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Agenda Item No

The Vale of Glamorgan Council

Cabinet Meeting: 23 February, 2015

Report of the Leader

Final Capital Proposals 2015/16 to 2019/20

Purpose of the Report

1. To gain approval for the Final Capital Programme Proposals for the years 2015/16 to 2019/20.

Recommendations

That Cabinet recommend to Council that:-

1. The final budget proposals for the Capital Programme for the years 2015/16 to 2019/20 as set out in Appendix A are approved.

 

2. The Managing Director or the Head of Finance, in consultation with the Cabinet Member responsible for Finance, is given delegated authority to make additions, deletions or transfers to or from the 2015/16 to 2019/20 Housing Improvement Programme as appropriate.

 

3. The Managing Director or the Head of Finance, in consultation with the Cabinet Member responsible for Finance, is given delegated authority to make additions, deletions or transfers to or from the 2015/16 to 2019/20 Asset Renewal budgets as appropriate.

 

4. The Renewal Area Grant, once approved by the Welsh Government, is automatically included in the 2015/16 Capital Programme.

 

5. Subject to the approval and award of Welsh Government Band B 21st Century Schools grant funding, the Capital Programme from 2020/21 onwards is increased by £49.039M (£18.361M is already included for 2019/20 in Appendix A), and schemes will be included in the programme on an individual basis following Welsh Government agreement to funding.

 

6. The policy for making Minimum Revenue Provision in 2015/16 is approved.

Reasons for the Recommendations

1. To set and approve future capital programmes to 2019/20.

 

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 2015/16 Capital Programme.

 

5. To approve the budget for Band B 21st Century Schools.

 

6. To agree the basis of the Minimum Revenue Provision calculation for 2015/16.

Background

2. The Initial Capital Programme Proposals 2015/16 to 2019/20 went to Cabinet on 17th November 2014 (minute C2534). They were subsequently referred to Scrutiny Committees in December 2014.

 

3. In responding to the Initial Capital Programme Proposals, Corporate Resources Scrutiny Committee, at its meeting on the 9th December 2014 (minute no. 682), recommended that the initial Capital Budget Proposals for 2015/16 be endorsed.  No recommendations were made by the following Scrutiny Committees:-

• Economy and Environment – 2nd December 14 – noted report.  

• Housing and Public Protection – 3rd December 14 – noted report.

• Lifelong Learning – 8th December 14 – noted report. 

• Social Care and Health – 1st December 14 – noted report. 

 

4. The minutes and recommendations of Corporate Resources Scrutiny were referred to Cabinet on the 12th January 2015 (minute no.C2599) as no recommendations were made Cabinet recommended that the Initial Capital Budget Proposals for 2015/16 be endorsed.

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 Proposals should maximise the availability of resources to address the Council’s priorities.

 

6. The Final Capital Programme Proposals for 2015/16 to 2019/20 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 2014, 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 examine 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 later in this report.

Prioritisation of Schemes

8. As a starting point in the budget process, all services were required to submit new bids for the 5-year period commencing 2015/16.

 

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 Initial Capital Programme Proposals Report, in line with the Budget Strategy, only those schemes assessed as corporate priority 1 or higher and medium risk or higher are included in these proposals. The bids that did not meet these criteria have not been put forward for inclusion in the 2015/16 to 2019/20 programme. 

Resources Available

14. On 10th December 2014, the Welsh Government announced the final 2015/16 General Capital funding settlement. There has been a £62K (1.13%) reduction in funding from 2014/15.  There is no indication of the level of funding likely beyond 2015/16; therefore, in line with the approach adopted in the Medium Term Financial Plan, the proposals assume a reduction of 10% in each year of the programme from 2016/17.  On this basis, a table representing the capital funding from the Welsh Government is shown below: 

 


Resources from Welsh Government

15/16

£’000

16/17

£’000

17/18

£’000

18/19

£’000

19/20

£’000

Supported Borrowing - General Fund 3,398 3,058 2,752 2,477 2,229
General Capital Grant 2,068 1,861 1,675 1,507 1,356
Total 5,466 4,919 4,427 3,984 3,585

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 2015, the forecast balance of useable capital receipts totals £9.937M of which £1.225M is ring-fenced for Social Services and £0.074M is ring-fenced for Education.  A further £0.455M general capital receipts, £0.163M ring-fenced Social Services capital receipts and £11.250M ring-fenced Education capital receipts for the School Investment Programme are estimated to be generated between 2015/16 and 2019/20. It should be noted, however, that projected future capital receipts are not guaranteed. 

 

16. HRA capital receipts arise from the sale of dwellings under the Right To Buy Act, of HRA land and other HRA assets.  In the case of HRA receipts, regulations set out that receipts since 1 April 2004 can only be used to fund HRA capital expenditure or to repay HRA debt.  As at 31st March 2015, the forecast balance of useable HRA capital receipts is nil.  It is anticipated that receipts totalling £0.754M will be received during 2015/2016, and these will be used to fund the Housing Improvement Programme during the year.  No further HRA receipts have been assumed.

 

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.

 


Capital Receipts

General

£000

Ringfenced Social Services

£000

Ringfenced Education

£000

Balance as at 31st March 2015 8,638 1,225 74
Anticipated Required in 2015/16 -3,274 0 0
Anticipated Receipt in 2015/16 455 163 950
Balance as at 31st March 2016 5,819 1,388 1,024
Anticipated Required in 2016/17 -5,450 0 -1,684
Anticipated Receipt in 2016/17 0 0 2,000
Balance as at 31st March 2017 369 1,388 1,340
Anticipated Required in 2017/18 -23 -1388 0
Anticipated Receipt in 2017/18 0 0 5,500
Balance as at 31st March 2018 346 0 6,840
Anticipated Required in 2018/19 0 0 0
Anticipated Receipt in 2018/19 0 0 0
Balance as at 31st March 2019 346 0 6,840
Anticipated Required in 2019/20 -4 0 -1,404
Anticipated Receipt in 2019/20 0 0 2,800
Balance as at 31st March 2020 342 0 8,236
Anticipated Required to 2025/26 0 0 -8,186
Anticipated Receipts to 2025/26 0 0 0
Balance as at 31st March 2026 342 0 50

 

18. The Education Capital Programme utilises general capital receipts in addition to capital receipts ring-fenced for Education.

 

19. The capital receipt received in 2014/15 from the sale of Gardenhurst has been ring-fenced for Social Services capital expenditure. Options for its use are being explored by the Council however, it is expected that all ring-fenced Social Services capital receipts will be utilised for older persons accommodation in 2017/18.

 

20. 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.

 

21. 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 2015 is £4.367M. 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 2015 4,367
Anticipated Requirements – 2015/16 (1,686)
Anticipated Receipts – 2015/16 40
Balance as at 31st March 2016 2,721
Anticipated Requirements – 2016/17 (400)
Anticipated Receipts – 2016/17 0
Balance as at 31st March 2017 2,321
Anticipated Requirements - 2017/18 (100)
Anticipated Receipts - 2017/18 0
Balance as at 31st March 2018 2,221
Anticipated Requirements – 2018/19 0
Anticipated Receipts – 2018/19 0
Balance as at 31st March 2019 2,221
Anticipated Requirements – 2019/20 0
Anticipated Receipts – 2019/20 0
Balance as at 31st March 2020 2,221

  

22. In a similar vein, the Council has an IT Fund estimated at £4.382M as at the end of 2014/15. 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'.

 

23. Other means of generating income to fund capital projects is through monies forthcoming under S106 planning obligations.

 

24. 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 Capital Schemes is approximately £31.377M which is around £8.996M more than the level of General Capital Funding for the same period (£22.381M). Many of these schemes require a match funding contribution to be made by the Authority to the cost of the scheme.

 

25. 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

 

26. 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.

 

27. The projected amount of prudential borrowing utilised at 31st March 2015 is £17.537M which is made up of £6.690M for Highway Improvements under the Local Borrowing Initiative, £5.370M for Penarth Learning Community, £4.554M Housing Improvement Programme and the Local Government Borrowing Initiative for 21st Century Schools £0.923M. After allowing for repayments the balance is expected to be £17.024M at 31st March 2015.

 

28. The table below sets out the Council's Prudential Borrowing over the next 5 years: -

 

Prudiential Borrowing


Scheme

2015/16

£000

2016/17

£000

2017/18

£000

2018/19

£000

2019/20

£000

Total

£000

 

Affordability

Penarth Learning Community and Llantwit Learning Community 2,074 0 0 0 0 2,074 Repayments to be funded from Education budget and saving from amalgamation of schools.
21st Century Schools Local Borrowing Initiative 1,187 528 0 0 0 1,715 Repayments funded from specific grant in 2014/15 and budget transferred into RSG from 2015/16
Housing Improvement Programme 15,596 19,434 1,688 3,222 785 40,725 Repayments factored in as part of Housing Business Plan
Total 18,857 19,962 1,688 3,222 785 44,514

 

 

29. Future Prudential Borrowing for School Investment Programme Band B schemes totals £1.5M in 2021/22.

 

30. Total new Prudential Borrowing over the next 5 years is estimated at £44.514M of which £40.725M relates to the Housing Improvement Programme.

 

31. Included in the Council's unsupported borrowing in 2015/16 will be an amount for the Housing Subsidy buyout as reported to Cabinet in December 2014 (minute C2580).  This sum is not included in the above figures as further information will not be known until the end of March 2015.

 

32. At the end of the Capital Programme period (31st March 2020) the outstanding prudential borrowing taking into account repayments is expected to be £13.463M General Fund and £42.121M HRA.

Proposed Capital Programme 2015/16 to 2019/20

33. Following consideration of all of the above, the proposed 5-year Capital Programme 2015/16 to 2019/20 is attached at Appendix A. Since the Initial Capital Programme Proposals were prepared, a small number of amendments were received and are outlined below.

 

34. It has been requested that the £500K built into the 2015/16 Capital Programme for the School Investment Programme be carried forward into the 2016/17 Capital Programme and increased to £750K to be funded from the School Investment Strategy Reserve.  The £750K will be used to address essential requirements required for coeducational provision at the Barry and Bryn Hafren Buildings subject to proposals proceeding following statutory consultation.

 

35. The Rhoose Expansion Scheme has been reprofiled from 2015/16 - 2016/17 to 2017/18 - 2018/19, this is to reflect the expected timescales of delivery of the work.

 

36. The bid for the Additional Highways /Environmental Improvements scheme has been reduced due to a change in the projected cost of the scheme from £600K to £450K and split £150K and £300K over 2015/16 and 2016/17 respectively. 

 

37. The bid for the Causeway Improvement scheme has been reduced from £800K to £750K due to a change in the projected cost to the scheme and the whole amount is now only included in 2015/16 of the Capital Programme. 

 

38. The bid for £600K the High Street/Broad Street Traffic Management scheme was included in the Initial Capital Programme split equally over 2015/16 and 2016/17.  This bid has been increased to £750K, £375K in 2015/16 and £375K in 2016/17. The additional monies will be funded by a transfer from the Additional Highways /Environmental Improvement scheme bid which has been reduced by £150K as this was no longer required.

 

39. The Carbon Management Fund scheme £150K has been included in the 2015/16 Capital Programme to fund energy saving schemes.  This will be funded from the Energy Management Fund.  This complements the £100K included in the Revenue Budget Proposals as one off funding in 2015/16 only, to take forward energy initiatives.

The Financial Strategy

40. 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 Band B anticipated to start in 2019/20 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 draft Rural Local Development Strategy was endorsed by Cabinet on 22nd September 2014 and submitted to Welsh Government as a bid for grant under the LEADER strand of the Rural Development Plan for Wales.  It was also agreed that £250K of the Regeneration Fund would be allocated as match funding for the grant if approved.
  • Ensuring that all large Council Capital Projects are BREEAM (the design and assessment method for sustainable buildings) excellent rated.

41.  In the Final Capital Programme Proposals 2014/15 to 2018/19 a number of pressures were identified that would need to be subject to on-going 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)

£170K for Flood Management schemes at Boverton have been carried forward into the 2015/16 Capital Programme. On-going 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. Bids for Asset Renewal were ranked in accordance with Risk and Corporate Priority to help assist with rationing the scarce resources available. Following a review of Asset Renewal requirements as part of the budget process an additional £300K has been allocated to the Education service in 2015/16 and £400K from 2016/17 onwards. An additional £300K has been added to Visible Services in 2015/16 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 Barry Regeneration Partnership Fund and £150K each year for the Regeneration Fund. £250K of the Regeneration Fund is ring fenced in the 2015/16 to 2019/20 Capital Programme for the next Rural Development Programme business plan.
The continued expansion over time of the Schools Investment Programme;

Band B Schemes for the School Investment Strategy have now been included in the Capital Programme. Welsh Government has confirmed that Band B will commence in 2019/20. It is estimated that the cost of Band B will be in the region of £67.4M and it is assumed that the Welsh Government grant intervention rate will be 50%.

Funding of Renewal Areas to address housing, social and environmental problems in the light of reduced grant availability. In 2015/16 and 2016/17 an allocation of £500K has been made for match funding the Renewal Area Grant (plus £496K slippage from 2014/15). Grant funding for this scheme is expected to end in 2016/17.

School Investment Programme

42. The 21st Century Schools Programme is the Welsh Government's funding initiative for investment in schools. The first tranche of schemes under Band A of the funding were submitted prior to November 2011. Band A schemes run between 2013/14 and 2018/19. Band B schemes are expected to commence in 2019/20.

 

43. The schemes included under Band A submission for construction between 2013/14 and 2018/19 are; Ysgol Nant Talwg, Ysgol Dewi Sant, Ysgol Gwaun Y Nant and Oakfield, Colcot and Llantwit Learning Community.

 

44. In April 2014, WG notified the Council that some of the funding for Band A of the 21st Century Schools Programme will be in the form of unsupported borrowing instead of a revenue grant.  The Council will be expected to borrow; however, WG will provide revenue funding to cover the cost of the loan.  In 2014/15 this was via a specific grant and from 2015/16 the funding will be distributed through the Revenue Support Grant.  This has no impact on the value of the Capital Programme, only the way in which it is funded. The table below shows the sums to be borrowed between 2014/15 and 2016/17 and the corresponding borrowing costs provided by WG.

2014/15 - 2016/17 Local Government Borrowing Initiative


Period

Loan Value/Sum

Invested

£

Loan Charges

Funded by WG

£

2014/15 923,252 53,651
2015/16 1,187,038 68,980
2016/17 527,573 30,658
TOTAL 2,637,863 153,289

 

45. In September 2014 the Vale of Glamorgan Council received notification from WG that the funding envelope for 21st Century Schools was increased from £20.960M to £29.898M.   Since the Initial Capital Programme in November 2014 the Council has increased the contribution to the programme by a further £950K to the Llantwit Major Learning Community Scheme at Cabinet on the 12th January 2015 (Minute C2607)

 

46. The following table shows the planned spend on the Education Capital Programme from 2014/15 to 2019/20 incorporating expenditure under Band A schemes funded under 21st Century Schools Programme. Gross Expenditure totals £84.969M.

 

Proposed Education Programme to 2019/20


By Scheme

14/15

£000's

15/16

£000's

16/17

£000's

17/18

£000's

18/19

£000's

19/20

£000's

Total

£000's

Penarth Learning Community 14,747 2,780 0 0 0 0 17,527
Demolition of Ysgol Maes Dyfan 200 0 0 0 0 0 200
Ysgol Nant Talwg (£1.131M 13/14) 1,576 32 0 0 0 0 1,608
Ysgol Nant Talwg Slippage 27 0 0 0 0 0 27
Ysgol Dewi Sant 1,123 1,582 35 0 0 0 2,740
Slippage Ysgol Dewi Sant 22 0 0 0 0 0 22
Llantwit Learning Community 475 6,555 12,402 1,240 29 0 20,701
Gwaun Y Nant & Oakfield 1,188 2,410 47 0 0 0 3,645
Slippage Barry Cluster 0 147 0 0 0 0 147
Colcot 0 0 250 250 0 0 500
Barry Comp. Art Block 315 10 0 0 0 0 325
Barry Secondary School Transformation 0 0 750 0 0 0 750
Eagleswell Demolition 0 0 300 0 0 0 300
Band B Schemes 0 0 0 0 0 18,361 18,361
Modular Building Resiting 0 500 0 0 0 0 500
Asset Renewal 841 900 1,000 1,000 1,000 1,000 5,741
Asset Renewal Contingency 63 50 50 50 50 50 313
Rhoose S106 0 0 0 1,000 1,762 0 2,762
Llangan Classroom Base 0 117 0 0 0 0 117
Victorian Schools 600 1200 1,200 800 0 0 3,800
Evenlode – New School Hall 254 0 0 0 0 0 254
Additional Capital Schemes 950 0 0 0 0 0 950
Schools Challenge Cymru 30 0 0 0 0 0 30
Schools ICT Loans 200 200 200 200 200 200 1,200
Property Condition Surveys 40 40 0 0 0 0 80
Schools Capital Loan Schemes 352 300 300 300 300 300 1,852
Other 517 0 0 0 0 0 517
Total 23,520 16,823 16,534 4,840 3,341 19,911 84,969

 

47. The total allocation for Victorian Schools between 2014/15 and 2019/20 is £3.8M to support works across 22 Victorian Schools to address the existing issues with lath and plaster and masonry deterioration. Work is currently being carried out by three external consultants to assess scheme requirements and generate a prioritised list of schemes which will be brought to Cabinet in a full report which will address these problems.  Of the £600K allocated for Victorian Schools in the 2014/15 Capital Programme it has been approved by emergency powers that £75K is utilised to fund external consultancy services, £462K is utilised to increase the budget of the Overboarding Ceilings scheme, £20K is utilised to increase the budget of the scheme Victoria Primary School Emergency Roofing and £43K is used to fund emergency/urgent works should they be required.

 

48. There is an asset renewal budget of £900K in 2015/16 increasing to £1M in 2016/17. In addition there is £50K asset renewal contingency budget in each year.  Education in consultation with Property Services, allocate this budget in year to various schemes including rolling programmes of boiler and toilet renewal.

 

49. There is a £750K budget for Barry Secondary Schools in the 2016/17 Capital Programme. 

 

50. Band B schemes are expected to commence in 2019/20; the Council will be submitting proposals for a number of schemes.  Based on latest indications, it has been assumed that 50% funding will be available from Welsh Government to fund these schemes.  However there is no guarantee that this funding will be available from Welsh Government.

 

51. Indicative strategic projects for the Council under Band B funding would seek to address the following:

• Expanding primary sector capacity and addressing the condition of school buildings in various areas across the Vale.

• Rationalisation of school buildings currently situated on split sites. 

 

52. The total cost for Band B schemes is projected to be in the region of £67.4M.  It is anticipated that Band B will be funded from £33.7M Welsh Government Grant, £13.840M Capital Receipts, £9.023M S106 funding, £7.107M Reserves, £2.230M General Capital Funding and £1.5M Prudential Borrowing.

 

53. It is requested that the capital programme is increased by £67.4M from 2019/20 onwards and individual schemes will be included in the programme as and when they are approved. 

 

54. The Education Capital programme is anticipated to be funded as follows;


By Funding Source

14/15

15/16

16/17

17/18

18/19

19/20

Total


£000's

£000's

£000's

£000's

£000's

£000's

£000's

General Capital Funding

2,972

2,512

4,593

1,000

789

1,160

13,026

Capital Receipts

4,125

1,247

4,426

800

400

1,404

12,402

Other Reserves and Revenue Contribution

2,328

950

0

0

0

1,000

4,278

School Investment Reserve

1,062

2,411

1,756

415

290

1,397

7,331

School Rationalisation and Improvements Reserve

352

300

300

300

300

300

1,852

IT Fund

200

200

200

200

200

200

1,200

Prudential Borrowing

3,370

3,261

528

0

0

0

7,159

Prudential Borrowing Pending Receipts

2,000

0

0

0

0

0

2,000

Total Internal Funding

16,409

10,881

11,803

2,715

1,979

5,461

49,248

Other Councils Contributions

0

1,330

0

0

0

0

1,330

S106 Agreements

829

117

296

1,000

1,362

7,700

11,304

Welsh Government Grant

6,282

4,495

4,435

1,125

0

6,750

23,087

Total Funding

23,520

16,823

16,534

4,840

3,341

19,911

84,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

55. 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).

 

56. The latest annual Plan was submitted to Welsh Government in January 2015, 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 (WHQS)).

 

57. The MRA for 2015/16 has not yet been announced by the Welsh Government but the assumed budget in Appendix A remains at £2.760M p.a., as received in 2014/15.

 

58. The latest Business Plan projections were reported to Cabinet on 15th December 2014 (minute no. C2580) and approved at the Council meeting of 17th December 2014.  The Plan outlines an increase in the total amount of unsupported borrowing over 30 years from £33.9M to £43.629M for meeting and maintaining WHQS, and any regeneration work.  There is an additional estimated unsupported borrowing amount of £63.2M included in the latest Plan, which will be required for the exit of the Housing Revenue Account Subsidy System.  Based on the latest Business Plan projections, the potential savings generated from exiting the HRA Subsidy System will mean the anticipated date that all prudential debt (£106.829M) could be repaid is now 2039/40 (previously 2032/33, on a debt of £33.9M).

 

59. The Final Capital Programme Proposals includes an additional £550K for Emergency Works in 2015/16, 2016/17 and 2017/18 to be funded from unsupported borrowing.

 

60. It is expected that WHQS will be attained by 2017, with on-going work required to maintain the standard based on component lifecycles.  In addition the latest Housing Improvement Programme includes regeneration work of £20M between years 2015/16 and 2019/20, which will potentially include some new build schemes, as well as works to enhance the estates.

Other Schemes

61. A sum of £800K per annum is included to address high priority Visible Services assets and infrastructure improvements.

 

62. Flood Risk Management funding of £100K per annum is provided in addition to funding slipped from 2014/15 for Flood Risk Management Schemes at Boverton.

 

63. A sum of £184K in 2015/16, £260K in 2016/17 and £300K from 2017/18-2019/20 has been allocated 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 2015/16 for feasibility studies into future improvements at Penarth including the Esplanade.

 

64. Funding for Disabled Facilities Grants of £4.5M has been provided in total over the 5 years.

 

65. The Capital Programme Proposals includes funding for the Space Project £1.178M in 2015/16 and £300K in 2016/17. This investment is funded by the Project Fund is expected to achieve net revenue savings.  £125K is currently identified as a saving in 2016/17 from the termination of the Provincial House lease, however further savings could be identified as the project progresses.

Resource Implications (Financial and Employment)

66. 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 2015/16 Capital Programme

General Fund 

£’000

Welsh Government Resources:   

2,068

Supported Borrowing 

3,398



Council Resources:


Capital Receipts        

3,274

Unsupported (Prudential ) Borrowing  

3,261

Revenue/Reserves/Leasing       

10,773



Net Capital Resources 

22,774



Housing


Council Resources:


Capital Receipts 

754

Unsupported (Prudential) Borrowing 

15,596

Housing Reserves        

3,485



Net Capital Resources 

19,835

67. 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 £18.235M between 2015/16 and 2019/20 and as advised in the 17th November 2014 Initial Capital Programme Proposals are not included in the Final Proposed Capital Programme 2015/16 to 2019/20.

 

68. There will also be significant pressures on spending post 2019/20 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.

Annual Minimum Revenue Provision Statement 2015/16

69. 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.'

 

70. Welsh Government 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. It is proposed that the MRP charge in 2015/16 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.

 

71. The basis of the calculation is as follows:

 


MINIMUM REVENUE PROVISION 

£’000  

Estimated Non Housing Capital Financing Requirement at 31.03.15*    

108,050

Add Adjustment A ** 

2,004

Total

110,054

4% of the Total (the adjusted CFR)


= MRP 

4,402


 

*  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.

 

72. Capital expenditure incurred during 2015/16 will not be subject to a MRP charge until 2016/17.

 

73. The Authority has included in its 2015/16 revenue estimates a principal repayment of £472k in respect of the Prudential (unsupported) Borrowing (i.e. not supported for Revenue Grant Purposes) for the 21st Century Schools, Penarth Learning Community and the Local Road Network Improvement scheme.

 

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

Sustainability and Climate Change Implications

75. 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.

 

76. 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)

77. 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

78. 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)

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

Corporate/Service Objectives

80. Funds allocated contribute to the wide range of corporate service objectives as set out in the Corporate Plan.

Policy Framework and Budget

81. This report is following the procedure laid down in the constitution for the making of the capital budget and needs to be referred to Council to make the final decision.

Consultation (including Ward Member Consultation)

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

Relevant Scrutiny Committee

83. Corporate Resources

Background Papers

Bids received from departments

Correspondence received from the Welsh Government

Contact Officer

Vicky Williams Tel. No. 01446 709251

Officers Consulted

Corporate Management Team

Responsible Officer:

Sian Davies

Managing Director

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