Minutes:
In September/October 2016 both Prosperous Communities and Corporate Policy and Resources Committees agreed in principle to:
(a) a capped grant to enable the delivery of hotel and restaurant, and
(b) to the creation of a joint venture company.
In doing so Members acknowledged that securing a hotel in Gainsborough would have a significant and positive economic impact on the town; and with regard to the joint venture company the strong rationale as summarised below:
o DPL/NSGL ownership of the adjacent property required to deliver a hotel;
o DPL matching funding with the Council's equity share investment;
o DPL’s track record of delivering successful regeneration in the town;
o enabling the Council to deliver key regeneration objectives and generate potential commercial return to the Council.
In short, both projects would accelerate the physical and economic regeneration of the town centre. Officers at that time had beeen delegated to negotiate and prepare a Grant Funding Agreement (GFA). Joint Venture Agreement (JVA) and Articles of Association in line with the Heads of Terms agreed by these committees.
When first considering these proposals Members stressed the importance of securing high quality development and the need to maximise the environmental and regenerative impact of the projects to be commensurate with the level of Council support. In response to this Officers had worked up the Joint Venture Agreement, and Articles of Association to incorporate a wider area of benefit, to include Market, North and Church Streets and Market Place.
The Council and its commercial advisors had continued to work on an “open book” basis with DPL to scrutinise the cost and value of the hotel. A detailed scheme had been worked up and would form a planning application to be submitted to a future meeting of the Planning Committee.
Officers had augmented and quantified the business case to support the redevelopment of the hotel and restaurant, and Joint Venture Company through a bespoke economic impact assessment undertaken by an independent specialist 31TEN.
Further specialist legal advice had been taken in developing these proposals specifically with regards to State Aid and procurement, in addition to in-house legal advice, which had appraised the final suite of agreements to implement the recommendations. These Agreements followed the Heads of Terms Members agreed in September/October 2016 and provided a robust basis to manage the release of the Council’s funding, delivery of outputs and ensure value for money.
Debate ensued and Members expressed their concerns at the press release contained in the Gainsborough Standard on 19 January despite the Council having only made an in principle agreement. There was a view that had Members released the content of the proposals prior to a final decision, they would have been reprimanded. It was also questioned whether Planning Members had been compromised.
Officers offered their apologies and confirmed it was not a Council press release, the event had been a community consultation event around the planning application. Regardless, Members were of the view that arrangements should have been put in place to ensure that there was no media cover prior to the decision being made. Members had been put in a difficult position when faced with questions from residents and the article had the potential to damage the Council’s reputation without having put the potential loan arrangement into some wider context.
In responding to concerns, it was acknowledged that as with any project there was a risk, however the GFA had been drafted to include provisions which protected the Council in the event of non-performance or a breach of the terms of the GFA by NSGL the wholly owned subsidiary of DPL. There were also safeguards should the venture prove more successful than envisaged, the Council would share in these profits. These protections were outlined in detail to the Committee. It was stressed that this was in no way a soft loan and the private developer was considered to be carrying more risk. The provisions contained with the arrangements were tighter than any applied by European Funding. The project as a whole was a huge social and economic enabler and would deliver some key features the town was crying out for.
The S151 Officer offered further reassurance that he and the Monitoring Officer had looked at the proposal independently to ensure the Council’s funding was safeguarded as far as possible and that the Council’s interests were protected. The viability gap alleged by the developer had also been independently tested.
The Chief Operating Officer re-iterated his previous advice regarding Members of the Planning Committee and their position.
In responding to concerns that design and quality needed to be fitting, Officer reiterated that proposals would be subject to same planning requirements as any other application. This was a prime site and the developer would be obliged to meet certain legal requirements, if planning permission were to be granted, as would any development in that area. Members were reminded that this was part of the decision they were being asked to make and this was the responsibility of the Planning Committee. Visiting Members would be permitted at the Committee and would able to submit consultation responses as with any planning application.
No funding would be released until such time as planning permission had been granted.
Following much discussion it was:
RESOLVED that:
(a) the Council enters into a Grant Funding Agreement (in the form attached as appendix 1 to report PRCC.54 16/17), to enable the redevelopment of the Sun Inn to a new 56 bedroom hotel with an independent ground floor restaurant;
(b) the Council becomes a member of Market Street Renewal Limited (a 50/50 joint venture company with DPL to facilitate the regeneration of Market, Church and North Streets and Market Place area) by subscribing for shares in the company in accordance with the Joint Venture Agreement, Articles of Association and associated company formation documents in the form attached at Appendix 2 of report PRCC.54 16/17.
(c) the Council enters into the Joint Venture Agreement, and the Shareholders Loan Agreement (in the form attached as appendix 2 to report PRCC.54 16/17) to form, finance and govern the operation of “Market Street Renewal Limited”
(d) it be RECOMMENDED to the Corporate Policy and Resources Committee that the release of the requisite funding set out in recommendations 1 2 and 3 above and to include a capped grant of up to £1,400,000 to NSGL, pursuant to the GFA, and loan funding of £250,000 pursuant to a Shareholders Loan Agreement to Market Street Renewal Limited, be approved
(e) it be RECOMMENDED to the Corporate Policy and Resources Committee that the sale of the Council’s long leasehold interest in two commercial properties, into Market Street Renewal Limited at market value, subject to a business case and in compliance with the Council’s Disposal Policy, be approved
(f) the Commercial and Economic Growth Director plus one other officer or independent, be appointed as Directors of Market Street Renewal Limited and approve that the Council enters into the Deed of Indemnity (in the form attached as appendix 3 to report PRCC.54 16/17) in respect of each such appointee.
(g) the Director of Resources be appointed to represent the Council as the shareholder in Market Street Renewal Limited.
(h) the Chief Executive be granted delegated authority, following consultation with Chairmen of Corporate Policy and Resources and Prosperous Communities Committees to take such decisions and execute such documents as shall give effect to the above decisions.