AN inquiry into Herefordshire Council’s “commitment” to cover £2.5 million of running costs related to the Marches Local Enterprise Partnership (LEP) will be held in Hereford next week.

The council’s scrutiny committee has a day to examine the council effectively committing county taxpayers to funding a quarter-century of running costs for the LEP through an agreed investment approach to the Hereford Enterprise Zone at Skylon Park, Rotherwas.

Councillors Chris Chappell , Alan Seldon and Liz Harvey called the commitment in for a scrutiny hearing at Hereford Shirehall on Wednesday (Jan 14).

However, Scrutiny’s influence over the decision is limited as it was made by the LEP.

Initially, it was thought that the hearing would have to be held out of the county because the council had an obligation to consider a  venue central to the Marches area as a whole.

As revealed by the Hereford Times last month, the council has effectively committed county taxpayers to funding a quarter-century of running costs for the LEP through an agreed investment approach to the Hereford Enterprise Zone at Skylon Park, Rotherwas.

This approach sees some £50 million staked on Hereford having a new road over the Wye.

That figure represents what would the crossing would be worth to the LEP for re-investment.

The LEP is a driver of the enterprise zone and potential funding for the road that it calls “critical” is identified in the zone’s funding.

Meeting earlier this month, the LEP joint executive committee backed a new river crossing as “critical” to the success of the zone.

An agreed scenario by which a crossing could be achieved has the 25 year running costs of the LEP met through £100,000 a year in additional business rates from 2016/17.

The scrutiny committee can examine what the council has been committed to and, if deemed necessary,  ask the LEP to look again.

But the LEP  is under no obligation to do so.

Issues for scrutiny are:

* Obliging the council to find  £100,000 a year to fund unspecified LEP running costs effectively commits the authority to paying £2.5 million  over 25 years with no guarantee of business rates income in each of these years.

The report to the LEP committee conceded that a return from the zone  "has to be worked hard"  with the potential of not making a return until 2022/23.

* If the return showed signs of being reached, the council  would have funded £700,000 of tax payers' money before - if at all - being able to draw down on the £100,000 each year from business rates accrued.

Scrutiny councillors will be asking whether or not these figures have been included in any of the budget or policy papers put before full council or cabinet.

* The process by which the council committed itself to the scenario could also be questioned as not handled in accordance with the council’s constitution as it has not appeared on the agenda of any council or cabinet meetings and has not been discussed in either of these forums.

Reviewing options to accelerate delivery of the zone, the LEP has noted “limitations” that the city’s existing infrastructure could have on the project’s progress.

An advisory report to the committee from DTZ – commissioned by the government to work with enterprise zones across the country - considered the project’s financial position under three scenarios:

* Base Case – a summary of  interventions by  Herefordshire Council and outcomes to date, with £3.8 million of committed spending likely to provide an estimated take up of 35,525 sq m.

If no further proactive interventions were adopted, the report forecasts the rate of income over the 25 year life of the zone would be £21.3 million.

Following removal of costs and allowing for a contingency, a net surplus of £7.5 million would be generated over the 25 year period.

* Partial implementation of interventions but no river crossing

A range of further intervention measures or work costing £10.6 million would increase take-up across the zone to an estimated 49,435 sq m.

This would generate an estimated rates income of  £33.3 million.

Following removal of costs and allowing for a contingency, the report sees potential for a net surplus of £7.8-£8 million over the 25 year period.

* Interventions fully implemented and a river crossing completed

The report says a bridge would enable an estimated take-up of 146,925 sq m at a cost of £17.3 million.

This is said to have the potential to generate rates income of £79.4 million that, following removal of costs and allowing for a contingency, means a net surplus of £4 million over the 25 years.

The committee  was recommended to back the third scenario an investment approach and recognise the enterprise zone funding stream as a potential source funding for a river crossing.

But the report concedes that the success of the scenario does require the “certainty” of that river crossing.

And though the zone’s funding stream needed to remain one of the potential sources for the crossing, it needed Herefordshire Council to adopt a local development framework to make the situation clear.

Under the legislation establishing enterprise zones, business rates that are generated by new businesses occupying space on the zone can be allocated by the LEP to use for economic activity in the LEP area.

The DTZ model shows how this funding stream might be maximised over the life of the  zone to 2038 by investing in infrastructure.

Under the recommendation, Herefordshire Council will fund the interventions specified in scenario 3 on an agreement from other authorities involved in the LEP that those investments - and associated costs - are repaid from business rates.

The report says if the Wye crossing does not progress it is estimated that the additional investment will accrue an additional £7.8 million over the 25 years available for re-investment by the LEP.

If the crossing does progress, the report estimates the additional investment will accrue an additional £40.9 million over the 25 years available for re-investment by the LEP.

Herefordshire Council’s cabinet has backed SC2 despite scrutiny concerns that the selection process could have breached the council’s own rules.

In doing so, cabinet cites the “satisfaction” of council officers and outside consultants at the potential for the process to withstand procedural challenge and the case for its costs.

SC2 leaves the A49 at the Rotherwas access road roundabout to pass through farmland and Grafton Wood to cross over the Hereford-Cardiff rail line and under Haywood Lane in reaching a new roundabout near the A465-B4349 junction.