Agenda item

This report gives an overview of treasury management activity during 2023/24. Throughout the period the Council complied with its legislative and regulatory requirements.

Discussion:

The Head of Corporate Accounts introduced the report. The purpose of Treasury Management was manage to the Council’s cash flow and assist the funding of the capital programme. The report summarised the Treasury Management activities for 2023-2024 and compliance with indicators set out in the Treasury Management Strategy.

The Head of Corporate Accounts noted that borrowing had not exceeded the Capital Finance Requirement (CFR). This demonstrated that borrowing had only taken place to fund capital expenditure. Borrowing stood at £464m at the end of 2023-2024 significantly below the operational boundary of £644m.

The Council’s debt maturity profile showed the Council the continued to borrow primarily for the short term on the advice on the Council’s treasury management advisors. Interest rates were expected to fall in the near future.

Investment performance remained in line with expectations and benchmarking authorities. Property funds had fallen in value from an initial investment of £23m, in 2017 to a value of £19.9m as of 31 March 2024. However, those funds continued to generate income of around £900,000 a year which was credited to the revenue account. The Council continued to adopt a risk averse approach to investment and kept borrowing to a minimum.

The Lothbury property fund had ceased in May 2024 and the Council expected to realise a loss of around £1.4m. Provision had been made in the 2023-2024 accounts to cover those losses.

The following issues were discussed:

Capital Spend - in response to a question why the spend on capital projects was lower than envisioned in the treasury strategy, the Head of Corporate Accounts explained that at the time of publication the strategy was an estimate, however, all of the expected spending had not taken place in the year. The Chief Operating Officer added there had been some slippage in works taking place on projects such as the Brook Theatre and Innovation Park Medway. Those projects remained part of the programme, so the monies would be spent in future years rather than there being an underspend.

Treasury advisors – in response to a question whether formal meetings were held with treasury advisors to review the debt maturity profile, the Head of Corporate Accounts stated that he held regular monthly meetings with advisors.

Investment returns - a Member commented that the return on investment appeared to have improved against benchmarking authorities, he asked whether this was a result of improved performance by the Council or weaker performance elsewhere. The Chief Operating Officer explained that investment returns on the Council’s modest cash balances remained within the expected range for the level of risk associated with these investments.

CFR – It was asked whether there were any concerns that the Council may exceed the CFR limit following the additional borrowing the Council had undertaken. The Chief Operating Officer explained that the level of borrowing would ordinarily be closer to the CFR limit, so it was positive that the Council borrowing was below this. He added that he would expect the level of borrowing to be closer to the CFR this financial year with additional borrowing planned for revenue purposes, however, he was not concerned by the current situation.

Property investment – A Member expressed concern that the Medway Development Company (MDC) had moved towards a buy to rent strategy rather than buy to sell. It was asked whether the Council held too great a proportion of its investment in property. The Chief Operating Officer explained the Council was risk adverse in its investment strategy, property was the only significant investment made, but MDC had been created to develop sites that would otherwise not be developed.

He added that all investors had been affected by global events, however, the Garrison Point site had made a profit. Chatham Waterfront had proved more challenging which was why more units were under consideration for buy to rent rather than sell, however, as the market changed, MDC would respond accordingly.

Decision:

The Committee noted the treasury management outturn annual report.