Top

Top

 

 

Agenda Item No

The Vale of Glamorgan Council

 

Cabinet Meeting: 25 February 2013

 

Report of the Leader

 

Final Capital Programme Proposals 2013/14 to 2017/18

 

Purpose of the Report

1.         To detail the outcome of the budget review for capital and to gain approval for the final capital programme proposals for the years 2013/14 to 2017/18. 

Recommendations

1.         That Cabinet note the outcome of the budget review for capital.

That Cabinet recommend to Council that:-

2.         The final budget proposals for the Capital Programme for the years 2013/14 to 2017/18 as set out in Appendix A are approved.

3.         The Director of Resources, in consultation with the Cabinet Member responsible for Finance, is given delegated authority to make additions, deletions or transfers to or from the 2013/14 to 2017/18 Housing Capital Programme as appropriate.

4.         The Director of Resources, in consultation with the Cabinet Member responsible for Finance, is given delegated authority to make additions, deletions or transfers to or from the 2013/14 to 2017/18 Asset Renewal budgets as appropriate.

5.         The proposals outlined for funding of the School Investment Programme replace those under the former School Investment Strategy approved in 2005.

6.         Slippage of £200k on Disabled Facilities Grants from 2012/13 to 2013/14 is approved.

7.         The Renewal Area Grant, once approved by the Welsh Government, be automatically included in the 2013/14 Capital Programme.

8.         The policy for making the Minimum Revenue Provision in 2013/14 be approved and recommended to Council for approval.

Reasons for the Recommendations

1.         To update Cabinet on the outcome of the budget review for capital.

2.         To set and approve future capital programmes to 2017/18.

3.         To enable the Housing Capital budget to be managed effectively.

4.         To enable the Asset Renewal budgets to be managed effectively.

5.         To enable the School Investment Programme to be progressed.

6.         To gain Council approval for slippage.

7.         To update the 2013/14 Capital Programme.

8.         To gain Council agreement to the basis of the Minimum Revenue Provision calculation for 2013/14.

Background

2.         As part of the final budget proposals for 2012/13, Council on 7th March 2012 resolved that a budget review would be undertaken following the Council elections in May 2012 (minute no. 951).

3.         Details of the methodology for the budget review for the Capital Programme together with an update on progress at that time was reported as part of the initial capital programme budget proposals considered by Cabinet on 19th November 2012 (minute no. C1910).

4.         The results of the Budget Review would inform the final Capital Programme proposals 2013/14 to be considered by Cabinet on 25th February 2013 and Council on 6th March 2013.

5.         In responding to the initial capital programme budget proposals, Corporate Resources Scrutiny Committee, at its meeting on the 11th December 2012 (minute no.648), considered recommendations from other Scrutiny Committees. Specific recommendations are set out below.

·                Economy and Environment – 4th December – noted report.

·                Housing and Public Protection – 6th December – endorsed.

·                Lifelong Learning – 10th December - agreed report.

·                Social Care and Health – requested that Corporate Resources be informed of its concern that the cumulative effect of the substantial nature of the cuts proposed in the report may negatively impact on the provision of services. 

6.         The minutes and recommendations of Scrutiny were referred to Cabinet on the 17th December 2012 (minute no.C1953) and referred by them for consideration by the Budget Working Group (BWG). Subsequently the BWG noted all the Scrutiny recommendations and took responses into account in drafting the final budget proposals. Specific schemes for asset renewal in Social Services properties are included within the Capital Programme.

7.         Progress on the Budget Review was reported to Corporate Resources Scrutiny Committee on 8th February 2013 including the results of the assessment of corporate priority and risk. The Committee resolved to note the position on the Review and this recommendation will be reported to the Cabinet meeting of 25th February 2013 for consideration alongside this report.

Relevant Issues and Options

The Budget Review

8.         One of the main aims of the Budget Review process was to put in place a financial strategy for the Council to 2017. For capital this would require a different approach in that the traditional process of approving a programme which would be approved for the first year only (and indicative thereafter) would be replaced by a set programme spanning the period 2013/14 to 2017/18.

9.         In doing so, assumptions have been made as to the level of General Capital Funding (GCF) that will be received in future years from WG. Given the prospect of continued austerity in public finances and a further spending review by Westminster Government this capital programme is predicated upon a 10% cut in GCF year-on-year from 2015/16. As part of the Budget Review, therefore, a major consideration was how the Council could look to:

·                Mitigate the deteriorating situation in so far as it is able by reappraising all schemes and looking to progress only those which are deemed to be a key corporate priority, whilst also seeking to gain assurance that such schemes are delivered on time and within budget.

·                Develop a strategy to maximise the availability of resources to address these priorities.

Prioritisation of Schemes 

10.      As a starting point in the budget review process, all services were required to submit bids for the 5-year period commencing 2013/14. These were then prioritised by the Corporate Asset Management Group of officers (CAMG) in the normal manner using the criteria shown below.

A

 

Health and Safety Legislation

B

 

Other Legislation / Statutory requirement

Ci

 

Economic Sense

Cii

 

Corporate Plan

Ciii

 

Sufficiency

D

 

Condition / Suitability

E

 

Welsh Government objectives

F

 

Low Priority

11.      The evaluation of the bids by the CAMG resulted in a high number of priority A and B bids. Such a high level of high priorities awarded did not assist in the allocation of the Council's scarce resources. Consequently, bids were further reviewed by the Budget Working Group (BWG) in terms of their corporate priority and the risk they pose to the Council if they are not pursued. This methodology broadly followed that outlined in the Initial Revenue Budget Proposals report for the Budget Review,  the risk assessment element of which was undertaken in line with the Council's Corporate Risk Management Strategy as follows:

Possible Impact or Magnitude of Risk

Catastrophic

Medium

Medium/High

High

Very High

High

Medium/High

Medium

Medium/High

High

Medium

 Low

Medium

Medium

Medium/High

Low

Very Low

Low

Medium/Low

Medium

 

 

Risk Matrix

 

 

Very Unlikely

 

Possible

 

Probable

 

Almost Certain

        Likelihood/Probability of Risk Occurring

 

12.      Taking into account the nature of capital schemes, the following criteria were applied to assess corporate priority:

Corporate Priority

Score

Commitments and areas where the Council has no control over the expenditure, e.g. contractual and legal commitments, absolute minimum statutory service, taxes, etc.

3

Very high priority (publicly announced commitment e.g. items included in the Community Strategy, Corporate Plan etc.)

2

“Invest to Save” expenditure

2

Statutory expenditure above the absolute minimum and other priorities

1

13.      In addition, to the above assessment, regard has been given to the priorities as set out in the Draft Corporate Plan 2013 – 2017 as well as the results of the consultation process undertaken on the draft Plan and Council’s Initial Budget proposals. This consultation was publicised via the Council’s website and sought the views of members of the public, Local Service Board partners, town and community councils and the business sector. The draft Corporate Plan had also been subject to review by Cabinet and all scrutiny committees prior to this. In terms of capital schemes, one of the responses received from the consultation made specific references to request ‘the date for completion of the Barry Island relief road brought forward’ (action to work with the Waterfront Consortium to implement proposals for the Barry Waterfront scheme including the provision of a new link road to Barry Island has a 2013/14 date in the draft Corporate Plan) and that the Council ‘actively seek further regeneration funds for Barry from the Welsh Government’ (Implementation of the Barry Regeneration Area programme is included in the draft Plan).

14.      The results of the review process has been a major determinant in identifying those schemes now being put forward for inclusion in the Capital Programme for 2013/14 onwards. Clearly, limited resources will allow only those schemes of higher corporate priority and/or risk being pursued over the next 5 years. The exact extent of this will ultimately be determined not only by the amount of GCF allocated by WG but also the strategy adopted by the Council to maximise the resources available to it from other avenues.

Resources Available

15.      On 11th December 2012, the Welsh Government announced the final 2013/14 General Capital Funding settlement. There has been a 10.7% reduction in funding from 2012/13, which is marginally lower than had been assumed in the Initial Capital Programme Proposals report in November 2012 (£5.564M compared to £5.566M). The figure for 2014/15 is based on the forward indication from WG. General predictions for public sector finances is for a continuing period of austerity. Consequently, further cuts of 10% in 2015/16, and each year thereafter, have been assumed. On this basis, a table representing the capital funding from the Welsh Government is shown below:

 

 

 

Resources from Welsh Government

2013/14

2014/15

2015/16

2016/17

2017/18

 

£’000

£’000

£’000

£’000

£’000

Supported Borrowing - General Fund

3,281

3,281

2,925

2,604

2,315

Supported Borrowing – HRA

   280

  280

  280

  280

  280

General Capital Grant

2,003

2,003

1,803

1,622

1,460

 Totals

5,564

5,564

5,008

4,506

4,055

16.      Another means of financing capital expenditure is through capital receipts resulting from the sale of assets. Receipts from the sale of Housing Revenue Account (HRA) assets can only be spent in the HRA and cannot be used to finance General Fund capital schemes. As at 31st March 2013, the forecast balance of useable General Fund capital receipts is £10.176M with a further £1.056M estimated to be generated between 2013/14 and 2017/18. It should be noted, however, that projected future capital receipts are not guaranteed.

17.      If the schemes shown in Appendix A are approved, the effect on General Fund useable capital receipts will be as shown in the following table.

General Fund Capital Receipts

 £'000

Estimated Balance as at 31st March 2013

10,176

Anticipated Requirements – 2013/14

(5,287)

Anticipated Receipts – 2013/14

170

Balance as at 31st March 2014

5,059

Anticipated Requirements – 2014/15

(1,475)

Anticipated Receipts – 2014/15

0

Balance as at 31st March 2015

3,584

Anticipated Requirements – 2015/16

(2)

Anticipated Receipts – 2015/16

448

Balance as at 31st March 2016

4,030

Anticipated Requirements – 2016/17

(2,107)

Anticipated Receipts – 2016/17

438

Balance as at 31st March 2017

2,361

Anticipated Requirements – 2017/18

(315)

Anticipated Receipts – 2017/18

0

Balance as at 31st March 2018

2,046

18.      Capital expenditure can also be funded by revenue contributions or the utilisation of existing reserves. A reserve is a sum of money that has been set aside by the Council for a specific purpose. They are voluntary and can be made when the Council determines. Advances can be made from a reserve for the purchase of assets, which are then repayable over the life of the asset and the reserve is constantly replenished e.g. Vehicle Renewals Fund. Alternatively schemes can be funded from reserves with no repayment, however, once spent that source of funding is lost.

19.      One such reserve is the Project Fund which exists to finance capital and revenue projects.  The aim of the Fund is to initially finance a project with repayment of such advances (including interest), where possible, being credited back to the fund. The estimated balance of the Fund as at 31st March 2013 is £5.009M. The following table shows the projected position of the fund over the next five years. 

Project Fund Balance

             £'000

Estimated Balance as at 1st April 2013

5,009

Anticipated Requirements – 2013/14

      (1,272)

Anticipated Receipts – 2013/14

     152

Balance as at 31st March 2014

 3,889

Anticipated Requirements – 2014/15

       (1,594)

Anticipated Receipts – 2014/15

      350

Balance as at 31st March 2015

 2,645

Anticipated Requirements – 2015/16

      (450)

Anticipated Receipts – 2015/16

       100

Balance as at 31st March 2016

 2,295

Anticipated Requirements – 2016/17

(100)

Anticipated Receipts – 2016/17

60

Balance as at 31st March 2017

2,255

Anticipated Requirements – 2017/18

(100)

Anticipated Receipts – 2017/18

60

Balance as at 31st March 2018

2,215

20.      In a similar vein, the Council has an IT Fund estimated at £2.6M as at the end of 2012/13. The Council relies heavily on technology to deliver its services and the Fund allows investment in this infrastructure and also enables the Council to exploit opportunities to reduce the cost of services. This is in accordance with a report from the Wales Audit Office in December 2012 entitled ‘Use of Technology to Support Improvement and Efficiency in Local Government’.  Best practice highlighted in the report recommends that ‘A corporate technology development fund is used to fund all developments with commitment that efficiencies replenish funds'.

21.      Other means of generating income to fund capital projects is through monies forthcoming under S106 planning obligations and the new Community Infrastructure Levy.

22.      Outside of the above, the Council is heavily dependent on specific grant funding to supplement its own resources if certain capital schemes are to be progressed. Generally, this comes via Welsh Government, although contributions from other public sector organisations or associated bodies are also forthcoming. It is estimated that over the next 5 years, the level of specific grant funding for General Fund schemes at just over £41.25M could be over two thirds more than the level of General Capital Funding for the same period (£24.7M). This does, however, assume that the priorities of the grant funding body are the same as those of the Council as many schemes require a match funding contribution to be made by the Authority to the cost of the scheme.

23.      When considering options for capital financing, the ability of the Council to finance the repayment of any loans it raises for the funding of capital schemes must be considered.  Part 1 of the Local Government Act 2003 requires local authorities to have regard to the Prudential Code, which has been developed by CIPFA (the Chartered Institute of Public Finance and Accountancy) as a professional code of practice. In setting the capital programme, the Council must ensure that the key objectives of the Prudential Code are complied with. The Council must ensure that its capital investment plans:

·                Are affordable, and that

·                All external borrowing and other long term liabilities are within a prudent and sustainable level.

·                The consequent treasury management decisions for Prudential Borrowing (also referred to as Unsupported Borrowing) are taken in accordance with good professional practice.

24.      The Code recognises that in making capital investment decisions the Council must have regard to option appraisal, asset management planning and strategic planning. However, given, the expected severity of cuts in future revenue resources, the potential for servicing debt not funded by WG as part of GCF or already provided for (e.g. Prudential Borrowing for the Schools Investment Programme and Housing Improvement Programme) is extremely limited as this will need to be funded through increases in council tax and rents.

Scheme

2013/14

2014/15

2015/16

2016/17

2017/18

Total

 

 

£000

£000

£000

£000

£000

£000

Affordability

 

 

 

 

 

 

 

 

Penarth Learning Community

2,000

3,370

74

0

0

5,444

Up to £600k p.a. funded from Education revenue budgets

Housing Improvement Programme

0

8,267

11,089

10,950

768

31,074

Repayments factored in as part of Housing Business Plan

Local Highway Network Improvements

2,230

2,230

0

0

0

4,460

Repayments funded from savings in existing highways expenditure now funded through additional RSG

Totals

4,230

13,867

11,163

10,950

768

40,978

 

Total Prudential Borrowing over the next 5 years is estimated at £40.98M of which £31.1M relates to the Housing Improvement Programme.

 

Developing the Financial Strategy

25.      One of the main purposes of the Budget Review is to develop a strategy to maximise the availability of resources to address Council priorities for the Capital Programme. As such, the outcome of the exercise to establish relative corporate priority and risk has been invaluable in setting a scale against which bids can be assessed and scarce resources allocated appropriately.

26.      Underpinning this is the consideration of the direction of travel that the Council wishes to pursue in respect of its Capital Programme over the next 5 years (and beyond). As can be seen from the Draft Corporate Plan 2013 to 2017, this is very much based upon the twin themes of regeneration and sustainability.

27.      Certainly, the two biggest capital project areas in terms of the School Investment Programme and the Housing Improvement Programme have and will continue to bring with them opportunities for growth in terms of the local economy (e.g. use of local labour and sub-contractors), development of the surrounding infrastructure and potential inward investment.

28.      One notable strand of this is the targeted recruitment of unemployed people within the Vale via additional training placements, apprenticeships and work placements. Through these initiatives the Penarth Learning Community is aiming to achieve 4,000 new entrant weeks over the life of the project and will also seek to apply positive discrimination to job selection whenever possible.

29.      The Welsh Housing Quality Standard (WHQS) framework has and will continue to deliver a number of community benefits for the Vale. It will create employment opportunities for local SMEs (small and medium sized enterprises), encourage local labour and create apprenticeships in a number of key skills areas, as well as supporting the local communities as each contractor has a corporate social responsibility.

30.      The Council has made a commitment to improve its local roads network through participation in the Local Government Borrowing Initiative which could see up to £6.7M of additional expenditure in the three years to 2014/15. Together with other schemes these are considered to be critical in providing a solid foundation for future regeneration opportunities across the Vale.

31.      Sustainable development is at the centre of all Council capital projects in terms of environmental sustainability in ensuring that all large-scale schemes are Breeam (the design and assessment method for sustainable buildings) ‘excellent’ rated and that the projects themselves are delivered in a sustainable manner with the materials used and the employment opportunities they create. Proposals in the Capital Programme include £1.125M attributable to improved energy for street lighting and a replacement roof incorporating solar panels at the Civic Offices.

32.      The Council’s response to climate change, already identified as a key corporate risk, has been to concentrate on schemes associated with reducing flooding, improving drainage and combating where possible the effects of coastal erosion (e.g. £1.114M capital scheme for Llanmaes Flood Management) . The capital provision will be supplemented by prioritisation of revenue cost pressures associated with these areas with an additional annual sum of £150k included in the Final 2013/14 Revenue Budget proposals.

33.      To assist the evaluation process for capital projects, all schemes must submit a sustainability checklist in order to identify any likely impacts and the mitigating action required. The checklists are reviewed by the relevant officers of the Sustainable Development Working Group for their impact on issues such as biodiversity, the need for environmental surveys and carbon reduction. The checklists then form part of the Council’s project management toolkit for further evaluation.

34.      In adopting this strategy, it is acknowledged that there will still remain a number of issues, both burgeoning and extant, to which further consideration must be given that could affect the life of the next Capital Programme and/or beyond. These include:

·                The possibility of increased demands upon flooding, coastal protection and the environment generally (including an accelerated deterioration of the highways infrastructure);

·                The general shortfall of funding available to address the Council’s asset renewal requirements- both public buildings and highways (total values estimated at £65M and £49.8M respectively in the latest iteration of these Asset Management Plans);

·                The Council’s ambitions for further regeneration and how they can be realised;

·                The continued expansion over time of the Schools Investment Programme;

·                Funding of Renewal Areas to address housing, social and environmental problems in the light of reduced grant availability.

35.      Having regard to the above and the overall strategy and the principles outlined, a number of specific suggestions are proposed by the BWG in order to address the issue of resourcing the Capital Programme.

36.      Realisation of useable capital receipts. This will be a cornerstone of the strategy and includes the identification of surplus land and buildings as part of the Space Project and Schools Investment Programme and consequent action to facilitate their speedy disposal. Where capital receipts flow from the sale of schools land and buildings, these will be ring fenced for use with the Schools Investment Programme. A balance of £2M will be retained in order to provide some resilience to future demands.

37.      Use of reserves (Project Fund). This will ideally be based upon schemes being assessed on an ‘invest to save’ basis. However, in view of restrictions in capital funding, this will not always be possible to achieve and in certain circumstances, business critical schemes may be exempt from these criteria, with the prior approval of the Director of Resources. As with useable capital receipts, £2M will be held as a balance on the Fund.

38.      Use of reserves (IT Fund). It is anticipated that schemes progressed from this Fund will enable efficiencies to be realised which will allow the Fund to be replenished. The Fund will also be used for business critical expenditure.

39.      Use of reserves (Vehicles Repairs & Renewals Fund). The Fund will be used to repair vehicles or replace them as part of the Fleet Management Strategy when it is economically viable to do so. Vehicles may be purchased outright and the Fund replenished by revenue contributions over the expected life of the vehicle or financed through lease.

40.      Use of reserves (Other). These will be determined on a case-by-case basis having regard to the type of scheme and its priority status. While, not necessarily on an ‘invest to save’ basis, replenishment of the Fund from other sources such as revenue contributions will be a factor to be considered when determining the appropriateness of use.

41.      Maximisation of external grant funding. This will be essential to the establishment of a viable Capital Programme. To do so, and on the proviso that the funding is compatible with the Council’s own objectives and priorities, it will be necessary to ensure that all avenues for identifying the availability of such grants are pursued. This may include collaborations and partnerships with other public bodies and the third sector where this will unlock grant funding. Where match funding is required, the Council should seek to achieve this ‘in kind’ wherever possible utilising existing resources before considering direct financial contributions.

42.      Funding of capital schemes from revenue. This is viewed as an essential catalyst for ‘pump priming’ the Capital Programme. In this way regeneration, sustainability and business critical initiatives totalling in excess of £1.8M will be enabled for 2013/14. Given restrictions in the availability of revenue resources (as set out in the Final 2013/14 Revenue Budget Proposals) this is considered to be a ‘one off’ initiative which will not be able to be repeated to this level in future years.

43.      Section106 Planning Agreements/Community Infrastructure Levy. These contributions resulting from development in the area are viewed as a vital means of further improving the community infrastructure. Nearing £0.9M has been received from developers and is currently being held for S106 agreements. Officers are continuing to investigate best use for these funds. In addition, over £0.75M has been identified for use in the proposed Capital Programme. There is currently a further £3M expected to be received in the near future, based upon agreements made to date, and this, and any future agreements will be included in future Capital Programmes as works are agreed.

44.      Prudential Borrowing. The Council has significant planned commitments in respect of Prudential Borrowing (also known as unsupported borrowing). Outside of any temporary arrangements for unsupported borrowing to fund anticipated capital receipts on the Housing Improvement Programme, no further borrowing of this nature is planned as a means of funding the Capital Programme. Any future proposals will be the subject of a detailed business case in addition to the normal assessment required under the Prudential Code.

45.      Collaborations and Partnerships. As well as collaborations and partnerships being a means of unlocking grant funding to progress capital schemes, these vehicles are also seen as possible alternatives where the partner (whether private or public) can deliver solutions to address issues such as regeneration and improvements in private sector housing.

46.      Over time, changes will occur that will necessitate all capital schemes being subject to an annual review. This will take place each November and will include both the approved capital programme to 2017/18 together with any additional schemes proposed. In this way, new high priority schemes (e.g. as a result of unanticipated demand, changes in legislation etc.) not envisaged when the current Programme was set can be factored in. Dependent upon the outcome of this assessment and the funding available addition/changes to the Programme may be proposed.

47.      Future iterations of the Asset Management Plans will reflect the approved strategy and the resulting programme of works. Monitoring of the overall position will be carried out by the Corporate Asset Management Group of officers and reported to Cabinet and scrutiny committees as part of the regular monitoring reports.

Proposed Capital Programme 2013/14 to 2017/18

48.      Following consideration of all of the above, the proposed 5-year capital programme 2013/14 to 2017/18 is attached at Appendix A. As outlined in the financial strategy it is very much predicated upon the themes of regeneration and sustainability. Since the Initial Capital Proposals were prepared, a small number of additional bids were received and are included in the appendices to this report. In addition to the assessment of corporate priority and risk, the values and timings of bids have also been reviewed.

49.      Having regard to the resources available, only those schemes assessed as corporate priority 1 or medium risk are included in these proposals. This includes schemes which are termed as committed as these generally will score higher in terms of the risks associated with the failure to fulfil contractual obligations. Committed projects include the schemes which form part of the School Investment Programme and investment required to meet the Welsh Housing Quality Standard.

School Investment Programme

50.      The 21st Century Schools Programme is the Welsh Government’s funding initiative for investment in schools. The first tranche of schemes, Band A, were submitted to the WG by November 2011. Band A schemes run from 2013/14 to 2018/19 and WG funding available covers 50% of the costs. (Penarth Learning Community is now under construction and is being funded under separate transitional arrangements.)

51.      The schemes included under the Band A submission are:- Nant Talwg (£2.739M), Dewi Sant (£2.496M), Barry Cluster (£3.95M) and Llantwit Learning Community (£12.476M). Funding for the Band A schemes are shown in the table below.

Band A scheme Funding Source

£'000

General Capital Funding

9,329

School Investment Strategy Reserve                                      

1,737

General Capital Receipts

114

Welsh Government Grant

10,481

Total

21,661

52.      In December 2012, the Welsh Government announced that the Band A bid had been successful in outline. The next stage is for the submission of more detailed business cases for the schemes. To date only one relevant business justification case has been submitted – for Ysgol Nant Talwg. A response from WG is awaited.

53.      The following table shows the total spending on the School Investment Programme from 2013/14 to 2018/19 (the final year of Band A schemes), with gross expenditure totalling £69.713M. Asset renewal includes £50k annually to be ring fenced as a contingency for urgent schemes. Any unspent portion of this £50k may be rolled forward to the following financial year.

Funding of Education Programme to 2018/19

 

 

 

 

 

 

13/14

14/15

15/16

16/17

17/18

18/19

TOTAL

By Scheme

£’000

£’000

£’000

£’000

£’000

£’000

£’000

 

Penarth Learning Community

22,962

14,828

4,680

0

0

0

42,470

Nant Talwg

1,000

1,671

68

0

0

0

2,739

Dewi Sant

300

0

1,280

916

0

0

2,496

Llantwit Learning Community

0

0

2,000

8,476

2,000

0

12,476

Barry Cluster

0

3,200

0

250

250

250

3,950

Barry Comp. Art Block

0

315

10

0

0

0

325

Asset Renewal

650

650

650

650

650

650

3,900

School IT

150

150

150

150

150

150

900

Other

7

250

200

0

0

0

457

 

25,069

21,064

9,038

10,442

3,050

1,050

69,713

Funding of Education Programme to 2018/19 - con't

13/14

14/15

15/16

16/17

17/18

18/19

TOTAL

By Funding Source

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

General Capital Funding

5,705

  3,570

2,040

4,079

1,650

775

17,819

General (non-Education) Capital Receipts

0

0

0

114

0

0

114

School Investment Programme Reserve

1,586

965

694

1,278

125

0

4,648

IT Fund

150

150

150

150

150

150

900

Prudential Borrowing Pending Receipts

2,000

2,000

0

0

0

0

4,000

Prudential Borrowing

0

1,370

74

0

0

0

1,444

Total Internal Funding

9,441

8,055

2,958

5,621

1,925

925

28,925

Other Councils’ Contributions

0

0

1,330

0

0

0

1,330

S106 agreements

55

693

0

0

0

0

748

WG Grant

15,573

12,316

4,750

4,821

1,125

125

38,710

 

25,069

21,064

9,038

10,442

3,050

1,050

69,713

                   

54.      In order to achieve this, it is anticipated that capital receipts of £4M from sales of school land will be received. The Programme assumes £1.44M Prudential Borrowing with up to a possible further £4M on a temporary basis pending realisation of the land sales receipts. A sum of £1.33M has now been committed by a neighbouring authority as a capital contribution towards the Penarth Learning Community. Where councils have not made a capital contribution, their ‘share’ of investment costs will be recouped through increased charges for school places.  There is a potential risk that these revenue contributions could reduce should pupil places taken up by those Councils fall.

55.      Consequently, there may be a need for Prudential Borrowing to be undertaken up to a maximum of £5.44M. Should the capital receipts be delayed or not materialise, the repayment of this debt will be met by Education revenue budgets. This would, however, very severely constrain the Council's ability to fund any future schemes. This is a concern, due to the poor state of repair of some school buildings in the Vale.

56.      The Education revenue budget could support circa £600k for capital charges on unsupported (prudential) borrowing and so the unsupported borrowing outlined above can be afforded.  However, this level of debt incurs significant interest repayments and limits the service’s ability to respond to future pressures on both revenue and capital budgets. It is essential, therefore, that every effort is made to realise capital receipts from the sale of land.

57.      It is intended that the proposals outlined for funding of the School Investment Programme replace those under the former School Investment Strategy approved in 2005.

 

Housing Improvement Programme

58.      The Welsh Government requires all local authorities who retain their housing stock to submit an acceptable Housing Business Plan annually that incorporates a detailed financial forecast in the form of a 30 year financial model. The Business Plan is the primary tool for a local authority’s housing landlord service and includes all assets within the Council’s Housing Revenue Account (HRA).

59.      The latest annual Plan was submitted to WG in December 2012, and forms the basis of the Major Repairs Allowance (MRA) grant application, a pivotal financing component for the Housing Improvement Programme (to meet the Welsh Housing Quality Standard).

60.      The MRA for 2013/14 has not yet been announced by the Welsh Government but the assumed budget in Appendix A remains at £2.8M p.a., as received in 2012/13.

61.      The latest Business Plan projections were reported to Cabinet on 17th December 2012 (minute no. C1943) and approved at the Council meeting of 23rd January 2013.  The Plan outlines a reduction in the total amount of Prudential Borrowing required than was previously assumed from £32.9M to £32.4M. However, the date anticipated that all prudential debt could be repaid is now 2031/32 (previously 2029/30).

Other Schemes

62.      A sum of £800k per annum is included to address high priority Visible Services assets and infrastructure improvements. A further £1M is included to address Ewenny Road Bridge and £2.230M under the Local Government Borrowing Initiative is being utilised in both 2013/14 and 2014/15 for local road network improvements.

63.      Section 106 agreement funding will be used on various schemes including a skate park at Paget Road, Penarth £174k, various play area upgrades totalling £74k, public art at Pencoedtre Splash Pad £26k, Cogan Hill/Plassey Street junction improvements, £196k, Llantwit Major Beach Slipway, £20k (towards a £100k scheme), Sully Moors Road pedestrian/cycle route £11k, St Pauls Church £250k and £55k towards the Penarth Learning Community. These are all included in Appendix A.

64.      A sum of £300k has been allocated annually in relation to the Barry Regeneration Partnership. As well as being used for preparatory work (e.g. site investigations), this may also be applied as match funding to lever additional sources of grant funding. In addition, a further £150k has been allocated each year to fund regeneration initiatives including feasibility studies. A sum of £50k has been allocated in 2014/15 and 2015/16 for feasibility studies into future improvements at Penarth Esplanade and other Penarth regeneration. 

65.      The Llanmaes Flood Management scheme is included at £1.114M (of which the Council contribution is £167k). A further £1.15M towards flood risk management and drainage issues has been funded via a revenue contribution with any underspend in a financial year being automatically rolled forward to the next. A sum of £110k per annum has been set aside for inspection and works relating to coastal protection and drainage whilst £725k is allotted to prioritised energy schemes associated with street lighting. The replacement roof at the Civic Offices at £400k incorporates solar panels as a source of renewable energy.

66.      Funding for Disabled Facilities Grants of £4.9M has been provided over the 5 years. However, it should be noted that the £1.2M budget for Disabled Facility Grants for 2013/14 in Appendix A includes proposed ‘one off’ slippage of £200k brought forward from 2012/13.

Resource Implications (Financial and Employment)

67.      The table below details the General Capital Funding and internal resources required to fund the schemes proposed in Appendix A.

Analysis of Net Funding Required for the 2013/14 Capital Programme

General Fund                                                                      £’000      £’000

Welsh Government Resources:   

Supported Borrowing                                                          3,281

General Capital Grant                                                         2,003

            5,284

Council Resources:

Capital Receipts       5,287

S106 agreement funding                                                  556

Unsupported (Prudential ) Borrowing                            4,230

Revenue/Reserves/Leasing    6,681               

            16,754

Net Capital Resources                                                                              22,038          

Housing

Welsh Government Resources:   

Supported Borrowing                                                        280

                280

Council Resources:

Capital Receipts                                                               392

Housing Reserves   12,382

            12,774

Net Capital Resources                  13,054

68.      Reduced resources will restrict the number and size of capital schemes that the Council is able to fund. The value of schemes assessed as lower corporate priority and risk totals £24.86M. There will also be significant pressures on spending post 2017/18 which are not yet funded. These include the backlog of school, highway and buildings repairs which in time could expand beyond issues associated with repairs and maintenance to those of ‘fit for purpose’ considerations.

69.      In order to provide some resilience, it has been assumed that a balance of £2M each will be held in terms of both the Project Fund and unallocated capital receipts.

70.      Annual Minimum Revenue Provision Statement 2013/14  - there are two elements of cost where capital expenditure is financed by long-term borrowing. Interest on borrowing and principal (or capital) element charged as ‘minimum revenue provision’ (MRP). Until recently, the amount of MRP to be charged was determined by regulation, although the Council was allowed to make an additional “voluntary” charge to the revenue account. The Local Authorities (Capital Finance and Accounting) (Wales) (Amendment) Regulations 2008 which came into force on 31st March 2008, replaced the detailed statutory rules for calculating MRP with:  'A local authority must calculate for the current financial year an amount of minimum revenue provision which it considers to be prudent.'

71.      WG has issued guidance on what constitutes prudent provision and that requires the Council to approve a statement each year of the policy on making MRP. The MRP charge in 2013/14 for capital expenditure incurred will continue to be calculated in accordance with the methodology prescribed by the regulations in force until 31st March 2008. Another option would have been to calculate the MRP on the non-housing Capital Financing Requirement (CFR) at the end of the preceding year, i.e. without making the adjustment. However, the option that has been used more accurately reflects the MRP that should be charged. Such costs are supported by Revenue Support Grant.

72.      The basis of the calculation is as follows:

            Minimum Revenue Provision                                        £’000

Non Housing Capital Financing Requirement at 31.03.13*     113,456

Add Adjustment A **                                                                    2,004

Total                                                                                         115,460

4% of the Total (the adjusted CFR)

MRP                                                                                             4,618

*      The Non Housing Capital Financing Requirement measures the Council’s underlying need to borrow for capital purposes and is the Council’s cumulative capital expenditure not financed by other means, less the total MRP made in previous years.

**     Adjustment A nullifies the revenue effect of the changes to MRP calculation following the introduction of the Prudential Code in 2004.

73.      Capital expenditure incurred during 2013/14 will not be subject to a MRP charge until 2014/15.

74.      The Authority has included in its 2013/14 revenue estimates a principal repayment of £86k in respect of unsupported borrowing for capital expenditure on Local Road Network Improvement incurred during 2012/13. The loan is repayable over 20 years.

75.      The proposed 2013/14 capital programme estimates include Penarth Learning Community (£22.962M) and further expenditure on Local Road Network Improvement (£2.230M). It is intended to fund £2M of the Penarth Learning Community Scheme and all of the Local Road Network Improvement scheme by Prudential Borrowing. This unsupported borrowing (i.e. not supported for Revenue Grant purposes) would be repaid over a suggested 30 year and 20 year period respectively.

76.      Expenditure incurred in 2013/14 would require a first principal instalment to be made in 2014/15 of circa £121k. The section 151 Officer considers that the costs of unsupported borrowing are both prudent and sustainable.

Sustainability and Climate Change Implications

77.      Sustainability is one of the main strands of the financial strategy for capital. Several of the schemes included in these proposals will assist in addressing the impact of climate change. Details are set out in the main body of the report.

78.      One of the purposes of the Sustainable Development Working Group is to review the sustainability of major capital schemes. Wherever possible, the Council strives to reduce carbon emissions and improve energy efficiency and positively encourages waste reduction initiatives.

Legal Implications (to Include Human Rights Implications)

79.      The Council is required to show that capital expenditure is covered by identified resources when developing its Final Capital Programme proposals.

Crime and Disorder Implications

80.      The obligations of the Council with regard to Section 17 need to be fully considered in the budget decision making process.

Equal Opportunities Implications (to include Welsh Language issues)

81.      Additional finance improves the Council’s opportunities for assisting disadvantaged members of society.

Corporate/Service Objectives

82.      Contributes to the corporate priority of Corporate Resources by the provision of sound financial management

Policy Framework and Budget

83.      The results of the Budget Review will inform the Final Capital Programme proposals 2013/14 to 2017/18 which will require the approval of Council.

Consultation (including Ward Member Consultation)

84.      The Corporate Management Team has been consulted on the proposals.

Background Papers

Bids received from departments

Correspondence received from the Welsh Government

 

Contact Officer

Laura Davis Tel. No. 01446 709249

 

Officers Consulted

Corporate Management Team

 

Responsible Officer:

Sian Davies

Managing Director

 

Share on facebook Like us on Facebook