Cabinet Member for Assets and Investments
Minutes:
The Chairman welcomed Henry Cooke, Director, CIFCO Capital Ltd, Nigel Golder, Director Strategic Asset Management JLL, Helen Rumsey, Partner Ensors and Emily Atack, Assistant Director for Assets and Investments and Managing Director for CIFCO Capital Ltd.
Councillor Busby introduced the report and informed Council that the report detailed CIFCO Capital’s performance over the last 12 months and the proposed business plan for the next 12 months. The business plan is a fundamental part of CIFCO’s governance and ensures accountability to its shareholders. He particularly valued the contributions from the Joint Overview & Scrutiny Committee in June this year, which confirmed that in their view, the business plan is robust and they have sufficient confidence in the management of CIFCO.
Since its inception in 2017, CIFCO has provided Babergh with £3.5m of net income. £1.3m was delivered during the last financial year whilst facing unprecedented challenges as a consequence of the pandemic and certainly providing the Councils with much needed income at this time. CIFCO was able to withstand the challenges of the pandemic and continue to deliver income to the Councils and this is testament to the investment approach and strong management of the CIFCO portfolio since its inception, which has seen rent collection rates above the industry norm.
The business plan identifies that the challenges of the pandemic are not behind us and takes a prudent approach to CICFO’s financial management over the next few years, ensuring that the CIFCO portfolio continues to provide income to the Councils, running about a quarter of council tax, to support the delivery of services and projects locally as well as creating a long-term legacy for the District to benefit from in the future.
Councillor Busby then MOVED the recommendations in the report which Councillor Ward SECONDED.
Councillor Barrett queried why the recommendations in the Overview and Scrutiny report were for noting only.
In response, the Monitoring Officer informed Council that Scrutiny is not provided with pre-empted recommendations. It would be for Scrutiny to make their own recommendations once the review had been undertaken.
Councillor Lindsay asked about the deferment of the £1.5m for the next three years and what would happen if the money that was owed could not be paid back?
In response, Councillor Busby stated that it was the intention of CIFCO to pay each month and if they didn’t, interest would accrue.
The Assistant Director for Assets and Investments added that if the deferred income was not able to be paid back in three years time, then the amount would be added to the existing loan and would be paid back over a longer period and would incur accrued interest.
Councillor Lindsay asked how much the loan was and when it was scheduled for repayment.
In response, the Assistant Director for Assets and Investments informed Councillor Lindsay that the schedule of loan repayments was detailed in the report. The length of the loan would depend on when the asset was purchased with the average length of the loan being between 45 to 48 years.
Councillor Maybury sought confirmation as to whether the interest on the loan would be compound interest.
In response, the Assistant Director for Finance confirmed that this was the case.
Councillor Simon Barrett queried whether the Council was receiving a cash flow advantage at the moment, as opposed to just a culmination of a capital sum as CIFCO were not in a position to pay the cash to the Council?
In response, the Assistant Director for Assets and Investments clarified that to date full repayments had been made as per the schedule of payments detailed in the report. The report however made provision for prudent financial management in view of the current pandemic situation. Even with deferred payments the Council does receive a net benefit from CIFCO.
Councillor Maybury asked what the interest rate would be on the compound interest?
In response, the Assistant Director for Finance confirmed that 2% was the figure.
Councillor McCraw stated that he had sat on many Overview and Scrutiny Committees where the business plan had been reviewed and endorsed year after year. The income that the Council had gained had gone up year after year as predicted, despite the tricky circumstances that everyone had faced. Deferment of payments was common because of the current situation. Councillors should be reassured that proper prudential arrangements had been put in place to recover the interest if needed. Councillor McCraw was confident that a robust business plan was in place.
Councillor Jamieson raised concerns about the deferment of payments.
Councillor Busby stated that there had not been any deferment of payments, all payments had been made to date. The measures had been put in place in case there was a need to defer payments at a later date.
Councillor Simon Barrett felt that although the Business Plan was robust, the business model was not sustainable.
Councillor Busby stated that the Market experts had predicted that CIFCO would be back up to full value of the portfolio within ten years.
Councillor Ward stated that CIFCO was providing regular guaranteed income to the Council. The Council was increasingly dependent on this income, four fifths of the Councils investments with CIFCO in total now accounted for 14% of the Council’s income. This income allowed the Council to provide services to our residents where Council Tax and business rates only provided 45% of the income to provide them. The money made up for the loss of the Revenue Support Grant as the Council was increasingly expected to stand on its own two feet. CIFCO was doing the job it was designed for and doing it well.
It was RESOLVED: -
1.1 That CIFCO Capital Ltd trading activity and performance for the year to 31st March 2021 be noted.
That CIFCO Capital Ltd’s 2021/22 business plan for adoption by CIFCO Capital Limited be approved.
Supporting documents: