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Tuesday 11 April 2017

Knowle relocation project: and the Public Works Loan Board

This blog has looked at the easy credit available to local authorities:
Futures Forum: Knowle relocation project: how relocation is being financed >>> "While local authorities are furiously selling assets to plug gaps in their budgets, they have simultaneously been accumulating property assets"

As has the EDW blog:
When is a council asset not an asset? | East Devon Watch



“THE GREAT TOWN HALL PROPERTY BUYING SPREE”

9 APR 2017


Full page article in today’s Sunday Times main section, page 5.

The article relates to borrowing from the Public Works Loan Board (PWLB – a Treasury outpost) from which East Devon District Council expects to borrow to pay for its new Honiton HQ, and which the article warns:

“… there are growing concerns in the private sector and parts of Westminster that government grant cuts, coupled with generous lending by the
PWLB are encouraging councils to take risks they do not properly understand- in an asset class that is more volatile than many realise. Most of the property deals have been 100% funded with debt, leaving both the councils and the Treasury exposed to immediate losses if values fall. …

… Sam Resouly, a partner in an investment firm … said the trend had caused a distortion in the market … If they buy 10 years’ income, they have to accept that as 10 years goes to zero, they’re going to get a rapid deterioration in the value of that asset. At some point they’re going to have to spend money to get it up to standard, and what happens to council’s accounts then? …

… Councils’ interest payments must be paid ahead of their other commitments, such as spending on services …

… an associate partner of a strategy consultancy said” … councils were exploiting a loophole. He suggested they were using a legal but circuitous route to “launder” money ringfenced for capital projects into the separate part of their budget set aside for spending on services such as adult care. …“




“The Great Town Hall Property Buying Spree” | East Devon Watch
“The great town hall property buying spree” full text | East Devon Watch
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