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Flintshire Council Minutes Relating to Leisure Connection Bid From Minutes of Ordinary
Meeting of the Flintshire County Council 25/03/2003 (IV) Quicky Divorce of Cheltenham Borough Council and Leisure Connect In that the firm that runs Cheltenham District Council has lost its contract with CDC to run its Recreation Centres because Council takes over Recreation Centre Firm is given its marching orders. The firm that runs Cheltenham Recreation Centre will lose its contract, because the council says it has failed to deliver. Leisure Connection will not have its contract with Cheltenham Borough Council renewed when it runs out in April 2003. The council will manage the centre in Tommy Taylor's Lane itself, along with the Prince of Wales Stadium, Cheltenham Cricket Centre and Pittville Park and Lake. The decision was made behind closed doors at a cabinet meeting of the Council last night. A working group of the social overview and scrutiny committee said the firm had failed to meet targets. The report followed a council- commissioned users' survey, which found 40 per cent judged the centre's cleanliness as poor or very poor and complained there were too few staff. Leisure Connection was criticised for its staff failing to prevent sex acts taking place in the spa pool. Committee chairman, Coun Duncan Smith (Con, Charlton Kings), said "We have been increasingly concerned about the quality of the services we have received and the inability of the council to improve things for the public. "Months of hard work by officers and members resulted in a clear recommendation to bring the contract back in-house. "This decision heralds a revolution in the quality of sporting facilities in Cheltenham." Relations between the council and the company soured this summer. Developers began a £5.4 million revamp at the centre in June, which includes upgrading three swimming pools and building a two-storey extension. The sports hall and courts have remained open and more than 50 fitness classes are still taking place. But Leisure Connection said closing the pools meant it would lose hundreds of thousands of pounds. It launched a compensation claim for £494,000, which was cut to £245,000 following talks with council officers. Revised Proposal From LC Rejected 23.3.04 Have all councils been so thorough in assessing leisure bids? References to LC have been highlighted. Paragraphs have been created by PB. From http://www.flintshire.gov.uk/WebCont/testmin3.nsf/vwa_CommDateListEnglish/PCM10_04_2003 Policy & Corporate Management Overview and Scrutiny Committee Meeting
10/04/03 The Monitoring Officer commented upon the need to intensively examine the Business Case and the Head of Development and Resources indicated that it was necessary for her to obtain all views relative to this before the report could be finalised. Councillor Dodd enquired on what basis the officers felt that there would be VAT relief to the proposed Company in relation to its charitable status. The Monitoring Officer confirmed that the VAT implications arose not from any relief available to the proposed IPS but to the VAT chargeable on the activities to be undertaken by the IPS and the effect this might have on the Management Fee. It was important to ensure that the IPS had made the correct assumptions about VAT in their submission and that there was no duplication of VAT charges. With regard to the charging policy, the Head of Development and Resources confirmed that a concessionary scheme was in place and was clearly spelt out in the price structure and that the Contract provided for this. If there was any change to this, the contractor would have to seek the agreement of the Council. The Chairman enquired what the circumstances would be if the Council did not agree and the Head of Development and Resources explained the procedure in relation to negotiations in such circumstances. The Chair expressed a view that the projected figures for attendance were slightly optimistic. During the course of this debate Councillor J.F. Jones referred to the references made to the role of the charities and his involvement as such and if there was a need for him to declare an interest. The Monitoring Officer explained that his involvement was too remote to be a problem and that it would be quite in order for him to speak and vote on the matter under discussion. Councillor Armstrong-Braun felt that the discussion should not only be restricted to the proposed Contract with Leisure Connection to ensure that the Council were going down the correct line but that other options should be looked at to see what they had to offer. However, the Head of Development and Resources explained in detail that a two year process had been undertaken to identify the preferred partner and a wide assessment had been undertaken of all the interested parties. She also referred to the role of the Evaluation Panel in that process and that Leisure Connection was identified as the most suitable partner. The officer advised on discussions held with other Authorities and the identification of the good and bad experiences with the various contracts within those Authorities. The Committee concurred with the view that organised visits to Centres where such schemes were in operation would be helpful. Councillor R.P. MacFarlane indicated that the document as circulated went a long way to addressing a number of his concerns. He did have concerns however, in the relationship with the Company and the management fees. He also referred to initiatives of the Welsh Assembly Government on service delivery. Councillor J.O. Jones enquired what the relationship was with the Industrial and Provident Society. The Monitoring Officer explained that the vast majority of the management would be the responsibility of Leisure Connection but because of the need to demonstrate that the Industrial and Provident Society was an effective partner and proposed lessee it was necessary for it to have a purpose and he explained what functions it was proposed that it should reserve for itself. Councillor Dodd enquired how those functions would be discharged and the Monitoring Officer explained that they would not have their staff as they would be seconded from Leisure Connection. Councillor T.W. Jones enquired if other Authorities had exactly the same set up as proposed for the Council and Councillor Dodd in support of that, indicated that it would be a different arrangement in other Authorities. The Head of Development and Resources indicated that Wokingham had such an arrangement and Councillor Dodd commented that any visit to be of benefit must be a like with like comparison with what was proposed for Flintshire. He commented that for example the system proposed for Flintshire was not the same as Chester. Councillor T.W. Jones enquired if there were strong reasons why the Council did not enter into such a partnership in its own right without recourse to a contractor. The point made earlier regarding research undertaken by the Council was reiterated. In responding to points raised by Councillor MacFarlane, the Head of Development and Resources explained how the Council would influence management fees. The officer confirmed that there would be a fee structure and that there would be a 20 years maintenance programme bringing into account a level of investment. The Head of Development and Resources indicated that there would be development of the Council's own performance indicators and that there would be a developing and proactive role. Councillor MacFarlane enquired if the management would be directed. He was informed that it was a partnership and the Council would monitor what the firm were doing and that the Council had taken a strong stance on the issue of charging. Councillor MacFarlane also sought clarification on the role and future arrangements for staff and particularly if there was any threat of redundancies. The Head of Development and Resources indicated there was no proposal for redundancy but if there was a substantial reduction in duties any loss of staff would be done by natural wastage. She also stressed the importance of the role of the Leisure Manager and that this post could not be advertised until the job description was confirmed. Councillor Higham felt it was necessary for a business case to be in place before a final decision could be made and the Committee concurred with this view. He was concerned that there would not be sufficient time in May for the Council to consider and make a decision. The Chair of the meeting indicated that he felt the firm were very slow in their responses. The Head of Development and Resources replied that they were not slow as such but were giving detailed consideration to important issues which the Council had asked them to report upon. Councillor J.F. Jones suggested that it may be appropriate for the contractor to come before the Council or one of the Scrutiny Committees at some time. The Monitoring Officer indicated that it would not specifically be a Scrutiny function, but the firm would be a partner and the appropriate Forum could be determined at the appropriate time. Councillor Armstrong-Braun was of the opinion that the matter would not be considered in May as Leisure Connection still had substantial work to do and were still discussing key areas. He felt considerable more investigation was required and referred to cases elsewhere. He suggested that "proper" legal advice was required. The Monitoring Officer confirmed that the Council had been advised by Consultants at the various stages of the development of the Contract. He also felt that it was an unfortunate comment by Councillor Armstrong-Braun when he referred to "proper" legal advice, because he was satisfied such advice had been given at all stages of the development of the Contract. The Head of Development and Resources commented upon the significance of admitted body status in relation to the management fees and the Monitoring Officer reported that a response was still awaited from the Company's Solicitors on this matter. Councillor Barratt sought clarification on the protection of the role of the dual user sites and community use of such premises. Councillor Barratt also referred to the role of the Connah's Quay Town Council who had funded the provision of play schemes for a number of years in that area. The Head of Development and Resources confirmed that the Contract document took this into account and confirmed that community use was consistent with that currently in operation. Councillor T.W. Jones also commented upon the maintenance programme and the fact that different centres were in varying states of repair and his subsequent concern that there was a risk of closure should buildings not be properly maintained because sufficient funds were not available. The Head of Development and Resources explained how this would be addressed. Councillor Dodd referred to the proposal that there to be a Board of three Members. He suggested that Flintshire would always be in the minority on this Board as they have a single representative and felt that this could create difficulties. Councillor Dodd also commented upon the levels of investment required and queried the benefits gained as a result of the agreements in relation to NNDR for the contractor. The Head of Development and Resources reported that the current proposal was one of five options examined in 2001, the issues were addressed at that time and the fourth option was chosen. The Chair of the meeting confirmed that this was the popular option at that time. The Monitoring Officer, following comments by Members, identified the main points of the philosophy of the Partnership Agreement. The Monitoring Officer also explained the operation of the draft Contract and the process which the Council required to be in place should there be a dispute. With regard to the suggestion that the single Member could be consistently outvoted by the other two Members of the Board, he indicated whilst Members had been nominated by a particular body, they had a duty to act independently to a certain degree. He explained if there was a difficulty in this area how it would be addressed. Members reiterated their concern regarding the pricing policy but it was confirmed that the Council would have a veto on such matters. However, Members suggested that this could put any contract in jeopardy particularly if agreement could not be reached. Councillor Dodd referred to the fact that the establishment of Flintshire County Council's own Trust was an option. He expanded upon why he felt that this was a preferred option. He also enquired about any financial penalties should the Leisure Connection Contract fail. The Monitoring Officer explained that the Company would have to mitigate losses but that it was a requirement of the Company that capital investment would have to be repaid by the Council on termination for default. He referred to the contents of the report attached to these minutes and explained them in more detail. He also referred to the £250,000 Bond which the Company would need to provide and agreed to investigate if this was sufficient. Councillor Higham felt that there was a need for active public relations exercise with users and the Head of Development and Resources confirmed that this was very much the case and would be undertaken nearer the time of the Contract. It was confirmed that when all outstanding information was available it would be the subject of a special Council meeting probably in June. Members asked supplementary questions and the Chair of the meeting indicated that he felt it would be necessary for a report on the outstanding issues to come before this Committee before it was submitted to Council. The Committee concurred with the view of the Chair of the meeting that there were a number of items for the Committee to consider before it was considered by full Council. A joint report of the Director of Education, Children's Services and Recreation and the Monitoring Officer, copies of which had been previously circulated to Members, was submitted. The Monitoring Officer presented the report, the purpose of which was to advise Members of the response received from Leisure Connection on the revised draft operational and contractual obligations documentation and to seek Members' views on the next steps. The Monitoring Officer reminded Members that lengthy negotiations with Leisure Connection, the preferred partner, had been on-going, and the Council determined in July 2003 to bring these negotiations to an end because of an inability to agree acceptable terms with Leisure Connection. At the meeting of the Executive on 16th December 2003 it had been agreed to engage in further negotiations with Leisure Connection on the basis of a further approach and correspondence received from them, which indicated that they were prepared to revert to the original draft Partnership Agreement, if the commercial integrity of the terms could be agreed. Following the meeting of the Executive, a revised draft Agreement was provided to Leisure Connection and a meeting was subsequently held at the end of January 2004 to assist further negotiations. A formal response had now been received following that meeting, and a copy had been circulated as an Appendix to the report. The Monitoring Officer then proceeded to refer to the main points of the response, and that Leisure Connection had made it clear that provided the profit cost element of their management fees were protected over the length of the proposed Contract, they were prepared to be flexible in their approach to any additional requirements needed to accommodate employment conditions, new Welsh Assembly Government initiatives, the changing needs of the Council and new legislation. Where these would involve a reduction in the service provided, Leisure Connection required that their profit costs continue unchanged. The Council would, under the proposed Contract, retain responsibility for major structural repairs to buildings and plant. If there was to be a major problem resulting in closure, then Leisure Connection would require that the management fee continue to be paid, although they would have a duty to mitigate the costs of providing the service at the Leisure Centre until the repairs were completed. The Council would be responsible for any interruption or interference with the service by acts or omissions of the Council, or schools, in the case of a dual-use site, and compensation would be payable where
Leisure Connection could demonstrate any material increase in service costs or any losses suffered by them. Members had already been made aware of the difficulties the Council could face if the proposed Contract was to be terminated for any reason. The Council had negotiated with
Leisure Connection in an attempt to mitigate the impact of the repayment requirements; consequently, in the case of termination as a result of Contract default,
Leisure Connection were prepared to allow repayment over the remaining length of the proposed Contract, but at increasingly higher rates of interest than the rate they had to pay their lenders. The Monitoring Officer outlined the payments that would be required. The Monitoring Officer said that these matters presented potential major risks which required consideration by the Executive before any further detailed negotiations took place. If they were considered to be acceptable risks, further detailed work would be necessary on the management fee, which needed to be updated to incorporate all additional developments which had taken place over the last few months. Further discussions would also be needed with the Governing Bodies and Trades Unions. The Executive Member for Finance referred to the financial implications of the report and referred the specification that had been drawn up by the previous Director of Education, Children's Services and Recreation. Leisure Connection were not now meeting Flintshire County Council's perception of the service it wanted to provide to the Council Tax payers, residents and service users etc. The Executive Member for Education, Children's Services and Recreation stated that the company was prepared to be flexible, but with consideration their terms were unacceptable. The County Council had a responsibility for structural repairs and plant etc., and any closure would require a management fee to be paid to Leisure Connection regardless of any service being provided. In his opinion, the risks were too great and the Monitoring Officer had referred to the high interest rate which would not be acceptable. It was important that, as a Local Authority, it entered into an agreement that was acceptable to the County Council, the Council Tax payers and Leisure Centre users, and it was considered that this was not the case with the proposals that now were being put forward. The Executive Member therefore moved recommendation 4.2 that Leisure Connection be advised that the considerations in the report were not acceptable, and that a further report be made to the Executive in due course recommending further options for the management of the Council's Leisure Centres. In moving this recommendation he was mindful of paragraph 5.2 of the financial implications, and the Council would need to consider different options in relation to the future management of the Centres, including the need to review the current position in relation to the need for capital investment. The Executive Member for Community and Housing Services supported the recommendation and referred to the main reason for entering into a contract with the company was to improve facilities with capital investment for partnership. The situation had now changed and the proposals were not acceptable. The Director of Education, Children's Services and Recreation referred to the previous consideration of this matter by the Executive and County Council, and the main reason to enter into partnership with Leisure Connection was to improve facilities, but also to offset some of the risks. However, the situation had now changed significantly and in his opinion a decision to go ahead with the agreement represented a significant financial risk to the Council. In conclusion, he expressed his appreciation of the work undertaken by Mr. Barry Davies and Mrs. Heather Loveridge on this matter.
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