Agenda Item: 5D Wolverhampton City Council OPEN EXECUTIVE DECISION ITEM (AMBER) CABINET Date 10 OCTOBER 2012 Portfolio(s) COUNCILLOR P BILSON/ ECONOMIC REGENERATION & ENTERPRISE Originating Service Group(s) PARTNERSHIPS, ECONOMY AND CULTURE Contact Officer(s)/ GRAHAM CLARK / MARK TAYLOR KEY DECISION: NO Telephone Number(s) 5850 6609 IN FORWARD PLAN: YES Title BLACK COUNTRY ENTERPRISE ZONE – BUSINESS RATE UPLIFT. RECOMMENDATION 1) That Cabinet endorse the principles for the retention, management and use of the Black Country Enterprise Zone business rate uplift, namely: i. For i54 the business rate uplift is returned to Wolverhampton City Council and Staffordshire County Council to reimburse the two authorities for the financial investment made to deliver the motorway link and other on-site infrastructure works. ii. For the remaining Enterprise Zone sites business rate uplift is pooled into a Black Country Investment Fund to be deployed by the Black Country LEP to support the Black Country’s economic priorities. 2) That Cabinet agree to enter into two Agreements and/or Memorandum of Understandings setting out the arrangements for collecting and distributing the business rate uplift received as outline in point 1 above. 3) That the Cabinet Member for Economic Regeneration & Enterprise in conjunction with the Interim Strategic Director Education and Enterprise be authorised to finalise the Agreements/Memorandum of Understanding as follows: i. An Agreement / Memorandum of Understanding with South Staffordshire District Council, Staffordshire County Council, Stoke & Staffordshire LEP and Black Country LEP setting out the arrangements for the business rate uplift in respect of i54 and; ii. An Agreement / Memorandum of Understanding with Walsall Metropolitan Borough Council and Black Country LEP setting out the arrangements for the business rate uplift in respect of the remaining Enterprise Zone sites. Page 1 of 6 4) That Cabinet agree for Wolverhampton City Council to be the accountable body on behalf of the Black Country LEP, for collection and distribution of business rate uplift from the Black Country Enterprise Zone. Black Country Enterprise Zone – Business Rate Uplift 1.0 Purpose of Report 1.1 To advise Cabinet of the arrangements to be made for the collection and distribution of business rates received from the Black Country Enterprise Zone sites. 2.0 Background 2.1 The Black Country Enterprise Zone, which became operational from 1 April 2012, comprises a portfolio of development sites situated in Darlaston, Walsall and Wolverhampton North amounting to approximately 120 hectares. The Darlaston part of the Zone comprises a cluster of 15 sites either side of the M6 at Junction 10 providing some 45 hectares of land. The Wolverhampton North part of the Zone is made up of the regionally significant i54 site and four other development opportunities in the immediate surrounding area. It is anticipated that the development of all the sites could ultimately lead to the creation of approximately 6,500 jobs. 2.2 Department for Communities and Local Government has provided through its Enterprise Zone (EZ) policy a means for Local Authorities and Local Enterprise Partnerships (LEPs) to benefit from EZ status; by providing LEPs with the ability to retain the business rate uplift / growth generated by the occupation of EZ sites for a period of 25 years and to utilise this funding to invest in local economic priorities. The current Finance Bill sets out the legislative framework for the retention of business rates with the EZs by LEPs when new Local Government Finance systems comes into being on 1 April 2013. 2.3 This report sets out the ways in which the business rate uplift from the Black Country EZ will be retained by the Black Country LEP and the emerging principles as to how the funds could be deployed to support the delivery of local economic priorities. 2.4 The arrangements for agreeing the collection and distribution arrangements for the Black Country EZ are complex, particularly as i54 is within the Staffordshire administrative boundary. However, good progress has been made with South Staffordshire District Council, Staffordshire Country Council, Stoke & Staffordshire LEP, Walsall Metropolitan Borough Council and Black Country LEP. Indeed, a report based on this one has been approved by the Association of Black Country Authorities and Black Country LEP. 3.0 Report Detail 3.1 i54 In early 2011 Jaguar Land Rover (JLR) identified i54 as a possible location for their new UK engine plant. Wolverhampton City Council, South Staffs District Council and Staffordshire County Council worked closely together to ensure that JLR selected i54 as their preferred location. This hard work ultimately proved successful principally because Wolverhampton and Staffordshire agreed to fund and deliver the required motorway link from the site to the M54. Page 2 of 6 3.2 The Councils’ commitment to fund these infrastructure works totalling an estimated £36M (to be split 50:50 between Wolverhampton and Staffordshire) was made prior to the announcement of the Enterprise Zone. The original intention was to recoup the costs via Tax Incremental Financing (TIF) or something similar. With the announcement of the Enterprise Zone there was an expectation and understanding with Government that this would provide the funds in the same way as TIF to reimburse Wolverhampton and Staffordshire for the substantial costs involved. 3.3 Staffordshire County Council has produced an estimate of business rate take from the i54 site and an analysis of the period needed to repay the capital costs and loan charges associated with the development of the site. The model is, of necessity, based on certain assumptions and these are obviously subject to change throughout the life of the project. 3.4 Based on actual capital cash flows only, these EZ Receipts would need to be retained by Wolverhampton City Council and Staffordshire County Council until part way through 2025-26 before the capital costs are completely repaid. Therefore estimated surplus receipts of £4.3M would be available in 2025-26, rising to an estimated £5.1M per annum thereafter for 10 years until 2037-38. 3.5 WOLVERHAMPTON ENTERPRISE ZONE BUSINESS RATE RECEIPTS (EXCLUDING i54) 3.6 The estimated business rate receipts from the remaining EZ sites in Wolverhampton North and Darlaston has been calculated. The model used for this calculation is, of necessity, based on certain assumptions and these are obviously subject to change throughout the life of the project. The Wolverhampton North sites (excluding i54) are anticipated to generate £35.9M over 25 years and the Darlaston sites £65.5M over the same period. 3.7 At this point the anticipated income from business rates beyond 2015 has been determined based on the current criteria. However, a national revaluation is taking place which could significantly change the rateable value and receipts. 3.8 PROPOSED WAY FORWARD As outlined above there has been an expectation by various authorities as follows: (a) That the £36M borrowed by Wolverhampton and Staffordshire to facilitate the development of i54 and the major investment of Jaguar Land Rover in the area be reimbursed. (b) That all four local authority areas in the Black Country have an opportunity to get some benefit from the EZ rate uplift in accordance with the economic priorities for the area. (c) That South Staffordshire District, Staffordshire County and their LEP obtain some further long term benefit from the inclusion of the i54 site within their administrative area. 3.9 For the Wolverhampton (non i54) and Walsall sites it is recommended that all the generated receipts be pooled into a Black Country Investment Fund and that a series of criteria be developed to ensure that it is deployed to support the Black Country’s economic priorities. In particular, it should be used to release key sites for further business development which require key infrastructure to do so. The first priority should be the development of any EZ site requiring infrastructure or to kick start development. The sites in Darlaston and Wolverhampton North would inevitably be a top priority, as their early development is essential to achieving the rate uplift. Without their development the figures set out earlier in this report will not be achieved. The next priority would be to Page 3 of 6 release other sites across the Black Country which can generate jobs and private investment within a reasonable timeframe. 3.10 The i54 arrangements are more complex. It is recommended that the business rate receipts from i54 are initially used to reimburse Wolverhampton City Council and Staffordshire County Council for the cost of the infrastructure works (£36M) over the next 15 years. It is also proposed that following this any surplus receipts are apportioned on a 50:50 basis between the Black Country LEP, and Stoke and Staffordshire LEP. This, it is estimated, will generate receipts of approximately £2.5M each for 10 years commencing part way through 2025-26. 3.11 Legal agreements or Memorandum of Understanding will need to be signed by the relevant parties to formalise this process, it is suggested that these need to be signed by January 2013 in order to aid the financial planning of all affected and interested parties. 3.12 Wolverhampton City Council is the accountable body for the Black Country Enterprise Zone business rates receipts, so all receipts from all billing authorities will be paid over to Wolverhampton who will then distribute as determined by the Black Country LEP. 3.13 For i54 it is proposed that: a) A legal agreement and/or Memorandum of Understanding (MoU) is agreed between the following 5 parties: i. South Staffordshire District Council ii. Wolverhampton City Council (WCC) iii. The Black County Local Enterprise Partnership (LEP) iv. Staffordshire County Council (SCC) v. The Stoke and Staffordshire LEP b) That the legal agreement and/or MoU reflects the distribution of business rates receipts from i54 and that once the loans of WCC and SCC have been repaid the business rates receipts are distributed on a 50/50 basis between the two LEPs.