To agree to undertake a Deed of Variation to the Development Agreement with Coastal Housing Group Limited (CHGL) the purpose of which will be to provide for a provision to enable the Council to make an advance payment to CHGL, to seek Cabinet approval to authorise a payment of £1 million to CHGL to cover expenditure that CHGL will incur making an advanced payment bond to ensure that the Welsh Government’s (WG) Vibrant & Viable Places (VVP) Grant allocation for 2015-16 is fully maximised by the Council and suspend Rule 8 (4) (a) of the Council’s internal Financial Procedure Rules to allow for the payment to CHGL to take place before 31 March 2016.

The Group Manager, Chief Accountant presented a report, the purpose of which, was to agree to undertake a Deed of Variation to the Development Agreement with Coastal Housing Group to provide for a provision to enable the Council to make an advance payment to Coastal; seek approval to authorise a payment of £1m to Coastal to cover expenditure their expenditure making an advanced payment bond to ensure that Welsh government grant for 2015-16 is maximised, and finally, to suspend the Council’s internal Financial Procedure Rules 8 (4) (a) to allow payment to take place before the 31 March 2016.

By way of background information, she explained that in March 2013, the Council was awarded £5.978 million in Welsh Government Vibrant and Viable Places Grant Funding. The award meant annual allocations of £0.642m 14-15; £4.267m 15-16 and £1,069m for 16-17. The terms of the award were explicit stating that “each financial year’s allocation must be claimed in full by the end of that financial year otherwise any unclaimed part of the Funding will cease to be available”.The ability to meet the full drawdown of grant within 15-16 had proved challenging, she confirmed.

With regard to the current situation, The Group Manager, Chief Accountant stated that in April 2015, Cabinet approved that the Council entered into a Development Agreement with Coastal Housing Group to deliver the Rhiw Gateway Project. The successful contractor would be appointed by Coastal and not the Council, and so there would be no direct contact between the Council and Contractor.

She explained that Coastal undertook a procurement process which resulted in tender returns exceeding the secured funding available for the contract which included the WG grant and resources from Coastal and the Council. This resulted in an extensive period of Value Engineering of the scheme to achieve a position to bring the project within budgets available for both the car park and the residential and commercial units. The result was a delayed start on site by two months which had an impact of the cash flow forecast for the year.

The Group Manager, Chief Accountant advised that various options have been examined. Welsh Government initially looked to see if another local authority would be in a position to swap grant resources with Bridgend, but this didn’t materialise. However, with Welsh Government approval, the Council were able to use £400,000 of the grant on other expenditure within Bridgend, with the proviso that Bridgend’s own resources then slipped into 16-17 for the Rhiw Gateway. This will still leave a shortfall of £1m including an element of contingency in case the March valuation was short.

She further explained, that the only remaining option was for Coastal Housing to make an advanced payment bond in line with their contractor. This would be an On-Demand bond so could be drawn down by the Council or Coastal, and it would be likely to be used to pay for April and May’s valuations to the contractor. Welsh Government has confirmed that the legal costs and professional fees will be eligible expenditure for the grant. If this option was not pursued, the completion of the scheme would be at risk, as there would be a circa £1million shortfall in funding due to the loss of Welsh Government grant. Cabinet were therefore being asked to approve a payment to Coastal Housing to cover their defrayed expenditure, and then the grant could be drawn down to match that expenditure.

She finalised her submission, by confirming that Wales Audit Office had been consulted regarding the above, and had advised that they were happy for the payment to be made in 2015-16.

The Cabinet Member Regeneration and Economic Development commended the report and the recommendations detailed therein, which now allowed the Council to progress the Scheme within budget. The Project would benefit both Bridgend town and the County Borough as a whole he added.

The Cabinet Member Resources asked Officers if they could possibly look into the feasibility of developing more flats than were proposed above the retail development, should this be possible.

RESOLVED:          That Cabinet:

                           a)  Approved that a Deed of Variation on the Development  Agreement is undertaken to include the provision for advancing funds to CHGL and including suitable clawback arrangements.

                           b)  Authorised that a payment is made to CHGL upon evidence that they have defrayed monies into the Bond of £1 million.

                           c)  Suspended Rule 8.4 (a) of the Council’s internal Financial Procedure Rules to allow for the payment to CHGL to take place

                           d)  Gave the Corporate Director – Communities delegated power to agree any other provisions of the Deed of variation in consultation with the Section 151 Officer and the Assistant Chief Executive Legal and Regulatory Services.