This Council resolves to:
1. Halt all future investments in the Council’s commercial property investment arm, CIFCO. For the avoidance of doubt, this means halt all purchases of any property from this day forward via CIFCO.
2. Subject to agreement with the S151 Officer that this can be done, use any of the agreed remaining borrowing authority (approximately £13 million from the Public Works Loan Board) to re-invest in local market housing within the district.
3. That this local market housing be constructed to provide:
a. Market homes, including bungalows, suitable for elderly residents to downsize
b. Market homes, including a majority one and two bedroom homes, suitable for young people and key workers to purchase
c. Market homes, suitable for investors to purchase for means of private rent for the above categories of residents.
Proposer: Cllr Rachel Eburne
Seconder: Cllr Andrew Stringer
Minutes:
118.1 The Chair invited Councillor Eburne to move her Motion under agenda item 16b.
118.2 Councillor Eburne said that the Motion was a proposal to halt all future investment from the Council in CIFCO, due to the following three reasons:
1. It was not the role of local government to be involved in commercial property speculation, nor was it the role of the Public Loan Board to be part of such activities. The Council had exploited a loophole in Government regulations, which had finally been recognised by Government. It had never been the intention for public funding to be used in property speculation.
2. CIFCO was flawed in matters of risk, as there was no expertise within the Council to manage commercial properties and investments. It was not enough that the Council had outsourced management, consultants and advisors for CIFCO, as this did not push away all the responsibly that the Council had for the investments made using taxpayer’s money. It was still the responsibly of the Council to make the decisions for allocating funding and loans for CIFCO and that the liability for the £25M invested so far was with the Council and those who elected the Councillors.
3. CIFCO was flawed as a matter of priority, when the Company was set up in 2017, the focus had been on how to build more affordable housing and properties for first time buyers and key workers in the District. However, CIFCO was set-up as a commercial company to buy properties outside the District for profit. Had the original funding been invested in 2016 there would now have been housing available for local people.
She felt that it was not right for a rural Council to own commercial properties outside the district for commercial gain.
She asked that Members listen to their constituents, and those who had contacted Members regarding concerns over CIFCO. She was frequently approached by members of the public some, who worked professionally in finance and property investment, had expressed concerns over the Council’s involvement in this area. Questions were raised regarding the risk of the Council being involved in the commercial market and the amount of money invested in CIFCO. She felt that this was so far removed from the role of the Council.
The Council’s reserves were higher now, than when the Council set-up CIFCO. and she felt that had this money been invested locally in building housing, they would have been occupied by residents who would have supported the local economy and infrastructure.
118.3 Councillor Eburne MOVED the Motion, which was SECONDED by Councillor Stringer:
1. Halt all future investments in the Council’s commercial property investment arm, CIFCO. For the avoidance of doubt, this means halt all purchases of any property from this day forward via CIFCO.
2. Subject to agreement with the S151 Officer that this can be done, use any of the agreed remaining borrowing authority (approximately £13 million from the Public Works Loan Board) to re-invest in local market housing within the district.
3. That this local market housing be constructed to provide:
a. Market homes, including bungalows, suitable for elderly residents to downsize
b. Market homes, including a majority one- and two-bedroom homes, suitable for young people and key workers to purchase
c. Market homes, suitable for investors to purchase for means of private rent for the above categories of residents.
118.4 Members debated the Motion including:
· That the Council had elected Members as directors of CIFCO and the Holding Company.
· That the Company was set-up as a professional company and was managed as a going concern.
· That some Members who had been against setting up CIFCO, now supported the business.
· That other Members had been and were still opposed to CIFCO and the investments made into the commercial market.
· That questions regarding CIFCO often were raised at Parish Council meetings and that some residents were against the Council investing in CIFCO.
· That CIFCO was set up for generating an immediate income for the Council and had brought an income of £3M during the past three years to both Councils.
· That halting investment would remove an important part of the Council’s income in times when other income resources were reduced.
· That the income from CIFCO supported the delivery of services to residents in the District.
· That there were always risks involved when investing, but that had to be set against the gain.
· That CIFCO was managed by professional people with years of experience in commercial investments.
118.5 Councillor Mellen thought the present performance had been influenced by the Covid-19 pandemic, however the last quarter had seen a collapse in the commercial sector. Online sales were up, and home working placed a lesser demand on future requirements for office space. The financial situation had been launched into uncharted territories. He thought that much had been made of the income for CIFCO, but the financial loss made by CIFCO had been disregarded and stated as a paper loss. He was concerned that the properties being bought by CIFCO would decrease in value and he thought that the Council should not continue to lend money to invest in CIFCO.
118.6 Councillor Otton had never supported CIFCO, as the investments were made outside the District. The Government would review all investments in property made by Council later this month and was expecting Council to use borrowed money to be used for housing regeneration and development of services. Covid-19 had caused people, who had never before claimed benefits, who would now be unemployed and need support. Investing in housing in the District would have supported employment and helped the people in the District.
118.7 Councillor Whitehead stated that there was a sound procedure in place to build a robust portfolio. The Council needed to be diverse to ensure resilience for further income for the medium-term financial position and that the programme was already in place for investment requirement for CIFCO.
118.8 Councillor Richardson referred to the loss incurred by CIFCO and that this was a paper loss, which was solely a loss on the balance sheet. He endorsed the trading and that CIFCO had performed well during the past few months despite the Covid-19 lockdown.
118.9 Councillor Ekpenyong thought that CIFCO was a successful investment vehicle for the Council. Mid Suffolk Growth was the vehicle for the redevelopment of the old HQ in Needham Market. He added that the Council would deliver 200 houses over the next three years.
118.10 Councillor Field was concerned about the risk and the possible financial losses. He thought that the Covid-19 Pandemic would drive the economy into another financial crisis, and this would have an impact on the investment made by CIFCO.
118.11 Councillor Warboys was concerned that the investment was for 50 years and would have to be managed by the next generation too. Investment schemes, which relied upon investments to make a return, was dependent on the value of the investments, which in CIFCO’s case had decreased.
118.12 Councillor Welham informed Members that he had been contacted by a number of concerned residents regarding CIFCO. He thought that the Council should build homes, which provided jobs for local residents and not invest further in CIFCO.
118.13 Councillor Morley advised Members that the Council was building homes but that It was the lack of available land, which held up the process in the District.
118.14 Councillor Geake said that the amendment did not seek to withdraw from CIFCO, but to minimise the current risk by not investing further in the company. She thought that the Council should follow the Governments proposal and guidance from the Treasury Department regarding investment made by local authorities.
118.15 Councillor Meyer, as a Director of CIFCO, said that due diligence had been applied, when the company purchased properties. He thought that there were opportunities to grasp for long-term investments for future income.
118.16 Councillor Pratt considered what the future was for commercial properties in town centres. He thought that the Government would be condemning investments made by Councils and make them illegal.
118.17 The Chair intervened in the debate, as the meeting had exceeded its constitutional time limit and asked for a proposer and seconder for an extension to the meeting.
118.18 Councillor Flatman PROPOSED that the meeting continued, which was SECONDED by Councillor Humphreys. The proposal was put to Members for voting and the vote was unanimous.
118.19 Members continued the debate and Councillor Stringer said that Members had been elected to be the decision makers and that half of Mid Suffolk’s electorate had elected to move away from borrowing to speculate outside the District. He considered the consequences if the Council had not invested in CIFCO and invested in the District instead. He detailed how this would have provided an income stream based on local development and rental income from local businesses instead.
118.20 He continued that in 2016 the Council had £10M in reserves and today this figure was £17.6m. He could not understand why the Council had risked borrowing further. He asked that Members, the decision makers, moved away from investing further in CIFCO. This did not include selling the properties currently in the CIFCO portfolio, as this was not good business sense, but move to local housing investments for the future.
118.21 Councillor Eburne summed up the debate and thanked all Members for their contribution. This was not personal, the advisors and officers who undertook the investments were acting on behalf of the Council. She thought that it was unhelpful that some Members wrapped up both Councils in their arguments, which may not be apparent to the constituents and that quoting figures for both Babergh and Mid Suffolk was misleading. She addressed the issues around the reserves and that the increase of £7M did not support the argument that the CIFCO provided a much-needed income to the Council.
118.22 She was pleased with the fantastic debate and that Members had taken the time to provide considered responses and arguments and she hoped Members would support the Motion.
118.23 The Motion was put to Members for voting.
By 17 votes to 17 votes
The Chair advised Members that she would not be using her Chair’s casting vote and the Motion therefore FELL