Minutes:
The Portfolio Holder for Resources, Cllr Graham Arthur, outlined progress on staff matters, finance and assets.
On staffing the Portfolio Holder included the following in his comments:
· the team responsible for measures to assist young people into work had received an award at the recent Bromley Stars event;
· graduate trainees are included within the Council’s staff;
· staff involved with the GLA elections and Referendum vote were commended and thanked for their work, including the level of hours worked both day and night;
· Departmental Representatives were in place and meeting in a positive way;
· it was hoped that the contract with Amey and Cushman & Wakefield for Facilities Management and Strategic and Operational Property Management would be in place by 1st October 2016; and
· Registrars had recently received a positive assessment.
Concerning finance, the Portfolio Holder highlighted that the Council would need to be self-sufficient from 2020. He also referred to the Government’s four year funding offer and transition funding of £4.1m. The Council had a well-resourced contingency fund and there was a firewall between capital and revenue budgets. Bank deposits were now yielding diminishing returns.
The Portfolio Holder also referred to the Growth Fund and an increase in Business Rate income; the Council’s investment portfolio was also delivering over £13m for front line services.
Concerning assets, the Council pursued a policy of selling those it no longer needed. Referring to the Mears contract, the Portfolio Holder highlighted savings of some £4.6m per annum that would be realised, reflecting the Council’s sustainable stewardship.
In discussion a Member suggested there were current risks with commercial property investment, the Bank of England warning of difficulties for the sector; prices had been too high and seven property funds had suspended funds following the Referendum outcome. The Member suggested that (property) assets were widely overvalued.
However, the Council’s property investments were used to generate interest income and were not held for capital gain. Returns could be expected to fluctuate up or down and a declining property market could be an investment opportunity. A declining market would be short term and the Council was looking to achieve a 6.1% return longer term. Property investments were carefully targeted by advisers, Colliers, and any investment would be considered by a panel, including the Portfolio Holder, before Executive decision. Referring to Bear Stearns and the start of the 2007-08 Financial Crises, the Member contended that he was not looking short term and suggested the Council was willing to gamble funds to achieve income, warning that the market to drive property growth would cease and not be stable for some time. Prices would stay low and he asked for any investment properties to be debated at length by the Committee. He also disputed that investment returns went to front line services.
For a property coming to the market, the Chairman referred to the Council needing to process its decision making with speed - excessive scrutiny could jeopardise an investment opportunity. Another Member indicated the importance of yield; against a backdrop of minimum Government funding, it was possible to earn a 6% return. It was suggested that business rate income would only increase significantly with developments over 9,000 sq.ft and it was necessary to be proactive in obtaining such a size of premises e.g. a distribution centre (rather than stores/shops). For investment opportunities and key infrastructure improvements, the growth fund was targeted at three areas (Biggin Hill, the Cray Business Corridor, and Bromley Town Centre).
Concerning any risk management following the Referendum, the Portfolio Holder indicated that property investments needed the security of being long term. The Chairman indicated that not all investment properties were accepted, the Portfolio Holder adding that more were rejected than pursued. Over recent years the Council had sold defunct properties and bought investment properties with a good return. A Member indicated that such investments had produced a return to help the Council - the Executive’s performance had been good and on several occasions the Executive had listened to the views of PDS Members when selecting properties.
The Portfolio Holder was also asked about the current position on funds invested with Heritable Bank and it was confirmed that 98% of the Council’s investment had been recovered and the remaining 2% would be provided in due course. There would however be no interest paid.
Concerning the contract with Mears, the Portfolio Holder saw the provision of 400 properties as a first tranche. A neighbouring authority wanted a similar contract with Mears but there would be no arrangement for 12 months. There might be sufficient properties for all interested authorities but it was not possible to confirm at this stage whether this would be the case.