SEMLEP NORTHAMPTON WATERSIDE ENTERPRISE ZONE BOARD MEETING

18th March 2019 10am –12 noon

Jeffrey Room, The Guildhall, Northampton Borough Council, St Giles Square NN1 1DE

Access and Parking Arrangements:

Please contact Marina Stafford on 01604 837078 or email [email protected] should you require a parking space (on a first come, first served basis). Please make your way to the Jeffery Room, which is up the old stairs, then up the ramp into the new part of the building; the room is directly in front of you. Alternatively please head to the One Stop Shop and ask for Marina Stafford on 01604 837078.

AGENDA

1. Welcome, Introductions and Apologies

2. Declarations of Interest

3. Minutes from Previous Meetings

4. Overview of the Waterside Enterprise Zone

5. Project Updates (paper attached)

a) Vulcan Works b) Horizon Park c) St James Mill Road d) Four Waterside

6. Financial update (paper attached)

7. Waterside Enterprise Zone Risk Overview (paper attached)

8. Northampton’s High Street Fund proposal (verbal update)

9. Development of Northampton’s Economic Growth Strategy (verbal update)

10. A.O.B

LIST OF INVITEES

Members

Cllr Jonathan Nunn, Chair of the EZ Board and Leader, Northampton Borough Council Peter Horrocks CBE, Chair of SEMLEP Dr Kerry Mashford OBE Cllr Tim Hadland, Northampton Borough Council Cllr Ian Morris, Northamptonshire County Council Terry Neville, University of Northampton Brian Binley, SEMLEP

Invited Observers (who will not necessarily attend every meeting):

Rowena Limb, BEIS (or nominee) Hilary Chipping SEMLEP George Candler, Northampton Borough Council Rick O’Farrell, Northampton Borough Council Neil Darwin, Northampton Borough Council Kevin Langley, Northampton Borough Council Craig Forsyth, Communications, NBC Roy Boulton, Northamptonshire County Council Stuart McGregor/Carol Wood, LGSS Finance Andrew Lewer, MP

SEMLEP NORTHAMPTON WATERSIDE ENTERPRISE ZONE BOARD MEETING Minutes of the meeting held on Monday, 29th October 2018.

PRESENT: Board Ann Limb* (Chair) SEMLEP Cllr. Jonathan Nunn * Leader, Northampton Borough Council Cllr. Tim Hadland* Northampton Borough Council Clive Faine * (CF) SEMLEP, Chair of Property Development and Infrastructure Delivery Group Hilary Chipping SEMLEP Terry Neville* University of Northampton George Candler Northampton Borough Council Rick O’Farrell Northampton Borough Council Neil Darwin Northampton Borough Council Stuart McGregor Northampton Borough Council Carol Wood Northampton Borough Council Sean Prosser Northampton Borough Council Marina Stafford Northampton Borough Council (Minutes)

APOLOGIES

Brian Binley * SEMLEP Board Member Cllr. Ian Morris * Northamptonshire County Council Andrew Lewer MP, Northampton South Roy Boulton Northamptonshire County Council Craig Forsyth Northampton Borough Council Rowena Limb

* - Board member. 1. Welcome and Introductions AL welcomed all to the meeting and advised that she had been the Chair of SEMLEP since 2011 and as at the end of January 2019, she would be leaving SEMLEP and therefore would not be chairing a further Enterprise Zone Board. AL advised that she did not believe it was prudent to hold an EZ Board meeting until, at least, March 2019, when it was anticipated that the appointment of a new Chair of SEMLEP would be known. However, AL advised that if something urgent arose and a Board meeting was required, she would be happy to chair such a meeting. SEMLEP are currently recruiting for new private sector Board members and for the new Chair, as Tom Wells stands down from the Board at the end of October and Clive Faine would also be standing down from the Board at the end of October.

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AL wished to record her thanks for TN’s contribution and that of the University over the years and AL was pleased to record that her last EZ Board Meeting was being held at the University’s new campus.

2. Declarations of Interest There were no Declarations of Interest.

3. Minutes of the Meeting held in June 2018 The Notes were agreed as a true record of the meeting. AL thanked JN for chairing the meeting on her behalf, the first and only EZ Board Meeting that she had not chaired since its inception.

4. Project Updates Waterside Campus TN advised that there were 14,000 people on site, the first few weeks of the first academic term had gone very well, and TN was pleased to advise that a lot of items on the Risk Register had not happen. There had been one or two minor issues which had cropped up, as one might have expected for such a large project, the most recent being students causing issues by parking in Far Cotton and the Far Cotton residents were complaining on a daily basis. Another issue which had cropped up was residents being disturbed at all hours by take-away deliveries being delivered to the incorrect address (one resident and his family having been woken up at 3.30 a.m. that morning by a pizza delivery). The Park and Ride facility was going extremely well, with 700 people using the scheme on a daily basis. AL congratulated TN on what had been achieved. JN advised he was very impressed, particularly with the quality of the development and confirmed that the authority would continue to work with the University. AL confirmed that she would be pleased to report this information back to the SEMLEP Board and would suggest that a SEMLEP Board meeting be held at the University in order that the Board can look at the entirety of the University at some point in 2019. TN advised that although he was pleased with the usage being made of the Park and Ride facility, there were still plenty of spaces not being utilised and the University were thinking of offering this facility to the NHS. Currently staff are parking for free at the campus, due to the ticket machines not yet having been installed, but this will change from the beginning of December and therefore further use of the Park and Ride facility will take effect. Currently car park no. 4 is invariably empty.

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AL queried the number of students at the University, due to the national trend being down on previous years. TN advised that the University was currently 150 students above target.

Vulcan Works RO’F advised that one tender had been received. Interview being held next week and it is expected, following a report to Cabinet, to award the contract in January 2019. If this is agreed, RO’F expects work to commence on site in February 2019, with completion due March 2020. The University were now considering to transfer their Fine Arts/Photography School to the site and RO’F acknowledged that this transfer would enhance the Cultural Quarter tremendously. HC enquired what impact, if any, the Fine Arts School would have upon the project outcomes. RO’F advised he had only just received this news, prior to the meeting, and would need to review this. HC requested RO’F liaise with Judith Barker of SEMLEP on outputs. Action Point: RO’F to liaise with Judith Barker on outputs.

Horizon Park RO’F confirmed that all site investigations had now taken place and was pleased to report that all was well and the site can be delivered, although there were some issues regarding access and confirmed that the authority were liaising with the Highways Authority regarding this. GC advised that Northampton Partnership Homes (NPH) had been keen to have their office accommodation on the site, with a report going to Cabinet in April 2018. Following the submission of this report, NPH withdrew from progressing with their proposals, but have since come back to the table with continued interest. NPH were keen to move onto the site and have expressed a strong desire to manage the build themselves. Currently the authority’s auditors were undertaking due diligence and their report is expected by the end of this week. At this point, the authority will then be in a position to see if the proposition is viable. If the auditors advise that the proposition is not favourable, then the authority will need to discuss the future use of the site. CF – Within the financial model, there is still showing a substantive contribution from BRU, without NPH, this figure will not be achievable. GC responded that a lot depended on what happened with the Four Waterside site, as this could generate further interest, particularly around the office accommodation sector.

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St. James Mill Link Road RO’F advised that as the road forms part of the public highway, Northamptonshire County Council, as Highways Authority, were requested to tender. NCC came in with a scheme which was far too expensive. The scheme originally started at £600,000 and the authority set aside a budget of £2 million. The scheme costs are now estimated at £4.7 million. The authority have spent considerable time challenging costs and the scheme has currently reduced to £4 million. A major issue which has occurred and which was not known previously, is that there are significant drainage issues that would need to be corrected before the extension of the road could be progressed. An independent report was commissioned, which could pull costs down, but by going down this route, further significant delays would be incurred. It was acknowledged that at the current time there were significant, tough decisions to be made re whether the authority should progress with the extension of the road. JN advised that at one time it was mitigation issues which had been causing delays, but that the authority now finds itself, when trying to set future budgets, with additional costs for the road extension and difficult decisions would need to be made. It was acknowledged that there was a need to separate the benefits of extending the road from the costs and that GC and JN were meeting with Cosworth on Friday of this week in order to update them of the issues that were facing the authority with regard to the proposed extension of the road and JN admitted that it was currently very difficult to see if the authority could progress due to the new issues. Concern raised, due to businesses within the area, submitting planning applications, as these businesses believe it is worthwhile investing in their properties/site, based on the perception that the road will shortly be delivered. By not proceeding, a lot of people will be disappointed within the St. James’ area. Expenditure will bring forward further development potential, but it is a difficult call based on the figures and is something that only NBC can make a final decision on. HC concerned that if the decision made was to proceed, where would the authority obtain the additional funds from and, at the same time, if the authority decided not to proceed, SEMLEP needed to be made advised as soon as possible, in order that SEMLEP could reallocate the funds. JN acknowledged HC’s comments and advised that the decision would form part of the budget setting process and that SEMLEP would be advised as soon as possible if the authority decided not to proceed with the road extension. AG queried when SEMLEP would be advised if the authority were not to proceed, as it was important to them in order that they could reallocate the potential funding previously given to the authority.

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JN advised that it was anticipated that a decision would be made before the end of November 2018. AL thanked JN for his commitment and requested JN update the SEMLEP Board meeting on the authority’s decision in December. Action Point: JN to update the SEMLEP Board at December’s meeting.

Four Waterside All admitted that there had been a lot of frustration with Kier in the past and that was why the Board had previously requested that the authority terminate the agreement with them. GC at the June 2018 Board meeting had requested a little further time to review, having only recently joined the authority, and since that time several meetings with Kier have taken place. RO’F advised that he and ND met with Anglian Water Authority (AWA) with regards to the Victorian sewer which ran across the middle of the site, who had advised that if the sewer was to be moved to the edge of the site, this would mean traffic being interrupted for at least six months, in order to progress the works, but that, in their opinion, as long as buildings were not erected directly over the sewer, AWA did not see any problems with the site being developed and that they were happy for a road and/or car parking to be directly over the sewer. Kier have confirmed to NBC they have a potential pre-let and the authority is now looking at some form of lease-wrap and the authority were pleased that they now had the opportunity to do something with the site. The proposed hotel was likely to be a freehold sale, as this is currently what the market is requiring and there has been a lot of hotel development interest in the town recently, with a high demand for rooms, particularly during the week. TN concurred with this as the Sunley accommodation on the University Campus site was fully booked during the week. Kier had proposed two drive-through food and beverage establishments on the site, with Kier having been very keen to focus on food and beverage, however, the authority had been keen to stress to Kier that they were looking for employment on the site. It had been proposed that Phase 1 would be office accommodation and food and beverage establishments, with Phase 2 being the hotel development. If the authority were to proceed, the proposed timetable would be: Feasibility and Legals November 2018 – January 2019 Design November 2018 – January 2019 Planning January 2019 – June 2019 Procurement January 2019 – January 2020 Construction June 2019 – March 2021.

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ND advised that the authority would be tidying up the current hoardings around the site over the next few weeks. Looking at up to 50,000 sq. ft. of office accommodation (Grade A) and this will include open plan, meeting rooms and a large central atrium. Company A have expressed very keen interest in taking a pre-let. GC admitted he had been expecting to receive the financial model prior to the meeting, but was still awaiting this. HC extremely concerned with the proposed quality of the development, that the Enterprise Zone had been based on the assumption of delivering high quality engineering and she had certainly been looking for something far more interesting than a fast food outlet and stressed that the authority needed to consider if they really believed that this was the sort of development that they wanted for such an important site. CF agreed with HC’s comments and admitted he was struggling to accept the proposals, particularly for such a flagship site and that, in his opinion, the hotel should be Phase 1, not Phase 2. CF extremely concerned that yet again Kier were proposing lease-wraps and that he had minuted many time in the past that Kier were a good developer and contractor, but that for this site, they had just not put the effort in, in order to develop this site. CF continued that Kier had not delivered on the site for five years and CF did not have any sympathy for them and believed that it was highly likely that in a further five years’ time, there would still be no development. CF advised that it was the authority’s decision on how to take this site forward, but that it related not just to the EZ, but to Northampton as a whole. CF re-emphasised that the site was a flagship site and certainly deserved far better. SMcG advised that the authority were in the early stage of reviewing the financial risk to the authority and admitted that drive-through properties were, on the whole, mainly temporary buildings, but that these proposed drive- throughs would bring in an income. CF extremely concerned regarding the proposed financial risks to the authority and that Kier did not appear to be prepared to take on any financial risks themselves. AL advised that she was extremely concerned that the authority may regret the decision to proceed, as is, in the longer term, and concurred with everything that HC and CF had said. The quality and design of the University was something that was not seen across the SEMLEP area and Northampton had a wide range of historical buildings that again were not seen across the area, but that what was proposed was something that had been proposed and used several times by Kier across the country and was not unique to Northampton.

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TH advised that having heard that the hotel development could potentially be on a freehold basis, it was not inconceivable that the hotel could purchase and start to build straight away. However, TH was disappointed to note that the proposals put forward by Kier in the presentation, were the same as had been put forward some several years previously. CF confirmed that he, too, had noted that Kier had not provided anything new and that he would like to see a multi-use hotel, i.e. one that provided gym, fitness facilities etc, not just to residents of the hotel, but to the general public, in order to increase footfall. CF advised that the retail sector needed to re-invent itself and that selling the site freehold would not generate an exciting package. CF advised that bearing in mind the way that the market was going, the authority had time to re-evaluate the site and were not tied to urgent timescales, as they had been previously.

5. Financial Model CW presented the report which had been based as at the end of September 2018. CW and SP had taken on board previous comments and amended the report accordingly and had include Business Rates Uplift (BRU) up to 2023. CW circulated a supplementary paper to the meeting, following a conversation she had had with CF a few days before the meeting. Previously information had focused on Admin costs and SP had undertaken work on this, following earlier concern that the figure seemed to stay on the same level, together with a review of Infrastructure costs, and that going forward, these costs would change as developments or schemes came forward. SP confirmed that all needed to have a clear understanding of what makes a base line figure. CF advised that the financial information had proved to be very helpful, as the information identified the opportunity and the risk and highlighted the fact that there could be such a scenario as that at the end of the EZ, there could be a negative and that this needed to be highlighted to the Board to give clarity. CF concerned that the Government had done nothing to re-enforce the issue of identification and funding of EZ’s, now that the EZ had completed its first five years. AL acknowledged that CF’s comments should be being taken forward by the politicians and that SEMLEP supported this. HC enquired when the Board last saw a Government representative at one of the Board meetings, and that it appeared that Government’s initial interest had completely gone. JN advised he had attended a meeting recently with James Brokenshire (albeit that it was a Unitary meeting) and had raised these concerns with him.

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6. Marketing Update ND advised that the tidying up of the hoardings around the Four Waterside site had been mentioned earlier in the meeting and that he was involved in updating the EZ signage around the town. Currently have 64 signs within the town and conversations were being held with businesses both inside and just outside the Zone, in order to get the signage updated. The question had also been raised re how the authority reposition the EZ within the Northampton offer. ND was trying to find a third party to work with the authority and was hopeful of doing something early in the New Year. Action Point: ND to update at the next meeting.

7. Risk Overview ND advised that the paper had been circulated for the Board to note and to raise any questions. CF queried what had happened to make the changes to G2 and G3 to become Red as opposed to Yellow. AL queried where the Unitary issue was covered and how it was proposed that the EZ would work within the proposed new Unitary.

8. Any Other Business No one had any issues that they wished to raise. TH advised the meeting that he had been involved with the EZ Board, since its inception, and knew how hard AL had worked for the authority and the town and wanted to place on record the authority’s thanks for this and to wish her all the best for the future. TH also commented that he wished to place on record that CF had been a very positive friend and also wished him all the best for the future. AL and CF thanked TH for his comments.

______Chair, Northampton Waterside EZ Board

______Date

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Item 4) Northampton Waterside Enterprise Zone – Project Overview

Project Name: Project Angel; Cultural Quarter Vulcan Works Creative Hub

Project Summary: Provision of workspace for creative industries and to regenerate an important Town Centre site.

Project Lead: Regeneration team, Northampton Borough Council Start date: 12/17 End Date: 11/20

Overall rating Next Steps:

 Order to be placed with contractor and mobilisation to commence. – March 2019  ERDF funding agreement to be completed and signed off as deed – April 2019 Project Governance  Procure operator for the new facilities – November 2019  Scheme operational September 2020

Finance

Key risks  ERDF budget not sufficient to cover required work  Failure to procure Contractors  No market interest in the new facilities or pricing too expensive Mitigation  Cost overrun – strict cost control and value re-engineering underway through the design process and beyond. required  Review of the local and regional market for Creative industry space and ensure future pricing is competitive.

Progress made this reporting period:  Tender returns evaluated and recommendation to appoint made.  Approval of the appointment of the main contractor made by NBC Cabinet on 16th January  ERDF funding agreement received  Road Closure application submitted to highways

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Project Name: Horizon Park

Project Summary: To develop site for employment uses

Project Lead: Regeneration team, Northampton Borough Council Start date: 01/18 End Date: 01/21

Overall rating Next Steps:

 Study being undertaken to determine possible scale of development on the site.  Outline planning application to be submitted for possible development by Northampton Partnership Homes Project (27,000 sq. ft. offices). Governance  Market advice to be sought once potential scale of development determined.

Finance

Key risks  In view of the status of the project, risks will depend on the new direction the project takes. Mitigation  None currently. required

Progress made this reporting period:  Architects appointed to do capacity study and develop outline planning application.  Meeting held with Cadent and Aldi about site access issues.

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Project Name: St James Mill Link Road

Project Summary: Construction of a link road connecting St James Mill Road to Towcester Road to ease congestion in and around town whilst increasing access through the Northampton Waterside Enterprise Zone.

Project Lead: Regeneration team, Northampton Borough Council Start date: March 2019 End Date: September 2021

Overall rating Next Steps:

 The approved budget currently sits at £2m. Since this budget was allocated, high level estimates at £2.6m were provided which were prepared without having ground investigation data. Following receipt of this data and establishing the level of contamination and therefore the level of remedial works, project costs are now Project estimated at £4.7m to dig and replace all contaminated land. Governance

 This project has been deferred until 2020/21 to allow for a review of the scheme to see how and if this project should be taken forwards. Finance

Key risks  Deep soil mixing surveys return the result that doesn’t reduce the project cost as expected.  Inability to find additional funding to bridge funding gap  Land purchase is still ongoing. Mitigation  NBC is undertaking Soil testing to reveal the extent of contamination and ability to declassify the level of contamination. required  NBC has appointed a consultant to test NCC/Kier WSP costs and determine if savings can be made.

Progress made this reporting period:  Further engagement taken place with St James Mill businesses and residents’ groups.  SEMLEP informed of project status ahead of review of scheme.

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Project Name: Four Waterside

Project Summary: To develop a prominent gateway to Northampton as a high quality mixed use scheme

Project Lead: Regeneration team, Northampton Borough Council Start date: 11/18 End Date: 01/21

Overall rating Next Steps:

 Develop new Masterplan.  Secure outline planning consent for Masterplan proposals. Project Governance  Pursue potential pre-let opportunity.  Develop delivery options for site.

Finance

Key risks  Masterplan does not meet local aspiration.  The Masterplan does not provide a suitable mix.  Funding for the scheme may not be easily available.  Potential tenants for the scheme not secured or scheme becomes financially unviable Mitigation  Develop delivery options. required

Progress made this reporting period:  We have now informed Kier that in view of lack of satisfactory progress we are terminating the development agreement when the longstop date is reached.  Faulkner Browns, Architects, engaged to develop Masterplan.  Hotel Feasibility Study delivered.

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1. Sites still to be progressed Site Project 1 Duston Mill Lane 6 Wrefords 8 Harvey Reeves Road 14 Freeschool Street 15 St Peter’s Car Park

2. Completed Sites Site Project 4B Saints Ground; Franklins Gardens

7A Edgar Mobbs Way North; Hellerman Tyton

11 St James Mill Riverside; Industrial Estate A/B 12A Northampton Railway Station

13A St Peter’s Way; Innovation Centre (part) 17 Project Angel; Phipps Brewery part

18A Project Angel, Albion Place; Hotel (site 18). Northamptonshire County Council 19 St Johns; Student Accommodation

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20C Carlsberg

9-11 St James Mill Road; Area (LIF Loan)

8 SEMLEP ENTERPRISE ZONE BOARD 18th March 2019

NORTHAMPTON WATERSIDE ENTERPRISE ZONE: FINANCE PAPER

1. Introduction 1.1 This paper provides an overview of the Northampton Waterside Enterprise Zone (NWEZ) financial performance to the end of February 2019 and a projection of future income and expenditure.

2. Recommendation 2.1 The Board is asked to agree the latest NWEZ financial performance and the NWEZ financial model

3. Background 3.1 Business Rates Uplift (BRU) is the key income stream from NWEZ; this is effectively the growth in business rates compared to the baseline caused by specific development activity on the sites initially agreed.

3.2 The uplift can then be used to help fund the EZ or made available to SEMLEP to meet their local economic priorities. This uplift can only be achieved through the continued development of the EZ. A 2012 Memorandum of Understanding between SEMLEP and Northampton Borough Council allows the use of BRU to fund operational and development costs and any outstanding loan charges.

4. 2018-19 Administration Costs 4.1 £400k for the Four Waterside sewer diversion has been removed from the budget, as agreed at the previous Board meeting. Actual running costs are as follows, with further detail provided in Appendix A:

Forecast at start of Costs to date Year-end forecast 2018-19 Admin costs 2018-19* 2018-19 2018-19 Total staff £ 259,800 £ 174,317 £ 257,161 Total non-staff £ 927,537 £ 116,518 £ 343,426 Total £ 1,187,337 £ 207,814 £ 600,587

4.2 Recommendation - We propose to carry forward £300k in survey and technical costs and £100k marketing (£75k of which will be funded by NBC) in order to match the planned site activity set out in the capital programme.

5. 2018-19 Outturn Business Rates Uplift

5.1 The table below outlines the forecast BRU position to March 2023, with the current year highlighted. This also shows that surpluses are now expected for both the in-year position and cumulative position during 2018/19. At the previous Board meeting a surplus in the overall position had not been expected until 2020/21.

5.2 The figures for 2022/23 show that the scheduled infrastructure and development loan repayments due between 2021 and 2024 will result in the overall position fluctuating between deficit and surplus over the next five years.

5.3 The full model is presented in Appendix B.

2018/19 2019/20 2020/21 2021/22 2022/23 £ 000 £ 000 £ 000 £ 000 £ 000 Gross BRU 5,214 5,440 6,130 6,545 6,720 less Business Rates Baseline (3,261) (3,341) (3,402) (3,470) (3,539) less Business Rates Appeals (417) (435) (490) (524) (538) Net BRU 1,536 1,664 2,238 2,552 2,643 Administration Costs (534) (997) (473) (473) (236) (less 75% NBC marketing contribution) Infrastructure and Development Costs (130) (268) (304) (1,723) (2,478) Surplus / (Deficit) in-year 872 399 1,461 356 (71) Cumulative Surplus / (Deficit) position 817 1,216 2,677 3,033 2,962

6. NWEZ Financial Forecast of BRU Growth

6.1 The following changes have been made since the previous meeting:

- Baseline - £1.2m reduction (positive impact on BRU) as a result of a technical review of properties covered by the baseline.

- Administrative costs – £0.9m reduction (positive impact on BRU) as a result of in-year 18/19 underspends and the removal of £400k costs relating to the Four Waterside sewer diversion, which is no longer required.

- St. James’ Mill Link Road - £1.4m reduction (positive impact on BRU) in Infrastructure and Development costs as a result of re-purposing of site.

- Appeals provision – An area of potential change relates to the amount that is set aside for successful appeals against Business Rates by individual businesses. This has been included within the model at 8%, rather than the 6% shown in previous reports, following an increase in the overall provision for NBC.

Recommendation - We recommend an increase in the Appeals Provision from 6% to 8%, which is in line with adjustments made to the NBV overall provision. The effect of this change is an increase by £2.2m (minimum model) to £3.1m (maximum model) over the life of the model – a negative impact on BRU. If this recommendation is not accepted, there is a risk that there will be a significant reduction in rates received following successful appeals, which would not be absorbed by the provision and have a direct impact upon BRU.

6.2 The tables below show the total BRU for the model and changes since the previous report, including the effect of the recommendation in 6.1.

- ‘Maximum sites’ includes all sites currently under development, including those in the early stages, but not those that are currently under review. Sites under review may yield BRU within the lifetime at the model, but it is prudent to exclude these until the sites move into the early stages of development.

-‘Minimum sites’ comprises all completed sites and those that are currently under construction but no other sites, including those in earlier stages of development.

Maximum Minimum Total Forecasted Business Rates Uplift (net) – Oct 18 £ 000's £ 000's 1) Total Gross BR 170,351 149,872 2) BR Baseline (97,263) (97,263) 3) BR Appeals Provision (9,448) (6,854) Total BRU before costs 63,640 45,755 4) Administration Costs (9,422) (9,422) 5) Infrastructure and Development Investment (19,376) (19,376) Net BRU Surplus/(Deficit) 34,842 16,957

Maximum Minimum Total Forecasted Business Rates Uplift (net) – Mar 19 £ 000's £ 000's 1) Total Gross BR 170,637 150,043 2) BR Baseline (96,071) (96,071) 3) BR Appeals Provision (12,543) (9,073) Total BRU before costs 62,023 44,898 4) Administration Costs (8,419) (8,419) 5) Infrastructure and Development Investment (19,376) (17,961) Net BRU Surplus/(Deficit) 34,228 18,518 Change from Previous Report (614) 1,561 6.3 The realisation of these benefits will be delivered primarily by external developers and therefore these forecasts carry a degree of risk. It is important to note that the risk profile will change as the forecast BRU receipts increase into the future.

7. NWEZ Funding Position

7.1 The NWEZ running costs are currently running at a deficit with the position being funded by Northampton Borough Council (NBC). NBC have budgeted for the deficits to be cleared by the end of 2020/21. 7.2 NWEZ is forecast to generate positive annual cash-flows from 2018-19. The continuation of a surplus position is predicated on the delivery of sites currently under development. This becomes critical to the cash-flow position as from 2021-22 repayment of the loans that facilitated or will facilitate seven infrastructure projects will increase the annual expenditure, as shown below. NBC carries the risk associated with these loans if BRU does not materialise.

Infrastructure & Year of Payment Development Expected Comments total Investments Expenditure Net-nil Cosworth Rental Agreement £0.0m 2015/16 to 2023/24 expenditure/receipts £1.0m 2018/19 to 2021/22 Investment scheduled to Four Waterside market rent £2.0m 2022/23 to 2026/27 begin this year and end subsidy - BRU £2.4m 2027/28 to 2031/32 in 2033/34 £0.8m 2032/33 to 2033/34

St Peters Roundabout/Black £1.4m 2021/22 Investment phased Lion Hill - GPF £2.1m 2022/23 across two years Brought forward from Castle Station - NCC £5.0m 2023/24 2029/30 Cosworth - Balance repayment £1.2m 2023/24 - GPF

St James Mill Road Sub £0.2m 2024/25 Investment phased Station - LIF £1.3m 2025/26 across two years

St James Mill Link Road - GPF £0.6m 2026/27 Removed from ‘minimum’ St James Mill Link Road - BRU £1.4m 2026/27 model as this is not yet under construction

Total Infrastructure & £19.4m Development Investments

7.3 The risks associated with the successful completion of future developments result in a long-term break-even point ranging from 2024 to 2028. It is beyond this break-even point that funding is expected to be available to be reinvested to meet SEMLEP’s local economic priorities in line with the agreed Memorandum of Understanding.

8. Summary

8.1 The Dashboard (Appendix C) shows the nature of the forecast cash-flows over the lifetime of NWEZ. The graphs highlight the following:  Business Rates Uplift over the lifetime of the model is expected to be between £18.5m and £34.2m;

 Administration costs are the key cost driver until 2022;

 Infrastructure investment costs increase from 2022-23 as loan repayments begin; and

 Forecast annual level of business rates appeals over the lifetime of NWEZ, assuming an increased estimate of 8%, will be £12.5m. If the value of successful appeals is lower than this figure, BRU will increase.

 The sensitivity analysis (Appendix D) shows the effects on the model of different assumptions for inflation, administration costs, appeals and site developments.

Carol Wood, LGSS – Senior Finance Business Partner

Sean Prosser, LGSS – Finance Business Partner

Rick O’Farrell, NBC – Head of Economic Development and Regeneration

Appendices

Appendix A EZ Dashboard

Appendix B Administration Costs

Appendix C NWEZ Financial Model

Appendix D Sensitivity Analysis

Administration Costs Appendix A

2018-19 The following three years (to end 2021-22) 2022-23 and beyond Total Forecast In-year 2019-20 Forecast at start Forecast % Spend Changes to be made Changes to be made Budgets Description spending to Provisional of 18-19 Actual to date 2019-22 2022 onwards date Budget All temporary posts to end and a 25% Project Officer post to be filled in 2019- taper rate to the involvement of all Staffing £ 231,011 £ 184,298 £ 159,923 92% £ 282,791 £ 1,598,375 20 other staff in the 2022-23, 15% annually thereafter 25% taper rate in 2022-23, 15% annually Communications/ marketing post £ 28,789 £ 21,918 £ 14,394 66% 1% inflation assumed £ 22,137 £ 199,361 thereafter Total staff £ 259,800 £ 206,216 £ 174,317 67% £ 304,928 £ 1,797,735 £300k to be carried forward to 19/20 25% taper rate in 2022-23, 15% annually Survey and technical £ 556,400 £ 238,864 £ 104,851 19% Significant reductions assumed from £ 520,000 £ 891,439 thereafter 20/21 25% taper rate in 2022-23, 15% annually Legal £ 50,000 £ 1,147 £ 1,147 2% No assumed changes £ 50,000 £ 382,584 thereafter 25% taper rate in 2022-23, 15% annually Commercial advice £ 100,000 £ 60,000 £ - 0% No assumed changes £ 50,000 £ 441,437 thereafter Web running costs £ 15,000 £ 15,000 £ - 0% No assumed changes £ 15,000 No assumed changes £ 300,000

£100k of underspend (75% funded by 25% taper rate in 2022-23, 15% annually Marketing £ 198,637 £ 20,915 £ 10,520 9% £ 200,000 £ 883,790 NBC) carried forward to 2019/20 thereafter Rates implementation and running £ 7,500 £ 7,500 £ - 0% No assumed changes £ 7,500 No assumed changes £ 150,000 costs Total non-staff £ 927,537 £ 343,426 £ 116,518 13% £ 842,500 £ 3,049,250 Total £ 1,187,337 £ 549,642 £ 290,836 24% £ 1,147,428 £ 4,846,985

Total Budget in Financial Model Plus spending to date £ 4,486,899 Total Business Rates Uplift £ 1,187,337 Less NBC contribution to -£ 914,126 less Marketing Contribution from Total Admin Costs £ 8,419,759 -£ 148,637 NBC (recovered from uplift) Adjusted Budget - 2018-19 £ 1,038,700 Operational or NWEZ Financial Model Appendix B Under Future Developments Construction Business Rates Uplift 2012-17 2017/18 2018/19 2019/20 2020/21 2021/22 2017-22 2022-27 2027-32 2032-38 Total Forecast Contribution to Total Site Site Name Actuals (£k) Actuals (£k) Forecast (£k) Forecast (£k) Forecast (£k) Forecast (£k) Forecast (£k) Forecast (£k) Forecast (£k) Forecast (£k) Forecast (£k) Future BRU (£k) NET BRU Uplift Forecast (£k) 1 Duston Mill Lane £0 £0 £0 £0 -£156 -£166 -£322 -£913 -£1,008 -£1,349 -£3,593 -£3,593 -5.8% £0 2 Upton Way £0 £0 £0 £0 -£28 -£39 -£67 -£232 -£261 -£350 -£909 -£909 -1.5% £0 3 Sixfields -£916 -£233 -£234 -£238 -£243 -£247 -£1,194 -£1,309 -£1,438 -£1,914 -£6,771 £0 0.0% -£6,771 4 Abbey Street -£420 -£142 -£146 -£148 -£151 -£154 -£741 -£816 -£896 -£1,193 -£4,067 £0 0.0% -£4,067 5 Sharman Lake / Lincoln Street -£238 -£81 -£83 -£85 -£127 -£182 -£558 -£1,030 -£1,163 -£1,553 -£4,542 -£2,219 -3.6% -£2,323 6 Wrefords £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 0.0% £0 7 Edgar Mobbs Way -£71 -£52 -£91 -£100 -£139 -£143 -£525 -£757 -£833 -£1,110 -£3,296 -£634 -1.0% -£2,662 8 Harvey Reeves Road -£2,749 -£723 -£721 -£734 -£748 -£762 -£3,689 -£4,035 -£4,433 -£5,901 -£20,807 £0 0.0% -£20,807 9 Westbridge -£3,072 -£752 -£735 -£749 -£763 -£778 -£3,777 -£4,116 -£4,522 -£6,019 -£21,506 £0 0.0% -£21,506 10 St James Mill Road -£1,264 -£392 -£379 -£386 -£393 -£401 -£1,951 -£2,121 -£2,330 -£3,102 -£10,768 £0 0.0% -£10,768 11 St James Mill Road (East) -£169 -£46 -£47 -£48 -£49 -£50 -£240 -£264 -£290 -£386 -£1,349 £0 0.0% -£1,349 12 Castle Station -£148 -£53 -£54 -£55 -£69 -£174 -£406 -£1,068 -£1,240 -£1,657 -£4,518 -£3,017 -4.9% -£1,501 13 Four Waterside -£210 -£24 -£28 -£29 -£199 -£267 -£547 -£1,589 -£1,827 -£2,444 -£6,617 -£5,701 -9.2% -£916 14 Freeschool Street -£127 -£32 -£32 -£33 -£34 -£34 -£165 -£181 -£199 -£264 -£936 £0 0.0% -£936 15 St Peters Car Park -£547 -£151 -£156 -£159 -£162 -£165 -£792 -£872 -£958 -£1,275 -£4,445 £0 0.0% -£4,445 16 National Grid; Horizon Park -£123 -£261 -£269 -£274 -£279 -£284 -£1,367 -£1,504 -£1,653 -£2,200 -£6,847 £0 0.0% -£6,847 17 Central Northampton -£819 -£180 -£686 -£818 -£834 -£850 -£3,368 -£4,512 -£4,979 -£6,658 -£20,335 £0 0.0% -£20,335 18 Albion Place -£187 -£144 -£148 -£151 -£154 -£157 -£754 -£830 -£912 -£1,214 -£3,896 £0 0.0% -£3,896 19 St Johns £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 0.0% £0 20 Bridge Street / Cattlemarket Road -£4,369 -£1,046 -£1,030 -£1,049 -£1,069 -£1,090 -£5,284 -£5,766 -£6,336 -£8,433 -£30,188 £0 0.0% -£30,188 21 Avon / University Campus -£1,306 -£371 -£376 -£383 -£534 -£601 -£2,266 -£3,266 -£3,604 -£4,806 -£15,247 -£4,521 -7.3% -£10,726 * Total GROSS Business Rates Uplift -£16,736 -£4,683 -£5,214 -£5,440 -£6,130 -£6,545 -£28,011 -£35,180 -£38,881 -£51,829 -£170,637 -£20,595 -33.2% -£150,043 ** Business Rates Baseline £13,467 £3,166 £3,261 £3,341 £3,402 £3,470 £16,639 £18,417 £20,334 £27,214 £96,071 £96,071 *** Business Rates Appeals £231 £375 £417 £435 £490 £524 £2,241 £2,814 £3,110 £4,146 £12,543 £9,073 TOTAL NET Business Rates Uplift -£3,038 -£1,143 -£1,536 -£1,664 -£2,238 -£2,552 -£9,132 -£13,948 -£15,436 -£20,469 -£62,023 -£44,898 NWEZ Expenditure Plans Total Administration Costs £3,655 £580 £534 £997 £473 £473 £3,057 £911 £475 £321 £8,419 £8,419

Total Infrastructure & Development Investments £0 £0 £130 £268 £304 £1,723 £2,425 £13,711 £2,399 £841 £19,376 £17,961

(Surplus)/Deficit in Year £617 -£563 -£872 -£399 -£1,461 -£356 -£3,033 -£2,359 -£14,921 -£34,228 -£34,228 -£18,518

Cumulative (Surplus)/Deficit Position of NWEZ £617 £55 -£817 -£1,216 -£2,677 -£3,033 -£3,033 -£2,359 -£14,921 -34,228 Dashboard Appendix C

1) Annual Administration Costs 2) Annual Uplift & Appeals 1,600,000 5,000,000 4,292,422 1,400,000 4,000,000 1,200,000 3,000,000 1,000,000 1,952,881

2,000,000 800,000 724,444

600,000 1,000,000 417,094

400,000 534,000 0 43,000 200,000 2012/13 2017/18 2022/23 2027/28 2032/33 2037/38 -1,000,000 0 2012/13 2014/15 2016/17 2018/19 2020/21 2022/23 2024/25 2026/27 2028/29 2030/31 2032/33 2034/35 2036/37 Appeals Uplift

- Excludes NBC-funded marketing costs (75% = £15k, the difference between the 2018/19 figure and the forecast in Appendix A) - The additional admin costs are expected to facilitate a sharp rise in BRU from 2019/20 onwards as projects are supported to - Admin costs will reach a peak between 2018 and 2022. From 2022/23 onwards, costs are scheduled to fall significantly initially when temporary completion and marketing activity is increased EZ staff are no longer expected to be required - Further additions to the uplift figure can be expected as more sites are given an estimated BRU - All other staff and expenses, other than running costs, will reduce each year, to a point where there will be between 0.5 and 1 FTE working on - Appeals have been assumed as a 8% of total BRU. This methodology will be refined to more accurately reflect EZ-specific the project by 2038 properties, and has been increased to 8% in line with the overall NBC appeals position

3) Annual Infrastructure Development Costs 4) In-year Surplus/(Deficit)

7,000,000 6,590,860 £4,000k £3,000k 6,000,000 £872k £3,525k £2,000k 5,000,000 £1,000k 4,000,000 £0k 2013/14 2020/21 2025/26 2030/31 2035/36 3,000,000 -£1,000k

2,000,000 -£2,000k 130,000 1,000,000 -£3,000k -£4,000k 0 2012/13 2015/16 2018/19 2021/22 2024/25 2027/28 2030/31 2033/34 2036/37 -£5,000k

- There are several points at which the increasing in-year BRU surplus is significantly reduced. This volatility is a result of the - There are significant infrastructure costs in 2022 (St Peter's Roundabout), 2023/24 (Castle Station - £5m NCC loan repayment) and 2025-27 (St phasing of infrastructure development costs James Mill Link Road and Sub Station) - The trendline indicates that there is an annual rise in surplus of approximately £197k per year over the long-term

5) NWEZ Model Financial Outcomes £40 Minimum Sites Model Maximum Sites Model £35 Millions £34.2m £30

£25

£20 £18.5m

£15

£10 £0.8m

£5

£0 2012/13 2014/15 2016/17 2018/19 2020/21 2022/23 2024/25 2026/27 2028/29 2030/31 2032/33 2034/35 2036/37 -£5

-£10

- Minimum sites - £18.5m - based on existing sites and sites under construction - Maximum sites - £34.2m - based on existing sites, sites under construction and all sites for which a BRU and completion timescale has been estimated - Under both models, we expect to move from deficit to surplus by 2018/19 year-end, although this will move back into deficit in 2022/23 due to the phasing of loan repayments for Castle Station. Break-even is expected to recur between 2024 and 2028 depending on progress made on sites under development. Sensitivity Analysis Appendix D

Neutral models Assumptions Max model Min model Good model Limited model Admin (assumes 75% in 2022/23 in all 90% 85% 50% models) Appeals 5% 8% 15% All sites completed before 2038 (in line with All current developments completed in line Site Developments Only under construction complete No more complete current estimations) with current estimations Inflation 2.50% 2.00% 1.50%

Admin costs 2022/23 - temporary staff will no longer be working on EZ, all other costs (including other staffing costs) reduced by 25% in first year, then 15% in subsequent years. This is 25% for all years using the 'limited' model as no new sites will be developed under the assumptions of this model. Neutral model assumptions The 'minimum' model shows an immediate reduction in staffing costs (50% attrition) as this model assumes all developments, including those currently under construction, will cease. Conversely, the 'maximum' model shows a slower reduction (10% attrition) as it is assumed that more staffing and other administrative costs will be required to undertake and complete development of sites not currently in the development pipeline. Using the neutral model as a baseline (15% attrition per year from 2022/23) the following changes would occur: 90% 85% 75% 50% (+5% from 2023/24 onwards) (no change from 2023/24 onwards) (-10% from 2023/24 onwards) (-35% from 2023/24 onwards) Current staffing forecast (2018/19) £259,800 £206,216 £206,216 £259,800 Current staffing structure 12 staff members, once the staffing structure is filled, approx 5 FTE (including consultants) 2028/29 staffing forecast £59,114 £41,952 £19,797 £1,738 2028/29 staffing structure Approx 2 FTE Approx 1.5 FTE Approx 2 FTE Approx 0.05 FTE % difference 40.9% 0.0% -52.8% -95.9% Final staffing forecast (2037/38) £25,048 £10,627 £1,626 £4 Final staffing structure Approx 1 FTE Approx 0.5 FTE Approx 0.1 FTE No staff % difference 135.7% 0.0% -84.7% -100.0%

Appeals Neutral model assumptions 6% is approximately the level used for appeals across Northampton. This has been increased to 8% within the neutral model, to be prudent. 5% 6% 8% 15% Assumed level of BRU losses from appeals over life of the model (£ £7,926 £9,465 £12,543 £23,316 000) % difference -36.8% -24.5% 0.0% 85.9%

Site Developments Min model assumptions Min model - no more sites are completed, all development expenditure is committed but resulting BRU will not be realised Good model - all current 'Site Developments' will be completed, but no other sites will be developed. Neutral model assumptions Limited model - only the sites that are currently under construction (Edgar Mobbs Way (2) and Avon) will be completed All sites have been given provisional estimates of their BRU, and these have been included in the final model. Where site developments have started, these are in line with the 'Good' model above. Where site developments have not yet been started, these have been assumed to have Max model assumptions completed the 'Site Identification stage' by 2030, with completion and valuation assessment expected by 2038. As a result, these sites will not show full BRU receipts until the final year of the model.

Inflation The current assumption is long-term inflation of 2.0%, in line with the Bank of England target rate (previously 1.9%). This was the original assumption of the model. As of 18/9/18 Neutral model assumptions the CPI inflation rate was measured as 2.7%. 1.50% 1.90% 2.00% 2.50% Net BRU (£m) over life of EZ 32.9 34.0 34.2 35.6 (to 2038) % difference -3.8% -0.8% 0.0% 4.0%

BRU models 70,000,000 £57.1m 60,000,000

50,000,000

40,000,000 £34.2m

30,000,000

20,000,000

10,000,000 £18.5m

0 2012/13 2014/15 2016/17 2018/19 2020/21 2022/23 2024/25 2026/27 2028/29 2030/31 2032/33 2034/35 2036/37 -10,000,000 -£1.3m

-20,000,000

Min Limited Good Max

Estimated 'break-even' point Max 2018/19 Good 2024/25 Limited 2028/29 Min N/A Northampton Waterside Enterprise Zone - Strategic Risk Register Item 7

Board request

a) To note the Waterside EZ Risk Register.

REF RISK CATEGORY RISK DESCRIPTION IMPACT LIKELI- CURRENT PREVIOUS CURRENT MITIGATION IN ADDITIONAL MITIGATION (Score 1- HOOD RISK RATING RISK PLACE REQUIRED 5) (Score 1-5) September 18 RATING

Locally Controlled S1 Strategic Resourcing - insufficient 5 3 Work to be undertaken to None currently required resourcing impacts on ability to put in place a permanent handle enquires and managed well-resourced EZ team deal flow leading to loss of investment S2 Strategic Lack of visibility of Waterside 4 4 Work underway to None currently required. EZ to potential investors and develop marketing plans relocating companies to increase visibility to prospective investors S3 Strategic That predicted investment and 3 5 The inherent attraction of None currently required. growth is slower or does not the site together with the happen. benefits of EZ status means that there will be a strong level of potential growth. The mix of marketing and delivery of required infrastructure will reduce this risk substantially. F1 Financial Rate Relief for Waterside EZ - 4 5 Rate Relief to new Continue conversation Loss of EZ Rates reliefs in 2018 investors is available until with Government impacts on demand. 31 March 2018 regarding potential extension to the F2 Financial Cash Flow - The time lag 3 5 Regular review of options None required at present between investment in zones by partners to consider and retained rates income investment up front being received. Northampton Waterside Enterprise Zone - Strategic Risk Register Item 7

borrowed against future business rates income. F3 Financial Commercial Failure by 3 5 NBC as the executive lead None required at companies located on the EZ to maintain strong links to present. leads to decrease in rates investing companies and receipts long term residents to understand the scale of risk to the EZ receipts. R1 Reputational Impact - EZ initiative fails to 5 3 Waterside EZ can Plans underway to deliver significant economic demonstrate successful refresh the marketing benefits leading to adverse delivery to date. However approach to Waterside publicity. the next phase is more EZ. likely to require more emphasis on marketing and infrastructure.

R2 Reputational Displacement - Use of rate 2 4 Risks is heightened by None at present. relief to displace investment for tenant moves outside of existing premises or other sites the EZ to Waterside. leads to complaints and Mitigation through the adverse publicity media demonstrating company growth achieved through the move. Also negotiation with companies simply seeking to fence jump prior to any decisions.

National control G2 Governance Government changes focus 3 3 SEMLEP seeking to Continued influence at away from Enterprise Zones influence the LEP Review policy level G3 Governance EZ Governance - lack of clarity 3 2 Revised Terms of None at present. over roles & responsibilities Reference agreed at the impedes decision making June EZ Board resulting in loss of potential investment. Northampton Waterside Enterprise Zone - Strategic Risk Register Item 7

S4 Strategic Competition from other regions 3 5 Inherent risk from having Focus on developing a to attract businesses to the EZ 24 nationally competitive high quality, visible sites are missed / businesses EZs. Need consistent marketing campaign will attracted to locate elsewhere. progress on marketing to be key. Also needs ensure Waterside stands infrastructure to progress out as the natural location to ensure consistent of choice. supply of sites. F4 Financial That anticipated match funding 5 4 Support funding is Ongoing discussions for infrastructure does not required is for a range of regarding individual sites materialise infrastructure that are currently being improvements. Work will progressed. focus on securing developer contributions and funding from central government to address this issue.