Plans for Lichfield District Council to invest in commercial property have been scrapped after chiefs said “the goalposts had changed”.
The local authority drew up the proposal following the failed Friarsgate project.
But Cllr Rob Strachan, cabinet member for finance and procurement, said:
“For many years local councils have seen a decline in funding from central government, creating a need to become more self-sufficient in terms of funding the services they provide to their communities.
“In recent years a number of councils have taken advantage of being able to borrow at a low rate of interest and using this funding to purchase commercial property assets.
“This has given them a new source of income to help fill their funding gaps.
“Concerns began to arise that the activities of councils was driving up commercial property prices and was seeing them hold assets not directly related to their normal activities.
“As a result, the Public Works Loan Board increased borrowing rates for councils towards the end of last year.
“The Chartered Institute of Public Finance and Accountancy has also advised councils they should not make investments in commercial property using borrowed funds purely to raise income.
“Therefore, we recognised the goalposts had changed and decided not to look to buy any property assets using borrowed funds.”Cllr Rob Strachan, Lichfield District Council
“We have spent £15,000”
In 2018, then Labour group opposition leader, Cllr Sue Woodward, warned the property investment strategy was a risky proposal, claiming instead that it was “an attempt to hide Conservative embarrassment over the failure of their Friarsgate project”.
The local authority revealed that it had spent £15,000 on the looking at possible properties – but had not progressed with them.
Cllr Strachan said other ways of helping to shape the future of the area where being looked at.
“Lichfield District Council has looked at a number of potential property purchases. To do this we needed to take professional advice relating to the properties under consideration and we have spent £15,000 in total.
“After councillors considered the properties we were looking at buying, we decided not to proceed for different reasons.
“Councils may still invest using their own reserves or borrow to invest in shaping their place.
“We are looking to shape place through our masterplan that members will be considering at a meeting on 9th June, ahead of this being considered by Cabinet on 7th July.
“We remain focused on ensuring value for money – recent examples include buying out a number of historic pension agreements to save £58,000 a year, as well as reducing the running costs of our shared waste service to save £100,000 a year, and updating the software for our revenues and benefits system to save more than £17,000 a year.”Cllr Rob Strachan, Lichfield District Council