Council to make savings as it fears second lockdown could wipe out reserves

LYME Regis Town Council – having already lost an estimated £300,000 due to the coronavirus pandemic – is considering serious money-saving measures in case of a second lockdown.

Meeting virtually on Wednesday night, councillors considered extreme measures, such as selling the council offices, to ensure its reserves would not be completely wiped out if another wave of COVID-19 was to hit next year.

Lyme Regis was once considered to be a “rich council”, with reserves of £1.4million in the bank. But the impact of the coronavirus lockdown in spring and early summer – as well as a £650,000 major project to resurface the flat roof area above SWIM, the Amusement Arcade and Antiques & Craft Centre on Marine Parade – has seen its reserves significantly reduced.

In April, as lockdown measures first took hold, the council’s reserves stood at £969,794 but by June this had dropped to £581,674. Councillors were warned that they could decrease further to just £67,000 by the end of the financial year in March 2021 but, as facilities were reopened in July, this estimate was upped to £200,000.

After a successful late summer season, the council is now expected to have at least £375,000 in reserves by the end of the financial year. But town clerk John Wright has warned that COVID-19 still poses a “significant risk”, and if a similar lockdown was to take place over the same period next year, it could almost wipe out the council’s finances.

The impact of the virus has already cost the town council an estimated £300,000 and Mr Wright said they could lose another £350,000 if the same was to happen again in 2021.

To ensure financial security, the town clerk has now set out targets to increase the council’s reserve to £800,000 by the end of March 2021, and to £1.6million by the end of March 22, while increasing income by £100,000 and reducing expenditure by the same amount.

To achieve this, he outlined a number of measures the council could adopt in a report considered by members this week.

Options included paying back a £200,000 loan the town council took out several years ago from West Dorset District Council to develop the Marine Parade shelters, which is currently costing £37,500 a year, and then to take out a new loan of £650,000 over 20 years, which would cost £39,311 a year.

While the annual cost of paying back the loan would slightly increase, it would give the council an additional £450,000 in the bank.

Other options included selling the council’s offices at Guildhall Cottage and moving into St Michael’s Business Centre, creating and selling two additional beach huts, selling the cemetery lodge or the putting green in Lister Gardens.

To increase income, the council could rent out the Jubilee Pavilion on Marine Parade, which currently stands empty, the Lister Room above and create additional car parking at Monmouth Beach.

The town clerk also suggested that expenditure could be cut but reducing office running costs, procurement improvements, reducing professional support, and a critical review of recruitment to vacancies.

The Mayor of Lyme Regis, Councillor Brian Larcombe MBE, has said he thinks the council should only take out a loan as a ‘last resort’

Loan should be ‘last resort’, says mayor

Discussion during the virtual meeting centred largely on whether the council should seek a new loan, with the Mayor of Lyme Regis, Councillor Brian Larcombe MBE, arguing this should only be considered as a “last resort”.

He said: “If we did have another break out of COVID next year and we took out a loan, we would of course then spend most of that loan and then have to worry about how we would pay it back if we were then to have another incident of COVID the following year, by which time we’d have a debt to pay and be in just the same position as we are now, with difficulty in paying it.

“Why would we reach for some of these measures until we really have to? To me, the loan is a last resort; it doesn’t have to be done early, it can be done nearer the time of need as it can be quite quickly implemented. My concern is we could be saddled with a debt and still have the same problem.”

Councillor Larcombe said the suggested £100,000 savings in expenditure was “encouraging”, adding: “We have to make that the way of doing things from now on; it’s not a one-off exercise, it’s got to be a continuous exercise of efficiency and finding those savings every single year because that’s the climate we’re going to be entering into.”

Mr Wright said that if the council was to eventually apply for a loan, it needed to show that it had taken some action to improve financial resilience and manage risk.

“I don’t think we can rely on other arms of the state to support us now,” he said.

“The government is looking at debt of two trillion pounds and we know Dorset Council is forecasting the impact of COVID-19 on its own operations and has been coming up with figures of about £50million.

“I don’t think there’s going to be a queue of people saying ‘yes, we will help you’ but if they do help us they will want to know what we have been doing to manage this crisis and our risks.”

He added that Lyme Regis Town Council was “really different” to most other councils as 92 per cent of its income came from commercial activity, rather than the council tax precept, so it felt the effects of situations such as COVID-19 more.

The mayor replied: “You’ve mentioned commercial activity. If our running costs are £1.2 or £1.3million and our income is £1.6million, that’s not very commercial; that margin is tiny. That implies that our running costs are catching up with our income and in a minute it’s almost going to be even, which is not very commercial savvy, is it?”

Councillor Michaela Ellis said she would “hate” to see the council selling any of its assets at this point, suggesting it would be “a silly thing to do” when they could be used at a later date if necessary.

“It would be a last resort, in my view, to see us selling anything off,” she added.

Councillor Ellis spoke in favour of buying new beach huts for either sale or rental, cutting back on outgoings and keeping the proposed refurbishment of the council offices to the bare minimum.

However, she disagreed with the mayor’s suggestion that they should hold off on looking into loans, commenting: “We do need to look into a loan; there’s no point leaving it until the last minute and saying ‘we want a loan’ when everyone else is also trying to get one.”

Councillor Cheryl Reynolds said the council will not received government support if it takes out a large loan

‘Local councils run this country’

Councillor Larcombe replied: “It should be a last resort; we won’t be alone in looking for a loan if it comes to that, other councils will be looking. When that is happening, government will ensure there’s a way of doing it. No government is going to allow town councils to go under, it just cannot happen.”

Councillor Cheryl Reynolds added: “Local councils run this country, every single council runs a bit of this country. If we have a huge, big reserve by taking out a loan, do you think the government will help us by any stretch of the imagination, or will they help the councils that haven’t got so much money? Because they’re not going to be running the country themselves. They don’t, do they? We all do that.

“If we have a lot of money in our coffers, when it comes to the government having to do something about it, we’ll be the last one looked at.”

Councillor Larcombe agreed, adding: “I don’t believe that we will be allowed to go under, like any other council.”

However, the town clerk expressed concerns that this was the wrong attitude for the council to take.

He commented: “I don’t think the government would want to see any council willingly rely on them for funding. If an organisation is deliberately choosing not to sort itself out when it does have options and choices, pushing it right to the wire and expecting the government to come in and support them, I think there would be a massive adversary action to that.”

Councillor John Broom pointed out that the council’s biggest cost was its staff, adding: “We haven’t even looked at labour and everyone is frightened to grab the nettle and look at it because it’s a nasty thing to do, to have to sack people, but that’s where we should be looking, I’m sorry.”

The mayor agreed, saying that if the council took a loan it would be “borrowing to put money in the reserves to cover the costs of staff and consumables”.

“The margin is tiny, the proportion of overheads in our running costs to what we get back is closing the gap, there isn’t much left over,” he said.

“To me that says we’ve got to look at our costs, we’ve got to look at the size of our undertakings. We’re a small town and we do grow in the summer, but the money comes in and goes out; it’s a huge amount of money for a council of this size.

“Administratively, we should be lean, very tight, we should be able to do things smarter. If we were a commercial business, that margin wouldn’t be acceptable.”

‘We were approaching a problem before COVID’

The mayor continued: “If you took COVID away, we were already approaching a problem because our costs were catching up with our income. If that £300,000 is the difference on a £1.5million budget, something’s getting pretty damn close.”

The town clerk responded: “We are actually quite commercial. If you look at the level of reserve and increase on that over the past five years, it’s actually quite significant, and that’s because of the surpluses we have generated.

“You are right as well, there has been an increase in expenditure; we have increased our income but also our expenditure. The town council spends things on projects which other councils have generally not been in a position to do and that’s where we have been spending our excess cash over the past few years.

“We will look at staffing and all the vacancies that arise in the future. It is a big line of expenditure but our percentage on staffing is not that significant compared to other councils; about 40 per cent of our expenditure is on staffing.”

Councillor Larcombe replied: “Part of the reason the reserves became £1.4million was because we were not spending the money we should have on asset maintenance. The Guildhall is having money spent on it because the windows are falling out and the like. We had money aside that could have been spent on that asset years ago.”

Councillor Broom agreed, adding: “We had this wonderful bank balance but what have we done? We have the Guildhall Cottage falling to pieces around us and everyone wondering why, it’s because we haven’t spent anything on that building since 2007. It’s easy to keep money in the bank but we should be keeping our assets together and we haven’t been doing it.”

Councillor Stan Williams said he “could not believe” the council was in this situation, adding that it was owed “so much money it’s unbelievable”, especially from the Monmouth Beach area.

After lengthy discussions, the mayor proposed that they explore the suggested £100,000 expenditure cuts and look at further options, such as a loan, in December when they would have more accurate figures on the council’s financial forecast.

But Councillor Ellis said that waiting until December was “ridiculous” and that decisions needed to be made now.

She made a counter proposal which was eventually agreed, to look into buying additional beach huts to sell; cut back on outgoings from £50,000 to £30,000-£40,000 a month; minimise office refurbishment costs and do only necessary works; look into getting a loan in place, which may be taken out if or when needed; and instruct officers to explore all other alternatives to either save money or increase revenue for presentation to the next meeting in October.

Members also generally agreed they were not currently interested in selling the council offices.

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