Agenda item

The minutes of the Executive of 10 July 2018 were presented by the Leader, Councillor Edwards, and taken as read.

 

In respect of Minute No.71 (Exeter City Group Ltd Business Case (August 2018 to March 2019), the Leader proposed the recommendation subject to an amendment to recommendation (7) to read:  ‘delegate authority 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 Portfolio Holders (currently the Portfolio Holder for Place and Commercialisation; the Portfolio Holder for People, and in addition the Chair or Deputy Chair, Corporate Services Scrutiny’. This was seconded by Councillor Sutton.

 

In accordance with Standing Order No.8, Councillor Thompson put the following questions to the Leader.

 

Question - Can the City Council ensure transparency in Council business if some of Council business is transacted through private companies?

 

The Leader replied that the City Council was able to ensure transparency by a number of internal and external controls. The City Council would be the sole shareholder of Exeter City Group Limited and Exeter City Group Limited would be the sole shareholder of Exeter City Living Property Company Limited, Exeter City Living Limited and Exeter City Homes Limited. Decisions taken by any of the Companies must be in accordance with the Articles of Association (which were public documents) and the Group Management Agreement, which sets out the relationship between the City Council and the Exeter City Group of Companies. 

 

The Articles and the Group Management Agreement set out the decision making structure and the powers delegated to the Board of Directors. In particular, the Scheme of Delegation (Schedule 4 to the Group Management Agreement) sets out how and by whom different decisions could be made. 

 

The Business Case and annual Business Plans must be approved by Full Council and there was limited scope for decisions to be taken by the Board of Directors outside of these approved documents. 

 

When going through the City Council's committee process, there would be a presumption that the Business Case and Annual Business Plans would be subject to the same presumption in favour of being made publicly available, save for the same limited exceptions for Part II matters defined in the Local Government Act 1972. For example, sensitive financial modelling information or matters relating to specific tenants or employees may legitimately be withheld as Part II matters.

 

In addition to the requirements imposed by virtue of local government legislation, the Companies will be subject to the requirements of the Freedom of Information Act 2000, the Data Protection Act 2018, the General Data Protection Regulations 2018 and the Companies Act 2006, which included the transparency rules for limited liability partnerships and limited companies introduced in April 2016.

 

In short, the City Council exercises complete control over the Companies as the sole shareholder and the Companies were subject to a range of statutory reporting and disclosure requirements.

 

Councillor Thompson asked a supplementary question  - in respect of the meeting with the Town & Country Planning Association held on 18 July asking who attended to contribute to the discussions and is it possible to have access to the papers?

 

The Leader stated that it was prudent that the Council had good legal advice. He would clarify the position and let Cllr Thompson know the outcome.

 

Question - If a Private Development Company for the City Council has residential sites in the City looking to be developed through the Company, will the City Council adhere to its minimum 35% affordable housing policy and possibly achieve a higher percentage above 35%?

 

The Leader responded that the Development Company had always stated that it would comply with Council policy on affordable housing and aimed to provide 35%. Due to lower profit expectations than a private developer it was in a better position to fulfil this commitment.

 

Councillor Thompson asked a supplementary question - if the private company use viability as a reason for not meeting the City Councils policy of 35% affordable housing will an appraisal be carried out by an independent assessor?

 

The Leader stated that only the first year’s projects were in the Business Case and there would be need for the company to build up monies to invest in Social Housing in future years.

 

Question - Will the City Council resist any suggestions 35% affordable housing is not viable on residential sites being developed through the Company?

 

The Leader stated yes, challenging on the grounds of viability did not align with the Development Company’s objectives and purpose. If the company could not deliver a scheme with 35% affordable homes or the financial equivalent then it would not be a viable scheme to proceed. As a private company, its Directors had a responsibility to run the company in a financially prudent manner.

 

Councillor Thompson asked a supplementary question  - would the Council by not adhering to its own policy to deliver 35% affordable housing and social rented homes appear as "don't do as I do but do as I say"?

 

The Leader replied that the company would undertake their own viability assessments and if sites were not viable then they would not be developed.

 

Question - How will the City Council ensure no conflict of interest with the Planning process if the entire Planning Committee needs to declare a possible pecuniary interest in any applications from the Private Company?

 

The Leader stated that it had been advised that the Members of the Planning Committee did not have a Disclosable Pecuniary Interest ("DPI") in any planning applications made by the Companies. At Appendix 1, the City Council's Code of Conduct (the "Code") sets out DPIs which were those set out in the regulations. They did not apply to planning applications made by the Companies. Appendix 2 of the Code defines 'other interests' which again did not apply.

 

It was settled law that local planning authorities ("LPA") were required to, and do, routinely determine planning applications for developments in which they had a pecuniary interest, or even where they were themselves the applicant for planning permission. They had no choice, because they (and no other body) had the function of determining applications for planning permission for development in their area. The mere fact that the LPA which determined an application for planning permission had a pecuniary interest (whether as an owner of the land, as an applicant for planning permission, or a shareholder in a local authority company) did not in itself give rise to any issue of unlawful bias.

 

The Planning Advisory Service (part of the Local Government Association) had issued guidance, “Probity in Planning for Councillors and Officers”, which advised simply that “proposals for a council’s own development should be treated with the same transparency and impartiality as those of private developers”. This guidance was reflected in the Local Planning Code of Conduct which forms part of the City Council's Constitution.

 

Councillor Thompson asked a supplementary question  - is there potential conflict with Compulsory Purchase Orders, Section 106 agreements and is this private company being set up to sidestep the Right to Buy scheme?

 

The Leader replied that the company intended to raise monies that would then be invested in building social and affordable housing in the city.

 

During discussion Members raised the following points:-

 

·         this was the only way for the Council to deliver much needed social and affordable housing in the city

·         cautiously supportive but had concerns regarding the Governance

·         the first year’s projects were critical to ensure capital funding for future investment in social and affordable housing 

·         the scheme proposed would be policy compliant

·         the current housing market was broken, this proposal would be a way in which the Council could help to address the situation for its residents

·         concerns regarding the financing of the start-up costs of the company and the implications for the Council.

 

The Leader stated that he welcomed a good debate on the proposals and that a lot of work had been undertaken by Members and Officers on this project. This Company was the way forward to start to build social and affordable homes for the city’s residents. The Leader clarified that the Council would loan the company the start-up funding of £4.35 million, this would be borrowed at a rate of 2.7% and the Council would charge the company an interest rate of 4.86%, therefore making money for the Council. He asked all Members to vote for this proposal as amended.

 

RESOLVED that:-

 

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

 

(2)          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 be noted;

 

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

           

(4)          a Registered Provider of Social Housing (RP) be developed 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)          a loan of £4.35 million to Exeter City Living Ltd in order to implement and complete the year one Business Case set out in Appendix A of the report presented at the meeting be approved;

 

(6)          the Management Agreement set out in Appendix B of the report presented at the meeting be approved;

 

(7)          delegated authority be given 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 Portfolio Holders (currently the Portfolio Holder for Place and Commercialisation; the Portfolio Holder for People) and in addition the Chair or Deputy Chair Corporate Services Scrutiny;

 

(8)          the Articles of Association for Exeter City Group Ltd and its subsidiary companies as set out in Appendix C of the report presented at the meeting be approved;

 

(9)          delegated 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, of the report presented at the meeting), 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)        that the Vaughan Road development identified for year two of the Development Company’s operation be brought forward to year one, subject to the remaining assurance work being agreed. 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.

 

RESOLVED that the minutes of Executive held on 10 July 2018 be received and, where appropriate, adopted.