26 November 2008 - RIVER CENTRE RESPONSE TO THE SAVE OUR RIVERSIDE GROUP
From Rob Gray,
in response to the points raised about the River Centre business plan by the Save Our Riverside Group.
Dear Save Our Riverside Group,
Thank-you for reviewing the Trust's Business Plan for the Twickenham River Centre. I am writing to you as the building manager for the River Centre and the main author of the Business Plan. I have attempted to provide answers to each of your questions below. Each question is numbered, with my numbered response to it.
Q1. The fit out costs in Table 2 (p.29) total £1,125,000. As there is "material non-charitable" use as well as charitable use in the building, all development and fitting out costs will suffer VAT at 17.5% which could add a further £200,000 to the bill. The building will include a café/restaurant, commercial boathouse, shop, commercial exhibitions and evening and weekend room hire. These are all non-charitable uses.
A1. The fit out costs in Table 2 of the plan include £775k for the main building and a further £350k for the restaurant. In each case these are initial costed estimates based on an outline specification of the works proposed. An allowance has been made for VAT at 17.5 per cent in each case at this stage. VAT is likely to be payable for the restaurant as this is a commercial operation. We shall be taking advice as to the VAT situation for the main building, giving its largely charitable purposes, in due course.
The main building fit out costs will be paid by the Trust as the works proceed (likely to be largely in 2011). The specification for the main building is currently being developed and the costs will be updated over the next 12 months.
The restaurant fit out costs will be paid by the restaurateur as the works proceed (also likely to be largely in 2011). The costs will be recouped by the restaurant by amortised rent rebates over the proposed ten year contract period. The rent rebates will be at £35,000 per year over the ten year period, providing a total fit out cost of £1,125,000. Further work will be undertaken on the restaurant plan for the project over the next 12 months.
Q2. Inflation is discounted in the report. If inflation continues to rise will all the funding be commensurately increased?
A2. Inflation has been discounted from the plan as this allows a more objective view of the forecast changes in costs and revenues over the ten year model period. This is based on the assumption that inflation (or deflation) will act equally on both costs and revenues over this period. This is a standard assumption in business planning at this stage in the process.
Given that all costs are based on Q3 2008 the fit out costs will increase in line with inflation as the forecasts are re-cast in subsequent plans. However, in the present climate, costs are as likely to reduce as increase in the short to medium term.
Q3. The development phase of the project is expected to cost £257,000. Only £102,000 has been found so far, leaving £155,000 still to be found, and we are told that two funding bids have not been successful. It is alarming to note that the shortfall is expected to be raised by fund-raising events, educational activities and volunteer support. So the biggest cost element is being raised on a wing and prayer. Not very sound business.
A3. The development phase runs from 2007 to 2011. A major grant is in place from City Bridge Trust. This has covered all the costs to date and will run until the end of 2010. Other funders have been reticent to fund the development phase of the project prior to planning permission being in place. This has resulted in a funding gap of some £31,500 in 2009 and the project team proposes to bridge this gap by organising fund raising events - potentially supplemented by educational and project revenue from other Trust activities.
A fund raising team is in place to organise these events. Plans are being developed for events next year. This is an experienced team and we are confident that this funding gap will be met.
In 2010 and 2011 the short fall will be met in large part by grant funding bids, following receipt of planning, potentially supplemented by commercial support. In discussion with grant funders it has been made clear that funding bids will be welcomed once planning permission is in place. Additional fund raising from further events is also possible to further supplement this.
This period of the project, prior to planning, was always recognised by the team as the most difficult to fund. We are very grateful to City Bridge Trust fort heir support, the great generosity of local members and supporters who have provided a further £10,000 of funds and not least the many professionals in the project team who are providing a large number of hours on a pro bono basis so as to progress the project.
Q4. The Richmond Adult Community College is expected to provide 32% of the income for the River Centre. Where is their Business Plan to support these figures? They are already saying that the River Centre may restrict their growth in services because of the lack of space in the education space of the building. Will their contract bind them to paying 32% of the necessary income? Who will be responsible if there is a shortfall? RACC have told us that they do not need the River Centre for their expanded programme.
A4. The Trust has an agreement to work with RACC to develop a programme of environmental education courses. It is this programme of courses that will provide 32 per cent of the income to the River Centre. Five separate packages of courses have been identified as follows:
- A Diploma in land based environmental studies for 14 to 19 year olds
- National Vocational Qualifications (NVQs) in conservation management for adults
- Apprenticeships in conservation management for 16 to 25 year olds
- Adult courses based on the river, the wider environment and sustainable living
- Supported learning in the environment and horticulture for students with learning difficulties
Preliminary estimates of the revenues from these courses to the River Centre were provided by RACC, based on their extensive experience in the education sector and knowledge of the funders. The Trust and RACC are currently working in earnest to develop these packages. The first joint project with RACC was under package (e) and this was completed earlier this year, delivering support to students with learning difficulties. This programme will be extended next year. Delivery of packages (b) and (d) will start in the spring of next year with package (c) to follow later in the year. The Diploma (package (a)) is the largest of the five and is due to start in 2010.
The implementation of these packages of environmental education over the next year or so will help the River Centre project in many ways. It will provide considerable practical experience of project delivery in partnership with RACC and others in advance of the River Centre opening; it will raise the profile of the project; it will train many local (and predominantly young) people in environmental matters; it will help to implement practical improvements in the local environment; and it will identify local individuals and organisations who are willing to be involved in the sector (both teachers and students). All in all it will greatly increase the capacity and resilience of the sector.
It is very likely that this development process will result in changes to the Business Plan - this is to be expected and welcomed as the document is charting a rapidly evolving process. In essence the scale of the education work proposed is considered appropriate at present but the details are likely to change. The Trust is happy to report that the RACC are committed to this partnership - they require a strong community based partner to deliver this programme of work and consider that the Trust and its partners provide this. They also welcome the River Centre as an important asset to the community and resource for environmental education.
Q5. The other major contributor to the income of the River Centre is the Restaurant, which is budgeted to produce 23%. In this recessionary climate this is extremely risky.
A5. The restaurant will be open along with the rest of the River Centre in 2011. The economic climate in three years time is very difficult to predict at this stage. However UK HMG Treasury's latest (November 2008) summation of independent forecasts of annual changes in UK GDP shows a 0.9 per cent fall in 2009 with growth of 1.2 per cent in 2010 and 2.4 per cent growth in 2011 and 2012. This current best indicator shows a return to growth by the time the restaurant is open.
Any venture includes an element of risk. However, the Business plan shows that revenues are distributed across seven main categories, with 17 revenue streams in total, and this provides a broad and robust operational model. This model has been tested in the risk analysis section of the Business Plan, which shows the River Centre is capable of operating through periodic failures of revenue from the restaurant or other major revenue sources.
Q6. The income from the learning space is budgeted at 19%. Where does this money come from? Is there any overlapping with the money being raised by the RACC?
A6. The learning space consists of two class rooms that can also be configured as a single large space. These spaces will be used for education courses being managed with RACC and for other events managed by the River Centre team. These events are referred to as "learning space" revenue and are separate from the RACC revenue. These will include:
- School visits organised by the education manager
- Community events organised by the River Centre manager and partner organisations
- Community bookings made by third party organisations for events with a broad community benefit in line with the values of the River Centre organisation
The River Centre will be a vibrant and well used building with a full programme of community and environmental events seven days per week, daytime and evening.
Q7. Why are the tenants of the office space paying service charges which are either equivalent or lower than the charges they are currently paying?
A7. The service charges set out in the business plan are based on the operational cost estimates derived to date. The actual service charges have not been set as yet and will be developed with reference to the actual operating costs of the building and the expectations and capacities of the key interested parties.
The River Centre team has a target to provide a service charge that is either equivalent or lower than the charges currently being paid (with a suitable allowance for inflation) so that these organisations, that are operating in the charitable sector and for the benefit of local communities, are able to continue to operate effectively, in a high quality office environment and with no additional financial burden.
Q8. The Environment Trust is being charged a peppercorn rent by the Council for the use of the building. How much could the Council receive if was a commercial enterprise? Does this represent best value for council tax payers?
A8. The first part of this question is probably best answered by the Council. The second part of the question will be answered in good time by the local community. The hope and expectation of the River Centre team is that the services and activities provided through the River Centre will be greatly valued by the local community.
Q9. Has adequate funding been set aside to pay for the legal documentation which will be needed for the operation of the River Centre as well as the operations of the restaurant and boathouse?
A9. The legal fees anticipated to draw up agreements for the River Centre itself and the restaurant operation are a major component of the costs envisaged for the latter part of the development phase of the project. These fees have been estimated with the advice of a recently retired senior partner in a city legal firm with some 30 years experience of building and commercial development. The fees anticipated for setting up the agreement for the boat house operation are significantly smaller.
Q10. Grant funding is required for the fitting out of the building and one of the salaries, namely the community education manager. The community seems to be at the bottom of the list!
A10. Most of the operations of the River Centre will provide either direct or indirect benefits to the community. Most of the staff will be funded through the operational revenue of the building and will also be largely employed in providing benefits to the community, either directly or indirectly. The community education manager has been identified as potentially grant funded as this is a position which particularly attracts grant funding.
Q11. This will do nothing to rejuvenate Twickenham, which is dying in front of our eyes. We already have a much loved playground and café, which are going to be destroyed and replaced elsewhere. We shall be left with private housing and an extension to the RACC, which was not envisaged when the original plan for a River Centre was mooted.
A11. The River Centre team shares the concerns expressed by the Save Our Riverside group as to the current state of the Twickenham town centre. Our team is working very hard to ensure that the River Centre is a major new asset for Twickenham. We are hopeful that this will have a significant beneficial impact on the character of the town centre and will encourage other exciting initiatives to happen.
The SOR group is well aware that the current playground and café were always designed and provided as a temporary scheme. The River Centre will include a larger café and restaurant than is currently provided and the Council has promised that there will be a replacement playground and this is likely to be adjacent to the River Centre. The River Centre team is also hopeful that this playground will be of a more interesting and natural construction than the current temporary scheme.
The SOR group is also aware that the brief for the overall site includes a significant amount of new public open space as well as improvements to the river frontage. The RACC is a key partner for the River Centre project and is helping to deliver one of the seven main revenue components. This in no way equates to the description provided by the SOR group.
River Centre Project
Environment Trust for Richmond upon Thames