Agenda item

Context:

To scrutinise the proposed capital budget for 2017/18 and the indicative capital budgets for the three years 2018/19 to 2020/21.

Key Issues:

Capital Medium Term Financial Plan (MTFP) issues:

·         The four year capital programme is reviewed annually and updated to take account of any new information that is relevant.

·         The major component of the capital MTFP for the next few years is the Future Schools Programme. The Council has recently approved further funding for this programme at its meeting on the 20^th October 2016.

·         There are a number of other areas where there is a commitment to invest. However, the schemes currently sit outside the programme as work progresses to identify the funding requirements.  These are:

-       Monmouth Pool – commitment to re-provide the pool in Monmouth as a consequence of the Future Schools Programme.

-       Abergavenny Hub – commitment to re-provide the library with the One Stop Shop in Abergavenny to conclude the creation of a Hub in each of the towns.

-       Disabled Facilities Grants – the demand for grants is currently outstripping the budget. Work is being undertaken to assess the level of investment required to maximize the impact and benefit for recipients.

-       City Deal - 10 Authorities in the Cardiff City region are looking at a potential £1.2 billion City Deal. Agreement to commit to this programme is being sought across the region in January 2017 and so would impact on the capital MTFP. The potential impact on individual authority budgets is currently being modelled in advance of decisions on specific projects and profiles in order for authorities to start reflecting the commitment in their MTFPs.

-       J and E Block – the office rationalization programme is being considered to see if there is a solution that would enable the Magor and Usk sites to be consolidated, releasing funding to pay for the necessary investment to bring the blocks into use.

·         A strategy that enables the core programme, Future Schools and the above schemes to be accommodated is being developed. Notwithstanding this, there will still remain a considerable number of pressures that sit outside of any potential to fund them within the Capital MTFP and this has significant risk associated with it.  Cabinet has previously accepted this risk.

·         The current policy is that further new schemes can only be added to the programme if the business case demonstrates that they are self-financing or the scheme is deemed a higher priority than current schemes in the programme and therefore displaces it.

·         In summary, the following other issues and pressures have been identified:

-       Long list of back log pressures – infrastructure, property, DDA work, Public rights of way, as outlined in Appendix 1 of the report.  None of these pressures are included in the current capital MTFP, but this carries with it a considerable risk.

-       Capital investment required to deliver revenue savings – this is principally in the area of office accommodation and looking at alternative delivery models for leisure and culture, social care, property investment and possibly Additional Learning Needs. The level of investment is currently being assessed. However, in accordance with the principle already established , if the schemes are not going to displace anything already in the programme then the cost of any additional borrowing will need to be netted off the saving to be made.

-       The IT reserve is depleted so funding for any major new IT investment is limited.  Any additional IT schemes will need to either be able to pay for themselves or displace other schemes in the programme.

-       Circuit of Wales – the Authority has undertaken due diligence work on a version of the proposal which concluded not to proceed, the current proposal is being considered by Welsh Government without recourse to Local Authority funding.

Members’ attention was drawn to the information that Adults Select has had the least funding of all the Select Committees for capital in past years that has focussed on property maintenance schemes affecting social care establishments and the Mardy Park refurbishment, noting that most of the work has not have been core funded, but ICF funded from Welsh Government initiatives.   

In terms of Capital budgeting, the Council faces a reducing resource base that affects the capacity for supported borrowing.

It was commented that DFG grants have been maintained at the previous level and the focus is mainly on the Future schools programme and the rebuilt of two secondary schools.  It was noted that previously, it has been possible to utilise underspends in the County Farms budget, however there is a backlog of farm maintenance which now limits flexibility.

It was confirmed that the programme contains £1m prudential borrowing per annum which is proposed to be maintained.

Members’ attention was drawn to para 3.4, in the context of the pressures identified in Appendix 1 and 3.7, which mentions the potential replacement of Severnview and an uplift in DFG funding.

As highlighted in the report, some work, as listed, will need continued funding but that £500,000 headroom has been included to progress the work through a mixture of the short term borrowing strategy and the MRP calculations.

It was explained that the Capital Budget will be set by council at the end of February and there will be opportunities to comment on priorities.

Member Scrutiny

A Member queried, and it was confirmed, that there will be a capital receipt for the disposal of the Magor premises but this may be worth less than the cost of the work to refurbish J and E block due to the current property market conditions. It was added that past mandates have presumed a saving from the Magor premises to rationalise our buildings.The Cabinet Member, Resources explained that given the current property market climate, consideration is being given to possibly leasing the building in whole or part noting that the costs of running the Magor premises will be significant in the calculations to refurbish J and E Block.

It was confirmed that the £300,000 listed under County Farm schemes is a capital expenditure cost (not the net cost after receipts) to the authority in term of its maintenance responsibilities as a landlord.

In response to a question, it was confirmed that E Block is in the ownership of the authority currently in use as storage for election equipment.

A Member asked about the ALN service and when any information will be available.  It was confirmed by the Cabinet Member, Resources that progress is advanced.

Regarding County Farms, it was queried when rents were last reviewed.  It was explained that rents are reviewed on a 3 or 4 year rolling programme and assessed on a commercial basis, adding that the holdings are not of high rentable value.  If farms are sold, the sale is on a non-discounted, open market value basis.

The timetable for the proposed replacement of Severnview was queried and it was explained that this proposal for re-provision has been under consideration for a few years.  It was suggested that it could be within a 5 year timeframe.