BUSINESS IMPROVEMENT DISTRICT – TEXT ABOUT FUNDING / LOAN

FUNDING, EXPENDITURE AND LEGAL AGREEMENTS

Expenditure - How Much Will the BID Priorities Cost

The preferred scheme involving building a new bridge immediatley south of the line of the existing, elevated to overcome flooding, is expected to cost £3,361,695

The costs are made up as follows, based on the current best known information:

Item / Cost £
Construction Costs / £2,127,148
Land Acquisition / £97,000
Repayment of CST Section 106 Funding (Note 1) / £53,000
Statutory Undertakers Diversions / £409,000
Contingency and Risk / £601,852
Maximum Loan Interest (Will be based on Public Works Loan Board rate at the date when the loan is given but won’t’ exceed the figure opposite) / £73,695
Totals / £3,361,695

Note 1 – Cleveland Steel and Tube advanced the scheme £53,000 to cover private sector contributions towards scheme development and detailed design, currently £35,036.11 has been spent and a further £17,963.89 has been committed to the design stage. The commitment made by the Steering Group was always that this would be returned to CST.

Who Will Be Subject To The Levy?

All those parties who are liable for business rates on 1 September 2016 within the BID geographical boundary will be liable to pay the levy. The 6% levy for Dalton Industrial Estate and 4% levy for Dalton Lane will be based on the rateable value in the rating list as at 1 September 2016 on the 1 September 2016. The rateable value used to calculate the BID levy will therefore be fixed and no amendments to the rating list will affect the calculation of the levy.

Any new entries to the National Non Domestic Rating list within the BID geographical area will see the liable party become subject to the levy from the date of entry in the list and at the value first entered in the list.

Each year the liable party responsible for the business rates on 1 September will be liable for the BID levy for that year.

How Will The Levy Be Collected

A separate bill will be sent out for the BID levy showing the amount of the levy and the payment instalments required. Payments will normally be requested in ten monthly instalments but this does not remove the right for a business to pay in one upfront instalment if it so wishes.

How Long Will You Pay The Levy For?

If the ballot results in a “yes” vote the BID will run from the 1st September 2016to 30 August 2021.

Income - Sources of Funding

In addition to the funding raised through the application of the BID levy the following external public sector and private sector funding will also be secured:

Name of Funder / Funding Type / Income Sum £
Local Enterprise Partnership Local Growth Fund / Public Grant –current bid for funding / £1,800,000
Environment Agency and Local Authority Flood Levy / PublicGrant - current bid for funding / £288,000
D009 Developer Contribution / Private Sector / £178,000
Totals / £2,266,000

Levy Income Profile

The estimated income from the application of a 6% levy for businesses on Dalton Industrial Estate and 4% for business on Dalton Lane for 5 years is £1,095,695 as shown in the table below:

INCOME / 2016/17 / 2017/18 / 2018/19 / 2019/20 / 2020/21 / Total
Bid Levy / £219,139 / £219,139 / £219,139 / £219,139 / £219,139 / £1,095,695
Totals / £219,139 / £219,139 / £219,139 / £219,139 / £219,139

Total Income

Name of Funder / Funding Type / Income Sum £
Other Sources of Funding / Public Grant / Private Sector / £2,266,000
Levy Income / Private Sector / £1,095,695
Totals / £3,361,695

LEGAL AGREEMENTS

The BID Company will need to enter into the following agreements for the purposes of delivering the new bridge and highway:

  • A loan agreement with Hambleton District Council as described in detail below.
  • A Service Level Agreement with Hambleton District Council as the Billing Authority covering:
  1. The delivery of an effective billing and collection service for the Business Improvement District in line with Business Improvement District enforcement regulations
  2. Maximisation of the collection to provide funding over the 5 year period of the Business Improvement District
  • A Section 278 Agreement with North Yorkshire County Council to commit NYCC to commit to build the new bridge and highway.
  • A land transfer agreement between Dalton Land Holdings Ltd. who have advanced purchased the land required to build the new bridge and highway and the BID Company who need to release the land to NYCC through the Section 278 Agreement to allow them to build the new highway and subsequently formally adopt it.

LOAN AGREEMENT

To enable the Dalton Businesses to deliver the new bridge and highway scheme immediately, as opposed to waiting 5 years until all the levy has been collected, Hambleton District Council has agreed to lend the businesses up to £1,200,000.

In returning a “Yes Vote” through the ballot the businesses are agreeing to the terms of the loan to be given by Hambleton District Council, as described below:

  • Principles of the Loan Agreement
  1. The loan given to the BID Company will be capped at £1,200,000, but this could vary downwards depending on the appetite of businesses to make a one off upfront payment covering their total 5 year levy contribution. Hambleton District Council will be looking to maximise the upfront contributions as part of managing residual risks to the authority.
  2. The loan period will be 5 years.
  3. The loan given to the BID Company will be a “Soft Loan” nota commercial loan
  4. The interest to be charged on the loan will be determined on the date the loan is given to the BID Company. If the Council decides to finance the loan from the Public Works Loan Board (PWLB) the interest rate will be the PWLB rate on that date. The maximum interest Hambleton District Council will ever charge the BID will be £73,695 (as identified in the Scheme Expenditure Section of this Business Plan). If the PWLB interest rate on the date the loan is made results in a higher interest figure than £73,695 than the Council will finance the loan from internal reserves where the interest rate will be zero. This will ensure the project is fully fundable and the businesses have cost certainty.
  5. For the 5 year duration of the loan / BID the business rates levy will be 6% for businesses on Dalton Industrial Estate and 4% for business on Dalton Lane.
  6. A BID, which is run by a private-sector BID body, can normally be varied or terminated on the initiative of that BID body. This would damage or destroy the repayment mechanism relied upon by the Council to recover its loan to the businesses. To avoid this risk occurring it is the Council’s intention (subject to Full Council endorsement) to :
  • secure at least one share in the BID Company;
  • ensure that the BID Companies constitutional documents contain provisions giving the Council special powers, in particular, the directors of BID Company will need to be forbidden from taking any action to terminate or vary the BID arrangements with out the Council’s express consent;
  • ensure that the loan to Dalton Businesses is to be used for the sole purpose of funding a new public bridge and highway along Dalton Lane together with re-prioritised junction onto Eldmire Lane and flood embankments. The BID Companies articles and objects must make this clear.
  1. The BID Company will be expected to enter into a loan agreement.
  • Defaults On Loan

The key principles for dealing with defaults on loan repayments are as follows:

  1. The collection of the BID levy is defined in Statute and therefore can be collected if businesses default under statute law and Hambleton District Council will recover this default in the same way that a default on normal business rates would be pursued.
  2. If at the time of giving the loan the interest that should have been charged (i.e if the interest rate is less than that which equates to £73,695 at the time the loan is actually given) results in an over-recovery for Hambleton District Council, this will be held in a separate Debt Reserve Account and will be used to cover any defaults on the loan which occur during the 5 year loan repayment period. This reserve will be accessed by Hambleton District Council on an annual basis.
  3. One hundred percent of all over-recovery of business rates levy as a result of growth at the industrial estate during the 5 year BID period will always be used to advance early repayment of the loan, or cover over-run costs incurred by North Yorkshire County Council managing the construction contract (this will be split on a 50:50 basis). Again this money will be held in a Debt Reserve Account.
  • Reconciliation of The Debt Reserve Account

At the end of the 5 years a reconciliation of the Debt Reserve Account will take place and the following will occur:

  1. If surplus funds exist in the account after repayment of all loan defaults and after covering the cost of construction over-run costs, the surplus funds will be repaid back to the 30 businesses identified in this business plan and D009 on a pro-rata basis to their total contribution in the 5 year BID period.
  2. If there is no surplus in the account and there are loan defaults and / or the construction over-run costs have not been covered, both Hambleton District Council and North Yorkshire County Council will write this debt off. This is subject to those businesses that have defaulted on the BID levy being pursued by Hambleton District Council through statue law in the same way that a default on normal business rates would be pursued, until such time that the Council; deems it appropriate for the write off of the debt to occur.

CONTINGENCY FUNDING

The preferred scheme involving building a new bridge immediatley south of the line of the existing, elevated to overcome flooding, is expected to cost between £3,361,695which includes £601,852of risk and contingency funding.

If on completion of the detailed design and construction, having paid all construction costs to the contractor, there remains contingency funding unspent then the surplus funding will paid back to the following organisations based on their intervention rate:

  • The 30 businesses identified in this business plan and D009 (up to £1,293,107 private sector contribution);
  • The Local Enterprise Partnership (£1,800,000 public sector funding)
  • Environment Agency (£288,000 public sector funding)