PUBLIC CONSULTATION DOCUMENT

The Proposal

The Rochester Bridge Trust proposes to transfer to Medway Council the freehold of the Medway Tunnel, including the tunnel structure, tunnel portals, and the associated land and tunnel service buildings in its ownership. The transfer would also include a sum of £3.648 million. (The original sum offered was £4million, but during the preparation for the proposed transfer, some of this money has already been given to the Council to assist with the 2007/08 running costs of the tunnel.) Following the transfer, the charity would cease to have any involvement with, or responsibility for, the operation of the Tunnel. Ownership and full responsibility for the Tunnel would rest with the Council.

Is the proposed transfer of the Medway Tunnel to Medway Council in the best interests of the Rochester Bridge Trust and its beneficiaries?

Background to the Consultation

The Rochester Bridge Trust is a charitable trust governed by various Charity Commission schemes and Acts of Parliament. To fulfill its obligations under the Medway Tunnel Act 1990 and the Charities Act 1993, the Rochester Bridge Trust must decide whether the proposed transfer and terms are in the best interests of the charity and its beneficiaries. The Trust is therefore holding a consultation and invites the public to raise any matters which might lead the trustees (also known locally as the Bridge Wardens) to alter their provisional decision.

Further information on the background to the Trust, its involvement with the Medway Tunnel, and the proposed transfer to Medway Council is set out below to assist members of the public in considering any response they wish to make to this consultation. More details about the Trust and its work are available elsewhere on this website.

The Trust invites the public to raise any further matters, in addition to those discussed below, which might lead it to alter its provisional decision that this transaction would be in the interests of the charity and its beneficiaries. Details of how to respond to the consultation are given at the end of this document. A summary of all the responses received will be considered by the Bridge Wardens, and the outcome of the consultation will be reported on this website.

Executive Summary

In the late 1980s, Kent County Council (KCC) asked the Trust to help construct the Medway Tunnel to aid regeneration of the Medway Towns. The Trust obtained the Act of Parliament, purchased the necessary land, and became the tunnel's formal owner; however, the tunnel itself was built by KCC mainly using public funds, Following the tunnel's completion in 1996, KCC took on a 999-year lease to operate, maintain and replace the tunnel as required. This tunnel lease passed to Medway Council in 1998. Since 1996 the Trust has voluntarily contributed a proportion of the annual cost of maintaining the Tunnel.

In 2008, Medway Council asked for ownership of the Tunnel to be transferred to it, arguing that it would be sensible for the Council both to own and manage the Tunnel, leaving the Trust to manage and maintain the old and new bridges at Rochester, for which it has sole responsibility and which it has managed for centuries at no cost to the taxpayer. Medway Council has debated this matter in public, and its decision to accept the freehold transfer and the substantial payment has been widely reported in the local press.

The Trust takes the view that the current arrangements are unnecessarily complex and has agreed that a transfer would be in the interests of users of the Tunnel and the bridges at Rochester and its other beneficiaries. The Trust has taken considerable care in its deliberations about the future of the Tunnel, and has taken appropriate professional advice from its legal, financial, actuarial, engineering and valuation advisers. Because the Trust is a registered charity, the Trust has also kept the Charity Commission fully informed throughout the transfer process.

There are four individuals who serve as both Medway Councillors and Bridge Wardens. They have declared their potential conflict of interest and have not been involved in the decisions made by either organisation. This is to ensure that there is no suggestion that the decisions by one body have been unduly influenced by the interests of the other.

The Trust - its history and its management

In the 1390s the Trust was formed to build and maintain a bridge at Rochester. It originally consisted of two wardens elected by representatives from the 54 parishes, manors, and estates surrounding Rochester that were assigned by ancient custom with the responsibility for repairing and maintaining the bridge across the River Medway. The Trust's two founders and a number of other benefactors gave land and money in the 14th and 15th centuries for a charitable endowment to pay these substantial costs in perpetuity.

Today, the Rochester Bridge Trust is a registered charity with a board of 12 trustees. Six of the trustees are nominated independently by local authorities (3 by Medway Council, 2 by Kent County Council and 1 by Maidstone Borough Council). In accordance with charity law, when taking part in the work of the Trust, these nominated trustees must act in the best interests of the charity and its beneficiaries rather than in the interests of the nominating organisation. The other six trustees are appointed by the charity itself, which seeks to draw from the local area candidates that have relevant skills and experience. The most recent vacancy for a trustee was filled following public advertisement. Trustees receive no payment for their work on behalf of the Trust.

In its current form the Trust is governed by several Acts of Parliament and Charity Commission schemes. In line with its charitable status, it is obliged to use its income "for the passage over, under, or across the River Medway" and also for the "maintenance of the banks and channels of the River Medway". It therefore contributes a significant amount of money to the running of public transport infrastructure to the benefit of the public.

While the charity's structure has changed since its formation, its objective to serve travellers across the River Medway remains its sole purpose. Although bridge trusts were relatively common in the medieval period, the Rochester Bridge Trust is the only surviving independent bridge trust which is still serving its original purpose. As such, it is an important part of the character and distinctiveness of the local area while remaining an effective provider of public service.

When funds allow, the charity also makes grants towards other Medway crossings or important local projects. (For more information, see PAST GRANT AWARDS.) However, the charity's main focus is to ensure that its reserve funds will be sufficient to maintain and replace the Rochester bridges without any recourse to public money. Bridge ownership is expensive, and without the charity the responsibility for the management and funding of the Rochester bridges would have to revert to the local authority with funding by the taxpayer.

The Trust's Income

Over the years, the properties donated in the 14th and 15th centuries have been let to tenants whose rent has provided income to care for the bridges. Some of the original properties have been sold, and others have been bought to replace them. Today, the charity owns agricultural land and buildings, cottages and houses mainly associated with the farms, three urban shops, and some other commercial property. All of the property is in Kent apart from one agricultural estate in Cambridgeshire. The charity has no property holdings in London, contrary to erroneous reports in the press.

The money donated at the charity's inception has also been invested in a wide variety of ways over the centuries, ensuring that the capital value has continued to grow and provides vital income from interest and dividends.

For over six centuries the local community and travellers through Kent have enjoyed the benefit of the road crossings at Rochester at no cost to the public. In its day-to-day work, the charity endeavours to ensure that the property and financial holdings derived from the original endowments will continue to be used to pay the entire cost of maintaining and improving the Rochester bridges.

In the context of its future obligations, the charity does not hold excessive reserves. A recent actuarial valuation shows that future bridge replacements should be affordable provided the charity continues to exercise prudent financial management and make sound investment decisions. If the proposed payment is made to Medway Council on transfer of the Tunnel, this should continue to be the case, but as a result there will not be substantial surpluses to be allocated to other purposes. The charity does hope to be able to continue its work in making grants for local charitable purposes, although this may be on a more limited scale than in the past.

History of the Medway Tunnel

As well as providing its own bridges at Rochester, the Trust has made over the centuries significant financial contributions to many other crossings of the Medway, including Maidstone Bridge and the Great Bridge at Tonbridge. The charity has the legal powers to contribute to other Medway crossings, if it chooses to and can afford to, but is not responsible for providing them as has been erroneously reported in the press from time to time. The charity has never assumed the ownership of any of the other bridges outside Rochester to which it has contributed.

In 1987, Kent County Council asked the Trust to help build an additional crossing of the Medway - a tunnel. This project was too expensive for the County to build alone, but was vital to enable regeneration of the area after the closure of Chatham Naval Base in 1984.

Out of goodwill, the Trust agreed to use its independent legal standing to promote the necessary Parliamentary Bill and to set up a subsidiary company for the tunnel's construction. A financing partner was engaged, and a large financial contribution was made by English Estates, who were developing the former Naval Base. The Trust contributed £5m for the purchase of land and professional costs.

The Parliamentary Bill was delayed in the House of Commons but became law on 26 July 1990. However, shortly afterwards, changes to tax laws meant the Trust lost its VAT exemption. This would have meant VAT being payable on the construction which would have added significantly to the cost. The financing partner also withdrew its involvement. Fortunately, the local government finance situation improved at about this time, and the Trust was able to work with KCC to secure Transport Supplementary Grant from the Government to complete the scheme.

The Trust delegated the powers it had been granted under the Medway Tunnel Act to KCC, which then let a contract for the construction of the Tunnel. The construction was completed in 1996. The financial value of the charity's contribution represented about 6% of the total cost with the remaining 94% coming from public funds.

After completion of construction of the Tunnel, the freehold remained with the charity, although KCC operated and maintained the Tunnel under a 999-year lease from the charity. Under the lease, the Council was responsible for operating, maintaining and replacing the Tunnel, including meeting all the costs. The lease effectively put the Council in the same position it would be in for any other piece of transport infrastructure that it controlled. The lease also included a clause under which the charity could sell the Tunnel to the leaseholder for a nominal sum. When Medway Council was formed and took on the role of highway authority for the area, it took on KCC's responsibilities under the lease on the same terms.

The charity decided that it would try to help with some of the running costs of the Tunnel in the years in which it could afford to - taking into account the cost of maintaining its bridges and ensuring that adequate reserves were built up to meet future replacement costs. Averaged over all the years since the tunnel was opened, these charitable grants by the Trust toward tunnel maintenance costs have amounted to £287,000 per annum.

Because of its obligations under charity legislation, the Trust had to ensure proper use of these charitable grants. Accordingly, the Trust reached an agreement with Medway Council under which certain conditions would have to be met with respect to maintenance methods and standards in return for the payment of a contribution from the charity in any year. These conditions were set out in the agreement of terms with the Council.

The charity pays its expert professional advisors to work with the Council's staff to monitor activities at the Tunnel and assess compliance with the agreement and the lease. Inevitably, the Council has needed to allocate some of its resources to providing evidence of the work it is doing and to assisting the charity's advisors with their enquiries. This process has become an administrative burden on both parties, and time and effort have had to be spent by the Council's engineers on administration which would be better allocated to the running of the tunnel itself.

By simplifying the management and removing the extra layer of bureaucracy, the Council would be in a better position to manage the tunnel efficiently and transparently. The Council would have the advantages of full ownership, independence and clarity, placing their responsibilities on a simpler and clearer footing.

It makes sense for the Council to combine ownership and management of this important piece of transport infrastructure. By removing the unusual ownership arrangements currently in place, the Tunnel will become part of the highway network and can be operated without the need to meet special requirements.

Public ownership of the Tunnel would place it on a more usual footing and make it eligible for Government transport funding in the usual way. There has been a question mark over whether the charity's technical ownership of the Tunnel might be an obstacle to the receipt of public grants.

The Terms of the Proposed Transfer

The charity became involved with the construction of the Tunnel to pursue its objective of facilitating crossing of the River Medway. It has not benefitted, and was never intended to benefit, financially from the construction of the Tunnel, and in any case the freehold has no "market" value. The Tunnel was funded largely with public funds. Therefore, the charity is satisfied that any transfer of the freehold of the Tunnel should be made at no cost to the Council. It had previously been thought that a nominal £1 sum would need to be paid, but even this is not now believed to be necessary.

Because the charity has until now made voluntary charitable contributions to the running costs of the Tunnel, the charity recognises that it would be equitable to accompany any transfer with a sum of money as a settlement payment to be used for future maintenance, rather than simply using the powers of transfer available under the lease. The charity has, therefore, offered the Council £3.648 million as a final contribution to accompany the transfer of the Tunnel. In April 2008, the Cabinet of Medway Council decided to accept the freehold of the Tunnel together with this payment. Negotiations and the necessary procedures to complete the transfer have taken some time, so the charity has made a further annual payment to the Council in the meantime, on the understanding that this sum would be deducted from the final settlement sum if the transfer goes ahead.

Future Impact on the Charity and its Beneficiaries

The charity's actuary has advised that, although the proposed payment is very large, with care it can be afforded without jeopardising the ability of the charity to meet its objective of providing for the Rochester bridges in perpetuity. The payment of the capital sum would reduce the charity's reserve funds and have a long-term negative effect on interest payment receipts which are used to fund bridge maintenance, running costs, and the vital reserve funds for future bridge replacement. It would be the charity's intention to continue to manage its finances prudently to ensure that this reduction does not damage its long-term viability.

Users should not see any change at the Tunnel as the result of a transfer. The Council has been wholly responsible for running the Tunnel since 1998, and this will not change. There will be a saving in professional fees for the Council, which will no longer need to liaise with the charity's engineers.

The charity has requested that a condition of the transfer of the Tunnel would be the adoption of the route as public highway. This is the best protection in law to ensure that public rights to use the Tunnel are in place. At present there is technically no automatic right for the public to use the Tunnel, even though it was funded substantially by public money.

Conclusion

It is proposed that the ownership of the Medway Tunnel should be transferred from the Rochester Bridge Trust to Medway Council. This document seeks to explain the issues the charity has taken into account in reaching its provisional decision that a transfer on the proposed terms would be in the best long-term interests of the charity and its beneficiaries.

The public is invited to respond to this consultation to suggest whether any other matters should be taken into account.

Responses should be sent from this website using the Consultation Response Form or by post to The Bridge Clerk, Rochester Bridge Trust, 5 Esplanade, Rochester, Kent ME1 1QE and should be clearly marked "MEDWAY TUNNEL - CONSULTATION". The closing date for responses is 21 July 2009.

Thank you for taking the time to read and understand this document.