Birmingham borrows for combined authority investment fund
0Birmingham City Council is set to borrow £70m on behalf of the West Midland Combined Authority (WMCA) to create a new investment fund to spark property development.
The city’s cabinet yesterday rubber stamped plans for the collective investment fund (CIF), which will be underwritten by the six other metropolitan districts which are set to become members of the WMCA in April.
The new vehicle is expected to provide a return on investments over its life cycle – planned to last at least 10 years.
A report to Birmingham’s council members said the CIF would be “used to invest in land and property development and/or remediation which supports equality of access to housing, jobs, services and skills development, as well as supporting economic growth”.
The council will draw down funding as required, following each approved investment, as loan or equity capital loans. The cost of borrowing over five years is currently 3% for 2016/17, rising to 3.5% and 3.75% in the subsequent two years, it said.
The minimum revenue provision for loans will be set to zero and loan repayments will provide for the prudent write-down of the debts, the council said.
Where an equity investment is made, it will be held as an asset on the balance sheet and valued annually.
Losses arising from the CIF will be met equally by each of the seven councils participating in the scheme.
The CIF will operate as a revolving fund for at least a decade, with the initial capital being repaid in full at the time the CIF is wound up.
The WMCA shadow board intends to initially appoint Birmingham City Council’s wholly-owned company Finance Birmingham (FB) as fund manager for the CIF.
Once the WMCA is officially constituted, a new company will be created as part of the FB group of companies to be wholly owned by the WMCA.
“In this way, the WMCA will be able to directly contract with its own fund managers for the provision of financial services,” the report said.
FB has recently appointed commercial property advisers and progress has been made on a pipeline of projects for the CIF, the meeting heard.
Councillors also approved a contribution of £50,000 in 2016/17 towards the management costs of the CIF, funded from the Birmingham’s revenue budget.
Work is also underway for the WMCA to establish a separate land remediation fund to support bringing brownfield sites back into use for employment and housing development, the cabinet was told.
Photo (cropped): Elliott Brown, Flickr.
