Decision Maker: Mid Suffolk Cabinet
Decision status: Recommendations Approved
Is Key decision?: No
Is subject to call in?: Yes
It was RESOLVED: -
1.1 That the Council agree to act as guarantor in respect of agreements between Gateway 14 Ltd and statutory bodies to deliver the required public works enabling Gateway 14 to be developed.
1.2 That authority be delegated to the S151 officer to approve and enter into any necessary agreements for the Council to act as guarantor for Gateway 14 in this respect.
REASON FOR DECISION
To support the delivery of Gateway 14 and the agreed business goals and objectives.
Alternative Options Considered and Rejected:
1.1 Option 1: - Gateway 14 Ltd pays a cash deposit to the statutory bodies that is equivalent to the value of the works being undertaken. This is likely to be in the order of £2,025,000 and would be retained by the statutory bodies until all of the works have been undertaken to an acceptable standard plus necessary time for snagging and warranty periods. This option is not viable as it is likely to use all of the Gateway 14 Ltd debt facility and leave minimal working capital within the business to operate thus delaying delivery or require the peak debt facility to be increased further which would increase borrowing costs without improving the return on investment.
1.2 Option 2: - Gateway 14 Ltd provide a bond to the statutory undertakers using a third party (bondsman) to provide the necessary security. The bondsman would require a premium to be payable for offering this service, the cost of which is likely to be in the order of £300,000. This would be a development cost and not returned to Gateway 14 Ltd and therefore would reduce the profits/ dividends payable to the Council in the longer term. It has been increasingly difficult to secure bonds for construction works over the last 18 months and as such this option may not be deliverable in the market or may exceed the estimate cost provided.
1.3 Option 3: - The Council act as Guarantor for the public works, and as such are party to the necessary agreements such as the S278, 38 and 104 agreements with statutory undertakers, such as Highways and Anglian Water. The Council would be liable to complete any works not undertaken by the developer (Gateway 14 Ltd) in the event that the developer ceased to trade. Gateway 14 Ltd is a wholly owned subsidiary of MSDC (Suffolk Holdings) Ltd which in turn is wholly owned by the Council. The guarantee would terminate once works had been successfully completed and snagging warranty periods expire.
1.4 Option 3 provides the best value for money for the Council, mitigating the need to increase borrowings in the short term. Gateway 14 Ltd is a wholly owned company and activities and performance are monitored and reported regularly, thereby mitigating the risk of the Company’s failure in the future. In the event that the company did fail, and the guarantor was required to implement the necessary works, the land ownership would pass to the Council who in turn would benefit from the increase in value of the land generated by the development process undertaken to date.
Any Declarations of Interests Declared:
Councillor Brewster as Director and Chair of MSDC (Suffolk Holdings) Ltd.
Councillor Gould as Director of MSDC (Suffolk Holdings) Ltd.
Councillor Whitehead as Director of Gateway 14.
Any Dispensation Granted: None
Publication date: 05/10/2021
Date of decision: 04/10/2021
Decided at meeting: 04/10/2021 - Mid Suffolk Cabinet
Effective from: 13/10/2021