“It feels like the prime motivation for this development is to generate millions of pounds for Shepway District Council rather than to meet the genuine housing needs of Shepway people thereby making this a case of ‘profit before people’.
The £100,000,000 will more likely than not come from the Public Works Loan Board(PWLB), which issues loans to local authorities. PWLB loans rose by 1%, in Oct 2019, meaning the Council will now borrow at a higher rate of interest. The council state they would not borrow in advance of need, as such it is not proposed that the council would borrow £100 million immediately. Report Number C/19/23 makes it clear the money will be drawn down over a period of up to five years. A rough estimate is that a maximum of £40 million will be required in this or the next financial year, with the remainder over the next four or five years. The amount actually drawn down may change and be dependant, amongst other factors, on contributions from third parties. This means there is the possibility that at some point down the line the Council may well ask for more.
The report assumes the Council would acquire the whole Otterpool Park site and sell serviced plots to house builders. Which indicates the Council may well buy out the Reuben Brothers if Planning Permission is granted, making them a hefty profit if this happens.
The webcast will not be released until Dec 13th due to purdah being enforced because of the General Election. Part 1 and Part 2 are set out below. In Part 1 the Otterpool Park debate starts at approx 1 minute 30 seconds in.
One of the Council’s consultants, BNP Paribas, primarily considered the feasibility of the role of master developer – the Council & Cozumel Estates Ltd presently, investing in infrastructure and selling the resultant parcels of land. The analysis is based both on financial appraisals, and benchmarking with reference to contemporary market transactions. On that basis they concluded that there was significant opportunity for the Council to be involved in a scheme that will create a significant return, at least commensurate to the risk undertaken.
Additionally the BNP Paribas work also points to significant additional opportunities for the Council in the future should it wish to invest in vertical development.
The financial consultants PWC provided the Council with the following financial analysis.
This analysis has been developed to aid the Council’s understanding of the potential financial implications and risks of the project in its entirety. The analysis provided provides the base case on the overall commercial viability of the project and its cashflows. This model and analysis will not stand still, it will continue to evolve as the project does and as further information becomes available and decisions are taken. Some key elements that will have an impact on the model moving forward include decisions on the delivery model (how this aligns to the Council’s risk appetite and key objectives), funding and grant contributions including clarity on the role of potential partners and continued clarification on infrastructure costs as the project gains outline planning permission and phases are designed in greater detail, providing increased certainty.
The infrastructure schedule prepared by the Council’s master planner consultant Arcadis sets out the essential infrastructure for the first phases of development where a funding commitment to progress the matters is needed including:
Waste Water Treatment Works;
new roads into the site;
upgrade to the power supply;
advance planting; and
early investment in the green spaces including the castle park.
There is then a significant infrastructure requirement. The costs of infrastructure are not incurred merely in construction, there are costs in preparatory work (e.g. feasibility studies) before any spade is put in the ground. These costs will fall in the short term. The sum requested will also be used for necessary preparatory work on infrastructure requirements, e.g. feasibility studies as well as implementing some in part.
So ten Tories, two UKIP, one Independent, one Lib Dem and one Green agreed upon the facility of £100 million pounds to be drawn down as and when the Council needs to. There is nothing wrong with profit, but when it comes before the people of the district; and the safety of tenants in Council homes it is surely a case of ‘profit before people’.
