Agenda item

The Committee considered the Capital and Investment Outturn Report for 2019-20, which had included:

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

·        a summary of the approved strategy for 2019-20

·        a summary of the treasury management activity for 2019-20

·        details of 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 2019-20 had been £48.1 million, which was less than the budget by £38.7 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 £1.02 million, the outturn had been £926,639, due to slippage in the capital programme in 2018-19.

Councillors noted that the Council’s investment property portfolio stood at £153 million as at 31 March 2020.  Rental income had been £8.4 million, and income return was 6% against the benchmark of 4.7%.

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 2020, the Council held £107.6 million in investments, £44 million of short-term borrowing and £192 million of long-term borrowing, resulting in net debt of £129 million.

The report confirmed that the Council had complied with its prudential indicators, treasury management policy statement, and treasury management practices for 2019-20. 

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.

Officers had been reporting higher interest receivable and payable and a lower charge for MRP during the year as part of the budget monitoring when reported to councillors during the year.

The report had also set out detailed information on the return on investments, and interest paid on external debt.

During the debate, the following queries were raised:

a)    In relation to performance of investment property, what percentage of rent roll was received for the March quarter day?

b)    In the table in paragraph 3.11 of Appendix 1 to the report on page 35 showing General Fund items of capital expenditure, there appeared to be an error in respect of the variance in respect of the Rodboro through road scheme, which was shown as 0 in the table.

c)     In the same table, an explanation was requested as to the reason for the 50% overspend on Strategic property.

d)    In the same table, it was clarified that the £4.4 million variance in respect of the Weyside Urban Village project related to actual expenditure against the original budget, which did not take account of a subsequent revised budget.

e)    The projected rental income on investment property for 2020-21 was approximately £7.5 million.

In relation to a) to c) above, Officers would circulate a response to each of these queries following the meeting.

The Committee also noted the following additional points:

·       Whilst the Council investments generally included commercial property, there was a prudent diversity in investments in order to spread the risk.

·       The Council’s property investments in CCLA totalling £6.5 million related to retail and offices, but mainly industrial property across the country.

·       Given that demand in the local office market was generally for smaller space, and in view of the costs associated with dividing large office buildings into smaller lettable units, it was confirmed that there were no plans to divide the Council’s remaining office properties.  It was also understood that any that might require revised layouts in the future would not be too expensive to divide.

The Committee, having noted the various corrections on the Supplementary Information Sheet and that the outturn report would also be considered by the Executive at its meeting on 22 September 2020, and by full Council on 6 October 2020

RESOLVED: That, subject to the comments referred to above, the report be commended to the Executive.

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.