From Capital of Culture to capital strategy

Sir Paul McCartney’s performance in front of 40,000 fans at Anfield stadium in June 2008 was perhaps the zenith of Liverpool’s year as European Capital of Culture. The year-long event was not cheap, with Liverpool City Council contributing £75m towards the £130m budget of the organising body, Liverpool Culture Company. But it undoubtedly played a key part in helping cast off the city’s bleak image as a victim of social deprivation.

Tim Povall, head of finance for regeneration, communities & capital at the council, tells Room151 that the council’s money was well spent. “There has been a snowball effect,” he claims. “Thanks to the change in perceptions about the city, we are now hosting more and more international events, which is helping to increase income from tourism. And as we go on, these events are costing the council less and less – commercial sponsors are much keener to get involved.”

Povall, who joined the council as finance manager in 1998, is one of three heads of finance at the council reporting to the director of finance. He is responsible for an annual budget of £100m across regeneration and communities services – covering planning, housing, environment, leisure, libraries, highways, youth services, and property management. And while admitting that the City of Culture title has made life easier, he says there is still plenty of work to be done to complete the transformation of the city’s fortunes.

The most tangible sign of the city’s new-found confidence are some of the major physical changes being driven partly by increasing private sector confidence, but partly by Povall and his team. Chief among these at the moment is the major extension to the city’s arena and convention centre, which originally opened in 2008. The new extension will add a new 8,000sq metres exhibition hall and 200 bedroom hotel next to the existing arena.

The plans are being driven forward by a standalone company owned by the council, an arrangement which has attracted key managers from Birmingham’s national exhibition centre. Povall says: “The council underwrites the company, which started to make surpluses after just five years of the original opening. But it is not just about the cash it provides to the council – the economic benefits to the city from conferences and concerts are huge.”

The council is also making the most of its strategic property assets. At the time we talk, Povall says his team is close to finalising a deal which will allow a charity providing children’s services to move into a building currently sitting on the council’s books. “They currently provide services in Liverpool but are based outside the city. Under this deal, they will pay a commercial rent but the council is going to carry out some improvements before the provider moves in.”

Povall says that although the council, along with many others, faces massive pressures on its resource budget, it is in a good position in relation to its capital budget thanks to receipts from the sales of some of the land it owns. Part of this was prompted by a need to find cash to improve schools after central government funding was slashed. Land freed up by the programme has been sold to housing developers, creating capital receipts on top of the school rebuilding work.

The council has not been slow to make use of these receipts. Last year it paid £1.95m to acquire the leasehold of the former Royal Insurance Building to help high-end hotel operator Aloft open its first facility in the UK outside London. Povall says: “The council will now get the business rates and the rental yield from the building – after ten years we will have made our investment back. And 160 jobs will have been created.”

Using the receipts from the sale of two of its other buildings, the council has acquired the famous Grade II* listed Cunard building on the city’s waterfront. The council will relocate staff to the site, generating accommodation costs of around £1.35m per year. It is hoped that another £1.75m will be generated from renting out spare office space in the rest of the building. And the council will have the option to buy the freehold for a nominal fee after five years.

Liverpool has also put some of its land into a joint venture partnership created with urban regeneration investor Sigma. The company, Regeneration Liverpool, was originally established in 2006 but was rebranded in 2012 following a lull in operations during the recession. Aimed at projects most deprived areas of the city, the firm is developing housing and commercial schemes.

Separately, the council has appointed a consortium of official housing delivery partners – housebuilder Redrow, building contractor Willmott Dixon, and housing association Liverpool Mutual Homes. The council says the partnership has the potential to deliver 1,500 new homes and bring a further 1,000 back into use. The partnership will provide executive homes side by side with affordable housing, with Liverpool selling surplus land to the partnership for development.

Both projects are helping the authority deal with the coalition government’s decision to withdraw funding which had been promised to help demolish and rebuild areas of low demand housing within the city. Povall says that the council has responded to criticism of the scale of demolition programme and is now taking a more sophisticated approach. He says: “We are compromising and are now carrying out some refurbishments – including knocking smaller homes in terraced streets together to create larger properties.”

Coalition policy has led to changes elsewhere in the city. Liverpool has been allocated two enterprise zones. The first covers the Liverpool Waters development being brought forward by developer Peel, aimed at regenerating rundown dockland areas. The second, announced earlier this year, covers land next to Liverpool Waters, but away from the waterfront.

The enterprise zones allow the council to provide business rate discounts to enterprises moving into the areas. Povall says that these discounts have attracted a number of businesses into new offices and industrial facilities. But, he says, appeals mean that “although we are winning on jobs, we are losing out on the business rate income.” The dampened business rate increases from new development are one of the reasons that the council has not yet created a tax increment finance scheme to borrow against expected future rises in rates.

But Povall says the strategy is set to pay dividends in the long term. He says: “We are trying to get a few sites ticking over. If we can offer occupiers a good deal on business rates, that is often the difference between a developer building a scheme speculatively or not. Once a few start moving in then others will get the confidence to build.”

Finally, the city is using European aid to provide grants to small and medium sized businesses to create jobs. Last year, Briggs Automotive Company moved production of its BAC Mono sports cars to the city, creating 60 local, high-end manufacturing jobs. Povall says: “We give them a percentage of employment costs and capital investment. There are terms written in which mean if they achieve certain profits then they repay us. But we could waive this if they wanted to reinvest the profits to expand.”

Povall proudly points out that Liverpool’s capital strategy is currently being used as a case study on the website of CIPFA. The council’s “invest to earn” approach revolves around using one-off capital receipts to assist the creation of sustainable revenue streams for the future. If successful, it could do as much for Liverpool’s reputation as the 2008 City of Culture jamboree.

Photo (cropped): “Picture postcard Liverpool” by Beverley Goodwin is licensed under CC BY 2.0