I’ve just been reading the Masterplan Viability Report which has already received a good deal of criticism from the Council of Ministers and the Jersey Development Company.
It is pretty clear that the figures don’t stack up, and that at different times, different figures are being bandied about. What is lacking from the whole development is a comprehensive budget and time table so that we can see how it is going. This need not include revealing fine details of tenancy agreements, but at present it seems that “confidentiality” is a neat way of hiding rather embarrassing figures.
Ernst and Young (EY) who had some of that more confidential information calculated that the first block B4 may return a `profit' of £3,040,000 assuming the land is contributed at nil value. This figure will further reduce once site decontamination costs are known. The report states that:
“Due to the restrictions of the Non-Disclosure Agreement, this figure does not take account of the actual incentives provided to UBS but does reflect 'market' rental incentives.”
In other words, in the desperation to get the project off the ground, what we don’t know is how much discounting in one way or another was done to secure the tenancy of UBS. For all we know, and no assurances have been forthcoming, it may be that single tenancy, which was required to start the whole project moving, was rather like a “loss leader” in a Supermarket, a product artifically priced low in order to get people inside in the first place.
What is also clear is that the project won’t deliver the full plan - the basic public realm promised as part of the scheme, namely the underground car parking - to replace the car park being removed by the development - nor will it deliver the park, and as for the underground road, forget it.
When the scheme was passed in 2008, annual maintenance costs for the sunken road (which goes down by the underpass and comes up at Gloucester Street) were estimated to be half a million pounds. I imagine that seven years down the line, that would be even greater. Can we afford to throw away that money?
It is not clear whether the ultimate responsibility for those costs would be funded by the scheme, that is by the rentals, or by the States, or by the States making up any shortfall. Clearly if funded by the States, in the term of a four year States Assembly’s lifetime, that would amount to £2 million. At a time of economic austerity, it would seem madness.
EY themselves note:
“There are currently proposals to sink the road beneath the development which we consider to be commercially unrealistic and arguably a burden upon the whole project. The associated public realm, including the creation of landscaped amenity areas, should also be considered in the context of a revised masterplan of the wider scheme.”
So why not go back to the drawing board? The reason is simple. To remove the sunken road from the scheme, it would involve re-examining the whole scheme, and effectively bringing an amended scheme back to the States. The Council of Ministers is afraid that if that happened, they might lose more than the sunken road, and hence they do not dare do that.
The carrot dangled before the States Assembly was that there would be a significant return to the States from the scheme. But there is a more modest idea: that the development of the scheme will allow influx of existing businesses to the Esplanade “hub”, and free up parts of St Helier for redevelopment of old offices, not easily adapted to the 21st century as offices and better for housing.
That’s a Keynsian idea – pumping money into the economy (or at the least, breaking even on the scheme) while revitalising the economy at the same time. It is a much more modest idea than one involving sunken roads (another one of “Freddie’s Follies”) or massive returns to the States. It suggest that States won’t actually lose out on the deal, but they won’t make a massive profit either – but that was never the point of the scheme. That more modest proposal might be achievable.
If that is the real rationale behind the International Finance Centre, and I suspect it is, the Council of Ministers might garner more support by being open and honest about it, rather than feeding the public what looks like a pie in the sky which will never materialise on the plate.
The problem is that they are now so entrenched with promises made that they would sooner try to shoot their way out than change their story. They don’t seem to realise how damaging it is.
I was talking to a businessman yesterday who had formed the view that this Council of Ministers had less confidence from the public and the business community than any other.
Given the lacklustre performance and mistakes under Terry Le Sueur as Chief Minister, I’d say that is quite an achievement, but probably true. It is the inability to admit mistakes, the fortress mentality, and the political hubris that says "Trust us" which just does not inspire confidence.
It is pretty clear that the figures don’t stack up, and that at different times, different figures are being bandied about. What is lacking from the whole development is a comprehensive budget and time table so that we can see how it is going. This need not include revealing fine details of tenancy agreements, but at present it seems that “confidentiality” is a neat way of hiding rather embarrassing figures.
Ernst and Young (EY) who had some of that more confidential information calculated that the first block B4 may return a `profit' of £3,040,000 assuming the land is contributed at nil value. This figure will further reduce once site decontamination costs are known. The report states that:
“Due to the restrictions of the Non-Disclosure Agreement, this figure does not take account of the actual incentives provided to UBS but does reflect 'market' rental incentives.”
In other words, in the desperation to get the project off the ground, what we don’t know is how much discounting in one way or another was done to secure the tenancy of UBS. For all we know, and no assurances have been forthcoming, it may be that single tenancy, which was required to start the whole project moving, was rather like a “loss leader” in a Supermarket, a product artifically priced low in order to get people inside in the first place.
What is also clear is that the project won’t deliver the full plan - the basic public realm promised as part of the scheme, namely the underground car parking - to replace the car park being removed by the development - nor will it deliver the park, and as for the underground road, forget it.
When the scheme was passed in 2008, annual maintenance costs for the sunken road (which goes down by the underpass and comes up at Gloucester Street) were estimated to be half a million pounds. I imagine that seven years down the line, that would be even greater. Can we afford to throw away that money?
It is not clear whether the ultimate responsibility for those costs would be funded by the scheme, that is by the rentals, or by the States, or by the States making up any shortfall. Clearly if funded by the States, in the term of a four year States Assembly’s lifetime, that would amount to £2 million. At a time of economic austerity, it would seem madness.
EY themselves note:
“There are currently proposals to sink the road beneath the development which we consider to be commercially unrealistic and arguably a burden upon the whole project. The associated public realm, including the creation of landscaped amenity areas, should also be considered in the context of a revised masterplan of the wider scheme.”
So why not go back to the drawing board? The reason is simple. To remove the sunken road from the scheme, it would involve re-examining the whole scheme, and effectively bringing an amended scheme back to the States. The Council of Ministers is afraid that if that happened, they might lose more than the sunken road, and hence they do not dare do that.
The carrot dangled before the States Assembly was that there would be a significant return to the States from the scheme. But there is a more modest idea: that the development of the scheme will allow influx of existing businesses to the Esplanade “hub”, and free up parts of St Helier for redevelopment of old offices, not easily adapted to the 21st century as offices and better for housing.
That’s a Keynsian idea – pumping money into the economy (or at the least, breaking even on the scheme) while revitalising the economy at the same time. It is a much more modest idea than one involving sunken roads (another one of “Freddie’s Follies”) or massive returns to the States. It suggest that States won’t actually lose out on the deal, but they won’t make a massive profit either – but that was never the point of the scheme. That more modest proposal might be achievable.
If that is the real rationale behind the International Finance Centre, and I suspect it is, the Council of Ministers might garner more support by being open and honest about it, rather than feeding the public what looks like a pie in the sky which will never materialise on the plate.
The problem is that they are now so entrenched with promises made that they would sooner try to shoot their way out than change their story. They don’t seem to realise how damaging it is.
I was talking to a businessman yesterday who had formed the view that this Council of Ministers had less confidence from the public and the business community than any other.
Given the lacklustre performance and mistakes under Terry Le Sueur as Chief Minister, I’d say that is quite an achievement, but probably true. It is the inability to admit mistakes, the fortress mentality, and the political hubris that says "Trust us" which just does not inspire confidence.
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2 comments:
That’s a Keynsian idea – pumping money into the economy (or at the least, breaking even on the scheme) while revitalising the economy at the same time. It is a much more modest idea than one involving sunken roads (another one of “Freddie’s Follies”) or massive returns to the States. It suggest that States won’t actually lose out on the deal, but they won’t make a massive profit either – but that was never the point of the scheme. That more modest proposal might be achievable.
You're quite right. But the political consequences of saying that government needs to invest in the public good are too dreadful for States members to contemplate: the tide of garbage from the small-staters will flood in.
I could not agree more with the last part. I never thought that the Le Sueur tenure could be bettered for incompetence.
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