Residents may have seen articles which have appeared in the national and local media that are critical of councils investing in property in order to generate income to fund services.
Spelthorne Borough Council fully co-operated with all these investigations in order to ensure full transparency. Unfortunately the resulting articles are misleading and the analysis on which they are based is flawed. We have made representations to the journalists in response to the articles. We are now publishing further details of the issues on our website to inform residents of the full facts and to allow them to make up their own minds.
Like almost all local authorities, Spelthorne Council has been dealing with continuing Government funding cuts. This, coupled with rising demand and increased costs means that we have had to develop new ways of doing things. For almost two years we have pursued a strategy of investing in high quality commercial offices with strong, long-term, secure tenants.
These investments are protecting Borough Council services that affect the most vulnerable people in our communities such as day centres, meals on wheels, community transport and personal alarms, as well as those services that all residents value such as the upkeep of our parks and open spaces.
Since April 2018, the income has also been used to progress an ambitious housing delivery programme designed to meet the pressing housing needs of our residents and meet Government targets. This includes providing a range of much-needed emergency accommodation, affordable housing and private rental properties.
Some of the articles have focussed on the ratio of debt to Council budgets. In Spelthorne’s case, we believe this is the wrong approach as this overlooks the fact that the debt is backed by valuable assets with tenants of highest financial strength such as BP, and that Spelthorne Council is steadily paying off the debt on a year-by-year basis. We also ensure that we identify and model future liabilities associated with acquisitions, for example future refurbishments when tenants move out and covering rent free periods when new tenants move in.
Our approach is consistent with current guidance issued by Government and we have obtained legal advice to that effect. We have very robust and extensive checks and balances in place to make sure that we fully understand and can mitigate all of the risks associated with a potential acquisition and walk away from many more opportunities than we pursue.
The acquisitions are financed by fixed rate loans at low rates so we know our financing costs for the coming years. To reduce the risk of property market fluctuations we always look at the potential to develop a site for alternative uses and have exit strategies in place.
Spelthorne has developed internal expertise by employing individuals with extensive commercial experience from the private sector, and we work with the highest quality external advisers. We pursue a professional approach to the ongoing management of our property portfolio, and all the purchases are either in Spelthorne or in the wider Heathrow economic area in which Spelthorne is located.
Some of the articles have accused councils of not being transparent. We agree that councils should be as open as possible and accountable to residents. To this end, Spelthorne Council has published details of its commercial property acquisitions in our residents’ magazine, press releases and on the Council’s website. In addition, senior councillors have spoken to residents’ associations to explain the Council’s policy and residents have been generally supportive of our approach. We will be making even more information available in easily accessible format over the coming months as we finalise and publish our Capital Strategy.
Cllr Ian Harvey, Leader of Spelthorne Borough Council, said: “We want to reassure residents that we are not speculating with public money. Our approach is restrained, prudent and risk-averse at all stages. This includes rigorous scenario testing, including looking at worst case scenarios.
We believe there is no viable alternative because valuable services, including those that affect the most vulnerable in our communities, would otherwise be under threat.
These investments are good news for our residents as they help ensure that we can continue to deliver and enhance the services they need and deserve, as well as address the housing needs of a growing number of people in our communities who struggle to find a suitable home that they can afford.”