At its meeting on 13 September 2018, Cabinet considered Paper BCa/18/35 (revised copy attached with amendments made following the Joint Member Briefing highlighted in yellow).
Cabinet approved the approach of the establishment of a Strategic Property and Land Investment Fund as recommended in paragraph 3.1 of the report, and delegated to the Strategic Director with responsibility for Assets and Investments, in consultation with the Cabinet Members for Assets and Investments, Finance and Economy, authority to pursue and finalise purchases of strategic property and land as set out in Sections 4.5 and 4.6 of Paper BCa/18/35.
Council approval is required to the funding arrangements for this dedicated fund, which will enable the Council to act immediately when opportunities are available for strategic purchases of land and properties.
Cabinet therefore RECOMMENDS TO COUNCIL:
That approval be given to the establishment of a Strategic Property and Land Investment Fund of £3m, to be funded from borrowing as required.
Minutes:
71.1 Councillor Ward introduced the report and informed Council that it had been recognised that the Council may not always be able to respond quickly enough through the normal governance procedures when property and land that could be of strategic interest became available for purchase. This report sought to establish a fund for investing in strategic property and land within the district. In addition to approval for establishing a fund of £3m to be funded from borrowing as and when required, the report set out the strict criteria to guide property and land purchases and a streamlined approval process outlined in appendix a of the report that would enable the Council to act quickly and compete with the commercial sector not just to acquire an asset but to be able to secure the best purchase price for the Council. The criteria was listed in paragraph 4.7 of the report and further checks and balances would be put in place as described in paragraph 4.8 of the report. This proposal would meet several of the Council’s strategic priorities and outcomes for delivering homes and developing the local economy as described in paragraph 5.1 of the report.
71.2 Councillor Ward then MOVED the recommendations in the report as modified by the Overview and Scrutiny as follows:-
“that Council approves the establishment of a strategic property and land investment fund of £3m to be funded borrowing as required and paragraph 3.2 delegates to the strategic director with responsibility for assets and investments in consultation with a minimum of 3 cabinet members including the cabinet members for assets and investments, finance and economy, the authority to pursue and finalise purchases of strategic property and land as set out within sections 4.7 and 4.8 of the report to enable the council to react and secure when required strategic property and land as an investment opportunity and to assist future house building and economic growth within the district.”
71.3 Councillor Barrett seconded the recommendations and reserved the right to speak.
71.4 Councillor Parker queried why the figure was £3m and was there any significance in that figure?
71.5 In response Councillor Simon Barrett informed Council that it was felt that £3m was a reasonable figure, looking at what had been historically brought, the amounts had been significantly less than that, but the Council did make an acquisition which was around that sort of mark. There had to be some limit,we also have to authorise a certain amount of borrowing, this is a sensible level for the type of investment that the Council is looking to make.
71.6 Councillor Patrick raised concerns relating to the proposals and felt that the Council already had enough to focus on without adding any more. He also felt that the Overview and Scrutiny’s recommendations would slow the process down and defeat the purpose of the report, to move quickly.
71.7 Councillor Hinton sought clarification as the report requested Cabinet approval and also asked if the Council were to borrow £3m, what would that produce in terms of the total borrowing for the Council planned and actual before May 2019?
71.8 In response Councillor Simon Barrett clarified that the £3m limit did not mean that the Council would have £3m sitting there waiting for a project to come along. The Council would only borrow the money when a project came up. If you take recent projects the money required was substantially less. The borrowing cost to the Council of up to a maximum of £3m is approximately £27K which is detailed in the report. It is an extra cost but it is minimal and the whole point is to generate extra income where the Council can. Therefore this is the worst case scenario but obviously there would be positive sides that would come out of any deal.
71.9 Councillor Ward also clarified that the report was not discussing two £1.5m purchases. The Council would have a fund up to £3m in total, of which any one single purchase would not exceed 1.5m so it could have a larger one of 1.5m then maybe 2 or 3 others of say half a million each. In terms of what it meant between now and the end of the financial year, it would depend on what if anything the Council would buy in that period. At the moment it was not possible to say what the total outlay was going to be, however there was some indicative numbers at paragraph 6.4 of the report which would show typically what the whole lot of £1.5m being invested in a single purchase. The indicative numbers were for the first 2 years in terms of the interest and the MRP depreciation over those years. If the Council were to borrow at the long term interest rates should it need to borrow the money for a long period up to 40 years or 50 years but typically if it were going to buy something just for a short period of time, 2 or 3 years, the Council would probably be looking at short term borrowing which was at currently a lot lower interest rate of about 0.75% at the moment.
71.10 Councillor Bavington asked what mechanisms would the Council have in place to scrutinise the spending of this money.
71.12 In response the Assistant Director for Assets and Investments informed Council that a report would be taken to Cabinet reporting that an acquisition had taken place which would provide an opportunity to keep a running review on the fund as and when every acquisition had occurred.
71.13 Councillor Patrick reminded Council that the professional external advice that would be required for an acquisition would need to be accounted for from the General Fund if the bid were to fail.
It was Resolved:-
1) That the establishment of a strategic property and land investment fund of £3m to be funded by borrowing as required be approved.
2) That the Strategic Director for Assets and Investments in consultation with a minimum of 3 Cabinet Members including the Cabinet Members for Assets and Investments, Finance and Economy, be authorised to pursue and finalise purchases of strategic property and land as set out within sections 4.7 and 4.8 of the report to enable the Council to react and secure when required, strategic property and land as an investment opportunity and to assist future house building and economic growth within the district.
Supporting documents: