(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.
(Cabinet Members with Special Responsibility Councillors Archer and Kerr)
The Corporate Director (Regeneration) submitted a report updating members about 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:
Option 1
The City Council has already started a process of acquisition in line with the 2005 funding agreement and the 2005 funds have now been fully drawn down by the City Council. In accordance with the (Plan A) proposals of the original scheme, the City Council could seek to work with English Partnerships to identify how a partial demolition/refurbishment scheme could progress, and identify future funding needs to deliver such a project. At this stage, it is impossible to assess whether such a scheme would be financially viable and whether funds could be made available. Further work will be required to draw up a (Plan A) option and it is recommended that officers are instructed to start early negotiations with funders to seek an “acceptable” funding package for further consideration by Members.
|
Operated Risk |
Financial Risk |
Legal Risk |
Benefits |
|
· English Partnerships would not agree to such a proposal as their existing analysis on the refurb/demolition option (Plan A) was originally considered by the funder as not to be a cost effective option. Bearing in mind current market conditions, it is difficult to see how this analysis would signicantly change to provide a positive cost effective outcome. · A developer partner cannot be found to deliver such a scheme. This is of particular concern as the Plan A scheme was the proposal that was originally tested with developers. · The community within the West End will consider the consultation exercise for the Exemplar Scheme to have been “ignored”, and they may raise concerns that a “step change” project has not been achieved. · Further design work/appraisal work will take time, and we currently have empty properties within the scheme awaiting demolition. We are also holding all costs of staff and security as a City Council cost, which is outside budget provision. |
In the absence of a full commitment from English Partnerships and on a fully committed developer partner, there would probably be an increase in the financial contribution required from the Council sufficient to rule this option out.
There is also the risk that while a certain level of commitment might be obtained from English Partnerships and / or a developer partner could be secured under certain conditions, the increase burden would still be greater than the Council could afford.
Further costs that would be incurred will be, in the absence of any additional funding, represent an additional cost to the Council which will increase steadily with time. |
All options have legal implications in terms of our contractual relationship with English Partnerships and at this stage it would premature to observe what these implications would be prior to further discussions with the funding body.
|
· 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 seeks to re-negotiate the current “variation to funding agreement” document with English Partnerships to reflect the funding gap, and seek possible options on how this funding gap should be addressed, for further consideration by Members.
|
Operated Risk |
Financial Risk |
Legal Risk |
Benefits |
|
· Insufficient funds will be made available to bridge the gap, causing a delay in delivery for any possible alternative options. |
There is no specific financial risk in that if sufficient funds are not made available the scheme will simply not proceed.
There will be some residual costs but this is dealt with in option 4. |
All options have legal implications in terms of our contractual relationship with English Partnerships and at this stage it would premature to observe what these implications would be prior to further discussions with the funding body. |
· 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 3
That the City Council seek to implement both Option 1 and Option 2, ensuring that a full report is submitted to Members, providing for:
a) Possible options for partial demolition/refurbishment.
b) Options for implementing a full scale demolition/re-build for the Exemplar site.
|
Operated Risk |
Financial Risk |
Legal Risk |
Benefits |
|
· See Options 1 and 2. |
See options 1 & 2 |
All options have legal implications in terms of our contractual relationship with English Partnerships and at this stage it would premature to observe what these implications would be prior to further discussions with the funding body. |
· 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 4
The City Council no longer proceed with the Exemplar scheme, and either offer the properties acquired back to the original owners, or dispose of the assets on the open market, in their current condition.
|
Operated Risk |
Financial Risk |
Legal Risk |
Benefits |
|
· The City Council may be subject to claw-back provision with EP, for the funding already spent on the scheme. Due to current market conditions, it is unclear whether the subsequent sale of these properties on the open market will release sufficient capital to re-pay the funding drawn-down. It is also uncertain whether the City Council could sell these properties taking into account current market conditions. · The delivery of the objectives of the West End Masterplan would be significantly affected, as the original proposals for the project was to reduce the large numbers of rented accommodation and HMOs, and replace with family sized owner occupied/part ownership accommodation. · The future relationship with our funding partner, English Partnerships, could be damaged due to the Exemplar Scheme not proceeding in some form. |
The maximum amount that is potentially subject to claw-back is £4.5M. Though, if the full amount were required this would be offset by receipts from the sale of the properties currently held.
A more likely outcome is that EP would require that the properties be sold and the proceeds be remitted to them, though any such arrangement would be subject to negotiation.
There would be some additional revenue cost to the Council incurred in the maintenance and security of properties pending sale. These are estimated at approximately £32K per annum.
The Delivery Team is subject to a separate funding agreement of £277K and there is sufficient funding to finance the team for another 9 – 12 months, if it isn’t subject to claw-back. Provision. |
All options have legal implications in terms of our contractual relationship with English Partnerships and at this stage it would premature to observe what these implications would be prior to further discussions with the funding body.
|
|
Officer Preferred Option
The preferred option is Option 3 in the report. This will hopefully find an early solution to an issue that has been created by a recession in the markets, and will work with funders to ensure that we retain good partnership working, which is essential during the current financial crisis.
The recommendations of Councillors Archer and Kerr were set out in the report as follows:
”That Cabinet:
(1) Notes (a) the need to provide quality family accommodation on a key gateway site into the West End, and (b) the current position regarding delivery of the Chatsworth Gardens Housing Scheme.
(2) Requests full independent legal advice as to the status of and enforceability by or against the Council of “the 2005 funding agreement” and all the subsequent development and other related agreements, whether signed or not, and the continuing or future legal and financial implications of all those agreements.
(3) Requests the Corporate Director (Regeneration) to enter into urgent discussions with English Partnerships as the funding body, to clarify the legal implications of our relationship, and to pursue the potential for options to be placed before Cabinet in place of a complete new-build which would be more economical and more environmentally sustainable than the current scheme, would not be subject to the risk of claw-back, and would deliver quality family accommodation in partnership with one or more developers over a period of time.
(4) Subject to the advice received in (2) above, and the outcome of discussions in (3) above, requests a report setting out alternative options for the council, in place of a complete new-build.”
It was moved by Councillor Kerr and seconded by Councillor Archer:
“That the recommendations, as set out in the report, be approved.”
Members then voted as follows:-
Resolved unanimously:
That Cabinet:
(1) Notes (a) the need to provide quality family accommodation on a key gateway site into the West End, and (b) the current position regarding delivery of the Chatsworth Gardens Housing Scheme.
(2) Requests full independent legal advice as to the status of and enforceability by or against the Council of “the 2005 funding agreement” and all the subsequent development and other related agreements, whether signed or not, and the continuing or future legal and financial implications of all those agreements.
(3) Requests the Corporate Director (Regeneration) to enter into urgent discussions with English Partnerships as the funding body, to clarify the legal implications of our relationship, and to pursue the potential for options to be placed before Cabinet in place of a complete new-build which would be more economical and more environmentally sustainable than the current scheme, would not be subject to the risk of claw-back, and would deliver quality family accommodation in partnership with one or more developers over a period of time.
(4) Subject to the advice received in (2) above, and the outcome of discussions in (3) above, requests a report setting out alternative options for the council, in place of a complete new-build.
Officers responsible for effecting the decision:
Corporate Director (Regeneration)
Reasons for making the decision:
The decision will hopefully find an early solution to an issue that has been created by a recession in the markets and will work with funders to ensure that the City Council retains good partnership working, which is essential during the current financial crisis.