Issue - meetings

To consider any recommendations that may arise from the Scrutiny Committee.

No recommendations from the Scrutiny Committee were received

To consider any decisions made by the Cabinet at its last meeting that may be called-in.

A Decision made by the Cabinet on 16 August 2023 in respect of the following report was called in for consideration by Councillor R Gilmour.

3 Rivers Options Appraisal Report

1. Cabinet recommend to Full Council a “soft closure” of 3 Rivers Development Ltd. over a sensible short term period in order to minimise any potential financial exposure and maximise returns from company assets.

2. Delegated authority is given to the Deputy Chief Executive in conjunction with the Cabinet Member for Finance to deliver/instruct all necessary activities in order to deliver a “soft closure” and maintain timely decision making in order to protect the Council’s position during this process.

3. That the Deputy Chief Executive, in discussion with the Cabinet Member for Finance procure any additional professional advice required to protect the Council’s position and maximise the return to the Shareholder and minimise any potential further losses.

The reason for the call in was:

• The decisions are outside of the Budget & Policy Framework.

The Chairman read a statement which included the following:

• That this Extraordinary Scrutiny Committee Meeting had been called today to identify whether the decision of Cabinet to recommend “soft closure” of 3 Rivers Development Ltd, and any losses or costs that would be incurred by Mid Devon Council.

• That any decision of the Cabinet or of the Full Council around the future options for 3RDL was projected to carry a cost for Mid Devon residents.

• That the Committee’s objective was to learn any lessons that need to be learned to prevent a repeat of this scenario in the future. As those who do not remember the past, are condemned to repeat it.

• That the Committee was not here to assign blame, rather to ensure that the blameless – the residents – were not left to pick up the bill for similar failures in the future.

• That no matter how well-meaning, humans were fallible. This was why we build procedures and controls around decision making. One such role was the role of Scrutiny, with the defined role in our Constitution and, more widely, as Councillors of this Council to speak up and ask questions to ensure good decision making.

• The majority of the current Councillors had no part in the decision making process around 3 Rivers Development Ltd, until the future options decision be presented to Full Council lessons must be learnt from the past to ensure the Council does not repeat the mistakes of predecessors.

• Time should be set aside on the Committee’s Work Programme to talk to previous Cabinet members, senior officers and other relevant parties to learn lessons.

RESOLVED that:

1. Time be set aside in the Work Programme for a “3 Rivers lessons learned” exercise and that any recommendations that come out of that be reported back to cabinet.

2.  A “3 Rivers – Lessons to be learned” issue take place over one or two meetings in November and any recommendations sent back to Cabinet by the end of December 2023.

(Proposed by the Chairman, Cllr R Gilmour)

Report of the Deputy Chief Executive, this item will be discussed under the general exception clause.

The Cabinet were presented a report* which considered the current trading position of the Council’s wholly owned property development company – 3 Rivers Development Ltd - and its potential for medium to longer term financial viability based on its own analysis and supported by external opinion from Francis Clark.

The Cabinet Member for Finance highlighted the options available to the Council along with a guideline on the potential losses for each option.  And suggested that a soft closure was the most appropriate option out of the four. 

The Deputy Chief Executive (S151) explained that the recommended soft closure considered and estimated a 6 to 12 month rundown for a soft closure.

The following was considered:

·       Asked if there were more positive options available to the Council, the Deputy Chief Executive (S151) explained that a soft closure was the least worse option which also minimised risk.

·       It was noted that the pandemic was a challenging moment for all business and that it was contemplated that 3 Rivers Development Ltd needed a second chance. However, it was suggested that a private company may not have been appropriate for a Local Authority to create. It was felt that this had put a strain on the openness and transparency of the Council. It was asked if actions of other Local Authorities had been considered.

The Deputy Chief Executive (S151) confirmed that the pandemic hindered all business nationally and in particular development companies, which was further compounded by the cost of living crisis that followed. Furthermore, it was agreed that the balance between confidential information of a company in a competitive market and the need for openness and transparency had been a challenge. It was noted that other Authorities operated trading companies all with mixed results and that failures tended to be what the media focussed on.

·       Asked whether the confidential reports might be published publicly in the future, the Deputy Chief Executive (S151) explained that currently reports were live commercial reports that needed to be kept confidential but some financial information might be placed on Companies House in the future.

·       The expected completion time of outstanding projects was sought along with reassurance in the losses calculated in the report, given the current housing market. The Deputy Chief Executive (S151) explained that the Bampton site was due to complete in 6 months and the St George’s site completion date was imminent. In addition, the Deputy Chief Executive (S151) officer along with Francis Clark were experts and estimated that there could be a 10% tolerance of the calculations presented. This was also supported by additional external advice and that the housing market was not something that could be easily predicted.

·       It was established that all work requested by Full Council had been completed.

·       That there was a need for the Council to move forwards on this matter.

·       External reports were welcomed but encouraged that an independent survey took place at the Bampton site.

·       It was felt that there was a need to maximise income from  ...  view the full minutes text for item 30