A DEBT-RIDDEN council did not have a ‘clear idea’ how it will pay off a £250m project it took on that would have seen 1,000 homes built.
A special cabinet has been called next Wednesday where senior councillors have been recommended to sell off the former Akzo Nobel site, which it bought for £38m in January 2021.
The southern part of the brownfield site in Wexham Road was purchased from international real estate company Panatonni, which secured planning permission in 2020 to build 1,000 homes to the south of the site and a data centre to the north.
The council was eyeing up a build of about 850 homes at the 11.5-acre site with an offer of 50 per cent affordable homes – double what Panatonni proposed.
But with the bankrupt local authority needing to sell up to £600m assets to reduce its £760m debt, it is needing to flog off many of its properties and land to reach financial stability.
To develop the homes, the council would have needed to spend at least £250m – something the local authority cannot commit to in its current circumstances.
It would have increased by £27.5m per year if external borrowing was not forthcoming.
The report was highly critical of councillors for choosing to pursue this venture as the original confidential report brought to members in 2021 did not state how this project was going to be funded.
It states: “The council agreed to purchase a site and potentially embark on a project which would have committed the council to at least £250m without any clear idea about how this was to be paid for or from where.”
The confidential report did not explain that the £38m purchase was predicated on securing funding from Homes England, which if not available would increase the price by an additional £2.4m because of stamp duty land tax.
Just by holding the undeveloped former Akzo Nobel site, which is producing no income, it is still costing the council £4.1m a year in minimum revenue provision – money set aside in the revenue budget to pay off borrowing – and interest.
Whilst the preferred bidder is not named within the report, it does hint the residential part of the site could become another data centre. It said: “It is recognised that the proposed development of the site as a data centre complex will generate limited employment and that there are potential environmental impacts which will be addressed within the planning process.”
Property advisor Avison Young said out of the 14 offers it had received for the site and the preferred bidder has offered ‘the highest financial receipt’.
However, because the Homes England grant is not forthcoming the council will still have to pay the £2.4m stamp duty land tax.
It would have claimed relief from paying that cost, but the conditions are no longer met because of this sale. Avison Young warns HMRC could impose a penalty if it determines that relief was claimed ‘inappropriately,’ but thinks a fine can be avoided as the council ‘plans to make a voluntary disclosure by submitting an amended return to HMRC’.