Agenda item

Report attached.

The Cabinet considered a report of Councillor Noordad Aziz, Deputy Leader and Portfolio Holder for Transformation, Education and Skills, seeking confirmation that the Council was committed to financially supporting the proposed development of Market Chambers through a commitment to provide annual funding towards the operational costs of Market Chambers once opened in late 2027 in accordance with the estimated sums set out in paragraph 4 of that report.

 

Members were also advised that such funding would need to remain in place unless and until the Market Chambers scheme was in a position to self-fund without the need for significant support funding from the Council.  The Council's independent advisors, Bradshaw Advisory, had produced financial forecasts confirming their advice that Market Chambers would be largely self-financed within 10 years from opening.  Although from that point onwards, the Council should assume that it might be required to provide some funding in the region of up to £50,000 to £60,000 per year whilst identifying alternative revenue generating opportunities to ensure that Market Chambers no longer required any Council support.

 

Councillor Aziz provided a brief introduction to the report.

 

Councillor Khan asked how frequently the level of future financial support from the Council for the operation of Market Chambers would be reviewed.  He noted that, given the projected timescales, this responsibility would become a matter for the proposed new unitary authority, which introduced an element of risk to any long-term arrangements.  Councillor Aziz responded that the level of financial support would be reviewed from time to time, as necessary.  In respect of the long-term arrangements, the new unitary authority would be fully apprised of the situation and elected councillors for Hyndburn wards within that council would need to be a strong advocate for supporting this project.

 

Approval of the report was considered to be a key decision.

 

Reasons for Decision

 

The Council was currently promoting a Compulsory Purchase Order (CPO) for Market Chambers, Accrington.  An Inquiry had been opened with an Inspector appointed by the Secretary of State for Levelling Up, Housing and Communities in December 2024.  That inquiry had not yet closed but had been adjourned for closing submissions to take place in early 2025.  The Inspector had not yet determined whether or not the CPO would be confirmed.

 

To provide the best opportunity for the CPO to be confirmed by the Inspector, it was necessary for the Council to demonstrate that the proposed development, was likely to contribute to achieving the promotion or improvement of the economic, social, and environmental well-being of the Council's area.  The Council also had to show that it had a clear plan for the land's use including confirmation that the required funding was available.  This included both development costs and reasonable ongoing operation costs for the proposed development.  There should be no physical or legal impediments that would prevent the development from being implemented and maintained in the future.

 

In January 2022, Cabinet had given its formal approval in support of the Town Centre Stakeholder Board’s recommendations that the Council’s LUF submission and key priorities should focus around a single scheme that included the following three principal interventions, noting that at the time of submission 2 and 3 were not in the Council’s ownership;

 

1.      Redevelopment within the Indoor Market Hall and outdoor pavilions along Peel Street – the intervention known as Market Hall.

2.      Improvements and redevelopment to the block 61-69 Blackburn Road – the intervention known as Burtons Chambers.

3.      Improvements and redevelopment to the block of properties at 43-59 Blackburn Road / 2-4 Church Street – the intervention known as Market Chambers.

 

Cabinet had received regular updates on LUF funding and the progress of its property acquisition consultant, CBRE, in their negotiations to seek purchase by agreement from the relevant freeholders/leaseholders in Market Chambers.  As far as working with freeholders/leaseholders to seek agreement for the acquisition of their land interests, it was also prudent for the Council to consider the use of CPO powers where sale by agreement could not be reached.  A report presented to Cabinet by the Levelling Up Portfolio Holder in June 2023, sought and received approval to make a Compulsory Purchase Order (CPO) for Market Chambers.

 

A second report presented by the Portfolio Holder, titled National Lottery Heritage Fund Submission, had asked that Cabinet support the recommendation of the Town Centre Stakeholder Board and delegate authority to the Executive Director (Environment) following consultation with the Portfolio Holder to prepare and submit a £5 million Development Plan, to the National Lottery Heritage Fund (Heritage Fund) which included providing all the evidence and documentation required by the Heritage Fund.

 

Within the financial implications section of the second report, Cabinet Members had been informed that if successful, the Council would likely receive around 10% of the bid to enable the Council to undertake the initial Development Phase works to submit a Delivery Phase submission.  This section also stated:

 

·         that whilst NLHF funding would be used for the capital works to redevelop Market Chambers, there will be ongoing revenue required to manage and operate the centre. This would be either through specific external revenue funding stream/s, income generated from within the facility, annual grant from the Council or a combination.

 

A report presented by the Portfolio Holder for Culture, Heritage and Arts to Cabinet in December 2024, recommended Cabinet:

 

·         acknowledges the need for a robust business plan to be developed as part of the Market Chambers Development Stage, and additional funding bids made to support the running of the venue in its early years; and

·         recognises that there may be a need to consider future budget provision to support operational costs during the post-opening period.

 

It had been the Council’s working assumption that funding for the Market Chambers ongoing operations costs would be through external grants, event income and the reallocation of savings from the current Market Hall revenue budget, plus new income streams from Burtons Chambers and lease income from the Market Hall.  In the report Cabinet was being asked to note and agree that in principle savings from the existing Market Hall budget and all surplus income that resulted from the development of both the Burtons Chambers and Market Hall schemes, once open, were sufficient to meet the forecast unmet operational costs of Market Chambers until it operated at breakeven or better.

 

The advice from the Council’s consultant Bradshaw Advisory, had always been to see the LUF funded projects as a whole scheme, with each project: Market Hall; Burtons Chambers and Market Chambers complimenting each other, providing visitor/customer footfall; income generation opportunities and therefore any surplus income generation or savings from one should be diverted to cover costs, where needed, by another.

 

Funding

 

Capital funding to the sum of £11m to undertake the necessary capital works on Market Chambers was from the following sources: Levelling Up (LUF) £3.4m; UK Shared Prosperity Fund £0.6m; Lancashire County Council £1m; Hyndburn Borough Council £1m and Heritage Fund £5m.  The Council had secured £463,056 from the Heritage Fund as a Development Grant, with the remaining Delivery Grant funding to be applied for following the successful agreement to the Council's Market Chambers Delivery Phase Submission.

 

The 5-year business plan for Market Chambers, (included in the report as Appendix 1) had been produced by the Council’s external bid writing consultant, Bradshaw Advisory in August 2023, as required for the Heritage Fund Development Phase submission.  A table outlining Market Chambers Revenue cost estimates, (page 25 of the business plan), indicated that the Council would be required to provide funding towards the annual operating costs once the facility opened.  A version of that table was reproduced in the Cabinet report and highlighted those Council funding requirements.  Due to the delay in the Heritage Fund Development Phase funding approval, the current anticipated opening for Market Chambers was now late 2027, (but could slip into 2028 if the Council did not receive approval of the Delivery Phase funding at the start 2026).

 

The business plan estimated this annual financial support from the Council to be circa:

 

·         £120,000 in 2027/28 (part year);

·         £230,000 in 2028/29;

·         £200,000 in 2029/30;

·         £180,000 in 2030/31; and

·         £160,000 in 2031/32.

 

Beyond the 5-year business plan, the Council would still need to provide funding, but it was anticipated that this would reduce year by year from the level of £160,000 at year 5 (2032) up to year 10 (2037), as the aim was for Market Chambers to be largely self-financing at that point.  Whilst this would be the aim, it should be noted that the business plan also highlighted that it might well not be fully achieved within this timescale and so it would be prudent for the Council to assume it could need to continue with the funding for a further 10 years but at a reduced level, estimated to be in the region of £50,000 to £60,000 per annum.

 

The business plan also indicated other income streams would be required to meet the operational costs of Market Chambers.  Whilst acknowledging that costs could increase or decrease, if it was assumed these operating costs remained the same, but a reduced income achieved from events or external grants, there would be a shortfall.  As an example, if the estimated income generation from the two main income streams (events and external grants), was only 66% of that stated in the business plan, the following additionalfunding would need to be provided by the Council (in addition to that anticipated to be required as stated at Paragraph 4.3 of the report):

 

·         £79,200 in year 2027/28 (part year);

·         £123,750 in year 2028/29;

·         £140,250 in year 2029/30;

·         £145,200 in year 2030/31; and

·         £155,500 in year 2031/32.

 

In this scenario and if there was no change, (reduction or increase) in costs, the total annual funding from the Council would increase to circa:

 

·         £199,200 in 2027/28 (part year);

·         £353,750 in 2028/29;

·         £340,250 in year 2029/30;

·         £325,200 in year 2030/31; and

·         £315,000 in year 2031/32.

 

However, it should be noted that if the operating costs of Market Chambers were lower and/or the income/grants higher than anticipated, then the required annual funding required from the Council would be lower than the figures set out at Paragraph 4.3 of the report.

 

In terms of how this funding requirement was anticipated to be met, the Council’s financial position from the opening of the Market Hall and Burtons Chambers in later 2025, was anticipated to improve on a year-by-year basis.  If the current Market Hall service budget was maintained, noting the Council had been providing funding for the provision of a market offering since Hyndburn Council was created in 1974, (from the amalgamation of local townships) it would have a positive variance for the Council of circa £328,000 per year (comprising £278,000 in respect of savings and £50,000 in respect of income generated from the new market operator lease).  In addition, as a result of the operating agreement in place, the Council was expected to receive 60% of the profit from Burtons Chambers, in the order of circa £60,000 from year 5 (2032), or earlier/greater if usage was higher than anticipated.  The surplus anticipated to be generated in respect of both Market Hall and Burtons Chambers would provide the Council with sufficient income and savings to support the ongoing funding which was likely to be required in respect of Market Chambers.

 

A further report/s would be brought at an appropriate time, that would provide an update on procurement of a preferred operator and any funding implications associated with such an appointment in accordance with any legal/constitutional requirements.

 

Alternative Options considered and Reasons for Rejection

 

Cabinet could choose not to make the commitment to fund the operational costs of Market Chambers once open, until it was able to self-fund or alternative sources of funding become secured.  It was recommended that this option be rejected because the redevelopment of Market Chambers, Market Hall and Burtons Chambers were viewed a single scheme and were a key priority within the Council’s Corporate Strategy 2023-2028.  The scheme was an essential part of the town centre investment plan (TCIP) and was anticipated to act as a catalyst for further development/investment in the heart of the town centre.

 

The three projects were viewed as a single scheme and it had been the Council’s working assumption that any savings and income generation from the Market Hall and Burtons Chambers would be the first call for any operational costs of Market Chambers.  Without the commitment from the Council to fund, where needed, any deficit in operational costs would affect the long-term success of the Market Chambers project and could also have a negative impact on the outcome of the CPO for Market Chambers.

 

Resolved                                 (1)   That Cabinet notes and agrees that, in principle, savings from the existing Market Hall budget and all surplus income that results from the development of both the Burtons Chambers and Market Hall schemes, be directed, insofar as is necessary, to support the ongoing Council funding which is likely to be required in respect of Market Chambers.

 

(2)   That Cabinet notes the report and agrees to identify and include the ongoing operational costs of Market Chambers in the Council's budget setting proposals in the sums identified in the table in Section 4 of the report, allowing for a potential increase in these sums in the event that other income sources underperform (and the potential reduction of the same if additional income is secured from other sources); at a reducing rate from year 5 (2032) to year 10 (2037) and thereafter at a reduced level of circa £50,000 - £60,000 per year.

 

(3)   That Cabinet notes the report and agrees to recommend that the Council’s Medium Term Financial Strategy is updated to reflect details from this report.