Lorn Arc Tax Incremental Finance Programme - Oban Airport Business Park - Update
Argyll and Bute Council · 10 October 2024
Back to Policy and Resources Committee — 10 October 2024 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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1.0 EXECUTIVE SUMMARY 1.1 At May 2024 Policy and Resources Committee it was agreed to allocate £8.05m from TIF to deliver the construction of roads, infrastructure, servicing and site works. This included an immediate draw down of £1.6m to deliver the Full Business Case for the overall project. 1.2 Ongoing work is also progressing in relation to identifying and securing other funded investment in the business park including and the development of commercial buildings for lease. This Full Business Case is now well underway and this paper provides an update on progress. RECOMMENDATION That the Policy and Resources Committee: i. Consider this project update relating to Oban Airport Business Park; and ii. Note another update report including the Full Business Case will be reported back to Members for consideration in December 2024. ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE COMMERCIAL SERVICES DEVELOPMENT AND ECONOMIC GROWTH 10th OCTOBER 2024 LORN ARC TAX INCREMENTAL FINANCE PROGRAMME – OBAN AIRPORT BUSINESS PARK – UPDATE
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2.0 INTRODUCTION 2.1 At May 2024 Policy and Resources Committee it was agreed to allocate £8.05m from TIF to deliver the construction of roads, infrastructure, servicing and site works. This included an immediate draw down of £1.6m to deliver the Full Business Case for the overall project. 2.2 Ongoing work is also progressing in relation to identifying and securing other funded investment in the business park including and the development of commercial buildings for lease. This Full Business Case is now well underway and this paper provides an update on progress. 3.0 RECOMMENDATION That the Policy and Resources Committee: i. Consider this project update relating to Oban Airport Business Park; and ii. Note another update report including the Full Business Case will be reported back to Members for consideration in December 2024. ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE COMMERCIAL SERVICES DEVELOPMENT AND ECONOMIC GROWTH 10th OCTOBER 2024 LORN ARC TAX INCREMENTAL FINANCE PROGRAMME – OBAN AIRPORT BUSINESS PARK – UPDATE
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4.0 DETAIL Background 4.1 The initial phase of investment at Oban Airport was for the installation of a road link and services to enable the development of a new business park adjacent to the airport – this was completed several years ago. Despite this investment there was nervousness of businesses to move into the site without additional infrastructure being provided. Following this market feedback, Estates have instructed site investigations, service assessments and costings and generated business interests in the site from aviation related businesses. The existing site and newly proposed service site layout is shown below: EXISTING SITE PROPOSED DEVELOPMENT LAYOUT
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4.2 Officers have been working with Stantec and other specialist consultants to deliver a serviced site proposition for the private sector at Oban Airport. The Council has not created a new business park for several decades but now is in a progressed stage at this location and at Kilmory Business Park in Lochgilphead. Creating business park space can create spaces for local and incoming business to growth and trade plus it has the additional benefit of creating commercial income as part of the Council’s rental portfolio. 4.3 At Oban Airport an Outline Business Case (OBC) has been produced and has secured funding from the TIF Executive (subject to Scottish Government approval) for the development of roads, infrastructure, servicing and site works and the OBC. This was detailed in full, including financial draw down and commitments, at the May P&R Committee. At that time the 2 initial lynchpin tenants of Bristow Search and Rescue and TSL were also identified as interested occupants of Plots 1 and 2. 4.4 Policy and Resources Committee agreed in May (subject to TIF Executive approval, which was subsequently obtained) that the team would proceed with a Full Business Case (FBC) and updates would be brought back to this committee. Work is well underway with the FBC and Members and public will start to see both planning applications and on site activity as part of that process. Statutory Consents Update 4.5 Obtaining planning permission for Plot 2A (Bristow SAR) is seen as a priority and this is programmed for submission early November 2024 at the latest. The team have had early engagement with Argyll and Bute Council planning team to make them aware of the upcoming submission. It’s then hoped that planning approval can be achieved by mid January 2025. Full Business Case (FBC) 4.6 Early engagement has taken place with Stantec and the team have set out in principle our approach to FBC. The majority of information will be pulled together by the end of October 2024 for submission with the exception of a fully market tested tender cost. This will allow for early submission/engagement on a price which has been verified by a Tier 1 Contractor as a cost envelope. The current target is to have a Stage 2 Pricing Report prepared by end of February 2025 for inclusion in to a final FBC. The report to Policy & Resources Committee in December 2024 will provide an update on this process and likely seek approval to proceed with the information available. The current programme (Appendix A) indicates site commencement will be in April 2025, however we’re considering if there are any opportunities for early site clearance to give a head start on programme and mitigate against nesting bird risks etc. The completion and handover of site 2A (Bristow SAR) would be January 2026. Tenant Engagement 4.7 The team have now held two meetings with TSL on Plot 1 and two meetings with Bristow SAR on Plot 2A. Both have been sent a list requirements for buildings and how they will use spaces. We are starting to receive feedback on this to allow team to agree the design of both buildings and general layouts by the end of September 2024 and get a cost verification as part of our hub Stage 1 Report.
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Funding Tax Incremental Funding 4.8 The principal source of funding currently being pursued to deliver this project is Tax Incremental Funding (TIF). Engagement has been ongoing with Scottish Government about extending the period of the TIF and the TIF Executive has been kept informed of updates. It was emphasised to the SG that the success of the extension has implication on the wider ability to deliver other TIF projects such as the Dunbeg housing development. Engagement with SG about the delivery of TIF will continue and future updates will be provided to P&R. Levelling Up Partnership Fund 4.9 Another source of funding for this project has been the Levelling Up Partnership (LUP). At this stage, there is no definitive update whether LUP will be a viable source due to the current national political circumstances stimulated by the change in Government at Westminster. Engagement has taken place with senior Civil Servants however it remains unclear about the delivery of both existing or new projects that had previously been earmarked. Updates will be provided when the position becomes clearer, however the narrative surrounding LUP at a national level is making it increasingly unlikely it will be available for this project. 4.10 Due to the unclear funding position that currently exists the Full Business Case is being progressed on a twin track basis. A contingency option (Plan B) is under development with Bristow’s in the event that the Council does not receive LUP (or other) funding to deliver the buildings. Bristow’s proposed they submit a concurrent planning application for a reduced facility on the same site as a backup plan (this is contingent on the Council delivering the site infrastructure). Whilst this would give a better chance of the development proceeding however the net position would be a substantially reduced commercial income to the Council on a ground lease only basis. This would also rely upon Bristow’s being able to raise their own capital which is at this point not certain. It would increase the risk profile of the project overall. 4.11 Beyond the above mentioned funding sources (TIF and LUP) there may be other options to financially support this project. However, these would potentially come at additional cost and make the financial case more challenging. Further investigation and exploration of funding options will be progressed and updates provided to this Committee at a future date. 5.0 CONCLUSIONS 5.1 The development of Oban Airport Business Park is an ambitious project. The Outline Business Case outlines, that while there is demand from businesses to be located at the site, there is a market failure due to the high costs of development. Following approval of OBC in May 2024 the team are now well progressed with the development of the Full Business Case (FBC) and both works on site and statutory consents are being applied for.
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5.2 The Tax Incremental Finance (TIF) programme offers an opportunity to address this by providing the funding to develop the infrastructure to allow the site to be developed. 5.3 Alongside this investment in infrastructure officers will also progress the business case for further investment in the site to provide accommodation for the businesses outlined within the report alongside the UAV (Drone) Hub proposed to be funded through the Rural Growth Deal. 6.0 IMPLICATIONS 6.1 Policy – None. 6.2 Financial – There has been £8.05m of funding approved from the TIF programme. Further funding requires to be identified from other sources and income will be received once sites are completed and leased out. Further funding from additional sources for other elements of the project will also require to be clarified in future reports once there is more clarity on external funding opportunities. 6.3 Legal - The terms and conditions of transactions arising from this project are intended to be delegated to the Executive Director of Customer Services. 6.4 HR – There will be additional resource requirements as the project moves into the delivery phase as outlined in the report. 6.5 Fairer Scotland Duty 6.5.1 Equalities – None. 6.5.2 Socio economic Duty – None. 6.5.3 Islands – Oban Airport provides lifeline services to the islands and supporting the development of a Mull based business and services including emergency search and rescue response will enhance this. The development of UAV technology also has the opportunity to improve connections to the islands. 6.6 Climate Change – Aviation in general is increasingly viewed as a climate change risk. However the services proposed to be developed at Oban Airport are mainly lifeline services rather than recreational or tourism related and some of the new UAV technology under consideration could reduce the need for traditional aviation thereby reducing the carbon footprint of the airport. In addition Oban provides a central location for search & rescue functions which could reduce the flying time of operational activity. 6.7 Risk – There are risks from undertaking the development such as cost overruns, unforeseen abnormal costs, statutory approvals and timescale pressure. However there are also risks from not undertaking the development such as stagnating growth, the decline of the airport and the loss of grant funding. 6.8 Customer Service – None.
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6.9 The Rights of the Child (UNCRC) – None. Douglas Hendry, Executive Director with responsibility for Commercial Services Kirsty Flanagan, Executive Director with responsibility for Development and Economic Growth Councillor Ross Moreland – Policy Lead, Finance and Commercial Services Council Leader Jim Lynch – Policy Lead, Rural Growth Deal & Strategic / Major Regeneration 11th September 2024 For further information contact: David Allan Estates & Property Development Manager The Helensburgh and Lomond Civic Centre david.allan@argyll-bute.gov.uk 01436 657620 APPENDICES Appendix 1 – Full Business Case Programme