Report by the Chief Operating Officer
27.1 The Committee considered a report by the Chief Operating Officer, together with exempt information contained in a later agenda item.
27.2 In response to a query from the Committee it was confirmed that a listing with the District or Borough Council of a property as an Asset of Community Value meant that the local community could give notice of an intent to bid for that property, and did not give rise to a “right to buy”. It was set out that there is a small list of County Council properties so listed.
27.3 The Committee asked questions about the capacity of the Property Team to deliver, in the light of the review of the Orbis Partnership and return of property services to the sovereign authorities, and the recent Internal Audit [see minute 23.2 and 23.3]. The Committee expressed concern regarding the non-realisation of expectations from Orbis. Kevin Foster set out the delivery of £12m of repeatable savings. He confirmed that scrutiny of the Orbis services would be through the Place Scrutiny Committee, but agreed to provide an update to the Audit Committee.
27.4 Kevin Foster confirmed that the County Council had considered options for investment in property for a commercial return, but none of the options had reached the benchmark score to satisfy the business case. He further confirmed that decisions to invest would go through Cabinet for inclusion on the Capital Programme. Graham Glenn highlighted the change in emphasis from realisation of capital receipts toward retention for alternative service requirements, and onto a model of joint ventures and re-development of existing assets (subject to business cases). He drew attention to the proposals for a solar farm in the Eastbourne area as an example.
27.5 The Committee RESOLVED to: (1) note the content of the report;
(2) note that progress continues against the background of some wider market uncertainties and the need to support capacity to ensure delivery; and
(3) consider an update on the Orbis partnership at a future meeting.
30.1 The Acquisition and Disposal Manager introduced the report. The Council has £550 million worth of non-highways assets on the property balance sheet, and most of the assets are fairly illiquid. There is a core of around £25 million worth of assets that have been the focus of the work on the Strategy, which could be delivered over the next five years. The work on the Strategy does not include direct property investment. However, the Strategy does include the ability to invest directly into new opportunities. For example, the Council could invest in a site that it owns to develop business units rather than sell the site. The report outlines the business processes and the sort of resources required for the implementation of the Strategy. This includes how the Strategy works with asset management planning, property planning and investment planning processes within the Council.
30.2 The Committee asked whether all assets and leased buildings are under central management. The Chief Operating Officer responded that the corporate landlord model is in place for most assets, but there are still a few smaller assets managed directly by departments. This is being reviewed as part of the RPPR process in terms of the operational estate. The management of the portfolio of operational assets, and the portfolio of non-operational and investment assets, are both functions within the Property Team. Corporate policy links asset management with the investment part of the property function.
30.3 The Acquisition and Disposal Manager outlined that from a portfolio management point of view, there are other financial and non-financial returns that can be achieved rather than simply achieving a capital receipt. Implementation of the Strategy includes a wider modelling of economic benefits. The Committee noted the process of site and asset reviews and where a higher level of social value benefit is possible, an opportunity for a Community Asset Transfer (CAT) of an asset may be identified. The Committee suggested that it would be good to publicise the Community Asset Transfer process where an asset is transferred for specific social or community value outcomes, and that it is important to have a good explanation of the process.
30.4 The Committee asked whether there is a view on the equity to debt ratio and a minimum acceptable level of return, when the Council is looking at redeveloping or investing in an asset. The Acquisition and Disposal Manager replied that the equity to debt ratio and the level of return is taken into account on a site by site basis.
30.5 The Committee asked what was meant by paragraph 3.3 in the conclusion of the report. The Acquisition and Disposal Manager explained that this refers to the impact that changes to the delivery of services may have on property portfolio, which will in turn feed into the Property Asset Disposal and Investment Strategy work. The Committee asked if there was a risk of a premature disposal of assets in a scenario where the Council’s finances change in the future. The Acquisition and ... view the full minutes text for item 30
Report by Chief Operating Officer
59.1 The Cabinet considered a report by the Chief Operating Officer
59.2 It was RESOLVED to:
1) approve the Property Asset Disposal & Investment Strategy set out in Appendix 1 of the report;
2) note the governance and resource arrangements required to deliver the Strategy;
3) note that any initial revenue costs of funding initiatives that will deliver enhanced income and capital receipts in the longer term will be considered as investment proposals against the Council’s Transformation reserve which is delegated to the Chief Executive to approve; and
4) note that any capital investment into assets will be subject to Cabinet approval of business cases developed to support the investment consideration
59.3 The development of a Property Asset Disposal and Investment Strategy, covering investment in assets already producing an income and investment in development opportunities that support the Council’s ability to enhance its financial resilience in the longer term, will act as a catalyst for improved economic outcomes for the County. The financial returns delivered from the strategy will support the Council in continuing to deliver its essential services to residents. The proposed approach is based upon the following key principles:
· Invest in schemes that align with and support the Councils four priority outcomes.
· Invest in income producing assets within the County, creating a diversified portfolio to manage risks and secure an annual return.
· Retaining assets where appropriate and undertaking effective property and asset management initiatives and investment to enhance income or capital receipts.
Report by the Chief Operating Officer.
53.1 The Committee considered a report by the Chief Operating Officer, introduced by the Chief Finance Officer which provided the latest iteration of the Strategy. It set out the governance arrangements and proposed Asset Investment Board (AIB) which would consider the business case for each proposal and make recommendations to Cabinet.
53.2 Members set out the approaches of other local authorities with which they were familiar, and the risks associated with those approaches, in particular with the cyclical nature of the retail market. The Chief Property Officer reassured the Committee that the proposed AIB would take those concerns into account when assessing the business case for a proposed investment.
53.3 Members asked questions about the method of accounting for the investment and any potential losses and the scaleability of the project, given the estimated rate of return of 1-2%. The Chief Finance Officer set out that the Council would have to make provision for any potential loss, and that impacts on the balance sheet would be part of the assessment process of the AIB, in accordance with International Financial Reporting Standard (IFRS) 9.
53.4 The Chief Finance Officer clarified that provision for potential losses may have to be made at the time of investment, in a similar way to the Minimum Revenue Provision for debts. Income would be set aside to cover the provision in the form of a reserve. Members reflected on the potential for the risks to have an impact on the revenue budget, and the council’s ability to fund service offers.
53.5 The Chief Executive set out that the Strategy provided the framework through which individual investment decisions will be taken. The Strategy also allows for assessment of the Council’s existing assets, to see if they can be developed in pursuance of the Council’s priorities.
53.6 The role of officers on the AIB was discussed, and it was emphasised that it was to provide neutral and professional advise, supported by the business case, on each investment, and its associated risk. Councillor Smith remarked that Lewes District council has an Investment Board that contains Members from the majority and minority parties, supported by officers and external expert advisors.
53.7 The Committee offered encouragement to the Strategy with a level of prudent caution.
53.8 The Committee RESOLVED to (1) note the governance and resource arrangements required to deliver the strategy;
(2) note that any initial revenue costs of funding initiatives that will deliver enhanced income and capital receipts in the longer term will be considered as investment proposals against the Council’s transformation reserve which is delegated to the Chief Executive to approve; and
(3) note that any capital investment into assets will be subject to Cabinet approval of business cases developed to support the investment consideration.