Hampshire County Council

Cabinet Item 9

27 February 2006

Strategic Property Review - Phases I & II

Report by the Director of Property, Business & Regulatory Services

Contact: Andrew Smith Ext: 7826 e-mail: andrew.j.smith@hants.gov.uk

1

Summary

1.1

This report reviews the County Council's policies in relation to its land and buildings. Specifically, the report recommends:

(i) a strategic review of our land and buildings; - see part 1 of report

(ii) a review of our office accommodation portfolio - see part II of report

(iii) a series of targets and methodologies to improve performance - see

part III of report.

These reviews will focus on efficiency, improving utilisation and corporate working, reducing costs of occupancy, reducing the number of buildings held for operational purposes and bring forward land and building disposals that will generate further capital receipts. The success of the County Council's policy on capital receipts is widely regarded across local government. Some £380 million has been realised over the last 20 years.

1.2

At a time when the County Council is required to fund efficiencies (cashable and non cashable) as part of its budget strategy and the wider efficiency agenda, it is prudent to review once again the costs associated with the Built Estate. It is recommended that this is done by completing:

(i) service reviews of land and property to check current and future usage alongside new models of service delivery;

(ii) thematic reviews of properties for particular uses (e.g. office accommodation);

(iii) area reviews to look at our own (and potentially other public sector) property holdings in specific geographical areas; and

(iv) efficiency reviews to establish higher levels of utilisation for the same or lower levels of input cost.

1.3

The reviews will act as a catalyst to challenge existing service delivery models, facilitate the exploitation of our e-government and recent IT investment and support more flexible working patterns.

1.4

The first service review will start with Recreation and Heritage. The first thematic review would be Office Accommodation (which is significantly affected by Ashburton Court). The first efficiency/viability review has largely been started in Adult Services residential accommodation (with the proposal to review three existing residential establishments). It is proposed to consider on an annual basis proposals for 2007 and 2008 so that the review process covers all services and land holdings.

1.5

Given the planned scale of activity and the changes in Children and Adult Services it makes sense to develop a corporate approach to surplus school places especially if there is an opportunity to reuse surplus school freehold accommodation as a substitute for high cost leased accommodation. This would suggest therefore that a strong connection could be made with future school reviews and the proposed property reviews.

1.6

It is recommended that, subject to resources being available, that the Director of Property, Business and Regulatory Services begins a series of land and property reviews, from 2006 to 2009. It is further recommended that the outcomes be reported to the Buildings, Land and Procurement Panel to advise the relevant Executive Members and ultimately the Executive Member for Policy and Resources who has the responsibility for key policies and decisions in this area.

2

Background

2.1

The size and value of the County Council's land and property estate extends to 4,300 buildings on 1,200 sites and approximately 6,000 hectares of land. The estimated capital value of the estate is some £2 billion. It costs about £60 million per annum to clean, repair, maintain and provide energy for the buildings. Therefore, its efficient operation is important in terms of its cost to the County Council and the opportunities it provides to generate capital receipts to fund improvements in service delivery. The Built Estate has an estimated liability of some £400 million over the next five years.

A schedule of properties currently surplus to requirements is attached at Appendix 1.

2.2

In addition, land and property currently held for operational purposes may be promoted through Local Plan Reviews and in the Local Development Frameworks for planning approval for changes in use. This would provide the opportunity to release additional capital through the sale or lease of the property assets and reinvestment in improved facilities. The County Council is unusual in the way it seeks to realise the potential value of its assets through a long-term approach of identifying and robustly promoting any development potential through the local planning processes at the regional and sub-regional level, and those of the relevant District Councils in Hampshire. In the context of local and national planning policies this advocacy is critical to securing future flows of capital receipts.

3

A Strategic Approach to Property

3.1

Decisions on the management of these substantial property assets have been guided by a series of strategies, service reviews and individual property decisions approved by the Cabinet, the Executive Member for Policy and Resources, and the Buildings, Land and Procurement Panel. These include the:

    (i) Strategy for the Built Estate (the annual maintenance and safety programmes)

    (ii) Specific Land and Property Reviews (to create capital receipts)

    (iii) County Farms` Review (to identify future strategic and tactical land disposals)

    (iv) Strategies for Capital Receipts/Reinvestment Projects, Major Development Areas such as Popley and Binfields, and Key Worker Housing

    (vi) Service reviews, such as the review of special education needs in the Winchester and Eastleigh areas.

3.2

Collectively, these strategies aim to provide land and buildings that are located, designed, maintained, efficient and cost effective to provide services for Hampshire. They also generate income by promoting opportunities, where appropriate, to sell land and buildings for development by third parties often for direct re-investment in new operational facilities. The new Secondary Schools at Andover and Basingstoke are good examples.

4

Part 1 - Strategic Property Review

4.1

The last review was completed in 2002 and involved a review of the County Council's entire estate. Since 2002 the detailed reviews referred to in paragraph 3.1 above have been more specifically about generating capital receipts or service improvements.

4.2

The changing requirements for accommodation are illustrated by the changes underway in providing Children's and Adults` Services which will require a differing pattern and location of accommodation to enable the delivery of enhanced services. A Working Group is currently drawing-up proposals on a pilot basis and its recommendations will form part of the wider Property Strategies.

4.3

In addition to the current initiatives and strategies to minimise the costs of occupying accommodation (including rent, service charges, capital cost, repair, non-domestic rates and energy consumption), it will be essential to improve efficiencies of use. To date, the principal focus has been on the quality and value for money of the accommodation provided but potentially, the largest efficiency improvements would be from the utilisation of property.

4.4

It is intended that through major accommodation changes arising from the refurbishment of Ashburton Court (and linked investment decisions on leases of office accommodation), new ways of working will be introduced and provide significant improvements in efficiency, bringing together property, IT and HR policies. This will represent a significant challenge to the Council, but is where some of the benefits may arise. However, the approaches to flexible working across the Council are rarely co-ordinated, evaluated and validated as to the benefits. It is difficult to see how this work, essential to an effective review of property, can be properly managed and updated unless it is set up as a corporate and defined project in its own right, with significant managerial leadership.

4.5

Each successive property review has challenged the reasons for holding and occupying property which has led to a refinement of the County Council's overall land holdings and a programme of disposals. However, the use of the holdings has not received the same scrutiny and it is anticipated that significant improvements may be achieved by targeting certain buildings such as the County Council's offices for improvements in the utilisation of available floor space. Recent reviews of utilisation have demonstrated that this could be achieved through new ways of working and moving away from the County Council's traditional occupation of office space.

4.6

Pilot projects have been implemented which have demonstrated how greater utilisation and decreases in overall operating costs can be achieved whilst still improving working conditions through good design, investment in modern equipment and revised working arrangements. The proposed redevelopment of Ashburton Court will have as a core theme, the introduction of new ways of working. This provides a catalyst for a widespread change across all of the County Council's office portfolio which would be instigated by the Strategic Property Review described below in Part II of the report.

4.7

It is further proposed that area based reviews should be carried out (possibly in each of the District Council areas in Hampshire) which would need to link to the following service reviews currently underway:

    (a) Children's Services

    (b) Environment area offices

    (c) Recreation and Heritage - Museums, Arts Centres and

    Countryside sites.

4.8

It is proposed to report the outcome of the strategic review to the Buildings, Land and Procurement Panel and the Executive Member for Policy and Resources on a six monthly basis along with any individual projects/disposals/acquisitions. On this basis the Panel can then establish on an annual basis phased and targeted landlords' programmes at the core stock.

4.9

In order to deliver the Strategic Property Review and build on the current work carried out by Property Services, it is proposed that:

    (i) a dedicated team be established to be led by a new appointment at Assistant Head of Estates level, this approach was approved by the Executive Member for Policy and Resources at his meeting on 14 July 2005.

    (ii) The team to be funded on a `invest to save' basis with a review after three years, at a cost of £150,000 per annum.

5

Other Estates Strategies

5.1

In parallel to the property review, other estates strategies are in place aimed at protecting or enhancing the County Council's property interests. The remaining sections of Part 1 of this report identify some of these key strategies.

6

Business Rates

6.1

The ownership and/or occupation of property, results in most cases, in a liability for non-domestic rates and/or council tax which is notionally based on the rental value of the property. Since 2000 a team has operated in Property to minimise the County Council's liability for these taxes on an `invest to save' basis.

6.2

Detailed and accurate records of some 1,800 properties are now being maintained via a new database. Some 750 rating assessments have been successfully challenged resulting in major savings, with at least a further 250 to be settled from the April 2000 revaluation. Further expenditure has been avoided by ensuring that exemptions and reliefs available to the County Council are obtained, e.g. the exemption of special schools. Savings in excess of £5m have been achieved through negotiating reductions in rateable values in the five year period to 2005, securing exemptions and recovering over paid rates. In comparison, the cost of operating a rating team is currently £105,000 per annum.

6.3

The five-yearly cycle of rating revaluations has led to a revaluation as of 1 April 2005. This will lead to a further round of negotiations in respect of assessments in the `new List' and the potential for further significant reductions in expenditure. Given the success of the project to date and the high returns on investment it is recommended that the work of the team be continued in relation to the new List and also concluding the unresolved cases under the 2000 List. It is proposed that this work should continue to be funded as an `Invest to Save' project.

7

7.1

Advance and Advantageous Land Purchases

The availability of funding from this budget has enabled the County Council to make strategic purchases to facilitate future development and to protect and conserve Hampshire's natural and built environment. In recent

years, significant purchases have been made of land and buildings at Sir George Staunton Country Park, Havant; Serle's House, Winchester; and Newtown Common, Burghclere. Given the effectiveness of such purchases, it is proposed that the availability of this budget should continue in the future. Where it is not utilised in a specific year it can be recycled, subject to the Leader's agreement, to provide efficiency improvements or to meet existing liabilities.

8

Historic and Vacant Buildings

8.1

Currently the County Council has 43 standing properties which are vacant, of which 21 are short-term vacancies pending re-use/re-letting such as dwellings for staff occupation. The remainder are where a property has been declared surplus to County Council requirements, or where it is on the market for re-letting.

9

Planning Process Representations

9.1

The representations and advocacy employed on behalf of the County Council as landowner in the Regional, Sub-Regional and Local Planning process is of major importance to ensure that the County Council's existing operational uses may be included in Plans. This will enable a continuing stream of capital receipts to be generated in support of the Capital Programme or to provide funding for replacement facilities. In addition, representations are also made on behalf of the County Council as a major public service provider seeking supportive policies in new planning documents that will assist future service reviews (such as school

reorganisations). It is proposed that this work should continue and progress reports be made to the Buildings, Land and Procurement Panel and Executive Member for Policy and Resources.

10

Part II - Office Accommodation

10.1

Much of what has been said about land and property for service provision applies to Office Accommodation. The County Council has 62 buildings (or offices), (70,000 square metres) of office accommodation with an estimated 5,500 people in the buildings and an annual cost of about £5.6 million including maintenance.

10.2

In the last few months, a number of detailed studies have been undertaken to identify how space is utilised, particularly by staff in the various area offices. Some examples of the outputs are:

Office Average utilisation

        (%)

Regulatory Services

(Basingstoke, Fareham and Winchester) 48

Adult/Children's Services

Gosport 35

Eastleigh 42

Basingstoke 42

Lymington 65

In each case there are strong indicators of `spare capacity' which would provide opportunities to improve efficiency and utilisation. It is expected that the above results would be applicable to many County Council services.

11

The Flexible Approach

11.1

Almost universally in the business of accommodating employees, organisations that have engaged with the need for change and efficiency have done so by:

    · rationalising their portfolios (usually significantly reducing the
    volume of occupied space and the number of buildings);

    · introducing `flexible working', based on major investment in technology, business systems and furniture/storage; and

    · migrating to a model based on fewer offices, and the removal of the `silo' approach to ownership of space.

11.2

Reference has been made for a number of years about moving towards a reduced profile based on core properties that work much harder, and are all used as corporate spaces. This report proposes such an approach and further research on new models.

11.3

Elements of the research into new models could include;

    · reviewing the portfolio to establish which are the core buildings (see paragraph below 11.4 below);

    · undertaking more feasibility studies, and identifying opportunities for rationalisation by a specific Project Team;

    · establishing a number of key principles for example, offices should no longer be regarded as `departmental fiefdoms';

    · creating a flexible working culture by demonstrating achievements and spreading knowledge and experience; and

    · implementing of changes linked, where possible, to disposal, and re-investment

11.4

The review of the portfolio, suggested in the previous paragraph, is essential, but should not be too complicated. Other factors (for example condition) need to be taken into account, but an initial broad brush review suggests that out of the 62 offices shown only 35 are likely to be regarded as core properties. There is a further number of buildings that are not core properties, but which may have to be retained for some time, through either leasehold commitments, or other operational reasons. Around 10 to15 offices could be candidates for removal from the portfolio as part of a planned rationalisation and reinvestment strategy.

11.5

A modern configuration of offices would generally involve a smaller number of larger and more efficient offices. One model could be Winchester as HQ and create other (new) offices at Eastleigh, Basingstoke, Andover, Havant, Fleet/Aldershot area and the New Forest. Capital receipts from the remaining (surplus) offices could be used to finance new modern facilities. A model like this could take 3 to 4 years to implement. In general terms the value of the surplus offices would be the cost limit for the project. It is likely that this approach would produce a surplus of receipts and lower operating costs for the future.

11.6

Another model would be to take the opportunity of relatively high cost leases coming to an end and plan to provide `new' accommodation using existing surplus sites and buildings. This may not have such a compelling financial case as the first model and is quite difficult to plan for without capital or reusable freehold opportunities.

11.7

In practice a mix of both approaches could be developed. At the same time it would be important to open up access to existing facilities and manage a programme of flexible working to take some of the pressure and improve utilisation levels. This more strategic approach would be best identified with a robust business case and asset management rationale.

12

Nuance Global House

12.1

The County Council currently occupies two floors at Nuance Global House. Two further floors remain and it would seem to be the most effective and efficient solution to procure these floors. It is proposed that the Director of Property, Business & Regulatory Services produces a specific a business case based on the costs and benefits for taking all the space with Nuance Global House.

13

13.1

Part III Conclusions

The County Council has for over twenty years been at the forefront of capital planning and design, asset management and the realisation of significant capital receipts. Much has been achieved in all aspects of asset management. It is therefore unlikely that these planned reviews will bring `easy wins' or significant efficiencies without investment and serious management challenge. However, it would be complacent (and inefficient) not to challenge existing policies and provision given that the built estate represents a major part of the Council's fixed costs and probably one of its largest liabilities.

13.2

It would be tempting to think that stretching targets and improvement could not be achieved. While much work has to be done by the reviews it will be important (if not essential) that Executive Members and Chief Officers are prepared to support the reviews and challenge some long established models of service delivery. Otherwise a great deal of effort would be expended without major benefits.

13.3

The `Big Wins'

13.3.1

In any strategic review of Property the really significant reductions in cost, increases in capital receipts, increased value and improved efficiency comes from:

    · reducing the number of buildings that are used to provide public services in Hampshire;

    · establishing new (higher value) uses from surplus assets;

    · increasing utilisation of existing asset base;

    · reducing the costs of occupancy; and

    · vacating higher cost buildings (usually with commercial leases) in favour of freehold accommodation

13.3.2

If the approach and methodology is not robust enough to deliver the above it will not be effective.

13.3.3

On the basis that the reviews have as their focus greater efficiency then it is proposed that surplus assets and receipts from each review be shared on a 50:50 basis between the department concerned and the `landlord'. In the case of the latter the receipts will be used to improve repair and maintenance levels to core stock and contribute to the cost of office accommodation projects. In view of the gap between unsupported borrowing and the disposal receipt we may need to manage the cash flow so that the receipt is received before we plan the expenditure.

13.4

Targets & Performance Improvement

13.4.1

It is intended to set specific targets, to be reviewed on an annual basis in each of the areas below:

(i) improved utilisation in office accommodation

(ii) reduce the number of buildings used by County Council

(iii) reduce the proportion of leased accommodation

(iv) generate significant capital receipts

(v) bring forward more land for development, consistent with Local Development Frameworks and wider regional housing strategies.

13.4.2

The approval of this report would constitute Phase 1 of a Strategic review of all the County Councils land and buildings. Phase II would concentrate on implementing a series of reviews as set out in paragraph 1.2 during 2006. Further work would be completed on Phase III for approval later this year.

Recommendation(s)

It is recommended that approval be given to:

1.

Subject to resources being available, a programme of reviews for 2006 to 2009 covering all County Council services, and that the first reviews concentrate on Recreation and Heritage, office accommodation and elderly persons' residential establishments.

2.

The Strategic Property Review and all future reviews of surplus school places being developed together .

3.

The Service Reviews process being reported to the Buildings Land and Procurement Panel and Executive Members.

4.

Other public sector agencies be invited to take part in the review(s).

5.

A dedicated review team being established up to 2009 on an `invest to save' basis at a cost of £150,000 per annum.

6.

The `business rates/valuation' project continuing to be developed on an `invest to save' basis.

7.

The promotion of County Council land for development through future Local Development Frameworks and Sub-Regional Strategies.

8.

The Director of Property, Business and Regulatory Services producing a business case to support occupying all floors at Nuance Global House, Eastleigh.

9.

The proceeds from the disposal of surplus properties as part of this review being retained on the basis of 50% for the department and 50% for the landlord (with the latter being made available for repair and maintenance expenditure and office accommodation).

Section 100D - Local Government Act 1972 - Background Papers:

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

File Location

None.

CAB0206B Appendix 1

Surplus Land and Property

Basingstoke Area

Existing John Hunt of Everest School, Basingstoke (2-phase disposal)

Former Beech Down School, Basingstoke (part)

Greatfield Farmhouse, Basingstoke

Land at former Burnham Copse Infant & Junior Schools, Tadley

Land at Queen Mary Avenue, Basingstoke

Merton Rise (North Popley), Basingstoke (phased disposal commencing 2006/7)

Pack Lane Playing Fields, Basingstoke

Residue of Binfields (2 small sites), Basingstoke

The Old Forge, Church Road, North Waltham

Town Centre West, Basingstoke

Verdi Close, Basingstoke

Worting Infant School, Basingstoke

East Hampshire

Alton Day Services, Chawton Road, Alton

Former Library site, Alton

Land in Readon Close, Petersfield

The Pines, The Shrave, Four Marks

Whitedown Special School, Alton

Eastleigh

11 Knowle Lane, Fair Oak

Chandlers Ford Infants' Annex, Chandlers Ford

El Nido (former Caretaker's house), Hamble College, Hamble

Former Nightingale School, Eastleigh (part)

Holm Glade, RVCP, Netley

Kings Copse Primary School, Hedge End

Land at Crestwood School, Eastleigh

Land at former Rookwood School, Eastleigh

Land in Moorgreen Road, West End

The Barn, Woodhouse Lane, Hedge End

Fareham

239-241 Hunts Pond Road, Titchfield

Land at Heath Road, Fareham

Land at Swanwick Lodge, Sarisbury Green

Wickham Road Annex, Fareham

Gosport

Former Gosport Railway Station

Fort Gilkicker

Hart

4/6 Victoria Road, Fleet

Flat 1 Elmwood, Fleet

Havant

Former Glenwood Special School, Havant (part)

Former Park House Primary School, Havant

Land at Langstone Road, Havant

Land at Warblington School, Havant

Land at Woolston Road, Havant

New Forest

Blackfield Infant School, Blackfield

Former Divisional Education Office, Lymington

Holbury Infant School, Holbury

Land at Fernhill Lane, New Milton

Land at Mill Lane, Brockenhurst

Langdown School, Hythe

Rushmoor

Former Grounds Maintenance Depot, York Road, Aldershot

Test Valley

Land at Canal Walk, Romsey

Land rear of Palmerston House, Romsey

Land rear of Romsey Library

Romsey Infant School, Romsey

Woodlands/Copse Hill, Shepherds Row, Andover

Winchester

Former Milesdown Children's Home, Winchester

Greenacres School, Winchester

Land at Bar End Depot, Winchester (Emmaus Site)

Land at Beggars Drove, Sutton Scotney

Land at Lady Betty's Drive, Whiteley

Land/buildings adjoining Park Farmhouse, Titchfield

Warner's Farm Buildings, Compton

Winchester Library HQ, North Walls, Winchester

Winton House/Ashborne Lodge, Winchester