury. I was told by the City Mayor that the Poundstretcher option was much cheaper than the Post Office. Which would be fair enough.

How much cheaper? I asked, and was told it would cost £16,000 pa. To me that sounded too good to be true. A large shop front in Granby St for just £16,000 per year? And of course it was too good to be true. The actual cost to the council is about £6.5 million. So how does £16,000 become £6.5 million?

Well things are not always what they seem. Yes it does look as if the council has got a good deal on the ground floor shop. It is costing  £16,000 plus service charges. However could this bargain price be related to the fact that the council has entered into a new 10 year lease for the whole building at around £573,000 per year plus the £800,000 refurbishment for the former shop? So the cost to the council is over £6.5 million.

To be fair this is not the whole story. The council already had leases on the building. However longer lease arrangements for the whole building including the former shop represents a good deal for any building’s owner as it gives a more secure income over a longer period of time.

So why does this matter? Well we were told it was much cheaper than converting the former post office which it clearly isn’t. The Post Office was bought for £1.4m and could have cost between £3-4.5m to refurbish. So well under the £6.5m for Poundstretcher. Perhaps more importantly the council would have owned the freehold of the Post Office, with nothing more to pay. Whereas after 10 years the council will have to enter into a new lease for the Granby St Shop for guess knows how much, £10-15million? Many people would say this is not good use of public money, when other options are available.

One last point. I know that having raised this I will be told that there is a lot of complicated equipment in the building that would be expensive to move. I acknowledge that. However moving it to a building we own would be better in the long term. Ensuring we are not ‘over a barrel’ when future lease negotiations come up. It might have even been possible to relocate it to the Post Office, have the customer service centre there with the security of owning the building. it might have also saved the 10 jobs at Poundstretcher as well.

ps Now we read that the Bishop St Post office building has been sold for £600,000 less than we paid for it. If this is the case and we don’t yet know for certain, it takes the total cost to £7.1m for a shop front on Granby St!