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Agenda Item No

 

The Vale of Glamorgan Council

 

Cabinet Meeting: 24 February, 2014

 

Report of the Leader

 

Final Capital Proposals 2014/15 to 2018/19

 

Purpose of the Report

1.         To gain approval for the final capital programme proposals for the years 2014/15 to 2018/19. 

Recommendations

That Cabinet recommend to Council that:-

1.          The final budget proposals for the Capital Programme for the years 2014/15 to 2018/19 as set out in Appendix A are approved.

2.         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 2014/15 to 2018/19 Housing Capital Programme as appropriate.

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 2014/15 to 2018/19 Asset Renewal budgets as appropriate.

4.         The Renewal Area Grant, once approved by the Welsh Government, is automatically included in the 2014/15 Capital Programme.

5.         The policy for making Minimum Revenue Provision in 2014/15 be approved.

Reasons for the Recommendations

1.         To set and approve future capital programmes to 2018/19.

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

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

4.         To update the 2014/15 Capital Programme.

5.         To agree the basis of the Minimum Revenue Provision calculation for 2014/15.

Background

2.         The initial capital proposals went to Cabinet on 18th November 2013 (minute C2074). They were subsequently referred to Scrutiny Committees in December 2013.

3.         In responding to the initial capital programme budget proposals, Corporate Resources Scrutiny Committee, at its meeting on the 10th December 2013 (minute no. 688), considered comments from other Scrutiny Committees. Specific comments are set out below.

·           Economy and Environment – 3rd December – noted report.

·           Housing and Public Protection – 4th December – noted report.

·           Lifelong Learning – 9th December – noted report

·           Social Care and Health – 2nd December – noted report. Members noted the reduced size of the proposed Capital Programme and enquired if this was as a result of choice or necessity.  In response, Members were advised that the bids were based on pragmatism.  In addition in response to a question, Members were informed that the Welsh Government had agreed a further Capital injection towards Flying Start, and the Directorate had bid for £250,000 for 2014/15.

4.         The minutes and recommendations of Scrutiny were referred to Cabinet on the 16th December 2013 (minute no.C2140) and referred by them for consideration by the Budget Working Group. Subsequently the Budget Working Group noted all the Scrutiny recommendations and took responses into account in drafting the final budget proposals. With regard to the comments made by Social Care and Health Scrutiny regarding the reduced size of the capital programme, the Budget Working Group concurred that the reduced number of bids was due to pragmatism. With regard to the comment on Flying Start the Council has been awarded £150,000 in 2014/15 and this has been included in the Final Capital Proposals.  

Relevant Issues and Options

5.         A Budget Review was carried out as part of the 2013/14 Capital Proposals, and formulated a financial strategy which stated that;

·           The Capital Programme would be approved on a five year rolling programme.

·           In order to mitigate the deteriorating situation, only Capital Bids that were deemed to meet the criteria of higher corporate priority and/or risk should be progressed.

·           The Capital programme was set with regard to the key themes of regeneration and sustainability

·           The Capital Programme should maximise the availability of resources to address the Council’s priorities.

6.         The Final Capital Programme for 2014/15 to 2018/19 has been set broadly in line with this strategy. The programme has continued to be set as a five year rolling programme.

7.         Since the Draft Proposals were submitted in November, as set out in the financial strategy all schemes in the Capital programme have been reviewed. All Project Managers and Project Sponsors have been asked to review their schemes and advise if the scheme is still required.  They have also been asked to review if there are any changes to the timings and/or costs of the schemes, the changes requested are reflected in these proposals and are outlined in paragraphs 28 to 33 of this report.

Prioritisation of Schemes 

8.         As a starting point in the budget process, all services were required to submit bids for the 5-year period commencing 2014/15.

9.         The Corporate Asset Management Group used the criteria set out by the Budget Strategy; the bids were prioritised in terms of their corporate priority and the risk they pose to the Council if they are not pursued. Following this the prioritisation of bids was reviewed by the Budget Working Group.

10.      The risk assessment element 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/LOW

 

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

11.      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†and preventative expenditure

2

Statutory expenditure above the absolute minimum and other priorities

1

 

12.      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 General Capital Funding allocated by Welsh Government but also the strategy adopted by the Council to maximise the resources available to it from other avenues.

13.      As reported in the November Draft Capital Proposals Report, in line with the Budget Strategy, only those schemes assessed as corporate priority 1 or medium risk and above are included in these proposals. The bids that did not meet these criteria or were excluded from consideration because funding has already been allocated have not been put forward for inclusion in the 2014/15 to 2018/19 programme. 

 

Resources Available

14.      On 11th December 2013, the Welsh Government announced the final 2014/15 General Capital funding settlement. There has been a £36K (0.65%) reduction in funding from 2013/14, which is a slightly greater reduction than had been assumed in the Initial Capital Programme Proposals report in November 2013 (£5.528M compared to £5.530M). The figure for 2015/16 is based on the forward indication from Welsh Government and maintains the level of Capital Funding at £5.528M. General predictions for public sector finances is for a continuing period of austerity. Consequently, further cuts of 10% in 2016/17, 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

2014/15

2015/16

2016/17

2017/18

2018/19

 

£’000

£’000

£’000

£’000

£’000

Supported Borrowing - General Fund

3,437

3,437

3,093

2,784

2,505

General Capital Grant

2,091

2,091

1,882

1,694

1,525

 Totals

5,528

5,528

4,975

4,478

4,030

15.      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 2014, the forecast balance of useable General Fund capital receipts is £8.845M with a further £1.185M estimated to be generated between 2014/15 and 2018/19. It should be noted, however, that projected future capital receipts are not guaranteed.

16.      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 2014

8,845

Anticipated Requirements – 2014/15

(2,343)

Anticipated Receipts – 2014/15

1,185

Balance as at 31st March 2015

7,687

Anticipated Requirements – 2015/16

(865)

Anticipated Receipts – 2015/16

0

Balance as at 31st March 2016

6,822

Anticipated Requirements – 2016/17

(3,233)

Anticipated Receipts – 2016/17

0

Balance as at 31st March 2017

3,589

Anticipated Requirements  - 2017/18

(1,695)

Anticipated Receipts - 2017/18

0

Balance as at 31st March 2018

1,894

Anticipated Requirements  - 2018/19

0

Anticipated Receipts   - 2018/19

0

Balance as at 31st March 2019

1,894

17.      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.

18.      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 2014 is £4.217M. 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 2014

4,217

Anticipated Requirements – 2014/15

(1,754)

Anticipated Receipts – 2014/15

402

Balance as at 31st March 2015

2,865

Anticipated Requirements – 2015/16

(450)

Anticipated Receipts – 2015/16

100

Balance as at 31st March 2016

2,515

Anticipated Requirements  - 2016/17

(400)

Anticipated Receipts   - 2016/17

60

Balance as at 31st March 2017

2,175

Anticipated Requirements – 2017/18

(100)

Anticipated Receipts – 2017/18

60

Balance as at 31st March 2018

2,135

Anticipated Requirements – 2018/19

0

Anticipated Receipts – 2018/19

0

Balance as at 31st March 2019

2,135

 

19.      In a similar vein, the Council has an IT Fund estimated at £4.374M as at the end of 2013/14. 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'.

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

21.      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 £42.757M could be over two thirds more than the level of General Capital Funding for the same period (£24.541M). Many of these schemes require a match funding contribution to be made by the Authority to the cost of the scheme.

22.      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

23.      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 Welsh Government as part of General Capital Funding 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 the revenue budget.

24.      The projected amount of prudential borrowing utilised at 31st March 2014 is £6.46M which is made up of £4.46M for Highway Improvements under the Local Borrowing Initiative and £2M for Penarth Learning Community. After allowing for repayments the balance is expected to be £6.176M.

Scheme

2014/15

2015/16

2016/17

2017/18

2018/19

Total

 

 

£000

£000

£000

£000

£000

£000

Affordability

Penarth Learning Community and Llantwit Learning Community

3,370

2,074

0

0

0

5,444

Up to £313k p.a. for Penarth and up to £210 p.a for Llantwit to be funded from savings identified from the scheme and Education revenue budgets

Housing Improvement Programme

6,034

12,225

12,529

1,152

1,051

32,991

Repayments factored in as part of Housing Business Plan

Local Highway Network Improvements

2,230

0

0

0

0

2,230

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

Totals

11,634

14,299

12,529

1,152

1,051

40,665

 

25.      Total new Prudential Borrowing over the next 5 years is estimated at £40.665M of which £32.991M relates to the Housing Improvement Programme.

26.      At the end of the Capital Programme period (31st March 2019) the outstanding prudential borrowing taking into account repayments is expected to be £11.858M General Fund and £31.284M HRA.

Proposed Capital Programme 2014/15 to 2018/19

27.      Following consideration of all of the above, the proposed 5-year capital programme 2014/15 to 2018/19 is attached at Appendix A. Since the Initial Capital Proposals were prepared, a small number of amendments were received and are outlined below.

28.      An additional bid has been received from Social Services for urgent works required to Hen Goleg clock tower to address the health and safety risk for falling masonry at the site. Social Services were asked to reprioritise their schemes in light of the urgent nature of these works and as a result removed the proposed schemes at Gardenhurst.

29.      As part of the review of schemes it was identified that the works at Castleland Community Centre relating to roof renewal that were programmed in for 2014/15 had been carried out in 2013/14, therefore this scheme has been removed from the programme.

30.      Given the number of issues encountered with schools in 2013/14 Capital programme, particularly given the issue with Lath and Plaster at the authority’s Victorian schools and other issues with falling masonry, a specific programme is required to address this issue.  To help minimise the risk of occurrence of a similar problem in future provision has been made within the capital programme for property condition surveys in schools. The costs of these surveys will be funded by a contribution from the School Investment Strategy Reserve. In addition, additional Asset Renewal Funding is being proposed the Final Capital programme of £300k in each of 2014/15 and 2015/16 this shall be funded by a contribution from the School Investment Strategy Reserve. Additional funding has also been provided in 2015/16 for the School Investment Programme of £500k.  This will also be funded from a contribution from the School Investment Strategy Reserve.

31.      Given the importance of the Highways network, additional asset renewal of £300k in 2014/15 and £300k in 2015/16 has been included in the Capital programme to be funded from the Visible Services Reserve.

32.      The Final Capital Programme for Housing includes an additional £600K for Void Properties in 2014/15 to be funded using a revenue contribution.

33.      Whilst no specific sum has been included in the Capital Programme at this time, the Council will be investigating the possibility of improving facilities at Jenner Park. The costs of any improvements will be funded by a contribution from the Visible Services Reserve.

The Financial Strategy

34.      The Capital Programme has continued to be set with regard to the key themes of regeneration and sustainability, examples are as follows;

·           The continued development of the School Investment Programme with the proposed expansion of the Llantwit Comprehensive remodelling scheme to a larger Llantwit Learning Community and continued investment in housing under the Housing Improvement Programme. These schemes will bring with them continued opportunities for growth, development of surrounding infrastructure and inward investment.

·           The continued utilisation of the Local Government Borrowing Initiative to improve the local road network thereby supporting local infrastructure and underpinning future regeneration opportunities. The final year of the current scheme is 2014/15 we are not aware, what scheme, if any will replace the funding mechanism from 2015/16.

·           Ensuring that all large Council Capital Projects are BREEAM (the design and assessment method for sustainable buildings) excellent rated.

35.       In the Final Capital Proposals 2013/14 to 2017/18 a number of pressures were identified that would need to be subject to ongoing review and management as follows;

Capital Budget Pressure

Mitigating Action Taken

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

Additional funds, £650k, were allocated in the 2013/14 Capital Programme to address Flood Risk Management on a one off basis. £388K for Flood Management schemes at Boverton and Coldbrook have been carried forward into 2014/15. Ongoing funding for Flood Risk Management is provided for in the five year capital programme at £100K per annum.

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);

Bids for Asset Renewal were ranked in accordance with Risk and Corporate Priority to help assist with rationing the scarce resources available. Where sufficient resources were not available to award a bid that met the criteria the bid was allocated to a future year of the programme with sufficient asset renewal funding available.  Following a review of Asset Renewal requirements as part of the budget process an additional £300K has been allocated to both Education and Schools and Visible Services to meet their specific pressures.

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

Provision is made in each year of the capital programme for regeneration via the regeneration fund £150K, and the Barry Regeneration Partnership Fund £300K.

The continued expansion over time of the Schools Investment Programme;

Proposed changes to School Investment Programme funding for Ysgol Gwaun Y Nant and Oakfield, Llantwit Learning Community means that more schools benefit from the available funding.

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

Bid for extension of Castleland Renewal funding following extension of grant to 2016/17 has been awarded.

 

School Investment Programme

36.      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 Welsh Government by November 2011. Band A schemes run from 2013/14 to 2018/19 and Welsh Government funding available covers 50% of the costs. (Penarth Learning Community is now under construction and is being funded under separate transitional arrangements.)

37.      The schemes included under the Band A submission between 2013-14 and 2018/19 are: - Nant Talwg (£2.737M), Dewi Sant (£3.039M), Barry Cluster (£4.2M) and Llantwit Learning Community (£22.100M), small discrepancies between the figures shown here and in the table below are due to additional funding allocated from reserves or asset renewal for the schemes.

38.      The following table shows the total spending on the Education  Programme from 2013/14 to 2018/19  incorporating expenditure as part of the School Investment programme under 21st Century Schools funding (the final year of Band A schemes), with gross expenditure totalling £85.401M. 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.

Proposed 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

22,397

15,012

4,680

0

0

0

42,089

Demolition of St Cyres

300

0

0

0

0

0

300

Demolition of Ysgol Maes Dyfan

0

200

0

0

0

0

200

Nant Talwg

1,227

1,498

39

0

0

0

2,764

Dewi Sant

302

1,823

848

68

0

0

3,041

Llantwit Learning Community

0

0

7,104

9,471

5,525

0

22,100

Barry Cluster (Ysgol Gwaun Y Nant and Oakfield)

0

2,747

600

500

0

0

3,847

Barry Cluster Colcot

0

0

0

250

250

0

500

Barry Comp. Art Block

0

315

10

0

0

0

325

School Investment Programme

0

0

500

0

0

0

500

Asset Renewal

1,356

950

950

650

650

650

5,206

School IT

200

200

200

200

200

200

1,200

Property Condition Surveys

0

40

40

0

0

0

80

Schools Capital Loan Scheme

300

300

300

300

300

300

1,800

Other

759

0

0

0

0

0

759

Learning in Digital Wales Grant

690

0

0

0

0

0

690

 

27,531

23,085

15,271

11,439

6,925

1,150

85,401

 

39.      The schemes in the Education Capital Programme include the enhanced scheme for Llantwit Learning Community with a revised cost of £22.1M. The Business Case has been submitted to Welsh Government using Delegated Powers. There are various risks in the funding for the scheme regarding Capital Receipts and additional Welsh Government grant required to fund the scheme, these can be mitigated to a certain extent through a combination of delaying the amalgamation stage of the scheme to qualify for funding under Band B of 21st Century Schools funding, value engineering the scheme to reduce its overall costs and limited additional use of reserves. However if no additional grant is received from Welsh Government and no Capital Receipt is received from the Eagleswell site the Council will be unable to progress the scheme.

40.      The Education Capital Programme is funded as follows;

Funding of Education Programme to 2018/19

 

 

 

 

 

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

5,141

3,354

1,724

4,079

1,650

650

16,598

Capital Receipts

427

147

552

611

1,763

0

3,500

Revenue Contribution

794

0

0

0

0

0

794

School Investment Programme Reserve

2,086

2,029

1,534

1,195

125

0

6,969

Schools Rationalisation and Improvements Reserve

300

300

300

300

300

300

1,800

IT Fund

200

200

200

200

200

200

1,200

Prudential Borrowing Pending Receipts

2,000

2,000

0

0

0

0

4,000

Prudential Borrowing

0

1,370

2,074

0

0

0

3,444

Total Internal Funding

10,948

9,400

6,384

6,385

4,038

1,150

38,305

Other Councils’ Contributions

0

0

1,330

0

0

0

1,330

S106 agreements and other External Contributions

120

693

0

0

0

0

813

Welsh Government Grant

16,463

12,992

7,557

5,054

2,887

0

44,953

 Total Funding

27,531

23,085

15,271

11,439

6,925

1,150

85,401

 

 Housing Improvement Programme

41.      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).

42.      The latest annual Plan was submitted to Welsh Government in December 2013, 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).

43.      The MRA for 2014/15 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 2013/14.

44.      The Final Capital Programme includes an additional £600K for Void Properties in 2014/15 to be funded using a revenue contribution.

45.      The latest Business Plan projections were reported to Cabinet on 2nd December 2013 (minute no. C2113) and approved at the Council meeting of 18th December 2013.  The Plan outlines an increase in the total amount of Prudential Borrowing required than was previously assumed from £32.4M to £33.9M. The date anticipated that all prudential debt could be repaid is now 2032/33 (previously 2031/32).

Other Schemes

46.      A sum of £400k has been scheduled for 2014/15 for a Replacement Client Record System in Social Services.

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

48.      Flood Risk Management funding of £100K is provided in addition to funding slipped from 2013/14 for Flood Risk Management Schemes at Coldbrook and Boverton.

49.      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. 

50.      Funding for Disabled Facilities Grants of £4.6M has been provided over the 5 years.

51.      The Capital Programme includes funding for the Space Project £1.195M in 2014/15 and £300K in 2016/17. This investment is funded by the Project fund is expected to achieve net revenue savings.

Resource Implications (Financial and Employment)

52.      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 2014/15 Capital Programme

General Fund                                

£’000

Welsh Government Resources:   

3,437

Supported Borrowing                                     

2,091

 

 

Council Resources:

 

Capital Receipts                                                   

2,343

Unsupported (Prudential ) Borrowing                        

5,600

Revenue/Reserves/Leasing                                 

8,307

 

 

Net Capital Resources                                  

21,778

 

 

Housing

 

Council Resources:

 

Capital Receipts                                          

1,525

Unsupported (Prudential) Borrowing                               

6,034

Housing Reserves                                            

7,987

 

 

Net Capital Resources                                  

15,546

53.      Reduced resources will restrict the number and size of capital schemes that the Council is able to fund. The gross value of schemes assessed as lower corporate priority and risk totals £8.956M between 2014/15 and 2018/19 and as advised in the 18th November 2013 Initial Capital Proposals are not included in the Final Proposed Capital Programme 2014/15 to 2018/19.

54.      There will also be significant pressures on spending post 2018/19 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.

Minimum Revenue Provision

55.      Annual Minimum Revenue Provision Statement 2014/15 - 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). 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.'

56.      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 2014/15 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.

57.      The basis of the calculation is as follows:

 

MINIMUM REVENUE PROVISION                                             £’000

Estimated Non Housing Capital Financing Requirement      

 at  31.03.14*                                                                            109,957                                                                           

Add Adjustment A **                                                                    2,004

Total                                                                                         111,961

4% of the Total (the adjusted CFR)

 MRP                                                                                            4,478

*      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. (Supported Borrowing).

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

58.      Capital expenditure incurred during 2014/15 will not be subject to a MRP charge until 2015/16.

59.      The Authority has included in its 2014/15 revenue estimates a principal repayment of £348k in respect of the Prudential (unsupported) borrowing i.e. not supported for Revenue Grant purposes for the Penarth Learning Community scheme and the Local Road Network Improvement scheme

60.      The Section 151 Officer considers that the estimated costs of unsupported borrowing are both prudent and sustainable.

 

Sustainability and Climate Change Implications

61.      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.

62.      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)

63.      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

64.      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)

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

Corporate/Service Objectives

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

Policy Framework and Budget

67.      The results of the Budget Review will inform the Final Capital Programme proposals 2014/15 to 2018/19 which will require the approval of Council.

Consultation (including Ward Member Consultation)

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

Relevant Scrutiny Committee

69.      Corporate Resources

Background Papers

Bids received from departments

Correspondence received from the Welsh Government

 

Contact Officer

Gemma Jones Tel. No. 01446 709141

 

Officers Consulted

Corporate Management Team

 

Responsible Officer:

Sian Davies

Managing Director

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