The Executive Board Report

This annotated HTML version identifies in red contested statements in the report to the Council's Executive Board on 15 December 2004. This document formed part of my complaint to External Audit in July 2005, slightly updated to reflect subsequent events. My original intention was to wait for the auditors to complete their inquiries, but the Council has "jumped the gun" by embarking on a defective public consultation exercise in advance of the external audit report. It is therefore necessary to publish earlier than intended. Please click the numbered blue links included in the anotated report to see the corresponding detailed criticism.

Some of the errors were repeated many times. Use the "Back" button on your browser to return from the critique to the annotated text, or click one of the blue links following each critical entry to examine other instances of the same error, elsewhere in the report.



Annotated version
AGENDA
ITEM NO.: 18

Originator:
P Brook

Tel: 247 4233

REPORT OF THE DEVELOPMENT DEPARTMENT
REPORT TO: EXECUTIVE BOARD
DATE: 15 DECEMBER 2004


SUBJECT: ABBEY MILLS AND ST ANNíS MILLS KIRKSTALL

Electoral Wards Affected:

Specific Implications for:

Ethnic Minorities ?
Women ?
Disabled People ?
Executive
Board
Decision
Eligible for call inNot Eligible for call in
(details contained in the report

1.0 PURPOSE OF THE REPORT

1.1 The purpose of the report is to make proposals regarding the refurbishment/remodelling of Council property at Abbey Mills and St Annís Mills, Kirkstall, so as to assist in the regeneration of the Kirkstall Valley. (1)

EXECUTIVE SUMMARY

The report considers the need for capital investment at the Abbey Mills and St Annís Mills small industrial units. It examines a number of options to achieve the required investment and also considers total cessation of the service. On balance the report concludes, that due to other service pressures, mainline capital is unlikely to be made available to resolve the issues and that the preferred option is to dispose of the more valuable Abbey Mills site and to re-invest the proceeds at St Annís Mills

2.0 BACKGROUND

2.1 Abbey & St Annís Mills form part of the City Council's Small Industrial Unit (SIU) portfolio (2). The SIUs consists of 13 industrial estates comprising 248 units which was originally developed in the late seventies/early eighties to provide accommodation for new/small businesses. Most of the estates were developed in inner city areas (within a 3 mile radius of the city centre). The SIUs were originally developed as a way of tackling high unemployment since in the late seventies the private sector was considered to be "risk averse" in developing small units at an affordable price in these areas. The Council with assistance from various Government/EU funding programmes therefore filled the gap in provision by developing it's own portfolio of small units.

Though the investment climate has significantly improved over the last twenty five years there is still a need for the Council to influence the small unit market. Recent research conducted by the Development Department has demonstrated that there is a shortage of small units available in the City on terms which are affordable and sufficiently flexible for new/small businesses particularly in "City Fringe" locations. In fact there is evidence to suggest that the economic success of Leeds is actually driving out lower value uses (such as small industrial units) in favour of higher value developments (3). A current survey of available industrial premises in the Kirkstall area indicates that only one unit of less than 1000 sq ft is available and only 6 non-Council units of between 1000 and 5000 sq ft. A recent baseline study on the City Growth Area, which includes Armley/Kirkstall, indicates that there is little industrial/commercial accommodation under 5000 sq ft coming forward in these residential communities.

2.2 Members will recall that in May 2004 Executive Board received a report about proposals for the creation of a new Kirkstall Valley Park, to be based, in part, upon land owned by the City Council, and that the Board gave its support, in principle, to further feasibility work being carried out on those proposals.

2.3 A planning framework is being prepared for the area between the City Centre and the Kirkstall railway viaduct and an overall framework is being considered for the Kirkstall Centre. This will have regard to the proposals from Allders and the Pinnacle Group (Kwik Save site), the LIFT scheme proposed for Kirkstall Hill, and the redevelopment of Abbey Mills and St Annís Mills. (4) In the interim officers are carrying out a co-ordination role and will produce detailed guidance as required. A framework has been produced for Kirkstall Forge and pre-application discussions are underway.

2.4 Notwithstanding the above studies, decisions are needed on some specific issues in the Kirkstall Valley which cannot await the final outcome of the above exercises. In particular, these concern Abbey Mills and St Annís Mills (marked A and S respectively on the attached plan at Appendix 1) Ė two SIU sites operated by the Council. Neither of these sites have purpose built industrial units, being, as they are, based in and around old mill buildings which date from the nineteenth century. Consequently the individual units do not generally meet the requirements of modern day small or start-up businesses and they do not meet the specification set by the Development Department for the evolution of the service which is predicated upon the creation of small, ideally purpose built accommodation and/or managed workspace (5).

The St Annís Mills site offers the potential to contribute to the proposed Kirkstall Valley Park if sensitively remodelled with associated public realm works (river crossing, riverside walkway etc).

2.5 The units at Abbey Mills and St Annís Mills are 37% and 83% occupied at the present time, with annual rent rolls of £21,520 and £20,500 respectively (6). In total over the two sites there are 8 small businesses employing 49 people. One major occupier of space at St Annís Mills is intent upon leaving the site. The empty units are in such a poor condition that it would not be prudent to seek to re-let them without first investing significant sums of capital.

2.6 Full surveys (7) of the two sites in August 2003 by the Asset Management Service of the Development Department have identified backlog maintenance (8) totalling £626,000 (Abbey Mills) and £433,000 (St Annís Mills) respectively. These figures need to be updated for inflation and fees added. If the Council was to invest such sums at the two sites on backlog maintenance alone (8) it would be unlikely to improve the functionality of the industrial units since the works identified are of essentially a wind, weather tight and health and safety (9) nature. However, it is acknowledged that the main three storey mill building at St Annís Mills (see photograph at appendix 3(ii) might, because of its large, uniform floor plates, lend itself well to some kind of remodelling if any additional funding was available.

2.7 Neither site is easily upgradeable to meet the requirements of the Disability Discrimination Act. Consequently, Members will appreciate that in order to continue to operate both sites the Council would need to invest something in the order of £2m in capital refurbishment works with no guarantee that the units created would all be appropriate for modern day requirements and as a consequence, therefore, all be lettable. Such a refurbishment is estimated to increase the combined rent rolls by some £70,000 per annum. (10)

2.8 There is currently no specific provision (11) within the Capital Programme for expenditure on these two sites, although some general provision for dealing with backlog maintenance across Council departments does exist within the Asset Management Capital Programme.

2.9 St Annís Mills has no specific land use allocation in the UDP (12). Policy GP3 stresses that on unallocated land the existing land uses will remain the dominant land use of an area. The existing use of the mill is light industrial (B1c). Consequently, employment use would be considered acceptable in principle. Abbey Mills is also used for light industrial but could support residential and/or office use (13). Accordingly the Council has had independent valuations carried out which value the sites at £375,000 (St Annís Mills) and £1,650,000 (Abbey Mills).* (14)

2.10 The Council is therefore faced with the challenge of creating some high quality, purpose built SIUs in the Kirkstall area to protect those businesses already operating there (15), and to create some scope for growth, and also, bringing up to standard buildings on the two sites so as to contribute to the regeneration of the Kirkstall community. This report now goes on to examine a number of options for delivering these objectives.

3.0 OPTION APPRAISAL

3.1 The Council has no other sites available in the Kirkstall area which are suitable for the reprovisioning of these SIUs.

Consequently the following options are now examined:-

(i) Make available £2m of Capital Programme resources and retain/refurbish both sites for SIUs (16).

* Abbey Mills existing use value (light industrial) is only £300,000 (17). A mixed use 'living over the shop' valuation of Abbey Mills produces a value of only £450,000.

(ii) Dispose of both sites and use the receipts to support the mainline Capital Programme.
(iii) Dispose of St Annís Mills and re-invest the capital receipts in Abbey Mills.
(iv) Dispose of Abbey Mills and re-invest the capital receipts in St Annís Mills.

3.2 The options are assessed against the following criteria:-

(i) Ability to create and protect jobs (18) in the Kirkstall area through the provision of appropriate, modern small industrial units.
(ii) Extent of call upon the existing Capital Programme resources or the enhancement thereof.
(iii) Ability to address backlog maintenance (8) on both sites.
(iv) Ability to support/fund public realm works on both sites.
(v) Extent to which the proposals are complementary to the Kirkstall Valley proposals (1).
(vi) Extent to which the rent roll is protected/enhanced (6).
(vii) Extent to which the Council retains control.

3.3 Option 1 Ė make available £2m of Capital Programme resources (16) and retain/refurbish both sites for SIUs.

3.3.1 As previously stated, no specific Capital Programme provision exists for the required works. The Councilís Asset Management Group does have available some £3m through to 2006/07 for backlog maintenance works but given the other pressures on this budget is able to recommend only that a maximum of £200,000 be released for these purposes.

The advantages and disadvantages of this option are therefore:-

3.3.2 Advantages:-

(i) Retains both sites in full Council control
(ii) Maximises, in the short term (19), the square footage available for letting as SIUs.
(iii) Protects existing Kirkstall businesses, albeit, in somewhat inappropriate buildings (20).

3.3.3 Disadvantages:-

(i) Requires an unfunded injection of at least £1.8m into the Capital Programme (16).
(ii) Little visible investment in the two sites as a result of incurring this expenditure, and hence little impact upon local physical regeneration, with the buildings continuing to appear tired (21).
(iii) The expenditure includes no remodelling (22) and therefore would leave the Council with a collection of inappropriately sized/shaped units, which would continue to be difficult to let.
(iv) No budget available for public realm works (river crossings/riverside walkways etc. at the two sites).
(v) The extra rent roll generated (£69,670pa) would not justify the net £2m capital investment (23).

3.4 Option 2 Ė Dispose of both sites and use the capital receipts to support the mainline

Capital Programme.

3.4.1 Sale of the two sites might realise a figure in the region of £2,025,000 (£1,650,000 for Abbey Mills, £375,000 for St Annís Mills) (24).

3.4.2 Advantages:-

(i) Contribution to Capital Programme resources.
(ii) Likely improvement of Abbey Mills site for residential, along with some associated public realm works.
(iii) Possible private sector improvement of St Annís Mills as industrial units.

3.4.3 Disadvantages:-

(i) Loss of all Council operated SIUs in this area of Kirkstall. Paragraph 2.1 of this report explains the rationale for Council intervention in this aspect of the local economy.
(ii) No guarantee of protection for existing businesses operating from the two sites.
(iii) Loss of current rent roll of £42,000 per annum.
(iv) No guarantee (25) of significant improvement of St Annís Mills or associated public realm works (eg river crossing, riverside walk).

3.5 Option 3 - Dispose of St Annís Mills and re-invest the capital receipts in Abbey Mills.

3.5.1 Advantages:-

(i) Retains sufficient square footage at Abbey Mills to accommodate existing tenants from both sites.
(ii) May help to protect current rent roll
(iii) Would result in some improvements to Abbey Mills although these would not be significant due to the low value of the capital receipt receivable for the St Annís Mills site.
(iv) Possible private sector investment in St Annís Mills

3.5.2 Disadvantages:-

(i) Lower site value of St Annís Mills limits scale of investment at Abbey Mills.
(ii) Nature of works at Abbey Mills would be essentially dealing with backlog maintenance with no ability to consider the remodelling/refurbishment of the site or to deal properly with DDA issues (8, 9). Consequently, the Council would be left with units which would continue to be inappropriate (20) for their use.
(iii) There would be no visible improvement of the Abbey Mills site, and no budget for public realm works (26). As such there would be little contribution to the physical regeneration of the valley.
(iv) No guarantee of any investment or public realm works at St Annís Mills once in private hands.
(v) Reduction in total square footage available for Council run SIU sites in Kirkstall.
(vi) Abbey Mills is a grade II listed building which will never lend itself well to industrial use (eg difficulty in incorporating an industrial goods lift) (20).

3.6 Option 4 - Dispose of Abbey Mills and re-invest the capital receipts in St Annís Mills.

3.6.1 Advantages:-

(i) Maximises capital receipts available for re-investment in small industrial units in Kirkstall.
(ii) Eliminates backlog maintenance at St Annís Mills and also allows significant remodelling/refurbishment leaving the Council with modern, appropriate units.
(iii) Facilitates the complete refurbishment of the 3 storey stone building on the St Annís Mills site with the opportunity to also replace the fourth storey and pitched roof lost in a fire (27) some years ago, if viable. The value of the spare development land at St Annís Mills would increase as a result of the upgrading of the site (28).
(iv) Retained site can accommodate all tenants intending to remain on the two current sites (29).
(v) Rent roll protected and enhanced (29).
(vi) Budget would support Council funded public realm works at both St Annís Mills and Abbey Mills (26).
(vii) Likely major private sector refurbishment of Abbey Mills for either residential or office use. There have already been unsolicited approaches from prospective buyers for Abbey Mills (30).
(viii) More appropriate use (20) (residential and/or office) of the key Abbey Mills site adjacent to Kirkstall Abbey

3.6.2 Disadvantages:-

(i) Loss of control of Abbey Mills site
(ii) Initial reduction in total square footage available for Council run SIUs in Kirkstall, although the supply could be replenished through development of spare land at St Annís Mills (28).

3.7 Summary of Options

3.7.1 In terms of their ability to meet key objectives the merits of the four options can be summarised in the table below.

Options1234
Budgets/ObjectivesRetain both sitesSell both sitesSell St Annís Mills, retain Abbey MillsSell Abbey Mills, retain St Annís Mills
Asset Management budget available (£000s)200-200200
Capital receipts available (14) (£000s)-2,0253751,650
Contribution to capital programme (14) (£000s)-2,025--
Backlog maintenance (8) to be addressed (£000s)1,060-626433
Sufficient budget to cover backlog maintenance (8) on retained properties.NYNY
Sufficient budget to cover remodelling/refurbishment and DDA issues (9) on retained propertiesNYNY
Sufficient budget to cover public realm works at St Annís MillsNYNY
Sufficient budget to provide public realm works at Abbey MillsNYNY
Likely that both sites will contribute to physical regeneration of KirkstallNYNY
Retention of sufficient quantity of Council SIU space in KirkstallYNYY
Retention of sufficient quality of Council SIU space in KirkstallNNNY
Rent roll protectedY(?)NY(?)Y(?)
Guaranteed protection of existing tenantsYNYY
Retains both sites in Council controlYNNN

3.8 On balance therefore, it will be noted that option 4 Ė dispose of Abbey Mills and reinvest the capital receipts at St Annís Mills - would appear to be the best option. In summary, this would leave the private sector to completely refurbish Abbey Mills (with associated section 106 contributions for public realm works, supplemented by Council funded works). The capital receipts generated, when taken with the Asset Management contribution to backlog maintenance, would allow a major refurbishment of St Annís Mills, bringing these units up to modern day standards. There would also be sufficient monies remaining for public realm works at St Annís Mills (26). With the impending departure of one of the St Annís Mills tenants there would be sufficient space at St Annís Mills, under the proposals, to accommodate all other tenants who currently occupy the two sites. The proposals provide the opportunity to make a significant contribution to the physical regeneration of the Kirkstall Valley and would be consistent with the proposals to create the new Kirkstall Valley Park adjacent to the St Annís Mills site (1).

3.9 The Director of Corporate Services has carried out a discounted cash flow exercise (52) for each of the four options and the net present values produced are as follows:-

 NPV (£m)
Option 1  -  Retain both sites1.37 (52)
Option 2  -  Sell both sites2.04 (52)
Option 3  -  Sell St Ann's, retain Abbey2.20 (52)
Option 4  -  Sell Abbey, retain St Ann's2.91 (52)

This analysis therefore also supports the choice of option 4 as the way forward. Option 4 is, therefore, the one recommended to Executive Board.

4.0 THE PROPOSALS IN PRINCIPLE (subject to consultation and planning)

4.1 Planning officers and the Civic Architect continue to be consulted about the proposals. A scheme on the following lines could form the basis of consultation with the Kirkstall community.

4.2 Abbey Mills

Refurbishment for residential and/or offices.
Some limited demolition of later, poor quality additions to the property (31).
Some new build adjacent to the river (32).
New egress from the site further from the main signalled crossroads than the current access/egress (33).
New publicly accessible spaces within the site thus helping to re-establish the heart of the Kirkstall Village (32).
Riverside walkways as appropriate (32).

4.3 St Annís Mills

Complete refurbishment of the 3 storey stone building, possibly re-instating the former 4th storey and pitched roof. Remodelling of the same to provide smaller floor plate managed workspace more appropriate to the needs of small businesses and the aspirations of the Development Department (34).
Demolition/rebuilding/relocation of some of the smaller stand alone units to facilitate a later, more strategic redevelopment of the site.
Strengthening of the existing bridge over the goit.
New pedestrian footbridge over the river to the site proposed for the nature reserve element of the new Kirkstall Valley Park (35).
Riverside walkways as appropriate (36).

5.0 ISSUES

5.1 Tenant Holding Over

5.1.1 One tenant at St Annís Mills is liable for dilapidation costs under the terms of his lease. An estimate of these costs is given in the confidential section of this agenda. It is not believed that the tenant has the means to meet such costs and any attempt to pursue him for them would be likely to result in the winding up of his business which employs 12 people. The tenant is currently holding over. Given that the departure of this tenant would facilitate the proposal above, and that he intends to relocate to alternative premises in the Kirkstall environs, thus protecting the existing jobs (37), it is necessary to consider whether he should be allowed to surrender his lease, without meeting his dilapidations obligations. This issue is discussed further in the confidential section of this agenda.

5.2 Vesting of Land

5.2.1 Some of the land at Abbey Mills is vested in the Neighbourhoods and Housing Department (see plan at appendix 2(i) (38). Ideally to achieve the optimum redevelopment solution on this site this land would be included in the proposals. Agreement will therefore be required with the Department of Neighbourhoods and Housing and the North West ALMO. Initial discussions (39) indicate that both are supportive in principle of the proposals, subject to a satisfactory apportionment of the capital receipts generated by the site.

5.3 649 Kirkstall Road

5.3.1 649 Kirkstall Road is a small Council owned, stone built, detached house on two storeys totalling some 1,260 sq ft (see plan at Appendix 1, site K). The building dates from the late nineteenth century and is of some local historic interest. Unfortunately, because of its remote location and the fact that it has been unoccupied now for 13 years the building has been severely vandalised. Estimates suggest that it would cost in the order of £150,000 (40) to restore the house (which is relatively small in terms of floor area) back to a habitable form. There is very poor vehicular access to this property from Kirkstall Road and this makes the property unattractive to potential buyers (41). There is, therefore, a strong possibility that even if the Council was to restore this building it would find it extremely difficult to protect it from further vandalism pending any disposal. The building is currently secured but continues to represent a health and safety risk and continued inaction is not an option.

5.3.2 The Asset Management Unit has polled all Council departments to establish if there is any requirement for a building in this location (eg visitor centre) and no demand has been identified. Similarly, there is no sponsoring department for any third party/voluntary sector use (42). In reality, the building is unsuitable, because of its design and the lack of parking space, for anything other than residential use.

5.3.3 As a result of the above Ė that is, the health and safety position, the risk of investing over £150,000 in the property with no guarantee of a future disposal, and the associated risk of further vandalism, officers are of the view that the property should be demolished. The Civic Architect, who has visited the site, supports this view, and has proposed that the materials could be re-used on the St Annís Mills or the Abbey Mills site. Demolition is estimated to cost in the region of £15,000 and would be the subject of a report to the Councilís Asset Management Group seeking support for the allocation of funding.

6.0 FINANCIAL IMPLICATIONS OF THE PREFERRED OPTION

6.1 The capital cost of the works proposed (51) are estimated as:-

 £000ís 
 St Annís Mills  Abbey Mills   Total
 
Refurbish Mill building1,200  1,200
Extra storey and pitched roof to Mill building420  420
Other buildings200  200
Landscaping/Riverside walkways250250* 500
Pedestrian bridge over river50  50
 
Subtotal2,120250 2,370
Fees at 12%25530 285
Removal costs/compensation/cost of voids 200 200
 
Total2,375480 2,855

*City Council allowance over and above any developer S106 contribution

6.2 The capital receipt from the disposal of Abbey Mills is expected to be in the region of £1.65m (14).

6.3 A contribution towards backlog maintenance of £0.2m could be made available from the Asset Management priority major maintenance budget.

6.4 A fully refurbished St Annís Mills with an additional floor added to the main mill building is estimated to produce a rent roll of £271,000 per annum - £229,000 in excess of the current rent roll from the two sites and £159,000 in excess of that which could be delivered by carrying out the more basic upgrading of both sites if they were to be retained (34). This latter sum would support prudential borrowing of £1.67m.

6.5 Total capital funding available therefore could be:-

 £000ís  (this header should have read "millions")
Capital receipts1.65(14)
Asset Management priority major maintenance0.20 
Prudential borrowing1.67 
   
Total3.52 

6.6 Members will note therefore that potential total funding of £3.52m exceeds capital required of £2.85 by some £0.67m (43). This surplus will be needed to cover any capital payment to NW ALMO to reflect its interest in the Abbey Mills site and to enable it to declare the site surplus to its requirements (see paragraph 5.2).

6.7 Capital Value of the Completed Development - The current value of St Annís Mills is £375,000 (14). The total capital invested in the Mills under the preferred option (paragraph 6.1) excluding public realm works is £2.04m. The value of the completed development is estimated to be £3.25m. It will be noted, therefore, that the capital value of the completed development does justify the financial investment if the proposal was to be appraised on a purely commercial basis.

7.0 RISK ANALYSIS

7.1 The main risk associated with the two sites in question is that if no capital investment is made then the sites will:-

(i) Remain non DDA compliant.
(ii) Increasingly become a health and safety risk.
(iii) Become increasingly difficult to let, with the consequent impact upon rent roll.
(iv) Not contribute to the regeneration of the Kirkstall area.

To avoid these risks this report proposes the pursuance of option 4 Ė sell Abbey Mills and re-invest the proceeds in St Annís Mills (44).

7.2 The risks associated with this option are:-

(i) Failure to secure a buyer for Abbey Mills Ė from the unsolicited enquiries (30) received for these premises to date officers are confident that there will be significant market interest in this site.
(ii) Capital cost over-runs at St Annís Mills. The estimates provided in this report allow for the usual provision of contingency sums. However, should tenders exceed the estimates then the specification would be reviewed to identify potential cost savings. In particular, the provision of the fourth storey in the old mill building would be tested again against rent roll assumptions (34).
(iii) Failure to be able to re-let the new accommodation created at St Annís Mills. Officers are confident that significant demand exists for the right type of units. However, it is also possible that the risk on re-letting could be passed to a private sector partner and this is discussed further at Section 9 (45).

8.0 CONSULTATION

8.1 The three Kirkstall Ward Members have been briefed on the proposals and their views are as follows:

(i) Two Members are supportive of the broad thrust of the proposals (46). That is, to dispose of Abbey Mills and to reinvest the proceeds at St Ann's Mills. These two Members also reluctantly support the demolition of 649 Kirkstall Road but expressed regret that this had become inevitable as a result of previous inaction by the Council.

With regard to the disposal of Abbey Mills, one of these two Members did have a preference for a mixed use 'living over the shop' solution for the site but acknowledged that the lower disposal value (£450,000) this would attract made delivery of the overall proposals much more difficult.

The support of these two Members for the broad proposals was caveated as follows:

(a) That there would be ample time for Ward Members to comment upon the detailed planning briefs as they emerge. This is not a problem.

(b) That there should not be intensive development on the Neighbourhoods and Housing land at Abbey Mills. One Member expressed a desire for a sizeable part of this land to be incorporated into the adjacent Kirkstall Abbey Park grounds. The merits of this will be addressed at the planning brief stage and after consultation with the Parks and Countryside Service. This will ultimately be a decision for Executive Board since it may affect the value of the disposal and also increase future revenue maintenance costs.

(c) That there should be no new through road created between the Allders site and the Abbey Mills site (by bridging the river). Such a new road is not currently (47) envisaged.

(d) That officers revisit the defined boundary for the Abbey Mills disposal and consider, in consultation with Ward Members, whether this should be extended slightly to include the pocket park and one other small problem building on the site. Officers can comply with this request.

(e) Maintaining public access to the river on both sites is of paramount importance and a pedestrian bridge at St Ann's Mills, connecting the site to the proposed Kirkstall Valley Park, is essential.

(f) The public realm works are an essential part of the proposal in that they seek to address the key issue of community regeneration.

(ii) One Member did not support the proposals, objecting to both the Abbey Mills\St Ann's Mills elements and also to the demolition of 649 Kirkstall Road. He put forward an alternative proposal as follows:

(a) Retain both Abbey Mills and St Ann's Mills

(b) Consider some disposals to existing tenants at Abbey Mills to generate some (small) capital receipts and to develop a mixed economy solution on that site. He was advised that officers could not, from a property management perspective, support adhoc disposals within the greater Abbey Mills site (48).

(c) Seek to relocate St Ann's Mills tenants and use the 3 storey mill building to house local community groups, perhaps paying a market rent (48).

(d) Retain No 649 Kirkstall Road for community use.

Officers' general view on the alternative proposal for the three sites is that it does not address the pressing issue of the condition of the buildings. It raises very little capital and could significantly increase the demand for revenue support from community groups. When viewed in the context of the ongoing community centre review it would exacerbate the problem of community groups with limited funding of their own being moved into poorly maintained and inappropriate buildings (48).

8.2 Overall then, there is support in principle from two Ward Members (46), subject to the caveats at 8.1 (a) to (f), with the other Ward Member being opposed to the proposals. This Ward Member has made a counter proposal which is not supported by officers because it is not believed to provide a deliverable route to solving the main problem, ie the poor condition of the buildings (7).

8.3 It is proposed that there should be full consultation with the Kirkstall community upon the preferred public realm works (4) at Abbey Mills and St Annís Mills (budget allowed £530,000 plus fees) and any S106 monies from the developer of Abbey Mills. Any proposals would be consistent with those emerging from the Kirkstall Valley Park consultation (1).

9.0 CASHFLOW IMPLICATIONS

9.1 The proposed way forward seeks investment of up to £2.855m of capital resources prior to the delivery of a capital receipt from the disposal of the Abbey Mills site. This would create a cash flow pressure within the existing Capital Programme. The revenue implications of any prudential borrowing might also prove difficult for the Development Department to contain during the period when the newly refurbished units at St Annís Mills are empty and being remarketed. If a private sector partner could be identified to provide the capital for investment at the St Annís Mills site, in exchange, for example, for a share of the rent roll, then this might obviate the need for the Council to find the capital required for the works in advance of the disposal of Abbey Mills, and thus also ease any revenue pressures (45).

9.2 Clearly, any such partnership would need to have regard to the objectives set down at paragraph 3.2. If the delivery of these objectives could be safeguarded through the partnership then this is an approach which would be supported by officers (45). Executive Board is therefore requested to support the exploration of such avenues in parallel with the proposal for a more traditional, Council funded scheme.

10.0 EQUALITY

10.1 The proposed works to the retained St Annís Mills will make these premises completely DDA compliant (9).

10.2 The Development Department continues to seek the views of SIU tenants and non-tenants regarding the preferred form of business support which they require, with the aim of delivering a tenant and employee mix in the SIUs which is representative of the wider Leeds community (34).

11.0 LINKS TO CORPORATE OBJECTIVES

11.1 The proposed scheme scored 140 when tested against the Capital Scoring Matrix approved by Executive Board (49). This matrix assesses schemes in terms of their contribution towards the achievement of corporate objectives. The minimum score for inclusion in the Capital Programme is 110.

11.2 In particular, the proposals are relevant to the Vision theme of ĎCompeting in a Global Economyí with its focus areas of economic competitiveness and access to employment. The proposal is targetted on reducing unemployment (18) which is a key priority associated with this Vision theme.

12.0 SUMMARY AND CONCLUSIONS

12.1 Backlog maintenance at St Annís and Abbey Mills stands at over £1m (8). Along with required DDA works and the need for major refurbishment the total bill is likely to exceed £2m. Even if such capital investment is made the industrial units on these sites will not meet modern day requirements and the rent roll is not anticipated to increase significantly as a result of the investment. No provision for such capital works currently exists within the Capital Programme.

12.2 ĎDo nothingí is not an option. The units are proving increasingly difficult to let and health and safety and DDA issues are increasingly becoming of concern (9).

12.3 Whilst it is important to retain some small industrial units in the Kirkstall area and to protect the jobs which currently exist on the two sites this report acknowledges that, due to other service pressures, it is unlikely that the Council would seek to fund all of the necessary works from mainline capital. Consequently, this report proposes a solution which, other than for a £200,000 contribution from the Asset Management priority major maintenance capital scheme, is essentially self-financing (34). Of the options considered only the disposal of Abbey Mills, with the proceeds re-invested in St Annís Mills, can fulfil this criterium. This is, therefore, the option recommended to Members.

13.0. RECOMMENDATIONS

13.1 Executive Board is requested to agree the following principles:-

(i) The retention of small industrial units in the Kirkstall Valley at the St Annís Mills site.
(ii) The opening of formal negotiations with the tenants of Abbey Mills regarding a relocation to St Annís Mills (34).
(iii) The marketing and disposal of Abbey Mills.
(iv) The ring-fencing of the Councilís element of the Abbey Mills capital receipt to the refurbishment of St Annís Mills.
(v) Negotiations with the NW ALMO regarding the entitlement of the ALMO to a share of the capital receipt from the Abbey Mills site.
(vi) Consultation with the Kirkstall community regarding the preferred form of public realm works at the sites of Abbey Mills and St Annís Mills (1).
(vii) The demolition of 649 Kirkstall Road and the re-use of the materials in the new developments.
(viii) The injection into the Capital Programme of a sum of £100,000 for feasibility and design work on the preferred option (50).
(ix) The seeking of expressions of interest in a partnership for the redevelopment of the St Annís Mills site (46).
(x) Officers to further develop the proposals contained in this report and to bring back a more detailed report when designs have been prepared and costed to RIBA stage D and the results of the marketing of the Abbey Mills site are known (50).

13.2 Executive Board is asked to instruct officers regarding the dilapidations issue at St Annís Mills.




Detailed criticism of the Executive Board Report

The report to the Executive Board on 15 December 2004 about the redevelopment of Abbey Mills and St Annís Mills in Kirkstall contained numerous errors and omissions, misleading or ambiguous statements. Some of these were repeated several times. These notes try to identify the most serious deficiencies, and are repetitious because the original report was repetitious. The most serious problems are covered in notes 1, 2, 4, 6, 7, 8, 9,10, 14, 16, 23, 30, 34 and 50.

1) The projected Kirkstall Valley Park both includes and requires St Annís Mills, initially for a community punishment and rehabilitation scheme, and later for a visitor centre, sports and recreation facilities. Far from assisting the park project, new commercial or LCC development at St Annís Mills could prejudice the entire scheme for a Kirkstall Valley Park. back 01a back 01b back 01c back 01d back 01e

2) Both these mills were purchased by the Council around 1970 to provide public open space, and for development of a Kirkstall Riverside Park. They were ďtemporarilyĒ managed by the former Industry and Estates Department, which then diverted them to commercial uses. back 02

3) Development officers are engaged in the very thing they deplore: they are converting low profit (but socially desirable) small industrial units into more valuable commercial office and residential developments. back 03

4) At present Development officers are very reluctant to concede any effective public input into the sites that they control. Note how the next paragraph (2.4) tries to take the decision away from the public. They are trying to confine the public input to the ďpublic realmĒ and may also attempt to transfer some of the developerís landscaping costs onto this budget head. Will the public have any effective veto on the overall scheme at St Annís Mills? back 04

5) Where is the evidence for the claims in this paragraph? Abbey Mills suits the current tenants quite well, and would suit many other small industrial users. Low rents are important for many manufacturing or repair operations, especially when starting up. What is the specification set by the Development Department for the evolution of the service? Has this been agreed by Council? Does this really mean that the Development Department isnít making enough profit out of these units? back 05

6) This is the key paragraph, where it is vital to get a grip on the costs. The report to the Executive Board only gives half the story. The missing information is added in red:

buildingtotal floor area
square metres
%
occupied
floor area let
square metres
rent
roll
annual rent per
square metre
Abbey Mills266137%985£21,520£21.86
St Annís Mills213283%1770£20,500£11.58

Figures for St Ann's Mills are correct for December 2004, before the departure of Arteeco. back 06a back 06b

7) These were not ďfull surveysĒ of either building, since they involved no high-level inspection or dismantling and only covered accessible parts of the site. They did NOT include units 5 and 6 at Abbey Mills, which are among the oldest and most significant parts of the complex. Are Development officers planning to demolish these before anybody realises what is happening? The surveyors concluded that the overall condition of most of these buildings was grade B (satisfactory) and recommended that they be refurbished for continuing industrial use. Why was this vital, and highly relevant information omitted from the officersí report to the Executive Board? back 07a back 07b

8) The "backlog maintenance" description is false. Detailed figures in the unpublished survey report show that these estimates included a wide range of improvements and projected expenditure over the next 20 years. back 08a back 08b back 08c back 08d back 08e back 08f

9) The surveyors' estimates already include redecoration and works required under the Disability Discrimination Act as well as Health and Safety requirements and welfare improvements. back 09a back 09b back 09c back 09d back 09e

10) Paragraph 2.7 is incorrect Ė DDA requirements were included in the survey report, and there was no reason to arbitrarily double the costs. Moreover, the surveyors were told to maintain the current subdivision into individual units. If the opportunity were taken to lay these out in a more sensible fashion it would greatly reduce the costs of DDA compliance. back 10

11) Paragraphs 3.3.1 and 6.3 identify £200,000 from the maintenance budget for these two sites, and this is sufficient to cover all the urgent works. Despite knowing about the problem, Development officers have left the roof leaking at Abbey Mills since July 2003, causing needless additional damage to the building. back 11

12) Paragraph 2.9 is incorrect. The land near St Annís Mills was purchased as public open space and forms part of the urban green corridor (policy N8). It is also part of the designated flood plain of the River Aire. Development officers were aware of this because they had lobbied the Environment Agency to lift the flood plain designation, on the basis that the ground level was excessive, because Council had previously permitted unlawful dumping on the site. Why was this omitted from the report? back 12

13) Why was the employment designation considered secure at St Annís Mills where officers want further high class riverside office development, but flexible at Abbey Mills where they want a residential conversion? The adopted UDP lays down strict criteria (policy E7) for industrial to residential conversions, which were not satisfied at Abbey Mills. Why was this not mentioned in the December 2004 report?

Chapter 8 (Employment) in the Adopted Leeds Unitary Development Plan contains the following section at pages 178 - 179:

8.5.12 During the Plan period, non employment uses (i.e. outside the B Use Classes) will inevitably be proposed on employment sites identified under Policies E3 and E4, or existing land in employment uses. This leakage to other uses was recognised above, in discussing the appropriate overall scale of provision (para. 8.4.3). A number of factors will need to be taken into account in considering such proposals. These will include the need to ensure the availability of an adequate supply of alternative employment sites both District-wide and locally, in terms of quality and quantity, and the suitability of the site in amenity terms for continued employment use.

The following policy will apply:


E7: PROPOSALS FOR NON EMPLOYMENT USES (I.E. USES OUTSIDE THE B USE CLASSES), WITH THE EXCEPTION OF ANCILLARY DEVELOPMENT SUPPORTING EMPLOYMENT USES, WILL NOT BE PERMITTED ON LAND IDENTIFIED FOR EMPLOYMENT PURPOSES UNDER POLICIES E3 AND E4, AND ON LAND OR FOR PREMISES CURRENTLY IN EMPLOYMENT USE, UNLESS ALL THE FOLLOWING CRITERIA CAN BE MET:

i. THE SITE IS NOT RESERVED FOR SPECIFIC TYPES OF EMPLOYMENT USE UNDER POLICIES E8 AND E18 ;

ii. SUFFICIENT ALTERNATIVE EMPLOYMENT SITES EXIST DISTRICT WIDE, READILY AVAILABLE IN TERMS OF QUALITY AND QUANTITY SO AS NOT TO PREJUDICE THE ACHIEVEMENT OF THE EMPLOYMENT LAND STRATEGY THROUGH POLICIES E1 AND E2;

iii. WITHIN THE LOCALITY THERE ARE SUFFICIENT ALTERNATIVE EMPLOYMENT SITES AVAILABLE IN TERMS OF QUALITY AND QUANTITY SO AS NOT TO PREJUDICE OPPORTUNITIES FOR LOCAL EMPLOYMENT USES;

iv. THE PROPOSAL WOULD NOT RESULT IN ENVIRONMENTAL, AMENITY OR TRAFFIC PROBLEMS.


The Council tried to strengthen this policy during the UDP Review, adding two further clauses to the four listed above. These resulted in numerous objections from property developers. The proposed alteration was not accepted by the Planning Inspector, who recommended that policy E7 be amended to bring it into congruence with paragraph 42(a) of Planning Policy Guidance Note number 3 (PPG3) published in January 2005. The Council very recently published a convoluted rewording of policy E7 which seems likely to result in further objections. This will be published electronically on 27th February and objections must be submitted before 10th April 2006. back 13

14) These valuations are wrong. The current value of Abbey Mills is £900,000 for residential use, and St Annís Mill is only worth £75,000 because of the outstanding repairs. The higher value of £1,650,000 for Abbey Mills included Abbey Villa and significant new build. back 14a back 14b back 14c back 14d back 14e

15) The proposals will not protect the existing businesses, who will be unable to afford the new increased rents. How exactly will the yuppyfication of a grade 2 listed building ďcontribute to the regeneration of the Kirkstall communityĒ? back 15

16) The estimated cost (£2 million) has been artificially inflated by adopting a perverse strategy and arbitrarily doubling the survey figures. back 16

17) The various valuations in this report do not compare like with like. Prices have been inserted into this report, as suits the need of the argument, with and without the completion of outstanding repairs, with or without additional development, with or without conversion into high class offices, with or without permission for residential conversion, with and without the inclusion of Abbey Villa. Note how the smaller St Annís Mill site is claimed to have a higher "unimproved" value than the larger Abbey Mills complex. back 17

18) How will a net loss of small industrial units ďcreate and protect jobsĒ. back 18

19) "maximises in the short term". The only way that the alternative scheme favoured by Development officers could exceed this figure is by very substantial new build on the riverside at St Annís Mills. Is this really what they have in mind? back 19

20) What exactly does "inappropriate" mean? Abbey Mills was in its day a purpose-built industrial building, which is still suitable for a wide range of industrial uses. back 20a back 20b back 20c back 20d

21) What is meant by listed buildings appearing ďtiredĒ? The estimated cost of £626,000 at Abbey Mills included cleaning and repointing the external stonework and renewing roofs, windows, doors and lintels. back 21

22) It is relatively easy to remodel these buildings, and this would result in a lower overall cost than the perverse solution recommended by Development officers. back 22

23) The figure of £2 million is wrong, for the reasons explained at (16) above. If both buildings were brought fully into use, then the total floor area would be 4793 square metres, or a net increase of 2038 square metres, corresponding to a rental income of £34 per square metre for the additional space. Alternatively, using the total space and the total income (£111690), then the average rent would be £23 per square metre per year. back 23

24) All these figures are wrong. The net value of St Annís Mills is only £75,000 and the net value of Abbey Mills, with a planning consent for residential conversion is only £900,000. back 24

25) The argument is absurd. If we had the capital receipt in our pocket we could spend it on whatever improvements we wanted at St Annís Mills. back 25

26) We donít need the £500,000 contribution towards the public realm. A charitable organisation such as Kirkstall Valley Park can fund the regeneration of the Kirkstall Valley from alternative sources, and has a much better business plan. back 26a back 26b back 26c

27) This destructive fire took place while the building was in the tender care of LCC Industry and Estates Department, who declined to repair the damage at the time. back 27

28) Are Development officers planning a major office development at St Annís Mills, and is this why they donít want the public involved? back 28

29) None of our existing tenants could afford to rent space in a refurbished St Annís Mills. back 29a back 29b

30) Who made these ďunsolicited inquiriesĒ, what did they offer, and what did they want to do? back 30a back 30b

31) The claim is false. The current proposal is to demolish unit 2 (which is part of the listed buildings) to increase road access to the development site. The building surveyors proposed demolition of units 5 and 6 which are the water mill shown on the 1834 Enclosure Map. These are among the oldest and most historically valuable parts of the site. back 31

32) More precise details are required. What public consultation is envisaged over this? What will happen if the public do not support the proposals? back 32

33) Where is the phase one safety audit for this proposal, how will it accommodate the normal requirements for staggered junctions, and what demolition and tree felling will be necessary to accommodate the required visibility splays? back 33

34) The proposed redevelopment will not consist of small industrial units (SIUs) for poor struggling starter companies, but luxury riverside offices suitable for corporate clients. This can be deduced from the expected rental income calculated at paragraph 6.4

St Annís Millsusable floor area sqmrent rollcost / sqm
at present2132£20,500£12
predicted1733£271,000£156

There is no budget to refurbish several poor quality outbuildings at St Annís Mills, and this would not be a cost-effective solution, so the Development officersí proposal at paragraph 4.3 is to demolish them. The total floor area would therefore fall on redevelopment. Even if these outbuildings were retained, the average rent would still rise by a factor of ten. It is very unlikely that our existing industrial tenants could afford these luxury office prices.

Development officers know that our existing tenants at Abbey Mills are very unlikely to move to St Annís Mills and are currently applying to Yorkshire Forward to fund another, higher value use for the main mill building. back 34a back 34b back 34c back 34d back 34e back 34f

35) The foot bridge is a very minor benefit. We have also priced it at about £50,000 depending on the exact design and specification. It would be easy to raise this sum, which is not a material consideration in the overall assessment of the proposals. back 35

36) Riverside walkways would also be easy to provide and fund, so this is a trivial benefit in the overall assessment. The key question is whether the walkways provide good public access around all sides of the main mill building. We have seen some earlier designs (now hopefully abandoned) where the footbridge and walkways were used in conjunction with a 2 metre high security fence to keep people away from a prestige private development. back 36

37) The alternative premises are in Horsforth. It is a matter of opinion whether these are in the ďKirkstall environsĒ and whether this could be said to protect local jobs. back 37

38) The additional land vested in the Neighbourhoods and Housing Department was Abbey Villa. It has now been confirmed that this will not be included in the disposal, although it represents almost half the value of the site. The original valuation for Abbey Mills with residential consent (and implied demolition) £900,000 or £1 million with new build. Both would require a new access road. Extra value with Abbey Villa included £650,000. It is not clear how the shortfall will be funded. back 38

39) The board of Leeds North West Homes were not consulted and would not have supported the disposal of Abbey Villa. back 39

40) Please can we see these written ďestimatesĒ, if they exist? back 40

41) The access to 649 Kirkstall Road is better than either the present or the proposed access to Abbey Mills, but curiously road access is seen as a serious problem at 649 Kirkstall Road, whereas at Abbey Mills it is not. back 41

42) Development officers canvassed Council departments and organisations who were most unlikely to want any involvement with 649 Kirkstall Road, but they never asked Kirkstall Valley Park, who were interested in acquiring the building. back 42

43) The removal of Abbey Villa means that there is now no financial ďslackĒ in the scheme. No provision has yet been made for any highway works. This means that public consultation will be constrained by the knowledge that unless the public agree to potentially unacceptable development proposals, the "public benefit" will be lost. This is not public consultation as it is normally understood. back 43

44) This is based on a perverse approach to the situation. The survey results showed that all essential Wind and Watertight, Health & Safety and DDA issues at Abbey Mills could have been addressed within the allocated budget of £200,000 revenue repairs plus £100,000 allocated to new design fees. There is a viable proposal from Kirkstall Valley Park to restore St Annís Mills. The Council has shot itself in the foot, creating a problem where no problem need exist. back 44

45) Has the private sector partner already been identified, and if so, who is it? back 45a back 45b back 45c

46) Membersí views on these proposals were canvassed early in 2004 on the basis that the financial information supplied by the Development Department was accurate, and before there had been any opportunity for an intensive study of the scheme. They have not been updated to reflect a rapidly changing situation. None of the Kirkstall Ward members now adheres to the positions described in the Executive Board report. back 46

47) A road linkage certainly was considered and this is minuted in the Development Department files. It has currently been abandoned, but developers may resurrect it at a future date. What safeguards or guarantees can the Council offer against a subsequent application? back 47

48) This proposed disposal of Abbey Mills unit 3 to the sitting tenants was advanced in response to a verbal claim by Development officers, now known to be false, that the Council could not fund essential outstanding repairs to the Abbey Mills site. It is now clear from reading the full survey report that the it would be relatively straightforward to accommodate all our remaining tenants in safe and secure, DDA compliant accommodation at Abbey Mills. The proposed use of St Annís Mills as a community punishment and rehabilitation centre, leading eventually to community use, is a viable proposition that offers significant advantages over the solution proposed in the December 2004 report. back 48a back 48b back 48c

49) Can we see the capital scoring matrix, in order to assess our own proposals against the same criteria? back 49

50) There is an alternative, financially viable, proposal from Kirkstall Valley Park which would accommodate all the existing tenants at Abbey Mills, in order to incorporate St Annís Mills into the proposed Kirkstall Valley Park. back 50a back 50b

51) It has been difficult to establish how these costs were derived. The Council commissioned three independent valuations of St Ann's Mills. The surveyors' report in 2003 estimated £433,000 to refurbish these units as basic industrial workshops. A "Concept Study" in February 2004 by Leeds Architectural Design Services (in house), based on moderately detailed bills of quantities, gave a total refurbishment cost of £1,913,000 (plus fees) for refurbishment of the main mill building for occupation by the Council's existing industrial tenants from St Ann's Mills. This did not include an additional floor. Refubishment of unit 1 as workshops would cost £385,000 (plus fees) while demolition of the derelict units and site clearance was estimated to cost an additional £135,500 (plus fees) giving a total cost of £2.8 million just to clean up the site and accommodate our existing tenants, with a little bit of slack. A much less detailed estimate by Lambert Smith Hampton in October 2004 (which appears to be based on gross floor areas multiplied by an overall rate per square foot from an estimating guide) gave a slightly lower figure for conversion of the main mill building into offices that I am not permitted to disclose. This did include an additional floor, but it excluded the workshops. The price for the extra floor was not analysed in detail. The internal ADS figures are much more detailed, and presumably more reliable.

However, none of these professional estimates bears much relation to the numbers in the Executive Board report. I have not been able to discover any factual basis for the estimates in section 6 using the Council's records, which should have been fully disclosed to me for the Scrutiny "call in" hearing in January 2005. The value of the completed development in paragraph 6.7 comes from the Lambert Smith Hampton valuation, but the other figures do not. Perhaps External Audit will have more success in locating where these numbers came from. back 51

52) The discounted cash flow calculations were originally the subject of a separate critique, which is reproduced here for completeness. Click here to download a copy of the original DCF spreadsheet.

Discounted cash flow critique

Paragraph 3.9 in the December 2004 report to the Executive Board contains a discounted cash flow analysis of the alternative proposals. There are four separate problems with this work:

1) the financial model is completely implausible
2) the inputs were not correctly transcribed from the source
3) there is a serious arithmetical mistake in the spreadsheet itself
4) the results were not correctly transcribed into the finished report

1) financial model: Asset values are derived (incorrectly) from recent valuations, and make no allowance for the new investment. The effects are to produce an absurd rate of return on capital of 72% per year in option 4, while maintenance costs bear no relationship to the true value of the property. It is highly unlikely that the Council will achieve 100% occupancy of the incubator units at St. Annís Mills at full market rents, and the tenants would in any case require a substantial continuing subsidy from public funds to afford these inflated prices.

It is not realistic to expect small struggling start-up companies, which require the services of an incubator unit, to pay the anticipated rent in option 4 of £156 per square metre per year. No evidence is included anywhere in the financial model or the December 2004 report to support this estimate, which has a crucial effect on the outcome of the modelling process. The rents in option 3 are only about £30 per square metre per year.

2) input data: The most recent valuation of St Annís Mills in its current run-down condition was only £75,000. The financial model uses the industrial valuation of £375,000 (based on industrial rents) after completing backlog maintenance totalling £433,000. But the Council proposes to invest an additional £1.4 million in the main mill building in option 4, and the total cost of this scheme would be £2.85 million. At Abbey Mills the corresponding industrial valuation was £300,000 but the financial model uses the residential valuation of the mill, plus the council houses next door, of £1.65 million. The council house sale has subsequently been abandoned. This has knock-on effects on the projected maintenance costs, calculated as 2.5% of notional asset value. The effect is to massively load the dice in favour of option 4.

The "backlog maintenance" estimates in the December 2004 report to the Executive Board already included allowances for building improvements and future maintenance over the next 25 years. Both elements have been counted twice in the financial model, inflating both the initial expenditure in years one to three and the ongoing maintenance costs.

3) arithmetic: In option 3, the investment is entered as a credit in cells C9:I9 when it should be a debit. As a result the model records an overall profit of £2.12 million, when on these (highly questionable) figures it should be a loss of £568,000.

4) output results: Option 1 actually produced a loss of £1.37 million on the financial model but this was incorrectly transcribed as a profit in the December 2004 report.

The discounted cash flow analysis contains so many errors that the results in paragraph 3.9 of the December report are completely worthless. However the approach is valid, and should be repeated with the correct property valuations, realistic improvement and maintenance costs, affordable market rents and realistic occupancy rates. Any need for ongoing public subsidies must be properly identified, and the option of investing in the vacant units at Abbey Mills included in the appraisal.

Cllr John Illingworth
27 September 2005
back 52




To be continued...

This site is still under construction. I am working as fast as I can!

Brief summary
Introduction
St Ann's Mills
Executive Board
Resolution