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May 11, 2010

Council assets under pressure

The most recent survey of council assets reported that more than a quarter were in poor physical condition and almost the same number were no longer fit for purpose. With the squeeze on public finances this situation can only get worse. One option is for councils to transfer some of these surplus assets to community groups. Some councils see this an opportunity to help build community resilience. Others are less convinced. DTAS has produced an overview of the policy and practice of asset transfer across Scotland’s 32 local authorities

Council assets under pressure


DTAS is running a policy symposium on Asset Transfer on 26th May.

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Extract from report – Public Asset Transfer: Empowering Communities

Summary of findings from interviews


Each interview was introduced with a short explanation of why the review was being carried out with specific references to the Community Empowerment Action Plan, work that has been taking place in other parts of the UK and in particular the significance of the Quirk Review in terms of the Review’s impact on the development of policy and practice in England.


While a significant number of Councils were broadly aware of the existence of the Community Empowerment Action Plan, only a few were aware of the references in the plan to the contribution that community ownership of assets could make, and fewer still were familiar with the findings of the Quirk Review and its report – Making Assets Work.


This may explain why only a very small number of councils were found to be making a direct connection, either strategically or operationally, between how they managed their assets and the how communities within the local authority area could be supported to become more empowered and resilient.



Asset management policy – key findings


Aim of asset management. The overarching purpose which characterised  the approach of most councils towards managing their assets was to have an estate of the correct size and condition which is fit for purpose in terms of being able to meet their service delivery obligations. 


Recent increase in proactive approaches the management of assets.  A significant number of councils reported that they had recently undertaken comprehensive asset reviews and were in the process of implementing newly agreed asset management strategies.  The key drivers behind this increase in proactive asset management activity appears to have been a combination of the recent Audit Scotland report, internally driven processes of service rationalisation, and external budgetary pressures. Of these, the principle driver of policy was most commonly reported as the need to rationalise assets in order to reduce the associated revenue costs.  This pressure had intensified in recent months as the prospects of severe constraints in public spending have become more certain. The need to generate capital receipts was also considered to be  important but current market conditions were severely restricting activity in this respect.


Strategies not joined up.  No council cited the disposal or transfer of assets to community groups as being part of, or reflected in, any formal strategy or council policy relating to community empowerment.  A small number of councils reported that they were familiar with the correlation between community development and asset ownership and as a result were operating informal policies which had been informed by the experience of council officers and which had evolved over many years through local custom and practice. In general however the absence of any formal local authority strategy or policy was not necessarily considered to be a barrier to asset transfer. Most respondents viewed any barriers as being external to the council.


Disposal of surplus assets.  For the majority of councils, asset disposal was typically considered as an option only after the council had declared an asset to be surplus to its service requirements.  The most common description of Council policy in these circumstances was to offer the asset, in the first instance, to community planning partners and thereafter to place it on the open market. For these purposes, the community sector was not considered to be a CP partner. Whether this reflected a wider issue of the community sector’s engagement in the local community planning process was beyond the scope of the review.



Asset transfer practice – key findings


Ad hoc and demand led.  Asset transfer to community organisations was referred to by most councils as being ad hoc and in the main arising out of direct approaches to the council from local groups.


Leases rather than title.  With very few exceptions, councils viewed the concept of asset transfer as referring to the transfer of management responsibility through a lease arrangement rather than the transfer of outright ownership. The leases could vary in length from medium term (15 – 20 years) to long term (99 year lease). Councils that expressed a preference for leases referred to the need for some assurance that these public assets could ultimately be brought back under council control if it were considered necessary. In addition, the majority of councils expressed concern that if public assets were to be disposed of, best value had to be the principle consideration and therefore consideration of disposal at less than market value would be unlikely.  Several councils argued that there is no material difference or advantage to be gained when choosing between the transfer of outright ownership and providing a very long lease.


Sale at less than market valuation.  However a small number of councils were willing to consider the case for disposing at less than market value where community benefit could be demonstrated. Current regulations require councils to seek Ministerial approval (Section 74) before making such a transfer and although the government is currently consulting on whether this requirement should be lifted, councils did not view the additional requirement as an impediment to the transfer of assets.


Volume and value of transfers.  It proved difficult to obtain definitive information on the scale and value of disposals/transfers which had taken place over the past few years and which could in any way be extrapolated to describe an accurate national picture or trends over the last three years.   Overall, the scale and value of assets transferred through lease arrangements over this period appears to be relatively minimal, and with respect to the transfer of outright ownership, the level of reported activity was negligible.


Type of asset transferred.  The main asset class which councils consider in this context is what might be referred to as “community amenity” assets: former town halls, village halls, community centres, bowling greens, golf courses etc. In many cases these were being leased at peppercorn rents and sometimes with the council retaining an element of maintenance responsibility. However, a number of councils appeared to be reviewing their approach to this asset class because many of these assets are no longer considered core to service delivery, give rise to increasing revenue costs and there is additional pressure to be more transparent re how financial support is provided to groups. (“Following the public pound” report by Audit Scotland cited).  A variety of approaches are being adopted or considered including large scale transfers on a locality basis into an arm’s length trust, case by case reviews, and putting leases on more commercial terms with corresponding grants from the council to offset increased costs to groups where this is consistent with council policy objectives and priorities.


Demand or supply led?  It is difficult to determine whether the emphasis on this type of community asset reflected a general demand deficit from community groups or a lack of an appreciation on the part of councils as to why or how different types of asset, with more obvious commercial potential, might be of interest/value to a community.   For instance while many councils appeared to be reviewing other asset classes (e.g. offices, schools) with a view to rationalising their estate, there was no evidence that disposal of these assets to the community sector would typically be considered. 


Demands for ownership blamed on funders.  In general, councils reported limited demand from community groups to purchase assets outright.  It was expressed that most communities were content with long lease arrangements. Where interest in assuming outright ownership had been expressed, a number of councils voiced concerns that this was this was a result of grant conditions stipulated by certain funders rather than the result of genuine community led interest. This was not entirely borne out by the feedback from communities – some of whom reported that their local councils had not responded favourably to their expressed interest in taking on outright ownership.  However, a number of councils indicated that they could become more enthusiastic around sales rather than long leases in the future due to the anticipated budgetary restriction in the short to medium term.


Physical condition of asset.  Councils would normally seek to transfer a building in its current state of repair although some refurbishment might be considered where a third sector organisation was going to use the asset in order to deliver a service as part of a service level agreement with the Council.


The role of elected members.   Elected members were described as having both a corporate and constituency role.  Very few responses indicated any level of political leadership at a council-wide level in relation to promoting the asset ownership by communities but individual councillors were seen to be highly influential in making the case for particular projects in their wards. In more rural local authorities where communities are more dispersed, the local councillor appeared to have more influence and was able to argue for different terms of transfer than might exist elsewhere in the local authority area.  A number of councils reported that the changing political complexion of their councils since the last election has had an impact in terms of the overall willingness to engage in asset transfer (50% first time councillors at last election)


Understanding the rationale for asset transfer.  A number of councils appeared to acknowledge that community ownership or control of assets is potentially empowering for local communities and can result in better local services (especially in areas which might not otherwise be a high priority for council services).   However there was no evidence that this perspective was formally reflected in any council policies.  


Inherent risks of asset transfer.  Most councils reported that there are a number of significant risks involved in transferring assets to communities.  Most commonly cited were concerns over the capacity of groups to manage, maintain and develop assets.  This concern was linked to a concern around the longevity and sustainability of groups – the cyclical nature of the stability of community groups was often referred to. Councils were concerned that where they had transferred buildings to community groups, there nonetheless remained an undiminished public duty to step in if things went wrong (especially where iconic local buildings were concerned). In those circumstances the overriding concern was that the council would be taking an asset back in a worse condition than when it was transferred or having to operate an asset in a locality which would not necessarily be a priority for the council.  A number of examples were cited but further work is required to assess whether this general view is supported by the evidence..


Inclusive communities.  Some councils noted concern about how representative and inclusive some community groups were and that some groups appeared unwilling to share their facilities with the wider community.


Underlying attitudes.  On a number of occasions, councils raised concerns that asset transfer was akin to ‘selling off the family silver’  and therefore was a reason not to engage in it. This was linked to both losing control of an asset once it had been transferred,as well as forgoing potential future capital receipts.  The same concerns did not seem to apply to disposals on the open market which suggests that a different approach is applied to transfers to the community sector.  Many councils appeared to start from the assumption that there was little demand or interest from community groups to take on ownership of assets.  Consequently many councils felt it unnecessary to expect or propose to communities that they should consider taking on the burdens and risks of running an asset in circumstances where the council was prepared to fulfil that function. 


Concerns about capacity.  Many councils expressed concerns about the organisational capacity of groups to own, maintain and develop assets in the long term. Whether this is a generally held perception or whether it is based on practical experience was difficult to determine as very few concrete examples were presented. Only a very few councils said they would commit resources towards building the capacity of groups where capacity (or lack of it) was being identified as a risk factor in a potential transfer.


Funding and resources.  A serious concern for all councils was the lack of external funding and different forms of finance that are available to community groups who wish to acquire assets, especially at full market values. In addition the lack of available sources of ongoing revenue support to assist in the post acquisition phase was frequently cited as a barrier.  Given how few councils felt able to commit resources to build local capacity, a significant barrier to increased levels of transfer was the lack of external support available to groups.



Conclusions and implications for further work


The Review Process.  It is worth noting that the findings contained in this report are only a snapshot of how officers in particular sections of the each local authority responded to the researchers. Given the apparent absence of formal strategic linkages between approaches to asset management and community development and empowerment, it is quite possible that different perspectives on these issues would have been proffered if different sections of the council had engaged in the interviews.


Levels of awareness less well developed.  Despite this, it seems that the general levels of awareness of the key issues surrounding the community asset agenda is not as developed in Scotland as it is in parts of England. The development of the remaining elements of this programme of work will need to reflect this and consider the different organisational role and status of local authorities in Scotland to those in England..


Opportunities and risks in future.  The next few years could be potent ones for increased levels of asset transfer as many Councils throughout Scotland may be looking to rationalise their assets. However, there are risks regarding the type and quality of assets which could be on offer and the capacity of community groups to respond to opportunities.


Ownership vs. Long lease. The case for community asset ownership needs to be promoted and encouraged in a way which reflects the current levels of activity and general awareness of this agenda – both in terms of why communities might be interested in assets and how asset transfer can be of benefit to local council– particularly from the point of view of elected members.Furthermore, it would be worth exploring models of ownership and leasing, and the benefits that flow from each option. This could be taken forward during the remainder of the programme.


Resources are key.  Funding/financing and support to groups are critical issues which need to be addressed.  There appears to be a need for more and better designed funding and finance programmes.  The model pioneered by the Adventure Capital Fund (now called the Social Investment Business) in England and adopted in the English Government’s Communitybuilders programme is relevant (an integrated programme of feasibility, business planning and support; grant funding; and loan financing including patient capital) could be studied to assess applicability in Scotland.


National policy needs to connect locally.  A stronger focus on the community empowerment agenda from Scottish Government, backed up with resources, may help to create a more positive policy framework within which councils could respond. More specifically, the new guidance for councils promised in the CEAP on disposal at less than market value could also provide an opportunity to make a clearer, more positive statement about community asset ownership.


Promoting community anchor organisations.  Active promotion and support of the concept of community anchors by Scottish Government could encourage a more strategic and sustainable approach and would link community empowerment objectives nationally with community ownership of assets locally.