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Agenda Item No. 7

 

The Vale of Glamorgan Council

 

Scrutiny Committee (Housing and Public Protection) 3rd December 2014

 

Joint Report of the Director of Development Services and the Director of Visible Services and Housing

 

 Initial Capital Programme Proposals 2015/16

 

Purpose of the Report

1.         To advise Scrutiny Committee of the revised Capital Programme for 2014/15 and to submit for consultation the Initial Capital Proposals for 2015/16.

Recommendations

It is recommended:-

1.         Scrutiny Committee consider the 2015/16 initial capital budget proposals and forward its recommendations to Scrutiny Committee (Corporate Resources) as the lead Scrutiny Committee.

2.         That any recommendations of Scrutiny Committees are passed to Scrutiny Committee (Corporate Resources) as the lead Scrutiny Committee in order for their views to be forwarded to Cabinet.

3.         That Committee note the following changes to the 2014/15 and 2015/16 Capital Programmes that require Council approval:

·           Renewal Area - Carry forward £496k from 2014/15 Capital Programme to 2015/16 as follows; £70k Holton Road Phase 1, Holton Road Phase 2 £155k, Holton Road Phase 3 £105k and Holton Road Phase 4 £125k, Castleland Renewal Area Phase 3E £9k, Castleland Renewal Area 4A £20k, and Castleland Renewal Area Phase 4B £12k.

Reasons for the Recommendations

1.         To allow full consultation on the future Capital Programme.

2.         In order that Cabinet be informed of the comments of Scrutiny Committees before making a final proposal on the 2015/16 Capital Programme.

3.         To ensure that Members are aware of the position with regards the 2014/15 and 2015/16 Capital Programme, relevant to this Scrutiny Committee.

Relevant Issues and Options

2014/15 Capital Programme

2.         Appendix A details financial progress on the Capital Programme as at 30th September 2014.   

Director of Development Services

3.         Renewal Area - A carry forward of £496k from the 2014/15 Capital Programme to 2015/16 is requested for the following schemes; £70k Holton Road Phase 1, Holton Road Phase 2 £155k, Holton Road Phase 3 £105k and Holton Road Phase 4 £125k. Holton Road Phase 1 has now been tendered, Phase 2 of the scheme is currently out to tender and phases 3 and 4 will be tendered by January. The following amounts will be carried forward to 2015/16 to allow 12 month retentions to be paid against the schemes Castleland Renewal £9k Area Phase 3E, Castleland Renewal Area 4A £20k and Castleland Renewal Area Phase 4B £12k.

Variance between Actual Spend to date and Profiled Spend

4.         Cabinet have previously agreed that further information would be provided where schemes have a value of over £500,000 and show a variance of 20% or more between actual spend and the profile. The following schemes meet this criteria:-

·           WHQS Works- As noted in the previous monitoring report there is likely to be a variance in the WHQS expenditure as the extent of the works required in a property is not known until the works commence. Less has been spent than was projected for Rewire schemes, Kitchen Replacements, Bathroom works and schemes in Non Traditional Properties. More has been spent than was projected for Central Heating works and General Improvement schemes, the total budget is unaffected. The allocation of the WHQS budget will be reviewed as part of the forthcoming Housing Business Plan.

·           Disabled Facilities Grants - As detailed in previous monitoring there is a variance between profiled budget and actual because the profiled budget has been based on historical patterns of spend. Changes made to processes within the service for 2014/15 has led to a more consistent pattern of approvals and spend throughout the financial year. This budget will be monitored closely to ensure that overall expenditure remains within the available funding.

2015/16 to 2019/20 Capital Programme

5.         The Welsh Government (WG) announced the provisional 2015/16 General Capital Funding, on 8th October 2014. The 2015/16 capital settlement represents a £62k decrease on the 2014/15 Final Settlement which equates to a 1% cut. 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% for each year of the programme from 2016/17. This has been reflected in the proposed Capital Programme 2015/16 to 2019/20.  Proposed schemes for this Committee are outlined in Appendix B.

6.         In line with the financial strategy, the Council will mitigate the deteriorating situation by looking to progress only those schemes 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.

7.         The Major Repairs Allowance (MRA), which is the grant that provides capital funding to the Housing Revenue Account (HRA), for 2015/16 has not yet been announced by the Welsh Government.  Cabinet will be advised once the announcement is made. An assumption has been made in Appendix B that the grant will continue at the allocation reflected in the current business plan of £2.8m in 2015/16 and throughout the period of the Capital Programme. The actual MRA in 2014/15 is £2.76m and this figure will be reflected in the Housing Business Plan when it is brought to Cabinet in December 2014; the revised figure will then be reflected in the Final Capital Programme in February 2015.

8.         In addition to external funding, the Council will finance part of the Capital Programme from its own resources, e.g. capital receipts and reserves.  

9.         The table below details the General Capital Funding and internal resources required to fund the proposed schemes for the Council as a whole.

Analysis of Net Funding Required for the Indicative 2015/16 Capital Programme

GENERAL FUND                                                                £’000               £’000

Welsh Government Resources 

Supported Borrowing                                                        3,398

General Capital Grant                                                       2,068

                                                                                                                  5,466

Council Resources

Capital Receipts                                                                2,260

Reserves/Leasing                                                             9,920

Unsupported Borrowing                                                   2,074

                                                                                                                  14,254           

Net Capital Resources                                                                            19,720                       

HOUSING REVENUE ACCOUNT                                       £’000                 £’000

Housing Reserves                                                             4,141

Housing Capital Receipts                                                         0

Housing Unsupported Borrowing                                    11,292

Net Capital Resources                                                                            15,433

 

10.      The indicative 2015/16 Capital Programme shown in Appendix B includes allocations already approved by Council and reflects the amendments requested within this report.

Capital Bids 2015/16 to 2019/20

11.      New capital bids were invited for return by 30th September 2014 and the number of bids received were low (1 from Social Services, 11 from Visible Services and 6 from Development). Departments were requested to rank their own bids in order of importance before submission, and bids from each Department were forwarded to the Corporate Asset Management Group (CAMG) for evaluation.

12.      The CAMG 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. 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

 

13.      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

Low Priority

0

 

 

 

 

 

 

 

14.      Only those schemes assessed as corporate priority 1 or higher and medium risk or higher are included in these proposals.

15.      In addition to bids meeting the criteria for inclusion in the Capital Programme, there have been a number of changes approved by Cabinet since the final budget proposals 2014/15 to 2018/19 in February 2014 that have an impact on the Capital Programme. These changes include capital sums carried forward; changes to the Housing Improvement Plan are set out below.

Housing Improvement Plan

16.      The new Housing Improvement Plan is due to be submitted to Cabinet for approval in December 2014. The recommendations of the amended plan will be reflected in the Final Capital Proposals when they are brought to Cabinet in February 2015.

17.      The capital funded from revenue (CERA) for the current Housing Improvement Plan is £4.141m, an increase of £933k on the £3.208m currently reflected in the Capital Programme. The 2015/16 Capital Programme has been amended to reflect an increased revenue contribution of £4.141m in 2015/16 and reduced Prudential Borrowing of £11.293m, pending the amended programme in December 2014.

Next Steps

18.      The next stage is for the estimates to be submitted to Scrutiny Committees for consultation.  Scrutiny Committee (Corporate Resources) is the lead Scrutiny Committee and will consider both the Initial Budget Proposals and the comments that other Scrutiny Committees have made.  The responses of Scrutiny Committee must be made no later than the 16th December 2014.

19.      Scrutiny Committee is asked to first consider the initial Capital Programme proposals as shown in Appendix B.  They then may make recommendations for changes.  If they wish to make a change, the reason for this needs to be recorded in order to assist the Cabinet and the Budget Working Group (BWG) draw up the final proposals.

20.      Managers will be asked to revisit the schemes included in Appendix B and to confirm final costs and spend profile prior to the final proposals being presented to Cabinet, which will be no later than 23rd February 2015. 

21.      Cabinet’s Final Capital Programme proposals will be considered by Council on 4th March 2015.

Resource Implications (Financial and Employment)

22.      The total net capital expenditure of the proposed programme for the Council as a whole, over the 5 years, is approximately £96.144m.

23.      If all proposed schemes for the Council as a whole shown are approved, the effect on General Fund useable capital receipts will be as shown in the following table. 

Capital Receipts

General

Ringfenced Social Services

Ringfenced Education

 

    £000's

           £000's

           £000's

Anticipated Balance as at 1st April 2015

8,233

1,225

0

 

 

 

 

Anticipated Requirements – 2015/16

(1,660)

0

(600)

Anticipated Receipts – 2015/16

0

0

1,285

Balance as at 31st March 2016

 6,573

1,225

685

 

 

 

 

Anticipated Requirements – 2016/17

(5,525)

0

(1,684)

Anticipated Receipts – 2016/17

0

0

2,500

Balance as at 31st March 2017

1,048

1,225

1,501

 

 

 

 

Anticipated Requirements – 2017/18

0

(1,225)

(800)

Anticipated Receipts – 2017/18

0

0

2,500

Balance as at 31st March 2018

1,048

0

3,201

 

 

 

 

Anticipated Requirements – 2018/19

0

0

0

Anticipated Receipts – 2018/19

0

0

0

Balance as at 31st March 2019

1,048

0

3,201

 

 

 

 

Anticipated Requirements – 2019/20

0

0

0

Anticipated Receipts – 2019/20

0

0

2,800

Balance as at 31st March 2020

1,048

0

6,001

 

 

 

 

Anticipated Requirements between 2020/21 and 2025/26

0

0

(6,001)

Anticipated Receipts between 2020/21 and 2025/26

0

0

0

Balance as at 31st March 2026

1,048

0

0

 

24.      In line with the overall strategy and specific suggestions proposed by the BWG, in order to resource the Capital Programme, reserves will be utilised over the period of the Capital Programme 2015/16 to 2019/20.

25.      The Project Fund will be used to fund schemes assessed on an invest to save basis, and in certain circumstances business critical schemes may also be funded from this reserve with the prior approval of the Director of Resources. A balance of £2m will be retained as a balance on this fund.  The projected usage of this reserve over the period of the Capital Programme is shown below:

Project Fund

             £'000

Anticipated Balance as at 1st April 2015

4,244

 

 

Anticipated Requirements – 2015/16

(1,684)

Anticipated Receipts – 2015/16

100

Balance as at 31st March 2016

2,660

 

 

Anticipated Requirements – 2016/17

(400)

Anticipated Receipts – 2016/17

60

Balance as at 31st March 2017

2,320

 

 

Anticipated Requirements – 2017/18

(100)

Anticipated Receipts – 2017/18

60

Balance as at 31st March 2018

2,280

 

 

Anticipated Requirements – 2018/19

0

Anticipated Receipts – 2018/19

0

Balance as at 31st March 2019

2,280

 

 

Anticipated Requirements – 2019/20

0

Anticipated Receipts – 2019/20

0

Balance as at 31st March 2020

2,280

 

26.      The above forecast balances need to be seen in the context of significant pressures for spending which are not yet included in the Capital Programme. These include the backlog of school, highways and buildings improvements.

Sustainability and Climate Change Implications

27.      The bids must also be evaluated for Sustainable Development.  The four areas of Sustainable Development to be considered are:

·         Living within environmental limits

·         Ensuring a strong, healthy and just society

·         Achieving a sustainable economy

·         Promoting good governance.

 

28.      Sustainability checklists will be requested from Project Managers for each of the proposed bids taken forward. These will be reviewed by members of the Sustainable Development Working Group, with a view to ensuring that wherever possible the four sustainable targets are addressed. The results will be incorporated into the Final Capital Programme Proposals report in February 2015. 

Legal Implications (to Include Human Rights Implications)

29.      The Council is required to show that capital expenditure is covered by identified resources.

Crime and Disorder Implications

30.      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)

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

Corporate/Service Objectives

32.      Contributes to the corporate priority of Community Leadership by the provision of sound financial management. 

Policy Framework and Budget

33.      This report follows the procedure laid down in the constitution for the making of the budget.  The 2015/16 budget proposals will require the approval of Council.  Some of the proposals for amendments to the 2014/15 Capital Programme are the responsibility of Cabinet and others are for Council.  These are identified in the recommendations to this report.

Consultation (including Ward Member Consultation)

34.      The Corporate Management Team and all Scrutiny Committees have been consulted on the proposals.

Relevant Scrutiny Committee

35.      Corporate Resources

Background Papers

Bids received from departments

Correspondence received from the Welsh Government

 

Contact Officer

Gemma Jones, Principal Accountant

 

Officers Consulted

The following Officers have been consulted on the contents of this report:-

Corporate Management Team

 

Responsible Officer:

Rob Thomas, Director of Development Services

Miles Punter, Director of Visible Services

 

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