Content

Salford City Council - Record of Decision
(Cabinet)

13 February 2024
 
I, Paul Dennett, City
Mayor, in consultation with Cabinet and in exercise of the
powers contained within the City Council’s
Constitution do hereby:
 

1.   
Consider the 4 options
put forward within the report to acquire the City of Salford
Community Stadium either through the outright purchase of the
Stadium or for the Council to take full control of the City of
Salford Community Stadium Ltd (CoSCoS)
through the acquisition of Peel’s shares in CoSCoS.  

 

2.   
Note the impact of a
decision to purchase on the Council’s debt position in
CoSCoS which will see its priority debt
position in CoSCoS reduce, reflecting
the value attributed to the stadium as part of the purchase
arrangement. 

 

3.   
Note that further
financial and legal advice is still required in order to finalise
any tax and legal implications advice as part of the due diligence
process and to support the Council’s stance on negotiations.
Note that this due diligence will need to be completed before
acquisition and the opportunities and risks associated with such a
purchase in coming to a decision.

 

4.   
Authorise the
acquisition of the Stadium Company via the Council’s
preferred route, Option 2. 

 

5.   
Authorise the Executive
Director Place in consultation with the S151 Officer to negotiate
with Peel with the intention of finalising heads of terms and
reaching agreement for the conclusion of the acquisition via the
proposed route of Option 2. 

 

6.   
Authorise the City
Solicitor to prepare all necessary documentation and to take all
steps which are required to give effect to the
decision. 
 

7.   
In relation to points 5 & 6 above the outcome of
negotiations with Peel and all associated paperwork to be discussed
with the City Mayor and Deputy City Mayors to allow for a briefing
with the Leader of the Official Opposition in advance of the final
sign off.

  
The Reasons are:
To support the
achievement of the objectives set out in the Council’s
statement of intent approved by the Council on 20th March 2023,
which were as follows:
 
1. To deliver demonstrable and ongoing social
value via CoSCoS, its tenants and
associated activities and any associated land transactions, to
contribute to the Council’s aspirations for social value in
the community as set out in The Salford Way strategies.
 
2. To secure the ongoing community use of the
City of Salford Community Stadium, in keeping with the strategic
rationale for its original construction and the remaining funding
conditions associated with infrastructure grant funding initially
received.
 
3. To secure Best Value in the use of public
money in any associated transactions involving the City Council,
including consideration for any ongoing financial or other support
provided to Salford Red Devils RLFC and any potential subsidy
control implications of this.
 
4. To secure the Council’s long-term
interests in any future redevelopment and regeneration of the
CoSCoS site and adjacent development
land.
 
5. To build on the positive legacy of
regeneration and social value delivered to date via the
CoSCoS joint venture.
 
6. To support Salford Red Devils RLFC and
retain them playing in the City of Salford.
 
7. To recognise and celebrate the 150 year
history and cultural contribution to the City made by Salford Red
Devils RLFC and the Salford Red Devils Foundation, and to help
develop a city-wide rugby strategy building on this heritage. This
important contribution includes the physical and mental health and
wellbeing in the City.
 
8. To support and encourage the longevity of
Salford Red Devils RLFC, and a sustainable financial plan for the
Club, evidenced by a compelling business and restructuring plan to
be developed by the Club.
 
9. To support Salford Red Devils RLFC to get
into a long term financially sustainable position within a
time-limited period.
 
Options considered
and rejected were:
To acquire the
Stadium separately from the CoSCoS
stadium company: to acquire the CoSCoS
stadium company without the development land, or to do nothing and
continue with the existing arrangements. However, this may not
secure the ongoing community use of the City of Salford Community
Stadium, in keeping with the strategic rationale for its original
construction and the remaining funding conditions associated with
infrastructure grant funding initially received.
 
Assessment of
Risk:
There is a potential
for significant risk in respect of the overall acquisition of the
stadium company, CoSCoS.  However, this decision acknowledges the need for
further detailed due diligence and legal and financial advice
before legals can be fully completed. 
That full and final advice legal and financial advice should help
to manage and mitigate any risk associated with the ultimate
decisions on this matter.
 
The source of funding
is:
 

There are no cash implications in the purchase as it
is swap of an existing priority debt for additional equity shares
in the company.  
 
Legal Advice obtained:
The key
legal risks associated with the various Options are in
summary:

 

Option 1 (Purchase of the Stadium asset):
the Legal Risks analysis identifies the key implications, including
key contract preconditions to the acquisition, subsidy control
risks, loss of the limited liability shelter, continuity of current
CoSCoS governance, risks associated
with not having full control of CoSCoS,
the need for agreement with Peel on the restructuring of debt
within CoSCoS, and the requirement for
legal due diligence.

 

Option 2 (Purchase of the Stadium Company
(as it is)): the Legal Risks analysis identifies the key
implications, including key contract preconditions to the
acquisition, subsidy control risks, valuation methodology, the need
for agreement with Peel on the restructuring of debt within
CoSCoS, the assumption of full
governance responsibility for CoSCoS
and the requirement for legal due diligence.

 

Option 3 (Purchase of the Stadium Company
(with development land stripped out and debt restructured): the
Legal Risks analysis identifies the key implications, including key
contract preconditions to the acquisition, subsidy control risks,
valuation methodology, SDLT and the need for agreement with Peel on
the restructuring of debt within CoSCoS, the assumption of full governance
responsibility for CoSCoS, the
acquisition of governance and management responsibility for the new
development land entity and the requirement for legal due
diligence.

 

Option 4: (Do nothing): If Peel formally
withdraws financial support the key legal risk is insolvency, with
subsidy control risks if the Council provides financial support
unilaterally.
 
Financial Advice obtained:

Several valuations have been undertaken to ascertain
a fair value for the land and stadium asset, valuations are subject
volatility in values of development land due to current economic
conditions.  This decision does not
significantly change the Council’s current exposure on this
risk.

 

There are no immediate additional revenue
implications for the Council’s budget as a result of the
acquisition as the capital financing costs for the capital loan to
CoScoS are already provided for in the
Council’s budget.
 
As the Council will continue to
have liability for any losses from the stadium operation, it is
necessary to ensure that CoScoS is on a
stable financial footing in the future and that Salford City
Council meets its own objectives of best value as set out within
the strategic intent document and meets subsidy control
rules.

The financial due diligence work for this proposal
will continue alongside commercial negotiations to ensure the
financial risk and value for money for Salford is transparent and a
key consideration in the final decision making process.   
Procurement Advice obtained: N/A
HR Advice obtained:
N/A
Climate Change Advice
obtained: N/A
 
It is noted that at
the Cabinet Meeting the following members declared a personal and
prejudicial interest in this matter and left the meeting prior to
any decision being taken :
Councillor Hinds and
Councillor Lancaster
The following
documents have been used to assist the decision process:

Appendices 

1.   
Comparison Table of
options  

2.   
Cabinet Report Jan
2023 

3.   
Cabinet Report July
2023 

 

Background Documents
Available: None
 
Contact
Officer:  Tom Stannard                           
Telephone number:

The appropriate
scrutiny to call-in the decision is the Growth and Prosperity
Scrutiny Panel      
 

Signed:     Paul
Dennett                      
    Dated:   21.02.24 
City Mayor
 

For Democratic
Services use only

This decision was
published on 21.02.24
This decision will come in force at 4.00 p.m. on 28.02.24
unless it is called-in in
accordance with the Decision Making Process Rules.