Issue - meetings

This item was considered by Extraordinary Council on 29th August 2023.

Debbie Smith (Development Programme Manager) to circulate Update Report.

2 Members registered to speak on the item;

-        Cllr Hyman proposed that a vote should be taken before the exclusion of the press and public.

-        Cllr Austin posed several questions related to valuations and comparisons to other purchases. Abi Lewis requested that Cllr Austin submit her questions in writing so that officers could issue a formal response.

The Committee considered the following recommendation of the motion of the Chairman:

Recommendation:

That pursuant to Procedure Rule 20 and in accordance with Section 100A(4) of the Local government Act 1972, the press and public be excluded from the meeting during consideration of the following items on the grounds that it is likely, in view of the nature of the business to be transacted or the nature of the proceedings, that if members of the public were present during the items, there would be disclosure to them of exempt information (as defined by Section 100I of the Act) of the description specified in the appropriate paragraph(s) of the revised Part 1 of Schedule 12A to the Act.

All Members present voted in favour of the motion.

THE SESSION WENT INTO EXEMPT.

[Discussion exempt]

THE MEETING WENT BACK INTO LIVE SESSION.

The Chair proposed 2 recommendations to the Executive, which the Committee voted on;

i.                 The Committee expressed concerns regarding the acquisition and development of 69 High Street.
- 4 Members voted in favour and 5 Members voted against

ii.                The Committee expressed a desire for a full review to be undertaken, including lessons learned for the future.
- All Members voted in favour and the recommendation was therefore carried.

The Committee therefore resolved to recommend to the Executive;

-        A full review of the 69 High Street project is to be undertaken, which includes lessons learned for the future.

The Executive recommends to Council

             I.        the approval of a budget of £230,000 (Exempt Annexe 2), to be met from the Asset Investment Reserve, to progress Phase 1 of the revised project.  This will be to deliver the commercial element of the project to RIBA Stage 4 (the detailed design phase) and to enable the submission of a planning application for the commercial unit.

            II.        the approval of an overall capital budget of £1.96 million (including the £230,000 referred to above), as per the breakdown in Exempt Appendix 4, to cover the anticipated cost of the capital works to the commercial unit, with delegation to Executive to approve the final budget once tender returns for the construction contract have been received.

42.1    The Leader introduced the report and moved the recommendations from the Executive, duly seconded by Cllr Clark.

42.2    The Leader stated that the project represented a first iteration of an approach to intervention in highstreets across the Borough that would form part of the new corporate strategy in the winter, and one which had been part of cross-party political manifestos during the election. Intervention in local highstreets was fundamental to their ongoing sustainability, rather than awaiting government intervention. Residents incorrectly assumed that the Borough Council chose which businesses operated on the high streets, and that the rent was set by the Borough Council who in turn would set and retain Business Rates. However, only around 5p in each £1 of Business Rates were retained by the Council, and the Council only set rents where it owned the site. 

42.3    The Leader continued that the Council had wider obligations than private businesses which included providing value for money for its residents together with tackling climate change through more ethical and sustainable actions. He expressed the view that a landlord should be financially sustainable enough to absorb short-term financial pressure, be viable in the long term, and not solely driven by profit but concerned also about sustainability and community values. The project would support Godalming HighStreet and bring forward sustainable housing in a Council owned development aligned to the Council’s corporate strategy. The Leader was of the view the debate on the matter should be held in open session, as much as possible.

42.4    Councillor Liz Townsend spoke in favour of the recommendations on behalf of the Portfolio Holder, Councillor Merryweather, and thanked Officers for their hard work on the project. All Councils had to generate additional income to replace core Government funding which had been withdrawn. The project would achieve additional income whilst Councils continued to face financial uncertainty through the government having again postponed the fair funding review. The Council had been prudent in the investments it had made to date working within a clearly defined investment strategy and risk appetite and the proposed tenant was attracted as part of an open market process. Waverley had experienced a weakening economy, and between 2016 and 2021 approximately 3,000 jobs had been lost with a year-on-year decline in the number of businesses being set up. More businesses had failed than had been started.  Therefore, the Council should do what it could to attract more businesses into the Borough and also a range of businesses onto high streets.  Members were reminded that the site had beenpurchased in early 2022 by the Council as a general fund mixed use development with the benefit of planning permission and the project was also aligned to the aspirations set out in the Corporate Strategy to optimise the availability of housing.

42.5    Councillor  ...  view the full minutes text for item 42

In March 2022, Full Council approved the acquisition of 69 High Street, Godalming as a General Fund mixed use asset to support the Council’s aspirations contained within the Corporate Strategy 2020-25, including:

·             To bring forward affordable housing, in this case in Godalming town centre, and

·             To deliver a positive contribution to Godalming by preserving the integrity of the high street

The purchase was completed in May 2022, and in November 2022 the Executive noted a “mixed use” Project Initiation Document (PID) to:

·             progress the design optimisation scheme, in line with corporate priorities, to optimise housing numbers, and

·             ensure the site – in the central high street – does not remain vacant and development of the scheme is done at pace.

This report describes the outcome of the Stage 1 (RIBA stage 0-2) work  in that PID and makes recommendations for next steps.

Recommendation to the Executive:

1.       To approve the phasing of the project.

2.       To approve the Outline Business Case and project timeline for the Phase 1 of the revised project (Exempt Annexe 1).

3.       To recommend to Full Council the approval of a budget of £230,000 (Exempt Annexe 2), to be met from the Asset Investment Reserve, to progress phase 1 of the revised project.  This will be to deliver the commercial element of the project to RIBA Stage 4 (the detailed design phase) and to enable the submission of a planning application for the commercial unit.

4.       To delegate to the Strategic Director of Place, in consultation with the Lead Portfolio Holder, the submission of a new planning application for the commercial unit, including demolition to facilitate delivery and preparation for the prospective housing.

5.       To recommend to Full Council the approval of an overall capital budget of £1.96 million (including the £230,000 referred to above), as per the breakdown in Exempt Appendix 4, to cover the anticipated cost of the capital works to the commercial unit, with delegation to Executive to approve the final budget once tender returns for the construction contract have been received.

6.       To delegate authority to the Executive Head of Assets to enter into a long-term (15 years) commercial lease for 69 High Street.

7.       To delegate to the Strategic Director of Place to:

i.         Approve the commencement of tender process for construction contracts, including those of the professional team.

ii.        Approve the appointment of contractors following appropriate procurement subject to the appointment being within the identified budget.

iii.       Approve the entering into any related contractual documentation (including collateral warranties and novation agreements) related to the development of the project.

iv.       Approve the entering into any agreement (including paying any necessary sums provided they are within the project budget) with any utility or related provider to ensure the connection, moving or management of any services to facilitate the project.

The Executive RESOLVED to:

1.       approve the phasing of the project.

2.       approve the Outline Business Case and project timeline for the Phase 1 of the revised project (Exempt Annexe 1).

3.       recommend to Full Council the approval of a budget of £230,000 (Exempt Annexe 2), to be met from the Asset Investment Reserve, to progress Phase 1 of the revised project.  This will be to deliver the commercial element of the project to RIBA Stage 4 (the detailed design phase) and to enable the submission of a planning application for the commercial unit.

4.       delegate authority to the Strategic Director of Place, in consultation with the Lead Portfolio Holder, to submit a new planning application for the commercial unit, including demolition to facilitate delivery and preparation for the prospective housing.

5.       recommend to Full Council the approval of an overall capital budget of £1.96 million (including the £230,000 referred to above), as per the breakdown in Exempt Appendix 4, to cover the anticipated cost of the capital works to the commercial unit, with delegation to Executive to approve the final budget once tender returns for the construction contract have been received.

6.       delegate authority to the Executive Head of Assets and Property to enter into a long-term (15 years) commercial lease for 69 High Street.

7.       delegate authority to the Strategic Director of Place to:

i.        Approve the commencement of tender process for construction contracts, including those of the professional team.

ii.       Approve the appointment of contractors following appropriate procurement subject to the appointment being within the identified budget.

iii.      Approve the entering into any related contractual documentation (including collateral warranties and novation agreements) related to the development of the project.

iv.      Approve the entering into any agreement (including paying any necessary sums provided they are within the project budget) with any utility or related provider to ensure the connection, moving or management of any services to facilitate the project.

Reasons for the decision:

1.       69 High Street, Godalming was purchased as a General Fund mixed use redevelopment project to support the Council’s aspirations contained within the Corporate Strategy.

2.       It aligns with the Government guidelines around ‘Investment for Service Purposes’ being expenditure on assets that form part of the Council’s public service which also support the corporate priorities.

3.       Since the property was bought, macro-economic factors including build cost inflation and increased borrowing costs have adversely impacted the financial landscape. The redevelopment options have been revised accordingly, and are in line with the Council’s Asset Investment Strategy. Further consideration has been given as to how the Council might best look to progress the delivery of the scheme to achieve the strategic objectives. The recommendations in this report will enable the scheme to progress towards delivery of the project.

[Overview and Scrutiny Committee – Resources]

36.1   Cllr Mark Merryweather, Portfolio Holder for Finance and Assets, introduced the report which recommended the preferred option for developing the property asset at 69 High Street, Godalming.

36.2   Cllr Merryweather explained that much of the reporting relating to this matter had to be restricted to Exempt papers for good reason including commercial confidentiality, and it would be necessary to move into Exempt session, but there were a few points of principle that he wished to draw out from the public part of the report:

1.     When the council acquired this site nearly 18 months ago, the objective was – and it still was - to provide much needed genuinely affordable housing and to re-invigorate the one empty High Street unit that we could.

2.     The council had not been immune to the macro-economic climate which had made this project so much more difficult, but there were still options to deliver the intended outcome that were financially viable and demonstrated value for money.  The macro-economic climate meant that these and other options had weakened from where they were 18 months ago, while others had even had to be all but ruled out, but the recommended option was still expected to achieve the original outcome and pay for itself.

3.     Indeed, beyond the base case version of recommended Option 3 presented in the Exempt Annexes, the council also had funding reserve capacity to improve on that base case should it chose to do so, plus the flexibility to progress the residential element through either the General Fund or the Housing Revenue Account – decisions that did not have to be taken now.

4.     While the council had to assess the project’s value for money, it was not allowed to undertake the project primarily to make a profit, a yield, either in income or capital terms.  In contrast though, and precisely because of the exact same macro-economic factors, it would not be in the council’s strategic or financial interests to abandon the project and exit now into the open market.

36.3   Cllr Merryweather thanked council officers and the council’s team of independent professional expert advisers who had worked so hard to update all of the analyses in this period of exceptional economic turmoil. 

36.4   Before moving into exempt session, the Deputy Leader asked the Executive Head of Legal and Democratic Services and Monitoring Officer to respond to a point raised by Cllr Jerry Hyman prior to the meeting regarding whether the Executive was able to make a decision in Exempt session, referring to Paragraph 9 of revised Part 1 of Schedule 12A of the Local Government Act 1972. The Executive Head of Legal and Democratic Services confirmed that she was satisfied that the report did contain exempt information in accordance with paragraph 3 of Schedule 12A to the Local Government Act 1972 which provided that information that related to the financial or business affairs of any particular person including the authority holding that information could be deemed to be exempt. There was  ...  view the full minutes text for item 36