Decision details

Confirmation of final terms for purchase of Abbotts Depot and assignment of Winters Lease

Decision Maker: Chief Operating Officer (Director of Finance / Section 151 Officer)

Decision status: Recommendations Approved

Is Key decision?: No

Is subject to call in?: No

Purpose:

London Borough of Barnet (LBB) currently operates a waste and recycling depot at Mill Hill East. The depot falls within the area identified for regeneration in the Council’s adopted Mill Hill East Area Action Plan (MHEAAP)[1], as agreed in January 2009. In 2010, LBB agreed to form a consortium with private partners to develop the land, forming the Inglis Consortium. As part of this agreement, LBB has a contractual commitment to relocate the depot by December 2016, which will bring significant financial benefits, estimated at £41.5m over the next 10 years.

 

A business case has been developed, reviewing the short-listed sites from the options appraisal stage. The business case has appraised the options and recommended the option that presents the greatest value for money for the Council. It has also reviewed commercial considerations, affordability and management arrangements to recommend a preferred option. The preferred scheme is now moving forward to the next stage of the process i.e. planning permission, land acquisition, and Stage 3 design.

 

Detailed site searches have been developed since 2011, and in 2014 an evaluation process was run to shortlist the available sites. The two sites which were shortlisted are:

·        Relocation of current operations to Lupa House, Borehamwood (with the bulk transfer facility and salt barn relocating to Bunns Lane);

·        Relocation of current operations to the old Abbotts Depot in Oakleigh Road South, Barnet;

·        An option for No relocation, and extraction from the Inglis Consortium will be considered;

·        Do Nothing will also be reviewed.

 

Following the Council decision on 14 April 2015 (as referred by the Assets, Regeneration and Growth committee on 16 March 2015), officers included Winters lease within the preferred option. This analysis in the business case indicates that the Abbotts site with a lease of the Winters site is still the preferred option, with a Net Present Value (NPV) per benefit point[2], of £7,208 per benefit point to -£2,190 per benefit point (a Net Present Cost or NPC) for Lupa House.

 

Do Nothing is not an option for the Council as continuing operations of the depot from the current site is not possible. The Council entered into a Limited Liability Partnership and Co-operation Agreement with private developers to develop the Mill Hill East area for residential use, the ‘Inglis Consortium’. It is bound under this agreement to vacate the Mill Hill Depot site by December 2016. The Council also chose not to take up the option to ‘carve out’[3]part of the existing depot land in June 2013.

 

We have considered a further option of not relocating from the depot site at all. This would mean terminating a contractual agreement with a number of partners, failure to regenerate the Mill Hill East area (and benefit from the associated income), failure to meet LBB’s strategic regeneration aims in that area, lead to significant reputational damage and open the Council up to a high degree of financial and commercial risk. The loss of income from the Mill Hill site would amount to a total NPC of £35.7m over 11 years, which does not include the additional costs of exit from LBB’s contractual agreements.

 

The Lupa House site is out-of-borough, requiring another facility to be acquired for the salt barn and bulking station, which results in the option being too large for the Council’s needs. Furthermore, the only commercial option open to the Council at this point is a lease arrangement. Timescales however are a positive factor for this site, with the build being simpler than for Abbotts (it is an existing industrial site which would require modification rather than a complete new build) and therefore LBB could be more likely to meet the December 2016 vacation date. The total gross capital costs of this option are £10.6m, with recurrent costs of £1.7m per annum.

 



[1] https://www.barnet.gov.uk/citizen-home/planning-conservation-and-building-control/planning-policies-and-further-information/mill-hill-east-aap/mill-hill-east-area-action-plan.html

[2]The outputs from the qualitative analysis result in a total weighted score for the total non-financial benefits. Quantitative analyses are then used to derive a Net Present Value (NPV) taking into account the net savings of the estate to meet the need, over the life of the estate. The total NPV divided by the total weighted non-financial benefit score for each option derives an NPV per benefit point. The option which appears to offer the highest value per benefit point will be considered the preferred option. Note that a negative NPV (i.e. a net cost) is a Net Present Cost (NPC). The options considered have been appraised over 25 years with costs / savings discounted over those periods at 3.5% (Year 1 being 2015/16) as per HM Treasury Guidance.

[3]In the contract, LBB reserved the option to carve out and exclude from the development part of the depot site (Frith lane site), the ‘carve-out land’; LBB in 2013 elected not to exercise this right.

Publication date: 05/05/2015

Date of decision: 05/05/2015

Accompanying Documents: