Agenda item

ORDERED that Executive

1.    Approves investment in Middlesbrough College of up to £1,600,000 of capital funding from within the approved Capital Programme to enable facility expansion to grow the educational capacity of the college.

2.    Approve an amendment to the existing lease of land at Middlesbrough College to introduce a rental value of £131,234 per annum, for a period of 20 years.

3.    Approve that the arrangement set out was subject to acceptance by Middlesbrough College Board of Governors.

4.      Approve the delegation of any administration and determination of the terms of the lease amendment to the Chief Finance Officer (S151).

The Executive Member for Development submitted a report for Executive consideration. The purpose of the report sought Executive approval to invest in expanded facilities, and capacity, at Middlesbrough College. The investment would allow for provision to meet the demand for expanded student capacity in engineering and technical qualifications and provided an enhanced skills pipeline for the major industrial developments planned across the Tees Valley.

Middlesbrough College was seeking Council investment of up to £1,600,000 to facilitate an expansion in educational facilities on the site. The recently opened £12,000,000 TTE facility has been welcomed as a world-leading engineering skills facility. The success of the relocation of TTE services, following near liquidation in 2019 and Middlesbrough College stepping in, had seen a doubling of student numbers, with further demand anticipated in the near future. As such, the new facility remained under capacity, in relation to the new and projected student numbers.

An expansion of a mezzanine level, to be attached to the new facility, would provide sufficient capacity to accommodate growth in student numbers. Middlesbrough Council had freehold ownership on all of the land on which Middlesbrough College was situated. These leases were subject to a 250 year coterminous lease, whereby a lease premium was paid at the beginning of the lease, leaving a peppercorn due for the remainder of the lease duration.

This legal structure allowed the Council to amend the existing lease to invest in the College site and realise a rental income stream, which was to be incorporated in the current lease structure, as a consequence of the investment, and to allow the investment to be recovered.

Council investment would result in an annual rent of £131,234 over 20 years. The urgency of the capacity requirement was due to the College being unable to access the funding through its own prudential borrowing or grant opportunities. Like any public body, Middlesbrough College was subject to borrowing ratios, as a proportion of its turnover.

The Mayor commented the Council was able to lend the funds to the College and still be able to capitalise on it. Middlesbrough College had expressed concern that the student population was expected to significantly increase, and this investment would allow them to keep up with demand.

The Mayor also stated he would welcome schemes such as this in the future.

OPTIONS

Alternative funding sources had been explored. However, the urgency of the capacity requirement meant that grant funding programmes were largely at capacity.

In 2022 Colleges in the UK were again classed as public sector bodies. Prior to this they were classed as private institutions and able to establish their own debt ratios.

Whilst Middlesbrough College had been prudent in its investments, the return into the public sector in 2022 meant that it did not have capacity to borrow this money, given the extant debt ratios. As such, Council investment was critical.

The College did forward this project to Tees Valley Combined Authority (TVCA) as part of the recent 2025/26 round of UK Shared Prosperity Fund (UKSPF) capital funding. However, the proposal was not prioritised for investment.

Towns Fund and Levelling Up Partnership Funds administered by Middlesbrough Council were fully committed / exhausted.

ORDERED that Executive:

1.    Approve investment in Middlesbrough College of up to £1,600,000 of capital funding from within the approved Capital Programme to enable facility expansion to grow the educational capacity of the college.

2.    Approve an amendment to the existing lease of land at Middlesbrough College to introduce a rental value of £131,234 per annum, for a period of 20 years.

3.    Approve that the arrangement set out was subject to acceptance by Middlesbrough College Board of Governors.

4.    Approve the delegation of any administration and determination of the terms of the lease amendment to the Chief Finance Officer (S151).

REASONS

The proposed investment was cost neutral to the Council as the investment was recoverable through a rental agreement.

Investment in College capacity increased the propensity for major economic growth developments to directly benefit the skills and employment prospects of Middlesbrough’s resident population. Those measures tackled a wide range of deprivation measures and supported personal and financial independence.