Agenda item
Reference from Council - Watts Grove Depot Project and financial mechanisms for Dame Colet House and Poplar Baths projects
- Meeting of Overview & Scrutiny Committee, Tuesday, 3rd December, 2013 7.00 p.m. (Item 7.1)
- View the background to item 7.1
Report to Follow - To consider the information presented in the report and prepare a response for submission to Council.
Minutes:
Please note that an element of OSC deliberations relating to this item of business took place in Part Two of the proceedings or “closed session” (Exempt/ Confidential Section of the agenda), for the reasons outlined by the Chair below. However, for ease of reference, the deliberations/ decision taken that pertain to the unrestricted report are set out below in the order detailed in the agenda.
The Chair informed the OSC that:
· The report comprised of two parts: an unrestricted report now before the OSC for consideration, and two appendices thereto which contained exempt/ confidential information (as defined in Schedule 12A of the Local Government Act 1972) due to its commercially sensitive nature, the consideration of which was required in “closed session” (Exempt/ Confidential Section of the agenda: agenda Item 14.1). After an initial introduction of the unrestricted report and any discussion thereof in “open session”, it would therefore be necessary to exclude the public and press during consideration of the exempt/ confidential appendices. However he considered it was important that as much of the discussion as possible took place in “open session”.
· It was disappointing that the Mayor and Cabinet Members with portfolio for this matter, nor any members of the Executive, were in attendance for this item. He reiterated that their absence meant that the OSC was unable to fulfil its constitutional function of undertaking full and appropriate scrutiny, by asking them questions/ holding them to account for decisions made by the Executive. In their absence he would ask Officers to introduce the report, but emphasised/ asked the OSC to note that Officers were only able to provide factual information eg on financial / contractual / process issues, and could not answer questions about the political rationale for decisions taken.
Special Circumstances and Reasons for Urgency
The Chair informed OSC members that the special circumstances and reasons for urgency associated with consideration of the report were set out on the front of the report as below:-.
“This matter was considered by the OSC at its meeting on 5 November 2013, following which, the matter was adjourned with requests for action as outlined in this report. Unfortunately, the time taken to complete the work was such that this report was not published with the main agenda for the Committee’s meeting of 3 December 2013. Given that the Committee is responding to a request from Council, the Committee may wish to deal with the item at its meeting of 3 December 2013 rather than waiting to a later meeting so as to allow the statutory notice period to be met.”
The Chair subsequently agreed the special circumstances and reasons for urgency, indicating that he was satisfied that the matter was urgent, as defined in the Authority’s Constitution (Part 4 Rules of Procedure, Section 4.2 Access to Information Procedure Rules, Rule 6 Items of Business, sub paragraphs 6.3 and 6.5. The special circumstances justifying urgency being as detailed above.
Ann Sutcliffe (Service Head Strategic Property) in introducing the report, summarised salient points of background including:-
· OSC had partially considered this matter at its November meeting and deferred further consideration to its December meeting to:-
- Provide OSC members with greater opportunity to review the exempt/ confidential elements of the report or to allow exempt/ confidential information to be made available in the unrestricted papers/ discussed in “open session” where possible. One of the three reports which had been exempt/ confidential in the November OSC agenda pack had now been provided in the unrestricted agenda pack. However two reports remained exempt/ confidential as they contained commercially sensitive information and she had written to OSC members to explain the reasons for this.
- To allow requested additional information to be provided such as the chronology appended to the report.
- To clarify the rationale for the 35 year lease element of the Watts Grove Depot proposal and whether this resulted in an automatic right to buy the freehold for the land at the end of the period. There was no automatic right for the developer to purchase the freehold at the end of a 35 year lease.
Jackie Odunoye(Service Head Strategy Regeneration & Sustainability),
Paul Leeson (Finance Manager D&R), Chris Holme (Acting Corporate Director Resources) were also in attendance for this item.
A discussion followed which focused on the following points:-
· Clarification sought as to the rationale for the Mayor’s change of mind on progressing the Watts Grove Depot redevelopment, due to unforeseen complexities, particularly as this was at variance from Officer recommendations and would result in the “write off” of £390k in developmental costs incurred to progress the project to date. Officers could not comment on the rationale for the Mayor’s decision to halt the scheme. However the procurement for the scheme was an iterative process from competitive dialogue to competitive tender; and when the timeline was examined one of the most attractive bids at competitive dialogue stage became one of the least attractive at competitive tender stage, primarily due to the bidder changing the terms and transferring risk back to the Council which would have resulted in an unacceptable call on HRA resources and notional borrowing limits relating to the Council’s statutory HRA debt cap. Although bidding developers relied on funding from private equity companies and banks there was no obvious reason why the bidder took the opportunity at the second iterative stage of the procurement process to change the terms of their bid.
· Referencing paragraph 6.5 of the Cabinet report dated 4th July 2012 relating to Poplar Baths and Dame Colet House [appendix to cover report at agenda item 7.1], clarification sought and given as to whether the variant scheme proposal involving a Registered Provider (RP), referred to therein, would have delivered the Watts Grove Depot scheme at no cost to the Council. Developmental costs incurred to progress the project would have been incurred in any event but if the procurement process had been successful these would have been recouped from the developer. If an RP partner delivered the scheme there would have been no impact on the HRA as the new homes would not be Council housing stock/ a Council asset, therefore no impact on the HRA. However the Mayor had taken a decision that delivery of housing stock owned by the Council was preferable as it retained control of the stock and it provided a more secure tenancy for local residents.
· Clarification sought and given as to whether the Council would have nomination rights to the 149 affordable new homes that the scheme would deliver regardless of whether the Council or an RP delivered them. A key element of development rules for affordable housing schemes was that any RP delivery partner was required to be a member of the Common Housing Register and this provided for allocation of homes in accordance with the Council’s standard allocations policy/ procedure.
· Clarification sought and given as to whether if an RP was used for delivery of affordable housing they were required to charge 80% of market rent, or could charge less as with other RP led developments in the borough. There was no definitive policy, with GLA housing policy stipulating that 80% of market rent should be charged for homes delivered by grant supported housing schemes. LBTH policy stipulated a sliding scale, from 60-80% of market rent, depending on the number of bedrooms. RPs tried to adhere to LBTH policy where possible, but in other boroughs this was the subject of legal challenge by the GLA. There were other RP led developments in the borough charging less than 80% of market rent.
· Clarification sought and given as to whether the Council had initiated dialogue with RPs in relation to setting rents below 80% of market rent in general and specifically in relation to the Watts Grove Depot scheme. Was there a plan B in relation to Watts Grove to prevent the community losing the delivery of badly needed affordable homes. RPs could charge up to 80% of market rent, however they could only collect rent at levels which were affordable and consistent with their business plans. In relation to Watts Grove Depot scheme Officers considered an RP delivery partner would struggle to charge less than 80% of market rent and RPs did not have a level of reserves to support a lesser charge. The Council was in constant dialogue with RPs regarding affordable rent levels, and they tried to adhere to LBTH guidelines where they could. There was pressure from the GLA to charge 80% of market rent for grant supported housing schemes.
· Clarification sought and given as to whether it remained an option to enter into partnership with an RP to enable the Watts Grove Depot redevelopment scheme to progress and thereby ensure delivery of the 149 affordable new homes badly needed by the community. Consideration that if this remained an option it should be explored by the Executive. This would be a change the procurement route and procurement rules would require starting the procurement process again. Also clarified that RPs had been able to bid in the original procurement process as it did not allow otherwise.
The Chair Moved and it was:-
Resolved
1. That the contents of the report and information given by Officers be noted;
2. That the OSC Chair be authorised to prepare a full report on OSC consideration of this matter including any recommendations arising, and that this be submitted to the January OSC for agreement and onward reporting to January Council.
Action by:
Louise Russell (Service Head Corporate Strategy and Equalities)
Frances Jones (One Tower Hamlets Service Manager, Corporate Strategy & Equality Service, CE’s)
Mark Cairns (Senior Policy and Performance Officer, Corporate Strategy & Equality Service, CE’s)
Angus Taylor (Principal Committee Officer, Democratic Services, CE’s)
Please note that the remainder of the OSC deliberations relating to this item of business took place in Part Two of the proceedings or “closed session”. Please see summary of exempt proceedings at the foot of the minutes.
Variation of Order of Business
At this juncture the Chair informed OSC members that he considered it appropriate that the Order of Business be varied so that agenda item 7.1 “Reference from Council - Watts Grove Depot Project and financial mechanisms for Dame Colet House and Poplar Baths projects” be considered in conjunction with agenda item 14.1, which comprised the exempt/ confidential appendices to the unrestricted report at agenda item 7.1, in order that the interruption to the flow of OSC deliberations was minimised and these deliberations were concluded. To provide for this agenda item 11 “Exclusion of the Press and Public” would also need to be agreed as the appendices contained exempt/ confidential information (as defined in Schedule 12A of the Local Government Act 1972, as amended by the Local Government (Access to Information) Act 1985) the consideration of which was required in “closed session”. Accordingly the Chair Moved and it was:-
Resolved
That the Order of Business be varied as below:
· Agenda item 7.1 and 14.1 “Reference from Council - Watts Grove Depot Project and financial mechanisms for Dame Colet House and Poplar Baths projects” be considered in conjunction.
· Agenda item 12 “Exempt/ confidential minutes” [OSC meeting held on 5th November 2013] be considered after that.
· That the press and public be excluded for OSC discussion of the above agenda items.
· Subsequently the OSC return to the order of business detailed in the agenda.
However for ease of reference OSC deliberations and subsequent decisions taken, are set out below in the order detailed in the agenda.
Supporting documents:
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8 1a OSC Cover Ref - Watts Grove Depot 301013 for 3rd Dec - FINAL, item 7.1
PDF 98 KB
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Appendix 1 - Watts Grove OAS finance, item 7.1
PDF 63 KB
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Appendix 2 - Watts Grove OAS, item 7.1
PDF 74 KB
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Appendix 3.1_Executive Mayor decision log Watts Grove.PDF, item 7.1
PDF 55 KB
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Appendix 3.2_Exective Mayor Decision Watts Grove.PDF, item 7.1
PDF 15 KB
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Appendix 3.3_Executive Mayor report Watts Grove.PDF, item 7.1
PDF 103 KB
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Appendix 4.1_poplar Baths Cabinet report Part 1 4th July2012, item 7.1
PDF 110 KB
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Appendix 4.2_Poplar baths Cabinet report 4th July2012 Part 2, item 7.1
PDF 92 KB
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Appendix 5.1_July 2012 Cabinet approval minutes, item 7.1
PDF 107 KB
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Appendix 5.2_July 2012 decision sheet, item 7.1
PDF 17 MB
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Appendix 6.1_Poplar Baths part 1 report Jan 2013 cabinet, item 7.1
PDF 100 KB
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Appendix 7_Janurary 2013 cabinet decision sheet PBDC, item 7.1
PDF 17 MB
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Appendix 8_2013.11.23 OaS information matrix, item 7.1
PDF 19 KB