Decision details

Cabinet received a report which included detailed proposals for the delivery of growth and regeneration schemes in Peterborough and for the Council’s involvement in those schemes.

The purpose of the report was to seek Cabinet’s approval to:

1)    Establish a 50:50 joint venture company with a new Peterborough Investment Fund to prepare viable and consented development schemes for a series of sites;

2)    Participate in the governance of the Peterborough Investment Fund through representation on the Fund’s Investment Committee and Management Board;

3)    Grant Option Agreements on the sites listed in section 4.3.3 of this report to the Peterborough Investment Fund;

4)    Approve the future Council office consolidation plan described in this report and enter into an Agreement for Lease with the Peterborough Investment Fund for new administrative offices to be developed on Fletton Quays; and

5)    Recommend to Council that the Treasury Management Strategy is amended to permit investments in Collective Investment Schemes to enable the Council to participate in the profits of the Peterborough Investment Fund, if it choose to do so.

Cabinet considered the report and RESOLVED the following:

In order to facilitate the establishment of a Peterborough investment Fund to bring forward development through £130M of external investment, Cabinet APPROVED:

(1)    The business case for an investment joint venture at Appendix 1;

(2)    The establishment of a Joint Venture Company with a Fund regulated by a UK registered fund manager with a 50% equal shareholding for each party;

(3)    Investment of £3m funded from the existing capital programme, representing the value of the 50% shareholding in the joint venture company and match funded by the Fund;

(4)    Granting of Option Agreements in favour of the Fund on the sites listed within this report, and to be included in the asset disposal list to be agreed by Council as part of the Capital Strategy; and

(5)    An Agreement for Lease with the Fund for the development of offices on Fletton Quays.

Cabinet RECOMMENDED to Council:

(6)    Amendments to the Capital Strategy and Asset Management Plan as part of the Medium Term Financial Strategy to be approved by Council to include the revised capital programme, the sites listed in this report on the asset disposal list and the approach to granting Option Agreements;

(7)    Amendment to the Treasury Management Strategy as part of the Medium Term Financial Strategy to be approved by Council to allow the Council to elect to take the benefit of land transfers as units in the fund;

(8)    Amendment of the Constitution ‘Appointments to external organisations’ to include the joint venture company and the Fund within the ‘key partnerships category’ to enable the Leader to appoint members to:

a.    the Board of the Joint Venture Company

b.    the Fund investment committee

c.    the Fund management board

Cabinet DELEGATED authority to the Director of Growth & Regeneration, in consultation with the Leader of the Council, the Director of Governance and Executive Director of Resources, to

(9)    Agree the fund investment criteria, shareholders agreement and all other necessary documents to establish the joint venture company and the agreements with the Fund; and

(10) Authorise the creation of additional organisations such as limited companies, or limited liability partnerships (a council wholly owned company) to hold any dividend bearing units in the Fund

Cabinet DELEGATED authority to the Director of Governance, in consultation with the Executive Director of Resources, to agree the terms of the Agreement for Lease and to execute the transfers of land in response to the exercise of the Option Agreements by the Fund.

The proposals within the report offer the Council an opportunity to unlock significant investment to help bring forward key city centre regeneration sites, allowing the Council to further the city’s growth and regeneration with minimal additional investment whilst delivering potential financial and other benefits to the Council and the city. 

i)    Use of prudential borrowing

The Council has the ability to obtain finance directly from the Public Works Loan Board at preferential rates of interest.  It could choose to borrow in this way and invest in some specific growth projects, either itself or through financing of a wholly owned delivery model.

There are, however, limitations to this approach that limit its attractiveness. For example, most of the schemes that the joint venture would enable would not create operational Council buildings on Council land. They are schemes for the city, not for the Council, and would not be schemes the Council would normally fund from borrowing. 

There is also a cost to borrowing finance in this way, and the nature of regeneration schemes tends to result in significant upfront costs and delayed returns, so were the Council to take this approach there would be a period of time where it is paying a substantial interest charge without receiving income or receipts from a sale of capital assets that a scheme creates to offset this.  It would also mean that the Council is taking on 100% of the risk in the development. With the Council forecasting a budget deficit in 2015/16 of £18m, this approach would be extremely difficult.

ii)  Traditional Local Asset Backed Vehicle

A Local Asset Backed Vehicle (LABV) is a partnership or joint venture between a public body and a private sector investment partner, normally over the medium or long-term.  The public partner generally inputs assets, with the private sector partner providing finance and technical expertise.  In the past, there have been some high-profile examples created in the UK, but they are now less favoured. For example, the private sector firm that created the first UK LABV with Croydon Borough Council, John Laing, announced in January 2013 it would not be involved in any future partnerships. 

The level of delivery of schemes by LABVs has been lower than expected. Where they work best is where there are ‘oven-ready’ schemes and it is clear how to get the best out of specific sites. Peterborough has a number of complex regeneration sites that are not well-matched to this approach.  LABVs, by their nature, also tend to be constrained to work on sites the relevant public body has transferred to them, whereas the JVCo proposed here would be free to work more widely if its Board approved.

iii)    Allow the market to drive growth

Whilst the UK economy is slowly recovering, it remains fragile.  There are still many difficulties around bank lending and financing options that restrict the ability of the market to deliver growth projects. Peterborough has a number of key strategic sites, such as Fletton Quays, which failed to come forward during the height of the economic boom. With significantly less public sector subsidy available today and more difficulties in raising private finance, relying on the market alone could be a significant risk.  Despite Peterborough’s recent development successes, the market will also want to cherry-pick the easier, lower risk sites and leave the more difficult ones – of which the city has a number.

None.

·      Cabinet Report: “Peterborough’s New Growth Delivery Arrangements” (http://democracy.peterborough.gov.uk/ieDecisionDetails.aspx?ID=248)

·      Cabinet Report: “Delivery Strategy for South Bank & Surrounding Areas” (http://democracy.peterborough.gov.uk/ieDecisionDetails.aspx?ID=640)

·      ‘General Power for Local Authorities to Trade in Function Related Activities Through a Company’

·      Equality Impact Assessment dated 07/02/2014