Agenda item

This report puts forward a proposal for the establishment of a revolving infrastructure fund to support the delivery of critical infrastructure in step with new homes.

The Committee considered the Cranbrook New Community Manager and Service Lead – Growth, Development & Prosperity’s report seeking an in-principle agreement to borrow up to £40m from the Public Works Loan Board to capitalise the Cranbrook Infrastructure Fund.  If approved, this would both benefit residents and help to address ongoing viability challenges in relation to the expansion areas for Cranbrook.

The report advised that high up front infrastructure costs could potentially be a barrier to the delivery of large scale development and the Service Lead – Growth, Development & Prosperity reported that Cranbrook had overcome that barrier by the use of revolving infrastructure funds to accelerate the upfront delivery of critical infrastructure with the costs recovered on a roof tax basis.  He referred to St Martin’s Primary School as an example of infrastructure delivered through a revolving infrastructure fund enabling it to be opened with just 30 homes occupied in Cranbrook ensuring the attractiveness of Cranbrook to young families.

The Cranbrook New Community Manager advised that the Cranbrook Development Plan Document was in the process of Examination in Public and was out for consultation to the viability participants.  Members’ attention was drawn to the potential of upwards of six different developers to negotiate with to secure agreement on the delivery of infrastructure.  They have welcomed the potential cost savings of approximately £9m from the overall development costs that could be saved in interest payments from the £30m infrastructure fund.

The Cranbrook New Community Manager outlined the importance of the infrastructure fund that would be required to help fund items including the first additional primary school as well as leisure provision and potential highway upgrade works.  Other items could also be included such as additional education provision and the delivery of enhanced public transport, depending on how the fund revolved.

Comments raised by Committee Members included:

·         Concern raised about the eye watering amount of money the district council would borrow and how little detail in the report about what the £30m was going to be used for.  Comfort and reassurance was sought on the risks and to learn what other councils were doing.  In response the Service Lead, Growth, Development & Prosperity acknowledged the concerns raised and highlighted that £32m of revolving infrastructure funds had gone into Cranbrook which had been secured through legal agreements, bonds and parent company guarantees.  He referred to potential risks but said these were mitigated through the use of legal agreements and updated Members on the upgrade of Long Lane next to Exeter Airport that was using the forward funding of infrastructure and advised the payments for future development was secured by bespoke legal agreements. 

·         It is unclear about what is happening with the town centre.  In response the Service Lead – Growth, Development and Prosperity advised he would provide a full report on the town centre after Cabinet on 28 July.

·         Clarification sought on the £10m for electricity.  In response the Service Lead – Growth, Development & Prosperity advised the Council would be looking at a wholesale upgrade of electrical capacity that would potentially benefit all 4,000 homes in the expansion areas.

·         Concern raised about the depletion of reserves.

·         Clarification sought on the terms and conditions attached to the loan agreement.

·         The need for a full report with appropriate evidence to justify our decisions.

·         Clarification sought on how many dwellings would be required to be built to recoup £40m.

·         Cranbrook deserves good facilities and good infrastructure and is long overdue in some areas.

·         Clarification sought on whether a decision was time critical.  In response the Service Lead – Growth, Development & Prosperity confirmed there was a critical timing issue because of the Cranbrook DPD Examination and a need to give assurance to the inspector that the Council was actively pursuing a route, in principle, which could result in the cancellation of an offer of a further £9m in infrastructure.

·         Clarification sought on whether the repayment of the loan would be on a per roof basis or time limited.  In response it was confirmed the loan would be on a roof tax basis.

·         Clarification sought that the money borrowed would be used to benefit the people of Cranbrook and surrounding areas.

·         The need to deliver a viable community.

·         The need to weigh up the financial risks versus the risks of making Cranbrook viable for further development.

·         On behalf of Members the Chair sought clarification from the Service Lead – Growth, Development & Prosperity on the risk securities that the council were proposing.  In response he outlined the three established ways of securing repayment which were a financial bond, a parent company guarantee or a charge overland.

·         The Council has a morale and ethical duty to the people of Cranbrook to sort this out.

·         Reference was made to Recommendation 3 and the financial implications and it was queried whether some Members understood the report.  It was pointed out that Strategic Planning Committee was not an audit and governance Committee, it was Committee that was meant to be proactive and creative.  In response the Principal Solicitor outlined that Strategic Planning Committee would only agree in principle the recommendations and a further decision would be made by Cabinet and Full Council.  It was advised Strategic Planning Committee did not have the power to be the final sign off at this point.

·         Clarification sought about whether there was an expectation that every developer would have to pay back £10,000 per dwelling.  In response the Service Lead – Growth, Development & Prosperity advised it would be considered on the cost of a particular piece of infrastructure divided by the number of homes that would benefit.

·         This is fundamental to the Cranbrook expansion and without it the Council’s five year land supply fails.

·         Plea to Cabinet and Full Council to look at the land options and bond options for securing the money.  Please do not consider the parent company option because the uncertainty is high.

·         This proposal would enable things to happen so a successful development can follow.

·         The risk is identified as a high risk but in reality that risk is on the lower end of the scale as this Council will see the money come back.

·         A good electricity supply is essential if this Council is to achieve its green targets.

The Service Lead – Growth, Development & Prosperity acknowledged all the concerns raised and reassured Members that the interest costs that would need to be repaid in full would be paid by the developer party.  This means that all funds would come back to the Council and overall would be cost neutral to the Council.

The following motion was proposed by Councillor Mike Allen and seconded by Councillor Ben Ingham which was later withdrawn and further seconded by Councillor Jess Bailey.

‘That the report cannot proceed until it has a proper cost analysis, including the cost implications to the Council.’

The proposer of the motion, Councillor Allen referred to the lack of detail in the report on the financial element and the reason for asking for a further detailed report was because it was the responsibility of the Committee to know what infrastructure was being requested for £40m.

The motion was put to Committee and with seven votes against, two votes in support and one abstention the motion was not carried.

Councillor Paul Arnott proposed the recommendations as written in the report and was seconded by Councillor Eleanor Rylance.

The Chair requested that a vote take place and was carried with nine votes in support, three votes against and one abstention.

RESOLVED:

1.    That the significance of revolving infrastructure funds to both the past delivery of infrastructure at Cranbrook and the potential impact in terms of improving viability in relation to the future expansion areas be noted.

2.    That an in-principle agreement to borrow up to £40m from the Public Works Loan Board to capitalise the Cranbrook Local Infrastructure Fund be recommended to Cabinet and Council for approval.

3.    That a further report setting out the detailed terms of reference for the fund be considered at a future Cabinet meeting were agreed.

RECOMMENDED TO CABINET:

That an in-principle agreement to borrow up to £40m from the Public Works Loan Board to capitalise the Cranbrook Local Infrastructure Fund be agreed.