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Decision Maker: Executive Councillor for Transformation
Decision status: Recommendations Approved
Is Key decision?: Yes
Is subject to call in?: No
Recommend to Council the approval of the Annual Treasury Management Strategy Statement.
Matter
for Decision: The Council is required
by regulations issued under the Local Government Act 2003, to produce an Annual
Treasury Management Strategy Report. The officer’s report complied with the
CIPFA Code of Practice on Treasury Management (February 2011) and the CIPFA
Prudential Code for Capital Finance in Local Authorities (May 2013 edition).
The report also included any changes to the prudential & treasury
indicators, since they were last reported within the Mid-Year Financial Review
(MFR), to Council, on 6th November 2014.
Decision of the Executive Councillor for
Finance and Resources
The Executive Councillor resolved to:
i.
Recommend
to Council the Annual Borrowing Statement at Paragraph 3.2 of the officer’s
report, the Council’s Minimum Revenue Provision (MRP) Policy at Paragraph 3.3
of the officer’s report and the Council’s Annual Investment Strategy as
contained within Paragraph 6 of the officer’s report.
ii.
Recommend
to Council an amendment to counterparty limits as follows (which puts these financial
instruments in line with the other products in use):
Name |
Recommended Limit (£) |
Supranational Bonds - AAA |
15m |
UK Government Treasury Bills |
15m |
UK Government Gilts |
15m |
iii. Recommend to Council changes to the estimated
Prudential & Treasury Indicators for 2014/15 to 2017/18, inclusive, as set
out in Appendix D.
Reasons for the
Decision: As set out in the officer’s report
Any alternative
options considered and rejected: As set out in the officer’s report
Scrutiny Considerations:
The committee received a report from the Head of Finance.
In response to member’s questions the Head of Finance, the
Director of Customer and Community Services and the Accountant (VAT and
Treasury) said the following:
i.
Pointed out that the HRA Business Plan was
currently making a provision so that 25% of HRA debts could be repaid from 2038
onwards. However, this would depend on the financial situation at the
time.
ii.
The Council’s proposed £10m investment with the
Charities, Churches and Local Authorities’ Property Fund (CCLAPF) would
represent 10% of the available cash balances.
iii.
CCLAPF actively manage portfolios to limit voids
and have performed consistently well in this area. They also renovate property
to a high standard to ensure quality tenants.
iv.
The yield of the fund is based on the rental
income.
v.
The administration costs are within the industry
standards.
vi.
The City Council’s Treasury Management Advisors are
supportive of this proposed investment.
vii.
New investors increase the size of CCLAPF. The City
Council would therefore be buying new ‘units’ not ones previously been sold on
by other Local Authorities.
viii.
Any capital appreciation would be released upon
sale of the ‘units’.
With regard to the concerns raised about the investment with CCLAPF the
Executive Councillor for Finance and Resources said the following:
i.
This type of investment provided a very stable and
long term return for the Council.
ii.
Returns were generally in the 3.5% - 10% range.
iii.
A diverse geographical and property type portfolio
reduces risk as differing areas and property types may be affected differently
at the same point in any property cycle.
iv.
Since 1971 no Local Authority who had invested in
this fund had sold any of its ‘units’.
v.
Whilst the capital value of properties did vary
over time, the rental income stayed very stable.
vi.
Had been very reassured by his meetings and ongoing
dialogue with the CCLAPF Managers.
vii.
CCLAPF held a very diverse portfolio of property
and it was therefore very unlikely that the City Council would be bidding on
the same properties. This could however be further discussed between the two
parties.
viii.
Whilst the overall governance structure was
controlled by the LGA, individual investors did have an input into this.
ix.
Any capital appreciation would only be realised if
and when ‘units’ were sold.
x.
This was a safe long term investment for the City
Council and the tax payers of Cambridge.
Councillor Bick proposed the following additional
recommendation:
i.
To defer investment in CCLAPF for 1 month to
allow for alternative proposals to be considered.
On a show of hands this proposal was lost by 3 votes to 5.
Councillor Bick requested that separate votes be taken on
the recommendations included in the officer’s report.
The Scrutiny Committee considered recommendation i) and
endorsed it by 5 votes to 0.
The Scrutiny Committee considered recommendation ii) and
endorsed it unanimously.
The Scrutiny Committee considered recommendation iii) and
endorsed it by 5 votes to 0.
The Executive Councillor approved the recommendations.
Conflicts of Interest Declared by the Executive Councillor (and any
Dispensations Granted):
Not applicable.
Publication date: 07/04/2015
Date of decision: 19/01/2015