Council considers lease and rent-back scheme for county car parks

Shropshire Council will consider a plan to sell off leaseholds to council-owned car parks to raise money.

The proposed “income strip” deals would see the council receive an upfront payment for the sale of the lease, then rent back the car park over a fixed term.

If approved, the scheme could raise around £34 million to close a gap in the council’s capital receipts programme, which is facing a shortfall despite identifying potential asset sales of around £19m this year.

The programme includes transformational costs to the council, such as redundancy payments to staff and payments to consultants.

A document set to go before full council later this month shows a typical lease length of up to 125 years, with an option to buy the lease back after 50 years, but options could vary according to market demand.

“The selected car parks are crucial for local infrastructure, supporting economic activity, tourism, and public services,” the report says.

“The income strip model enables the Council to unlock immediate capital while ensuring that these vital assets remain under public control.

“The development of an ‘income strip’ option… could yield a substantial receipt through an alternative approach to the treatment of car parks as an asset and surplus income relating to controlled parking.

“Crucially, the agreement includes a buy back option at year 50, allowing the Council to repurchase the leasehold interest for a nominal sum of £1.

This provision enables the Council to regain full ownership of the car parks, maintaining the flexibility to manage these assets according to future public needs and policy directions.”

According to the document, the council would pay an average of £2.2m per year to lease back its own car parks over the course of the deal, but would remain responsible for their maintenance during the lease.

However, it would also retain all the income generated from the sites, including if they were to be redeveloped for other uses.

The specific car parks set to be included in the deal are still be be finalised.

Drawing up of detailed plans and “soft market testing” is taking place, with an outline date of November earmarked to attract bids for the leases if the policy is approved by full council later this month.

Underdale councillor David Vasmer told the council’s Transformation Scrutiny committee on Monday, September 9, that he was worried about the future implications of the policy.

“It might solve the problem this year but in future years the situation will be even worse because that income stream will be gone,” he said.

“It’s ridiculous, I think, to engage in a policy with such long term implications for this authority, it means councillors will be more and more constrained about the choices they have.

“This to me is a step too far.”

The proposal will be discussed by full council on September 26.