Decision details

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.