Agenda item

Report from the Strategic Director for Regeneration and Environment.

Recommendations:

That Cabinet: -

1.    Approves an increase in the Council’s Capital Programme to allow Forge Island to be funded by the Council.

2.    Approves the award of the contract for the delivery of the Forge Island Development to Muse Developments Limited.

3.    Delegates authority to the Strategic Director of Regeneration of Environment, in consultation with the S151 Officer and the Cabinet Member for Jobs and Local Economy, to enter into the agreements necessary to give effect to the Forge Island Scheme. 

Consideration was given to the report which set out a recommended delivery approach to allow the Forge Island Scheme to progress to the construction phase. The approach involved the Council acting as funder for the scheme and contracting with Muse Development Limited to facilitate delivery.

Very recent volatility of the financial markets and the challenge this posed to private funders providing up-front capital within the requirements previously agreed by the Council, had resulted in Muse (in line with the Development Agreement for Lease) re-assessing delivery arrangements and proposing options for the Council to consider, including the Council acting as funder of the whole or part of the development. Consideration of this option was urgent as a result of ongoing and rapidly changing upheaval in the financial markets which was reducing both the availability and the attractiveness of private funding as a route to deliver the scheme. This was combined with time pressures that were created through the commercial agreements with prospective tenants and contract prices.

The matter had been considered by Council on 5th October, 2022, and Council had agreed to give Cabinet the option to act as funder of the whole development and approve the necessary increase in the Council’s Capital Programme to allow for this.

It was noted that, irrespective of the source of upfront Capital funding, it was expected that the cost of repayment of the Capital costs would be met wholly or largely over the long term by revenue generated from commercial activity in the Forge Island development. It was recognised that changing the delivery arrangements for the Scheme to a position where the Council acted as funder would change the nature of the arrangement with Muse. To do so would require the Council and Muse to enter into a Forward Funding Agreement (otherwise known as a “development funding agreement”) which would create a Public Works Contract. For reasons of transparency, a Voluntary Ex-ante Transparency Notice (VEAT) Notice was issued on 26th September, 2022, putting into the public domain the fact that the Council was considering this option.

Full details of the analysis and financial modelling of all options had been presented to Cabinet in Exempt Appendix 1.

This report had been considered by the Overview and Scrutiny Management Board as part of the pre-decision scrutiny process. The Board fully supported the recommendations.

Resolved:

That Cabinet:

1.    Approves an increase in the Council’s Capital Programme to allow the upfront capital costs of the Forge Island development to be funded by the Council rather than a private investor, in order to provide best value to the taxpayer.

2.    Approves the award of the contract for the delivery of the Forge Island Development to Muse Developments Limited.

3.    Delegates authority to the Strategic Director of Regeneration of Environment, in consultation with the S151 Officer and the Cabinet Member for Jobs and Local Economy, to enter into the agreements necessary to give effect to the Forge Island Scheme.