Agenda item

The attached report considers three key options, which have been modelled with the help of Local Partnerships including re-investment into a new fund, exiting the fund and paying down the Council debt and exiting the fund and directly purchasing properties to house homeless clients. This report examines the financial and non-financial risks and benefits, with equal weight, of each option to come to a considered decision.

The Executive Mayor in Cabinet is recommended to:

1.     Consider the options and approve proceeding with option 2: divestment and withdrawal from RLPF1,using the funds received to reduce the future debt refinancing needs, subsequently supporting lower interest costs.

2.     Note that the value for money and financial case indicates that, over the 15 year period used as the basis of assessment the better return for the Council will be through re-investing (Option 1). However this does not meet the more immediate need for the Council to seek cash to avoid future borrowing costs. As detailed in paragraph 2.27 to 2.29 due to current and short-term challenging financial circumstances the Council will need to forgo the longer-term gain in return for immediate financial support and in order to deliver its core services.

3.     Note that the final value of the investment returned will depend on the values achieved at the point of exit as it depends on house price achieved from the disposal of properties. The valuation as at end of September 2022 (when the last valuation was conducted by Resonance) indicated £36m return to the Council.

4.     Approve that the Council agrees to a managed exit, as this will provide the Council with sufficient time to assess and identify suitable and cost-effective accommodation for Temporary Accommodation households who will be impacted from the exit.

5.     Delegate to the Deputy Section 151 Officer, in consultation with Cabinet Member of Finance and Monitoring Officer, authority to agree relevant documentation (including any special resolutions required under the LPA, and a Deed of Variation to the LPA (DoV)) required in order to effect Option2.

6.     Note that exiting the investment, and agreeing such documentation, will be subject to appropriate legal and financial advice and due diligence.

7.    Note that the Council will continue to be an investor in RPLF1 until all its investment balance has been paid.

With reference to Minute No.2/23 to these minutes, the Deputy (Statutory) Executive Mayor and Cabinet Member for Homes, Councillor Lynne Hale, and the Council’s Corporate Director of Resources and S151 Officer, Jane West, left the meeting during discussion of this matter and took no part in the consideration or voting thereon.

Cabinet considered a report, which considered three key options that had been modelled with the help of Local Partnerships including re-investment into a new fund, exiting the fund and paying down the Council debt and exiting the fund and directly purchasing properties to house homeless clients. The report also examined the financial and non-financial risks and benefits, with equal weight, of each option to come to a considered decision.

It was reported that the recommendation was for withdrawal from the fund with an acceptance that a small rise may be seen in general fund temporary accommodation costs greatly offset by savings on debt costs.

The Executive Mayor said that this decision would allow the Council to pay down £36m of the Council’s debt and reduce its debt payments by £1.7m a year.  He added that the managed exit procedure set out in the report also protected current tenants, ensuring that they were not negatively impacted.

The Executive Mayor then invited the Council’s Monitoring Officer, Mr Stephen Lawrence-Orumwense, to speak on technical amendments made to the report by officers, post-publication, details of which had been circulated to all Members.

In apologising for the late amendments, Mr Lawrence-Orumwense said that officers had requested that amendments be made to the following pages within the report:

i)             Page 395 – the heading of the report (under “Lead Officer”) the title “Interim Head of Corporate Finance and Deputy S151 Officer” be inserted. 

ii)            Page 397 – under Recommendation No.5, the reference to the Corporate Director of Resources, be deleted and replaced with “Deputy S151 Officer.”  The Corporate Director of Resources had advised the Monitoring Officer of a potential conflict of interest and had excused herself from further consideration of this matter.

iii)           Page 408 – under “Legal Comments”, there were amendments to better clarify the legal basis for this decision.

iv)           Page 409 – to insert the name of the Monitoring Officer.

On that basis, the Executive Mayor was happy to agree the amendments put forward by officers and recommendations in the report.

The Executive Mayor, in Cabinet, RESOLVED that:

1.            To proceed with Option 2: Divestment and withdrawal from RLPF1, using the funds received to reduce the future debt refinancing needs, subsequently supporting lower interest costs, be approved.

2.            The value for money and financial case, which indicated that, over the 15-year period used as the basis of assessment, the better return for the Council would be through re-investing (Option 1), be noted.

(However, this did not meet the more immediate need for the Council to seek cash to avoid future borrowing costs.  As detailed in paragraph 2.27 to 2.29 due to current and short-term challenging financial circumstances the Council will need to forgo the longer-term gain in return for immediate financial support and in order to deliver its core services.)

3.            The fact that the final value of the investment returned would depend on the values achieved at the point of exit as it depended on house price achieved from the disposal of properties, be noted.

(The valuation as at end of September 2022 (when the last valuation was conducted by Resonance) indicated £36m return to the Council.)

4.            The Council agreeing to a managed exit, as this would provide the Council with sufficient time to assess and identify suitable and cost-effective accommodation for Temporary Accommodation households who would be impacted from the exit, be approved.

5.            The Corporate Director of Resources and Section 151 Officer, in consultation with the Cabinet Member for Finance and the Monitoring Officer, be authorised to agree relevant documentation (including any special resolutions required under the LPA, and a Deed of Variation to the LPA (DoV)) required in order to effect Option 2.

6.            The fact that exiting the investment, and agreeing such documentation, would be subject to appropriate legal and financial advice and due diligence, be noted.

7.            The fact that the Council would continue to be an investor in RPLF1 until all its investment balance had been paid, be noted.