This report is the responsibility of Executive Councillor Marcus Kravis, Portfolio Holder for Asset Management and Economic Development.
This confidential report is brought to Council following earlier reports and approval that have progressed the regeneration of the Firepool site.
Minutes:
The report was presented by Councillor Kravis and the Assistant Director – Asset Development Projects and Assistant Director – Major and Special Projects.
The report was considered at Council following earlier reports and approval that progressed the regeneration of the Firepool site from the previous aborted scheme into the revised, fit for purpose, residential and leisure use approach of 2020. The scheme had been broken into 6 blocks that could be delivered in separate phases to reduce the overall financial commitment and risk at any one time, and to allow the plan to adapt to social or economic requirements.
The report outlined the business case for the commencement of the first full phase of infrastructure and utility work that is pre-requisite to bring the rest of the site forward, including flood defence, sewerage, electricity and water, along with some elements of public realm and car parking that were essential to unlock the remainder of the site and allow the development to progress.
It also described the business case for Block 1 and was self-contained and able to be delivered earlier in the programme.
The report recommended that the Phase 1 infrastructure works were delivered by the SPV, and that a subsidiary SPV would be created and the land in Block 1 transferred on a long lease basis to the SPV for delivery of the construction phases and disposal/ management of the assets on completion.
During the discussion the following comments and questions were raised:-
· The committee requested for phosphate levels on the Somerset levels impacting on the site needed to be reflected in the recommendations and risk assessment.
· Planning permission was in place, it was recognised that there was risk to the scheme if the construction of the development took place over a certain period.
· Phase 1 infrastructure costs were questioned. PWLB financing and risks of volatility in interest rates were considered. Understanding the implications was important in planning ahead.
· An Inflationary figure was included in costs.
· The scheme was flexible with conditions in the market, a venue was planned at the end of project but plan b could be explored depending on the market requirements.
· The scheme could make a return on elements of the scheme without the homes England funding, although the viability of the second phase came into question.
· App 1.1 infrastructure costs were considered alongside the Homes England contribution towards a significant portion of infrastructure costs. Homes England funding was anticipated only on basis of building houses.
· The possibility of negotiating a long deadline due to the impact of the pandemic and the risk of timescale impacting any funding from homes England.
· The carry over debt from Firepool to Homes England was determined a Significant sum.
· Clarification was made that through SPV’s – reports would come back to full council for approval for each project.
· There had been changes to the funding schemes with project officers waiting for clearer direction from government on funding programmes. When the funding is in place, commitment to the scheme could be made.
· Homes England were aware it’s a mixed use scheme, their funding would contribute to support housing and infrastructure.
· The 151 Officer was confident in respect of the Minimum Revenue Provision (MRP) for 50 years. Confident SPV would repay loan and mitigating the cost of MRP.
· A return on interest of SPV would mitigate impact on the authority.
· The Public Works Loan Board interest rates and borrowing rates were anticipated to remain low for the next 5-6 years. This was not the only option in the source of borrowing, and may not be the best value but a guide for the business case.
· The committee questioned if the scheme was ambitious enough or if it was too cautious.
· Few large scale providers of residential rental providers. Commercial landlords difficult undertaking, assurance was provided that the rates would be stress tested.
· There was a strong market for a high quality and up market rental product with a secure source of ongoing rental income. This would reduce the risk in the impact of selling the properties.
· SPV taxable on rents, could lead to a cashflow issues. The owner of the car parks was questioned alongside the Group and subsidiary SPV’s. An adequate accounting system for the SPV was required.
· Concerns were expressed around traffic and potential risks around funding posed an issue in taking the scheme forward.
· Commercial activity was considered taxable in terms of council’s loan to the SPV, professional tax advice would be sought for this.
· Repairs and maintenance rental model was determined as substantial. PWC advice appended to the SPV report. Tax mechanisms would be modelled through the scenarios for the benefit to be determined. The land would belong to the councils, the leasehold would belong to the Council.
· Provision of affordable housing on other sites could work out in respect of proportion attributed to the Firepool development. This would be considered but the committee urged to have some allocation of affordable housing on the site.
· The reference to a car club was noted along with the emphasis of this to minimise the need for the total number of cars to be owned by residents. Cycling provision was also encouraged to be in part of the scheme.
· Infrastructure was costed to deliver the appropriate amount of infrastructure on the site as a whole, if this was a leisure option this was not specific to the infrastructure planned.
· Zero carbon – air source or ground source hear pumps and solar panels were all considerations, there was ambition to build buildings to the highest quality and to buy in zero carbon solutions following this.
· Procuring a Modular housing provider and appointing them was a difficult balance between building the buildings to the best as you can and bolting on zero carbon technology.
· The committee were in favour of a long term project that would benefit the residents of Taunton including part of regeneration and building for the future. Economic benefits needed to be quantified, the socioeconomic benefit would need to be articulated outside of the facts of the investment.
· It was positive that there was flexibility in the site, along with term delivery if needed. The boulevard from the station through the town, investment detail in terms of the returns in numbers was requested between 3-4%
· Concerns were expressed around the market for the site and communications strategy.
· The economic benefits of the scheme questioned.
· Responses from consultees such as the environment agency has slowed down the scheme and technical documents. The CNCR strategy and design guide slowed to cross reference the plans. Out to consultation in December.
· Car parks won’t be designed just for residents, those using leisure facilities would access these. Work on the boulevard would start early.
· The risk of recession and a drop in the market following the Covid-19 pandemic was a concern in the scheme development.
· A Communications document would be developed for residents in the town to promote the site.
· Allocations for electric vehicle charging points were questioned, these would be included and had been costed for both car parks.
· The Break-even point from the borrowing was requested and cost value per property information would be provided to the committee separately.
· The costs of the venue had been included as part of the costs of the delivery.
· The design layout was questioned and encouraging better use of the land for parking, utilising underground parking if possible.
· Members of the committee commended the work undertaken on the project and encouraged accurate project management going forward.
Resolved that Scrutiny Committee recommended to Executive and Full Council the recommendations numbered 2.1 to 2.8 within the confidential report and added an additional recommendation:
2.9 The committee request that a risk assessment be put in place recognising the recent Natural England advice around phosphates and potential impacts on the projects.”
All but one of the committee members agreed the recommendations with one abstention.