Agenda item

Report for Decision

ORDERED that Executive:

1.    Approves the reinvestment of additional business rates income due to the Council, generated from growth within the Tees Valley Investment Zone - Middlesbrough Site, only in meeting the needs of the Priority Sectors. This approval was subject to assurances, required from TVCA, around the decision-making processes for projects the TVCA was responsible for.

2.    Delegates authority to the s151 Officer to finalise and authorise the draft Memorandum of Understanding (MoU) with the Tees Valley Combined Authority (TVCA)

AGREED that Executive notes the Council’s engagement in delivering the Tees Valley Investment Zone programme.

The Executive Member for Finance submitted a report for Executive’s consideration. The purpose of the report was to seek approval for the Council to enter into an Memorandum of Understanding (MoU) with Tees Valley Combined Authority (TVCA) governing the operation of the Tees Valley Investment Zone - Middlesbrough Site and associated programme.

On 20 February 2025, Regulations were laid before Parliament that created the Tees Valley Investment Zone - Middlesbrough Site for 24 years from 1 April 2025 as a designated area for the purposes of the local retention of non-domestic rates.

The Regulations referenced a map of the Site, which in part included an existing designated area, Tees Valley EZ Growth Extension: Middlesbrough historic quarter.

It covered an area with Shepherdson Way as its most eastern extent, the River Tees near to Durham Street at its most northern, North Road adjacent to the Hartington interchange at its eastern and Waverley Street at its most southern. A location map was included in Appendix two of the MoU, located at the end of Section one.

The Regulations also record the initial baseline established for the purpose of determining additional business rates income, which was £5,131,673. The effect of the Regulations and the MoU was that any sum over this amount would be retained to be shared for the purpose of reinvestment in the Tees Valley Investment Zone programme, with 50% being paid to the TVCA and 50% held by the Council.

The existing designated area would cease to exist in April 2041, at which time the portion within the Site would be included for the purposes of calculating additional business rates. The initial baseline income from the portion was £1,730,615 and, so rather than the Council continuing to retain its share of rates income that it might then have received from April 2041, the amount of additional income would be calculated by reference to the overall combined baseline of £6,862,288 and shared for reinvestment in the Tees Valley Investment Zone programme until March 2049.

The baseline was finalised in January 2025, before detailed arrangements had been shared around the allocation for retained business rates. Investment Zone funding was not yet deployed, so it could reasonably be concluded that any growth that there may have been in the 2025/26 financial year could not be attributed to the existence of the Zone, but that growth would nevertheless be retained. The MoU would require allocation of any sum to the Zone programme and sharing with TVCA.

OPTIONS

Do nothing. whilst it was possible that increased business rates income may have been received without entering into the MoU, the substantial gain for the town represented by the government funding provided through the Investment Zone would be lost.

The terms of the MoU had been modified so far as possible in discussion between Council officers and TVCA. The scope of the original proposals to government made by TVCA meant that limits existed to the extent of change that was possible without jeopardising the provision of the funding that is available.

ORDERED that Executive:

1.    Approves the reinvestment of additional business rates income due to the Council, generated from growth within the Tees Valley Investment Zone - Middlesbrough Site, only in meeting the needs of the Priority Sectors. This approval was subject to assurances, required from TVCA, around the decision-making processes for projects the TVCA was responsible for.

2.    Delegates authority to the s151 Officer to finalise and authorise the draft Memorandum of Understanding (MoU) with the Tees Valley Combined Authority (TVCA)

AGREED that Executive notes the Council’s engagement in delivering the Tees Valley Investment Zone programme.

REASONS

The decision was required as a pre-requisite to Central Government providing £80m of funding available to the Tees Valley Investment Zone. If the Council was unable to enter into a MoU with TVCA, the funding would not be available to promote growth in the town.

It was a key decision that impacted on two or more wards and would likely have financial consequences totalling more than £250,000.