Issue - meetings

Formation of a Development Company

Meeting: 10/07/2018 - Executive (Item 71)

71 Exeter City Group Ltd Business Case (August 2018 to March 2019) pdf icon PDF 360 KB

To consider the report of the Director (DB)

 

Corporate Services Scrutiny Committee considered the report at its meeting on 28 June 2018 and its comments will be reported.

 

Additional documents:

Decision:

Agreed

That it is recommended that Council:--

 

(1)             approves the establishment of Exeter City Group Ltd and Exeter City Living Ltd;

 

(2)          notes that whilst Exeter City Homes Ltd and Exeter City Living Property Ltd have already been registered at Companies House, no approval was being sought for the Companies’ activities as their financial impact on the Council had not yet been assessed;

 

(3)          the Year One Business Case at Appendix A to be implemented by Exeter City Living Ltd for the period August 2018 to the end of March 2019;

           

(4)          develop a Registered Provider of Social Housing (RP) to take ownership of any social housing created as a result of Exeter City Living Ltd works, subject to a satisfactory business case demonstrating the RP’s viability being approved by the Council. The Registered Provider would be established and functional in advance of the availability of the social housing.  The two work streams to be linked to ensure appropriate staging would coincide;

 

(5)          approves a loan of £4.35 million pounds to Exeter City Living Ltd in order to implement and complete the year one Business Case set out in Appendix A;

 

(6)          approves the Management Agreement set out in Appendix B;

 

(7)          delegate authority be to the Director (David Bartram) to agree any necessary amendments to the Management Agreement in consultation with the Leader of the Council, the Chief Finance Officer and the appropriate three Portfolio Holders (currently the Portfolio Holder for Place and Commercialisation; the Portfolio Holder for People and in addition the Portfolio Holder Housing Revenue Account) and three Members of Scrutiny as appropriate – this to be clarified with the Chair and Deputy Chair of Corporate Services Scrutiny;

 

(8)          approve the Articles of Association for Exeter City Group Ltd and its subsidiary companies as set out in Appendix C;

 

(9)          delegate authority be given to the City Solicitor and Head of Human Resources in consultation with the City Surveyor to sell at open market value any council owned land identified in the Year One Business Case; and

 

(10)        delegated authority be given to the appropriate Director (currently David Bartram) to act in the role of Shareholder Representative and to undertake the activities and decisions as identified in the Shareholder Representative Delegated Powers Document (Appendix D), including the ability to financially commit up to £499,999 funding for use by Exeter City Living Ltd for matters not in the Year One Business Case (August 2018 – end March 2019); and

 

(11)        agree that the Vaughan Road development identified for year two of the Development Company’s operation will go forward, subject to the remaining assurance work. This is in order to ensure that the Housing Revenue Account is not disadvantaged and that the Development Company is able to deliver on Members’ expectations on Affordable Housing.

 

 

Reason for Decision:

 

As set out in the report.

 

Minutes:

The Chief Executive & Growth Director confirmed that he was no longer a named Director for the Development Company.

 

The Chief Executive & Growth Director presented the report proposing the establishment of a group of wholly-owned Council companies (ECG). The Council owned its own housing stock but the Housing Revenue Account was very limited as to what it could build and the aspiration of the ECG was to build high quality affordable and social housing in the city. The business case set out how the ECG would operate and that it would be financed by the City Council. A Director, currently David Bartram, was proposed to be the Council’s shareholder representative on the Board.

 

Members were advised of a proposed additional recommendation:-

‘That Members agree that the Vaughan Road development identified for year two of the Development Company’s operation will go forward, subject to the remaining assurance work. This is in order to ensure that the Housing Revenue Account is not disadvantaged and that the Development Company is able to deliver on Members’ expectations on Affordable Housing.’

 

In response to a Member’s question, the Chief Finance Officer clarified that the Council would borrow the required £4.25 million identified in the business case from the Public Works Loan Board (PWLB) at a rate of 2.5% and then lend to the company at the higher rate of 4.86%, therefore giving the Council a net interest rate of 2.3% on the loan. The reason for this was because the Council was constrained by state aid rules.

 

Members were advised that the Council’s shareholder representative would liaise with the Steering Group to ensure the Council’s interest for retaining the necessary control over the ECG and to ensure that it had autonomy to carry out the proposed actions in the Year One business case.

 

The Leader advised of the changes and the additional recommendation proposed by Corporate Services Scrutiny Committee. He stated that before the report was considered by Council on 24 July 2018, he would meet with the Chair and Deputy Chair of Corporate Services Scrutiny to clarify the Committee’s proposed changes to recommendation (7).

 

In response to a Member, it was clarified that the proposed condition regarding the development of a Registered Provider of Social Housing (RP) would not preclude the Housing Revenue Account from building homes.

 

The Portfolio Holder for Housing Revenue Account supported this exciting proposal that would bring forward affordable and social housing for the city.

 

Members welcomed the proposal which would support the building of good quality affordable homes for the residents of Exeter.

 

The Leader proposed the recommendation that was agreed by Corporate Services Scrutiny Committee, with the amendment to recommendation (7) to replace the Portfolio Holder for Economy and Culture with Portfolio Holder for People and clarification with the Chair and Deputy Chair of Corporate Services Scrutiny Committee regarding Members to be consulted with and the additional recommendation as advised by the Chief Executive & Growth Director.

 

This was agreed by the Executive.

 

Corporate Services Scrutiny Committee considered the report  ...  view the full minutes text for item 71


Meeting: 28/06/2018 - Corporate Services Scrutiny Committee (Item 24)

24 Formation of a Development Company pdf icon PDF 360 KB

To consider the report of the Shadow Director.

 

Additional documents:

Minutes:

The Chief Executive & Growth Director declared an interest and withdrew from the room whilst this matter was discussed. It was noted that he was named as Director but would soon be replaced to prevent any conflicts of interest ahead of the development company trading should Members approve the request.

 

The Shadow Director presented the report which sought Member’s approval for the establishment of a group of wholly-owned Council companies to be collectively known as Exeter City Group Ltd (ECG). The four companies would be comprised as follows:-

 

·           Exeter City Group Ltd – (the holding company);

·           Exeter City Living Ltd – (the development company);

·           Exeter City Homes Ltd – (the residential property company); and

·           Exeter City Living Property Ltd – (the commercial property company).

 

The Shadow Director confirmed that Exeter City Homes Ltd and Exeter City Living Property Company Ltd would not be in operation until approval was received from Council to be able to operate based upon sound and viable business cases.  The structure would be made up of Exeter City Council Group Ltd (the holding company) with the three subsidiaries operating under the parent company. The Council would own 100% of the shares in Exeter City Group Ltd and 100% in all of the subsidiaries. She explained the reasons for setting up the ECG, which included the acute need for housing where home ownership was out of the reach for many local people and private rents were increasing; and, although the demand for affordable homes had grown, existing approaches to the building of new housing were increasingly not delivering affordable homes of the type and quality required by the city’s residents. The City Council sought to deliver more affordable homes themselves through developing new council homes through the HRA but this was not enough to meet the housing need. Finance available to the HRA in terms of borrowing had been capped preventing new council homes being built.  More than 150 local authorities had created a wholly owned housing company and the Government supported local authorities in establishing such companies to provide well designed high quality homes in a range of tenures. 

 

The report set out the strategic and Year One business case and included the structure, governance and operational arrangements which had been designed with the assistance of external legal support.  A Steering Group had been set up to ensure the Council’s interest for retaining the necessary level of control over ECG, and the need to ensure that it had the autonomy to carry out the proposed actions in the Year One business case. The group consisted of the Leader and Deputy Leader of the Council, Portfolio Holder for Economy, Culture and Chair of Planning, Portfolio Holder for Housing and Revenue Account, Portfolio Holder for City Transformation, Energy and Transport, Portfolio Holder for People. The Group also included City Solicitor, Head of HR Services and the Chief Finance Officer.  The governance structure also included the appointment of shareholder representation to support the Council and scrutinise and manage its interests  ...  view the full minutes text for item 24