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STROUD DISTRICT COUNCIL EXTRAORDINARY COUNCIL MEETING 16DECEMBER

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					               STROUD DISTRICT COUNCIL                                         AGENDA
                                                                               ITEM NO
       EXTRAORDINARY COUNCIL MEETING

                      16 DECEMBER 2008
                                                                                        3
Report Title                       COTSWOLD          CANALS       RESTORATION           AND
                                   REGENERATION PROJECT – WORK FROM SAUL
                                   TO BRIMSCOMBE (PHASE 1A)
Purpose of Report                  To provide members with information and advice,
                                   particularly on legal and financial matters, that enables
                                   the Council to decide to commit to the project.
Decision(s)                        Council is recommended;
                                    1. To commit to undertake the canal
                                        regeneration project between Saul and
                                        Brimscombe         (Phase      1A)    subject     to
                                        completion of a funding agreement with the
                                        Heritage Lottery Fund in the sum of £11.924
                                        million.
                                    2. To enter into a funding agreement with HLF
                                        and such other funding partners as necessary
                                        after consultation between the Chief
                                        Executive, the Strategic Head (Regeneration
                                        and Culture), Heads of Finance and Legal
                                        Services, the Leader of the Council and such
                                        portfolio holders as the Leader may decide
                                        appropriate.
                                    3. To agree the establishment of a company to
                                        be known as the Stroud Valleys Canal
                                        Company; this company to be limited by
                                        guarantee and to have charitable trust status
                                        with the Council taking a minority interest
                                        (The Stroud Valleys Canal Company’s
                                        purpose being to acquire freehold and
                                        leasehold property interests by gift or
                                        purchase and be responsible for the
                                        operation, repair and maintenance of the
                                        canal until such time as British Waterways
                                        take on these responsibilities).
                                    4. To delegate authority to the Chief Executive,
                                        the Strategic Head (Regeneration and
                                        Culture), Heads of Finance and Legal Services
                                        to agree documentation that enables the
                                        Council to establish and participate in the
                                        company and charitable trust referred to in
                                        recommendation          3    and     such      other
                                        agreements and licences as may reasonably
                                        be required to implement the project.
                                    5. To agree should circumstances dictate and it
                                        being in the interests of the council taxpayer,
                                        the Chief Executive and the Leader of the
                                        Council be authorised to suspend the project
                                        and a report be brought to Council.


Extraordinary Meeting of Council               1                               Agenda Item 3
16 December 2008
Decision                           6.   To agree the preparation and publication of a
Cont’d/…                                development brief for the Brimscombe Port
                                        area.
                                    7. To earmark the capital receipts from the sale
                                        of Dudbridge depot and the Dursley
                                        supermarket site specifically to fund the
                                        Council’s contribution of £2.342m to the canal
                                        project. In the event that costs look likely to
                                        exceed the capital receipts available
                                        recommendation 5 above would apply.
                                    8. Subject to compliance with EU Procurement
                                        Directives and to the overriding objective of
                                        ensuring best value under the relevant
                                        legislative   requirements,    and     specific
                                        approval by the Heads of Finance and Legal
                                        Services, to authorise the suspension of or
                                        exception from the Procedure Rules Relating
                                        to Contracts as may from time to time be
                                        appropriate, subject to, in order to take best
                                        advantage of innovative procurement, value
                                        engineering and opportunities to utilise other
                                        partners, and to facilitate progress on
                                        individual schemes within the overall project.
                                        In each instance, specific approval will need
                                        to be given by the Heads of Finance and Legal
                                        Services.
Consultation and                   Previous reports to Council have outlined the
Feedback                           substantial consultation that has taken place with
                                   partners and the community. This has continued
                                   through the Cotswold Canals Partnership and the
                                   Western Consultative Committee.

                                   Since the report to Council in June 2008, the County
                                   Council has discussed the A46 Bridge scheme at
                                   Wallbridge, Stroud with the Stroud Chamber of Trade
                                   and this Council. Because this Council had yet to
                                   decide whether to proceed with the whole canal
                                   project, the County Council reprogrammed the project
                                   to start in June 2009.

                                   Further consultation has taken place involving Thrupp
                                   Canal Committee and Thrupp Parish Council (now
                                   Brimscombe & Thrupp Parish Council). At a meeting
                                   on 4th September, they supported the proposed
                                   approach to planning for the area.

                                   At its meeting on the 5th September, the Stroud
                                   District Local Strategic Partnership reaffirmed its
                                   support for the ‘bold community leadership’ approach
                                   being taken by the Council and the importance of the
                                   project to Stroud District.




Extraordinary Meeting of Council              2                             Agenda Item 3
16 December 2008
Financial Implications             Should the Council commit to undertaking the canal
                                   restoration project between Saul and Brimscombe, it
                                   must fully understand the financial commitment it is
                                   being asked to make.

                                   The cost estimates for the project have not changed
                                   since last reported to Council on 5 June 2008. As part
                                   of the Tameside review, the estimates were uplifted
                                   for inflation from 2005 prices to September 2010. It is
                                   likely that further inflationary increases will need to be
                                   applied as the project progresses beyond that date.

                                   It would be fair to say that in the current economic
                                   climate, the robustness of the cost estimates for the
                                   project will not be known until tenders are received for
                                   the     construction    works.    Contingencies,    risk
                                   allowances and inflation have all been included which
                                   provides some assurance that the estimates are
                                   realistic. The market will be very competitive at the
                                   moment and borrowing costs will be lower with the
                                   falling base rate, all of which should help to keep the
                                   costs down.

                                   Work is being undertaken to package the project into
                                   smaller chunks with a view to limiting the Council’s
                                   liability at any one time. Whilst this approach has its
                                   merits, should the project be suspended at any point
                                   due to cost overruns or any other reason, we need
                                   assurance that the HLF will still contribute to the works
                                   completed. The HLF funds are for the whole project
                                   and there is no guarantee that they will not claw back
                                   any payments made if the whole project is not
                                   completed.

                                   The main change since last reported is the position
                                   with Brimscombe Port. If, as suggested in the report, a
                                   developer can deliver this part of the project to the
                                   requirements of the HLF agreement, the Council’s
                                   involvement and liability is reduced. It is still very
                                   much an integral part of the project and if not
                                   completed, the HLF funds could be at risk.

                                   Discussions between the various interested parties
                                   are at a very early stage and until the details have
                                   been agreed, it is not clear exactly how the costs need
                                   to be split between the 2 parts of the project. If the
                                   split is as set out in Appendix A, then the additional
                                   contribution    required     from    the   Council    is
                                   approximately £2.34m. The Council has already
                                   committed £1.35m to the project which is included in
                                   the capital programme. The total contribution would
                                   therefore be £3.69m.




Extraordinary Meeting of Council               3                                Agenda Item 3
16 December 2008
Financial Implications             The Council has submitted applications for tax relief
Cont’d/…                           on the removal/treatment of contaminated land on four
                                   sites. If granted, this will reduce the construction costs
                                   currently reported. The outcome of the applications
                                   will be known by the end of December.

                                   Given the number of uncertainties with the figures, the
                                   Council needs to decide how much financially it is
                                   prepared to commit to the project. The Council has,
                                   subject to the completion of the sale of the Dursley
                                   Supermarket site, approximately £2.6m in capital
                                   receipts that could be earmarked for this project. The
                                   Council has no other capital funds available. Any
                                   additional expenditure on this project or any other
                                   capital scheme would have to be funded by borrowing.
                                   Whilst the Council is holding these receipts, they are
                                   invested and interest is earned. Once spent, the
                                   investment interest is also forgone.

                                   The uncertainty around the Council’s deposits in
                                   Iceland plays a part in this decision. Should the
                                   Council recover the total sum invested, there is less
                                   pressure on the revenue budget. Should the Council
                                   recover part or none of the deposits, there will be
                                   significant implications for the revenue budget. A small
                                   loss may have to be written off against the Council’s
                                   reserves and balances immediately. Should the full
                                   amount be lost and the Government allow the loss to
                                   be written off over a number of years, the cost to the
                                   Council will be the loss of the capital and the interest
                                   forgone, a total of approximately £300,000 per year.
                                   There is currently no provision for this in the Council’s
                                   Medium Term Financial Plan.

                                   Until the outcome of the recoverability of the Icelandic
                                   deposits is known, it would not be advisable to commit
                                   the Council to any borrowing. The impact on the
                                   revenue budget and ultimately the council taxpayer
                                   would be too great.

                                   A major concern is that once the works have begun,
                                   given the huge effort put into getting the project to that
                                   stage, the Council will feel compelled to continue with
                                   the project. A decision to suspend the project will not
                                   be taken lightly but to commit to spending more than
                                   the capital receipts that that are available would be
                                   unreasonable at this stage.

                                   The proposal to set up a company limited by
                                   guarantee and with charitable status would appear to
                                   be the most appropriate vehicle for delivering the
                                   ongoing operation management, maintenance and
                                   repair of the canal. This reduces the risk of the
                                   Council being held solely responsible for these
                                   functions and the associated costs.


Extraordinary Meeting of Council               4                                Agenda Item 3
16 December 2008
                                   The Council would be part of this company but the
                                   report does not specify what the level of the Council’s
                                   contribution would be to the ongoing management and
                                   maintenance of the canal. Before committing to this
                                   proposal, it would be advisable for the Council to be
                                   informed of the likely level of financial commitment
                                   that would be required. There is currently no revenue
                                   budget for this.

                                   To summarise:
                                         Further clarity is required around the split of
                                         costs between Brimscombe Port and the rest
                                         of the project to provide assurance about the
                                         Council’s financial contribution to the project.
                                         However, if the Council’s contribution is
                                         “capped” at £2.5m, this will not delay a
                                         decision being made by the Council.
                                         The Council can choose to earmark the capital
                                         receipts up to £2.5million to the canal project
                                         at the expense of all other capital schemes.
                                         There are no further capital funds available
                                         without borrowing.
                                         It is not recommended that the Council
                                         commits to any borrowing until such time as
                                         the deposits in Iceland are recovered.
                                         The actual shortfall in the funding required will
                                         not be known until the construction works are
                                         tendered for. To package the project into
                                         smaller chunks will reduce the risk to the
                                         Council.
                                         Should the developer interest in Brimscombe
                                         Port lead to a satisfactory agreement that
                                         meets HLF requirements, the Council’s liability
                                         in this part of the project is removed.
                                         It is proposed that the salaries of the
                                         professional officers involved in the canal
                                         project be capitalised and charged against the
                                         project management budget. This will generate
                                         savings to the Council’s General revenue
                                         budget for the period of the project. The
                                         benefits to the revenue budget of doing this
                                         need to be balanced against the constraints on
                                         the capital budget for the canal. Any savings in
                                         the revenue budget could be set aside to fund
                                         any losses arising from the Iceland deposits or
                                         for further investment in the canal.
                                         The setting up of a company limited by
                                         guarantee is key to the delivery of the ongoing
                                         management and maintenance of the canal.
                                         The estimated costs and the level of
                                         contribution from the parties involved in the
                                         company must be established.

                                   Sandra Cowley, Head of Finance,
                                   Tel: 01453 754136
                                   Email: sandra.cowley@stroud.gov.uk

Extraordinary Meeting of Council              5                               Agenda Item 3
16 December 2008
Legal Implications                 Under the Local Government Act 2000, the Council
                                   has legal powers to undertake the canal regeneration
                                   project. However, in exercising those powers, for
                                   such a complex, costly and significant project, it is of
                                   especial importance to ensure that a comprehensive
                                   and legally robust framework is in place so that the
                                   project can be procured, implemented and financed
                                   on a Best Value basis within available resources and
                                   that proper arrangements are in place to guarantee
                                   the future maintenance, management and repair of
                                   the canal once the project is completed.

                                   The most obvious basic resources are finance and
                                   land and these elements are considered below.

                                   The financial implications of the project are addressed
                                   elsewhere in the report. On the assumption that the
                                   position regarding Brimscombe Port explained in
                                   paragraphs 7 to 10 inclusive of this report results in a
                                   direct sale to a developer and that there are no other
                                   corresponding contrary factors, it would seem that the
                                   financial risk to the Council may be less than had
                                   previously appeared to be the case and that the
                                   contingent public subsidy agreed by the Council in
                                   November 2007 may not be required. Nevertheless,
                                   the Council must consider the capital and revenue
                                   costs of this scheme against its resources and
                                   expected commitments, overall.         If those costs,
                                   viewed       objectively,    represent      a     wholly
                                   disproportionate use of resources which no
                                   reasonable Council could possibly contemplate, then
                                   a decision to approve the project would be legally
                                   perverse and therefore unlawful.

                                   It is clearly vital to the success of this project that not
                                   only effective arrangements are in place for the
                                   development of Brimscombe Port, but even more
                                   significantly, that HLF Grant of £11.924m is available
                                   to the Council on acceptable conditions and that the
                                   risk of claw back of grant is minimised. The grant
                                   offer is subject to a number of standard conditions
                                   which are in general terms acceptable. However, one
                                   condition requires that the Grantee i.e. the Council
                                   has a freehold or long leasehold interest in the land
                                   required for the scheme. This is not currently the
                                   case; legal interests in large lengths of the canal are
                                   vested in either British Waterways or Gloucestershire
                                   County Council. Nevertheless, it is understood that
                                   HLF is prepared to adopt a pragmatic approach about
                                   the imposition of such a condition, provided that
                                   satisfactory alternative arrangements are in place to
                                   ensure delivery of the project.            Members will
                                   appreciate that the body with responsibility for the
                                   delivery of this project must have the ability to
                                   discharge those obligations. An obvious method of


Extraordinary Meeting of Council               6                                 Agenda Item 3
16 December 2008
Legal Implications                 ensuring this would be if that body had both the
Cont’d/…                           occupation and control of the land affected.
                                   Presumably, this is the reason for the HLF standard
                                   condition. However, with this scheme there are
                                   financial advantages for not owning the canal land
                                   which are referred to later. In that case, and to
                                   minimise Council risk, it is essential that mechanisms
                                   are in place to secure access to the land required for
                                   the project and for the subsequent maintenance and
                                   management of the asset. The report does not
                                   identify what these costs will be.

                                   External legal advice has confirmed that the
                                   establishment of a Company Limited by Guarantee
                                   and with charitable status is, as indicated elsewhere in
                                   the report, seen to be an acceptable vehicle to
                                   facilitate this project. Furthermore, the establishment
                                   of a body with charitable trust status has a number of
                                   fiscal advantages, for example, exemption from Stamp
                                   Duty Land Tax and from NNDR once the project has
                                   been completed. Such an arrangement could apply to
                                   the        whole       project     i.e.     delivery/land
                                   ownership/subsequent            management            and
                                   maintenance. However, an inevitable downside of
                                   such a comprehensive approach is that the Council
                                   would lose a degree of overall control for project
                                   delivery. The alternative – proposed in this report - is
                                   that the Company Limited by Guarantee/Charitable
                                   Trust option applies to land ownership and
                                   subsequent maintenance and management but not
                                   project delivery. An essential sequel is, however, that
                                   the Council’s risks in delivering the project must be
                                   subject to the maximum safeguards indicated in this
                                   report.

                                   Additionally, the proposed arrangements offer a
                                   degree of control in partnership with the Council in the
                                   operation and maintenance of the canal.            They
                                   provide a means by which current landowners –
                                   including British Waterways – can still have a say in
                                   the project and be responsible for future maintenance
                                   and a body to which there is, it is understood, a
                                   willingness to transfer their land interests. These
                                   arrangements will also transfer risk.

                                   The implementation of this project is undoubtedly
                                   likely to be complex and therefore some flexibility in
                                   contract procurement may be inevitable. However,
                                   any such flexibility cannot of course override EU
                                   Procurement Directives and must be generally in
                                   accordance with the requirements of Best Value.




Extraordinary Meeting of Council               7                               Agenda Item 3
16 December 2008
Legal Implications                 It will be apparent that a very considerable volume of
Cont’d…                            work must be done before this project can be
                                   implemented. For both that reason and to ensure that
                                   the risks to which the Council is exposed at any time
                                   are minimised, some of the recommendations
                                   appearing in the Decision Box are deliberately of a
                                   qualified nature designed to secure maximum
                                   protection of the public interest throughout.

                                   To conclude, it is considered essential before the
                                   scheme proceeds that:-
                                       The Council must be satisfied that it has the
                                       financial resources to deliver this major project
                                       without prejudicing its statutory or other current
                                       contractual obligations
                                       An acceptable funding agreement must be in
                                       place with HLF
                                       Acceptable arrangements are in place in respect
                                       of landowning through a Company Limited by
                                       Guarantee/Charitable Trust
                                       Proper access and related arrangements must be
                                       secured with those holding property interests
                                       The responsibility and likely cost implications to
                                       the future maintenance and management of the
                                       canal should be determined
                                   If difficulties are encountered in fulfilling any of the
                                   above criteria, it would be expected that the issue will
                                   be brought back for member consideration; indeed,
                                   the position is safeguarded by recommendations
                                   contained in the Decision Box.

                                   Colin Spencer, Head of Legal Services & Monitoring
                                   Officer

                                   Tel : 01453 754369
                                   Email : colin.spencer@stroud.gov.uk
Report Authors                     David Hagg, Chief Executive

                                   Tel: 01453 754290
                                   Email: david.hagg@stroud.gov.uk

                                   and Karen Toole, Strategic Head (Regeneration and
                                   Culture)

                                   Tel: 01453 754339
                                   Email: karen.toole@stroud.gov.uk




Extraordinary Meeting of Council               8                               Agenda Item 3
16 December 2008
Portfolio Holders                  Councillor Nigel Studdert-Kennedy, Cabinet Member
                                   for Regeneration & Tourism,

                                   Tel: 01453 821491
                                   Email: cllr.nigel.studdert-kennedy@stroud.gov.uk

                                   and Councillor Barbara Tait, Cabinet Member for
                                   Planning & Climate Change,

                                   Tel: 01452812743
                                   Email: cllr.barbara.tait@stroud.gov.uk
Options                            The Council could decide to delay committing until the
                                   legal agreement has been signed. This timescale is
                                   dependent on other parties but is only one aspect of a
                                   complex project. To plan sequentially i.e. one step at a
                                   time, when there are various strands of action that
                                   need to be taken, is not an appropriate way to project
                                   manage. Should the HLF agreement generate risks
                                   that are not already known, then a further report would
                                   be brought to Council before any agreement is signed.

                                   The Council could decide not to proceed with the
                                   project. Both the HLF and the South West of England
                                   Regional Development Agency grants would be lost to
                                   the District. This totals £17.924 million. Grants on this
                                   scale are highly unlikely to be available to the District
                                   in the future from any source.

                                   General business confidence and the investment
                                   decisions of developers/property investors will also be
                                   influenced by a Council decision not to proceed. Such
                                   an impact is difficult to measure but the project’s
                                   beneficial impact on jobs, tourism and canal side
                                   development will not be realised.
Performance                        The Council will need to address the political and
Management Follow Up               management oversight of this project. The Chief
                                   Executive has commissioned work to identify a small
                                   team of Council officers who would work on the
                                   project and be charged to its capital budget
                                   accordingly.    Detailed      project    management
                                   arrangements will be drawn up by the Canal Project
                                   Manager, including budget monitoring systems that
                                   meet with the approval of the Head of Finance.
Background Papers/                 None used in the preparation of this report. The
Appendices                         Tameside MBC report can be found at
                                   www.cotswoldcanalsproject.org

        Summary of Council Consideration in 2008

1.      The Chief Executive made an announcement at the Council meeting on 21st
        February (Minute CL.063), following the withdrawal of British Waterways on
        4th February. All members received a copy of the report he made to the
        Cabinet on the 13th March. Following this meeting, the Chief Executive and
        Strategic Head (Regeneration and Culture) commissioned Tameside


Extraordinary Meeting of Council               9                               Agenda Item 3
16 December 2008
        Metropolitan Borough Council to provide an independent opinion on revised
        proposals.

2.      At an Extraordinary Council meeting on the 5th June, members agreed to
        submit an application to the Heritage Lottery Fund to become lead partner
        and main grantee. The Council agreed various actions and asked that a
        further report be made, once the issues in the financial and legal implications
        sections of the report had been addressed (Minute CL.015).

3.      The Cabinet Member for Regeneration and Tourism announced the Heritage
        Lottery Fund award of £11.924million at the Council meeting on 26th June
        (Minute CL.018).

        Heritage Lottery Fund

4.      Discussions about the Fund’s grant conditions have been very positive. Whilst
        safeguarding its investment, the Fund recognises that its normal requirement
        for the grantee to own all the property will create significant stamp duty costs.
        As a result, the Fund is willing to consider an arrangement whereby the land
        is vested in a company limited by guarantee and with charitable status. The
        Council will have a minority interest (see paragraphs 21-25).

5.      The preparation of a legal agreement will take a further 8-10 weeks. The main
        heads of terms for this agreement do not raise any new issues or risks that
        have not been previously identified or reported to Council.

6.      The Fund no longer requires the preparation of an Action Area Plan for
        Brimscombe as a condition of its grant. The Heritage Lottery Fund will require
        the Council to secure the restored canal as part of its overall planning
        processes. This forms the basis of a new condition that has been agreed in
        principle. The Council can plan for the area through its local plan/core
        strategy and Industrial Heritage Conservation Area policies. The Council
        approved revised policy statements for the Industrial Heritage Conservation
        Area on 6th November. A development brief for the Brimscombe Port site will
        be prepared setting out the Council’s requirements as local planning
        authority. It is anticipated that the redevelopment of the area will be
        employment led, with a focus on retaining current jobs and developing new
        employment opportunities. This is consistent with the draft Regional Spatial
        Strategy, the Council’s Local Plan and the responses from recent consultation
        with the local community. This development brief will be submitted to Cabinet
        for approval.

        Development at Brimscombe Port

7.      When British Waterways was lead partner, the Council agreed to take over
        responsibility for delivering the Brimscombe Port section. In making this
        commitment, the Council recognised that a public subsidy may be required
        and agreed a contingent liability of £2 million in November 2007 (CL.050).

8.      Since June 2008, further work has been commissioned from consultants on
        the viability of development options. These options were generated through
        consultation with the local community. It is evident that a housing led solution
        is not appropriate from both a planning and a property market point of view.




Extraordinary Meeting of Council           10                               Agenda Item 3
16 December 2008
9.      Over recent months, confidential approaches have been made to the Council
        on behalf of developers interested in the Brimscombe Port area. These
        approaches have been made despite the well publicised impact of the ‘credit
        crunch’ on business confidence and the property market. The interest is for
        an employment led development, with the prospect of retaining existing jobs
        and creating new employment. The Council has introduced interested parties
        to British Waterways and the South West of England Regional Development
        Agency (SWRDA) who are the principal property owners at Brimscombe Port.
        British Waterways and SWERDA have confirmed they wish to sell their
        property assets to a developer who will deliver the canal.

10.     Using this approach, the Council would not be required to act as developer.
        The Council can secure the canal restoration works using its powers as local
        planning authority through a Development Brief and a Section
        106/Community Infrastructure Levy agreement. The contingent liability is
        therefore no longer necessary.

        Project Management

11.     The independent report prepared by Tameside Council recommended that an
        interim project manager should be appointed, with a view to identifying
        opportunities for value engineering and volunteer contributions.

12.     A member of the Cotswold Canal Trust, with extensive project management
        experience in the public and private sectors, has been employed on a
        consultancy basis to advise on project management. Using knowledge and
        experience of CCT members, this has included identifying works that can be
        undertaken by volunteers; ‘packaging’ canal restoration works for tendering;
        and examining the opportunities for value engineering. By identifying parts of
        the canal restoration that can be undertaken by CCT, cost reductions can be
        achieved. This preliminary work helps establish the basis on which the Canal
        Project Manager will begin project implementation.

13.     The Trust has recently undertaken work at Gough’s Orchard and the
        completed scheme is testament to the skill and expertise of its members.
        Such work not only brings the community to the heart of the project but also
        enables opportunities for value engineering to be realised.

14.     The Chief Executive advised all members in early September that the initial
        steps would be undertaken to recruit a Canal Project Manager. The national
        recruitment process commenced in late September and final interviews are
        taking place on 15th and 16th December. Appointment is dependent on
        whether the Council agrees to commit to the project.

        The Phase 1A Canal Project (Saul to Brimscombe)

15.     Phase 1A has three elements;

                 Saul to Ocean – SDC led provision of multi-user trail (cycleway and
                 footpath)
                 Ocean to Iron Works – SDC led canal work with land vested in
                 company by guarantee/charitable trust. £17.566 million expenditure
                 met by income from range of sources. Requires SDC to commit
                 £2.342 million in addition to current capital programme provision. The



Extraordinary Meeting of Council           11                             Agenda Item 3
16 December 2008
                 company/trust manages canal operation and undertakes repair and
                 maintenance
                 Brimscombe Port – private developer led project that satisfies SDC
                 development brief. Retains existing employment and creates new job
                 opportunities on the site. Canal delivered through Section 106
                 agreement and South West of England Regional Development
                 Agency/British Waterways conditions on land sales. Risk borne by
                 developer – no contingent liability on the Council

16.     Appendix 1 gives a summary of income and expenditure on the SDC led
        elements.

17.     Assuming the project is completed within the next 4 years, by 2020 the
        restoration of the Stroudwater Navigation between Stonehouse and
        Brimscombe Port is expected to generate the following benefits to the District;
            o Attract 215,000 extra visitors and £531,000 income each year
            o Create 21 new permanent jobs in tourism and leisure
            o Create 13,800m2 of new work space
            o Attract £83 million in private sector investment
            o Create 600 new permanent jobs in the private sector
            o Conserve 30 historic structures including bridges and locks
            o Help protect rare species
            o Health benefits from the 5.8km multi-user trail (Saul to Ocean) and
                9km multi-user towpath (Ocean to Brimscombe) valued at £94,000

18.     The revised approach to Brimscombe should offer better prospects of both
        retaining and creating new jobs. The Council commissioned further work on
        development scenarios around Brimscombe Port. From these assessments,
        it is estimated that the project will deliver the development or refurbishment of
        over 7,000 sq m of employment space and create over 300 additional long
        term jobs around the canal at Brimscombe Port. These development
        proposals would be consistent with the Council’s Industrial Heritage
        Conservation Area and Local Plan policies.

19.     The impact of a major public investment of this nature on business confidence
        should not be underestimated. At such a time in the economic cycle, the
        investment will create opportunities for local companies to tender for work and
        also give potential investors the confidence to invest in other forms of
        economic activity in the District.

19.     Environmental Impact and Equality Impact Assessments will need to be
        completed. The potential for hydro power generation is being examined. The
        carbon footprint of the project has yet to be assessed, as much will depend on
        detailed specifications, the amount of contaminated land to be treated and the
        nature of proposals brought forward by private developers at Brimscombe
        Port.

20.     The 14.8km corridor is a good example of providing green transport
        infrastructure. It provides a safe and attractive route linking to other cycle and
        footpath networks, including the Cotswold Way. This can also act as a nature
        trail and there is considerable scope for a ‘public art’ or ‘sculpture’ trail. Given
        the District’s growing reputation in this field, it provides a good opportunity to
        showcase local talent and for specific commissions. A local business, Snow
        Business, has already sponsored sculpture work in the Ebley section of the
        canal.


Extraordinary Meeting of Council            12                                Agenda Item 3
16 December 2008
        Stroud Valleys Canal Company

21.     Under the original project, British Waterways was to acquire or be gifted the
        land along the line of the canal. British Waterways deemed ownership
        essential if it was to maintain and repair the canal.

22.     The HLF would normally expect the grantee to acquire the property assets in
        order to deliver the project. The HLF recognises that acquisition by the
        Council would incur significant stamp duty costs. It has therefore agreed that
        a land holding company, limited by guarantee and with charitable status so it
        can be exempt from Stamp Duty Land Tax, is an acceptable vehicle to
        facilitate the project.

23.     The Council must only have a minority interest in such a company otherwise it
        is deemed to be a local authority controlled company and the tax exemption
        will not apply.

24.     Landowners are willing to vest their land in the company. It is proposed to set
        up a company; to be known as the Stroud Valleys Canal Company with an
        interest taken by each of the landowners. The Council would also have an
        interest. The company will allow the Council to enter its land to carry out the
        works. The company will be responsible for operational management,
        maintenance and repair of the canal once it has been restored. This will
        include the Brimscombe Port section where the developer will restore the
        canal and then transfer it to the company.

25.     The Cotswolds Canal Trust will have an interest in the Stroud Valleys Canal
        Company. The Trust has already prepared a business plan for the operation,
        management, maintenance and repair of the canal. This was submitted to,
        and accepted by, the HLF as part of the Council’s submission.

        Risk Management

26.     The risks were examined in depth in the Tameside MBC report. Appendix 1
        uses the median figures of their cost profile, as did the report to Council in
        June. Substantial risk and inflation allowances have been provided for in the
        project budget.

27.     There is a risk that the private sector does not deliver the Brimscombe Port
        section. However, current indications are that this can be delivered even in
        the current economic climate.

28.     If the risks to the Council change during implementation, then it may become
        necessary to suspend or stop the project. For example, such a situation could
        arise if tenders for a section of canal work are significantly in excess of
        budget. In such circumstances, it is proposed that the Chief Executive and
        Leader of the Council be authorised to suspend or stop the project pending a
        review. This review would be reported to the full Council at an extra-ordinary
        meeting.

29.     Steps have been taken to minimise any potential impact of landfill tax.
        Applications have been submitted to HM Revenues and Customs under the
        Landfill Tax: Exemption for Waste from Cleaning up Contaminated Land
        programme for sites at Brimscombe, Capel Mill, Gough’s Orchard and Hope


Extraordinary Meeting of Council          13                              Agenda Item 3
16 December 2008
        Mill. The Cotswold Canal Trust has established companies that could utilise
        these exemptions and further advice is being taken on how this would apply.

        Project Financing

30.     Total project costs shown in this report are from the Tameside MBC report.
        The project will be organised in sections by the Canal Project Manager, in
        order to manage risk and cash flow.

31.     The financial implications for the Council are set out above. These have been
        taken into account in preparing the budget report for Cabinet on the 11th
        December and the full Council on 21st January.

32.     To take advantage of innovative procurement, value engineering and
        opportunities to utilise other partners, the Council is recommended to make
        an exception to Procedure Rules Relating to Contracts in respect of this
        project.




Extraordinary Meeting of Council         14                              Agenda Item 3
16 December 2008
                                                                          Appendix 1

                                                                  Expenditure Profile


                          Mid Range as per  Expenditure         Expenditure
                          Tameside MBC      Ocean to Iron Mills Brimscombe Port
                          report      £000s              £000s              £000s
Construction                         13,900              9,452              4,448
Risk                                  2,400              1,632                768
Inflation                             4,500              3,060              1,440
Project Mgmt                          4,150              2,822              1,328
Total                                24,950             16,966              7,984

                         Total TMBC figure               16,966
                         Land acquisition                   600
                         Total                           17,566

Risk and Inflation provisions are 28% of the Ocean to Iron Works project costs as
determined by Tameside MBC. The construction costs contain 7.5% contingency.
Risk and inflation provision represents 49.6% of construction costs. Expenditure will
be reduced by value engineering and greater contribution by volunteers.

The shaded area gives indicative figures for Brimscombe Port – the budget and
actual expenditure will be for a developer to determine. The Council’s requirements
to provide canal facilities on the site will be set out in a development brief.

Income Profile

Income Source                        £000s Note
HLF                                 11,924 Committed – legal agreement to be
                                           completed
Cotswold Canal Trust                   800 Committed
Waterways Trust                        469 Committed
GCC                                    286 Value of land
Sports England                         225 Time limited grant – committed
SDC/Sec 106                            920 Capital programme and Section 106
SDC                                    600 Capital programme – unallocated
SDC                                  2,342 Capital requirement (see
                                           recommendation)
Total                               17,566

Only committed income is shown. Rental income from Brimscombe Port previously
committed by British Waterways and South West of England Regional Development
Agency may be available. Other sources of income are being pursued.

The Cotswold Canal Trust has submitted a £130,000 grant application under the
Aggregates Levy Sustainability Fund for the purchase of land between the A38 and
the M5. This will enable the creation of a major area for recreation and conservation
alongside the multi-user trail being provided under the HLF funded project.




Extraordinary Meeting of Council             15                           Agenda Item 3
16 December 2008

				
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