To the Members of Stroud District Council, Ward Councillors, Strategy and Resources Committee, and Fellow Residents of Stroud District, we are writing as a concerned residents to express serious reservations about the proposed development at Brimscombe Port, as outlined in recent council documents and meetings. Our intention is to highlight potential risks and to seek greater transparency and accountability in the decision-making process surrounding this significant project, writes Tomas Millar and David Haydock.
Disclosure: Given the short notice period AI has been used as an aid to help draft this letter and help make it clear and understandable and help check facts. However, all concerns represent the true concerns of the authors.
1. Financial Risk to the Council and Taxpayers
The Strategy and Resources Committee meeting to be held on November 21, 2024, proposes that the Council commit an additional £630,000 to purchase commercial units from St Modwen Homes (SMH) as part of the development agreement. According to the meeting agenda and the report to be presented:
Forward Payment Concerns: The proposal appears to involve the Council making a forward payment to the developer by purchasing commercial units in advance. This raises questions about why the Council is assuming this financial risk, especially given that the developer originally tendered to deliver these units without such an arrangement.
Council Assuming Developer Risks: By agreeing to purchase these units upfront, the Council is effectively shouldering risks typically borne by private developers, such as construction delays, cost overruns, and market fluctuations. This shift in risk could expose taxpayers to financial losses if the project does not proceed as planned.
Risk of Financial Loss: If the development does not proceed, there is a significant risk that the Council’s investment could be lost or fail to yield the anticipated returns. The financial implications section of the report acknowledges that borrowing will be required to fund this purchase, potentially impacting the Council’s capital reserves and creating ongoing revenue costs.
2. Lack of Transparency and Short Notice
Insufficient Public Notice: The public has been given only two days’ notice via a press release before the meeting where these substantial financial commitments are to be discussed and approved. This short timeframe is inadequate for meaningful public engagement or scrutiny, especially for a project of this magnitude and complexity.
Missing Milestone Dates: In the draft Heads of Terms under point 21, the milestone dates for key activities are not specified; they are left blank. This includes crucial dates like the submission of the planning application, planning approval, and the ultimate long-stop date for completion. Without these dates, it’s challenging to assess the project’s timeline and enforce accountability. This represents poor project governance.
Undefined Commercial Space Area: Under point 2 (Objectives), item 4 in the Heads of Terms specifies the provision of commercial/retail units as a minimum of “xxx sqm,” indicating that the exact area is yet to be determined or has been omitted. This lack of specificity makes it difficult to evaluate the scale of commercial development and its financial implications accurately.
3. Inconsistencies and Gaps in Financial Information
Inconsistencies in Funding Figures: The report and the Heads of Terms provide differing figures for public investment
The report mentions that the Council has contributed £2.6 million and secured an additional £2.776 million.
The Heads of Terms state funding from Homes England is £2 million, with £776,000 from the Land Release Fund and a further £750,000 committed by the Council.
Financial Viability Concerns: The proposal for the Council to purchase commercial units poses financial risks:
These inconsistencies need clarification to understand the total public investment accurately.
In the documents prepared for the Strategy and Resources (S&R) Committee it states that Council has contributed £2.6m capital to the project. This was the capital amount approved in April 2018. Since then the demolition costs have exceeded budget and the intended nature of the project will also have increased revenue costs. The total actual costs of the project, including a projection to completion, should be presented to the S&R Committee before any further funding is agreed. Individual financial decisions should not be made without considering the overall financial context (including the output from a comprehensive risk register). This represents standard project governance to which the Council should adhere.
The estimated annual cost of borrowing (£27,807) is almost equal to the estimated annual rental income (£28,000), leaving a minimal margin that could be eroded by void periods or additional costs.
A Net Present Value (NPV) analysis shows a marginally positive NPV of £7,075, indicating that the investment may not provide substantial financial returns.
The financial modelling assumes stable market conditions, but given current economic uncertainties, the risks may be higher than projected. Given that the project is not due to be delivered until the early 2030s it is clear from these numbers that the purchase of commercial property is not a commercial transaction rather a compromise with the Developer to enable the project.
4. Developer’s Viability Tests Before Agreement Becomes Unconditional
Conditional Agreement: The developer insists on pre- and post-planning application viability tests (Heads of Terms, point 12) before the agreement becomes unconditional. This could allow the developer to withdraw or renegotiate terms if certain viability thresholds aren’t met, potentially leaving the Council exposed after committing resources. There is also no time limit to when the viability test has to be completed.
Council Not Expecting Monetary Receipts: According to point 10 in the Heads of Terms, “SDC is not expecting monetary receipts for its investment of land and capital funding contributed at the outset.” This suggests the Council may not directly recoup its significant investment, relying instead on shared surplus if the project exceeds profit thresholds.
5. Delays and Uncertainties in Housing Delivery
Slipping Timelines: The recently released Stroud Five Year Housing Land Supply report indicates that the delivery of housing at Brimscombe Port has been consistently delayed: In 2021, housing was due to start within 3 years. In 2022, this shifted to within 4 years; in 2023, still within 4 years; in 2024, now pushed back to within 6 years.
This pattern suggests a continual postponement, with delivery dates receding further into the future each year.
The demolition of the site, including valuable community assets, was carried out based upon an apparent urgency that has not been delivered. Stronger governance is required to ensure that timelines, and consequences, do not continue to slip.
6. Uncertain Arrangements for Community Facilities
Lack of Identified Funding and Ownership: The Council plans to provide land for community facilities but requires an “accountable body” to fund construction and fit-out costs (Heads of Terms, point 19). This body has not been identified, creating uncertainty around the delivery and funding of these facilities.
Potential Delays or Gaps in Community Provision: Without a clear plan or committed partner, there is a risk that the community facilities may be delayed or not materialise, affecting the overall success and social value of the development.
7. Ongoing Financial Obligations
Maintenance Costs for Canal Infrastructure: The Heads of Terms mention an obligation for the site to generate no less than £60,000 per annum (index-linked) to fund canal maintenance, payable to the Stroud Valleys Canal Company (SVCC). This could impact the project’s financial viability and the Council’s long-term financial commitments.
Additional Financial Burdens: These ongoing obligations may not have been fully accounted for in the financial models, potentially increasing the financial strain on the Council and affecting the affordability of the development.
8. Lack of Detailed Financial Modelling Transparency
Developer Fees and Profits: While developer fees and profits are mentioned, there is no detailed disclosure of the developer’s financial model, fee structures, or how profits will be calculated and shared. This makes it difficult to assess the fairness and transparency of the financial arrangements.
Potential Misalignment of Incentives: With the developer recovering costs and profits first (Heads of Terms, points 8 and 9), and the Council only sharing in surplus profits beyond a certain threshold, there may be limited incentive for the developer to maximise returns beyond their target profit.
9. Ambiguity in Land Transfer Arrangements
Complex and Unclear Terms: The terms under point 18 regarding land transfers are complex and somewhat ambiguous, particularly concerning the conditions under which land interests transfer to the developer and the retention of certain units until canal works are completed.
Risk of Asset Loss: Without clear terms, there’s a risk that the Council may lose control over assets or that the developer may gain advantageous terms not fully understood or intended by the Council.
10. Concerns Over Developer Commitments
Reduced Risk Exposure for Developer: The arrangement for the Council to purchase commercial units may effectively reduce the developer’s financial risk while increasing the Council’s exposure. The developer’s insistence on viability tests before the agreement becomes unconditional could allow them to withdraw if conditions become unfavourable, leaving the Council bearing the costs.
No Contingency for Market Changes: Given the acknowledged volatility in the construction and housing markets, there is little mention of contingencies or risk mitigation strategies should costs escalate further or revenues decline.
11. Lack of Specifics on Sustainability and Affordable Housing
Vagueness on Sustainability Commitments: While there is mention of creating a “sustainable new residential-led mixed-use community,” the documents provide little detail on how sustainability goals will be achieved. In an era where environmental considerations are paramount, the lack of concrete plans is concerning.
No Specifics on Affordable Housing Costings: While it’s stated that costings for shared ownership and affordable rent units shall be included in the developer’s financial model (Heads of Terms, point 2), there is no information on pricing, standards, or how affordability will be ensured over time.
12. Potential Conflicts in Community Engagement Roles
Developer Leading Community Engagement: The developer is tasked with leading community and stakeholder engagement (Heads of Terms, point 5a). This is somewhat unusual, as this role is often led or closely overseen by the Council to ensure community interests are adequately represented.
Risk of Biased Representation: Allowing the developer to lead engagement may result in a focus on commercial interests over community needs, potentially overlooking or downplaying legitimate concerns from residents.
Greenspaces in developments. On 29th October the Council chaired a meeting on the management of green spaces in new developments. At this meeting the Council referred to guidance for developers on engaging with the community, including the Parish Council. This guidance is not referred to in the Heads of Terms
13. Difficulty in Raising Concerns and Seeking Representation
Lack of Responsiveness from Councillors: Past efforts to engage with councillors and to have these concerns represented have been challenging. For a development that significantly impacts the community, it is essential that residents’ voices are heard and that their concerns are addressed transparently.
In Conclusion
The proposed financial commitments and the manner in which they are being made raise serious concerns about the prudent use of public funds, the overall viability of the Brimscombe Port development and the compromises with the Developer that the Council is prepared to make to conclude a deal. The documents reveal gaps in critical information, such as specific dates, financial details, and clear terms of agreement, which are essential for transparent decision-making and risk assessment. We have significant concerns regarding the standards of governance on this project.
We urge the Council to:
Provide a Detailed Risk Assessment: Offer a comprehensive analysis of the financial implications for the Council and taxpayers, including potential risks and mitigation strategies.
Ensure Full Transparency: Publish all relevant documents, including finalised Heads of Terms with specific dates, financial commitments, and detailed explanations of terms.
Re-evaluate the Decision to Purchase Commercial Units in Advance: Only consider the decision when presented with the wider financial/commercial context, the potential risks involved and consequently whether this arrangement is in the best interest of the Council and the community.
Facilitate Meaningful Public Consultation: Provide adequate notice and opportunities for residents to engage with the project before making significant financial commitments. Move from an engagement model that informs the local community to one that truly engages and utilises the skills of the local community.
Clarify Sustainability and Affordable Housing Measures: Provide detailed plans on how sustainability goals will be achieved and how affordable housing will remain genuinely affordable over time.
Define Clear Terms and Accountability Measures: Specify milestone dates, areas, and financial details to hold all parties accountable and to facilitate effective project management.
Consider Independent Oversight: Given the significant delays on the project, overspends, significant shifts in the external environment and the compromises that the Council is being asked to commit to, commission third-party auditors/advisors to review the financial models and agreements to protect the Council’s and taxpayers’ interests.
It is crucial that the Council acts in the best interests of the community, ensuring that public funds are managed responsibly and that developments proceed with transparency and accountability. The success of the Brimscombe Port development depends not only on financial viability but also on genuine community engagement, sustainable practices, and the timely delivery of promised housing and facilities. I look forward to your response and hope that these concerns will be taken seriously in the ongoing deliberations.
Sincerely, Tomas Millar and David Haydock
