King's Lynn business hub 'worth £1 million less than unpaid council loans', report reveals
A Lynn business hub is now worth around £1 million less than the amount loaned by council chiefs towards it.
The shortfall has been revealed in a report outlining the proposed terms of reference of an independent inquiry, which itself is likely to cost tens of thousands of pounds, into affairs relating to the King’s Lynn Innovation Centre (KLIC).
And officials have admitted it is likely to be years before the sum is recovered.
The development and management of the Nar Ouse Way complex has been a major political issue since its operator, Norfolk and Waveney Enterprise Services (NWES), failed to repay loans worth £2.75 million to West Norfolk Council when they were due to last November.
Following an internal review, councillors voted to set up an independent inquiry into what went wrong during a special session in March.
And an independent commercial valuation of the building was jointly commissioned by NWES and the authority, whose cabinet will look at the issue next Tuesday.
But officials’ latest report said: “The jointly appointed valuation of the building undertaken by Savills concluded that the value was £1.87 million, leaving a balance outstanding against the loan and accrued interest and legal costs of over £1million.
“Negotiations are under way with NWES to finalise a settlement agreement for the repayment of the outstanding balance.
“This is likely to extend over a number of years.”
Labour backbencher Charles Joyce, who led calls for an external inquiry, said yesterday: “The KLIC has become a money pit.”
But, despite its financial problems and the potential for the investigation to cost up to £40,000 to complete, senior figures still insist the centre is working.
The report said: “The building itself has been a remarkable success story, is fully occupied and will provide a six figure financial return (per year) to the council.”
It added that NWES is continuing to manage the building at no cost to the council as a partial settlement of the debt.
The draft parameters of the inquiry, which were published this week, set out eight areas for investigation:
The “precise nature” of the partnership between the council and Norfolk and Waveney Enterprise Services (NWES)
Whether the partnership extended to other companies in the NWES group and the impact of that
Whether the partnership extended to companies outside the NWES group, where common shareholders or directors can be identified
Administration of the KLIC project, particularly the loans made by the council and arrangements for them
Councillors’involvement in the project’s establishment, approval and scrutiny.
Lessons learned as outlined in an internal audit committee task group and any further recommendations
Arrangements for the development, management and monitoring of large scale capital projects, plus any further recommendations for action
Arrangements for identifying, managing and mitigating risk of large capital projects, plus any further recommendations.
Officers’ report to the cabinet said the inquiry’s terms had been drafted so that it would look at areas which were not already being covered by the audit committee’s working group.
But Mr Joyce said that, while he welcomed the inquiry, its terms of reference needed to be made tougher.
He said: “People want to know not just what went wrong but where did it go wrong and who is responsible for it going wrong. They (the terms of reference) need beefing up.”
The form of the inquiry will not be finalised at Tuesday’s meeting, as the decisions taken there will be referred to the full council.
It is recommended that the leaders of the council’s three main political groups jointly appoint the inquiry’s chairman. Officials say six potential candidates have been put forward following discussions with the Local Government Association.