Investment & Commercialisation (Agenda Item 10)
Presentation by the Executive Director of Commercialisation and the Chief Accountant to include:
· Investment Strategy
· Disinvestment of Assets
· Cash / Treasury Management
The Executive Director Commercialisation gave a short presentation.
Members were advised that balances were reducing and it was necessary to be more careful with residual funds. Members might want to consider borrowing but there was a cost to that and there were rules set out in legislation for Councils that borrowed. They had to repay the principle and the interest. The DCLG were getting concerned about some Councils that were pushing the boundaries (deferring repayments). It was the Director’s job as Section 151 Officer to be prudent and conservative and to advice members to take risk in a balanced and proportionate way.
The Council had converted a lot of its reserves into assets. If interest rates started to rise it might be better to have that money back as cash. It was also highlighted that Councils could not secure debt against an existing asset; any loans had to be secured against the revenue account and be for a capital project.
The Strategic Property Manager discussed the difficult decisions about where to put money. It was important to ensure that the investment portfolio was performing well. As interest rates rose the gap between earnings from investments and what money would be realising in the bank, would get smaller. A rationalisation exercise had been carried out on the portfolio to look at how assets were performing. Any that were falling short of a particular yield would be considered for disposal and then that income could be reinvested in other assets with a higher return.
Currently the investment portfolio was realising a net yield of 7.3% which was quite good.
Thresholds had been set for the poorer performing assets. The wider factors of why they were being kept had been considered. About 15 units were failing to meet requirements and would be recommended to Cabinet for disposal. If given approval the money would be reinvested in higher yielding assets.
The Council’s other assets including community, land and operational would be reviewed in the same way.
The Executive Director would not recommend taking more risks. The remaining cash flow was retracting and a lot of it was already committed. If the remaining reserves were drawn together one large, or several small investments could be made. Alternatively, the money could be used to invest in IT or revenue or purchasing vehicles for the waste contract to make revenue savings.
The money lent to Breckland Bridge at a premium was achieving an extra income.
Business Rates was discussed in the context of stimulating the market particularly in renewables and to enable others to invest without necessarily taking the Council taking the risk itself, but could still benefit from 100% business rates.
Also as the Council moves to more reliance on business rate income it may need to increase the General Fund balance to guard against possible appeals, etc.
The cash investment constraints for local government was set out in regulation. Specified investments had a high level of security. Non-specified investments, such as Breckland Bridge, had much tighter controls.
The future reserve levels were shown in graph form. Investments were generally performing well.
Councillor Oliver referred to the green investment proposal and suggested that the Council should form a land formation company; buy the land (any renewable project) employ a company with that specialism, act as a conduit, get planning permission, get someone to build on the land, then sell to a company. That would expedite green investment in the district and retain an on-going stream of income from Business Rates.
Councillor Oliver made a formal proposal which was seconded by Councillor Jermy and supported unanimously.
RESOLVED TO RECOMMEND TO CABINET that they consider options to maximise the 100% allowance on renewables in the District.
Councillor Dimoglou did not understand the public works loan board. It was there to facilitate public works. He felt that the Commission needed a presentation on that single issue to get a better idea of how to facilitate growth.
The Chairman suggested that Councillor Dimoglou should Chair a Task & Finish Group with three other Members to look at the issues. Councillor Kybird volunteered to serve on the Group. Any non-Executive Member could serve on the Group and interested Members were asked to contact Councillor Dimoglou.
The Executive Director informed Members that Treasury Management specialists would be attending the Governance & Audit Committee meeting in December to explain the regulations. The Members of the T&FG might find it useful to attend.
The Chairman thanked the Officers for their presentation.