Agenda Item No

27^th November 2002

 

 

To the Mayor and Members of the Cabinet

 

DONCASTER COMMUNITY STADIUM –PROGRESS AND DELIVERY OPTIONS

 

Cabinet Member(s)   Councillor Ian Spowart Trade, Industry and Innovation.   Councillor Margaret Ward  Culture, Sport and Young People

Relevant Overview and Scrutiny Sub-Committee     Regeneration

Wards Affected       All

Key Decision         Yes This has a significant impact on all wards in the Borough and will incur expenditure in excess of £100k.

 

 

 Purpose of the Report

 

1. The purpose of this report is to update the Mayor and Cabinet on progress that has been made with the Community Stadium project and to seek support for a proposed way forward based on an assessment of potential delivery options.

 

Reason For Urgency

 

2.      This item was originally scheduled on the Forward Plan for 11^th December Cabinet Meeting. However due to the need to progress the scheme and maintain momentum for this project and the establishment of the virtual 3D company the key decision has been brought forward.

 

Recommendations

 

3. Cabinet is requested to

 

1.      Note the Progress made to date on the Community Stadium and endorse the outline vision for the project attached at Appendix 1.

 

2.      Grant specific scheme approval for Stage one, the appointment of external consultants to prepare a stadium specification and outline Heads of Terms with the Sporting Bodies.

 

3.      Approve further work on stage two i.e appointment of the design team, detailed business plan and market testing prior to stage 3. Specific scheme approval to be sought from the appropriate Cabinet Portfolio Member once budget estimates for each element are known and subject to them being able to be met from the approved £1m budget.

 

4.      Request a further more detailed report based upon the results of stage two which will identify and advise the most advantageous Stage 3 option for the Council to pursue.

 

Background

 

4.      The Cabinet received a Briefing on 18^th September 2002 with respect to options for the delivery of the Community Stadium.  Three options were explored:

 

1.      Where the Council sold the site of the stadium to the private sector who then built and operated it.

 

2.      Where the Council funds the capital cost of the stadium and goes on to operate it – this was not acceptable in terms of risk

 

3.      Where some sort of joint approach with the private sector was secured allowing the Council to avoid maintenance and operational responsibilities whilst minimising its capital contribution – the preferred option.

 

5.      It was agreed that a detailed report on a single recommended delivery route would be presented to the Cabinet for approval in due course in relation to the preferred option. This report now seeks to explain the recommended strategy and seeks approval for implementation of activity identified to progress the project.

 

Options Considered and Reasons for Recommended Option

 

6.      Although a recommended development model for the Community Stadium has been identified it should be recognised that the scheme is still at this stage conceptual, despite the Council’s strong commitment to the project. At this stage, we do not know to what degree any income generated by the operation of the stadium can help to finance the capital cost of constructing the facility, maintaining it and managing it.  Therefore the procurement strategy, which is proposed, will need to be re-examined in the light of factual information which needs to be gathered over coming months.  For example, we will need to establish with the three sporting clubs (Rovers, Dragons and Belles) the terms upon which they are willing to use the new stadium, how much income might be derived from turnstiles, catering, sponsorship etc.  In effect, a business plan needs to be prepared in relation to the stadium operation.  Whilst the Council’s financial contribution towards to project cannot therefore be quantified at this stage, the delivery mechanism below is still the recommended route.  Further reports will be submitted to Cabinet as soon as possible to seek specific approval to any capital or revenue support, which the project may require in order to proceed.

 

Stage One:

 

7.      The preferred route towards delivery involves the preparation of a specification for the stadium, both in terms of its built form and its mode of operation.  This requires an intensive period of say 3-4 months during which time the clubs and other user groups e.g. supporters, occupiers and residents will be consulted in order to arrive at an agreed output specification, detailing the contents of the facility.  Furthermore, Heads of Terms agreements for the use of the facility by the three main clubs will need to be put in place.

 

8.      All the above items are specialist tasks which will need to be out-sourced to experienced leisure sector consultants.  Approval is therefore sought to the appointment of external consultants following a competition interview process with a budget estimate for fees in the order of £15,000 - £18,000, excluding VAT.

 

Stage Two:

 

9.      Once the output specification is known, it will be possible to commission an outline scheme and cost plan which will indicate the capital cost of constructing the Community Stadium at Lakeside. This will necessitate the appointment of a design team comprising architect, engineer and quantity surveyor. These appointments would be external to the Council.  It should be emphasised that the work will be undertaken to sketch scheme stage only, to the point where reliable estimates of capital cost can be prepared by the team, in order to inform decisions of the Cabinet.

 

10.    In parallel with this activity, a firm of accountants would be asked to prepare an outline business plan for the operation of the proposed stadium, indicating its annual running costs, planned programme of maintenance and income by source in a cash flow format.

 

11.    By pulling together all the information at the end of stage 2, it will be possible to report further to Cabinet on the ability of the project to raise private finance and the degree to which the Council may be required to subsidise the scheme.

 

Stage Three:

 

12.    Proceeding to stage 3 presumes that the Council is willing to support the project in financial terms to the degree estimated at the end of stage 2.  At this point, it will be appropriate to invite the private sector to make proposals to partner the Council in the scheme.  The Council will be in a position to brief potential partners as to the scheme which is required in construction/building terms, as well as indicating the terms upon which the clubs will agree to participate and also indicate the likely revenue position of the facility.

 

13.    The Council proceeding to undertake the up-front feasibility work to the end of stage two, is the most sensible approach. It is not advisable to have several private sector bidders covering the same ground as this would lead to confusion and produce bids which were not capable of comparison on a like for like basis.

 

14.    There are three variations within Stage 3, all of which achieve the objective of removing any maintenance and operational liabilities from the Council but they achieve this via somewhat different routes.

 

Stage 3 Option A

 

15.    This involves the Council preparing invitations to tender for a Design, Build, Finance, Operate and Manage  (DBFOM) contract in common with many PFI situations.  The outline specification, sketch scheme and outline business plan would be packaged together in a bid format and used to undertake a staged selection process which would follow from an OJEC advertisement.

 

16.    The private sector would be invited to undertake the detailed design, obtain planning consent, raise short and long term finance, oversee construction and undertake the operation and on-going management of the stadium following its completion.

 

17.    The Council could probably grant a lease of the stadium site for say 25 or 30 years, allowing the stadium to revert to the Council on expiry of that lease. During the lease term, the appointed contractor would grant separate agreements to the clubs and negotiate a process for distributing income.

 

18.    Our initial assessment is that the income generated by the stadium is unlikely to be sufficient to finance the borrowing of £10-£12m (estimated cost of construction) and the revenue costs involved in maintaining and managing the facility.  It is likely that the bidding process will identify that the Council may need to make a capital contribution towards the building costs.  If this is the case, then the Council will require a legal charge over the property in the event that the operating company fails.  These rights will need to be considered alongside those of the bank who have financed the remaining part of the debt.  Normally, it is condition of any loan that the banks have first charge (step-in rights) in the event of failure of the business.  The Council’s position may therefore need to be subordinated and this undoubtedly represents a risk to the Council, albeit one which may be unavoidable if private finance is to be utilised.

 

 

 

19.    If the Council have part funded the cost of the stadium, then they might reasonably expect to share in the income generated by the facility, year on year.  It may be possible to negotiate this but that will depend on the strength of the income stream and the level of debt the business is serving.

 

20.    The open market bidding process will ensure that the capital contribution of the Council is minimised and that any income to the Council via the leasing structure is maximised.

 

Stage 3 Option B

 

21.    In this alternative, the Council takes a leading role in the design and construction of the stadium.  The design team appointed at Stage 2 are asked to produce a fully worked up and costed scheme which can be submitted for planning approval.  The team oversee competitive tendering of the construction contract, including detailed supervision, to ensure that a fixed price building contract is delivered on site. 

 

22.    Following completion of the building works, an Operation and Management contract is then tendered, again on the basis of a 25 or 30 years lease, whereby the private sector take full responsibility for the running of the Community Stadium and the upkeep of the structure.

 

23.    This option implies that the Council meets all the cost of the construction works, less any external grant contributions which might be secured.  This would markedly reduce the risk of the operation failing as its annual outgoings would be significantly reduced.  It also significantly reduces the risk to the private sector and improves the chances of the facility actually being delivered – see advantages and disadvantages set out below.

 

24.    This Council has established a Borough Investment Fund (B.I.F.) to assist with the delivery of transformational projects like the Community Stadium.  Given the financial plan to make available £4.5m per annum to the B.I.F. this delivery mechanism would require most of the B.I.F. support available over the 3 years 2003/04 to 2005/06.  This would obviously severely limit the Council's ability to make B.I.F. resources available to progress other T.P.I.P. priorities over the next 3 years.

 

Stage 3 Option C:

 

25.    This is a compromise between the two options of 3a and 3b.  Here the Council’s design team take forward the design to say 60% complete and then bids are invited from the private sector on a DBFOM basis.  This approach will improve the level of control which the Council has over the content of the scheme. 

 

Risks and Assumptions

 

26.    The advantages and disadvantages of each of the three routes are:

 

3a – advantages

 

            1.  Minimises the role and responsibility of the Council

2.      Minimises the capital and lead-in costs of the Council

3.      Allows a variety of scheme ideas to come forward for selection

4.      Strong input and guidance from the Council and it’s partners

 

3a – disadvantages

 

1.      The Council does not know what level of cost it will be required to meet until the procurement process is well underway

 

2.      Any legal charge/security for capital invested into the scheme by the Council will probably be subordinated to that of a bank and this will adversely affect the influence of the Council in the event of project failure

3.      There may be only few companies willing to bid for this contract which increases the risk of non-delivery – the scale of the contract is modest.  PFI type contracts are not suited to projects of less than £5m, but in practise are often many times that amount.

 

 

3b – advantages

 

1.      Maximises the control of the Council and guarantees its delivery against a predictable timescale

2.      Guarantees that the type of facility which the Council and other interest groups want is actually delivered

3.      Enables the Council to fully control the security of the money that it has invested into the project.

4.      Enables the Council to divest itself of the management and maintenance responsibilities for 25-30 years

5.      Strong input and guidance from the Council and it’s partners

 

3b – disadvantages

 

1.      Capital cost to the Council equates to the full cost of the building contract plus feasibility and design fees, less any external grants

2.      The Council would be responsible for the procurement of a construction project – although in practice it would appoint (via 3D) well qualified professionals to oversee this matter, with full indemnities in place

3.      Severely limits the resources available for other T.P.I.P. priorities over the next 3 years.

4.      Council exposed to financial risk of increased construction costs.

5.      Council exposed to pressure to meet the cost of future enhancement of stadium facilities.

 

 

3c – advantages

 

1.      Enables the Council to maximise the chances of securing the design it wants and simplifies the bid evaluation process

2.      Minimises the capital contribution of the Council

 

3c – disadvantages

 

1.      Increases lead-in costs over and above 3a

 

Timeframe:

 

·        Preparation of output specification and Heads of Terms agreements with the 3 clubs  - 3 months (stage 1)

·        Preparation of outline Business Plan and outline scheme – 3 months (stage 2)

·        Expression of Interest in OJEC and press, analysis of response – 6 weeks (stages 3a or 3c)

 

Consultation

 

27. A regular liaison meeting is held with the sporting clubs to keep them fully informed of progress made and of the all issues under consideration and to gain their views. The clubs are very supportive of the proposed way forward and are very amenable to a Joint Venture delivery.

 

28. Also as part of the preparation of the new Lakeside Masterplan the appointed consultants EDAW undertook considerable local consultation a component of which was the location of the stadium. There were no strong objections to its potential positioning in Lakeside nor of the suggested community uses.

 

Financial Implications

     

29.    A Borough Investment Fund (B.I.F.) has been established in the current financial year with the objective of providing the D.M.B.C. element of the funding to facilitate the delivery of the Transformational Projects Investment Programme.

30.    The Community Stadium is of course a transformational project and when the Council approved the capital programme for 2002/03 to 2004/05 on the 24th April 2002, a capital budget of £1m was approved to progress the project.
The costs identified as being necessary to be incurred to reach the end of stage 2 will be met from this approved budget.

 

 

 

 

Legal Implications

 

31.    The appointment of consultants to deliver Stages 1 and 2 needs to be the subject of competition under the Council's Contracts Procedure Rules. Under Part 1 of the Local Government Act 2000 the Council may use its well-being powers to incur expenditure if it is of the opinion that by doing so it is likely to promote or improve the economic, social or environmental well-being of its area or residents.

 

 

32.    Ultimately the preferred delivery option will be driven by the outcomes of Stages 1 and 2 and will be the subject of a further report and legal analysis in the context of relevant recommendations. The following key legal issues apply to each of the provisional delivery options identified in this report: -

·         Section 233 of the Town and Country Act 1990 may be utilized to avoid the duty imposed on the Council to achieve the best consideration reasonably available to it on the disposal of its land under Section 123 Local Government Act 1972. Using Section 233 the Council may impose conditions on the sale, resulting in a reduction in value, restricting the land's use to specific purposes consistent with allocated planning purpose.

·         Relevant EEC Procurement Regulations and Council Standing Orders will apply.

·         Well-being powers under the 2000 Act may be used by the Council fund works and provide financial assistance to others.

 

Property Implications

 

33.    Any disposal of council owned land has to achieve best consideration in keeping with the local government act 1972. Also any conditions set in the disposal, which would affect the market value of the site, would be in contravention of the above act. Other acts can be utilised in a disposal to achieve certain aims e.g. Town and Country Planning Act 1999 section 233. Whichever method of disposal is adopted legal input will be required, as will the views/opinions of the district auditor.

 

Other Implications

 

34.    There are no other implications arising from this report as it seeks authority to pursue a way forward for delivery. Other implications may arise further into the negotiations and these will be reported in the appropriate way

 

 

Conclusions

 

35.    If Cabinet decides that the over-riding consideration is to try to minimise the cost of the scheme to the Council and also to minimise its level of involvement in the delivery of the project, then clearly 3a is the best route.

 

36.    If this route is selected, then it is recommended that time is set aside for initial market testing in order to ascertain whether there are sufficient reputable and experienced companies in the private sector willing to bid for the DBFOM contract.  This would be done by running an “expression of interest” advertisement in OJEC and also the specialist leisure sector press.   If the response rate were to be poor, then this option would be high risk and should not be pursued to the next stage.  However, if interest levels were good, then full procurement could be pursued.

 

37.    This market testing exercise should be done whether 3a or 3c is selected.

 

38.    The Council may wish to consider it’s role in the future operation of the Community stadium on the grounds that this is not core business.   Nevertheless, whether involvement is minimised or not, if the business fails in the future, the community are likely to perceive that the Council is in the lead and will expect the Council to act to resolve difficulties.  If either route 3a or 3c is selected, the Council may find it difficult to influence matters in the event of any receivership or administration, despite its capital stake.

 

39.    Route 3b minimises the risk of non-delivery of the stadium but maximises the cost to the Council.  Risks associated with the management of a construction contract can be controlled via the mechanism of 3D and by the appointment of recognised experienced engineers. Such a mechanism has been used on the Arsenal stadium project and the Millennium Dome both of which were delivered on time and on budget.

 

40.    The outcomes of stages 1 and 2 will clarify issues and determine which approach to take to stage 3.

 

 

Contact Officer:      Tim Johnson

                                    Economic Development Manager

                                    736750

 

Report Author:        Judith Atkinson

                                    Interim 3D Director

 

                                    Dave Hazard

                                    Economic Programmes Group Leader

 

 

Janet Dean

Executive Director - Borough Strategy & Development

 

Background Papers

 

Doncaster Stadium Development Feasibility Report May 2001 Drivers Jonas – Overview and Scrutiny Standing Sub- Committee—Regeneration December 2001

Doncaster Community Stadium – The Vision in Appendix 1

 

 

Appendix 1                         Doncaster Community Stadium - The Vision

 

To develop a high quality; well designed, fully accessible Community Stadium with a capacity in the region of 10,000 which is a source of pride for all who use and visit it, which is seen as the benchmark for small scale Community Stadiums in the UK

 

The project will embrace the following:

 

·                    The provision of genuine Community access to facilities within the Stadium these could include for example: Learning suite/classroom; Flexible Community space; Focus for educational uses – sport into Education; Education City satellite

 

·                    An innovative, quality design which reflects its highly visible Lakeside location and which acts as a catalytic project.  Whilst the basic interior i.e. pitch environment/ seating/standing is likely to be of a fairly basic nature, the external appearance must be of a quality that engenders genuine pride in the Stadium and which enhances its commercial attractiveness.

 

·                    A venue which supports the professional clubs in reaching their sporting and commercial potential.

 

·                    The development of a Effective Green Transport Strategy and plan which reduces the need for predominantly car access.

 

·                    The use of sustainable technologies in the design and build process.  

 

·                    Maximising  the venue for sporting events of regional and national significance e.g. Women’s Internationals; Semi professional Internationals etc

 

·                    The provision of quality hospitality facilities that, maximise the Lakeside location; complement other uses on Lakeside and which contribute significantly to the viability of the Stadium on a 7 day a week basis.

 

 

·                    A focus for other sport provision within the Borough, that could benefit from adjacent location and shared facilities.

 

·                    The provision of appropriate and quality enabling development that fits within the Lakeside Masterplan and accepted planning policy.

 

·                    A design which can embrace success in that it can be expanded in the future if demand exists.

 

A Stadium within the Community and for the Community

A Stadium that will help the Borough Achieve its full potential.