Tesco Land Deal Referred To European Parliament Member

[Louis]

This letter was sent to Chris Davies MEP by Knowsley Liberal Democrats.

 

Dear Chris

 

Tesco / Everton / Knowsley plan - Kirkby.

Appropriation of Land.

 

Following our brief discussion in Bournemouth on conference Sunday 20 September regarding this matter I have drawn together documents relating to this proposal that were considered by Knowsley MBC prior to the Public Inquiry, and those presented in evidence during the Inquiry.

 

I will set out on a separate page the nature/ dates of the documents I refer to, hopefully to permit easier points of reference.

 

On behalf of the Knowsley Constituency Liberal Democrats it is hoped you can pass on our concerns to the European Commission about a land transaction by Knowsley MBC to Tesco plc as part of the above plan that at the time of writing awaits determination by the Secretary of State for Communities.

 

We consider the Council as a public body are operating as a business and may be granting state aid through the sale of land to a private company at a valuation that may not correspond with the Councils 6 year old valuation.

 

The background is contained in a report of Knowsley MBC dated 21 June 2006 that refers to a "Development Proposal for Kirkby Town Centre"

 

It relates to the above plan that later emerged on the 9 June 2009. Copy of 21June 2006 & Planning Report. Inquiry Document CD 5.1. ( Part ) 9 June 2009 attached

 

In the report 21 June 2006, page 38 paragraph 4.1 under Financial, "the second paragraph states the overall cost of the development proposal has been estimated by Tesco plc as approximately £250 million, and it is expected that the Council's main financial contribution would be through the investment of the land (circa £50m) into the scheme"

 

On page 31 under 2. Recommendations © "the Council set out their proposals to negotiate the terms of an exclusivity agreement with the developer to offer the developer the comfort that the council will not negotiate with other retail/leisure developers for a period of twelve months in respect of the sites identified in their proposal....."

 

This partnership between a public body and private company is clearly established by these proposals, and was confirmed in a document later considered by the Tesco public inquiry ref: KMBC/ INQUIRY/ 7. copy attached

 

When the Council identified that their investment of land was (circa £50m.) it would correspond with the Councils own valuation of land six years earlier at £1million per acre, this is referred to the attached press article dated September 2, 2003.

 

However by the 4 June 2008 the Council considered a report titled "Potential Redevelopment of Kirkby Town Centre - Disposal of Land Interests" On page 148 the Council were advised by one firm of valuers that the land that would form their investment in the proposed scheme was valued at £12 million. This equates to a drop of 75% in the value of land in their boundary that the Council set out in their report dated 21 June 2006. It is felt this price variation is commercially unsound. report 4 June 2008 attached

 

The total amount of land described in the report dated 4 June 2008, page 148, is 48.6 acres, plus what is described "as a number of other Council land interests" within the development site.

 

The 48.6 acres is designated as education and urban green space in Knowsley Council's unitary development plan, making it prime development land.

 

The Council initially valued their land interest at "circa £50million" in 2006, however when we reach the formal planning stage in 2008 it falls in valuation to £12million. It is believed this unexplained drop in valuation is likely to financially benefit the purchaser.

 

It should be noted that in 2003 the Council issued a press release stating land in their borough was valued at £1 million an acre. This a marked disparity with the Council's commissioned valuation in 2008. press article 2 September 2003

 

In addition the proposed sale is not being concluded on the basis of an open and unconditional bidding procedure, accepting the only bid.

 

Notwithstanding any disposal pursuant of the Local Government Act 1972 general disposal (England) and Circular 06/03, 2003, "disposal of land for less than the best consideration that can be reasonably obtained": It is felt the disposal may be in conflict with the advice in the EU Commissions Communication on State Aid - Sale of Land (97C 209/03).

 

It is also important to consider what was included in the planning report when the Council made its planning decision, prior to the call in by the secretary of state. The planning report dated 9 June 2008 ran to 420 pages. Copy attached.

 

I refer to the part that deals with the applicant's submissions and titled Financial Statement page 56.

 

This sets out the costs of the new stadium and the enabling role of retail element, this identifies a shortfall of £52m under the third bullet point.

 

On page 57 second paragraph it reads "the applicant updated their financial statement document in May (2008) through an additional single page document" it's is both vague and spare on detail identifying any funding head to meet the £52m shortfall. DTZ Financial Update Document 38. 13th May 2008 attached.

 

In the applicants financial statement prepared by DTZ -Development Consultants, dated 10 April 2008, on page 5 paragraph 4. 4.2 the shortfall of £52m is referred to. DTZ Report dated 10th April 2008 attached.

 

In neither the planning report (9 June 2008) or the DTZ Financial statement (10 April 2008) is there any mention of the proposal in the Councils cabinet report dated 4 June 2008 under Financial- paragraph 6.1.1 page 157 to re-invest the £12 m. income from the sale of the land to Tesco in replacement Council facilities.

 

It is a widely held view in the local community that the more realistic value of the 48 acres of land is nearer to the £52m shortfall that has been identified for the stadium project, and the land value could later emerge in a formula that address's the shortfall. The local press article dated June 2008 copy attached.

 

This view has been arrived at using the Council's own valuation methodology, a process they have previously been happy to publicise for promotional purposes.

 

The complexity of this matter can be illustrated by the fact there were two pre - inquiry meetings prior to the public inquiry, which sat from November 2008 until February 2009. Among the objectors were Grosvenor, owners of Liverpool One: and three out of the other four local authorities on Merseyside, together with local traders, residents, and community and voluntary groups.

 

We request that the Commission consider if the use of state aid applies in this instance, and whether a public body may be giving a gratuitous advantage of state resources to a private company - Tesco plc - to subsidise the construction of a new football stadium as part of a retail redevelopment.

 

Yours sincerely

 

Peter Fisher on behalf of the Knowsley Constituency Liberal Democrats

 

Attachments to Letter to Chris Davies, North West MEP. 5 October 2009

 

Enclosures

 

• Council Report dated 21 June 2006
• Council Report dated 4 June 2008
• Council Planning Report ( Part) front cover and pages 56.& 57 dated 9 June 2008
• DTZ Consultants Financial Statement dated 10 April 2008
• DTZ Consultants Financial Update dated 13 May 2008
• Exclusivity Agreement between the applicants Ref: KMBC/INQUIRY/ 7
• Liverpool Daily Post Article dated 2 September 2003
• Local Press Article dated June 2008

 

Total 8 Documents

 

 

Apparently, one of the documents suggests suggests that KMBC will receive one third of "the income generated from the operation of any new stadium."

[Bailey]

all gobbledegook to me louis but one thing is certain the land valued 6yrs ago wont be worth anything like it was then due to the recession.

 

 

Dunno, land prices seem to stay fairly constant but there might be a small reduction. However things like building costs etc should have gone down quite a bit. I dont know whether they have already agreed a deal with contractors but if they 'shopped around' then im pretty sure they may be able to get the costs down a wee bit.

[thechair]

so does this mean the decision will be delayed?

[Louis]

The decision is still going to be next week (Thursday or Friday in my opinion). Patto, some of it is gobbledegook to me too. Essentially what is happening is that Knowsley's Liberal Democrats believe it is unjustified state aid and have reported it to an MEP to look into. The letter says it was valued as 50million in both 2003 and 2006 but when it come to planning stage later on in 2006 the value decreased. I don't think land values will have decreased almost 80% in six months.

 

Something might come out of it, it might not (and probably won't).