In accordance with the Constitution at 4.2.6.1 the Chairman of the meeting may consider that for reasons of special circumstances, an item should be considered at the meeting as a matter of urgency.

The Chairman considered that for reasons of special circumstances set out below, this item should be considered at the meeting as a matter of urgency.

 

He stated that there was some urgency to decide whether to complete the deed of variation to enable the scheme to proceed. The urgency arises because the parties are close to finalising the deal, are in a position to make the necessary commitment in an uncertain financial climate and need to resolve matters now in order that work may start and completion targets for construction be met.

 

The Committee reviewed decisions 2012.CAB.045 KEY EXEMPT and 2012.CAB.046 KEY OPEN made by Cabinet on the 5^th April 2012.

 

Councillor JG Jarvis declared a personal interest as a Director of Hereford Futures.

Councillor PD Price declared a prejudicial interest as a decision maker.

 

The Chairman commented that some information before the Committee was commercially sensitive and therefore part of the meeting would be held in exempt (closed) session and explained the rationale for this decision.  He also explained the role of the Committee in considering the call-in.  He further commented that members of the public had submitted questions before the meeting and answers in writing would be made available as soon as possible.  Questions and responses currently available were circulated at the meeting. A copy is appended to these minutes.

 

The Chairman called upon Councillors: TM James; JVL Kenyon and R Preece to outline their reasons for the call-in.

 

Councillor TM James voiced concerns that the development had not been fully thought through, particularly in light of the changed financial climate.  He suggested that very little benefit would be derived from the multi-million pound asset and didn’t believe that the expected facilities in the development would be delivered as there was still no formal commitment from the developer.  He also expressed concerns that the opportunity hadn’t been taken to explore other means of attracting the various facilities and suggested the tendering process had missed an opportunity to get value for money. Much had already been spent on the development and he questioned the future costs, suggesting that the Council could have developed the site itself at less cost.

 

Councillor JVL Kenyon sought assurances about the whole development as these variations took the development a step further away from the original agreement.  He also expressed concern that misinformation was dressing up the situation.  He questioned whether there would be a cinema as Cabinet had said that this was only 95% certain.  He was concerned about the possibility of more empty shops in High Town as the variations would poach more retail outlets from the city centre.  He briefly reiterated the call-in reasons detailed in the agenda report.

 

Councillor R Preece expressed concerns about: the adequacy of the risk assessment; the level of consultation, particularly with the local ward member; the business viability of High Town, and questioned whether value for money was being derived for the council tax payer.

 

Replying to the nine specific issues raised by the call-in the Director for Places and Communities responded:

 

1.    Undue haste of decision.  Only 19 days from publication of Forward Plan to date of decision yet decision will impact for 250 years.

 

Response:  The publication of the decision in the Forward Plan is entirely in accordance with the Constitution which requires all key decisions (not subject to urgency) to be listed in a published Forward Plan for five clear days. The Forward Plan for the period beginning 1^st April, which contained the listing for this item, was published on the appropriate date in March in accordance with the requirements of the constitution. 

 

It is important to note that this decision deals with six variations to an existing agreement entered into in 2009 and varied in 2011.

 

2.    Lack of consultation with Ward Member before proposal was put forward for decision.

 

Response:  The scheme itself, while having a physical presence in one ward, has county wide impact; the Central Ward member attended a local member briefing on the matter on Wednesday 28^th March.  The Ward member has also been party to regular briefings over recent years in respect of the proposals and has been offered access to additional exempt information.  The ward member also had the opportunity to make his views known at the Cabinet meeting to inform their decision-making.   

 

3.    Lack of comprehensive risk assessment for the effect of decision.

 

Response:  An overview of the risk assessment was provided as Appendix 2 of the exempt report. This drew on a range of independent technical assessments and advice from the Hereford Futures team delivering the programme on our behalf. The decision sought is for the broad terms of the variations; the decision on the detail of each element is delegated to the relevant officer who will of course take into account all advice and information and complete all necessary assessments in line with this decision and the council’s own principles of delegation.

 

4.    No examination of the impact of the decision on the economic viability of High Town

 

Response: Officers have examined the likely impact of the variations on the economic viability of High Town, and in doing so have taken independent advice; this examination is reflected in the risk assessment within Appendix 2 of the exempt report.

Previous assessments were carried out on an open market basis; any protections offered by a Lettings & Displacement Strategy would provide additional protection.

 

5.    The dismantling of fundamental protection put in place at the request of previous Scrutiny and Council meetings.

 

Response: No ‘fundamental’ protections have been dismantled.

 

6.    Serious concerns about the value for money of this decision for local tax payers.

 

Response: Appendix 1 provides assurance on this matter. The council’s appointed auditors (Audit Commission) are required to assess whether the council has proper arrangements in place to secure economy, efficiency and effectiveness.  This is known as the value for money conclusion.  On 30th September 2011 it gave an unqualified opinion on the council’s arrangements to secure value for money.

 

7.    Lack of parity between the retail scheme with operating restrictions originally consulted upon in the scheme that have now gone forward.

 

Response:  There are of course differences between the original agreement and the current proposals hence the need for a decision.

 

However, it is the considered view of officers in making the recommendations that the variations do not adversely affect the overall outcomes of the development scheme.

 

8.    Doubts about the veracity of commercially confidential status given to the Exempt Report under the provisions of the Local Government Act.

 

Response: In accordance with the constitution (and the Local Government Act) some papers and some elements of the meeting were exempt from publication.

 

9.    Inaccuracy of retail study figures quoted to Cabinet when making the decision

 

Response: No incorrect information was provided to Cabinet on this matter; issues covered during political debate did refer to potential ‘leakage’ and clarification can be provided on detail if required.

 

Noting that certain exempt information had been published in the local press the Chairman emphasised that to safeguard the Council from any possible legal action in the future, the latter parts of the debate would need to be in exempt (private) session.

 

Responding to comments about the Council’s long term policy to revitalise the City; the cost to the Council, and ensuring value for money, the Cabinet Member (Enterprise and Culture) commented that this development was part of the Council’s long term policy with investment already being made in High Town and Widemarsh Street; rather than a one-off capital receipt through a sale of the site, the development would generate approximately £2.5 million per annum in long-term revenue to support the council tax and provide wider benefits through jobs and attractive facilities.  If development were delayed, a new procurement process could take 4 years, and this opportunity could be lost.

 

Questions and clarification was sought over the potential for the new site to ‘poach’ businesses from the High Town area and the ability to exclude current city centre retailers from moving to the new retail quarter.  An adverse lettings policy at a Wrexham development was referred to.  Mr Bretherton responded that he was familiar with the Wrexham development, however, the Council was in an unusual position of owning the freehold to the Cattle Market site and had put in place legal controls without having to rely only on its own planning controls.  The variations would mean that at least 25 named stores currently trading in the city centre would not be able to relocate into the new development.

 

Various letting scenarios were illustrated as to how businesses could possibly get around the lettings policy and assurances were sought that this would not be the case.  It was also questioned as to how the Council would react if a major retailer threatened to leave the city.   In response, Mr Bretherton confirmed that the policy only related to the first letting of a unit, subsequent letting was not covered under the policy, however, the agreement did require Stanhope to enter into leases for units of ten years or more unless the developer could show a compelling reason why it should be less.  Whilst the Policy wasn’t water tight it was better than many other agreements of this nature.  Lettings would ultimately be approved by the Council and would, therefore, be monitored.  The funding partner for the developer would be keen to examine the financial situation of potential tenants.

 

In reply to a question, Mr Bretherton said that there were no guarantees that a company would not go into administration after taking out a lease.  As the funder was paying £90m for the investment, they would use all due diligence in ensuring that they exercised their fiduciary duty to their shareholders when letting units.

 

It was confirmed that one of the variations would allow trading to take place on some parts of the site prior to practical completion of phase 1.  The Leader clarified that the department store and food store, for example, may be granted licences before completion.  On completion of the site the licence would be converted into a lease.  He anticipated the licences would only be for a matter of weeks or perhaps up to 3 months.  Mr Bretherton could not give an assurance that the cinema would be completed first.  The granting of licences, mentioned by the Leader, was normal operating practice as it allowed for businesses to undertake shop fitting etc. 

 

In reply to a question, the Leader sad that Cabinet had been provided with a report on the procurement law issues pertinent to the variations.

 

Questions were asked regarding the catchment area, particularly retail leakage, and the statistics quoted in this and other reports e.g. the LDF and on the Councils web site, as there seemed to be a number of inconsistences for example the figure of 75% had been used at Cabinet.   The Cabinet Member (Enterprise and Culture) commented that there was a difference between convenience goods and comparison goods.  There was evidence that people weren’t choosing Hereford as their first choice to shop.  The catchment covered the County and extended into surrounding counties and into mid Wales.  The Committee expressed reservations concerning the soundness of this evidence base.

 

Reference was made to a Deloitte report which suggested that around 40% of high street shops may be expected to close.  It was questioned whether now was the best time to undertake this development.  In response Mr Harris, Montagu Evans, confirmed that nationally some big high street names were closing stores.  The Retail Quarter Development showed a long term commitment to the development of the City and therefore provided good reasons for large retailers to stay in High Town.

 

It was asserted that Appendix 2 (Summary of the Impact/Risks of Variations) did not constitute a proper assessment.  The Cabinet Member (Enterprise and Culture) responded that Cabinet had been comfortable that appendix 2 had clearly indicated the risks.  To give more information may adversely affect city centre landlord/tenant relations.

 

In response to whether any equality or diversity assessment had been undertaken the Leader commented that these assessments would have been dealt with at the planning application stage.

 

In reply to a Member’s question, Mr Harris, Montagu Evans, said that the achievement criteria for pre-letting was a signed agreement to lease a unit.  Further questioned on what was the percentage of pre-lets for the scheme, and what proportion of the total retail value this represented, Mr Harris said that the variation required Stanhope to achieve 50% pre-lets by area (unchanged from the earlier agreement) and 40% by value (changed from 50%). This was to reflect the fact that pre-lets were being prioritised as a condition of the Development Agreement in respect of lower value but economically important units such as the cinema.

 

Questioned whether the variations were value for money, the Chief Officer Finance & Commercial responded that as the Council’s Section 151 Officer he had given careful consideration to them, principally on behalf of the council tax payer, but had also considered the wider view as not all the variations had a financial aspect and he concluded that the impact flowing from the variations had been minimal.

 

It was pointed out that independent shops were a minority group and it should not be forgotten that they wanted business security for the future.

 

The Committee adjourned at 12.02pm for a 13 minute break.

 

The two week difference between practical and final completion was standard practice and allowed for documents to be legally bound but this could be reduced at no risk to the Council.

 

Clarification was sought concerning the terms of the car parking lease, which was an option contained in the ‘option agreement’ for Phase 2 of the development.  Mr Bretherton outlined the terms and timescales of the possible lease arrangements for the car park site. These are set out in paragraph 7.4 of Appendix 3.

 

Clarifying how the value of the car park site would be established it was reported that if mutual agreement wasn’t reached then a valuation undertaken by a Chartered Surveyor using the open market value would be provided as this would take into account its potential value rather than only the value for any current use thereby protecting the Council’s interest.

 

Questioned whether the Cabinet decision was flawed or open to challenge, due to the Section 151 Officer, the Monitoring Officer and the Director for Places and Communities not being present on the 5 April, the Monitoring Officer responded that the final decision would be made at Cabinet on 16 April 2012.

 

Responding to questions concerning the current valuation of the cattle market site the Chief Officer Finance & Commercial reported that the current accounts indicated the site valued as a cattle market, however, future accounts would reflect the change and this was in accordance with the Royal Institute of Chartered Surveyors (RICS)/District Audit accountancy principles.

 

Further questions were asked regarding the recoupment of resources to reserves following the sale of the cattle market site. With current reserves being at a low level and with surpluses being set aside to mitigate expenditure in adult social care, the Section 151 Officer was asked whether he was content with this situation.  The Section 151 Officer responded that the Council’s accounts were different from those in 2009 and acknowledged that reserves were currently at their minimum level and, while not ideal, the situation was being managed.  The Medium Term Financial Strategy assumed that £5m would be returned to reserves.  Recent changes to the Business rates would provide an extra income stream that hadn’t been previously been factored in.

 

RESOLVED:  that under Section 100(A)(4) of the Local Government Act 1972, the public be excluded from the meeting on the grounds that it involved the likely disclosure of exempt information as defined in Schedule 12(A) of the Act, as indicated below and it is considered that the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

1                 Information relating to any individual.

3                 Information relating to the financial or business affairs of any particular person (including the authority holding that information).

5            information in respect of which a claim to legal professional privilege could be maintained in legal proceedings.

 

 

Summary of proceedings for Agenda Item 9 – Urgent Agenda Item Call-in of Cabinet Decision Concerning the Supplementary Agreement and Deed of Variation to the Retail Quarter (Old Livestock Market) Development Agreement.

 

The Committee considered the exempt report entitled ‘Call-in of Cabinet Decision Concerning the Supplementary Agreement and Deed of Variation to the Retail Quarter (Old Livestock Market) Development Agreement.  In particular they questioned or sought clarification on issues relating to: the protection of the Council’s interests; the procurement process, and the Lettings and Displacement Strategy

 

RESOLVED: That the Committee resume in open session.

 

A Member asked whether the variations affected the rental value of the Department Store, the cinema and the food store.  Mr Harris replied that pre letting percentage by area was not affected by the variations, and that the three units together comprised 43% of the rental space, and 25% of the total rental income.  The pre-let target was 50% by area, whereas over 60% had in fact been agreed (Heads of Terms). The variations had no impact on rental values

 

RESOLVED That Cabinet should ensure that:

 

a)    the procurement processes that have been undertaken are robust, and are content that appropriate steps have been taken to safeguard the Council’s position under the EU procurement rules.

 

b)    Cabinet be satisfied that a comprehensive risk assessment which identifies mitigation measures has been undertaken.

 

c)    an economic risk assessment, including financial impact statement on the viability of High Town and the surrounding streets, be undertaken before these Variations are approved in order to ensure that there should be no disproportionate effect on the independent trading sector.

 

d)    there has been a complete and robust Equality Impact assessment undertaken.

 

e)    further due diligence be shown to have been undertaken in demonstrating that value for money will be derived from the Variations.