Agenda item

7.1  The Chair welcomed to the meeting Cllr Geoff Taylor, Cabinet Member for Finance and Customer Services and Ian Williams, Group Director Finance and Corporate Resources from London Borough of Hackney.

7.2  The Commission asked for the following information to be presented at the meeting:

·  Information on the council’s role as a developer for the borough

·  Trading rules for local authorities

·  Constraints, principles and criteria

·  Legislative framework

·  Fees and charges

·  Competitive advantage

·  Examples of different service areas for commercialisation.

7.3  The officer advised he would provide a fuller presentation at the next meeting as part of the Brexit discussion.  The updates provided at the meeting were:

Competitive Advantage

7.4  Councils have access to cheaper forms of credit and an article by the Financial Times has raised questions about local authorities being able to buy commercial property at cheaper rates.  This is seen as a competitive advantage.

7.5  Councils do have access to a low finance funding model but there is speculation this might be subject to policy change.

7.6  Hackney Council’s strategy has involved internal borrowing to minimise the need for external borrowing.

Council as a developer of the Borough

7.7  The Council’s work on estate regeneration was cited as an example of its role as a developer for the borough.  Some estate regeneration work has been in partnership with the private sector.

7.8  For many schemes the Council has deferred capital receipts by 6-8 months and received enhanced payments from developers later in the programme.

7.9  For the Britannia Leisure Centre development it was pointed out the Council will retain ownership of the land, remaining in charge of the finances and selecting the contractors to deliver the scheme.  The Council is retaining its ability to influence and shape.

Trading rules for local authorities

7.10  An example of where the council has acted more commercial is having adverts on the council website.  However the market for this has changed and the number of adverts are decreasing.  This is an example of a revenue stream that is changing as a result of progression.

7.11  Councils can sell services to each other but as cost only.

Legislative framework

7.12  Further information will be provided about the legislative framework and the restrictions at the next meeting.

7.13  It was recognised that there are council’s that have set up organisation but some have not been utilised.  The Council is doing further investigative work to establish the success or failures of these ventures to build an evidence based for decision making.

7.14  Questions, Discussions and Answers

(i)  Members commented they want to get an understanding of how the council can have a long term role as a developer taking into consideration the risks of this role. 

(ii)  Members would like to see plans that outline how the council is driving developments and the opportunities for the council to build a long term plan around the role of a developer for the borough - having a framework and not just operating on an opportunistic basis.  Members want to see a purposeful 5 year plan and strategic vision that outlines the opportunities in this sphere.

The Group Director Finance and Corporate Resources advised they will go into more details about developments by other boroughs at the next meeting.

The Council will need to make a decision about the approach it wishes to take as a developer but currently the council is observing the work of other boroughs.

The Cabinet Member for Finance and Customer Services pointed out the sale of the Tesco’s site on Morning Lane was opportunistic it was not planned or predictable.

(iii)  Members asked for an explanation about how an overage clause in a contract operates.

The Group Director Finance and Corporate Resources explained a regeneration programme like Woodberry Downs can take a number of years to complete.  The Council has to first determine that the project is viable and that the project will cover all the costs incurred from the income generated, either from upfront sales or sales of private dwellings.

If the scheme predicated income 5 years prior exceeds expectations having an overage clause will lock in the income generation from the scheme.  The overage clause enables the council to benefit from the increased income at the end of the development.

It was noted typically developers do not like having this clause and like to buy the Council out at the early stages of the development.