Agenda item

West End Housing Exemplar Project - Chatsworth Gardens

(Cabinet Member with Special Responsibility Councillor Archer)

 

Report of the Corporate Director (Regeneration).

Minutes:

(Cabinet Members with Special Responsibility Councillors Archer and Kerr)

 

The Corporate Director (Regeneration) submitted a report to provide Cabinet with an update regarding the delivery of the Chatsworth Gardens West End Housing Exemplar Project.

 

The options, options analysis, including risk assessment, were set out in the report as follows:

Taking all the information to hand, and following a further officer meeting with HCA, a request has been received advising that HCA are prepared to consider possible funding options for the “new build” scheme, on the proviso that Member support is sought in principle to the scheme (see email Appendix C).  This, therefore, provides for the following options:-

 

Option 1

 

That Members support, in principle, the future delivery of a “new-build” Exemplar scheme at Chatsworth Gardens, in line with the development process that the City Council has been party to, on the proviso that HCA provide sufficient funding to secure the developer, Places for People, signing a Development Agreement which will contribute £1,239,300 to acquisition costs, and that HCA also provide interim support for the £1,379,000 capital receipts monies which will result from the City Council undertaking its best endeavours “to dispose of assets currently held by the City Council, which are “outside” of the Exemplar Scheme”.

 

Table 1 – Financial Costs

 

The projected financial cost of this option will remain largely as reported to Cabinet on the 11th November, with the main differences being:

 

·         The transfer of £62,200 contingency from the Surveyors / Valuations & Contingency, into Property Holding costs.  This does not alter the total cost of the project, and

 

·         The funding allocation between Capital and Revenue as shown in Table 2. The shortfall in the Capital funding would be met from a contribution from the revenue allocation, with the overall project cost being contained within the total available funding.

 

A summary of the indicative costs and funding are set out in the tables below.

 

Capital Costs

(£)

Remaining property acquisitions including Compensation and Disturbance

4,810,000

Less Developer Bid – Places for People

 (1,239,300)

Net Cost of Property Acquisition

3,570,700

Contingency

209,000

Surveyors/ Valuations & Conveyancing Costs.

33,600

Total Capital

3,813,300

 

 

Revenue Costs

 

CPO Legal Advice

49,200

Property Holding Costs

148,200

Delivery Team

150,600

Total Revenue Costs

348,000

Grand Total

4,161,300

 

                       

Table 2 - Funding

 

Capital Funding

(£)

EP Deed of Variation

2,200,200

Resale of Existing Property

1,379,500

Illuminations Depot Receipt

200,000

Total Capital

3,779,700

 

 

Revenue Funding

 

EP Deed of Variation

242,600

Rental Income

139,000

Total Revenue Funding

381,600

Total

4,161,300

 

 

Operational Risk

Financial Risk

Legal Risk

Benefits

The City Council must ensure the effective property management of all the properties currently acquired as part of the Exemplar scheme, and as soon as contracts are in place, must ensure a robust management plan is in place to manage the said properties up until all the properties have been acquired (either by agreement or compulsory purchase order).

 Subject to all appropriate funding being in place to acquire the remaining properties, a robust financial plan will need to be in place to manage the “property management plan” for the scheme, and the revised funding agreement with HCA will reflect such costs.

 

As an interim provision, funds will need to be made available to cover the holding costs of the properties, as current funding for this expires on 31st March 2009.  These costs are contained within Table 1 and will be covered, should option 1 be approved. It is estimated that up to £66,000 of the £148,200 would need to be allocated, within the first quarter of 2009/10.

The City Council must ensure that it has robust legal arrangements in place to ensure the Developer is contractually committed to the scheme, and at the same time, any legal agreements are made with HCA to accept further funding for the scheme.

The City Council is seen to be proactive with the community and its funders to finding a positive solution in current economically challenging times.

 

Option 2

The City Council does not approve in principle the revised proposal to deliver a “new build” Exemplar scheme in line with the Development process that has been carried out.

 

Operational Risk

Financial Risk

Legal Risk

Benefits

To proceed with this option would leave the City Council with ownership of residential properties to which no funding would immediately be available to progress an alternative scheme.  The failure to deliver this would also significantly affect the delivery of a significant element of the West End Masterplan.  A property management plan will also need to be put in place to assure the on-going safety of the public and buildings.

 

Should the City Council agree to not progress the “new build” Exemplar scheme, cost will be incurred in managing the currently vacant buildings acquired for the Exemplar scheme for example the holding costs alone are currently estimated at £66K per annum, and such costs could not be re-charged to HCA as there is currently no contractual funding agreement in place after 31 March 2009 to accommodate these costs. 

The City Council would then need to incur costs of re-appraising what scheme could progress, which are currently not provided for within the City Council’s Capital and Revenue programmes, particularly with the threat of “Critchell Down” (see legal risk).

The legal advice sought on this matter is that, technically, because a Development Agreement has not been signed, there is currently a breach of the 2005 Funding Agreement with HCA.  Should the Council not wish to pursue the HCA option of progressing with the “new build” Exemplar project, then further work will be required to seek an appropriate legal framework to exit the project (see legal advise, Appendix A).

 

It should also be noted that further work will also need to be carried out to assess the implications of the“Critchell Down” rules in this matter.

Given current economic climate, and the City Council’s current financial position, it is difficult to advise Members of what benefits there would be in not progressing the “new build” Exemplar scheme.

 

With regard both these options, it should be noted that the financial data used is based on 2008 figures.  Subject to Cabinet decision, these will be revisited and a further report will be submitted to Cabinet regarding the proposed funding agreement with HCA.

 

The officer preferred option is Option 1.

 

It was moved by Councillor Kerr and seconded by Councillor Archer:-

 

“(1)      That Members support, in principle, the future delivery of a “new-build” Exemplar scheme at Chatsworth Gardens, in line with the development process that the City Council has been party to, on the proviso that HCA provide sufficient funding to secure the developer, Places for People, signing a Development Agreement which will contribute £1,239,300 to acquisition costs, and that HCA also provide interim support for the £1,379,000 capital receipts monies which will result from the City Council undertaking its best endeavours “to dispose of assets currently held by the City Council, which are “outside” of the Exemplar Scheme.”

 

By way of amendment, Councillor Mace proposed and Councillor Charles seconded:

 

“The Homes and Communities Agency has refused to enter dialogue with the City Council. Instead they demand support in principle for the current flawed project. This is unacceptable bullying. As Cabinet has not been provided with a costed option that is acceptable on both environmental and financial grounds (Cabinet Minute 89, Resolution 3, 11th November 2008) or a report setting out alternative options for the Council in place of a complete new-build (Cabinet Minute 89, Resolution 4, 11th November 2008), the information for taking the decision is incomplete and Cabinet resolves that officers communicate with the Homes and Communities Agency on a “without prejudice” basis as described in paragraph 2.20 in Appendix A of the report, to rectify the situation.”

 

2 Members (Councillors Charles and Mace) voted in favour of the amendment, 5 Members (Councillors Archer, Blamire, Bryning, Gilbert and Kerr) voted against and 2 Members (Councillors Barry and Fletcher) abstained, whereupon the Chairman declared the amendment lost.

 

Members then voted on the substantive motion:-

 

 

Resolved:

 

(6 Members (Councillors Archer, Barry, Blamire, Bryning, Gilbert and Kerr) voted in favour, 2 Members (Councillors Charles and Mace) voted against and 1 Member (Councillor Fletcher) abstained).

 

(1)        That Members support, in principle, the future delivery of a “new-build” Exemplar scheme at Chatsworth Gardens, in line with the development process that the City Council has been party to, on the proviso that HCA provide sufficient funding to secure the developer, Places for People, signing a Development Agreement which will contribute £1,239,300 to acquisition costs, and that HCA also provide interim support for the £1,379,000 capital receipts monies which will result from the City Council undertaking its best endeavours “to dispose of assets currently held by the City Council, which are “outside” of the Exemplar Scheme.

 

Officer responsible for effecting the decision:

 

Corporate Director (Regeneration)

 

Reasons for making the decision:

 

The decision provides a way forward that will help manage the Council’s financial risk, whilst still delivering a regeneration scheme in economically challenging times.

Supporting documents: