Hampshire County Council is facing a funding gap on the A326 North Waterside Improvements scheme, if cost increases go beyond a current estimate of £125m.
The authority has agreed to continue developing the major road scheme on the condition that it does not have to use general funding to contribute to the costs or underwrite any increases.
Last week, council leader Rob Humby agreed for the scheme to move to the next stage. He said: ‘This strategically important scheme will address existing issues experienced by those who are living and working in or visiting the Waterside area of the New Forest.
'It will also support the wider Waterside Vision – which sets an ambition for the sustainable growth of the Waterside area – as well as expanding on a £50m investment in schemes to improve transportation and travel that we’ve delivered and are delivering already in this part of the county.’
According to a report presented to Cllr Humby, the current anticipated cost to deliver the scheme is around £125m of which the Department for Transport (DfT) will provide up to 85%.
The report states: 'The following finance principles for scheme delivery would be that the County Council will not use its general funding:
- to add to the local match funding
- to contribute to the costs of delivering the scheme
- to underwrite cost escalation that may occur between submission of an OBC and tender returns (typically the DfT will not underwrite this risk but they might given the scale of the scheme)
- to underwrite cost increases after tender has been awarded, unless they are within a certain limit and can be underwritten by a third party
It also notes that even if this cost remains accurate, ‘which is not certain’, that would leave a local ‘match contribution’ of around £19m, of which approximately £3m has been secured to date.
The scheme involves a series of junction improvements and road widening along the A326 in the Waterside area of the New Forest, between the Michigan Way junction west of Totton and the Main Road junction at Dibden.
The scheme is designed to help solve longstanding traffic congestion and severance issues on the road, which forms the only main road link between the strategic road network and local urban areas including Totton, Marchwood, Hythe, Dibden Purlieu and Holbury.
As well as facilitating its growth ambitions for the area, the scheme also aims to be a key enabler of the Solent Freeport sites, most of which are in the Waterside, ‘and which may not come forward without the A326 improvement’.
The council said agreement to develop a detailed design for the scheme will enable it to apply for planning approval and submit an OBC to the DfT in the Autumn for funding under the Large Local Majors (LLM) programme.
The scheme went through a competitive sifting process administered by sub-national transport body Transport for the South East and a pre-Strategic Outline Business Case (SOBC) was submitted to the DfT in September 2019.
In March 2020 the council was invited to submit a full SOBC, which it did in July 2021, and this was approved in February 2022.
The scheme was cited in the Government’s Network North announcement last autumn as one of the schemes eligible for an ‘uplift’ in the DfT contribution from 85% to 100% of costs at OBC stage.
The council report notes that options for obtaining the required local match funding include the Solent Freeport, by way of borrowing against future retained rates income obtained from tax sites located within the area.
'However, the full conditions that the Solent Freeport may require are currently unknown and further detail is required on the process for awarding funding based on future retained business rates, the council has said. Detailed discussions are required to ‘minimise or inform any risk the County Council chooses to take’.
The report notes that the DfT usually awards funding with a condition that once an OBC has been approved and it has agreed to fund a scheme at a certain value, ‘cost increases should be met locally’.
A council spokesperson told Highways: 'The statement from the Government refers to their uplift in contributions towards the Outline Business Case (OBC) stage of scheme development, and not the delivery phase.
'Funding has already been secured to develop the A326 scheme (prior to the Government announcement) through a combination of DfT, Solent Freeport and County Council monies.'