Agenda item

Councillors noted that Weyside Urban Village ("WUV") was a major 41-hectare brownfield regeneration scheme that the Council had anticipated could deliver approximately 1,500 homes across a range of tenures, as well as 2,000 square metres of community space and 6,500 square metres of employment space.

In February 2020, the Council had committed £334.9 million to fund the site assembly and infrastructure construction to enable the development of the WUV site.  It was expected that this sum would be fully recovered from the sale of ten land plots to housing developers, together with grant funding from Homes England and Enterprise M3 LEP.

Full Council approval had been based on financial modelling information which had demonstrated that the project would at least break even after undertaking activities such as securing planning consents and funding to ensure that the project would have greater or equal value to the receipts received.

Over 44% of the site was currently in Council ownership, and 100% would be achieved on completion of land transfers with Thames Water Utilities Ltd (“TWUL”). The conditional contract with TWUL had been signed on 25 April 2019 to fund and enable the relocation of the existing sewage treatment works on the Council's former landfill site freeing up the land for development.

The Council had secured £52.3m grant funding from Homes England and had signed a Grant Determination Agreement with Homes England in July 2020 to draw down the grant expenditure associated with the implementation of the infrastructure works, that were now in progress. In October 2021, the Planning Committee had issued a Resolution to Grant for the hybrid planning application for Weyside, with the decision notice to approve the application issued in March 2022.

Councillors noted that the broader economic landscape and its impact on the construction industry over the past 12 – 18 months had been profound. At the end of 2021, the Building Cost Information Service (BCIS) – which provided cost and price data for the UK construction industry – had reported that the annual growth in its material cost index reached a forty year high. Since then, pressures on supply chains had persisted and labour shortages had become more acute. Although the lifting of Covid restrictions led to a return to high activity levels, the war in Ukraine and high rates of inflation had put the construction industry in further turmoil. The impact of these issues was being felt at a local level, with forecast construction and financing costs also increasing significantly.

It had been agreed with the Executive that the project team would report the financial position to the Executive on an annual basis. The Council considered a report, which had been considered by the Executive at its meeting on 5 January 2023 and had outlined the financial forecast to the end of the programme, as well as the proposed mitigation to address the potential financial deficit that had arisen as a result of macro-level factors. 

Council noted that the Executive had endorsed the recommendations in the report.

Upon the motion of the Lead Councillor for Regeneration, Councillor John Rigg, seconded by the Leader of the Council, Councillor Julia McShane, the Council

RESOLVED: That full Council:

(1)    notes the current forecasted eventual deficit, as set out in exempt Appendix 1 to this report, in 2033 (year 10 of the project delivery programme)and resulting General Fund revenue implications, noting that this is based on a number of variables outlined within Section 4 of this report (Financial Implications); and

(2)    approves the continuation of the Weyside Urban Village project until officers have completed the required due diligence described in (a) and (b) below and report back to Full Council in July 2023:

(a)    To request officers to provide alternative risk assessed option appraisals other than to proceed with the original Full Council approved scheme, including all possible mitigations and alterations to the current funding and specifications, indicating by use of a range of values where specific data is not available, and a full explanation of assumptions with reasons, sufficient to enable Members to make a fully informed decision on how it wishes to proceed at Full Council in July 2023.

(b)    To request officers to update the project with the latest assumptions, indices and valuations and report back to the July 2023 Full Council.”

Reasons:

The projected deficit, and significantly wide variation and uncertainty of the outcome of this project, had rendered the project as no longer compliant with the Full Council approval to break even at zero cost to the Council, i.e. the project had greater or equal value to the receipts received. At this point, Officers did not have Full Council authority to incur any further expenditure until councillors had considered their full options and implications. However, temporarily stopping expenditure was not realistic due to contractual commitments.

The resolution above would:

·     Ensure that there was sufficient understanding of the projected financial forecast of the programme.

·     Ensure that there was sufficient funding in the approved programme to cover the phase 1 & 2 infrastructure costs, SCC Waste Transfer Centre design cost, construction of the new Council Depot and the payments which the Council was obliged to make to TWUL under the Thames Water Agreement for 2022/23 and 2023/24.

·     Ensure that statutory service agreements and construction agreements could be entered into for the delivery of services and infrastructure for the development and to ensure that Homes England Housing Infrastructure Fund (HIF) milestones were achieved. 

·     Support the delivery of the Council’s Corporate Plan (2021-2025) priorities, by supporting high quality development of a strategic site, creating employment opportunities through regeneration and facilitating housing that people could afford.