12 Middlesbrough Development Company (MDC): Finance PDF 558 KB
Minutes:
Following a declaration of interests in respect
of the following items, the Mayor left the meeting at this point. For the
remainder of business, Councillor Smiles chaired proceedings.
The Executive Member for Regeneration, the
Executive Member for Environment and Finance & Governance, the Director of
Regeneration and Culture and the Director of Finance submitted a report for the
Executive’s consideration. The purpose of
the report was to seek approval for an additional capital allocation to
Middlesbrough Development Company (MDC), to meet a funding shortfall caused by
a lower than anticipated Homes England grant allocation and increased costs.
In December 2019, the Executive approved the
use of £3.5m of allocated funding for the development of land at Rievaulx
Drive, known locally as Tollesby shops.
The report had informed the Executive that the
vacant parade of shops had been causing significant problems for the local
community and were viewed to be ‘blighting the area’. It was proposed that
MHomes (now Middlesbrough Development Company) would acquire the site and
utilise an existing scheme, for which planning permission had already been
secured by the then owner, to redevelop the site and provide 21 units of
affordable residential accommodation and two commercial units.
Since the approval of the December 2019
Executive report, the existing buildings had been demolished and MDC had
completed the purchase of the site from the private owner.
The MDC Board approved a Project Plan for the
development, which included the appointment of a professional team to redesign
the project and directly appoint a construction contractor, with MDC acting as
the developer. The Project Plan included a cash flow and viability assessment
for the project, which assumed a total development cost of £4.986m and an
Affordable Housing Programme (AHP) grant of £1.5m from Homes England.
A new scheme design provided retail units on
the ground floor and a total of 24 flats for affordable rent on the first and
second floors, with associated car parking and access provision.
The revised scheme was submitted to Homes
England for consideration for funding from the 2016 to 2021 AHP and a grant
allocation of £936k was subsequently confirmed.
The MDC Project Plan assumed a scheme cost of
£4.986m. The total cost of the project
was now estimated to be £5.4m (including a £100k contingency) as a consequence
of the factors set out below.
a)
The
scheme, which achieved planning was significantly different from the original
draft design.
b)
The
build costs were now largely based on actual contractor / consultant prices.
c)
Unforeseen
costs associated with complex foundation requirements and a new electricity
sub-station.
d)
A
2.5% increase in labour and material costs since the original Project Plan was
produced.
In order to allow construction to commence, it
was recommend that Executive approved additional funding of up to £1,200,000,
which would be provided to MDC in part from £700,000 of Section 106
contributions and £500,000 from Council resources, with the latter being
provided as a commercial loan.
OPTIONS
In respect of the recommendation for the Council ... view the full minutes text for item 12