The proposed new Everton stadium at Bramley-Moore Dock has recently been in the headlines.
As reported Liverpool City Council has proposed a finance deal but it is important to note it has not been finalised yet and is still being negotiated.
Mayor Joe Anderson has stressed all along that there will be a very public and open scrutiny about the terms of any deal. (See him explaining why the council is exploring the deal here)
However, in principle, the idea is that Everton Football Club borrows around £280m from the council to part finance their new stadium at Bramley-Moore Dock.
Here’s some key questions and answers on the issue:
How would the deal work?:
The city would lend Everton money at an interest rate which would deliver a surplus to pay for frontline services on completion. The profit would be expected to be around £7m a year. A new stadium and the redevelopment of Goodison would also kick start a huge regeneration impact in north Liverpool, with potentially new commercial and community assets, open space and housing which would generate new, net Business Rates and council tax – which, again, we could spend on council services.
Having lost £444 million in government finding since 2010, councils like Liverpool simply have no choice other than to adopt a commercial approach with our assets and services so we can continue to fund frontline services and protect the most vulnerable in our city.
Why is this loan a good deal for the city?
A new Everton stadium at Bramley-Moore Dock would become a transformational regeneration project for our city centre, delivering a £1bn boost to our local economy – an amount that is clearly ‘a game-changer’.
During construction, more than 12,000 jobs for local people would be created with more than £255m estimated to be spent locally through supply chains and other service costs during the same period.
Subject to a detailed economic appraisal it is estimated to generate more than £900m would be generated for the local economy before the stadium was even completed. Once complete, £94m a year would be generated through hotel occupancy, retail and tourist spend across the city.
It would be a catalyst for even further regeneration of the area and would enhance the £5.5bn Liverpool Waters scheme, having already created more interest in Liverpool Waters from investors, as well as the nearby Ten Streets District.
Where is this money coming from?
The Public Works Loan Board (PWLB). This is a statutory body of the UK Government that provides loans to public bodies from the National Loans Fund. PWLB provides loans to local authorities and has been helping finance capital spending since 1793.
Money drawn down by local authorities can only be used for capital spending on assets that are expected to last more than one year. (Land, buildings and equipment are all seen as spending on capital).
Crucially, local authorities cannot use borrowing to spend on day-to-day services run by the council (i.e. social care, bin collections).
Why is the council involved?
This is a major regeneration scheme for the city as a whole not just for the club or North Liverpool.
The council has been in detailed discussions with Everton for more than two years and, following on-going detailed due diligence, proposes to make a loan to Everton, on commercial terms, with the guarantee of a commercial return on our investment.
The margin the council would derive from this investment, as part of our ‘Invest to Earn’ strategy, would create an income stream that will be ploughed straight back into supporting frontline public services.
Why doesn’t Everton go to a bank for the money?
The council’s proposed investment would come from a loan that only the public sector can access at very low interest rates. The city would borrow this amount and loan at commercial terms loan to Everton, at a profit. No existing council money would be used, so there would be no impact on services.
Also, it’s important to note there are no concessions or subsidies involved here. This would be a commercial arrangement where the City Council potentially makes £7m a year spend on services, along with the additional Business Rates from the site. This way, the council gets the receipts from the loan and can realise all the regeneration benefits from the scheme, rather than the margin going to a bank or other third party.
Will this stop the Council spending in other areas?
Absolutely not. This would be capital not revenue Our borrowing powers allow us to finance large infrastructure projects, not routine services. The council is considering this commercial deal alongside other investments and subject to other prudent, affordable businesses cases, the council can borrow money to fund other key infrastructure developments.
When will the deal be concluded?
Negotiations are ongoing and then there will have to be due diligence through scrutiny on any eventual deal to prove it represents value for money for the city. The Mayor has repeatedly said that we simply won’t enter into a deal unless it is good for the city.
If negotiations with the club conclude successfully, the deal will be subject to detailed due diligence from legal and financial advisers. Further on-going assessment will support a decision to take the deal to cabinet and full council for final agreement, subject to all the appropriate council scrutiny mechanisms.
Does Liverpool have too much borrowing already?
Actually, the city’s borrowing is very low in comparison with other major cities. A recent report on our finances, carried out independently by the Local Government Association, showed Liverpool has the second lowest borrowing of any of Core Cities.