Minutes:
Following a declaration of interest in respect
of this item, the Mayor left the meeting at this point. For the remainder of
business, Councillor Smiles chaired proceedings.
The
submitted report recommended approval of the provision of up to £1m to MDC in
the form of a commercial loan, (subject to sign off from the Council’s Section
151 Officer), which would be taken from the approved Investment Strategy
allocation to MDC.
MDC
would then enter into a loan agreement with the partner(s) for a maximum term
of 20 years. The loan would incur a cost charged by MDC, which was negotiable.
The partner(s) would then be required to state how that cost would be covered,
such as through the payment of interest on the loan.
The
commercial loan from the Council to MDC would be on the same terms as the loan
from MDC to the delivery partner(s).
The
partner(s) would fund the refurbishment works in the first instance but would
reclaim those costs from MDC through draw-downs from the loan. Once a property
was fully refurbished and ready to be let, the partner(s) would request a
payment, based on the previously agreed refurbishment costs of each property.
That draw-down was anticipated to be on a monthly or quarterly basis.
Funds
loaned to the partner(s) from MDC would be secured via a first charge on each
property acquired, which would be registered by the partner(s) once the
refurbishment loan costs were drawn-down. As the Council owned 100% of the shares
of MDC, MBC would have a secured legal interest in those properties. A company
debenture may also be considered as an alternative form of security to legal
charges on each property.
Any
charges on the loan from MDC to the partner(s) would be invoiced and recovered
on an annual basis. The charges would be incurred for all funds drawn down via
the loan from the first letting of the property and then continuing until
repayment of the proportion of the loan relating to that particular property.
The
loan to the partner(s) for each property would be repaid in full upon disposal
or no later than the projected end date of 2041.
Although
the financial arrangements of the investment proposal would be a matter for the
MDC Board rather than the Council, the Council’s Section 151 officer would need
to be satisfied that the funding was being used appropriately and in line with
the Company’s objectives, and that it represented an appropriate use of the
Council’s resources.
In
response to Members’ queries, the Director of Finance advised that the
commercial loan provided by the Council would be made up of monies secured from
Section 106 Agreements and the Affordable Housing Fund. A Member sought further
clarification in respect of the sum obtained from Section 106 Agreements, the
Director of Finance advised that further information would be provided in due
course.
OPTIONS
In respect of the
recommendation for the Council to invest £1m to enable MDC to enter into an
Empty Homes Partnership, the other options were set out below:
·
Do nothing - would not
realise any of the benefits.
·
MBC partner with
another organisation - the Council did not have the staffing capacity to
deliver the scheme.
ORDERED
1.
That the provision of
up to £1,000,000 to MDC to establish a partnership to invest in the
refurbishment of empty and poor quality properties, within the key target areas
of Middlesbrough, be approved. That funding be provided in the form of a
commercial loan (subject to sign off from the Council’s Section 151 Officer)
and be taken from the approved Investment Strategy allocation to MDC.
2.
That delegated
authority be given to the Director of Finance and the Director of Regeneration
and Culture to agree the terms of the loan to MDC.
3.
That MDC be given
approval that where appropriate, MDC could acquire properties directly prior to
the establishment of a partnership.
REASON
Investing in the
project enabled MDC, and therefore the Council, to deliver tangible
Environmental, Social and Governance benefits to the targeted areas within
Middlesbrough.
1.
Environmental benefit
was delivered by bringing between 100 and 125 properties up to decent homes and
legally required environmental standards, based on an average expenditure of
between £8k and £10k per property.
2.
Social benefit was
delivered as every property was let to a person or family in housing need,
including those facing homelessness, with tenant support provided where
required.
3.
The partner
organisation would be a well governed socially responsible company, which,
combined with MDC’s resources and expertise, would make the project sustainable
and meaningful.
Supporting documents: