Agenda item

4.1  The Chair welcomed Ian Williams. Group Director for Finance and Resources to the meeting.  The Director presented two reports that had been submitted to the Panel: an Update on the Council’s Property Portfolio and the Monthly Financial Position from January 2019.

Property Portfolio

4.2  The paper summarised a number of developments that had taken place in the Council’s property portfolio since 2012/13.  The Council had made a concerted effort to invest in its assets and to ensure that these provided a return. This approach has helped to increase the income generated from the Councils HRA and General Fund portfolio. The Panel noted that rental income from HRA properties had increased from £1.6m in 2012/13 to £2.4m in 2018/19 and that rental income from General Fund Properties had increased from £1.5m to £7m over the same period.  These income streams had been used to protect front-line services.

4.3  The Council had also been able to reinvest in properties that were previously used for corporate accommodation.  For example, the Council had bought the lease for Keltan House and had re-let the property for much needed workspace in Hackney.  Keltan house now generated an annual income of £1.25m to the council.

4.4  The council had also made a number of strategic acquisitions within the borough to enable the council to fulfil its place shaping role.  For example, the council had acquired the building next to Hackney Central which would enable the council to shape and influence the future development of Hackney Central town centre.

4.5  A number of new acquisitions were highlighted to the Panel which included the purchase of the freehold of Sherry’s Wharf.  The freehold was purchased for £12.75m, which had protected the council from substantive rent increases which were planned for this (previously leased) property.

4.6  The Council constantly assessed the local property market to identify any properties or land which could be of strategic importance to the council.  It was noted however, that there were no plans at present for further acquisitions.

Questions

4.7  The Panel requested further details on the site in Hackney Central currently occupied by Tesco supermarkets. 

·  In response, it was clarified that the Council had purchased the site two years ago, but this did not include the arches which were currently used by Fashion Village.  In respect of progress for this development, it was noted that the council acquired the site and then granted a long-term lease to a developer to bring forward plans for the site.  The developer was in ongoing discussions with council planners about development plans. It was confirmed that any income due from this arrangement had been paid to the council and represented an ongoing income stream.  There were stipulations within the lease which required the developer to agree development options by certain times, which if not completed would allow the Council to exercise a different course of action.

4.8  The Panel sought to clarify if there were any risks posed with the Tesco site should the developer not come forward with viable plans? 

·  It was reported that progress had been made with the current developer and plans had progressed.  Although there were still uncertainties which may impact on the broader economic climate, the facts of the matter were that the purchase of the 3.5 acres of prime development site in the centre of Hackney was a good investment for the Council and provided a significant opportunity to shape and influence development on that site.

Agreed: The Group Director agreed to circulate a briefing with an update on the development of the Tesco site.

4.9  The Panel wanted to understand if there were any immediate risks to the council’s property portfolio and how the council planned to mitigate these? 

·  It was noted that the Council had properties relating to the HRA estate (e.g. those commercial properties under housing blocks) as well as free standing General Fund commercial properties.  It was reported that there was no significant sign of occupants not being able to pay their rents, surrendering their leases and that demand for leases remained strong.  In addition investment in local property such as on Dalston Lane Terrace had proved effective as not only had this restored Georgian listed properties, but commercial units had now been leased to generate additional income for the council.  A similar position was reported for units held by the council at Dalston Curve.

4.10  It was reiterated there had been no evident ‘flight’ from commercial properties in Hackney and that demand remained strong.  The council had also made a significant investment to ensure that commercial tenants now had regularised leases and had standardised rent reviews.  This has also helped to maintain and develop new income streams for the council.

4.11  The Panel questioned whether there was any potential to develop social housing in the property portfolio held by the council? 

·  It was noted that a development had taken place on Westgate Street where the council had been a long-term freeholder for the site.  A renegotiation of the lease with the leaseholder had helped to bring forward social housing and commercial units in the development of this site.

4.12  The Panel wanted further information on how the space at Stoke Newington Town Hall could be maximised in any redevelopment of the site?

·  It was reported that there would need to be significant investment in this building to make this commercially attractive to prospective tenants. It was agreed that the sooner the redevelopment could take place, the less of a burden this would place on existing maintenance and refurbishment budgets.  Work on this project has been ongoing, but was complex given the relevant heritage issues.

Agreed: An update would be provided on the redevelopment plans for Stoke Newington Town Hall.

4.13  The Panel sought to clarify if there was an update in respect of the East Curve Garden in Dalston and the planned developments to the rear of this site. 

·  It was noted that this was outside the scope of this particular item, but an update could be provided to the Panel. 

Agreed: An update would be provided on the redevelopment plans for Eastern Curve Gardens in Dalston.

Financial Update

4.14  Two reports were presented; the financial position of the Council as of January 2019 and the Capital Update.  The first report continued to show that the General Fund Revenue Account was experiencing significant challenges, and that overspend of £5m was forecast for 2018/19.  As a result of mitigating actions, the funding position had improved in-year.

4.15  It was reported that there had been successful renegotiation of the only PFI contract that the council had for the HLT/Library complex which had reduced the cost and liabilities of the council.  In total £2m savings had been made in the lifetime of the contract.

Questions

4.16  The Panel sought to clarify what reduction in the variance the council was hoping to achieve through a restructure of the Learning Disability Service?

·  The council had moved a long way from arbitrary budget reduction targets to a more consultative and collaborative approach to identify savings proposals.  In this instance, the council was working with the Clinical Commissioning Group (CCG) within the integrated commissioning framework to remodel the service and to establish contributions from each partner.  This process had identified that the CCG should fund at least £1.9m of what the Council currently spent on learning disability services and that all parties were in negotiation to ensure that health costs were appropriately funded by the CCG. The financial position of this service should therefore improve within the current financial year.

4.17  The Panel noted that there was an underspend in Streetscene by £177k and sought to understand the reasons for this. 

·  It was reported that Streetscene is able to generate incomes through the works on local highways for local utility companies and the issuing of enforcement licenses.  Thus, the £177k represents additional income above what was projected.

4.18  In respect of Environmental Operations the Panel questioned whether any savings could be obtained with the contract for Vehicle Repairs Operation?

·  Officer reported that there were a number of challenges within the vehicle maintenance and repairs contract. The council has worked hard with the contractor to improve performance but this has proved difficult.  The main issue is that this sector had continued to experience difficulties in the recruitment and retention of skilled staff. The Council was continuing to look at future options, which may include a partial in-source of this service as the current arrangements were not satisfactory.

4.19  In relation to HLT budget overspend on SEND and the requirement to drawdown from its own reserve, the Panel observed that this was considerably better than forecast and much less than in previous years.  Was this as a result of increased central government funding for SEND announced in November 2018? 

·  Officers noted that a report was recently taken to Audit Committee on the challenges that the council faced to fund SEND services and the responses it had made.  It was reported that SEND services had been chronically underfunded by central government for many years which had led to an estimated £1.6 billion shortfall for funding this service area. Demand would however remain high for this service, and finance officers would work with HLT to help manage this demand.

4.20  It was reported that there was still ongoing uncertainty for the funding of all public services as a date still had not yet been set for the public spending review.  There had also been no clarity for the current spending position given the uncertainty over Brexit and the length of the current Parliament.  There was also growing uncertainty at among Communities and Local Government (CLG) and Treasury officials about the Fairer Funding Review and the implications this would have for local authorities.

4.21  The Chair thanked the Group Director for attending and responding to questions from the Panel.