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Wednesday, 3rd Jul 2019

“Heads L&G win, tails the Council loses” - Greens on Mayor's Temple Island plans

Green Councillors yesterday condemned proposals from the Mayor to hand key public land on Bristol’s Temple Island site to financial services company Legal & General (L&G), through an agreement created which avoids the usual legal tendering process. The Council’s arrangement would use public funds to develop the site and guarantee private profits but would give the Council no control over the development process or levels of affordable housing.

Some of the issues raised by Green Councillors included:

  • The high costs borne by Bristol council in doing further preparatory work to prepare the site for Legal and General. This in addition to the half million pounds promised by Council to prepare initial plans and the millions of pounds already invested into Temple Island.
  • The potential for the council to be left owing as much as a hundred million pounds if tenants are not found for office space, which it has promised to rent from L+G for 40 years.
  • The lack of control the Council will have over the development or over levels of affordable housing. L+G successfully took Bristol Council to court last year to reduce affordable housing in one of its developments from 24 flats to 4.
  • The possible legal risk arising from the Mayor's unorthodox arrangement with L+G, which avoids the usual legal tender process. 
Response from Green councillors in full below.
 

"Taking public money from the many to line the pockets of the few at Legal & General"

Leader of the Green Group, Councillor Eleanor Combley, said:

“Let’s be clear about these plans: Bristol Council would be taking public money from the many to line the pockets of the few at Legal & General, and taking on much of the risk into the bargain.

“The city has already invested millions of pounds in our land at Temple Island. Now the Mayor is proposing to spend even more to upgrade it, and then hand the whole lot over to a multi-billion pound financial services company. Then, as if this deal wasn’t sweet enough, the Council will pay L&G half a million to fund planning and design work for the land, and promise to cover the rent on office spaces for 40 years (even if tenants can’t be found). In short, the Council will shoulder the risk in order to provide the private company with a guaranteed profit. It’s heads L&G win, tails the Council loses.

“As a result, you might hope we would secure strong controls over what is developed there, but in fact we have no guarantee even on levels of affordable housing – only ‘aspirations’ – and this from a company that has already taken Bristol Council to court in order to reduce its affordable housing on another site in the centre from 24 to just 4 flats.

“It is deeply concerning that the Mayor has tried to duck scrutiny and the normal legal process so he can make this cosy arrangement with Legal and General. As my colleague Cllr O’Rourke has raised, it’s even possible that this unorthodox deal could open the Council up to legal action from other developers who were denied the opportunity to tender, as occurred with a similar arrangement in West Berkshire. 

“The Mayor has said that actions, not words, are what matters. So what value should we put on his words about ‘municipal socialism’, when his proposed action amounts to bountiful generosity to wealthy corporations, with Bristol council tax payers stumping up the initial costs, and taking on a risk running to over a hundred million over the next forty years?"

"The people of Bristol might think that BCC is now too committed to the deal with L&G to objectively assess the risk"

Councillor Paula O’Rourke questioned the legality of the proposals, raising similarities to a case in West Berkshire where the Council recently lost a legal case. She asked the for assurances over the legal risk to the Council and said “The people of Bristol might think that BCC is now too committed to the deal with L&G to objectively assess the risk”. The Mayor was not in attendance at the meeting however his deputy said that 'independent legal advice' had been taken.

Cllr O'Rourke's full question is in the notes below.

"putting the Council at very significant financial risk"

Councillor Jerome Thomas submitted a statement against the proposal, comparing it to what the Mayor had promised after cancelling plans for the Bristol Arena.

He said:

“The Mayor said that there was an unacceptable level of financial risk of going ahead with the Arena at Temple Island, and that “the free market was offering us a solution without public intervention”. It is now clear that the Mayor’s preferred ‘solution’ requires very significant public intervention. This intervention is required in the form of many tens of millions of pounds of guaranteed rent payments to the Council’s preferred developer, putting the Council at very significant financial risk.”

Cllr Thomas' full question is below.

Notes: Statement and questions from Cllrs O'Rourke and Thomas

Statement: CS8.1 Cabinet – 2nd July 2019
Re: Agenda item 8- Temple Island
Statement submitted by: Cllr Jerome Thomas

In September 2018 Bristol’s councillors from all parties and without any opposition voted that the ‘best site for Bristol’s arena for the benefit of Bristol as a whole, is Temple Island in the centre of Bristol and that the decision maker by guided by the vote of this meeting.'

At the same time over 90% of the statements on the arena from Bristol’s residents were in favour of building the arena at Temple Island.

The day after that vote the Mayor took the decision to ignore the views of councillors and of Bristol residents and go ahead instead with an office led development at Temple Island. The Mayor said that there was an unacceptable level of financial risk of going ahead with the Arena at Temple Island, and that “the free market was offering us a solution without public intervention”. It is now clear that Mayor’s preferred ‘solution’ requires very significant public intervention. This intervention is required in the form of many tens of millions of pounds of guaranteed rent payments to the Council’s preferred developer, putting the Council at very significant financial risk.

Not only is the Mayor proposing to underwrite a development that Bristol doesn’t want, but he is doing everything within his powers to avoid public procurement rules which would ensure that, whatever the final outcome, the city gets the best value for the proposed use of the land, through an open and legal procurement process.

Question: CQ8.2 Cabinet – 2 July 2019
Re: Agenda item 8: Temple Island – update on proposals and disposal arrangements
Question submitted by: Cllr Paula O’Rourke

The report refers to the ‘Faraday case’ (Faraday Development Ltd v West Berkshire Council [2018] EWCA Civ 2532) where an authority was found to have entered into an ‘ineffective contract’ which was ‘ultimately unlawful’. This raises some concerns due to the similarity with that case and the proposal put forward to Cabinet.

Allow me to outline the similarities:
BCC proposes the disposal of Temple Island as a ‘property transaction’, which falls outside the Public Contracts Regulations 2015 (which would oblige BCC to enter into public procurement). By doing this, you empower yourselves to enter into a contract with L&G without any form of tendering. Ditto West Berkshire Council.

However, you are drawing up proposals which will ‘trigger’ development works which would fall within the guidelines for public procurement. In the Faraday case, the Court of Appeal judgement says that ‘once the developer...had proceeded to draw down the land as per the terms of the agreement, there had been a procurement of development works that did not undergo the requisite procurement procedure’. This is what made the contract ‘ineffective’ and it was judged that West Berkshire Council had ‘acted unlawfully’.

The judge then went on to give the following advice to other councils:
- Public bodies should consider whether an agreement may trigger the public procurement regimes at the beginning, or indeed at any stage of the agreement. It is important to note that the Court of Appeal found that although there had been no deliberate wrongdoing by the Council, the effect of circumventing the procurement regime was the same.

Questions:
1. What assurance can you give that developers, who have not been allowed to tender for Temple Island, will not take BCC to court, using the Faraday case as precedent?
2. I note that the Faraday case came to the Court of Appeal in December 2018. The sketch for the L&G development of Temple Island was public last summer, during the decision about the Arena and before this judgement. The people of Bristol might think that BCC is now too committed to the deal with L&G to objectively assess the risk; what assurance can you give that this is not true?

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