Issue details

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.