Agenda item

            The Director of Corporate Services submitted for the Committee’s consideration the undernoted report in relation to the District Rate 2008/2009:

 

“Purpose

 

      The purpose of this report is to update Committee on the progress made in relation to agreeing the District Rate for 2008/09 since the special Strategic Policy and Resources Committee meeting held on 8 January 2008.

 

Relevant Background Information

 

      At the Special Policy and Resources Committee on 8 January the Director of Corporate Services presented the Revenue Estimates 2008/09 and recommended a District Rate increase of 5.81%. The committee noted the progress which had been achieved in relation to the production of the Revenue Estimates for the 2008/2009 financial year but directed that the Members work with the officers at a corporate level, through both the Party Group Leaders, Committee Chairman and the Council Improvement Board, in order to examine the possibility of identifying further potential savings which could be made.

 

      This report will outline the further progress that has been made.

 

Key Issues

 

      Members are requested to note that each Departmental Revenue Estimate 2008/09 has now been agreed by the relevant committee.

 

      The Party Group Leaders met with the Chief Executive and Director of Corporate Services on 16 January to discuss potential options for further corporate savings. At the outset it was agreed that the savings were being discussed in the context of reaching consensus across the party groups on the level of District Rate increase. The following options were considered:

 

·         Improve the Product of a 1p Rate (PPR)

 

      The Director of Corporate Services requested the Land and Property Services Agency (LPSA) to re-run the PPR calculation and the result was that the PPR had marginally declined because the Richardsons site had been declassified from the industrial valuation listing. This option is therefore not available to the Council.

 

·         Events Expenditure

 

      The 2008/09 budget includes growth of £600,000 for events as follows:

 

                                                                                                     £

            Tall Ships                                                                   400,000

            Nodamic Restoration Fund                                     100,000

            World Irish Dancing Championships                     100,000

 

      It was suggested that one or all three of these events could be funded from reserves. After discussion, however, this option was rejected by the Party Group Leaders. It was agreed, however, that the future funding and nature of events should be considered in the context of an events strategy which is aligned to the corporate priorities.

 

·         Reprofile Financing of the City Investment Strategy

 

      The Party Group Leaders requested the Director of Corporate Services to provide a number of options on how the financing of the City Investment Strategy could be reprofiled with the effect of reducing the rate burden element in 2008/09. The Party Group Leaders agreed to consider these options at a meeting on 24 January and to table a recommendation on the setting of the District Rate 2008/09 at the Strategic Policy and Resources Committee meeting which will held the following day.

 

      The table below outlines the cash flow for the City Investment Strategy. From the table it can be seen that currently 1% of the proposed District Rate increase is dedicated to the City Investment Strategy.

 

City Investment Strategy – Cash Flow Analysis
	Year				Total
Source of Funding	2007	2008	2009	2010
	£m	£m	£m	£m	£m
Reserves	1.0				1.0
Boucher Road Receipt		1.5			1.5
Rental	1.0				1.0
1% Rate Increase		1.0	2.0	3.0	6.0
Capital Receipts		6.0	6.0	6.0	18.0
Efficiency Programme		0.5	0.5	0.5	1.5
Borrowing					0.0
Total	2.0	9.0	8.58	9.5	29.0

 

      The Director of Corporate Services will present the following options to the Party Group Leaders on 24 January.

 

Options	City Investment Strategy Rate Increase 2008/09	City Investment Strategy  Rate Contribution 2008/09	City Investment Strategy Financing Shortfall 2008/09	District Rate Increase 2008/09
		£	£
1	1%	1,000,000	0	5.81%
2	0.5%	500,000	500,000	5.32%
3	0.15%	150,000	850,000	4.97%
4	0%	0	1,000,000	4.83%

 

      The table below shows the cumulative impact of the options over the two year period 2009/10– 2010/11. The Director of Corporate Services has indicated that it would not be sustainable to finance these funding deficits from reserves.

 

Options	City Investment Strategy Rate Increase 2008/09	City Investment Strategy Funding Shortfall 2009/10– 2010/11
		£
1	1%	0
2	0.5%	1,000,000
3	0.15%	1,700,000
4	0%	2,000,000

 

      Members therefore must give consideration to the impact of the options not only in terms of setting the District Rate for 2008/09 but also over the lifespan of the City Investment Strategy. The main issue when deciding on an option will therefore be the Council’s ability to finance the funding shortfall associated with each option from sources other than reserves. The key determinant of this will be the future rates position.

 

      At present the rate finalisation for 2007/08 is unknown. The LPSA has indicated that a provisional finalisation may be available in May 2008. This would be substantially earlier than previous years. If the finalisation position was to be favourable

 

      the City Investment Strategy could be revisited and the additional income received could be earmarked for the City Investment Strategy and therefore ease the funding shortfall. Members, however, should be aware that the finalisation for 2006/07 has been received and resulted in the Council paying back £600,000.

 

      In terms of 2008/09, the Council is aware of a number of properties which are not included in the current PPR calculation but will generate rate income during 2008/09. The prime example being Victoria Square. This would indicate that the Council may be in a healthier position by the end of 2008/09 but consideration must also be given to areas which may have a negative impact on the rate. For example, the Odyssey Complex is currently applying for rates exemption with the Land Tribunal. Also, there may be a negative impact from potential future changes to rating policy such as the loss of rate income from universities if it is agreed to exempt them from rates.

 

      In summary, at face value the rates position during 2008/09 looks healthier for the Council but because of the number of variables which are outside the control of the Council and the difficulty in obtaining timely information, the Director of Corporate Services is not at this point able to provide Members with a definitive position.

 

      The other major factor which needs to be considered is the Council’s ability to realise capital receipts through the rationalisation of assets. The Director of Improvement is currently preparing a shortlist of asset rationalisation opportunities for presentation to Members. The Director of Corporate Services will review the financing options for the City Investment Strategy in the context of capital receipts being realised.

 

      Key Messages

 

      The Head of Corporate Communications will discuss the key messages for the setting of the District Rate with the Party Group Leaders on 24 January. He will provide a press release, a questions and answers sheet for Members and more detailed messages for inclusion in City Matters. These will also be provided to the Committee on 25 January 2008.

 

Recommendations

 

      Members are requested to note the contents of the report and agree to accept a tabled recommendation in relation to the setting of the District Rate 2008/09.”

 

            The Director of Corporate Services reported that the four options in relation to the contribution to be made to the City Investment Strategy as set out in the foregoing report had been presented to the Party Group Leaders at a meeting held on 24th January during which the advantages and disadvantages of the four options had been considered.  In order to achieve a unified position, option 2, that is, an increase of 5.32% in the District Rate for 2008/2009, had been identified as the preferred option to be recommended to the Committee.  This had been made in the context of the following:

 

·         the Party Group Leaders affirm their commitment to raising funds totaling £29 million in relation to the City Investment Strategy over the next three years;

 

·         an aspiration, over the next three years, to invest in the City and leave a legacy for future generations while at the same time attaining a rate increase not greater than inflation plus 1%;

 

·         the Strategic Policy and Resources Committee keep under continuous review the financial progress of establishing the £29 million required to fund the City Investment Strategy; and

 

·         the Committee would receive a report at an early stage on the asset rationalisation element of the aforementioned strategy.

 

            Accordingly, the revised summary of Income and Expenditure for the year ending 31st March, 2009 would be as follows:

 

Summary of Estimates of Income and Expenditure

for year ending 31 March 2009

 

Year Ending 31/03/2008	COMMITTEE	Year Ending 31/03/2009
£		£
14,284,560	STRATEGIC POLICY AND RESOURCES COMMITTEE	14,864,330
5,541,140	Chief Executive’s Department	5,590,580
205,220	Legal Services Department	215,620
10,111,740	Corporate Services Department	10,406,690
(1,573,540)	Improvement Department	(1,848,560)
-	City Investment Fund	500,000
21,731,400	DEVELOPMENT COMMITTEE	23,796,450
29,521,540	PARKS & LEISURE COMMITTEE	30,989,430
46,381,540	HEALTH & ENVIRONMENTAL SERVICES COMMITTEE	47,764,590
30,050	TOWN PLANNING COMMITTEE	31,400
111,949,090		117,446,200
(4,069,380)	Less Adjustments re Capital charges	(4,518,050)
107,879,710		112,928,150
	Less
(4,495,640)	GENERAL EXCHEQUER GRANT	(4,040,970)
103,384,070		108,887,180
	Less
(1,000,000)	ESTIMATED CREDIT BALANCE	(1,400,000)
102,384,070		107,487,180
4,837,630	ESTIMATED PRODUCT OF 1p RATE	4,822,430
21.1641p	NON-DOMESTIC RATE IN £ FOR YEAR ENDING 31/3/2009	22.2890p
0.011449	CONVERSION FACTOR	0.011449
0.2423p	DOMESTIC RATE IN £ YEAR ENDING 31/3/2009	0.2552p

 

This shows an increase of 5.32% over last year.”

 

            Accordingly, it was recommended that the Committee agrees:

 

(i)      the Council be recommended to approve the expenditure contained in the Estimates of Income and Expenditure, a summary which is set out above, and further to this a Domestic Rate of 0.2552 pence and a Business Rate of 22.289 pence be fixed to meet the estimated expenditure of the several Committees of the Council for the financial year commencing 1st April, 2008;

 

(ii)     in the context of the Council’s three-year planning cycle and its aspiration to invest in the City and leave a legacy for future generations, the Council would seek, conditions permitting, to achieve rate increases not greater than inflation plus 1%;

 

(iii)    to affirm its commitment to raising funds total £29 million in relation to the City Investment Strategy over the next three years;

 

(iv)    to keep under continuous review financial progress in relation to the establishment of the £29 million required to fund the City Investment Strategy; and

 

(v)     to receive at an early stage a report on the asset rationalisation element of the City Investment Strategy.

 

            After a lengthy discussion in the matter, it was

 

Moved by Councillor Newton,

Seconded by Councillor Rodway,

 

      That the Committee agrees to adopt the recommendations in relation to the setting of the District Rate.

 

Amendment

 

Moved by Councillor Stoker,

Seconded by Councillor D. Browne,

 

      That the Committee agrees to recommend to the Council that the amount of £1,000,000 to be allocated to the Strategic Investment Fund in the first year be taken from reserves so that the increase in the District Rate would be limited to 4.83%.

 

            On a vote by show of hands six Members voted for the amendment and thirteen against and it was accordingly declared lost.

 

            The original proposal standing in the name of Councillor Newton and seconded by Councillor Rodway was thereupon put to the meeting when thirteen Members voted for and six against and it was accordingly declared carried.