Agenda item

The Delivery of the Property Investment Strategy

Appendices A – C to the report are confidential since they contain commercially sensitive information as defined in Paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972.

 

Minutes:

The Committee received a report setting out proposals to meet the ambitions of the agreed Property Investment Strategy through an in-house property service to manage the council’s property estate and the creation of a local government company to develop, sell or lease residential property.

 

As the item had been already considered by Cabinet, before the item was formally opened for consideration, the Chairman requested views on whether Members would wish for an Overview & Scrutiny Call-In.  It was agreed that as the final decision would be made at Council, an amendment based on the Committees views could be made to the report before any decision was taken.

 

The Leader of the Council introduced the item to the Committee and noted that many other local authorities had already begun doing what was proposed in the report. He reminded the Committee that there was a continuing need to deliver services but as government funding would soon cease we need to look to create alternative income streams.  

 

The recommendations were then introduced to the Committee and it was reported that alternative options had been considered but not deemed viable.  It was noted that risks had been thought through and Brexit implications was the greatest concern.

 

Members asked for clarification on whether the already approved £45m borrowing for the Investment Strategy would be used for the proposed company and it was reported that the company was not part of that Strategy and so it would be funded through other routes including the use of reserves.  When asked, it was confirmed that the borrowing as approved in the Investment Strategy was broken down and within the MTFS. Members were pleased to note that it was intended to start with the small target of 5 properties per annum to allow the company to grow. 

 

It was noted that any Fit for the Future projects to modernise systems or processes to carry out the implementation of Property Management had already been budgeted for with resources already in place.

 

Governance arrangements were then discussed at length and the Committee had some concerns regarding the proposed delegations to the Leader of the Council and Chief Executive and in particular to allow property acquisitions of up to £2m with the oversight of the Section 151 and Monitoring Officers.  The Committee were concerned that there was no scrutiny which could lead to exposing individuals to risk.  It was reported that the proposal was based on other local authorities with a two stage process with due diligence being carried out before any transactions made. Members requested that the governance arrangements be made clearer and it was proposed that an amendment be made to the draft delegations to say that ‘an offer’ of up to £2m could be made.

 

Conflicts of interests of Officers also being Directors and Company Secretary was then discussed and it was confirmed that they would be subject to Section 225 of the Companies Act however deputy Statutory Officers could step in if necessary.  It was also clarified that as council Officers, they make recommendations and Councillors make the final decisions and in the case of the company, the shareholder, which would be Lichfield District Council, would make any decision.  The Committee accepted that this approach would allow risks of conflicts of interests to be managed and also noted that it would be short term solution and new company directors would be sought when profitable.  Assurances were given that the level of commitment required from Officers to be Directors and Company Secretary was manageable.

 

It was asked if Directors had authority to change the Memorandum of Association and Articles of Association and it was confirmed that the council as the shareholder would retain the right to approve any changes.

 

When asked it was confirmed that there could be opportunities for second or third party shareholders to be invited but there could be risks of bias in council decision making.

 

The long term vision for the council was considered and it was noted that the Investment arm should yield quicker results regarding income and the property company would take longer to become profitable as it would require an initial period of reinvestment.

 

When asked it was noted that audits of the company would be done separately and published on companies’ house giving transparency.  This information would also be reported to the relevant cabinet member along with a proposed member scrutiny committee.

 

It was noted that PSP may still be utilised.

 

RESOLVED:  That the Strategic (Overview & Scrutiny) Committee endorse the Cabinet decisions subject to the following amendment to the proposed delegation to the Leader and Chief Executive to read;

 

  • A change to the constitution to delegate the Leader and Chief Executive to make an offer for property acquisitions of up to £2m with oversight by the S151 officer and Monitoring Officer.

 

 

Supporting documents: