WAVERLEY plans to invest millions of pounds in “income generating” property to help offset the funding shortfall caused by cuts in government grant.

New guidance under The Localism Act means the borough council can expand its portfolio of investments to include property and assets, but borrowing purely to invest for return is still deemed unlawful.

At the last executive meeting members agreed the council should adopt an investment strategy and establish an investment advisory board to oversee it.

Councillors also agreed £2million of general fund capital receipts, subject to budget constraints, and £1million of Whitehall’s New Homes Bonus funding, should be transferred initially into a new property investment fund in 2017/18.

It was also agreed the executive would decide which opportunities to invest in, based on the advice from the new board, which would comprise the council leader and portfolio holders for property, finance and economic development plus a non-executive member.

The board will be supported by professional advisors and what they cost the council will initially be met by the investment fund and then set against the income it delivers. The investment strategy will be to invest in “a diversified and balanced portfolio” to manage risk and secure an annual overall rate of return.

Officers reported: “The adoption of the investment strategy and its implementation could have a significant impact on the council’s finances. While the investment strategy has the potential to generate significant income in future, there are major risks in this.

“The governance arrangements outlined, including the requirement for each investment to have a robust business case approved by the investment advisory board, provide the necessary control of these risks.”

Speaking before the debate, Farnham Residents councillor Jerry Hyman said: “Is it wise to become property investors?

“I urge great care. Are there any figures for the cost of hiring consultants against the projected addition in income? That cost and the legal advice costs may make it unviable. I’m concerned it may be difficult to make more money.”

Frensham councillor Ged Hall said: “There are no defined profit projections yet.

“It is still in the build phase. It is indeed a strategic change. Due to the loss of revenue support grant Waverley has to look to opportunities to provide income.”

Godalming councillor Tom Martin said: “It works very well at Surrey County Council, which has invested locally in Farnham’s Brightwells regeneration scheme and will reap the benefits in the future, as Waverley will.”

nThe executive agreed to accept the government’s four-year settlement offer to provide more certainty about funding support going forward, and to submit Waverley’s efficiency plan in order to take up the offer.

Members also agreed officers should “reinforce” the message to government, that Waverley’s objection to a negative grant of around £814million being applied in 2019-20 if its current prediction is correct.

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