PRSA errors will not be repeated

Friday, July 20: 4.30pm - BOSTON'S new councillors have hit out at their predecessors as the full details of the Princess Royal Sports Arena 'debacle' become clear.

A special meeting of Boston Borough Council's cabinet was held last week to discuss the recent Audit Commission report into the PRSA affair – and councillors were told of the 'significant shortcomings' in the way the project has been handled.

Presenting his damning report to the council, the commission's Neil Bellamy highlighted the rising costs of the arena since its inception in 1999, describing initial running-cost estimates as 'grossly inaccurate'.

"The cost was significantly more than anticipated," he said. "It's always been apparent the council intended to grant 3 million to the arena – but we now know it has cost an awful lot more than that."

To date, Boston Borough Council has spent more than 6.25 million on the PRSA, with that cost budgeted to rise as high as 8.25 million by 2012.

Mr Bellamy told the cabinet there had been 'key shortcomings' in the way these rising costs were monitored, describing how 'in certain circumstances' elected councillors had not been clearly informed by their officers about how much the project could eventually cost.

"I think there were some significant shortcomings in the way the council's involvement was handled, though it was nothing systemic," he said.

The new ruling group did not hold back in their criticism. Coun Ray Newell described the project as 'a cock-up by the old council', while finance portfolio holder Coun Richard Lenton said: "The people responsible for this debacle have all gone now. Is there some way of letting them know about this report?"

When told by Mr Bellamy that the Audit Commission's remit was simply to report its findings to the current council, and not to point the finger at any individuals, Coun Lenton added: "Then they get away with it."

Chairing the meeting, deputy leader Coun Peter Jordan pledged that the mistakes highlighted in the report would never happen again.

"We are aware of the weaknesses you've pointed out," he told Mr Bellamy. "We thank you for pointing us in the right direction.

"I think the duty of this new council is to make sure this is not repeated. The people of Boston want to hear that. This will not be repeated."

For a special report on how the PRSA's costs spiralled out of control, turn to pages eight and nine.

THE overall cost of the PRSA, and the losses it has been making since it opened, should have been predicted from the beginning.

This was the message from Boston Sports Initiative managing director Jackie Ross to a meeting of Boston Borough Council's cabinet on Wednesday.

"The final cost was exactly what a fantastic stadium like this costs to build," she said.

Council chief executive Mick Gallagher confirmed that in his experience, 'the total cost of this facility was probably about what you would expect'.

So while the eventual price of the stadium may have been about right, the problem for the council is that it never intended to spend so much money.

When the stadium plans were first drawn up and priced at around 10 million, the council insisted on scaling them back to something less expensive.

However, despite a major redesign, by the time it was completed the stadium still ended up costing around 10 million (not all this cost was met by the borough).

Furthermore, the funds the council had been told could be raised through grants from charities and other bodies never materialised. Mrs Ross told The Standard there are 'drawers full of rejection letters' at the stadium dating back to when the fundraising efforts were being undertaken.

Having already committed 3 million to the project, the borough council found it had to meet these shortfalls to ensure the stadium was completed.

Councillors were also told on Wednesday that it is common knowledge that every community sports facility, be it public swimming baths or an athletics stadium, always runs at a loss.

"There isn't a public sports facility anywhere that makes any money," said Mrs Ross.

Mr Gallagher confirmed this. "All local authority-run facilities are subsidised by that authority. The idea is to make it inclusive – you don't want it so expensive it excludes members of the community from being able to participate."

Back in July 2002, however, the council was told the PRSA would make a profit of almost 400,000 in its first five years.

"If I'd have been here then, I certainly would have asked how they got to those figures," Mrs Ross told The Standard.

EFFORTS to make the PRSA more profitable are currently being hamstrung by past mistakes, councillors were told.

Improving catering facilities – perhaps by introducing a coffee and juice bar – has been identified by the Boston Sports Initiative (which runs the arena) as a key way of increasing the arena's revenue

But councillors have been outraged to discover that when the PRSA was built, sole catering rights for the entire site were granted to Boston Rugby Club.

"That is an absolute disgrace, and yet another very bad decision on behalf of whoever drew up that lease," said Coun Anne Dorrian.

Deputy leader Coun Peter Jordan described the arrangement as 'totally contradictory to what we are trying to do'.

Under the lease agreed, Boston Sports Initiative says the income it receives from the rugby club in return for sole catering rights, and its use of the clubhouse and pitch, is 'barely sufficient to cover the basic costs of grounds maintenance'.

It was revealed at the cabinet meeting on Wednesday that the arrangement the rugby club would provide the PRSA catering – through private company Caterwell – was actually laid down in a covenant when the council bought the land from the Emerson family.

Even council chief executive Mick Gallagher was forced to admit he had 'no idea' about this latest development.

An upset Coun Dorrian said: "I'm extremely concerned that even after extensive discussions around this, things still keep coming out. Yet again there appears to be another skeleton coming out of the cupboard."

The council agreed it would have to look at exactly what had been agreed in closer detail.

Problems discovered by the audit commission...

1. Building costs – 'The development has cost over 2 million more to construct than originally expected'.

2. Funding problems – 'Funds expected from other sources have not materialised to the extent projected'.

3. Running costs – Estimates that the arena would make a profit during its first few years were 'grossly inaccurate'. In fact it has made enormous losses.

4. Information to councillors – 'The full extent of the financial exposure of the council should have been more clearly identified in reports to elected members when decisions on granting additional funding were made'.

5. Poor monitoring of performance – The benefits of the arena to the people of Boston need to be 'much more explicitly set out as targets, with performance monitored against them', so the Borough can see if it is getting value for money.

6. Contracts signed without councillors' approval – While for the most part 'appropriate authority' was obtained by officers, two instances were found when the commission was 'unable to trace any approval by the council'.

7. Lack of clear vision – The council should 'clearly identify what it expects from the facility, how this fits in with future strategies in the area, and consider this against the full likely costs'.

The Audit Commission's report reveals in grim detail how initial estimates of the arena's costs were 'grossly inaccurate' and simply spiralled out of control.

Much of this information was not available to the public at the time, with the press routinely being ejected from council meetings whenever the PRSA came up for discussion under the pretext that 'commercially sensitive' matters were to be discussed.

For the first time, The Standard can now reveal the full timetable of how costs soared at every stage...

1999-2002 – The planning stages. The council commits to spending 3 million from its reserves on the arena's construction. The arena's running costs are expected to break even 'at least'.

July 2002 – Things are looking good. The council is advised by its private consultants, Crescent Marketing, that the arena will make profits of 398,000 in its first five years. Construction work begins the following month.

September 2002 – The first signs of concern. Some councillors raise fears about rising construction costs and a shortfall in the amount of funding secured. However, the council 'receives assurances on all issues', and the project continues.

June 2003 – It all starts to go wrong. The consultants' advice that the arena would make a 398,000 profit in its first five years has to be drastically revised once a company (Bladerunner) is actually brought in to run the leisure facilities. Rather than making a profit, new estimates suggest the arena will lose around 325,000 over the same period.

June 2003 – And it gets worse. A 'significant shortfall' is revealed in the amount of funding that has been secured for the arena, while building costs have over-run by around 400,000.

June 2003 – As a result of these shortfalls, the council agrees to lend BSI 1.9 million from its reserves, as well as guaranteeing two further loans (from the Len Medlock Trust and Lloyds TSB Bank) totalling 1.4 million, to ensure the completion of the project.

June 2003 – The council also agrees to cover whatever losses the arena makes over its first five years (currently estimated at 325,000).

September 2004 – The arena is completed.

January 2005 – The council hands over a further 50,000 to fund BSI's planned legal claim against project managers PGA 'in light of perceived weaknesses in their control of the project'. To date, no lawsuit has been brought and no compensation received.

February 2006 – Disaster. The council is informed that the arena's expected operating losses have risen from 325,000 over five years to an estimated 754,000 over the final three years. This leaves the council with a gaping hole in its financial plans of more than 450,000.

March 2006 – The council pledges another 289,000 from its reserves to cover some of this cost.

January 2007 – But there's more. The council is told BSI's operating losses have increased further, and the now desperately cash-strapped Borough has to fork out another 159,000. The council embarks on a 'zero-budgeting' exercise, cutting costs wherever possible, and considering options such as the closure of public toilets.

February 2007 – And still there's more. A new report into BSI's losses reveals the council will need to pay another 184,000 to keep BSI afloat until April 2009.

Mark James

FORMER chief executive of Boston Borough Council, who led the planning of the project.

INVOLVED in the appointment of Crescent Marketing as external advisors and fundraisers, and PGA Management as project managers.

Left Boston in February 2002 (six months before construction work began) to become chief executive of Carmarthenshire County Council in Wales. There, his most high-profile project has been... the construction of a highly-controversial multi-million pound rugby and athletics arena.

Mr James' council is a 'joint partner' alongside the Llanelli Scarlets rugby team in the planned new stadium project, and has pledged 15 million towards its construction.

Crescent Marketing

Bath-based consultants brought in by Mr James on the advice of the Len Medlock Trust (also based in Bath).

RESPONSIBLE for raising funds for the project during its early stages. The Audit Commission found funds 'never materialised to the extent projected'.

Advised the council that the arena would make nearly 400,000 profit in its first five years. The Audit Commission found this prediction was 'grossly inaccurate'.

PGA Management

Another consultancy firm based in the south-west, brought in by Mr James on the advice of David Medlock, of the Medlock Trust, to oversee the construction of the arena.

The Audit Commission was critical of the fact it could find 'no trace' of the appointment of PGA ever being agreed by elected councillors.

PGA is now the subject of a million-pound compensation claim from BSI 'in light of perceived weaknesses in their control of the project'.

Nicola Bulbeck

Took over as chief executive of Boston Borough Council from Mr James in March 2002. In charge of the council during the project's construction stages and its first years in operation.

Left in February 2006 to become head of Teignbridge District Council in Devon.

Joyce Dobson

Conservative leader of the council throughout the project, from 2000 until she stepped down in May 2006.

Coun Richard Leggott

Only current member of the council involved in the project. The two-time mayor was a cabinet member throughout the period and was one of the council's representatives on the original BSI board.

Len Medlock Charity

Has provided funds, loans and advice throughout the project.