Assets, Culture and Housing Cabinet Member – Minutes – 21 April 2016
The council had long recognised the opportunities for making effective use of land and property assets towards achieving both financial and regeneration objectives. An internal commercial property development mechanism was established in 1999, underpinned by the Property Trading Account (PTA). The scope of the PTA was expanded in 2013, which provided a wider property management role to include surplus general fund properties which included smallholdings. The intention was to better support achievement of the council’s regeneration aims by way of managing property assets in a pro-active and commercial way. This would enable the council to safe guard existing streams and generate additional revenue and capital funds for reinvestment in projects aimed at boosting economic activity in the area and to support the capital programme in general.
Property represented a comparatively secure investment and returns remained good with the opportunity to benefit from capital growth as the momentum of economic recovery continued.
The Directors in their joint report detailed and explained potential options to finance, manage, invest and develop the property portfolio and sites, and addressed associated economic and financial challenges.
The joint report stated that as a pre cursor to developing the strategy, it was proposed to undertake a detailed review of the performance of the council’s existing property portfolio and to identify scope for generating further revenue. A detailed modelling of future estimates of Local Enterprise Partnerships (LEP) business rates retention was also required.
In terms of moving forward with an investment strategy the report outlined suggested core principles. If these were supported, the next suggested step was to obtain specialist legal and financial advice to ensure that all actions taken to implement the investment were vires. In particular clarity was needed on the requirement or otherwise to establish a property development company to deliver the investment strategy including ensuring compliance with the requirements of the Localism Act 2011, relating to local authorities doing anything for a commercial purpose in the exercise of their general power of competence.
It was understood that the proposed source of funding for property investment also had an influence on this. If the council had an existing source of funding such as reserves, or ring fenced capital receipts, there would be no requirement for investment to be made via a company. If the proposal necessitated increased borrowing, then the establishment of an arms length company may be required. As some local authorities had sought to deliver their investment strategies in-house whilst others had gone down the company route, further analysis of potentially available options was required.
Resolved – (a) That a strategic review of the PTA be undertaken to identify the potential scope for further income generation and achievement of economic growth and (b), that the specialist legal and financial advice required to inform a decision on the best delivery mechanism for the council to achieve its property investment objectives be secured.