Agenda item

Mr P B Carter, Leader of the Council; Mr A J King, Cabinet Member for Policy and Performance and Deputy Leader; Mr P Gilroy, Chief Executive; and Mr P Raine, Managing Director, Environment and Regeneration, will attend the meeting at 3.05 pm to answer Members’ questions on this item.

(1)       Mr P B Carter, Leader of the Council; Mr A J King, Cabinet Member for Policy and Performance and Deputy Leader; Mr P Gilroy, Chief Executive; and Mr P Raine, Managing Director, Environment and Regeneration, attended the meeting to answer Members’ questions on this matter, which covered the following issues:-

Total Costs Incurred or Committed on the Project

(2)       In answer to questions from Mr Capon and Dr Eddy, Mr Carter and Mr Raine said that the total costs incurred by all the partners in the project were £825,310, made up as follows:-

Cost to KCC

(3)       In answer to a question from Mr Wells, Mr Carter explained that the County Council’s share of the costs came from the Regeneration Fund, which was funded by the investment income from the Kings Hill development.  This year that investment income had totalled some £1.5m.  Mr Raine explained that the purpose of the Regeneration Fund was to allow the County Council to make one-off investments in projects with a calculated financial risk in order to seek to stimulate economic regeneration.

(4)       Mr Carter added that some investments, such as the Kent-Virginia Flights project proved unsuccessful but, in the overall context of the County Council’s entrepreneurial activity, unsuccessful projects were small in terms of both numbers and costs. 

Potential and Actual Benefits from KCC Involvement in Project

(5)       In answer to questions from Mr Capon, Mr Law and Dr Eddy, Mr Carter said that, if the project had been successful in terms of ticket sales, it could have generated up to £5m of revenue from US tourists to Kent.  Mr Raine explained that this figure was based on 3,000 US tourists (out of a total of 8,000 travellers) flying into Manston, each staying for three nights in Kent and spending £250 per day.

(6)       Mr Carter went on to say that even though the project itself had not been successful, there was a residual benefit in terms of increased awareness of Kent as a tourism destination amongst the residents of Virginia.

Reasons for Terminating Project

(7)       In answer to questions from Mr Law and Dr Eddy, Mr Raine explained that Cosmos had supplied ticket sales figures to the County Council and the other partners in the project on a weekly basis.  By the time the original contract with Cosmos expired in February, it was decided not to renew it because ticket sales had been lower than expected; no other partners were prepared to share the risks; and so the potential cost to KCC and its Council Tax payers was too high.  Mr Carter added that US ticket sales had undoubtedly been affected by adverse movements in the exchange rate and the downturn in the US economy.

Risk Assessment

(8)       In answer to questions from Mr Parker and Mr Bullock, Mr Raine said that a risk assessment had been undertaken by the County Council’s consultants as part of the feasibility study before the project commenced and he would circulate this to Members of the Committee.

(9)       In answer to a question from Mrs Dean, Mr Raine said that the fact that no airline chose to fund this route commercially did not indicate that it was an unacceptably high risk.  It was not unusual for local authorities and other public bodies to contribute to the costs of developing new air routes serving their area, because of the long-term economic benefits such routes would bring.  In answer to a question from Mr Smyth, Mr Raine pointed out that the main commercial partner in the project, Cosmos, while not exposed to any financial risk, had been willing to risk its reputation on the project.

Kent County Council/Commonwealth of Virginia Memorandum of Understanding (MoU)

(10)     In answer to questions from Mr Parker and Dr Eddy, Mr Gilroy said that the MoU was unaffected by the cancellation of the direct flights project.  The MoU was being revamped to establish a longer-term relationship between the County Council and the Commonwealth of Virginia which would include staff exchanges, peer reviews, etc.

 (11)    RESOLVED that:-

(a)       Mr Carter, Mr King, Mr Gilroy and Mr Raine be thanked for attending the meeting and answering Members’ questions;

(b)       the Leader of the Council’s decision not to proceed with the project following the meeting on 27 February be recognised as sensible given the lower than expected ticket sales; the fact that no other partners were prepared to share the risks; and the potential cost to the County Council and Council Tax payers;

(c)        the Managing Director, Environment and Regeneration’s agreement to provide Members of the Committee with the feasibility study undertaken by the Council’s consultants before the project commenced be welcomed;

(d)       the Leader of the Council be urged that, for all future potentially high-risk entrepreneurial projects, a proper risk assessment be undertaken in advance in accordance with the Council’s formal risk management procedures.  This should be made clear to the responsible project manager at the outset.