Agenda item

The Committee considered the Capital and Investment Outturn Report for 2018-19, which had included:

·        a summary of the economic factors affecting the approved strategy and counterparty update

·        a summary of the approved strategy for 2018-19

·        a summary of the treasury management activity for 2018-19

·        compliance with the treasury and prudential indicators

·        non-treasury investments

·        capital programme

·        risks and performance

·        Minimum Revenue Provision (MRP)

·        details of external service providers

·        details of training

The Committee was informed that total expenditure on the General Fund capital programme in 2018-19 had been £37.7 million, which was less than the revised budget by £99.6 million.  Details of the revised estimate and actual expenditure in the year for each scheme were set out in Appendix 3 to the report. Although the budget for Minimum Revenue Provision (MRP) had been £1.2 million, the outturn had been £795,190, due to slippage in the capital programme in 2017-18.

Councillors noted that the Council’s investment property portfolio stood at £161 million as at 31 March 2019.  Rental income had been £9 million, and income return was 6.3% against the benchmark of 4.8%.

The Council’s cash balances had built up over a number of years, and reflected the strong balance sheet, with considerable revenue and capital reserves.  Officers carried out the treasury function within the parameters set by the Council each year in the Capital and Investment Strategy.  As at 31 March 2019, the Council held £97.3 million in investments, of which £20 million was short term borrowing.

The Council had borrowed short-term from other local authorities for cash flow purposes, but did not take out any additional long-term borrowing during the year.  The Council had £212.9 million borrowing at 31 March 2019, of which £20 million was short-term borrowing for cash purposes.

The report confirmed that the Council had complied with its prudential indicators, treasury management policy statement, and treasury management practices for 2018-19. 

The Committee noted that the slippage in the capital programme had resulted in a lower Capital Financing Requirement than estimated. Interest paid on debt had been lower than budget, due to less long-term borrowing taken out on the General Fund because of slippage in the capital programme.

The yield returned on investments had been lower than estimated, but the interest received had been higher due to more cash being available to invest in the year – a direct result of the capital programme slippage.

During the debate, the Committee noted the following points:

(a)   The capital projects which were due to come forward in the 2018-19 financial year, but had been delayed were:

·        Westfield Road/Moorfield Road, Slyfield – resurfacing scheme

·        Chapel Street Public Realm scheme

·        Rodboro Buildings Environmental Improvement

·        New burial ground

·        Guildford Park Car Park Redevelopment

·        Guildford West Station

(b)   In response to a question regarding the Council’s proposals to address the empty industrial units at the Midleton Industrial Estate and the poor condition of the Estate, officers confirmed that the Council was deliberately letting units on a short-term tenure in order to provide flexibility for the longer term redevelopment. The scheme for the redevelopment of the Midleton Industrial Estate was now on the approved capital programme and had reached the stage at which a planning application was being developed in respect of the first phase. In terms of the redevelopment proposals and expected return on the Council’s investment, the Director of Finance indicated that she would circulate the report submitted to the Executive last year on the business case.

(c)   In respect of the Council’s investment property fund portfolio, officers acknowledged the current risks associated with the retail sector, and noted that the Council received rent on the long leases granted in respect of the Friary and Tunsgate shopping centres. In respect of the Council’s own tenants, there had been no increase in void properties currently.  Officers were also aware of similar risks associated with the office sector and noted that two tenants had exercised break clauses within their respective leases in recent months. The situation was being monitored via the Property Review Group. The Council’s current policy was to not acquire any additional retail units.

(d)   In response to a question regarding the Council’s strategy for addressing a reduced demand for retail units with an ever increasing supply, the Committee was informed that should any retail unit under the Council’s direct control become vacant, all options would be examined, including refurbishment and redevelopment, and progressed subject to a sound business case. 

The Committee, having noted that the outturn report would also be considered by the Executive at its meeting on 18 June 2019, and by full Council on 23 July 2019

RESOLVED: That the following recommendations to Council be supported:

(1)         That the Treasury Management Annual Report for 2018-19 be noted.

(2)         That the actual prudential indicators reported for 2018-19, as detailed in Appendix 1 to the report submitted to the Committee, be approved.

Reason:

To comply with the Council’s treasury management policy statement, the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice on treasury management and the CIPFA Prudential Code for Capital Finance in Local Authorities.