Agenda item

Purpose: This report seeks approval from the Executive for the Council to launch a Community Bond of £1m. This bond will be for retail investors, with marketing and promotion to West Berkshire residents, to enable the Council to fund some of its activities that deliver the Environment Strategy at a cheaper financing rate than using the Public Works Loans Board (PWLB), which is the Council’s traditional source of borrowing.

Resolved:

·         that the results of the due diligence work had been considered and that the summary had been noted.

·         that the launch of the Community Bond be approved, subject to final sign off of the necessary legal agreements being delegated to the Legal Services Manager in consultation with the Executive Director (Resources).

·         to delegate to the Executive Director (Resources), in consultation with the Portfolio Holder for Finance, the date of the formal launch of the bond, the bond length period, and bond issue rate so long as it is below the PWLB rate.

This decision is eligible to be ‘called-in’.  However, if the decision has not been ‘called-in’ by 5.00pm on 7 May 2020, then it will be implemented.

The Executive considered a report (Agenda Item 7) which sought approval for the Council to launch a Community Bond of £1m. This bond would be for retail investors, with marketing and promotion to West Berkshire residents, to enable the Council to fund some of its activities that delivered the Environment Strategy at a cheaper financing rate than using the Public Works Loans Board (PWLB), which was the Council’s traditional source of borrowing.

Councillor Ross Mackinnon presented the report and proposed approval of its recommendations. This was seconded by Councillor Steve Ardagh-Walter who stated that he looked forward to the Bond helping the Council to grow the Environment Strategy quite significantly. As stated by Councillor Mackinnon, the Council could access additional funds with lower borrowing costs. It also gave the Council the opportunity to engage further with residents and gave residents the opportunity to contribute personally towards their own pensions/savings vehicles, but also to the Environment Strategy.

Councillor Carolyne Culver gave her full support to this approach which she felt was an excellent idea. She noted that information on the Community Bond was already on the website of Abundance Investment.

Councillor Culver did however feel that greater clarity was needed on what the bond would be used for. The report referred to the Solar PV pilot, but also referred to other Capital Programme schemes. Councillor Culver felt that the Council needed to be more specific on investments to encourage investors to come forward. She requested more information on the other schemes; natural carbon reduction measures and the Urban Tree Fund.

Councillor Mackinnon advised that it was the intention for investments to go into the Solar PV project. However, as a result of Covid-19/social distancing, other projects had been referred to rather than identifying Solar PV in isolation. It was the hope, by the time the Bond was launched, to be in a better situation and for the Council to be able to specify what the community could invest in.

Councillor Mackinnon continued by stating that residents had pulled together and helped each other during the Covid-19 pandemic. He felt that residents would have also seen the Council stepping up, for example in helping vulnerable residents and working with businesses. Councillor Mackinnon felt that the Bond would be another way for the Council to work together with residents and have a shared commitment towards the Environment Strategy.

He reiterated that the Bond would achieve a cheaper financing rate than using the PWLB and offer good returns on a relatively low risk investment. Councillor Mackinnon stated that he was proud that West Berkshire Council was taking forward this innovative approach, as the first Council to offer investments to the community in this way.

Councillor Culver also queried the interest rate that would be offered to the public and whether Members could invest in the Bond. Councillor Mackinnon expected the interest rate for investors to be between 1% to 1.2%. The expected interest rate would be clearer by the time the Bond was launched.

Finally, Councillor Culver queried the Council’s communications plan for the Bond as it was important to ensure that people were made aware of this opportunity. Councillor Mackinnon explained that there would be regular communication with residents on how their investments were progressing. Abundance Investment had a strong record on engaging with residents and providing information on investments.

The launch date for the Bond was to be reviewed to ensure it started at an appropriate time, but Councillor Mackinnon was hopeful this would be in the fairly near future.

Councillor Jeff Brooks asked whether regular reports would be provided on the level of take up of the Bond. He felt this would be useful to understand this alongside a schedule of expected investment.

Councillor Mackinnon explained that there was a low risk of not raising the necessary finance. The finance for the Bond was underwritten by a major financial institution if there was not the expected level of uptake from residents. He did however confirm that this would be aimed at residents as much as possible.

Councillor Brooks also felt that the report was not clear in explaining that the Bond would be set up on an annuity basis and asked that this be clarified.

Councillor Mackinnon acknowledged this point. The detail would be finalised prior to launch between himself and the Executive Director for Resources, but this was intended to be an annuity with a reducing balance over a four year period.

Councillor Steve Masters referred to the expected return rate of 1% to 1.2% and queried this as this was considerably lower than many other projects that Abundance Investment were involved in. Was that a reflection of the current market?

Councillor Mackinnon could not comment on other Abundance projects, but felt that the difference in terms of return could relate to the risk profile and associated level of return. The Bond would offer a low risk investment which he felt would be very attractive to investors.

Councillor Masters also asked how the Bond would be published to residents prior to any investment. In response, Councillor Mackinnon explained that the Council would be utilising the expertise of Abundance Investment in communicating the opportunity and finding customers. This would be via a variety of communication channels. There was also a role for Members in raising awareness.

RESOLVED that:

·         The results of the due diligence work had been considered and the summary noted.

·         The launch of the Community Bond be approved, subject to final sign off of the necessary legal agreements delegated to the Legal Services Manager in consultation with the Executive Director (Resources).

·         The Executive delegated to the Executive Director (Resources), in consultation with the Portfolio Holder for Finance, the date of the formal launch of the bond, the bond length period, and bond issue rate so long as it was below the PWLB rate.

Other options considered:

·         The Council could opt to remain utilising PWLB; this is at a higher cost to the taxpayer than this route.

·         Seek alternative financing routes; the Council is actively considering these, though in the current timescales, further due diligence is required before utilising any of these options.

·         Neither of the other options include the ability to enhance engagement with residents over the Council’s Environment Strategy.