Decision details

Lancaster Market

Decision Maker: Cabinet

Decision status: Recommendations Approved

Is Key decision?: Yes

Is subject to call in?: Yes

Purpose:

To consider options for the future of Lancaster Market

Decisions:


(Cabinet Member with Special Responsibility Councillor Barry)

 

Cabinet received a report from the Head of Property Services to consider options for the future of Lancaster Market including the opportunity to integrate with the City Museum.

 

The options, options analysis, including risk assessment and officer preferred option, were set out as follows:

 

The Council had several options on how it might move the market forward. These options were based on the decision taken by Council in March 2010 to retain a refurbished and revitalised market in Lancaster.

 

 

 

Option 1:

·                     To implement the finding of the NCS review which would require the following investment

 

 

Budget Figure (£)

Entrance doors

40K per entrance

Internal layout changes

400K

Drop down banners

1K

External glazing vinyl transfers

12K (+ original images)

Demountable stalls

1K each

Part-time business development manager

20K per annum

 

·                     Review the rents to market value once the refurbishment works are completed

Advantages

·                     The NCS proposals would provide an opportunity to reinvigorate the market and potentially bring in new tenants.

Disadvantages

·                     There would be a substantial cost to the council and no guarantee that the scheme would be a success or that the existing deficit, currently estimated at £619,500 for 2011/12 would be reduced.

Risks

·                     There is a risk that reduced number of traders would continue in the market as a result of the increased rents.  This could lead to a further spiralling down of the market prior to refurbishment works being undertaken.

 

 

Option 2:

As a consequence of discussions held with the market traders there is a proposal to move all tenants down to the ground floor, and retain first floor accommodation for either a single let or a let at some other use, e.g. exhibition space. Costs of the works, including a plan of the proposal, are show at Appendix B.

·                     The costs of refurbishing the ground floor to accommodate such usage, with minimal refurbishment to the first floor are estimated at £270K including fees. However, it should be noted that this does not include the cost of any particular fitting out requirements in individual stalls other than specialist works to relocate café kitchen equipment. Market traders have expressed the view that the council should be responsible for all costs of any move, although cabinet may wish to indicate whether they feel that traders should contribute to fit out costs as part of this agreement 

·                     Consideration could be given under this arrangement to increase rents to full market value on completion of works.

 

Advantages

·                     The move of all units to the ground floor will give the traders more visibility and create a greater sense of vitality to the market

·                     Traders appear to be in agreement with the option, and this cooperation of the traders may well encourage a quicker resolution to current underutilisation.

·                     The option would cost less than full refurbishment

Disadvantages

·                     There would still be a substantial cost to the council, with no guarantee that the scheme would be a success

·                     There would be limited assurance that the deficit would be reduced as there is currently no confirmed tenant to take the upper floor at a market rent and no absolute guarantee that all existing traders would remain in the market after a move to the ground floor.

·                     Tenants may find the new rents and service charges on the ground floor unaffordable, and the council would still have a significant deficit, currently estimated at £619,500 for 2011/12,  with reducing numbers of stalls

Risks

·                     Increased rents and service charges may reduce stall holder numbers

·                     Significant investment with no guaranteed return

·                     The Landlord and Tenant process will result in new leases being granted, without a break/redevelopment clause, and if this was to happen, any move by the tenant would need to be by agreement of all the tenants.  Should a single tenant not wish to relocate, the proposal could not be implemented.

 

However, should the council wish to consider the option of not retaining a refurbished and revitalised market in Lancaster, the following options are appropriate:

 

 

Option 3:

·                     To renew the existing tenancies on a four year lease (subject to the outcome of the application to court)

·                     Not to invest any further funds in remodelling the market building

·                     Keep rents at the level set by cabinet on the 22 June 2010. (subject to court determination)

Advantages

·                     Certainty will be given to the tenants regarding the future of the indoor market, which may encourage new tenants to take units and prevent stall holders leaving

·                     No capital allocations will be required other than the repair and maintenance funds needed to implement the conditions of the lease.

Disadvantages

·                     Stall holders will continue to leave because no investment has been made

·                     The market will continue to run at a significant financial loss to the council, which may increase should further stall holders leave

·                     There will be no significant change programme for the market, and as identified in the NCS report, such change is required to try and achieve a vibrant and vital market for the future.

Risks

·                     Ongoing general deterioration of the market hall

·                     Tenants will continue to leave

·                     Landlord/Headlease costs are fixed, and the revenue losses to the market, currently estimated at £619,500 for 2011/12, may increase

 

 

Option 4:

·                     Renew the existing tenancies on a four year lease (subject to the outcome of the application to court)

·                     Provide no further investment in to the premises for remodelling purposes

·                     Increase the rent and service charges to the full market value (subject to court determination)

Advantages

·                     Certainty will be given to the tenants regarding the future of the indoor market, which may encourage new tenants to take units and prevent stall holders leaving

·                     No capital allocations will be required other than the repair and maintenance funds needed to implement the conditions of the lease.

Disadvantages

·                     Tenants may continue to leave due to lack of investment

·                     The increased rent may encourage tenants to leave at a greater pace

·                     The ‘net’ cost of holding the building will increase and revenue/rent decreases.

Risks

·                     Ongoing general deterioration of the market hall

·                     Tenants will continue to leave

·                     Landlord/Headlease costs are fixed, and the revenue losses to the market, currently estimated at £619,500 for 2011/12 may increase

 

In light of the findings of the report, and on the assumption that the Council still desired a thriving indoor market in line with Cabinet and Council decisions, it was evident that investment of some sort was needed in the market but achieving that desire is by no means guaranteed. It would be normal to carry out some form of cost benefit analysis to determine the benefits of investment in the market. However, it was impossible to predict the future income of the market due to the uncertainty of whether all existing traders would remain in the market and whether there would be any additional take up of stalls. As a result, whilst the main conversion cost for the ground floor of the market was known, any meaningful assessment of future income was not possible. However, the Council was committed to the market until at least March 2015 and a view needs to be taken as to the operation of the market during that period.

 

It was considered that, taking into account all known risks, option 2 would provide the best resolution to the very difficult, complicated and complex issues that surround the market. 

 

Councillor Barry proposed, seconded by Councillor Hamilton-Cox:-

 

(1)        “That the recommendations, as set out in the report be approved with the addition of a further recommendation: ‘that legal agreement be reached with traders on the move to the bottom floor and to costs that traders would pay for moving and fitting out.”

 

By way of an amendment to recommendation (7), which was accepted as a friendly amendment by the mover and seconder of the proposal, Councillor Bryning proposed:

 

“That all recommendations with the exception of recommendation (1) be referred on to Council for consideration, and that they also be subject to the outcome of a financial appraisal of all relevant options to reflect the Council’s fiduciary responsibilities to council tax payers as a whole, and that this appraisal be reported to Council for consideration to inform its final decision-making.”

 

Councillors then voted on the amended proposition:-

 

Resolved unanimously:

 

(1)        To not move the market to the museum.

(2)                 To move all market traders onto the ground floor and not to increase rents or service charges at this point.

(3)                 That legal agreement be reached with traders on the move to the bottom floor and to costs that traders would pay for moving and fitting out.

(4)                 That the move in (2) be done with some urgency to protect existing businesses on the top floor and to protect the Council's future rental income.

(5)                 To seek alternative tenants for the upper floor.

(6)                 To carry out the recommendations in terms of improved marketing and management recommended to Council in the NCS report received in December 2010.

(7)                 To examine the Council's costs of running the market and to consider whether these can be reduced.

(8)        That all recommendations with the exception of recommendation (1) be referred on to Council for consideration, and that they also be subject to the outcome of a financial appraisal of all relevant options to reflect the Council’s fiduciary responsibilities to council tax payers as a whole, and that this appraisal be reported to Council for consideration to inform its final decision-making.

 

 

Officers responsible for effecting the decision:

 

Head of Property Services

Head of Financial Services

 

Reasons for making the decision:

 

The City Council wishes to maintain an economically sustainable city centre and retaining and improving the provision of the indoor market can help to facilitate this.

Members need to ensure that their decision-making is based on appropriate consideration of relevant factors, including cost, risk, value for money and other finance related matters as outlined in the report.  This is in recognition of their fiduciary duties to local taxpayers as a whole.  Clearly at this stage the options presented did not take account of any investment appraisal and therefore information was incomplete.   The decision will enable a full options appraisal to be produced and included in the referral report to Council. 

 

Publication date: 20/09/2011

Date of decision: 26/07/2011

Decided at meeting: 26/07/2011 - Cabinet

Effective from: 10/08/2011

Accompanying Documents: