Councillor J A Gray, Executive Councillor for Finance and Resources, to present the Treasury Management Six Month Performance Review.
(The report was considered by the Overview and Scrutiny Panel (Performance and Growth) and the Cabinet at their meetings on 4th and 19th November 2020).
Contact:10 Minutes.
Minutes:
Consideration was given to a report by the Council’s Finance Manager (a copy of which is appended in the Minute Book) providing a six-month update in respect of treasury management activity for the period 1st April to 30th September 2020. Councillor J A Gray, Executive Councillor for Finance and Resources, drew Members attention to the main development since the last report in so far as there had been a fall in the Bank of England base rate soon after the pandemic broke out and had dropped further since but as this was not a major source of revenue for the Council. It was reported that the performance was as expected and the importance of the ongoing Commercial Investment Strategy and providing revenue to support the Council’s front line services equating to around 20% of the £4m revenue budget on a net basis. The report provided an important update for Members highlighting the safety of the investments and cash had been well looked after and paid tribute to the Members of the Finance Team during this difficult period looking after and stewarding the finances of the District Council.
Councillor B S Chapman raised a question in relation to the reduction of £4.774m in the capital value of investments and not taking into account those properties that had been purchased before the Commercial Investment Strategy (CIS) the loss was in the region of £7m in terms of reduction in capital value. Although it was reported that £1.3m of investment income was being received back it was forecast nationally that all property rents and capital values were likely to decline further in the short and medium term even if there was a recovery in 2022 and questioned whether the Council should be retaining property that was reported by expert opinion to continue to fall further in capital value over the next few years despite a revenue return less than the reduction in capital value.
In response, Councillor Gray reported that the Council had no plans to dispose of any of the property held for investment and drew Members to the values of these assets that had been made in the early part of lockdown this year where there was considerable uncertainty over property values and the Auditors had been erring on the side of caution when these had been assessed. Furthermore, Councillor Gray explained that the value was also dependent upon how much was left on the leases attached to the properties, where the property value increased as a new lease was agreed. Attention was drawn to this evidenced in the report with considerable work undertaken on the existing portfolio but had been suffering the same as the wider property market being under pressure and as a result of active work to renew leases the property prices had continued to rise. Councillor Gray reported upon his confidence with the properties listed, with the exception of the Rowley Centre that he felt was under the most commercial pressure but as the Council was the landlord was very conscious of the importance of the Centre for the residents of St Neots.
In relation to a supplementary question by Councillor Chapman and was pleased to note that the Council had been re-negotiating rents at higher than the market value and quoted the Royal Institute of Chartered Surveyors reporting figure that a large proportion of rents nationally for retail, office and industrial properties had been re-negotiated down but the nationally reported forecast was for significant falls in capital values and whether Councillor Gray agreed with this forecast. In response Councillor Gray reported that the Council had not retained many retail premises but the important factor was the location and he explained that the Council was fortunate to be located geographically in an area of growth and economic activity was taking place, as well as people re-locating to the area and the evolution of how people were working differently as a result of the pandemic with companies giving thought to expanding their office base outside of London.
In concluding, Councillor Gray reassured Members that the Council was not complacent in its approach to managing these investments and referred to the hard work of the Estates Team who were professional in their undertakings and understood their business.
In response to a question raised by Councillor Dr N Johnson on assistance for individuals struggling to pay bills and the avoidance of court action by the Council, as it was outside the remit of the Item under discussion Councillor Gray undertook to co-ordinate with Officers and liaise with Councillor Dr Johnson outside of the meeting on this matter.
Whereupon, it was
RESOLVED
that that the Treasury Management Performance during the period 1st April to 30th September 2020 be noted.
Supporting documents: