Councillor A. Ullah declared a personal interest in Agenda item 10.3 “Stifford Community Centre – Proposed new lease to facilitate redevelopment” (CAB 051/101). The declaration of interest was made on the basis that the report contained recommendations relating to Stifford Community Centre which was located in St Dunstan’s and Stepney Green Ward, and Councillor Ullah was one of the Ward Councillors for St Dunstan’s and Stepney Green Ward.

Councillor S. Alideclared a personal interest in Agenda item 10.3 “Stifford Community Centre – Proposed new lease to facilitate redevelopment” (CAB 051/101). The declaration of interest was made on the basis that:

·                    The report contained recommendations relating to Stifford Community Centre many users of which lived in Whitechapel Ward, and Councillor Ali was one of the Ward Councillors for Whitechapel Ward.

·                    Councillor Ali had been a member of the Authority’s Strategic Development Committee when an application for planning consent associated with the Stifford Community Centre had been considered.

Resolved

1.         That the grant of a lease of up to 99 years to Stifford Estate – Tinsley, Jamaica, Redmans and Stepney Green Tenants and Residents Association be approved in principle;

2.         That the Corporate Director Development and Renewal be authorised to finalise the detailed lease terms. Any such terms to be on a commercial basis and at market value at the time of sale;

3.         That the preconditions that the Stifford Centre will need to comply with prior to any lease being granted, be noted, namely: that capital funding is in place, a clear delivery plan agreed, demonstration of long-term viability, and completion of the lease within six months of a Cabinet decision;

4.                  That the requirement for the Stifford Centre to be decanted for the construction period, be noted; also that the Corporate Director Development and Renewal be instructed to support the Centre in finding temporary accommodation with any short-term letting being at market value and on commercial terms; and

5.                  With reference to resolution 2 and 3 above:

(a)               That the Corporate Director Development and Renewal be requested to examine the scope for the Authority to allow payment of the market value premium in instalments over a period of 5 years or more.

(b)               That should (a) above be possible, the Corporate Director Development and Renewal ensures the Stifford Tjrs Community Centre develop a viable long term business plan; including the raising of additional revenue sufficient to cover the annual impact of paying the premium in instalments.

(c)               That should the Corporate Director Development and Renewal identify (a) above to be possible and the business plan at (b) above to be viable, the matter be brought back for further Cabinet consideration.

Action by:

CORPORATE DIRECTOR DEVELOPMENT AND RENEWAL (A. DALVI)

Service Head Asset Management, Development and Renewal (A. Algar)

Councillor A. Ullah, withdrew from the proceedings following the conclusion of the Cabinet deliberations in respect of this item, being 6.20pm, and did not return to the proceedings.

Please note that the order of business was varied by resolution of the Cabinet earlier in the proceedings in order to allow this item to be considered following Agenda Item 4. “Deputations and Petitiions”, however for ease of reference the deliberations of the Cabinet, and subsequent decisions taken, are set out below in the order detailed in the agenda.

Councillor A. Ullah declared a personal interest in Agenda item 10.3 “Stifford Community Centre – Proposed new lease to facilitate redevelopment” (CAB 051/101). The declaration of interest was made on the basis that the report contained recommendations relating to Stifford Community Centre which was located in St Dunstan’s and Stepney Green Ward, and Councillor Ullah was one of the Ward Councillors for St Dunstan’s and Stepney Green Ward.

Councillor S. Alideclared a personal interest in Agenda item 10.3 “Stifford Community Centre – Proposed new lease to facilitate redevelopment” (CAB 051/101). The declaration of interest was made on the basis that:

·                    The report contained recommendations relating to Stifford Community Centre many users of which lived in Whitechapel Ward, and Councillor Ali was one of the Ward Councillors for Whitechapel Ward.

·                    Councillor Ali had been a member of the Authority’s Strategic Development Committee when an application for planning consent associated with the Stifford Community Centre had been considered.

Mr Algar, Service Head Asset Management, at the request of the Chair, in introducing the report:

·                          Summarised the key points contained therein, highlighting in particular:

o              The Stifford Tinsley, Jamaica, Redmans & Stepney Tenants and Residents Association Community Centre (Stifford Centre) was a well established community organisation providing a broad range of programmes and projects to local people in Stepney and beyond, and had established contracts with the Authority and the Tower Hamlets Primary Care Trust.

o              The Stifford Centre had ambitious re-development proposals and had obtained planning consent for a new four storey community centre that would enable it to provide a broader range of services from much improved premises.

o              Paragraph 6.1 of the report detailed that the Stifford Centre had estimated that £3.7 million would be required to meet the construction costs of the re-development scheme. However the Authority had been subsequently advised this would be £4.5 million with an additional £300,000 to purchase the leasehold interest in the land. The total funding required was therefore £4.8 million.

o              The Stifford Centre had raised a combination of grant and loan funding amounting to £1.9 million from “Community Builders” [The Social Investment Business], leaving a current funding gap of £2.9 million.

o              Officers were recommending that the Authority grant a long lease to the Stifford Centre with a number of pre-conditions.

Ø                 The issue of the lease’s market value was a technical one as the land required for the re-development was held by the Housing Revenue Account. As a consequence there were severe restrictions on the Authority disposing of the lease at less than the estimated market value of £300,000.

Ø                 The business model needed further work to demonstrate long term viability; and in particular sustainability of public sector funding.

Ø                 A clear timescale and delivery plan was required for completion of the new building within two years.

·                         Addressed the matters raised by the deputation in relation to the report earlier in the proceedings. In particular he advised that:

o                   Grant of unconditional lease of 99 years: In his extensive experience of property management external funding organisations accepted that local authorities granted leases subject to pre-conditions, and the proposed conditional lease was sufficient for the Stifford Centre to approach funders. It was not unusual for funders to anticipate land purchase for schemes and to fund it accordingly.

o                   Market Value: The Authority had very little discretion regarding disposal of assets at less than market value.

o                   Matchfunding:

Ø              Colleagues in the Planning Section of Development and Renewal Directorate had confirmed that there were no uncommitted Section 106 resources available for this scheme.

Ø              The allocation of capital funding to the scheme by the Authority was highly unlikely, given other demands on these resources, and was a reflection of the current climate of public sector funding constraint. The allocation of available capital funding was one element of the Authority’s current Budget setting process.

A lengthy and complex discussion followed, during which the proposals in the report were broadly welcomed, and which focused on the following points:-

·                    Clarification/ assurance was sought from, and given by, Ms Freeman, Assistant Chief Executive Legal Services, in relation to the Authority’s ability to dispose of the lease at less than market value.

·                    Clarification/ assurance was sought and given regarding the safeguard of reversion of the lease/ land to the Authority should the Stifford Centre not raise the capital funding necessary for the scheme, a proposed pre-condition for granting the lease.

·                    The Stifford Centre was widely commended by Cabinet members for the broad range of services it provided for the local community; and the acknowledged respect in the Community for its track record in this regard was welcomed and noted.

·                    Commented that the three retail units in Cressy Place had been derelict for several years, producing no income for the Council, and significant investment had been required to bring these back into use, demolition of the existing units was now proposed as part of the re-development scheme. Clarification was sought and given as to whether Officers of the Authority had engaged in discussions with the Stifford Centre around its ability to purchase the lease for a lump sum of £300,000.

·                    Clarification/ assurance was sought and given regarding the scope for phasing payment of the market value premium for the leasehold interest in the land over 5 years or slightly longer. This was possible but would put the overall payment up and generate additional risk for the Authority.

·                    Clarification/ assurance was sought and given regarding the scope for phasing payment of the market value premium for the leasehold interest in the land over a longer period, perhaps even the 99 year term of the lease. Such an arrangement would effectively be a ground rental agreement, rather than a lease agreement, and would not generate a capital receipt for the Housing Revenue Account for reinvestment.

·                    Consideration that the Cabinet should carefully weigh the merits of the proposed redevelopment scheme, outlined by the deputation earlier in the proceedings:

o                   Meeting the increasing demands of the local community for health and social care with the provision of a new health centre, additional facilities for elders and in particular a children’s crèche and nursery.

o                   Provide valuable training, employment and business opportunities.

The crèche/ nursery would be particularly important in the context of a recent announcement by the Coalition Government of cuts in “child benefit”, with worse likely to come, as the Centre would provide a safe haven for local children. The Centre was likely to become a valuable community asset, similar to that on the Tarling East Estate. Consideration also that this scheme would be a way to expand service provision for the Community through the Third Sector, acknowledged to be a way forward in the context of the Council scaling back its own activities because of funding constraints imposed by the Coalition Government. The land was held by the Council for housing but was unlikely to be built on by Tower Hamlets Homes but could be developed by the Community. The Administration should be daring, innovative and invest in the future of its Community.

·                    Corporate Directors: Children Schools & Families and Development & Renewal and the Service Head deputising for Corporate Director Adults Health and Wellbeing, summarised the near and medium term outlook for Council and Tower Hamlets Primary Care Trust future funding of elements of service provision at the Stifford Centre, as uncertain and bleak. The uncertainty around a range of future funding for the Stifford Centre and in particular for Service Level Agreements with the Council was noted.

·                    Consideration that it was appropriate for the Authority to:

o                   Assist the Stifford Centre to secure external funding by granting the proposed 99 year lease, in order to meet the funding criteria of funders.

o                   Assist the Stifford Centre to find temporary accommodation during the “demolition phase” of the re-development, in order that it could maintain service provision.

o                   Facilitate a discussion with the Secretary of State regarding the required approval by him of any lease disposal at less than market value, noting that the approval was unlikely in the current climate of financial constraint.

o                   Examine the scope for it to agree an arrangement for phasing payment of the market value premium for the leasehold interest in the land over 5 years, and to do so if possible.

·                    Consideration that the allocation of Section 106 resources came with certain requirements and it was inappropriate for the Cabinet to confirm the availability of such funding. Capital funding was being squeezed too in the current financial situation, and it was inappropriate to give a commitment of such funding at the present time, particularly given the known range of demands on available resources.

·                    Consideration that the Stifford Centre needed to think through its business plan, including the scale of the project in a particularly difficult financial climate, but in particular the existing generation of income from a range of sources that were now uncertain.

·                    With Cabinet consent, Constitutional Procedure Rules were suspended temporarily to allow a member of the Deputation from the Stifford Centre (Mr Alam, Centre Manager) to address the Cabinet in relation to the funding uncertainties highlighted above. The Centre anticipated raising a great deal of income from rental of space to gyms and other organisations/ businesses and additionally hall hire fees for events. The Centre had continued to grow in recessionary times and was confident it could raise sufficient funding, and in particular repay the market value premium over 5 to 6 years. However the initial challenge was to build the new Centre.

·                    Detailed discussion centred on the scope for an arrangement for phasing payment of the market value premium for the leasehold interest in the land in instalments over 5 years, including the following specific points:

o                    Officers should be requested to examine the scope for such an arrangement.

o                   The Administration wanted to support the Stifford Centre in securing the long lease, and it was important in this regard for Officers to work with the Centre to develop a robust and viable long-term business plan.

o                   The negative relating to spreading the market value premium over 5 years was that additional revenue would need to be raised sufficient to cover the annual impact of paying the premium in instalments over the period (for example should the premium be £300,000, and payments phased over 5 years, an additional £60,000 of revenue would need raised annually). Raising revenue was a challenge for an organisation such as the Stifford Centre, and if it struggled to raise revenue at the major fund raising point, it would struggle going forward.

o                   Officers should be requested to include this factor within the development of a viable business plan.

o                   It was not possible for Cabinet to currently make an informed decision regarding the long term viability of the Stifford Centre, and the assessment of that could be delegated to Officers. Were there to be scope for the phasing of payments for the market premium that should come back for Cabinet consideration, thereby meeting the wish of Cabinet members to make a judgement for themselves as to the long term sustainability of the business plan.

o                    It was appropriate to expand facilities on the site particularly given the good track record of the Stifford Centre, but it was also important for the Council to take care in making commitments at such a difficult time. In this context the Council should be flexible if that were possible, and looking at phasing payment of the premium over 4 to 5 years was therefore appropriate. It was also consistent with the phasing of payments over 3 to 4 years agreed by the Cabinet in respect of a similar case in April 2010.

o                   It was completely inappropriate to shift the phasing of the payment of premiums to such an extent that it became a ground rental agreement.

o                   The Housing Revenue Account should not bear the cost of any arrangement for phasing the payment of the premium, as additional pressures to those already facing the HRA Budget in the near future would be keenly felt in housing provision. If there were to be a phased payment arrangement a “one off” payment, equivalent to market value for the leasehold interest in the land, should be made to the HRA from the General Fund and repayments then made to the General Fund. 

The Chair summarised that:

·                    He had visited the Stifford Centre and knew the good work undertaken there, and wished to see more like it.

·                    It was right that the Authority should grant a 99 year lease to the Stifford Centre to help it secure external funding for its re-development scheme.

·                    The Council’s funding was about to be dramatically reduced, with the Government announcement, in October 2010, likely to bring a reduction in funding for Tower Hamlets of £70 million over the next 3 years.  This would present a significant challenge for the Council, and it was difficult to commit to funding other organisations, when it did not yet know what its own funding would be. All organisations would need to examine their projects in that context.

·                    The Lead Member Housing, Heritage and Planning was right to state that it would be unfair for the HRA to bear the cost and risk of any arrangement for phasing the payment of the market value premium for the leasehold interest in the land; however neither was it right to spread to cost and risk to the General Fund; and that was a discussion for another meeting.

·                    There was consensus that:

o                   The Authority should, if possible, be flexible with regard to payment of the market value premium for the leasehold interest in the land; and that Officers be requested to examine the scope to agree an arrangement for phasing payment of this over 5 years or more.

o                   That any discussions with the Stifford Tjrs Community Centre to develop a viable long term business plan should factor in the raising of additional revenue sufficient to cover the annual impact of paying the market value premium in instalments, should the latter be possible.

o                   Were there to be scope for the phasing of payments for the market premium, and should Officers consider the Stifford Centre business plan viable, the matter should be brought back to Cabinet for consideration.

Accordingly the Chair Moved the recommendations as set out in the report, together with an additional recommendation (see resolution 5. below) for the consideration of members of the Cabinet; and it was: -

Resolved

1.         That the grant of a lease of up to 99 years to Stifford Estate – Tinsley, Jamaica, Redmans and Stepney Green Tenants and Residents Association be approved in principle;

2.         That the Corporate Director Development and Renewal be authorised to finalise the detailed lease terms. Any such terms to be on a commercial basis and at market value at the time of sale;

3.         That the preconditions that the Stifford Centre will need to comply with prior to any lease being granted, be noted, namely: that capital funding is in place, a clear delivery plan agreed, demonstration of long-term viability, and completion of the lease within six months of a Cabinet decision;

4.                  That the requirement for the Stifford Centre to be decanted for the construction period, be noted; also that the Corporate Director Development and Renewal be instructed to support the Centre in finding temporary accommodation with any short-term letting being at market value and on commercial terms; and

5.                  With reference to resolution 2 and 3 above:

(a)               That the Corporate Director Development and Renewal be requested to examine the scope for the Authority to allow payment of the market value premium in instalments over a period of 5 years or more.

(b)               That should (a) above be possible, the Corporate Director Development and Renewal ensures the Stifford Tjrs Community Centre develop a viable long term business plan; including the raising of additional revenue sufficient to cover the annual impact of paying the premium in instalments.

(c)               That should the Corporate Director Development and Renewal identify (a) above to be possible and the business plan at (b) above to be viable, the matter be brought back for further Cabinet consideration.

Councillor A. Ullah, withdrew from the proceedings following the conclusion of the Cabinet deliberations in respect of this item, being 6.20pm, and did not return to the proceedings.