Agenda item

Briefing Note of the Director of Finance and Resources.

The Finance and Corporate Services Scrutiny Board (1) received a briefing note of the Director of Finance and Resources that provided the Board with information on Council’s approach to making commercial investment decisions, the statutory framework that the Council works within and how decisions were made, including the policy basis.

The One Coventry Plan provides the broad policy basis for Council’s service delivery including its approach to investment activity.  The Council’s medium term financial position forecasts revenue funding gaps.  The 2024/25 Budget Report (February 2024) identified gaps of £14m and £15m for 2025/26 and 2026/27 and the most recent monitoring report to Cabinet (December 2024) highlighted further budgetary pressure.

Whilst it was difficult to benchmark, it was likely that the Council was broadly ‘within the pack’ regarding income it generated from charging for discretionary and traded services.  Coventry held a large commercial property portfolio and the council had been active in providing external loan finance with similar authorities.

Long term assets held by the council (mainly land, buildings and infrastructure) formed the majority of council’s operational assets and the total asset value was circa £1.68bn.  Total Return on Investment had risen from 4.9% in 2021/22 to 5.7% in 2023/24.

The council’s investment property represented the largest share of commercial assets of £302m.  Values were subject to revaluation each year.  The total value of the council’s external loans 2023/24 was £55.0m.  These loans were constructed to deliver commercial returns and a return of 1.7m in 2023/24 was seen however, this was low compared to the Council’s budget.  Company shares were valued at circa £116m as at 31^st March 2024 based on company financial activity and performance.  The Council’s acquisition or establishment of each company was aligned to its policy and service objectives.  The Coventry and Solihull Waste Disposal Company Ltd (CSWDC), Tom White Waste Ltd (TWW) and Sherbourne Recycling Ltd (SRL), provide strong synergies with the Council’s waste collection, management and recycling responsibilities, and protected the Council from some of the volatility in waste markets, provided the opportunity to rationalise some of the costs of waste management and enabled the production of a local source of green energy from waste.  Some of the companies had lost value compared with the resources initially invested and Council’s shareholdings should be viewed as long-term assets. The current balance sheet valuations were not deemed to be a significant factor in terms of the Council’s day-to-day financial position.

Cllr Brown introduced the item referring to the One Coventry values that the local authority followed in order to make investments whilst taking account of local and strategic values.  The council’s investment portfolio in 2023/24 returned an overall investment of 5.7%. 

In considering the briefing note, the Board questioned officers, received responses and discussed matters as summarised below:

• The Council had invested £10m in the Coventry and Solihull Waste Disposal Company Ltd in the 1970’s and over time, the investment had been paid back, now showing as a balance sheet value of £68m.
• The Council owned ?^rds of the Coventry and Solihull Waste Disposal Company Ltd, and Solihull Council owned 1/3^rd.
• Auditors had raised concerns regarding the 2020 accounts however, these accounts were now reliable and had been signed off.  Since then, 3 sets of accounts had been signed off but not audited.  The 2023/24 accounts was currently being audited.
• The Council had made good progress in relation to the valuation process for its assets in recent years eg Tom White Waste Ltd, Coombe Abbey Park Ltd and Friargate Joint Venture Project Ltd.
• Tom White Waste Ltd and Coombe Abbey Park Ltd had made a profit in past years however, they were not currently performing as the Council would wish and valuations of these companies had declined due to poor performance.
• Business plans were in place to aid recovery for Tom White Waste Ltd and Coombe Abbey Park Ltd.
• Friargate Joint Venture Project Ltd was not a trading company; it had been bought to facilitate a regeneration scheme in Friargate Business District, which the Council had taken ownership of to influence direction of travel.
• Not all of the companies referred to in the Company Shareholding Values table were part of the Coventry Municipal Holdings umbrella as the council was not the sole shareholder of them.  Overheads in those companies were relatively lean.
• Property purchases by the council were long term, strategic investments, bought with the intention of providing a financial return and providing benefits to the city.  The return varied from year to year and was currently low due to values being depressed.
• A draft statement of accounts for the current financial year would be produced by the end of June 2025.

The Cabinet Member for Strategic Resources and Finance welcomed Members scrutiny and focus on Tom White Waste Ltd and Coombe Abbey Park Ltd, advising every effort was being made to improve their performance and adding that investments were about strategic value as well as the return.

The Board requested the following:

·  Assessment of Coventry’s debt to income ratio.

·  Income figures provided in future reports relating to companies owned by the Council.

RESOLVED that the Finance and Corporate Services Scrutiny Board (1):

1)  Notes the contents of the Briefing Note, Presentation and Appendix.

2)  Include this item on the Work Programme for 2025/2026.