THE planning approval for the new large multi-purpose building at Seaford Head Golf Club should come with a financial health warning to the council taxpayers of Seaford.
At present the existing golf club and course makes a profit of about £60,000, which is already applied to other services that the town council provide.
If as proposed the town council does the development using consultants, the cost has previously been indicated to be in the region of £1.4 million.
Consultants’ fees tend to be a higher per centage of final building cost, where councils lack in-house expertise.
The town council have already indicated that they will apply for a loan from the Public Works Loan Board which will require the payment of interest and has to be approved by the Rt Hon Eric Pickles MP’s department.
This loan will therefore be underwritten by the council taxpayers of Seaford.
The assumption that the new building will generate a lot of new income to cover increased overheads is very speculative.
Increase staffing and running cost will rise. For example, the current rateable value on the other Seaford Golf Club is £105,000 compared to £4,000 on the shop at Seaford Head. What will the rateable value be on the new building?
The greatest demand for other uses of the buildings such as wedding receptions is likely to be at weekends which are also peak periods for golfers.
In the worst case scenario including building cost over runs the open market value of the completed development could be less than what it cost and future increased running cost having to be subsides by the Seaford taxpayers.
Some town councillors keep making comparisons with the Constitutional Club, but this is false. The Constitutional Club is in a prime residential area which gives it a very secure alternative value.
In recent years, several reports show that there has been an over supply of golf courses and open market values are relatively low and ancillary building have to reflect this.
The need for public access at Seaford Head Golf Club and the size of the course together with the closeness of residential properties may well affect its open market value when compared to others courses.
Seaford taxpayers need to ask themselves why are we getting involved in a commercially risky venture and what make golfers from a much wider area than Seaford so special when other sports are not underwritten or provided by the taxpayer?
One option to reduce taxpayers’ risk would be for the council to offer their property out to the open market with the benefit of the Planning Approval, and see what terms they can obtain if they grant a ground/building lease at a premium with geared rent reviews to recover their cost and provide an income.
The building cost and risk would then fall on the developers/operator and not be underwritten by Seaford taxpayers. Seaford resident golfers could be protected by the lease in terms of membership fees etc. The lease terms could cover any other issues including public access. This approach to development has been done successfully elsewhere.
If there are no developers/operators interested, then that would indicate that the size of the current proposed development is too big, a poor return on investment, and would cause it to run at a loss.
John A Bailey BSc MA FRICS, Seaford