Decision details
Decision to move provisional capital budget to full approval to enable delivery of a market loan
Decision Maker: Director Finance - Section 151 Officer
Decision status: Approved
Is Key decision?: No
Is subject to call in?: No
Purpose:
The strategic site is Bath City’s
largest allocated housing site and is a central plank of the
Authority’s 5 year Housing Supply. The future phases have
substantial forecast housing outputs and Homes England grant
funding support, but before housing delivery can commence,
significant site enabling works must be carried out which currently
render the scheme commercially unviable. Homes England grant
funding has been provisionally approved to unlock the scheme and
close the viability gap.
The scheme is unable to progress without prior resolution of the
funding gap; however owing to the nature of the enabling works, key
critical order dates need to be met to maintain the overarching
scheme programme. Delays to Homes England’s programme has
resulted in delays in grant award and entering the contract, which
in turn has pushed funding commitment dates beyond those needed to
meet the critical path; a short-term loan is therefore required to
enable works to progress.
A decision has been taken for the Council to intervene by
delivering a market loan facility to cash flow finance the scheme
and enable critical dates to be met until grant funding is
contracted upon. An urgent decision was made in November 2018 to
guarantee a loan from capital contingency should the funding
application from the Local Enterprise Partnership (LEP) be
unsuccessful.
Since then approval has been granted by the West of England LEP
that headroom within an extant Council Revolving Infrastructure
Fund (RIF) business case can be utilised to deliver the required
loan up to £1.4M. In line with State aid compliance
requirements this loan is to be contracted with an interest rate of
4.75%. The LEP have accepted security for the loan by way of a
Parent Company Guarantee for the first tranche of £0.35M, and
a charge on the developer’s land asset for the remaining
£1.05M. This security mechanism structure has been devised to
meet the timeframe constraints needed to maintain the critical
order path, and be achievable in respect of the developer’s
Board approval process. Temporary loan arrangement agreed for a
maximum term of 4 years.
Decision:
The decision will move a provisional capital
budget to full approval (within the capital programme envelope of
£1.4M) enabling delivery of a market loan. Decision taken to
transact a £1,400,000 market loan in two tranches to a
property developer in order to maintain the housing delivery
programme at a key strategic housing site in Bath through an
officer delegated decision to move a Provisional Capital allocation
from BWR Phase 2 to a Full Allocation. An earlier decision in
November 2018 guaranteed the first tranche of the loan pending a
decision by the LEP.
Alternative options considered:
Option 1 (No Council intervention) –
cash flow gap results in failure to meet critical path and puts the
programme back by up to 2 years and beyond the timescale to
contract in certain Homes England funding in future. This will lead
to a shortfall in Authority’s 5 year housing
supply.
Publication date: 26/02/2019
Date of decision: 26/02/2019
Accompanying Documents: