Prepared by David Austin (Cllr, Vice Chair, Parracombe Parish Council)
Since its construction in the 1930’s Parracombe Village Hall’s freehold has been owned by the Parracombe lodge of the Royal Antediluvian Order of Buffaloes (RAOB). Parracombe Village Hall Charitable Trust has leased the hall from the RAOB for a peppercorn rent of £5 per year.
In August 2017 the RAOB decided to sell their freehold interest. As an asset of community value, Parracombe Parish Council (PPC) registered the hall as a community asset and assisted the Village Hall Trust, as a Custodian Trustee, by exercising the community’s right to bid for the purchase of the freehold. PPC have been in negotiations with the RAOB since August of 2017 and have now agreed a purchase price of £35,000 plus payment of conveyancing and estate agent fees (capped at £2,300) on behalf of the RAOB. PPC have paid a deposit of £3,500 to secure the purchase.
The proposal is that the council, with funding from a Public Works Loan Board (PWLB) loan, purchase the freehold interest of the hall for the benefit of the village. The PWLB provide the most favourable rates and terms for parish councils with rate loans determined by the UK Debt Management Office (DMO). To ensure that each household contributes fairly to the purchase, it is proposed that an increase in the parish precept be made to repay the loan over a number of years. PPC will then lease the hall to Parracombe Community Trust Limited, a Community Land Trust registered under the Co-operative Community Benefit Societies Act 2014 as a Community Benefit Society, Registration Number 7804. Parracombe Community Trust has been formed with the aims of maintaining and improving the physical, social and economic infrastructure within the village and to hold land in trust. Parracombe Community Trust will be responsible for securing additional money through community fundraising activities and grant applications for the improvement of the hall. In accordance with its Rules (Parracombe Community Trust Ltd, 2018), will also be responsible for its ongoing running and management as an asset for the benefit of the community.
The total cost to purchase the hall inclusive of PPC expenses and those agreed to be paid by PPC on behalf of the RAOB is expected to be in the region of £39,700. PPC are proposing that the expenses for the purchase (estimated at £4,700) are paid from PPC reserves. The loan principle sum required is £35,000. Parish Council Accounts as of the financial reports of 10 July 2018 the council bank accounts have £19,730 in reserve, this amount is exclusive of the £3,500 that the council has already paid from parish accounts to the vendors solicitor as a deposit. This deposit amount will be returned to parish reserves on receipt of loan funding. Please see a copy of Parracombe Parish Council year end 2017/2018 accounts .
Public Works Loan Board (Debt Management Office) loans are repayable by one of three methods:
- Maturity: half-yearly payments of interest only, with a single repayment of principal at the end of the term.
- EIP (Equal Instalments of Principal): equal half-yearly instalments of principal together with interest on the balance outstanding at the time.
- Annuity or ER (Equal Repayments): fixed half-yearly payments to include principal and interest.
Two repayment methods are generally available to parish councils, EIP and annuity. A maturity loan requires that a sinking fund is provided to meet the repayment of the principle at the end of the term. It has the highest financing costs and so this repayment method is not appropriate for the purchase of the hall.
The PWLB illustration details each loan type with a principle sum of £35,000 over a 30-year term. The type being proposed is an annuity loan. While the financing costs of an annuity over its term are marginally higher than an EIP the benefit of fixed repayments over the term provides predictability.
Repayment of the loan will be through an increase in the parish precept. The parish precept for the current year 2018/19 is £7,160 with the Band D Council Tax at £54.51. With the average parish precept in England for a Band D property 2017/18 being £61.03, (UK Government Web site gov.uk) by comparison Parracombe Band D rate at £53.45 for 2017/18 was around 10% below the average.
Using the figures in the PWLB Illustration for an annuity loan of £35,000 over a 30-year term would require the parish precept to be increased by £1,710.
An increase of £1710 requires that the precept for 2018/19 be increased by 23.9% to cover the loan repayments. This equates to an increase of £13 to a Band D property in Parracombe based on a tax base of 131.34. i.e. £8,870 / 131.34 = £67.53. Note: the tax base varies year-on-year and so actual figures may vary.
A Parracombe Parish Council meeting 22 August 2018 held at the RAOB Village Hall considered this proposal and unanimously voted in its favour. The parish council have put the proposal forward for public consultation, the consultation period of 28 days is from 6 September until 3 October 2018.
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