'Allowable expenses'?

Update 17th December - BBC Wales investigates the issue of EU State Aid Rules and whether they may have been breached by Carmarthenshire Council, Cllr Caiach again raises her concerns over this in her statement below

For sometime now attempts have been made to extract the detailed breakdown of the split of the proceeds of the car park at Parc Y Scarlets sold to Marston's Inns earlier this year.

The Land Registry records the sale figure as £850,000, this was to be split between the council (who are the landowners) and the Scarlets who have a 150 year lease on the land (with no rent payable until such time as the club makes a large profit).

According to Executive Board minutes of July 2012, in an exempt report, outline approval for the sale was given and "an independent valuer be jointly [Scarlets and Council] appointed to determine the appropriate percentage split of the proceeds." The Head of Corporate Property in consultation with the Executive Board Member for Finance, Cllr Jeff Edmunds (Lab) were delegated to finalise the details.

It was confirmed earlier this year, in a written answer from the head of Corporate Property to Cllr Caiach that the money was split equally after the allowable costs and expenses were deducted.

What was not revealed at the time though was how much of the proceeds were actually left to split 'equally', and what precisely those 'allowable costs' were.

Cllr Sian Caiach requested this information through the Freedom of Information Act but it was refused, as was her subsequent appeal. She has continued with her enquiries.

The Executive Member for Finance, Cllr Edmunds apparently under considerable pressure not to do so, has now decided to disclose the details himself (figures rounded off);

Fees to agents and architects                      £50k
Allowable expenses to Scarlets                  £280k
Finders fee for buyer  to Scarlets                £30k
Compensation to club for loss of lease        £76k
Share of remainder :-             Scarlets  -      £220k
        Carmarthenshire County Council  -     £200k

The figure which is interesting is the £280,000 of 'allowable expenses'. It seems that this was used by the Scarlets to pay off a loan to the developers of the Eastgate development, Nottingham based Henry Davidson Ltd  for fitting out the new Scarlets shop and restaurant, The Red Room, within the development.
According to the council this was 'allowable' as it would increase footfall and trade in Llanelli town centre.

Just in case there was any 'viability' concerns with the council's 'flagship' Eastgate development readers may remember that the council decided to rent office space in the new build from Henry Davidson Ltd on a 20 year lease at £250,000 per year. This, apparently, was to save money...

Anyway back to the car park and it all raises some interesting questions;

1. Was the reluctance of the council to release the details of the 'split' through FoI on the grounds of 'commercial sensitivity' an incorrect exemption? Would the disclosure have compromised either party, or would it have actually raised unwelcome questions over the 'allowable expenses'?

2. You would think that any 'allowable expenses' should be directly related to the sale of the property, so should the council have sanctioned it to be used by the Scarlets to pay off a loan from a private company? If the council wishes to increase footfall etc it has proper channels of funding at its disposal.

3. Out of the £850,000, the council had £200,000. The Scarlets had £600,000.
Were all the Executive Board members aware of this windfall prior to reviewing the three year financial agreement on terms favourable to the Scarlets a few short weeks ago?

Of course, councillors who have continued to question the council's financial arrangements with the rugby club and the stadium are considered to be committing nothing short of high treason; threatening the rugby region, the council's investment and economic well-being of Llanelli. This was evident at even the most recent meeting of full council.
Also, Cllr Peter Hughes Griffiths' Motion for two items; the review of the financial package for the Scarlet's and the vastly inflated charges for other council sports facilities, to be debated at full council was jettisoned off to the Executive Board last week where it was rejected out of hand.
A discussion at the last Audit Committee meeting on whether or not the council had sufficient security on the Scarlets' lease should they go into administration was omitted from the minutes completely. Pity it hadn't been filmed.

The reality is that the council is encouraging hundreds of its staff to take severance packages and every single 'non-statutory' service is being examined with a view to cuts, whilst the rugby club remains not only untouched, but enhanced.

It would seem that this may well be another late contender for the Wales Audit Office inbox.