Agenda item

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 to borrow additional capital in order to fund the Tollesby development, other potential decisions had been considered and were summarised in the following paragraphs.

 

1.     Do nothing - In the absence of an additional capital allocation the development would have been undeliverable in its current form. Considerable expense had been incurred in acquiring the site and achieving planning consent, which may not have been recovered.

2.     Reduce the scale/quality of the development - The scheme could have been re-designed to bring it within the original budget approval. Considerable expense had again been incurred to gain planning approval for the scheme and the proposals had been subject to consultation with the local community and had been discounted as an option for that reason.

 

ORDERED

 

1.     That additional funding of up to £1,200,000 to MDC, to facilitate the delivery of the Tollesby development, be approved. The funding would be provided from £700,000 of Section 106 4 contributions and £500,000 of Council resources, with the latter being provided in the form of a commercial loan (subject to sign off from the Council’s Section 151 Officer). Both amounts sat within the current approved Investment Strategy allocation to MDC so there would be no additional requirements in that regard;

2.     That the Council’s Section 151 Officer be given delegated authority to approve the transfer of residual funds held within MDC accounts to the Tollesby project, subject to MDC Board approval.

 

REASON

 

The approval of the additional funding planned to enable the regeneration of the now cleared site to commence in late May/early June 2021, which would:

a)    enable MDC to develop a high quality scheme of apartments and commercial units and secure a long-term future for a site;

b)    generate a long-term rental income stream for MDC;

c)    support local residents, who campaigned for the removal of a significant blight on the area; and

d)    secure income, which would be received from Council Tax and Business Rates.