The office of South Yorkshire mayor Oliver Coppard will borrow money to fund its purchase of Doncaster Sheffield Airport – but a planned £57m loan for City of Doncaster Council (CDC) for the reopening project is now being scrapped.
It was announced this week that South Yorkshire Mayoral Combined Authority (SYMCA) is to buy the airport and neighbouring land from Peel Group as an alternative to the existing arrangement in which CDC was leasing the site.
The change follows failed attempts to renegotiate the lease which SYMCA had set as a condition for releasing £160m of devolution funding earmarked towards the reopening efforts.
The purchase is being made for a currently unspecified sum but more details about the financial structure have now been published ahead of a SYMCA board meeting next week.
The report says that the costs of the reworked project can be met from the already earmarked £160m – with the exception of the additional purchase of 112 acres of neighbouring development land. Borrowing is also required to fund upfront purchase costs.
It said: “Purchase of the freeholds will require the MCA to take on borrowing. Borrowing related to the purchase of the airport site will be repaid over time through the funding and revenues that would otherwise have paid for the airport lease – no new funding is required to support a purchase of the airport site.
"The costs of finance used to buy the Gateway East development land – which does represent an additional cost - will in the near-term be matched to Investment Zone grant funding.
"Devolved powers allow the MCA to borrow for growth investment - as is required for the acquisitions - whilst the receipt of long-term devolved Gainshare funding, along with other revenues, will allow for the costs of airport-related borrowing to be funded.”
It added: “Borrowing is profiled to be repaid over a 30-year period but could potentially be repaid sooner, subject to operational performance. As leasehold rents were indexed to inflation and turnover rent would fall due, there is a material saving over the first 30 years which increases over the life of the 125-year lease.”
The report said modelling has assumed internal borrowing is used before external loans are taken in late 2028 at forecasted interest rates of around five per cent.
The change of plan will also see SYMCA take a controlling interest in FlyDoncaster, the company set up by CDC to run the airport.
It also means a previously-planned £57m loan CDC was due to take out from next year to frontload spending on the project will now not be needed.
A report going to a meeting of the CDC cabinet next week said listed the cancellation of the planned loan as among the benefits of the new arrangements, stating that they reduce “the council's ongoing operational and financial exposure and remove the requirement for the council to undertake the borrowing previously approved to support airport operations and associated shareholder funding arrangements”.
The council will get a future option to purchase the airport land when SYMCA’s borrowing has been fully repaid.
Should the land be sold before the borrowing is repaid, money received will be used to pay any remaining debts owed by SYMCA connected to the project, with any further cash going back into Doncaster’s share of devolution funding – cash which is currently entirely allocated to the reopening scheme.