Issue - meetings

Cabinet Member: Leader of the Council, Councillor Hamida Ali

Officer: Interim Chief Executive, Katherine Kerswell & Interim Director of Finance, Investment & Risk, Chris Buss

Key Decision: yes

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To

1.           Agree that the Council recognises the costs of the Fairfield Halls refurbishment, being a total of £69.261 million (as identified in Appendix 1 of the report), as capital expenditure rather than as a Capital Loan and to:

                  i.    Agree, in principle, that the existing Fairfield Halls refurbishment contracts with Brick by Brick be novated to the Council (subject to review of the individual contracts, to be finalised and authorised by the Interim Executive Director of Place under their delegated authority); and

                ii.    Agree, in principle, that specialist consultants or contractors, required to identify any additional remedial works to the building, be appointed (in accordance with the Council’s Tenders and Contracts Regulations).

2.           Approve that the Council’s Housing Revenue Account (HRA) can acquire 104 residential units from Brick by Brick as set out in Appendix 2 of the report and as further detailed in the Part B restricted report.

3.           Agree that the consolidated loan agreement shall, if required, be varied to include a further loan draw down amount of up to £10 million to cover additional working capital, in the event that this is required by Brick by Brick due to possible delays with forecast sales receipts (this is in addition to the £9.99m agreed by Cabinet in February 2021) and agree that authority be given to the Interim Chief Executive in consultation with the interim Director of Finance, Insurance and Risk and Section 151 officer and in consultation with the Leader and the Cabinet Member for Croydon Renewal and Cabinet Member for Resources and Financial Governance; to agree such draw down sums (not exceeding the overall additional £10m) as appropriate to address immediate operational needs. 

4.           To note that any recommendation to acquire further units or other assets from Brick by Brick, and that any such acquisition of units to be within existing capital budget provision and meet the affordability criteria, should return to Cabinet for decision.

5.           Otherwise note the progress made with regard to the previous February 2021 Cabinet recommendations on Brick by Brick.

The Leader of the Council (Councillor Hamida Ali) informed Members that the report provided an update following the decisions made by Cabinet in February 2021, but did not include a final decision on the future of the company as that would be considered at a future meeting of Cabinet. It was noted that the report principally sought agreement in terms of how the council accounted for the costs of the Fairfield Halls refurbishment, agreement to acquire 104 homes for the Housing Revenue Account (HRA) and approve an additional £10 million as working capital for Brick by Brick; should it be necessary.

It was further noted that the report sought to address the concerns raised by the external auditor in their Report in the Public Interest (RIPI) in terms of the purchase of homes from Brick by Brick which had initially been discussed by Cabinet in June 2020. Appendix 2 of the report, it was stated, sought to address the concerns; in particular in relation to the circular nature of the funding, and set out why the council felt the purchase of the homes was an appropriate decision.

The Interim Director of Finance, Investment & Risk (Chris Buss) drew Members attention to the appendices; appendix 2 Members were advised focussed on the purchase of 104 units and provided an extensive explanation on the officers view that the acquisition, via the use of the Greater London Authority (GLA) funding and the HRA, was the best option. Members were requested to read and seriously consider the detail provided within the appendix when making a decision on whether to purchase the homes.

Members were advised that the figures in relation to the overall spend on Fairfield Halls were incorrect within the report and the Interim Director advised that the breakdown of expenditure was; Fairfield Halls - £61.7 million, car park - £4.2 million, public realm - £3.2 million , and Fairfield homes - £4.2 million. The overall expenditure, it was stated, remained the same at £73.3 million. Members were further advised that the overall loan and interest owed to the council following accounting adjustments was £161,566,688 and that this figure included the £73.3 million spent on Fairfield Halls which was recommended to be reclassified as capital expenditure.

The Cabinet Member for Croydon Renewal (Councillor Stuart King) stated that in principle he supported the recommendations but sought clarification in terms of the loan agreement, which he felt was desirable for both the council and Brick by Brick and would account for all monies loaned to the company. It was noted that the original agreements had assumed a debt/equity ratio of 75/25 which it was known had not been met. The Cabinet Member queried how the total loan for Fairfield Halls and wider Brick by Brick loans had been determined and what due diligence had been undertaken to ensure those values were correct. Further queries related to whether the Brick by Brick Directors accepted the allocations and what monitoring would be put in place to ensure the  ...  view the full minutes text for item 70