This matter is the responsibility of the Executive Member for Corporate Resources
Report Author: Chris Hall, Director of Place and Climate Change
The Chair advised that there was an addendum to the agenda in addition to the report for this item.
The Portfolio Holder for Corporate Resources introduced the report:
· Midas had completed most of the building of Coal Orchard before the contract with them ceased. The report detailed how urgency powers had been used to enable the authority to intervene at Coal Orchard to ensure the project could continue.
· Coal Orchard should still produce a profit for the Council despite the report detailing that increased funding for the project would now be needed.
The Director for Place and Climate provided a further introduction to the report:
· Had updated the Corporate Scrutiny Committee earlier in the year about the issues around the Midas contract and on the termination of Midas’s contract due to poor performance ahead of Midas going into administration.
· The report primarily covered the financial procedures needed on behalf of the Council rather than a project update. It focused around the use of urgency powers.
· An urgency decision was made under the delegations to the Chief Executive due to the urgency of a decision needing to be made meaning that the timeframe of bringing a report to Full Council was not possible. The Chief Executive made the decision to spend £675,000 of funds and the Chair of Corporate Scrutiny at the time was consulted. As part of the Governance process a report on the decision then went to today’s meeting of the Committee before it would proceed to Full Council.
· The report also requested approval of an additional £100,000 in terms of capital above and beyond the existing capital programme. This additional funding required a Full Council decision. The project would continue to fund itself in terms of capital.
· Now had to be established as a developer with the National House Building Council (NHBC) due to Midas no longer being involved in the project and a warranty process needed to be established for the properties. As part of that funds needed to be put into an earmarked reserve for the warranties. If a warranty process failed to be set up, then the properties would become un-mortgageable.
· The addendum included a change to how the warranties would be funded as well as some changes to the wording of the recommendations.
During the debate the following points were raised:
· Support was expressed for completing the work at Coal Orchard.
· It was asked what the original anticipated cost of completing the project was, what the current full cost projection for the project was and what the anticipated final outcome cost for the project was. Officers responded that the amount of the original contract and the anticipated final costs were not currently publicly available information due to ongoing negotiations based on the completion of the work so officers would provide a written response to committee members only after the meetings. Once the project was completed the figures would be made publicly available.
· It was asked whether the funding was coming from general reserves or the Future High Streets Fund. If it was coming from the Future High Streets Fund, then it was asked what was being stopped to allow the money to be used for Coal Orchard. Officers responded that the capital allocation included the use of Future High Streets money. This could be done because an aspect of Firepool came in below budget, freeing up the funds to use elsewhere. Although the Future High Street fund had not yet given formal approval for the funds to be used for Coal Orchard they had expressed support for this.
· It was asked if the 40 units mentioned in the report were the number sold or total number available. Officers responded that the 40 units were the total number of units on the site. 11 were rented on block to Plymouth University. Of the remaining 29 units, 26 had been sold.
· It was asked what the actual cost of joining the NHBC was. Officers responded that the warranties with contractors were to do with the contractors warrantying for their work for the Council. The warranties for the properties the Council now had to own as the developer. The Council had become the developer because Midas had failed. The Council had to set itself up as a developer with NHBC. This had cost £45,000 but it was a refundable bond, and the money was only held by NHBC in case the Council ceased to be a going concern. In terms of cost, the true cost was therefore £0 to the Council. These warranties for the properties were not in place with Midas because they went into administration before the warranties were established as it was before the units reached practical completion.
· It was asked why the warranties did not go to each of the contractors. Officers responded that as the developer and seller of the homes when they went to market the Council had to provide the warranties for the properties. However, if something did go wrong then the Council would seek to rely on the individual warranties for different aspects of the properties such as the plumbing.
· It was asked if the earmarked reserve for the warranties had been set up yet or not. Officers responded that the earmarked reserve had not yet been set up.
· It was asked whether the Council had any opportunity to seek recompense from Midas given that the Council had been financially hindered by Midas going into administration. Officers responded that the Council were not on the list of Midas’s creditors due to the Council having terminated Midas’s contract in advance of them going into administration. Midas did not owe the Council any money nor did the Council owe Midas any money. However, it became apparent that Midas would not have been able to complete the contract. Officers had written to Midas’s administrators to notify them of the additional costs to the Council.
· It was asked whether the warranty for the homes at Coal Orchard would be guaranteed by the new unitary Council. Officers responded that they anticipated they would be as the bond would pass to the new authority.
The Committee resolved to note the recommendations included in the addendum to the report:
2.1 Full Council notes the use of urgency powers by the Chief Executive who approved the increased capital budget allocation of £675,000 towards the completion of the Coal Orchard regeneration scheme.
2.2 Full Council notes the allocation of a refundable £45,000 bond to National House Building Council, approved by the S151 Officer and managed through cash flow.
2.3 Full Council approves the transfer of £185,000 from General Reserves to a Coal Orchard Warranty Earmarked Reserve to manage any potential financial liabilities under warranty claims.
2.4 Full Council delegates authority to allocate funds from this reserve and approve related uplifts in relevant budgets to the Director of Development and Place, the Assistant Director Major and Special Projects and the S151 Officer.
2.5 Full Council approves a further supplementary capital budget increase of £100,000 for the Coal Orchard scheme, to be funded by capital receipts.