Agenda item

Cabinet Member with Special Responsibility Councillor Evelyn Archer)

Report of the Corporate Director (Finance and Performance).  

(Cabinet Member with Special Responsibility Councillor Evelyn Archer)

The Corporate Director (Finance and Performance) submitted a report that advised Members of the current situation at Lancaster Market and provided options for the Council to consider in terms of the future of the Market. 

The options, options analysis, including risk assessment, were set out in the report as follows: 

Option 1 – No Change. The Council would continue to operate the market and this would result in a continued deficit being incurred at the market in excess of £400,000. However, a recent announcement has been made which has indicated that the freehold of the market is to be sold which may result in some changes to the form of the landlord’s management. At the time of writing, this is most likely to be a sale of the whole Marketgate Shopping Centre rather than just the Market Hall building. It may be that from the sale, there could be some reductions in the level of service charge payable by the Council. Alternatively, charges could increase, though this would have to be agreed with the City Council. Until the new landlord is in place, no estimate can be given, but a substantial deficit will remain for the Council. 

Option 2 – The Council to acquire the freehold of the market. This option has arisen as a result of the recent inclusion of the freehold of the market building in a public auction. Had the auction proceeded, this option would have been a possibility in that the Council could consider the cost of borrowing against the cost of renting the building. However, the freehold of the market was withdrawn from the auction and at this time, this option is not available to the Council as the existing landlord is understood to be including it in a sale of the whole Marketgate Shopping Centre. Should such a sale fail, or if a new landlord wished to rationalise the property holding, this option may become possible at sometime in the future. 

Option 3 – Increase Income. This has been the policy of the Council for the last 2.5 years. It is clear that the demand for stalls in the market is limited and whilst new traders arrive, existing traders leave. This gives limited opportunity for increased income. Rental levels are at a point where there is little scope for an increase without the real potential for traders leaving the market resulting in a worse position for the Council. Option 3 is directly linked to options 4 and 5 below. 

Option 4 – Reduced expenditure. A complete look at the expenditure has been undertaken which has shown that there is limited scope for further reductions. A high proportion of expenditure is taken up by the rent and service charges payable to the Council’s landlord which amount to approximately £506,200 per annum with a rent review outstanding which could lead to an increase in this amount. As an alternative, the Council has considered a proposal by the Landlord for an additional retail unit to be created in the market building which would result in reduced rental and service charge payments, but this has not been progressed by the current landlord. Time will tell whether a new landlord would wish to proceed along similar lines. 

Option 5 – Consider increasing the occupation by including the Assembly Rooms Market and Charter Market (street market) in the main market building. 

(a)                Due to the success of the Charter Market, which created a surplus of over £37,000 in 2006/07, it would not be possible for all of the existing traders to physically fit into the market building. There could be a risk in this instance that by splitting the Charter Market to achieve a fuller market building but smaller Charter Market, the Council could end up with having two unsuccessful market operations. It should also be noted that the Charter Market only trades on each Wednesday and Saturday and, therefore, unless the traders decide to stay in the indoor market permanently, the effect of improving trade would be limited. From knowledge of the Charter Market traders, many stand on different markets during the week, and it is, therefore, unlikely that they would change to stay in Lancaster, an option that has already been offered to individual traders with no take-up. 

(b)                A complete review of the Assembly Rooms Market took place in January 2006 when the Lancaster and Morecambe Markets Committee resolved that the Market should stay in its current format as it was becoming a more attractive proposition to retain for the Council from the point of view of income generation and service provision. Since that time the Assembly Rooms Market has not changed and it remains fully occupied, producing a surplus in excess of £9,000 in 2006/07. Subject to some detailed survey of stall sizes being completed, it may be possible to fit most of the Assembly Rooms market into the indoor market. However, the Assembly Rooms market only operates from Tuesday to Saturday from 10.00 to 16.00 and not every trader can attend each day so that a “buddy” system operates where adjoining traders look after each others stalls. This would not fit with the opening hours of the indoor markets and it is therefore likely that some Assembly Rooms traders would be cease trading. If such an option was to proceed, the existing Assembly Rooms Market premises would need to be re-let. 

If this option were to proceed, in either format, there would be risks associated with affecting the success of two markets whilst not significantly reducing the problems associated with the main market.

Option 6 – Consider whether the market should be handed over to the Market Traders who, according to press reports wish to manage the Market. Alternatively consideration could be given to transferring the operation to a third party market operator, should one be available. Under this option it would clearly be preferable for a new operator to completely cover the Council’s rent and service charge to the landlord, but a market operator may indicate that they can only operate at a certain level of expenditure/income. The terms of a transfer, should one be possible, would determine the level of remaining deficit, if any. 

Option 7 – Consider whether the market should close. Many traders occupy on the basis of leases that are due to expire in March 2009 – the market could not close before that date without incurring costs as part of an agreement with traders. If the market closes with no alternative user identified the Council would have to continue paying rent and landlord service charges. This would mean that there was very little difference to the existing deficit. If an alternative retail user could be found, the opportunity would exist to assign the Council’s lease to that retailer and, thereby, eliminate any deficit. Should such an option be preferred, there are legal timescales involved which would need to commence in 2008/09, with any financial benefit commencing in 2009/10.

There were no preferred Officer options. 

It was moved by Councillor Roger Mace and seconded by Councillor Evelyn Archer: -

“(1)   That Officers investigate the feasibility of surrendering the lease, subletting to a single tenant or assigning the lease of the Market to a single tenant, all with effect from 1^st April 2009, and report back to Cabinet on these options within three months, with a view to eliminating or substantially reducing the current annual deficit of around £400,000 per annum, which is equivalent to approximately 6% of the City’s current Council Tax. 

(2)     That another report be presented to Cabinet at the same time, to outline options open to the Council to advise, support and assist market tenants affected by the proposals to relocate their businesses with effect from any closure.” 

By way of amendment it was moved by Councillor Jon Barry and seconded by Councillor Maia Whitelegg: -

“(1)   That the City Council makes every attempt to purchase the freehold of the Market. 

(2)     That the City Council attempts to revitalise the market in terms of layout and lettings using outside experts, if necessary.” 

3 Members (Councillors Jon Barry, Tony Johnson and Maia Whitelegg) voted in favour of the amendment, 6 Members voted against (Councillors Evelyn Archer, June Ashworth, Eileen Blamire, Abbott Bryning, David Kerr and Roger Mace) and 1 Member (Councillor John Gilbert) abstained from voting, whereupon the Chairman declared the amendment to be lost. 

Members then voted as follows on the original proposition. 

Resolved:

(8 Members voted in favour (Councillors Evelyn Archer, June Ashworth, Eileen Blamire, Abbott Bryning, John Gilbert, Tony Johnson, David Kerr and Roger Mace) and 2 Members voted against (Councillors Jon Barry and Maia Whitelegg)

(1)     That Officers investigate the feasibility of surrendering the lease, subletting to a single tenant or assigning the lease of the Market to a single tenant, all with effect from 1^st April 2009, and report back to Cabinet on these options within three months, with a view to eliminating or substantially reducing the current annual deficit of around £400,000 per annum, which is equivalent to approximately 6% of the City’s current Council Tax. 

(2)     That another report be presented to Cabinet at the same time, to outline options open to the Council to advise, support and assist market tenants affected by the proposals to relocate their businesses with effect from any closure.

Officers responsible for effecting the decision:

Corporate Director (Finance and Performance). 

Head of Property Services. 

Reason for making the decision:

The decision enables various options to be explored in order to reduce the current annual deficit.  The decision notes that the level of subsidy is not considered to be acceptable to the Council.  The decision also requests further work to be undertaken on supporting market tenants in the event that the market has to close.