We now know the broad outlines of the “seat of the pants” deal that’s being put together to guarantee funding of the new North-South stand at Headingley stadium.
An unnamed financial services company is putting in either £31m or £35m (depending on whether £4m of public money gets approved by the Local Enterprise Partnership). For that they get a 140-year lease on the new stand, which sounds to me like they’ll effectively own it.
Once the stand is built, Leeds City Council will take out a 40-45 year under-lease on it, paying the unnamed company rent to the value of the cost of the redevelopment. Plus a return on the company’s investment, obvs.
At the same time, Leeds Rhinos and Yorkshire County Cricket Club (YCCC) will take out sub-leases on the stand from the Council (either individually or as a joint company), paying a higher rent to the Council than the Council will be paying to the investor.
If everything goes smoothly, and everyone pays everyone what they’re supposed to, after 40 years the Council and/or the clubs will be able to buy the remainder of the lease from the investor for £1. That’s in 2059, folks.
That’s the broad plan, and it’s what senior councillors are going to sign up to when they meet on 19th April.
Council to underwrite £500,000 of immediate costs
The trouble is that all this has been done (and is still being done) at a gallop, after the attempt to fund the redevelopment by selling off two plots of greenbelt land fell through earlier this year.
The reason for the unseemly speed is that the new stand has to be ready to host YCCC’s allocated matches at the 2019 Cricket World Cup (income that, with over £24m in debts, it can’t afford to lose), so building work has got to get underway in June this year.
But there are loads of details that need working out before any final agreement is signed.
So, if they’re still dotting the ‘i’s by the end of June the Council is going to underwrite £500,000 of the £1m the clubs say they need before a formal contract start on site. It’s not clear (to me at least) whether this will be just a guarantee, or a gift from the council to the clubs, or money that will be recouped at some stage.
(Hang on, I hear you ask, wasn’t there an assurance only 10 days ago that there would be “no cost to the council tax payer”? There was. )
What’s left to do before the deal is signed?
As a report prepared for the senior councillors’ meeting on 19th April says: “further work and due diligence is required”.
They’ve still got detailed discussions ahead, for example, on the terms of the leases and on how the council can mitigate the risk it’s taking on in the event of the clubs defaulting on their payments.
The council has yet to seek independent advice too on how much it can charge the clubs in rent, on whether the clubs’ financial guarantees pass muster, and on whether the proposed deal is compliant with EU rules on state aid.
And who knows how and when the LEP will decide whether it’s going to stump up that £4m?
In the normal course of council events, such significant deals don’t get taken to senior councillors for approval with so many unknowns. And in the normal course of council events, ordinary councillors can call for such deals to be looked at by a scrutiny board if they’ve got reservations.
Not in this case.
Because of the rush, final approval of the terms is being delegated to two senior council officers in consultation with council leader Judith Blake and executive board member Richard Lewis.
And there’ll be NO opportunity for the deal to be looked at by any scrutiny board.
Do your run-of-the-mill councillors mind being sidelined like this? Enough to make a fuss about it?