Agenda item

(Finance Portfolio Holder) To consider the attached report (C-044-2016/17).

(1)        That the latest five-year forecast of capital receipts be noted;

 

(2)        That the level of usable capital receipts currently predicted to be £1,700,000 at 31 March 2021 be noted;

 

(3)        That external borrowing of an estimated £24,056,000, necessary to support the General Fund capital programme, be noted; and

 

(4)        That the following amendments to the Capital Programme be recommended to Council to approve:

 

            (a)        a supplementary capital estimate in the sum of £346,000 for the St John’s Road   development;

           

            (b)        a supplementary capital estimate in the sum of £28,000 for grounds             maintenance vehicles to be financed from external sources; and

 

            (c)        a supplementary Capital estimate in the sum of £130,000 for Disabled Facility             Grants to be financed from a Central Government Grant;

 

(5)        That the following amendments to the Capital Programme be approved:

 

            (a)        a reduction of £191,000 in 2016/17 and £200,000 thereafter for private sector             housing loans;

 

            (b)        virements in 2016/17 in respect of:

 

(i)        £12,000 to the Museum Development project from the Bridgeman House allocation within the General Fund; and

 

(ii)        £200,000    to    Structural   Repairs    from    the    Kitchen   Replacement   Programme within the Housing Revenue Account; and

 

            (c)        carry forwards totalling £8,060,000 from 2016/17 to 2017/18 in respect of the             General Fund Schemes listed below:

 

                        (i)         General ICT                                                    £32,000;

 

                        (ii)        Langston Road Shopping Park                       £7,190,000;

 

                        (iii)       Car Parking Schemes                                     £62,000;

 

                        (iv)       Waste Management Equipment                      £28,000;

 

                        (v)        Flood Alleviation Schemes                              £20,000;

 

                        (vi)       Purchase of Bridgeman House                       £297,000;

 

                        (vii)      CCTV Systems                                               £128,000;

 

                        (viii)     Housing Estate Parking                                  £50,000; and

 

                        (ix)       Parking Review Schemes                               £253,000; and

 

            (d)        carry  forwards  totalling  £8,947,000  from  2016/17 to 2017/18 in    respect of the       Housing Revenue Account Capital schemes listed below:

 

                        (i)         New House Building & Purchases                  £4,043,000;

 

                        (ii)        Communal Water Tanks                                 £100,000;

 

                        (iii)       Windows/Doors/Roofing                                 £225,000;

 

                        (iv)       Other Planned Maintenance                           £22,000;

 

                        (v)        Structural Schemes                                         £100,000;

 

                        (vi)       Bathroom Replacements                                £400,000;

 

                        (vii)      Garages & Environmental Improvements       £585,000;

 

                        (viii)     North Weald Depot                                         £3,130,000;

 

                        (ix)       Other Repairs & Maintenance             £33,000; and

 

                        (x)        Capital Service Enhancements                       £309,000.

The Finance Portfolio Holder presented a report on the review of the Capital Programme for the period 2016/17 to 2020/21.

 

The Portfolio Holder outlined the Council’s Capital Programme for the five year period 2016/17 to 2020/21. It included the forecast capital investment in Council owned assets; estimates of capital loans to be made for private housing initiatives; and projected levels of revenue expenditure funded from capital under statute. The capital programme had been prepared by updating the programme approved in February 2016, amended for any slippage and re-phasing approved in June 2016, as well as new schemes and allocations approved by the Cabinet subsequently.

 

The Portfolio Holder stated that the allocations included in 2016/17 and 2017/18 represented approved sums for capital schemes which the Council was committed to deliver. Allocations given for the years 2018/19 to 2020/21 represented forecast sums as a guide to future capital investment, and the schemes to which they related would require Cabinet approval before proceeding. The projects already approved within the Capital Programme had been reviewed and spending control Officers had reassessed estimated final costs and the phasing of expenditure profiles for each scheme as part of the Capital Review. Recommendations had been made to make amendments as appropriate.

 

The Portfolio Holder reported that the Council’s overall programme of capital expenditure was summarised for each Directorate in Appendix 1 of the report and forecasted an investment of £118,801,000 in Council-owned assets over the five year period under consideration. Details of individual schemes or groups of projects were shown at Appendix 2 of the report for the General Fund Capital Programme and an analysis of works into specific categories was shown at Appendix 3 of the report for the Housing Revenue Account (HRA) Capital Programme. Appendix 1 also disclosed the Council’s forecast to finance capital loans up to a maximum of £680,000 and planned expenditure of £4,443,000 - which was classified as revenue expenditure but could be financed from capital resources, over the five year period. Analyses of these figures were given in Appendices 4 and 5 of the report respectively.

 

The Portfolio Holder informed the Cabinet that Appendix 1 of the report also detailed  the proposed sources of funding for the Capital Programme over the five-year period from 2016/17 to 2020/21, based on maximising the funding available to finance each scheme. Estimated external funding from grants and private sources of £5,055,000 was identified, and it was proposed that capital receipts of an estimated £16,693,000 and direct revenue funding of an estimated £78,120,000 be applied to finance the Capital Programme over the next five years. It is forecast that external borrowing of an estimated £24,056,000 would be necessary to support the Council’s investments in new developments within the General Fund. The estimated level of capital resources available now and in the future were given in Appendix 6 of the report.

 

The Portfolio Holder concluded that the balance of capital receipts was expected to fall from £3,788,000 as at 1 April 2016 to £1,700,000 by 31 March 2021, and the Major Repairs Fund balance was expected to decrease from £12,292,000 to £0 by 31 March 2019, with annual contributions to be used in full each year thereafter.

 

In response to questions from the Members present, the Director of Resources explained that the proposed external borrowing would be undertaken through other Local Authorities, in order to obtain the best interest rates and value for money for the Council. The expectation was for the Council to borrow for as short a period as possible and repay the debt as quickly as possible; the Public Works Loans Board would be considered for any borrowing, but it also applied penalties for the early redemption of loans.

 

The Cabinet noted that the review of the Capital Programme demonstrated the underlying strength of the Council’s finances, and that it was working towards becoming self-funding as the funding available from Government grants continued to decrease.

 

Decision:

 

(1)        That the latest five-year forecast of capital receipts be noted;

 

(2)        That the level of usable capital receipts currently predicted to be £1,700,000 at 31 March 2021 be noted;

 

(3)        That external borrowing of an estimated £24,056,000, necessary to support the General Fund capital programme, be noted; and

 

(4)        That the following amendments to the Capital Programme be recommended to Council to approve:

 

            (a)        a supplementary capital estimate in the sum of £346,000 for the St John’s Road development;

           

            (b)        a supplementary capital estimate in the sum of £28,000 for grounds             maintenance vehicles to be financed from external sources; and

 

            (c)        a supplementary Capital estimate in the sum of £130,000 for Disabled         Facility Grants to be financed from a Central Government Grant;

 

(5)        That the following amendments to the Capital Programme be approved:

 

            (a)        a reduction of £191,000 in 2016/17 and £200,000 thereafter for private        sector housing loans;

 

            (b)        virements in 2016/17 in respect of:

 

(i)        £12,000 to the Museum Development project from the Bridgeman House allocation within the General Fund; and

 

(ii)        £200,000    to    Structural   Repairs    from    the    Kitchen   Replacement   Programme within the Housing Revenue Account; and

 

            (c)        carry forwards totalling £8,060,000 from 2016/17 to 2017/18 in respect        of the General Fund Schemes listed below:

 

                        (i)         General ICT                                                    £32,000;

 

                        (ii)        Langston Road Shopping Park                       £7,190,000;

 

                        (iii)       Car Parking Schemes                                     £62,000;

 

                        (iv)       Waste Management Equipment                      £28,000;

 

                        (v)        Flood Alleviation Schemes                              £20,000;

 

                        (vi)       Purchase of Bridgeman House                       £297,000;

 

                        (vii)      CCTV Systems                                               £128,000;

 

                        (viii)     Housing Estate Parking                                  £50,000; and

 

                        (ix)       Parking Review Schemes                               £253,000; and

 

            (d)        carry  forwards  totalling  £8,947,000  from  2016/17 to 2017/18 in    respect of the Housing Revenue Account Capital schemes listed below:

 

                        (i)         New House Building & Purchases                  £4,043,000;

 

                        (ii)        Communal Water Tanks                                 £100,000;

 

                        (iii)       Windows/Doors/Roofing                                 £225,000;

 

                        (iv)       Other Planned Maintenance                           £22,000;

 

                        (v)        Structural Schemes                                         £100,000;

 

                        (vi)       Bathroom Replacements                                £400,000;

 

                        (vii)      Garages & Environmental Improvements       £585,000;

 

                        (viii)     North Weald Depot                                         £3,130,000;

 

                        (ix)       Other Repairs & Maintenance             £33,000; and

 

                        (x)        Capital Service Enhancements                       £309,000.

 

Reasons for Decision:

 

The Capital Programme was based on decisions already approved by the Cabinet. The expenditure profiles were based on Member agreed timescales and practical considerations. The proposed decisions were intended to make the best use of the capital resources currently available and forecast to become available for capital schemes during the period up to and including 2020/21.

 

Other Options Considered and Rejected:

 

To reduce the General Fund and/or Housing Revenue Account Capital Programmes by re-considering the inclusion of some new schemes or re-assessing the inclusion of some existing schemes. However, the revenue consequence of reducing the level of capital and revenue balances over the next five years would be to reduce investment income, whilst at the same time external borrowing would result in increased revenue costs through interest charges.

 

With regard to financing the General Fund and HRA capital programmes, there were a number of options available; however, the level of direct revenue funding had been set at a high level in order to reduce the need for external borrowing. These contributions could be reduced by increasing the levels of external borrowing, but the suggested revenue contributions were affordable within the General Fund and HRA, according to current predictions, and the cost of increased borrowing would ultimately result in higher net interest charges.