“The Great Town Hall Property Buying Spree”

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. …

One thought on ““The Great Town Hall Property Buying Spree”

  1. And this is exactly what EDDC are proposing to do. For relocation and probably also with their new ‘Local Housing Company’. Do we believe they know what they’re doing? I don’t, past history tells us that cost control is not their strong point.

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