September 30th, 2016

Did Coventry council leader Lucas mislead taxpayers over Ricoh?

Updated: 4:50 pm, May 07, 2015

COVENTRY council leader Ann Lucas is facing questions over whether she misled voters, city taxpayers and Sky Blues fans over the Ricoh Arena dispute.

The Coventry Observer yesterday put questions to her after newly published accounts for the year up to May 31, 2014, for the then half council owned Ricoh firm, Arena Coventry Limited, revealed net losses of £392.229.

In August 2013, Coun Lucas had claimed to BBC Coventry and Warwickshire at the height of the Ricoh/Sky Blues dispute that ACL was “very profitable”, even without the football club, which was then playing “home” games in Northampton.

Today, she admitted the Ricoh Arena was not sustainable at the time without Coventry City Football Club and “not able to wash its face”.

Yet, in an interview with BBC Coventry and Warwickshire’s Shane O’Connor on October 8 last year – the day after councillors agreed a deal to sell the stadium built by and for the Sky Blues to the then High Wycombe-based London rugby club Wasps – she claimed ACL WAS “washing their face”.

Many observers at the time in August 2013 doubted her claims about ACL being “very profitable”, especially given evidence from the then latest publicly available accounts, which recorded only a small profit when the football club was a tenant.

We also put a series of questions to her about the Wasps deal agreed by councillors in private on October 7 last year, amid ongoing secrecy. We questioned her over the £14million loan, underwritten by taxpayers, to the now 100 per cent Wasps owned ACL, amid the deepest planned cuts to council jobs and services in living memory. The council’s loan arrangement to ACL to prevent its insolvency was originally approved by councillors in private in January, 2013.

Labour council leaders have repeatedly claimed they would only loan money to viable and sustainable businesses, including through the Coventry Investment Fund.

Asked about her previous claims about ACL, Coun Lucas, who had ousted John Mutton in a leadership coup in May 2013, told the Observer in a statement: “The period covered by the latest accounts published by ACL correspond with the temporary exile of the Sky Blues from the Ricoh Arena.

“This period was always going to be challenging for ACL financially as it developed a revised business plan to compensate for the loss of a major tenant.

“It was never likely that ACL would be able to replace this loss of revenue overnight. In addition to losing rental income from the club, ACL was also been faced with a significant level of additional expenditure required to protect its position through the various legal challenges it has faced during this period.

“I fully accept that, for the particular year in question, ACL was not able to wash its face and reported a loss in its accounts. This certainly reflects the challenges that ACL faced in operating the Arena without a sports team as a key partner.

“However, councillors recognised the transition that ACL would need to make in order to be viable without the Sky Blues back when making the decision to refinance the loan to ACL in January 2013 when this first looked a possibility.

“The decision taken then, and reiterated by me in the subsequent months, demonstrated our confidence in the underlying business and the ability of ACL to generate new revenues to be able to flourish and continue to provide a world class sports and entertainment venue for the people of Coventry preferably with, but if not then without, the Sky Blues. My view on this has not, and did not, change.

“ACL has positive shareholder funds and positive net profit to date – it is a profitable company. It has always published its accounts on time and has not had any qualification or emphasis of matter from its auditors.

“It has also always met its financial obligations to its creditors including the city council whose loan repayments have always been met in full and on time. It is not unheard of for businesses which are profitable in the long term to post losses in some years, particularly when faced with a uniquely challenging set of circumstances as was the case here.

“The overarching position remains that I am confident that in the long run ACL will remain profitable and we wish its new owners every success. I very much hope this will be built on a strong partnership between Wasps and Coventry City and very much hope to see both enjoy great success at the Ricoh Arena.”

The struggling Sky Blues claim to be still searching for a new stadium site just outside Coventry, and continue to claim the club is not sustainable without commercial revenue from owning a stadium.

The new ACL accounts for 2013/4 reveal losses which contrast with profits the previous year of £775,465.

They also appear to show very little of the then 40-year loan was being paid back to the council – just over £100,000, with interest payable of over £700,000.

Sky Blues’ owners Sisu had in 2013 put one of its companies into administration after ACL – then owned by the council and the Alan Edward Higgs Charity – had filed to put the club into administration, leading to the Sky Blues losing ten League One points.

The club had stopped making rent payments, claiming what many observers agreed had been extortionate rent of £1.3million. A further ten points was lost when ACL refused to sign the club out of administration in August, 2013.

Talks over Sky Blues buying back the charity’s 50 per cent shares in ACL had collapsed.

A High Court judge, Mr Justice Leggatt, ruled last year that any prospect of a deal in 2012/3 had “fallen away” because neither side had ultimately wanted it, including the charity and Coventry city councillors opposed to the club’s hedge fund owners.

In October last year, ACL’s shares were sold to Wasps for what council insiders claimed was £5.5million. The amount was similar to figures discussed between the parties in 2012, and much less than the £30million Bob Ainsworth MP had told Parliament would be a fair deal.

Under the Wasps deal, ACL’s lease arrangement with the council retaining the Ricoh’s freehold was believed to be extended to a mammoth 250 years. The Wasps deal would see them pay back ACL’s loan to the council, which is effectively acting as its banker, meaning city taxpayers retain a risk in ACL.

Successive courts have heard Sisu had offered to write off the loan, before the council purchased it from Yorkshire Bank in January 2013, as part of their bid for a 50per cent stake in ACL.

Wasps have refused to state how the whole deal is being financed, or who their funders are.

We also put the following questions to Coun Lucas and the council..

1. WIll the loan be retained as payable to the council and paid back over 20 years, as was reported and attributed to council sources after the council agreed to the Wasps deal on October 7?

ANSWER: “Commercially Confidential.”

2. Wasps has been reported to be a loss making company. The council appears to have tranferred the debt (that it purchased from Yorkshire Bank) in a loss making company to a loss making company. What assurances can the council leader, if any, give Coventry people and taxpayers that this loan will be paid back?

ANSWER: “The council has not transferred the debt – it remains with ACL, backed by a business plan.”

3. Does this not go against the stated ethos that the council will only invest in companies which evidence shows can be sustainable and/or promote economic growth?

ANSWER: “ACL is sustainable and is promoting economic growth. For example, the forthcoming European Cup Match with Leinster will put millions of pounds into the local economy.”

4. Might the council step in to help financially if the business is struggling?

ANSWER: “The council has no reason to believe this will happen.”

5. While many have so far welcomed Wasps’ move to Coventry, there is also widespread anger and despondency among many Coventry City fans that the council and charity sold the company running the stadium built by/for the club to Wasps. The unpopularity of the deal was recognised by councillors in the October 7 public “debate” in the chamber, and is still reflected almost daily on social media and other internet forums.

Was it councillors’ understanding when agreeing to the deal that the Wasps’ business case was predicated on double occupancy, and CCFC remaining as tenants?

ANSWER: “CCFC do remain as tenants of ACL under the terms of a licence agreement they signed with ACL which remains in force. ACL’s business case will of course include this.”

6. What, if anything, does the council leader suggest might be done in the future to help Coventry City FC?

ANSWER: “The future of CCFC is a matter for the club and its owners. As ever, the council’s door remains open if they wish to discuss anything.”

7. I was told by (council executives) Martin Reeves and Chris West in January 2014, as I believe was the BBC and as I reported at the time, that the £14.4m for the ACL loan was taken from the council’s “cash balances” – described as money lying around which had been allocated to future capital projects which may or may not materialise – which would be replenished at a later date by pruential borrowing.

Did that ever happen? If not, why not?

ANSWER: “The council loan to ACL was capital expenditure by the council, that will ultimately be funded by borrowing. The council has not yet needed to borrow to fund the loan because of its overall cash position.

“The council does not leave cash balances lying around but seeks to make returns on them to benefit the council tax payer and preserve services. In this case the interest on the ACL loan has already generated more than £1m in profit on interest.”

8. Why is it said in relation to the debate on budget cuts that cash balances and/or “usable reserves” are not available now (to stave off drastic cuts in services)? What is the estimate of “cash balances” available to the council and where is this recorded in the latest accounts?

ANSWER: “The council’s reserves are all earmarked, apart from a general reserve of approximately two per cent of net spending, which is kept as a contingency in case of unforeseen circumstances, in line with normal local authority practices. The level of reserves is kept under review.

“Cash balances are not simply available to spend – often they relate to cash received by the council for specific purposes. Like most large organisations, the council manages its cash flow to ensure it has the cash available when it needs it.”

9. What value was received, in anything, as part of the October 7 deal over the council’s shares in ACL with Wasps, for extending ACL’s lease?ANSWER: “Commercially Confidential.”

More to come.

The Sky Blues moved to the Ricoh Arena in 2005. (s)

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