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Council Leader Condemns Leak Of Scarborough Regeneration Costs

Council Leader Condemns Leak Of Scarborough Regeneration Costs

Published by Local Democracy Reporter Carl Gavaghan at 3:31pm 15th July 2019.

Leaked documents have revealed that Scarborough Council is looking to borrow £22 million for its plan to build 200 student flats and a public square in the town centre.

The borrowing will almost double the amount of debt the borough authority has with the council hoping to make a net return of £970,000 after 10 years, the proposals show.

The plans were approved during an extraordinary meeting of the council on Friday last week.

The former Argos building in Newborough will be purchased by the council, then demolished to create accommodation for university students and trainee nurses and doctors in partnership with the York Teaching Hospital NHS Foundation Trust.

Wrenbridge Land Ltd will be the council’s partner in the scheme and is budgeted to make a profit of more than £2.5 million, the documents reveal.

The financial details were not made available to the public at the time but have now been leaked online.

Councillors were given access to the sums before the decision was made and Council leader Cllr Steve Siddons (Lab) said he will be investigating the source of the leak and backed the project.

He said:

“This project is a once in a generation opportunity to improve the life chances of our young people whilst regenerating a part of the town centre that is looking tired and in need of some loving care.

I am disappointed and disgusted that someone has felt it appropriate to leak commercially confidential information from the council. This is a serious matter and I have instigated an immediate investigation to try and find the perpetrator.

I am not sure what is to be gained by sharing this information at this point. I have already said that the financial information would be shared at an appropriate time but that is not now. Sharing this information at this stage on social media is irresponsible; it is confidential. Suggestions that I am not being open and transparent are also flawed. I have been open with all councillors on this project and will continue to be with future decisions.”

The documents show that the cost of the scheme is estimated at just over £19million, which includes £1 million to purchase the building. To cover fees and possible overruns, the council is estimated to need to borrow £22m to fund the project.

The report prepared for the councillors notes that as of March 2019 the council had £25.7m in external long term borrowing, meaning the amount of debt would nearly double when the loan for the Argos project is factored in.

The scheme will create flats for the town’s Coventry University campus, CU Scarborough, and when not in use by students would be rented out over the summer months to increase the council’s income.

As well as the flats, the council is proposing to build commercial retail units on the site.

The council documents add:

“The indicative appraisal ... assumes that £915k will be generated from the commercial units over the initial 10-year investment period.

ln the unlikely event that the units are not let, or market rents are not achieved, this will directly affect the council’s net financial return from the asset.”

The report states that the scheme is not without risk, especially around its deal with Futurelets, the student accommodation provider for CU Scarborough.

It adds:

“There is a risk that some of the rental income included within the financial appraisal may not be achieved and that the council may need to identify an alternative use for the building in the unlikely scenario that Futurelets do not renew their lease after the initial lease term.

On that basis, it is proposed that the residual surplus generated from the asset over the initial 10-year lease term be ring-fenced for further regeneration of the site or as a mitigation against reduced rental income or potential changes in the future use of the building.”

Independent councillor Michelle Donohue-Moncrieff was one of three councillors who voted against the scheme last Friday.

She told the Local Democracy Reporting Service that while she supported the scheme she had concerns about the risk to the council, drawing similarities with the authority providing a £9m loan to fund a water park in the town that later got into financial difficulties.

Cllr Donohue-Moncrieff also expressed concerns that the deal with Futurelets only lasts for 10 years, by which stage the council will have paid off £3.39m of the loan.

She said:

“It’s a great scheme but it’s a bad deal for the tax-payer.

We are putting £22m of debt onto the council but if everyone pulls out where does that leave us? The council is raising its debt limit and I worry that this is just the start, is it going to happen again to finance other schemes?

There are things in the deal outside the council’s and the university’s control, what happens if there is a change to tuition fees, for example?

My concern is that we are adopting the same approach as we did with the water park, when people raised concerns they were dismissed but now I think, with hindsight, many of those concerns have come to fruition.

My worry is that CU Scarborough is a very good university but things may happen in the market that means it could not deliver its growth targets.

Yes, we should be working with them but not to put our debt up by almost double. We are taking on the majority of the risk and that is not the job of the council.”

Comments

There are 5 comments on this page.

phoenixweb, on 15th July 2019 4:28pm
Fail to understand why Cllr Steve Siddons can be so upset that the council's proposed investment of £22 million is public yet he declare he is being open and transparent. £22million is a massive amount more than £9 million involved at Alpamere
zara, on 15th July 2019 5:27pm
WELL I am surprised - NOT. It was pretty obvious that another grandiose scheme by the council was actually going to cost the taxpayer lots of money. Its alright for Councillor Siddons and his ilk to be spending our money like this maybe they can afford their council tax easily, the rest of us cannot. So yes councillor Siddons we would like to know how you are wasting our money. Its funny that its always the taxpayer that has to put so much up front for little return whilst the developers seem to get away pretty easy and you wonder why people are suspicious of deals behind closed doors!!
zara, on 15th July 2019 5:44pm
I have just been reading all the leaked documents and i can see why our esteemed council leader did not want them leaked!! Just out of interest are there any businessmen/women on our council because looking at it they must be rubbish at their job if they are. Talk about lots of risk and not much reward. Then again it is easy when it is not your money that is at risk...

Maybe if the councillor took some business classes instead of worrying about leaks it would be more advantageous to us all
andyh, on 15th July 2019 10:59pm
Hang on a minute. 200 flats at a minimum of say £50 a week
= £10,000 a week = £520,000 a year = £5.2m over 10 years
less maintenance costs. Include the businesses then it's
£6.115m over 10 years. Not brilliant but not too bad.
zara, on 16th July 2019 7:35am
that might be not too bad if all that £6.115m you are saying actually came back to the borough but most of it would go to the developer and that assumes that all the flats and commercial parts are actually rented out which as far as the commercial side is concerned would be dubious. The flats would only be let to students in term time with the possiblility of renting them out to others during the rest of the year (which would really be only the summer term). What is not clear to me is who will actually own the property and what happens if the developer suddenly goes bankrupt who pays the bill? Would the developer at any point be able to decide to sell the flats?

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