'Dramatic' report to be published into Durham County Council's 'risky hidden investments'
Council chiefs have agreed to publish a report looking at ‘headlease’ investments at several major development sites in County Durham.
Durham County Council has previously entered into agreements with developers to encourage private investment in the county.
In light of Covid-19 and potential changes in commercial and consumer behaviour, concerns have been raised about the potential financial risks from such development sites in future years.
The sites were named in a motion to full council on December 16 and included three in Durham City – office developments at Freeman’s Reach and the Milburngate development – and an industrial development at Merchant Park in Newton Aycliffe.
Liberal Democrat opposition councillor, Owen Temple, who launched the motion, said the agreements had been made “behind closed doors” and needed to be scrutinised in light of Covid-19.
“This motion looks dry but is actually dramatic,” he said.
“It’s about a potential hole in the council’s finances that will be there for decades, it’s about this council’s risky hidden investments.
“The investments are headleases and this is what has happened. By agreement investment firms have lent money to developers to build developments in Durham.
“Simultaneously, the council has agreed to take control of and make the payments for those developments.
“It will pay large and sometimes increasing amounts over a very long period to those private investment companies and hopes to meet its own payments from the tenants’ rents.
“The council could make a profit, it could make a loss, in the long-run it’s council taxpayers who will either reap the rewards or shoulder the loss.”
Cllr Temple added that the public deserves a “clear-eyed analysis of where recent changes in commercial and social patterns leave us.”
The motion asked for a report to be brought to the next meeting of cabinet after February 1, 2021 on the named development sites.
This included “cabinet’s latest detailed assessment of these changed circumstances and their likely impact on the council’s budget in future years” in terms of:
:: The current and future expected range of commercial activity to be undertaken by leaseholders/tenants of these properties.
:: Potentially changed lease or rental levels for each of these tenant types.
:: The likelihood of the council being able to re-let the properties where the leases of current or contracted occupants come to an end before the council’s headlease itself ends.
:: The revised best and worst-case scenarios the council envisages in terms of income and expenditure from these investments.
Labour councillor Carl Marshall, cabinet member for economy and regeneration, said he supported the motion and would bring a report in future.
“I think it’s on record the ambition we have to create thousands of well-paid jobs right across the county and that has been evidenced by our ambitions that have been laid out not just within the region and in County Durham but nationally and internationally as well,” he said.
“I’m happy to support this motion and I look forward to bringing forward a full and thorough report on our ambition to grow the economy in County Durham to cabinet in February .”
Labour councillor John Clare added the council would “welcome the opportunity” to produce a report and said Cllr Temple was “pushing at an open door.”
But councillor Richard Bell, leader of the council’s Conservative group, suggested the “open door has been shrouded by a curtain and some of us have missed it in the past.”
The motion won unanimous support from full council.