Another massive loan being voted on.

When you first look at this it is a bit odd. You need to understand how savings proposals are noted. A proposal to save costs would be a positive figure and so an income, being the opposite, is presented as a negative. Then you are probably wondering why there is income for only two years from a commercial property? That is because it is assumed to repeat each year and it is only the change in income from one year to the next that is recorded. Thus we have an anticipated income from some unknown commercial properties purchased over 2 years (not sports stadia Mr Mustard hopes or anything at Brent Cross) which will give the council an income of £1.9m a year.

It isn't clear but Mr Mustard thinks the loan interest may get accounted for elsewhere. He doesn't think much of a 3.9% return. You don't want to be looking at anything less than 10%.

The council can borrow for 30 or 40 years at 3% a year. This £50m invested in property would, if there weren't any costs, see an income of £1.9m p.a. against a cost of £1.5m but nothing is ever that simple. The buildings will need to be insured. They will need to be let which will mean a commission has to be paid. They could be empty for a while so there will be security costs. If they are empty for more than 12 weeks then you are looking at a gross loss for that year and you'll still have costs to pay. The council would have to pick up the commercial rates tab, most of which goes to central government. Someone will also have to manage the loans & they will want a big salary because bankers aren't known for their bonuses for nothing. The building might need repairs and there will be initial survey & legal costs.

What with the £23m that is being borrowed to lend on to Saracens, the £50m being borrowed from Cheyne / Touchpoint at a spiralling rental cost to sell and rent back properties that the council bought in the last 12 months and the £304m in long term loans which were in the balance sheet at March 2018 (which includes some old LOBO loans) Mr Mustard thinks we already have enough borrowing and that the reward will not be adequate for the risk that is being taken. There is a dearth of detail, perhaps more will come out at the meeting of the Assets, Regeneration and Growth committee tomorrow evening. 

This is also the exact type of borrowing which is vexing CIPFA at present.

Mr Mustard thinks that a council that can't manage to collect 99.9% of bins on time really should go back to basics and learn how to walk before it tries to run in areas where it doesn't have much expertise. What he expects they will do though is buy some white elephant as is reported by Inside Croydon in their neck of the woods.

Yours frugally

Mr Mustard