Decision details

a)    That the latest position regarding progress with and costs of the North and East Melton Mowbray Distributor Road (NE MMDR) scheme be noted;

 

b)    That the three options for the Council, all of which have significant financial consequences, be noted;

 

c)    That Option 1, to progress to delivery, is approved subject to confirmation by the Department for Transport that the Full Business Case for the NE MMDR is approved, and that the Large Local Majors funding for the scheme will be released;

 

d)    That subject to c) above, the Director of Environment and Transport, in consultation with the Director of Corporate Resources and following consultation with the relevant Cabinet Lead Member, be authorised to undertake the necessary actions to construct the NE MMDR;

 

e)    That in the light of the Council’s extremely serious financial position set out in this report, the Directors of Environment and Transport and the Director of Corporate Resources, following consultation with the relevant Cabinet Lead Members, be authorised to prioritise current available developer funding towards the delivery of the scheme and pursue additional funding, including with Melton Borough Council, the local Member of Parliament, the Department of Transport and developers;

 

f)      That the Director of Corporate Resources be authorised to manage the financial arrangements for the funding of the scheme using the range of treasury management options available to minimise the cost of providing gap funding for the project.

 

(KEY DECISION)

 

REASONS FOR DECISION:

 

The NE MMDR is a key piece of infrastructure (identified as part of Melton’s Local Plan) that is designed to facilitate sustainable growth in the Borough and economic growth in Leicestershire and the East Midlands.

 

Despite the increase in costs the scheme still represents value for money. Given the Council’s current financial challenges and cost escalations on the scheme it is faced with a difficult decision: whether to proceed with delivery of the NE MMDR, to withdraw from the scheme, or to pause work on the scheme. However, based on current information a decision to proceed with the scheme will provide most benefit for the investment and meet the objectives outlined above. 

 

There are a number of processes and contractual arrangements necessary to deliver a major transport infrastructure scheme that will be delegated to the relevant Directors to implement in accordance with the arrangements set out in the Constitution.

 

The ongoing financial challenges facing the Council necessitate the need to maximise external funding where possible. This will reduce the detrimental impact that would result from redirecting resources from other services. The Council’s capital programme borrowing requirement will increase as a result of the scheme.

 

OTHER OPTIONS CONSIDERED:

 

(Detailed in the report and summarised below)

 

Option 2 - do not proceed to delivery

 

Benefits included the reduction of upfront costs to the Council and the related borrowing requirement, and that there would be potential to use capital funds for other schemes or priorities.

 

Disbenefits included significant negative strategic planning implications, notably in relation to Melton BC’s Local Plan and housing development in the Borough but also relating to wider strategic planning activity in the Leicester and Leicestershire Housing Market Area.  Other adverse implications included reputational damage, potential negative impact on future funding bids, the need to re-design the MMDR South, and an added financial burden in providing school places if remaining development was not brought forward as envisaged in the Melton BC Local Plan. The £14m spent by the Council to date on the scheme would not be recoverable.

 

Option 3 - pause the scheme

 

Benefits included the potential to seek additional funding and the possible review or restructure of Melton BC’s Local Plan.

 

Disbenefits included the likelihood that costs would rise further whilst the scheme was paused, thus offsetting the benefit of any extra funding.  There were costs associated with a delay: the current scheme forecast was based on a target price agreed with the contractor and would not remain valid if the scheme did not proceed in line with the current programme. A new costing exercise would take at least 6 months. Existing developer funding agreements were likely to be linked to generic inflation rates. A pause would mean uncertainty for planning-related activity, outlined in Option 2. The project team would need to be reallocated to other work and the expertise/knowledge of the NE MMDR project lost. If in the short to medium term additional funding was not secured the pause would in effect become a withdrawal.