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Big week for Hereford's ESG scheme
THE future for Hereford's £90m ESG shopping and leisure scheme hinges on the next week.
Within the next 24 hours a special meeting of the council's overview and scrutiny committee could be confirmed to examine cabinet's authorisation yesterday (Wed) of an extra £500,000 for British Land, the scheme's funding partner.
British Land raised the stakes on the deal saying changing market conditions meant that for it to continue it needs to see a change in the financial return from the development.
Developer Stanhope will meet the shortfall in the terms of its funding agreement with British Land in part by the council accepting a £500,000 reduction in the payments it was owed from Stanhope and British Land.
But the ESG deal cannot be confirmed as done until any scrutiny process is completed. As of this morning (Thurs), a special scrutiny meeting into cabinet's decision was itself still to be confirmed.
If the meeting goes ahead it is likely to be either Thursday or Friday next week, with cabinet holding an extraordinary meeting - whatever the outcome - straight afterwards.
Two key issues have emerged for scrutiny to explore:
* When was it first known that the extra £500,000 would be asked for? Councillor Mark Hubbard, group leader of It's our County, told cabinet yesterday that he had been denied the opportunity of a full council debate on additional payments based on information he had received over the summer. The council says the first it knew of the need for another £500,000 was late last week.
* Can the £500,000 be challenged as unlawful state aid to Stanhope or be regarded a "material change" to the development agreement - for the purposes of procurement law - in changing the economic balance of the deal in favour of Stanhope?
There is already talk of a legal challenge to cabinet's decision on the basis of unlawful state aid alone.
Legal advice to the council is implement the £500,000 "contribution" by way of a standalone Deed of Variation rather than amending the development agreement.
A separate Deed of Variation would include an obligation on Stanhope to repay the £500,000 in the event that sum was considered state aid.
But even without this provision, existing legislation already requires the council to recover the money if it was considered state aid.
- See related link: 'It beggars belief that Herefordshire Council is falling for brinkmanship over cattle market deal'. http://www.herefordtimes.com/news/letters/10021468._It_beggars_belief_that_Herefordshire_Council_should_fall_for_brinkmanship_over_cattle_market_deal_/