Agenda item

The Council is in receipt of Final Bids from 3 shortlisted bidders following conclusion of an OJEU competitive dialogue procurement, each of which is capable of being proceeded with.  To progress the development of the Bath Quays North site the Council will appoint a preferred bidder (and reserve bidder) and finalise the terms of a Development Agreement with the preferred bidder or, if negotiations are not successfully concluded with the preferred bidder, the reserve bidder, on the most economically advantageous terms possible.

The Full Business Case (FBC) annexed in Appendix 1, provides Cabinet with a management tool for evidence-based and transparent decision making.  The FBC sets out a Treasury Green Book compliant 5 case business plan for the public intervention and role in delivering Bath Quays. Sections of the report relevant to this decision comprise:

a.  The Strategic case (sections 1-5), where we are now and rationale for investment

b.  The Economic case (section 10), summary of benefits

c.  The Financial case (sections 11-12), summary of costs and payment mechanisms

d.  The Commercial case (section 13), procurement approach and legal arrangements

e.  Operation and Viability (section 14), existing and future operational arrangements

f.  The Management case (section 15), programme management and governance structures

g.  Other sections cover options appraised (section 6), State Aid (section 7) Equality & Diversity (section 8), Environmental Sustainability considerations (section 9) and Monitoring and Evaluation.

The Council submitted (in November 2018) the Full Business Case to WECA for the application of £30.8m of WECA funding to support the implementation of BQN infrastructure in order to realise growth in the Bath Enterprise Zone. An approval decision from WECA is expected in February 2019.

Councillor Tim Warren informed the meeting that the wording for recommendation 2.3 would read as:

‘Approve the uplift to the provisional Innovation Quay - Economic Development Funding Enabling Infrastructure budget to £30.8m to bring in line with the additional grant funding WECA have provisionally allocated through the EDF and LGF funding programmes.’

Councillor Warren explained that word ‘provisionally’ has been included because WECA meeting where the additional grant funding would be approved has not happened (due to adverse weather), and the meeting has been postponed for 15th February 2019.

Councillor Paul Myers introduced the report by saying that over the past three decades, the market has failed to develop sufficient modern office accommodation within the City. This has had a significant effect on the economy and the City now faced a tipping point in terms of maintaining a viable and attractive office sector. The city would need to maintain a broad mixed economic base and a range of jobs in the local economy across key wealth growth and wealth creating sectors such as finance, digital and technology.  Also, as a World Heritage Site, the replacement of the old and ugly Avon St car park would repair a scar on the city and reconnect the city back to it riverside.

The Council would therefore propose to exercise its public function to revitalise the city and overcome the longstanding market failure in the provision of office space by utilising its strategic land asset at Bath Quays North to enable delivery of a new Business District in the heart of the city.

The Council were successful in achieving Outline Planning Consent in August last year for the comprehensive redevelopment of the Avon Street multi-storey carpark & Riverside coach park.

The planning permission could deliver a total combined floor space of up to 38,000sqm gross investment area (GIA) and critical infrastructure (basement carpark & highway improvements) and demolition of the existing multi storey car park.

WECA funding has been applied for to overcome the viability hurdle by the provision of economic development funding required to de-risk & unlock the Bath Quays North site in line with the Council’s planning permission.

Through provision of front-end public investment in development infrastructure the scheme was able to leverage substantial private investment and make an office-led development viable.

As part of the West of England Combined Authority (WECA), B&NES shares its combined Authorities’ ambitions for promoting sustainable growth across the sub-region. The LEP’s Strategic Economic Plan has set an ambitious baseline for delivering 65,000 jobs and 2.6% GVA growth in the West of England by 2030.

Bath plays a crucial role in the B&NES economy, providing 70% of the area’s employment and 75% of knowledge based and priority sector employment. The principal constraint to further future growth in the City’s knowledge economy was the lack of appropriate office stock and workspace. Adopted policy defines the need for provision of some 40,000sqm of centrally located office space to facilitate growth and drive inward investment. The Economic Strategy emphasises that delivering the Bath EZ was central to achieving the City’s economic potential.  Enabling development of BQN and the creation of a new Central Business District for the city was the principal underpinning intervention to deliver this strategy

The Council commenced a procurement process in July 2017 to procure a development partner via a formal OJEU tender process.

The Council has undertaken a thorough public procurement process to engage the private sector and has reached a conclusion to this with three outstanding propositions to become the Councils development partner. Through the final selection and award process the Council would secure the replacement of the Avon St carpark in a  modern basement, a minimum first phase of offices and commercial uses and capital income to maintain a balanced financial position for the Council.

Councillor Myers concluded his statement by thanking officers across the Economic & Community Regeneration and Finance & Efficiency teams for all their hard work in progressing this scheme to date.

Councillor Paul Myers moved the recommendations.

Councillor Charles Gerrish seconded the motion by saying that this was Council’s most significant investment to date.

The forecast total Project cost of BQN was currently estimated at £191m funded from the sources as per below:

•  B&NES short term Council funding (borrowing)£13,101,000 

•  WECA - LGF £8,313,00

•  WECA  - EDF  £23,878,000

•  Developer funding  £145,727,000

Councillor Tim Warren said that the scheme would be great for the city in terms of jobs and with a positive impact on the community. 

Councillor Bob Goodman said that the area has lost many jobs due to recession, and that Bath could not rely only on tourism and universities to generate income for the city.  The creation of jobs and office spaces would keep young people in the city.

RESOLVED (unanimously) that the Cabinet agreed to:

1)  Review the Full Business Case and approve the recommendations to award the contract to the preferred bidder as the Council’s development partner for the Bath Quays North site (the Site) (as shown edged red on the indicative plan at Appendix 4) having submitted the most economically advantageous bid in accordance with the Council's evaluation criteria as explained in the exempt Appendix 3, and in the event the Council is not able to conclude final negotiations with the preferred bidder it appoints the reserve bidder as the Council’s development partner.

2)  Delegate authority to the Director of Economy & Growth in consultation with the Leader, Chief Executive, the Council’s S.151 Officer and Monitoring Officer to take all necessary acts to:

a.  Agree final terms with the Council’s development partner including entering into the Development Agreement and all other ancillary documents to facilitate the carrying out of the redevelopment of the Site.

b.  Appropriate for planning purposes the Site under section 122 of the Local Government Act 1972 and to exercise the power (refer Section 4 of this report), if required, under Section 203 of the Housing and Planning Act 2016 (“Section 203”) to facilitate the carrying out of the redevelopment of the Site.

c.  Dispose of the Site to the appointed development partner under the terms of the Development Agreement.

d.  Complete contemporaneously, with the Development Agreement, a grant funding agreement with the West of England Combined Authority.

3)  Approve the uplift to the provisional Innovation Quay - Economic Development Funding Enabling Infrastructure budget to £30.8m to bring in line with the additional grant funding WECA have provisionally allocated through the EDF and LGF funding programmes.

4)  Fully approve Capital of £6.647m from the provisionally approved Bath Quays Delivery capital budget as set out in Section 3.3 of the report.

5)  Fully approve Capital of £30.8m from the provisionally approved Innovation Quay - Economic Development Funding Enabling Infrastructure capital budget as set out in Section 3.3 of the report.