Stockport council is to lend £60m to the ‘social impact developer’ behind the planned regeneration of an historic mill.
Planning chiefs last month granted Capital and Centric permission to restore Weir Mill and build a new 14-storey apartment block next to the town’s landmark viaduct.
Provided the government approves alterations to the Grade II-listed building, work on the scheme - which will deliver 253 apartments across the site - is due to begin in the new year.
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To ensure the project is brought to fruition, town hall bosses will lend Capital and Centric £60m on ‘commercial terms’ that will see a return over the long term.
The money will come from a £100m investment facility set up two years ago in order to support the regeneration of Town Centre West - also known as the Mayoral Development Corporation (MDC).
This facility is funded through ‘prudential borrowing’ and would not be funded through council reserves or other receipts such as council tax.
The figure may seem eye-watering on the face of it - particularly as some councils have built up huge debts buying up shopping centres, supermarkets and other property.
But Councillor David Meller, cabinet member for economy and regeneration, is ‘very confident’ in the due diligence that has been undertaken and believes the move represents ‘good, prudent use of borrowing’.
He said: “With anything like this, there’s always going to be a little bit of risk, we don’t know what’s going to come six months or a year down the line - we could have another pandemic for all I know.
“But in terms of what’s in the paper and the agreement, it’s not like someone would be running off with the money. If it fails the investment would effectively stay with the council and we would have to take it forward.”
While Coun Meller says he would not loan some firms ‘a single penny’, he has no such qualms over Capital and Centric, whose developments include Kampus and Crusader in Manchester.
However, he admits there is ‘some risk’ to the local authority.
“I can’t say this is risk-free, because it isn’t. But I’m as confident as I can be that this needs to be done and it’s a good use of money,” he said.
“If the worst comes to the worst and the developer goes bust it would fall back to the council again. We would still have the asset and have to look again at developing it ourselves.”
Eyebrows may be raised that the council is able to lend such a large sum of money at a time it is also lining up another round of cuts.
But Coun Meller points out councils are not allowed by law to fund services via capital borrowing, but only through revenue such as council tax and business rates.
“I take the point that it’s a lot of money but it’s that or Weir Mill would just dilapidate even further and I would completely lose that asset.” he said.
“A lot of what the council has done is for the long term. You would get investment back over a long period, like how the Interchange has been financed.
“We will get the return but it will be over the longer term. This is the issue with the public sector having to step in and provide what the private sector would have done.
“But when you prove it works, that’s when you should see the private sector investment coming in, as we have seen with Stockport Exchange [the office and hotel development near Stockport station].”
The use of the investment facility to bankroll the construction at Weir Mill was discussed in private at the council’s economy and regeneration scrutiny committee last week.
Coun Oliver Johnstone, the Conservative chair of the committee, said the Tory group was satisfied the council would not be financially exposed to an unacceptable extent.
“We have had assurance that if the contract did go down it would simply go back out to tender again. The risk on the council is very small,” he said.
"The council have done it before, it’s going to be repaid at commercial rates. It’s not like going to lend it on the same terms the council has borrowed it. That would be an issue, because then you start getting into subsidy.”
Coun Johnstone added that the Conservative group was strongly in favour of building on brownfield sites in order to protect green belt land.
“The Conservative group represents a lot of areas that sit right on green belt - that has to be our primary concern, here,” he said.
“I don’t think we are going to be prioritising stopping brownfield sites if at all possible.”
Coun Colin MacAlister, a Liberal Democrat member of the committee, took a similar view.
“There’s not much risk in it, but there is risk - it’s a commercial decision,” he said.
“The officers are saying there’s a commercial risk but we have got all the safeguards in place. We have to trust officers in their assumptions.
“I’m not a financial expert, so we have to take the officers’ view on that - particularly risk - although the risk was questioned.
“If I was a financial expert perhaps I could have questioned it on a different level.”
Stockport council’s economy and scrutiny committee met at the town hall on Thursday night (October 14).
