SECTION 1 ~ INTRODUCTION
1.
This report sets out the result of a review of
the States 2007 Property Plan that, in differing forms, was included
in the Strategic Plan as an Appendix and in the 2007 Business
Plan. That review concentrated mainly but not exclusively upon
the programme for property disposals during 2007. The terms
of reference for the review are set out in Appendix 1. A list
of the properties proposed for disposal is set out in Appendix
2.
2.
The review consisted of:
(1)
a review of the relevant documents and files,
(2)
discussions with Mr Eric le Ruez, the Chief Officer of Jersey
Property Holdings, the department which prepared the 2007 Property
Plan, and
(3)
discussions with other officials.
3.
I am grateful to all those who assisted me in conducting
this review and in particular to Mr Le Ruez.
Context for the 2007 Property Plan
4.
The 2007 Property Plan should be read in the context
of the States Annual Business Plan 2007 (‘the 2007 Business
Plan’) which sets out the States’ expenditure plans
for the years 2007-2011. These plans incorporate the benefits
of a number of savings from overall expenditure on property and
proceeds of a number of property disposals. The savings and disposal
proceeds arise from a programme which was presaged by
(1)
The current programme to make savings will end in 2008. This programme
was intended to achieve annual savings in expenditure of £20
million.
(2)
The savings were to be achieved partly by savings through greater
efficiency (annual savings of £15 million) and partly by
sales of property (annual savings of £5 million.
(3)
As is shown by Table 4.4 in the 2007 Business Plan, it is expected
that the planned annual savings of £20 million will have
been achieved by the end of 2008. In fact it is expected that
the total amount of annual efficiency savings will be £16
million (rather than £15 million) and the annual amount
of property disposal proceeds is expected to be £4 million
(rather than £5 million).
(4)
The 2007 Business Plan suggests that it is unlikely that further
significant efficiency savings can be expected.
5.
A summary of the financial statements in the 2007
Business Plan is set out in Appendices 3 – 6:
(1)
Appendix 3 sets out the plans for gross revenue and capital expenditure
(ie before future savings are deducted.
(2)
Appendix 4 sets out a summary of the savings that are expected
to be achieved by 2008.
(3)
Appendix 5 shows the 2007 Business Plan’s forecast of planned
net expenditure.
(4)
Appendix 6 shows a summary of forecast surpluses and deficits.
6.
Whilst it may appear that the proceeds of property
disposals and the effects of the property savings to be achieved
by Jersey Property Holdings are not material to the total amounts
of planned expenditure, they are certainly material to the forecast
budget surplus/deficit:
| £’Million |
2007 |
2008 |
2009 |
2010 |
2011 |
| Surplus/(deficit)
after fiscal measures to be approved |
-11 |
33 |
38 |
-22 |
-22 |
| Forecast
property disposals |
1 |
2 |
4 |
4 |
4 |
Structure of the report
7.
In section 3 of this report, I will review the
background to the creation of Jersey Property Holdings and the
way in which the 2007 Property Business Plan was prepared. In
section 4 of this report, I will set out my observations on that
plan and in section 5 of this report I will discuss the implications
of the plan for the efficiency of the States.
8.
But first, in section 2, I will summarise
the principal observations that seem appropriate as a result of
this review.
SECTION 2 ~ SUMMARY OF OBSERVATIONS
9.
As far as concerns the preparation of the 2007
Property Business Plan:
(1)
In view of the limited time available, the plan was prepared in
a sensible and appropriate manner.
(2)
All the evidence suggests that the property disposal targets are
not challenging and do not offer a prospect of achieving the ambitions
in the property proposals put to the States in 2005 in Proposition
93/2005.
(3)
For reasons that I have described above, in this first year of
States of Jersey Property Holdings’(PHD’s) existence,
this lack of challenge which normally would be unsatisfactory
may well be wise.
10.
One of the reasons for creating States of Jersey
Property holdings was to increase the efficiency of the States’
usage of property (and of office accommodation in particular).
Greater efficiency will offer not just the prospect of further
disposal proceeds but also of lower revenue expenditure. Whilst
work is in hand on this, the next property plan should demonstrate
the steps which will be taken to achieve the expected levels of
efficiency.
11.
It would be helpful for the Council of Ministers
to review the plans for improving the efficient use of property
(and of office space in particular).
SECTION 3 ~ JERSEY PROPERTY HOLDINGS AND ITS PLAN
Creation of Jersey
Property Holdings
12.
Report and Proposition P93/2005 which was lodged
au Greffe on 3 May 2005 proposed the establishment of “States
of Jersey Property Holdings”. Before then, successive
reviews by Environment Resources Management in 1999, the States
of Jersey Audit Commission in 2000 and a Report on The Future
of Property Services in 2001 had highlighted shortcomings in the
way in which the States of Jersey managed its property assets.
The rationale for an integrated approach to property management
to deal with the weaknesses identified in these reports was confirmed
in the five year vision for the public sector and extended in
the then States of Jersey Strategic Plan as a specific deliverable
under Strategic Aim 9:
“.
. . to balance the States of Jersey income and expenditure and improve the
delivery of public services”.
13.
The proposition for the establishment of States
of Jersey Property Holdings envisaged that the new organisation:
“.
. . would co-ordinate with States of Jersey departments through
the CMB [Corporate Management Board] the development of a States
of Jersey Property Plan that defines department
property requirements for a five year period. The States
Property Plan will become an integral part of the States Strategic
Plan.
The
States of Jersey Property Plan will identify
and quantify potential surplus accommodation and determine proposals
for the rationalisation of States property holding. For
example, the review looked at 16 primary States office buildings
and concluded that occupied space per workstation was some 26%
higher than the U.K. government office standard and as much as
73% higher than modern office space efficiency standards.
It concluded that this could translate into a realistic space
reduction potential of 54,000 square feet which could result in
a sustainable cost saving in excess of £1.0m per annum.
The
States Property Plan will also examine the potential to extract
value from the States property assets by obtaining a return on
“freed up” office space and trigger the re-development
of under-utilised properties. There is significant development
potential within States of Jersey property
assets that could be unlocked to provide either a new income stream
or capital receipt and further benefits to the island.
The
vision for change approved by the States of Jersey
last year [2004] identified the potential to achieve significant
savings by bringing under-utilised properties into productive
use. The review has confirmed this initial view and a conservative
estimate shows that there is potential to release in the region
of £20m-£25m from the States assets. This could
be by disposal or leasing to third parties. Such releases
would result from improving the use of existing assets and reducing
under-utilisation. The estimates assume that there would
need to be initial investment of sites and premises in order to
rationalise property and concentrate uses. It will also
be necessary to retain sufficient land and property to meet future
needs, and that is allowed for. This would have the added
benefit of providing premises and space to support economic development
and thereby minimise further encroachment outside existing developments
. . .
This
overall strategy will be translated into an achievable and affordable
States of Jersey Property Holdings Business Plan to be submitted
annually for approval by the States of Jersey
as part of the States Business Plan. This Business Plan
will be put forward by the Council of Ministers after review by
the CMB and the Treasury and Resources Minister. It will
include the property requirements within the approved States Property
Plan. The approval of the States of Jersey Property Holdings
Business Plan will authorise States of Jersey
Property Holdings to develop, sell, buy or otherwise manage the
property or interests in the property as identified within its
Business Plan.”
14.
This proposition was approved by the States Assembly
on 7 June 2005 and thus the creation of “States of Jersey
Property Holdings” was approved.
15.
On 19 September 2005, Mr Eric Le Ruez took up the
position of Director of the Property Holdings Department.
He was subsequently joined by Mr Graeme Hutchison, Director of
Architecture and Mr Mick Heald, Assistant Director, Education
Sport and Culture who was seconded to the project. The key
objectives of the new department were defined as:
“The
development and implementation of the Property Holdings Department
including:
1.
Setting the scope in terms of visions, services, functions and
modern operation.
2.
An organisation and management structure to deliver the services
identified.
3.
The key policies, procedures and standards required to deliver
the required services effectively.
4.
The transfer of the property assets to be administered by the
new department.
5.
The transfer of relevant staff from the departments to the new
department.
6.
The transfer of appropriate property budgets from departments
to the new department.
7.
The development of a States of Jersey Property
Holdings Business Plan.
8.
The development of a States of Jersey Property Plan, including
the identification of early opportunities for the release of value
from improved utilisation of the estate.”
Development of a property plan
16.
As can be seen from the extracts quoted above,
Jersey Property Holdings (PHD) was expected to prepare two plans:
an annual business plan and a property plan. The plan for PHD
included in the States 2007 Strategic Plan and the 2007 Business
Plan meets the requirement for an annual business plan and
is not intended to be the ‘property plan’ envisaged
in the 2005 Proposition.
That is under development and will be published in due course.
17.
As a basis for the development of the property
business plan, the new department circulated to Chief Officers
a questionnaire to gather necessary information. Information
was requested in respect of:
“1.
The suitability, sufficiency, economy and condition of property
occupied or administered by each department.
2.
An initial assessment of the impact of departmental strategic
and service requirements of future property needs.”
18.
The questionnaire was to be completed by Friday
8 December 2005 and the key questions were:
“1.
What do you feel are the main areas of service development (for
example, expansion, contraction, or different methods of delivery)
that would have an impact on your department’s future property
requirements?
2.
What are the main property needs of the service within the next
five years to 2010 and beyond 2010?
3.
Are there are significant property issues within the department
that are currently unresolved (un-financed or with no prospect
of being financed within the capital programme).
4.
Are there any properties or areas of land that you believe will
be surplus to requirements within the next five years to 2010
and beyond 2010?
5.
Are there any opportunities of making better use of or freeing
up property if the investment to achieve this was available (for
example, for the relocation of existing users)?
6.
Are there any other issues about the future development or management
of the Estate that you feel would be useful to the
development of a States wide Property Plan (this can include reference,
where appropriate, to any unusual land and property administered
by the department, such as bunkers, open space, lanes, plots,
fields, etc)?”
19.
Responses from all departments were collected and
in each case a member of the PHD team discussed the responses
with officials from the department concerned. On the basis
of this research, a draft Property Business Plan had been developed
by 20 February 2006, on which date it was sent to the Treasury
& Resources Minister.
Planned property disposals
20.
This draft plan included a number of proposals
for the disposal of properties. These are listed in Appendix 2.
This list was compiled in the following way:
(1)
All of the properties were taken from the departments’ own
lists of properties that were surplus to their requirements.
(2)
Properties were only included if their disposal appeared relatively
straightforward in that there were no planning or title issues
that would have to be resolved.
(3)
Properties were not included if it appeared that further work
was required to maximise of the disposal proceeds.
21.
The effect is that the published list of disposals
does not include all of those properties which the Department
has identified as potential disposals.
22.
Formal professional valuations of the properties
proposed for disposal were not obtained by PHD when the plan was
prepared although internal estimates of value were prepared to
provide some assurance that the planned disposals were likely
to meet the forecasts in the States’ financial plan for
2007. In fact, the estimates of value suggest that the proposed
disposals will more than meet the States’ targets for 2007
and 2008 combined. The total internal estimates of value of all
of the properties identified for possible disposal exceeds the
total amount of forecast disposal proceeds for the period 2007-2010. The review did not consider the appropriateness
of these internal estimates of value.
SECTION 4 ~ OBSERVATIONS ON THE PROPERTY BUSINESS PLAN
Time for preparing the business plan
23.
In view of the fact that the Department was not
created until September 2005, and that to meet the States’
timetable, the draft 2007 Property Plan was required by February
2006, there was little time in which to prepare a disposals plan.
Unsurprisingly, the time available was not sufficient to carry
out the form of searching review that would:
(1)
identify properties that are under-utilised,
(2)
identify unduly generous space allocations in States office and
other premises, and
(2)
develop plans to realise the value of these properties.
24.
Such reviews are likely to be time-consuming not
least where departments have not themselves realised that they
have properties that are under-utilised. In other words, the time
available was not sufficient for the 2007 Property Business Plan
to deliver many of the ambitions set out in Proposition P 93/2005.
Nature of the properties proposed
for disposal
25.
In the circumstances, the plan for disposals was
necessarily limited to properties that departments had themselves
proposed for disposal because they were surplus to their requirements
and other properties managed by Property Services. From the list
of properties set out in Appendix 2, it can be seen that a significant
number of the planned disposals were identified centrally by Property
Services staff.
26.
The implication of this is that the proposed
programme of disposals represents little more than the disposal
of properties that have for some time been regarded as surplus
to the States’ requirements.
27.
Nonetheless, in spite of the constraints upon the
development of the plan, the Department’s internal estimates
of the value
of the properties identified (not all of which are included in
the Property Business Plan 2007) suggest that disposal of the
properties proposed for disposal by the 2007 Property Business
Plan would more than meet the target for disposal proceeds in
both 2007 and 2008.
Appropriateness of the disposal targets
28.
In effect, the targets set in the Property Business
Plan for property disposals are not challenging: they require
PHD merely to complete disposal of properties that have for some
time been identified as surplus. In fact, the total estimated
value of all the properties identified for disposal (whether or
not they are included in the 2007 Property Business Plan) would
be sufficient to meet the States’ 2007 Business Plan’s
forecasts for the proceeds of disposals for the next four years
(ie between 1 January 2007 and 31 December 2010).
29.
Ordinarily, I would have regarded this as unsatisfactory.
Whilst it would be inappropriate to set hopelessly optimistic
targets, it would be equally inappropriate to set ‘soft’
targets whose achievement posed no challenge. In this case,
there may be good reasons for erring towards undue caution:
(1)
the States does not have a history of disposing of properties
which may prove to be problematic. It may not be unreasonable
to allow time for the process to become established.
(2)
undue pressure to dispose of properties may well undermine PHD’s
ability to realise their full value.
(3)
the States’ 2007 Business Plan suggests that some difficulty
is experienced in holding revenue expenditure within planned levels
so that when planning it is wise to be conservative in forecasting
future income.
(4)
the States’ 2007 Business Plan for future capital expenditure
suggests that capital expenditure will be held within existing
levels. If this were to prove impracticable, further sources of
funding would have to be found.
30.
In other words, although the targets for property
disposals are not challenging, there may be good reasons for concluding
that it is wise to adopt a cautious approach.
Summary
31.
My observations may be summarised in the following
way:
(1)
In view of the limited time available, the Property Business Plan
was prepared in a sensible and appropriate manner.
(2)
All the evidence suggests that the property disposal targets are
not challenging and do not offer a prospect of achieving the ambitions
in the property proposals put to the States in 2005 in Proposition
93/2005.
(3)
For reasons that I have described above, in this first year of
PHD’s existence, this lack of challenge which normally would
be unsatisfactory may well be wise.
SECTION 5 ~ IMPLICATIONS FOR STATES EFFICIENCY
Improving the States’ use of
its assets
32.
However wise may be the general approach to property
disposals, there is one consequence that may be unfortunate.
33.
The original proposition for the creation of Jersey
Property Holdings envisaged that the new department would seek
to improve the efficiency of the States’ utilisation of
property. On the basis of a crude comparison between office occupancy
in St Helier with space utilisation standards in England,
it was suggested that about 54,000 square feet could be released.
If this were done, the States would not only receive the proceeds
of disposal of the property concerned it would also save the occupancy
cost of that property (estimated at £1 million).
34.
As the 2007 Business Plan targets for the next
four years could be achieved by merely disposing of properties
already identified, there is no expectation that further space
saving efficiencies will be sought and thus no pressure to do
so.
States efficiency programme
35.
At the same time, the 2007 Business Plan suggests
that:
“.
. . there may be limited scope for delivering further major efficiency
savings.”
36.
This statement is consistent with there being no
expectation that further space saving efficiencies will be achieved
during the period covered by the 2007 Business Plan.
Consequence
37.
There is a risk that reasonable caution in forecasting
the proceeds of property disposals may result in a release of
pressure to maximise the efficiency of the States’ usage
of property (and of office accommodation in particular). Some
pressure will remain, however, because PHD is also expected to
achieve savings in revenue expenditure which will require some
saving in property occupancy cost.
38.
It ought to be possible, within the period covered
by the 2007 Business Plan, for the States to achieve some of the
property usage savings mentioned in the 2005 Proposition in addition
to realising properties already identified for disposal. Yet the
2007 Business Plan makes no explicit reference to them. There
are only general references to helping departments to prepare
asset management plans.
39.
This is unsatisfactory.
Conclusion
40.
One of the reasons for creating States of Jersey
Property holdings was to increase the efficiency of the States’
usage of property (and of office accommodation in particular).
Greater efficiency will offer not just the prospect of further
disposal proceeds but also of lower revenue expenditure. Whilst
work is in hand on this, the next property plan should demonstrate
the steps which will be taken to achieve the expected levels of
efficiency.
41.
It would be helpful for the Council of Ministers
to review the plans for improving the efficient use of property
(and of office space in particular).
APPENDIX 1 ~ TERMS OF REFERENCE
1.
This review is commissioned in accordance with the
powers of the Comptroller & Auditor General as set out in
the Public Finances (Jersey) Law 2005 to
take place in the light of concerns expressed in the States Assembly
concerning the proposed programme of property disposals included
in the 2007 Business Plan published by the States.
2.
The purpose of the review is to examine:
(1)
the manner in which the programme of property disposals was prepared;
(2)
any other detailed matters that appear relevant to item (1) above
and the issue to which paragraph 1 above refers.
3.
The outcome of the review will be a report prepared and
published in accordance with the provisions of the Public Finances
(Jersey) Law 2005.
APPENDIX 2 ~ PROPERTIES PROPOSED FOR
DISPOSAL IN 2007
1. Hue/Dumaresq Street site, St
Helier
Description
This site has long
been identified as being suitable for disposal/development, and
negotiations have been taking place with BG Romeril Limited for
a number or years to achieve a mutually beneficial outcome.
Observations
This property was
identified for disposal by Property Services staff.
2.
2-24 Dumaresq Street, 19-20 Charing Cross, St
Helier
Description
The properties were
acquired as part of the Dumaresq Street road widening scheme which was
abandoned in 1996. The site has had various temporary uses since,
including car parking. A petition was launched in 2006 seeking
the prevention of any development on the site, but overwhelmingly
rejected by the States.
Observations
This property was
identified for disposal by Property Services staff
3. Seaton Youth Centre, St
Helier
Description
This former church
was acquired by the States of Jersey in 1959 and has been used
as a Youth Centre. The internal layout of the building and
limited means of escape in the event of a fire has meant this
use has had to be terminated. The property is listed as
a building of local interest which restricts the development potential
of the site.
Observations
The property was
identified as possibly surplus to requirements in a paper dated
11 January 2006 prepared by the Department of Education, Sport
and Culture. The Health and Social Services Department had expressed
an interest in the site. That expression of interest had been
withdrawn.
4. Samarès
School Houses, St Clement
Description
A pair of houses
built in 1990 as staff accommodation for teachers. The properties
lie between the school and the housing, Le Squez Phase 1b development,
now started on site. The houses are no longer required for
staff and, as they are not designated for category A use, they
will probably be offered for sale once the housing development
is suitably advanced.
Observations
This property was
identified for disposal by Property Services staff.
5. Headingly, La
Route du Fort, St Helier
Description
This substantial
dwelling was acquired in 1990 to provide accommodation for single
nursing staff. The demand for this type of accommodation
is falling. The property is expected to be surplus to requirements
within twelve months.
Observations
This property was
identified as becoming surplus to requirements in a meeting with
the Health and Social Services Department on 20 February 2006.
6. 74 & 76 Colomberie, St
Helier
Description
Established commercial
units which were acquired in 1991 for possible extension of the
Keith Baal Gardens Housing Scheme. There are no plans to
pursue that course. Both units are let with break clauses
in the leases arising in 2007.
Observations
This property was
identified for disposal by Property Services staff. Disposal
would lead to a loss of rental income which should be taken into
account when calculating the revenue effects of the disposal programme.
7. Drury Lane Workshop
Description
This workshop was
acquired by the States of Jersey in 1995 to remove a “bad
neighbour” in a primarily residential area.
This was achieved the workshop has been let on a temporary basis
to the voluntary group “Tools for Self-Reliance”.
Observations
This property was
identified for disposal by Property Services staff.
8. Le Rondin Farm Fields, Trinity
Description
The fields were
purchased at a time when the use of Howard Davis Farm for crop
trials was expanding. This situated has reversed and
the fields are no longer needed.
Observations
This property was
identified for disposal by Property Services staff.
9. Field 373, Le Creux,
St Brelade
Description
This field was purchased
in 1994 as part of the land assembly for the municipal golf course
project. This project was abandoned and the majority of
the land acquired has been utilised from the Le Creux Country
Park, Fields 373 does not form
part of the park.
Observations
This property was
identified for disposal by Property Services staff.
10. Acorn Lodge, Les
Quennevais School
Description
Acorn Lodge and
Oak Lodge were previously used to house teachers but are no longer
required for that purpose and have both been empty for some time.
Observations
This property was identified for disposal
by Property Services staff.
11. Development site at Belle Vue
Description
On the grounds that
the States will not be proceeding with the project to develop
a residential home and day care centre or any other project, it
is recommended that this potentially valuable development site
be considered for disposal.
Observations
This property was
identified for disposal by Property Services staff.
I am aware that
an amendment was lodged by Deputy Power (P92/2006, Amendment 9)
to remove this property from the list of proposed disposals. I
understand that the Amendment was not debated as the subject was
deferred.
12. 1 Oxford Road, St Helier, offices
and workshop
Description
This property is
one of several to the States for the benefit of the aged, infirm
and needy residents of the island by Mr Harold Le Seelleur who
died in 1996. If the property is sold the proceeds will
be put toward the upkeep of the remaining properties of any balance
spent in accord with Mr Le Seelleur’s wishes. In May
2003 a proposition to sell the property for £356,000 was
rejected by the States. Unfortunately, since being left to the
States this property has generated no benefit and has incurred
only costs.
Observations
The will includes the following provision:
“It
is my express wish that the States of Jersey shall consult my
said Executors on my Movable Estate upon the use of my properties
with a particular view toward the use of such properties for the
benefit of aged, infirm and needy residents of the Island.”
In 1998, the Attorney-General
advised that the benefit from the properties should be for aged,
infirm and needy residents and not one or the other: all three
criteria must be satisfied.
Disposal of this
property would not contribute to meeting the savings target unless
the proceeds whilst being used for the purposes set out in the
will demonstrably reduced the call on the States’ funds.
13. La Mabonnerie Houses, Trinity
Description
The houses are on
the boundary of the Howard Davis Farm site and therefore their
sale would not impact on any plans for the main site, to the rear
(east) of the houses. The houses are outside the area of
the Howard Davis Farm restrictive covenant. It is recommended
therefore, that with no current use for the two houses, they should
be sold on the open market.
Observations
This property was
identified for disposal by Property Services staff.
