ࡱ> q bbjbjt+t+ .AA^]6666666JJJJJ^TJeKeMeMeMeMeMeMe$"girqe6qe6666KeJJ6666Ke&7a66Ke,wJJFddHadyard Hill Windfarm Community Fund Issues June 2005 ------------------oOo------------------ Background - general As part of the continuing process of seeking alternative energy sources, there are numerous proposals and projects across Scotland concerning the development of Wind Farms. South Ayrshire, like other Councils in rural Scotland, is experiencing pressure from developers proposing to construct new wind farms. As with earlier energy development programmes, most notably perhaps the oil industry developments in northern Scotland during the 1970s and 1980s, developers are offering a range of funding opportunities to local communities affected by such proposals. There is no obligation on developers to enter into such agreements or make contributions to Community Funds. Experience to date is that developers are keen to enter into partnership agreements with local communities and the local authority in the affected areas. While acknowledging the ability and enthusiasm of local communities to manage Community Funds, there is recognition on the part of many developers that there is a need to utilise the local knowledge and networks of local authorities to contribute to and facilitate the establishment and management of Funds. Such recognition is based on a number of factors. Local authorities are the legitimate elected body in local areas, chosen by local people in a fully open and democratic way with the appropriate checks and balances which are part of the formal Electoral system. Local authorities have a wide range of professional expertise available to them including legal and administrative staff, and staff with experience in supporting community and voluntary organisations in local areas. Finally there is an issue of continuity. Local authorities are likely to be in existence in one form or another for the considerable length of time that Windfarm Community Funds will be in place. The Council will be receiving advice from officers in due course about the principles, design and operational practices of Community Funds. While these will require to be negotiated with Windfarm developers and local communities, it is likely that such advice will reflect best practice which is developing across the country, and which has informed the views of many of the potential developers in South Ayrshire. The advice from officers referred to in paragraph f. above will be produced in the form of a recommended protocol which can be introduced into negotiations with potential developers at an early stage in discussions. The advantage of having such a protocol is that all parties Council, communities and developers are clear on such issues as levels of funding, the design and operation distribution systems, and the definition of impact zones. A protocol should also define and establish clear demarcation between the role of the Council acting as facilitator in the operation of distribution systems, and role of the Council as the Planning authority for the area. These latter roles are not to be confused and should not impact on each other. 2. Background Hadyard Hill development Even with the experience of energy related developments in northern Scotland in the latter part of the last century, developers and local authorities are currently going through a learning experience in terms of Windfarm Community Funds. The history of the past few years has been that of developers coming to terms with the funding expectations of local communities, and local authorities learning of how to support funding structures. South Ayrshire is no different from other authorities in this situation. The Council was first approached some two years ago by a developer considering a Windfarm in the Hadyard Hill area which is situated between the villages of Barr ad Dailly. Discussions have taken place with the developer (Scottish and Southern Electricity - SSE) and a formal agreement has recently been concluded between the Council and SSE. During the time that discussion has take place with SSE other developers have made suggestions for additional Windfarms in South Ayrshire. The protocol document referred to at paragraph 1.g will, if agreed by all parties, provide a framework within which future Windfarm Community Funds can be established and operated. Discussions concerning the Hadyard Hill development are too far advanced however to be included in ay future protocol. The purpose of this paper is to indicate some of the issues which will have to be considered in establishing the Hadyard Hill fund, and to recommend a model type of organisation to take the Fund forward. The basis for recommendations is the content of the agreement which has been drawn up between the Council and SSE. Where possible however, the recommendations reflect the type of future protocol which will in due course be presented to the Council for agreement. 3. Hadyard Hill Agreement - issues The introduction to the Agreement refers to the provision of a Community Fund to be used for the benefit of the communities in the area of the Community Councils. The Community Councils referred to in the Minutes are Barr, Dailly and Pinwherry/Pinmore. Paragraph 4.1 of the Agreement specifies that the Community Councils are the bodies which will use the Fund. The Councils role is to disburse funds to the Community Councils within a framework developed after consultation with the Community Councils. A decision-making structure will be needed which ensures that projects meet the criteria of the Fund describes the legal duties of, and provides protection to, local people and Council representatives involved in the structure is not at risk of a localised take over by a small group of people using the provision of the Councils Scheme for Community Councils. The Scheme for Community Councils is designed to support the general work of Community Councils across South Ayrshire not the work of three particular Councils in the role of funding distributor. Consideration should be given to establishing an arms-length organisation independent of the three Community Councils, South Ayrshire Council and SSE to act as distributor. Possible models are described in Section 5 below. Administration of the Fund and Agreement on Expenditure as described in Sections 4 and 5 of the Agreement gives a significant controlling role to SSE. It is recommended that SSE should therefore be involved in the decision-making process. This would tie in the company to the process and also lessen the likelihood of significant Council staff time being used to meet the demands detailed in paragraph 5.2 of the Agreement Paragraph 4.6 of the Agreement refers to the company not being required to contribute to the Fund in the event that it builds up a balance equivalent to 5 years input (i.e. 600,000 at 2005 prices). This provision militates against any suggestions for developing a substantial balance or Trust Fund for long term use in the areas. The Fund Administration structure described in Section 4 of the Agreement places a great deal of emphasis on work to be undertaken by the Council. There will be workload consequences and costs for the Council in terms of administering the Community Fund system, supporting Community Councils involved in the decision-making process, managing the various commitments agreed by the Council, and liaising and negotiating with SSE. Section 9 of the Agreement refers to it not being enforceable on Third Parties. Given that they will not be signatories to the document, this will include Community Councils. A further legal agreement addressing the needs of a suitable decision-making process, and the type of Guideline document referred to above will be required to legally bind the Community Councils to the provisions of this agreement. General issues concerning Fund Distributor role Given the resources available to them, and the fact that they are voluntary bodies, Community Councils are unlikely to have the capacity at least in the first instance to properly administer the distribution of the substantial cash available for the three local areas. In deciding upon the decision-making process to be used, the various stakeholders the three Community Councils, South Ayrshire Council and SSE will require to address issues of: The need to have very clear and consistent criteria from the outset both in terms of who can seek support, and for what types of projects. Not to have these established could lead to criticism of changing criteria to suit. Clarity about who will be administering the funding there will be a need for application forms, guideline documents, probably assessment forms, award letters, conditions of grant papers and some sort of monitoring forms. The stakeholders will need to be clear about who is doing this work, will call meetings, and where material will be stored. A monitoring system will be required was the money spent in the way that was promised This will be money from a public source, so statutory issues such as Data Protection and Freedom of Information legislation will apply. The stakeholders might want to think about things like advertising, marketing and press follow up to awards. The Agreement with SSE gives a broad outline of the type of expenditure which is seen as appropriate - being used by the Community Councils for such charitable, educational, environmental/energy efficiency/renewable energy, and general amenity projects or other purposes as may be agreed with the Company to be in the best interests of the communities in the areas of the Community Councils and for no other purposes. The Agreement specifically indicates that the Community Fund shall not be used for political or religious purposes, any purpose which the Company views as adverse to its interest, or any purpose already funded by public sector funding. Within this very broad definition of appropriate expenditure, the stakeholders may wish to consider focussing the objectives in order that the operation of the Distribution System can run more effectively. Refinements of the objectives might include: Reducing poverty and disadvantage. Improving the health of residents. Promoting care and support of vulnerable people. Increasing supply and quality of housing. Improving community safety. Ensuring easy access to employment opportunities. Achieving parity with national educational attainment levels. Promoting a wide range of recreational, sporting and cultural activities. Stimulating the development of life skills, individual growth and active citizenship across the age spectrum. Improving rural transport opportunities Improving rural business opportunities Building the capacity of voluntary organisations to learn skills and develop experience with a view to them becoming sustainable organisations The criteria might also be usefully expanded to include clearer definition of environmental/energy efficiency/renewable energy objects, and an explanation of the relationship that the Fund might have with other funders (e.g. could Windfarm Community Fund resources be used to pick up a project which previously received Lottery Funding? Can the resources be used as match funding to input from other funding bodies?). Monitoring systems these will be difficult to decide upon. Some funding bodies insist on very specific, number driven systems, others employ more vague ways of ensuring that monies have been appropriately spent. The stakeholders will need to consider how they wish to approach this issue, given in mind the level of resources which it may distribute (the higher the award, the more tightly expenditure might be monitored) set against the capacity of the stakeholders to actually follow through upon monitoring. Who can apply - The stakeholders will have to very clear on this at the outset. It is suggested that potential applicants will be national or local voluntary organisations, partner organisations, locally based community groups and Fund stakeholders which are properly constituted and can assure the Windfarm Fund that they operate for the benefit of residents in and around the areas covered by the Community Councils of Barr, Dailly and Pinwherry/Pinmore. Potential Decision-making models There are a number of decision-making models which could be used to manage the Windfarm Fund. Some of these are described in the following paragraphs. Whichever is finally chosen however, it is recommended that it involves input from each of the three Community Councils, South Ayrshire Council and SSE. Informal Association of Community Councils of Barr, Dailly and Pinwherry/Pinmore This structure would see an informal agreement drawn up between the three Community Councils. Advantages: Simplicity Reduced administration system Disadvantages Probable limited experience of those involved. Personal liability on the part of those involved if disputes arise - a voluntary association is not regarded by the law as having any legal existence separate from its members. In practical terms, that means that leases and other formal contracts (such as a funding agreement) have to be entered into in the names of (normally) the main office bearers (e.g. chair, secretary, treasurer) which can cause technical difficulties where there are changes in the people holding those offices. Similarly, legal proceedings cannot be taken by the organisation but by individuals representing it This model is not recommended. b. Formal Association made up of representatives from the three Community Councils, South Ayrshire Council and SSE This structure would be governed by a formal agreement drawn up between the stakeholders with specified membership, structure and roles. Advantages Relative simplicity Easier to commit support systems and staff from lead agency (the Council) Professional liability of officers covered by employers Disadvantages Potential liability issues concerning Community Council representatives Community Council positions vulnerable to organised take over This model is not recommended. c. Independent legal structure Company limited by Guarantee This structure would involve the creation of a separate legal entity of a Company Limited by Guarantee with representation drawn from three Community Councils, South Ayrshire Council and SSE Advantages Limited liability - in terms of a clause contained in the Memorandum of Association, each of the members undertakes to pay up to a nominal sum (normally 1) towards the company's debts if it goes into liquidation. The members' liability is therefore limited to the sum which they guarantee to pay, hence the name "company limited by guarantee" The company is a clear legal entity, separate from the people and organisations involved in it and can therefore hold property, enter into leases and other contracts, employ people, etc in its own name. That, in turn, introduces an important element of continuity since none of these legal relationships would be affected even if the whole board were replaced by a new set of people A company is generally regarded by funding bodies and public agencies as a more "stable" and professional structure than a voluntary association Disadvantages There are formal registration procedures to be followed in relation to creating a company There is an ongoing requirement to notify a change in directors, a change in the company secretary, or a change in the registered office, to a public register (Companies House). Similarly, annual accounts and annual returns have to be filed with Companies House There are various statutory requirements which have to be followed in relation to members' meetings etc and various principles of company law which could in certain circumstances have an impact on the company A company structure is more intimidating for those considering whether to join as members or put themselves forward for election to the board of directors This model should be considered. While it is a formal structure, it is relatively easy to operate, and there is local experience both in the voluntary and Council sectors of use. This model gives legal protection to local people and others involved in the structure. d. Independent Trust This structure would involve the creation of a separate legal entity of a Trust with representation drawn from three Community Councils, South Ayrshire Council and SSE Advantages There are no formal registration requirements in relation to creating a Trust There is no requirement to notify changes in trustees to any public register nor any requirement to file accounts There are no statutory procedures for meetings which require to be followed. Although there is a body of trust law, this mainly relates to the general duties of trustees (e.g. their duty of care) There is less administration than a voluntary association or company limited by guarantee, since there is no register of members to maintain, no collection of subscriptions, no AGMs, etc A trust is likely to be less intimidating than a company limited by guarantee for those considering whether to participate in decision making Disadvantages Although the law gives greater recognition to the trust as having some form of identity, it is still not a full legal "entity" in the way that a company limited by guarantee is. In particular, should the trust eventually hold property, formal leases, etc, this would have to be done in the names of the people serving as trustees at the time, and formal documents would ultimately have to be produced to vouch the "chain" between the people serving at that point as trustees and the people serving as trustees at the time when, for example, the property was sold Representatives would sit on the trust as individuals. There would be a requirement to change the trust when individuals moved away from the Community Council, Council or SSE There is no concept of accountability to a wider membership or to partner bodies/agencies. In particular, a trust could not hold meaningful AGMs since no-one other than the trustees themselves would have voting rights. This model should be considered. There is a history of Council members and employees serving on trusts which could be used to help establish and support a Trust in this circumstance. It should be noted however that the Trust model does not give the same level of legal protection as the Company Limited by Guarantee model. 6. Recommended model It is recommended that an independent structure be established to distribute Windfarm Funds. There are existing organisations which could administer the process SAWET, Energy Agency, South Ayrshire Association of Community Councils, etc but none of these are purpose built for the process of distributing such a level of funding to the voluntary and community sector in these very local areas of South Ayrshire Any structure should be designed to effectively and efficiently distribute funds within the local areas, for the purposes agreed by the stakeholders, but at the same time protect the interests of the stakeholders and reduce any element of personal liability of those involved in the process. The model which best meets the objectives particularly that of reduction in personal liability is that of a Company Limited by Guarantee. It is recommended that such a model be the one discussed with SSE and the Community Councils, with a view to a Company being established as the distribution system of the Hadyard Hill Windfarm Community Fund. 7. Detail of operation of Distribution system Once the stakeholders have agreed an appropriate structure and, if so decided, established a Company Limited by Guarantee, a detailed guideline document will require to be produced. While the detail of this will be discussed at the appropriate time, it may be helpful for stakeholders to consider some maters of practice and principal at an earlier stage in discussions. In no order of priority these may include: a. Make of Committee/Board of Directors. A suggested composition is: two representatives nominated by Barr Community Council two representatives nominated by Dailly Community Council two representatives nominated by Pinwherry and Pinmore Community Council one representatives nominated by Scottish and Southern Electricity plc (or any successor operator of the Hadyard Hill Windfarm) two representatives nominated by South Ayrshire Council (or any successor local authority for the area which includes the Hadyard Hill Windfarm) b. Statement of objectives and criteria The Committee/Board may wish to adopt the type of objectives listed at paragraph 4.c above c. Procedures and standing orders If the Company model is adopted, such matters will be addressed in the Articles of Association d. Application and monitoring processes Given the substantial amounts being discussed for the Hadyard Hill Community Fund, the decision making structure should seek full advice on appropriate processes for advertising, receiving, assessing, deciding upon and monitoring applications and projects. Such advice is available from a variety of sources. Initial advice on processes and information sources should be sought from Council staff. e. Administration and related costs The cost of advertising, administering and monitoring the Fund should not be underestimated. Should the Board/Committee decide to undertake this role itself, it will have to meet the stringent financial obligations involved in working with public money. Should the Board/Committee wish a third party (e.g. the Council) to undertake the administration of the Funds, then appropriate payment will be required to meet the costs of these tasks. f. Geographic distribution and impact zones The committed sums to the Hadyard Hill Fund are at least 3,240,000 over a twenty five year period (this sum includes an initial 240,000 payment). Experience elsewhere in Scotland is revealing that there are advantages to ring-fencing the majority of spending to local areas, and to using some of the funding in a wider area (for example, a Transport Scheme or subsidy would not stop when the bus came to the Community Council boundary). If the Board/Committee adopts such a view, then there is a need to decide upon two key questions how is local defined, and how is the Fund split between local and wider area. What is local? Elsewhere in Scotland, Windfarm Community Funds are using 5, 10 or 15 kilometre distance to help define local and wider areas. In many examples, local is being defined as an area within 5 kilometres of the boundary of physical sites the Windfarm turbines. A further measure of 15 kilometres for a more widely affected area could then be applied. If these figures were to be used in South Ayrshire then, from current planned developments, an area from an east-west line from just north of Minishant to the southern boundaries would form the Windfarm area. What should be the local/wider split? Elsewhere in Scotland, increasing numbers of Windfarm Community Funds are using a 60% local, 40% wider split. Should the Board/Committee adopt the 5/15 kilometre and 60/40 % structure described above, then this would largely make redundant any acrimonious discussions about distribution of funds on a micro level. There is a danger that discussions could become mired in a long debate about structures based on number of Community Councils, population figures, sight lines, etc. A Board/Committee structure as described at 7.a, along with the 5/15 and 60/40 principles, will allow decisions to be taken which will allow resources to be targeted both at local need and at (slightly) wider areas. If a Company model is adopted with Articles of Association to ensure fair and appropriate decision making, then all parties can benefit from the substantial sums which are to be available from the Hadyard Hill development. 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