The Head of Housing and Health and the Head of Strategic Finance and Property submitted a joint report that set out the case for diversifying East Herts Council’s investment portfolio by establishing a property investment company, wholly owned by East Herts Council. The Head of Housing and Health provided a summary of the report and outlined key elements and revisions requested by Members at the previous joint meeting in January 2017. The Chairman drew Members’ attention to the recommendation as now detailed.
Councillor K Crofton referred to the previous report considered when Members had not been happy with the model proposed and when alternative viable schemes to be submitted for consideration had been requested. He felt that the report before Members was virtually the same as the previous one. He did not believe that the Council would make money on 20 houses and that what was being proposed would generate a loss. Councillor G Cutting supported this view adding that alternative business proposals which had been asked for at the January 2017 meeting had not been explored.
The Chief Executive referred Members to the Service Plans agreed earlier on the agenda this evening and cited by example, a number of business opportunities and proposals which the Council would be proceeding with such as:
KA8 (Leisure strategy to determine future direction)
in terms of a large investment to reduce a subsidy;
a £500K investment in the Old River Lane - a
joint venture project with partners;
KA48 (Undertaking feasibility on a project to build
KA135 (Accommodation review ensuring health and
safety compliance) and the possibility of letting out office space
in the Hertford building and the commercial opportunities which
could generate approximately £600K.
The Chief Executive explained that the Council needed to take a first step in the process and referred to the Council’s general power of competence. She explained that the Council did not have the capacity to produce a lot of business cases for Members’ consideration and hoped that the Service Plans, agreed earlier, showed the significant amount of new ideas Officers were working on.
Councillor G Cutting commented that service plan ideas already were part of the process. The Chief Executive explained that it was simply a matter of capacity which was limited.
Councillor D Oldridge expressed his disappointment with the report which he felt was basically the same at that presented three weeks ago. He sought assurances that the investments proposed would give good value for money and sought further information on alternative ideas.
Councillor M Freeman was of the view that the report was clearer and more focussed. In response to a query from Councillor J Wyllie, the Acting Head of Legal and Democratic Services explained the legal position in relation to Directors of the proposed company who would also be employees of the Council. The Chief Executive cited, by example, the CCTV partnership and Building Control which worked in partnership with seven other authorities in Hertfordshire.
The Head of Housing and Health explained that approval of the report was to enable detailed discussion to proceed and to see how the business plan might look.
The Acting Head of Legal and Democratic Services explained that what was being proposed was not new, in that 14 other authorities were taking on such a role and that Members were being asked to comment on the case for establishing a property investment company. He stated that this was part 1 of the process and that the Executive would decide whether or not to set it up and that it would fall to scrutiny to make comments on the proposal. He reminded Members that only Council could agree any financial resource commitment outside of its agreed budget. The Acting Head of Legal and Democratic Services further explained that the Executive would establish the company, sign the articles of association and then ask Council to appoint Directors.
Councillor M Casey suggested that a company be set up with £100 share capital, that the five properties referred to be transferred to the company and that the business case be developed at a later date. The Chief Executive explained that the Council did not yet own the five properties.
The use of Section 106 monies was discussed. The Acting Head of Legal and Democratic Services explained the Council’s legal position on the establishment of a housing company and the restrictions on using Section 106 monies. He assured Members that the establishment of a property investment company was a well-trodden path by councils.
Councillor A Alder proposed and Councillor R Brunton seconded a motion to remove from the recommendation all the words after the word “Executive”. After being put to the meeting and a vote taken, this motion was declared LOST.
Councillor M Freeman proposed and Councillor P Phillips seconded a motion to amend the recommendation by the removal of the word “establishing” and replacing this with “developing”. After being put to the meeting and a vote taken, this motion was declared CARRIED.
The joint meeting of Scrutiny Committees supported the recommendations, as now amended .
RESOLVED – that (A) the report be received; and
(B) the Executive be advised that the joint meeting supports the case for developing a property investment company and that their detailed comments above, be taken into account when the Executive considers the proposal to set up a company.