A LOCAL authority which has seen its housebuilding schemes “far outstrip expectations” over their profitability has approved borrowing a further £9.5m to create another such venture.

A meeting of Darlington Borough Council’s cabinet saw members unanimously agree to setting up another joint venture company with Esh Homes to create large extra sums for frontline services.

Councillor Charles Johnson, the authority’s resources portfolio holder, said it was forecast that the latest scheme, to to bring forward residential development of homes for private sale and affordable housing, would deliver an average 17 per cent return on capital.

He added pre-tax profits would average at over £1m.

Cllr Johnson said while there were risks to the enterprise in regard to build costs and sales, but there would be “mechanisms in place to mitigate the risks as far as possible and safeguard the council’s position”.

He concluded: “This is extremely good business.”

Following Cllr Johnson’s statement, there were no comments or questions from the leaders of the Labour, Liberal Democrat, Independent and Green groups at the council.

The council has previously formed 50:50 split firms with the housebuilder for developments in the Eastbourne, Middleton St George, Heighington, and West Park Garden Village areas of the borough.

However, it is envisaged that future development sites may be outside of the borough of Darlington, but within the North-East region.

The meeting heard overall, the four ventures are projected to provide 388 new homes, an estimated new homes bonus of £2.1m, a post-tax profit of over £3m and a surplus on loan interest payments of £1.1m from a maximum investment of £24.3m.

An officers’ report to the meeting stated: “Based on the business plan the company activities are expected to generate enough profit to repay the loan in full from profits by the ninth anniversary of the scheme and (subject to sales outcomes) would then carry land and work in progress to the value of about £14m to continue with the joint venture debt free.”

The ventures, which started under the previous Labour-run administration, were launched to protect services following a drop in government funding in real terms of £42.4m for Darlington since 2010, which led to cutbacks, including the loss of 730 staff. The reductions have come at a time when demands for council services are increasing, particularly in social care and providing for children with special education needs and disabilities.