Tuesday, December 23, 2014

News: Extra £2.9m for Rotherham Council as part of Tesco deal

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Every Little Helps. Especially when your central grant from the Government is cut by £19m.

Rotherham Council has received an additional £2.934m as part of the sale of the site of the former civic buildings on Drummond Street - now home to a new £40m town centre Tesco Extra store.

The council agreed the £7.3m sale of its former town centre civic site with developers, TCN UK in 2013 which enabled the £41m required for a new Tesco development to be secured.

Following the land deal, real estate investment specialists, Osprey Equity Partners finalised its Osprey Income and Growth 2 LP fund, having raised £16.9m of equity from private investors and £23.75m of debt from HSBC Bank. It forward funded the food superstore which was pre-let to Tesco on a 30 year unbroken lease.

The new Tesco includes 66,000 sq ft of retail space with planning permission granted for an additional 36,000 sq ft of floorspace from the old store on Forge Island. The plans showed 14,000 sq ft of convenience and 22,000 sq ft of comparison goods with the additional floorspace allowing for a greater range of products such as clothing, books, CDs and household electrical goods to be sold from the new store.

The new supermarket opened in November triggering an overage payment of £2.9m due to the council. An overage is an additional payment made after the original deal and is often used when certain conditions are met - securing planning permission, practical completion of the development, sale or lease of the development. They are often used by the public sector to ensure that they secure "best value" when selling land and take into account the increase in value of the land when commercial development subsequently occurs.

The figure was revealed at a recent council meeting and comes as central Government announces the Local Government Finance Settlement, which will see local councils receive 8.8% less funding from Government to run local services in April 2015. Rotherham's Settlement Funding Assessment (SFA) - the amount allocated to each council - is £19.5m (15.2%) less than in 2014/15 compared with a national decrease of 12.4%. Councils are being expected to rely on non-guaranteed income from elsewhere, such as increases in business rates and the New Homes Bonus.

Rotherham Council secured over £15m by selling off assets in the last two years. Rotherham Council's latest budget included a £23m savings package put together in response to further massive reductions in Government funding. £70m has been cut from its budget since 2010 with £20m plus savings needed next year too.

A recent scrutiny review by borough councillors into how the council can support the local economy outlines its first recommendation as ensuring that the emerging Growth Plan is focused around two key objectives – income generation and employment creation.

In addition to creating jobs for local people and the regeneration of deprived communities the plan should look at generating income via an increase for the Council in business rates and council tax.

Images: Tesco

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