Agenda item

Report of the Cabinet Member Finance

The Cabinet Member Finance introduced the Asset Management Plan 2016/17-2020/21, as circulated with the agenda.  The Council’s current Asset Management Plan (AMP) had been due to expire in 2015 and the production and approval of the replacement Asset Management Plan had been deferred.  This was to allow time for consideration to be given to the advice and suggestions made by the Chartered Institute of Public Finance and Accountancy (CIPFA) following their review of the council’s approach to asset management.  The Asset Management Working Group (AMWG) had considered the replacement plan the previous week.  Council was now being required to specifically approve Appendix G of the report although the Cabinet Member would welcome comments on the report in its entirety. 

The Cabinet Member explained that a key recommendation of the CIPFA review was that the AMP should be a more dynamic, ‘living’ document which played a key role in the organisation. He believed effective asset management assisted the council in achieving its core objectives –

• delivering better services,
• helping to bridge the ongoing budget gap,
• helping to make the town a more beautiful, vibrant place,
• supporting the local economy,
• nurturing the town’s cultural life,
• providing more and better housing,
• and supporting the voluntary sector.

All of these threads were woven into the plan, together with policies and strategies to achieve them.

He stated that there were a number of things that were clearly required of an effective Asset Management Plan :

·         clear objectives (set out in the Asset Management Policy Appendix A)

·         clear performance indicators (set out at appendix J)

·         a series of policies and methodologies covering such things as :

roles and responsibilities

capital investment

planned maintenance

Disposals and rental policy

·         Procedures to ensure the decision-making processes are clear, considered and transparent.

The Cabinet Member referred members to appendix I of the report which set out a clear policy for carrying out and prioritising planned maintenance; he highlighted the fact that the CIPFA report recognised that CBC had made great progress in this area. He also commented that the CIPFA report was very positive about the cabinet member role in asset management, but it strongly recommended that the Asset Management Working Group be given a wider and more strategic role.  This recommendation had been accepted and made a crucial part of the decision-making process.  The Working Group would be encouraged not just to look strategically at the way assets were managed but also to monitor performance on a systematic basis.

The Cabinet Member also said that another significant feature of the Plan was that it proposed a clear policy and process for acquiring assets for investment purposes as set out at appendix G. He explained that this sought to smooth the process and seize opportunities where they arose, but without taking away the constitutional role of the Cabinet and Council in making property decisions.  He highlighted the importance of this if property income was going to be used as a means to do more than simply bridge the financial gap. 

The Cabinet Member paid tribute to the work of the property services division which had significantly contributed to many of the Council’s most important projects over recent years, including the Midwinter improvement scheme, the North Place and Portland Street sale and the renegotiation of the Regent Arcade lease. It had delivered over £13 million pounds worth of capital receipts over the last five years, which have made it possible to invest substantially in the town.  It had also increased the rental income from General Fund properties by £120,000 which was contributing to bridging the budget gap. Over five years it has carried out over £3 million pounds worth of planned maintenance to CBC properties. Property services had also played a major role in the Development Task Force programme of work and worked closely with CBH to achieve the council’s housing objectives. At the same time it continued to carry out a rolling option appraisal of assets, focusing on the properties that offer the biggest opportunities for increased income or capital receipts.

The Cabinet Member took the opportunity to remind members that investing in income-yielding property was nothing new for the Council and he gave the example of the Regent Arcade development 35 years ago, the decision to acquire the Shopfitters site two years ago and a large part of the rationale for the purchase of Delta Place a year ago.

Finally, he referred to Appendix C (AMP – Work Plan) which was a comprehensive, yet challenging proposition and efforts were being made to build resources within Property Services to enable them to continue to provide major support and even more so in the future. 

The Cabinet Member asked Council to support the Asset Management Plan for the management of the Council assets for the period 2016/17 to 2020/21 and to approve the policy G it contained.

The following questions were raised and responses given :

·         Delta Place investment- a member challenged whether there had been a switch in emphasis from the investment from providing new accommodation for the council to primarily an investment purpose; in response the Cabinet Member stated that the intention remained for the council to relocate but there was uncertainty in terms of timing; this however was no reason not to look at other options. The investment was proving to be hugely beneficial in terms of income and would deliver £500 000 annually for the council from 2023 onwards if roughly half the space was let and the other half occupied by the council itself. Retaining and sub-letting the whole building would give the council an income of approximately £1 million a year compared to the Regent Arcade investment which generated £560k per annum. He stressed therefore that it was important not to wholly rule out other options at this stage.

·         Delta Place-a member questioned why the council had purchased Delta House for £13,750,000 for a property which had an investment value of £11 million, an overpayment of £2.75 million and whether future rental growth was built into the calculations and if so why was it ignored. In response the Cabinet Member confirmed the responses to these questions had been addressed in Member Questions. The intention was for the council to move to Delta Place and also use it for income generating purposes. Retaining Delta Place purely as an investment would without a doubt be highly beneficial to the council. He added that one of the rationales for buying Delta House was based on information from the Athey report which stated that rents for office accommodation were likely to rise which was what occurred last year with rates rising from £12.50/sq ft to £17-23/sq ft. Therefore factoring in new rental levels would increase income post 2023 quite considerably. The Cabinet Member believed that the investment value was of limited relevance to the situation as valuations tended to be retrospective and it was clear that an increase in rental levels would enhance the value of the investment which was going to be long term.

·         A question was raised with regard to the working methods of the Property Acquisition Assessment Group (PPAG) and what “Briefing notes will be prepared where appropriate”. In response the Cabinet Member explained that the PPAG was an officer led group and he clarified that the “if appropriate” related to AMWG as it was important to give AMWG a bigger role in monitoring performance to enable it to input into the process.

In the debate that ensued the following points were raised :

·         The Chair of Audit Committee welcomed the timely presentation of the AMP as it complemented the new Grant Thornton accounting regime which looked at ensuring that assets were performing to their maximum and valued in the correct way. In the Value for Money exercise the Auditors also looked very carefully at the decision-making process which was now set out very clearly in the AMP.

·         The investment policy in terms of the acquisition of Delta Place was challenged by some members who believed there was a changing emphasis in terms of the purpose of the investment, albeit subtle. The potential office space rental value of £23 per sq. ft. quoted by the Cabinet Member was queried. In response the Cabinet Member Finance stated that Delta Place represented a big income generator for the council and provided flexibility in terms of the council being able to occupy as much space as it required or, if there was a better option, even lease the entire space

·         The issue of the absence of a fit for purpose asset management database was raised which had been highlighted in the CIPFA Asset Management Health Check. The Cabinet Member Finance commented that the criticism was that the data was not as accessible through IT as it should be. AMWG had discussed this issue at length at its recent meeting and it would receive a report on this in due course.

·         Some Members gave thanks to the Property Services team and the Cabinet Member Finance for providing options for the future which would generate income.

Upon a vote it was unanimously

RESOLVED THAT

1.    The policy set out in Appendix G be approved.