Lets try again to put this right. again as I understand things from when it was set up

The user agreement for both City and FC is with the council, its signed up for twenty five years, with a further twenty five years on the table with safeguards on price built in. The SMC operates the stadium complex on behalf of the city council and has no input on what the clubs have to pay rent.

There's also European law and any ramifications from the investigation into Swansea City's deal over their ground. You'd hope that if the Council terminate the lease they have a vision for the development of the site to bring in additional income to ensure the rents for City and FC remain affordable. Otherwise the full costs of maintaining an aging stadium will fall on both clubs.

A third party would only be interested in running the complex if it was profitable and that means being able to increase the rents of both clubs if costs rise.

Its alright jumping up and down over the way Assem Allam runs the KC but you need to know what the alternative is. Bartlett took money out of the SMC in loans and salary. I see no sign of that under Assem Allam. If fact Hull City Tigers Limited appears to be funding its operating shortfall with loans.

The SMC runs the KC on its own behalf because it is the leaseholder. It isn't an agent for the Council. The terms of the lease set out what it can and can't do. I'd be surprised if the user rights are with the Council but I'm not sure. The Council briefing papers on the KC make no mention of an agreement between the clubs and it. It is more likely that they are with the SMC. Assem Allam mentioned honouring the contract between Hull FC and the SMC in one of his interviews.

On another point I'm sure if Assem Allam could blame the Council for the money the SMC allegedly loses from putting on FC matches he would have done so.

Surely it is in the councils best interests and indeed primarily that of the citizens of Hull to terminate the lease (legally of course). The damage that has being done by the SMC, not only financially with regard to the debts accrued (and would be further into the future) that has a hefty whiff of skullduggery about it but also to the users, Hull FC being one of the prime targets for fallout from the actions of the owners of the SMC.

With all the other aspects of the negativity and heavy handedness toward the community at large (threats to pull the soccer club out amongst many others) and would continue to be affected into the future by allowing the SMC to retain the lease it would seem prudent and the best all round for the city of Hull to have the contract terminated..or do the council think everything will be fine and dandy once they've helped the plunderer to get what he wants anyway??

The lease protects the Council from the costs of maintaining a stadium for Premier League football. Since Hull City got promoted the TV companies have demanded a fairly huge investment in the ground's infrastructure. The SMC's losses could be genuine and show Assem Allam investing in the KC. He has every reason to do so if City remain in the Premier League. The SMC is hamstrung by the lease and its agreements with FC and City.

If the lease is terminated all those costs fall on the Council. As would the decision about who pays for the upkeep of the KC. It would need to find alternative sources of finances or else increase the rents paid by FC and City. Hull City paid rent of over £4 million last year and it will be substantially more this year (the season passes went up 30%). It is believed Manchester City pay £1 million a year for the Etihad and West Ham will pay £2.5 million a year rent for the Olympic Stadium.

Its not as simple as taking the lease off Assem Allam. A number of consequences will flow from that decision.

The £1 million a year must kill Man City, seen as Etihad pay £40million a year to name it [urlhttp://www.theguardian.com/football/2011/jul/08/manchester-city-deal-etihad-airways[/url

And whos funding the massive expansion?

Cant really compare the 2 City's, sadly

Its a partnership between the Council and the football club. It shows what's possible if the owners of Hull City/SMC and the Council talked to one another. Maybe not on the same scale but cooperation would be a massive improvement on what we currently have.

I fully understand the protection the council has wished to employ from the off, yet it's pretty clear no business model/plan was done to even try to see how the stadium could/would pay for it's upkeep without fear of costs. That other aspects of the council loses/wastes money hand over fist & other assets 'lose' money (ongoing running costs) seems to have avoided your gaze?

In fact given the £72.5k/year the council paid for office space alone and the approximate £1M profit (Based on the £50k returned profit to the council in the earlier years), the massively overinflated salaries paid to the SMC owners (compared to salaries to run it via the LA), the huge (£500K/year? I read somewhere) 'management fee' charged to the SMC by the owners, the running of loss making events that have done damage to the pitch such as the highly successful squash tournament which netted less than the expenditure, it would appear that the stadium would have being an opportunity to sustain itself quite nicely.

But the whole mess has being perpetuated further by a council who allowed transfer/sale of the SMC to a 'buyer' with the sale cost added as a debt to it making matters more complex as it is clear to see for all, Phil Webbo (EDITED after referring to wrong person) making the error as to what is exactly what with regard to the financial aspect alone, this in itself is an indication of how complex the matter has become.

The right and proper thing to do is for the council to terminate the lease at the first opportunity, regain control of its assets and ensure a fit and proper person is at the helm so that the community stadium is in the hands of the community not some power crazed psuedo anthropologist that has in fact caused so many issues across every aspect of the community stadium..or do you think the Allam's or any other private organisation for that matter solely in it to make profit is the best option, if so why?

Suppose the SMC was run by an independent company.

City come along and say "We want a new pitch". The other tenants say "We're happy with the pitch as it is - it's got another 5 years projected life in it anyway."

City come along and say "We want new floodlights (for Sky HD broadcasts)". The other tenants say "We're happy with the floodlights as they are. Lamps have all been replaced every 2 or 3 years during regular maintenance."

City say they'll fund what they want, but it'll cost the SMC £300k a year. And they'll want all the loans repaid in full.

Tricky.

Nothing will come of this. Allam will probably move his pitch to the bubble and the council will leave it there with Allam still controlling the SMC. Only way out of this is Council give Allam the KC on the proviso he then funds our own new ground

I agree its complex which is why getting the Council lease back of Assem Allam isn't the end of the KC's problems. It may be the start of more problems.

In the first 4 years the SMC was making profits of over £300,000 a year to give the Council income of around £15,000. A large chunk of that profit came from the Council renting space for the library and other offices. That was when maintenance costs were low, it was a brand new stadium covered by various warranties. The KC isn't a goldmine that has been badly mismanaged, it struggled to make a decent profit in the good times without the help of the Council and now it faces a sorry looking structure in need of lots of tender loving care. But that is becoming increasingly expensive.

When it was sold to Bartlett he received a salary, took out a charge on the lease and the profits dropped as did the payments to the Council. Assem Allam said that under Bartlett maintenance was neglected and he has had to pay for improvements that should have been done under the previous regime. I have no reason to doubt him and he has invested money in the KC and the pitch.

Under Assem Allam the SMC has made losses. There is no obvious payments out to Assem Allam, Allamhouse or Hull City Tigers Limited. In fact money has flowed in from the football club as loans. To me that suggests running the KC and the Arena isn't profitable. The only was to make it profitable is to increase the rents paid by FC and City. If the Council terminate the lease and try and get someone to take over the running of the KC they will face the same problem. The people taking it over will have to pay for the repairs and hand it back in a pristine condition. They may find somebody but would they be the right person? I have my doubts.

We cannot change the past but we can learn from its mistakes.

I want to see the Council terminate the lease, take on the running of the KC, issue proper tenancies to City and FC, increase the capacity, develop the land around the KC to provide additional sources of income for the running costs and if, a big if, Assem Allam sells Hull City develop a partnership similar to the one Manchester Council has with Manchester City, albeit on a smaller scale.

If Assem Allam was capable with working with others in a spirit of cooperation we'd have had all that already.

Obadiah, I edited my earlier post as I mentioned you as making the error with regard to the financials, it was of course Phil Webbo I should have attributed it to as part of my point re the complexity of the situation
Apologies

Apology accepted. I didn't think the comment was aimed at me personally but a general its not just about the money. If it was just the money a solution would be simple. Assem Allam's hatred of the Council makes everything ten times more difficult then it should be, in my view.

I may be wrong and will check the SMC accounts later. But your view of "the good times" is probably different to mine. IIRC the SMC was set up around 2003 and made a cumulative modest profit until the Allams took over, ie for 7-8 years, but importantly even since then the [uunderlying[/u profit before dealing the mortgage/debt exceptionals is not the disaster you imply. Think back to 2003, FC's gates were low and City weren't in the Premiership. I don't know what the increase in utilisation/combined attendances is, but reckon it's substantial and leveraging that should at least partially offset the increased maintenance costs. I'll have a look tonight at underlying profit over the full period. As we've discussed on here before, the supposed P&L impact of Hull FC between 2010 and the latest "view" implies a seismic escalation in costs since the first set of accounts Assem approved as director. Convenient.

Even though I left Hull many moons ago the actions of councils and various trusts (we have a very powerful so called charitable 'foundation' here in Letchworth Garden City whom own most of the towns land and commercial property) are very much to the fore for me. They are entrusted to do the right thing for the community and often as not they don't.

This is a classic situation where the council's hand has been forced to act, if it could have being allowed to just ignore the situation it would have done, otherwise why wait so late in the day to act?
I completely agree with Mrs Barista, what Phil Webbo describes is the MINIMUM EXPECTED action that the council should be doing to resolve this. It's being pretty obvious to all and sundry that the mismanagement of the SMC has had a direct effect not only on the rugby club but also the soccer club too, add in the the rest of the community issues that crop up and anything else you might want to throw in it's just incredible that the council have buried their heads for so long going back years. Failing to act to ensure proper management & running of their assets.
Not content with swishing down the gurgler the opportunity to actually make the stadium/arena etc into a real community place they allowed private individuals (the present meglamaniac included) to push and push, take and take and act without any consideration or integrity to the citizens of Hull.

Frankly it makes my blood boil seeing such an amazing stadium/set up that could have been so so much more, squandered and wasted on the back of rank and brazen profiteering.

Obadiah - do you have any idea what actually happened at that very first meeting to make Allam hate Geraghty and the council so much? Could the cause of the offence really be so trivial as to be the clothes the councillors were wearing, for example, as some reports suggest? I also find it unbelievable that he hasn't been philosophical regarding the "slights" whatever they were bearing in mind that cooperation with the council was crucial to acquiring the stadium - the whole pivot to the success of this venture as far as he's concerned - and try to overcome the feud. Instead, he's quite happy to never, ever forget even to the detriment of his own strategy. Crazy business decision.

If Allam is as petty as he appears, it's astonishing he's made the fortune in business he has - how has he ever managed to successfully negotiate business deals without mass fallouts?

Allam is an enigma which makes no sense.

Bob on the money, if it smells like a rat and looks like a rat under the gerbil coat it probably is a rat, it certainly doesn't add up the huge disparity, it's not even that difficult to conjur it up but the council as I've hinted at weren't interested so long as it wasn't 'costing' them..

I've only got the last set of Bartlett's accounts and they are abbreviated so I've no idea how the profit figure is made up.

Since Assem Allam has taken over the Council have closed the library and abandoned the offices. The £80,000 that the Council paid will have boosted the profits of the SMC. As far as I can see this loss of income has not been replaced. Given the current state of the Council's finances its unlikely to be replaced under a different owner.

Yes there has been an increase in income, especially from Hull City, but that has been eaten up by the costs of maintaining the stadium. Some of the balance sheet items are one offs but the trend under Assem Allam has been for operating costs to be greater than revenue. I see in evidence of any directors remuneration, management charges or other direct benefits to Assem Allam or his companies. It looks like loans from Hull City have funded the losses and the payments to RBS.

I have ignored the City/FC comparisons they include assumptions about how much you should contribute to the SMC staff and other expenditure. As with all assumptions they show different things if they change.

It is possible that the overall costs are genuine and rising. Which is what I'd expect as the stadium ages.

I don't imply any disaster. I just like to have a rough idea of how deep the water is before I jump in. The world has changed since 2003, not least by how much investment Bartlett should have made in the stadium but didn't and what the long term consequences of that will be.

I understand he thought Geraghty was rude to him. Phil Webbo may have the exact details, but I wouldn't have gone off in a huff over it.

So after 32 pages is it safe to say no ones got a scooby what's going on

Right, I've collated some data. The headlines are:

[uOverview - Cumulative profit position[/u
The SMC's been running for around 12 years. It has cumulative losses over that period of £6.33m. However, £5.4m of those losses are not down to the operations of the SMC business, but due to mortgage write-off (£4.6m), loss on disposal of training ground (£0.4m) and waiver of loans to related parties (£0.4m). Underlying operating losses across the period are therefore £0.9m.

[uOperating Profitability over time
[/u
Adam Pearson controlled the SMC from 2002-2007. Its operating profit in those six years was £13k.
Russell Bartlett controlled the SMC from 2008-2010. Its operating profit in those three years was £79k
Assem Allam has controlled the SMC from 2011-2014. Its operating loss in those four year was £1.02m
Profitability in 2014 returned to approaching breakeven after two years of heavy losses in 2012 and 2013; in 2014 the operating loss was only £33k.

Comparing 2014 to both 2003 and 2010, costs have risen virtually in line with income. Given what I'd estimate is the relatively fixed nature of costs in this business, either cost leverage has been disappointing or maintenance costs are increasing. Quite possibly the costs of constantly relaying the pitch are in the P&L as they have an economic life less than a year.

[uHull FC[/u
The accounts for 2010 disclose gross profit on FC-specific activities of £0.4m (no allocation of overheads), but a loss of £1.2m in 2014 after overhead allocation. Our direct costs in 2014 are reported as £1.2m with a further £0.5m on administrative expenses. So FC's share of stadium operating costs per annum is £1.7m.

The problem with "costs", as we all know, is that Mr Allam can charge City whatever he wants and it makes not a jot of difference to the size of his bank balance.
However, he can make Hull FC (and others) look unsustainable by using the same criteria.

The operating profit under Pearson and Bartlett included the rent from Hull City Council for the library and office space. Take that out and the SMC was making operating losses. The warranties on the building work have expired which means the SMC has to pay for any maintenance work done on the KC or the Arena. The margin for making profits is already very small and given the age of the buildings is likely to get smaller. Unless the rent paid by FC and City increases the only source of additional funds to fund the KC and the Arena is by developing the land to attract new businesses.

Pitch relaying - the Galpharm Stadium (built 6 years before the KC) pitch lasted 15 years and the underground soil heating when assessed "was in perfect working order".

No offence, but you're being too simplistic.

In terms of SMC income optimisation, binning off the other Arena tenants to satisfy City's requirements is unhelpful. Income from the Arena was £248k in 2014. Presumably most of that has been sacrificed.

I think you're overplaying the impact of maintenance. Don't forget that maintenance and repairs are only 14% of total SMC costs.

Which businesses do you think will be attracted to the KC with Assem Allam as landlord, given the experiences of the Council, former Arena tenants, Hull FC...? I don't disagree in principle that other income streams would help, but the cost base needs to be reviewed also. Presumably automated turnstiles will realise a saving. Does the pitch need to be ripped up every year or could that cash be better deployed?