Agenda item

Report number:     CAB/WS/22/068

Portfolio holder: Councillor Joanna Rayner

Lead officer: Alex Wilson

Recommended to Council:

(13 December 2022)

That:

1.           This review and update of the business case for the Western Way (WW) project, Bury St Edmunds and, as part of that wider scheme, the replacement of the Bury St Edmunds Leisure Centre, be approved so that Cabinet and officers can continue to deliver phase 1 of the project and any interim works to the rest of the site on the revised basis set out in this review and in accordance with the Council’s Constitution.

2.           The existing authorities, financial provisions, safeguards and financial tests for delivery of the project be updated as follows:

(a)         The remainder of the due diligence for the second stage of tendering be carried out in accordance with the two new gateways defined in Section E of this review.

(b)         For either facility to be included in the phase 1 construction contract, Suffolk County Council must have entered into a formal pre-let agreement for an archive facility and/or pre-school which meets the One Public Estate principles of full cost recovery.

(c)         The previous spending caps and financial tests for the hub and leisure centre be replaced by a new combined and reduced net capital expenditure limit of £65 million for the total phase 1 scheme defined in this report i.e. project costs, market analysis, enabling works, construction of the initial community hub, installation of renewables.

(d)         In addition to this cap on expenditure, at the time the main construction contract is signed, the phase 1 scheme must not increase the Council’s existing MTFS provision of £724,000 for Bury St Edmunds Leisure Centre and, in relation to other ancillary elements of the new hub, be capable of achieving at least a break-even position over the whole life of the borrowing.

(e)         In addition to the phase 1 scheme defined in the review, a further capital allocation of up to £10 million be made in the Council’s capital programme for interim works to the remainder of the Western Way site as defined in Appendix 3 of this report and also on the basis of at least a break-even income position over the life of the borrowing.

(f)          Subject to consultation with the relevant portfolio holders, approval be given for interim or enabling works ahead of the main contract for phase 1, to be financed from within the new combined WW capital budget of £75m. But only where these works will increase the commercial value of the site irrespective of whether the WW project proceeds or not.

(g)         The cash flow risk being managed.

(h)         The most beneficial and economic funding method for the project is identified, including entering into agreements with third-party investors if required; and

(i)           Any phase 2 scheme for a permanent use of the remainder of the WW site be subject to a new and separate business case to councillors before the conclusion of the phase 1 construction programme.

(Report number CAB/WS/22/068)

The Cabinet considered this report which explained that the Western Way project in Bury St Edmunds was part of a network of existing or planned community hub projects across the whole West Suffolk area being delivered by partners in the public, charity and community sectors. These ranged in scale from a community-led hub project in Clare up to the multi-agency Mildenhall Hub which opened in June 2021.

The Western Way project was first approved for delivery by Council in late 2019 and achieved planning consent in 2021 on the completion of its Section 106 agreement. After reviewing the impact of the COVID-19 pandemic, the Council gave support for a phased delivery of the project in June 2021. In both instances, a set of financial tests were set to safeguard the interests of taxpayers. A final review of these tests by Cabinet was currently required before any contract could be awarded. This would not occur before March 2023.

Given the current economic situation and the changing requirements of partners, the Cabinet had asked that an interim review of the status of the project be carried out before the end of 2022, so that the Council could consider whether it wished to continue with the current project. This report had provided that review.  Therefore, it was now being proposed that a smaller phase 1 scheme for Western Way continued through to the second stage of tendering, to allow a start on site in 2023 and a projected opening of new facilities in Autumn 2025.

Councillor Joanna Rayner, Portfolio Holder for Leisure, Culture and Community Hubs, drew relevant issues to the attention of the Cabinet. These included:

a.       Smaller phase 1 scheme: the original proposal for the initial Western Way Development had an approved expenditure cap of £140 million. During the scoping of this and working closely with consultants, this figure was reduced to around £100 million to reflect the impact of the pandemic and a phased approach being needed. A smaller phase 1 scheme, for consideration by the Council, requested support for a reduced spending cap of £75 million, of which £40 million would deliver a brand new leisure centre. Within this cap over £5 million of spending would be sourced from Suffolk County Council (SCC) and developer contributions and £10 million related to interim works to the remainder of the Western Way site not needed in phase 1 to ensure this could also continue to generate an income to the Council as landowner.

b.       Leisure centre: the existing Bury St Edmunds leisure centre provided a valued service to the local community; however, it was approaching fifty years old and in need of immediate repairs. That, coupled with a number of factors detailed in the report including that it was no longer large enough to suitably deliver an acceptable service to cope with the growth in population to 2040, meant a ‘do nothing’ option could not be applied.  Refurbishment options had been considered as detailed in Appendix 1; however, a new leisure centre was considered to return the best financial position over a 40 year period.  Just a basic refurbishment to extend its life by 20 years would cost around £13 million. This would only delay a new build by about 20 years, at which point the costs to rebuild would have escalated considerably.

c.       Renewables: the proposal was to invest £10 million on renewable energy during phase 1. It was expected that this would generate around £980,000 net a year from the phase 1 site alone. Such investment would also align with the Council’s ambition to address climate challenges. The planning consent allowed delivery of a scheme in several phases so the site would never sit empty.  However, the rest of the frame and its roof would be required to be in good condition to make use of it, alongside a completed phase 1. An additional £9 million would, therefore, enable the rest of the frame and roof to be brought up to a standard which allowed the installation of further renewables outside of phase 1. This cost could be met from any extra renewables income and any rent pending phase 2.

d.       Other partners/rest of site: Whilst phase 1 would be around a third smaller than anticipated, the design was sufficiently flexible to adapt and grow to accommodate changing needs of the population and partners. These included options for phase 1 that aligned with the Council’s strategic vision delivered elsewhere whereby a range of services were provided from one community hub. This proposal was therefore not only about replacing the leisure centre.

Other potential services in a smaller phase 1 hub included a small health centre; some provision for office, stores and meeting room space; a potential SCC archive office; and a SCC children’s pre-school. The aforementioned would need to be cost neutral or they would not be included in the scheme.  

e.       Mitigation of income risk and treasury management approach: The large income risks associated with the earlier scheme had been removed as the Council would no longer be borrowing on behalf of others or in commercial offices that may have taken time to become occupied. A conventional long-term treasury management approach to borrowing money could now be adopted as the Council had better control over when it would be the most appropriate time to borrow thus mitigating against higher interest rates.

At the conclusion of her speech, Councillor Rayner acknowledged and thanked Officers for all of their work on this project to-date.

Recommended to Council (13 December 2022):

That:

1.           This review and update of the business case for the Western Way (WW) project, Bury St Edmunds and, as part of that wider scheme, the replacement of the Bury St Edmunds Leisure Centre, be approved so that Cabinet and officers can continue to deliver phase 1 of the project and any interim works to the rest of the site on the revised basis set out in this review and in accordance with the Council’s Constitution.

2.           The existing authorities, financial provisions, safeguards and financial tests for delivery of the project be updated as follows:

(a)         The remainder of the due diligence for the second stage of tendering be carried out in accordance with the two new gateways defined in Section E of this review.

(b)         For either facility to be included in the phase 1 construction contract, Suffolk County Council must have entered into a formal pre-let agreement for an archive facility and/or pre-school which meets the One Public Estate principles of full cost recovery.

(c)         The previous spending caps and financial tests for the hub and leisure centre be replaced by a new combined and reduced net capital expenditure limit of £65 million for the total phase 1 scheme defined in this report i.e. project costs, market analysis, enabling works, construction of the initial community hub, installation of renewables.

(d)         In addition to this cap on expenditure, at the time the main construction contract is signed, the phase 1 scheme must not increase the Council’s existing MTFS provision of £724,000 for Bury St Edmunds Leisure Centre and, in relation to other ancillary elements of the new hub, be capable of achieving at least a break-even position over the whole life of the borrowing.

(e)         In addition to the phase 1 scheme defined in the review, a further capital allocation of up to £10 million be made in the Council’s capital programme for interim works to the remainder of the Western Way site as defined in Appendix 3 of this report and also on the basis of at least a break-even income position over the life of the borrowing.

(f)          Subject to consultation with the relevant portfolio holders, approval be given for interim or enabling works ahead of the main contract for phase 1, to be financed from within the new combined WW capital budget of £75m. But only where these works will increase the commercial value of the site irrespective of whether the WW project proceeds or not.

(g)         The cash flow risk being managed.

(h)         The most beneficial and economic funding method for the project is identified, including entering into agreements with third-party investors if required; and

(i)           Any phase 2 scheme for a permanent use of the remainder of the WW site be subject to a new and separate business case to councillors before the conclusion of the phase 1 construction programme.