Council to discuss borrowing £100m to invest in commercial property
PUBLISHED: 08:39 23 January 2019 | UPDATED: 09:26 24 January 2019
Uttlesford District Council is proposing to borrow £100million over three years to invest in commercial property.
Of this, £20million would be allocated to further investment at Chesterford Research Park, in which the council owns a 50 per cent share, and £80m allocated to other investments.
Councillors will also be asked to widen the areas in which the council can invest - at present, all investment has to be within the district boundary.
At the 2019-20 budget setting meeting on February 21, councillors will discuss the updated investment strategy.
In the face of major reductions in the funding the council receives from central Government, the council says the strategy puts an increased emphasis on developing new income streams from “prudent commercial investments”.
In 2016-17, Uttlesford received £7.65million in funding from central government, but in 2020-21 this sum is forecast to reduce to just over £5million, and by 2023-24 to £3.1million, representing a cut of 60 per cent.
While the proposals still give preference to investment for commercial acquisitions within the district, the council would look at investment opportunities within Essex, Hertfordshire, Cambridgeshire and Suffolk should more local opportunities not arise. If that in turn does not yield appropriate investments, opportunities further afield but still within the UK will be explored.
Cllr Simon Howell, cabinet member for finance and administration, said: “For some time we have been working within a challenging financial climate, and we know the council will be receiving less funding from the government over the forthcoming years. Increasing Council Tax also does not cover the shortfall – for every one per cent increase UDC only receives about £55,000 extra.
“Therefore we must continue to diversify and expand the ways in which we can generate income.
“The purchase of the 50 per cent share of Chesterford Research Park, for example, has proven to be an excellent investment which has delivered a surplus of £1.5million, after borrowing costs, in the first 12 months. The recent agreement to modernise a facility at the park will see this sum rise by £500,000 a year from the second half of 2020.
“By investing further, both in and out of our district, we can ensure that key services remain in place for residents.
“However, even with these investments, significant cost savings will still need to be found as we address a £4.5million per annum loss in government funding. We will, along with the MP, continue to lobby government for additional funding and to demonstrate to them the scale of the challenge that we and other rural councils face.”
Residents for Uttlesford said they welcome the council seeking a more diversified investment portfolio, but councillors still have concerns about investment in Chesterford Research Park.
A spokesman for the party said: “R4U has had significant concerns about the current investment in Chesterford Research Park. That investment breaks all the rules of prudent investment. It puts all our ‘eggs in one basket’ in that all of the fund is in a single property in a single location that serves a single market sector.
“The UDC leadership insist there is no risk of any reduction in the Cambridge area biotech market, but neither they, nor anyone else, can predict the future. Repeating that it is producing a good income is not the point.
“Should anything go wrong UDC could be left with shares in a company with debts, but no direct ownership of the land itself, and could not sell for changed use without creditors or their partners permission.
“That means that we welcome that the council has finally accepted our advice from two years ago and is now seeking a more diversified investment portfolio.
“UDC has a duty to residents to make safe and sound decisions. Currently, multi million pound decisions are taken by the executive, and are voted through by the majority party in full council without committee scrutiny. R4U believes that the investment policy and process should be primarily in the hands of a cross-party investment board comprising people who are experts in this field including legal, financial, business, and risk management.
“We will work to support a more diversified investment strategy and a more transparent decision making process.”