Agenda item

            The Committee considered the undernoted report which provided an update in relation to the Capital Programme:

 

“Relevant Background Information

 

      The purpose of this report is to update Members on the capital programme. The report will cover the following areas:

 

A request to move seven schemes from being ‘uncommitted’ to ‘committed’ in the 2008/09 capital programme.

 

Capital programme 2009/10 expenditure and future years.

 

A recommended approach for agreeing the capital programme and its financing 2009/10 and future years.

 

Key Issues

 

      Scheme Update

 

      There are 7 requests to advance projects which were previously included as ‘uncommitted’. Full details of each scheme are provided at Appendix A and a summary is provided below.

 

·         Roselawn Extension/Development (Parks and Leisure Department) – retrospective Committee approval is requested to the invitation of tenders for the infrastructure development element of this project and to the acceptance, under the general scheme of delegation, of the most economically advantageous offer based on quality and price criteria.

 

·         Outdoor SkatePark Facility (Parks and Leisure Department) - Committee is asked to consider approval of the acceptance, under the general scheme of delegation, of the most economically advantageous offer based on quality and price criteria. This will require a loan of £80,000 to lever a £300,000 grant.

 

·         Springfield Avenue Site A ChildrensPark (Parks and Leisure Department) - Committee is asked to consider approval of the invitation of tenders for the development of the park and to the acceptance, under the general scheme of delegation, of the most economically advantageous offer based on quality and price criteria. This scheme is 100% grant-aided.

 

·         Gasworks Northern Fringe Infrastructure (Development Department) - Committee is asked to consider approval of the invitation of tenders for the site/ground investigation works and to the acceptance, under the general scheme of delegation, of the most economically advantageous offer based on quality and price criteria.

 

·         2012 Elite Sports Facilities - Mary Peters Track & Blanchflower Playing Fields (Parks and Leisure Department) - Committee is asked to ratify the decision of the P&L Committee to prepare a bid for funding at a cost of £400,000.

 

·         Telephony System (Corporate Services) - Committee is asked to consider approval of the invitation of tenders and to the acceptance, under the general scheme of delegation, of the most economically advantageous offer based on quality and price criteria.

 

nb There remains approximately £ 77m of estimated proposals in the current capital programme to 2012/13

 

Resource Implications

 

      The table below shows that the forecast for capital expenditure financed by loan for 2008/09 amounts to £21.9m and that Members should note that the Council already has a loan of £11.2m for the Grove Wellbeing Centre. This means that by the end of 2008/09 the Council will have a loan requirement of £33.1m. The Councils affordability limit for loans financed capital expenditure is £45m.

 

Table One: Capital Expenditure Financed by Loan 2008/09

 

	Forecast Total Spend 08/09
	£
Underway and contractually committed	19,676,057
Committed by decision but not contractually committed	2,219,950
Uncommitted future proposals – but essential	0
Total	21,896,007

 

Table Two: Capital Expenditure Financed by Loan 2009/10

 

	Forecast Total Spend 09/10
	£
Underway and contractually committed	5,124,416
Committed by decision but not contractually committed	1,299,247
Uncommitted future proposals – but essential[1]	1,650,000
Total	8,073,663

 

      Rates Impact and future affordability

 

      This position has two major consequences for the Council. Firstly, the revenue impact of the loans will have to be covered both in the 2009/10 and 2010/11 estimates and also in future years until the loans are repaid i.e. up to 20 years.  

 

      Currently, £1.9m of debt charges is allowed for in the estimates which will finance £15m of debt. However, as the debt requirement for 2009/10 will be £33.1m an additional debt charge equivalent to 2% on the rate will be required. For 2010/11 the equivalent figure is an additional 1%.

 

      In total from 2010/11 onwards approximately 5% of the rate will be required to finance debt for current committed schemes for the foreseeable future.

 

      The second major issue for the Council is that the agreed affordability limit on loans financed capital expenditure is £45m and we will have reached £41.1m by the end of 2009/10. This means that only £3.9m of further  loans financing will be available post 2009/10 and it is likely that this will be required to finance the rollover of schemes due to start in 2009/10. Therefore, a reassessment of the affordability limit and/or other means of finance will need to be considered, if any new schemes are to be progressed.

 

      Members should also note that few schemes in the capital programme have had any revenue consequences assessed and this is an important factor in economically appraising any new schemes.

 

      Way Forward

 

      These are serious and complex issues for the Council and will involve difficult decisions.  It is also important that any decisions taken are as collective as possible to ensure any expenditure is allocated within agreed affordability limits and to address corporate priorities.

 

      These problems will not be resolved overnight and will require a significant amount of time commitment from Members. For these reasons, it is recommended that the Party Leaders as recommended in the Indicative Rates 2009/10 report also examines the future of the capital programme and takes all decisions via the SP&R Committee. The group will need to consider issues such as:

 

review the Councils agreed affordability limit;

 

an agreed level of capital expenditure for 2009/10;

 

prioritisation mechanism for the 2009/10 and future capital programme;

 

agree prioritisation criteria  for all schemes e.g. place shaping; 100% grant aid etc.;

 

assess economic appraisals of prioritised schemes

 

develop financing rules for future capital schemes

 

consider other ways of financing capital expenditure

 

Recommendations

 

      The Committee is requested to:

 

1.      Note the Capital Programme update information provided.

 

2.      Sign off the 7 projects proposed for advancement.

 

3.      Agree to establish a cross party working group within the Strategic Policy and Resources Committee with the purpose of considering future arrangements for the capital programme.”

 

            After a lengthy discussion, the Committee agreed that:

 

(i)      the projects outlined be included as committed projects in the 2008/09 Capital Programme;

 

(ii)     a detailed report outlining the procedures for including schemes in the Capital Programme be submitted to the Committee for consideration in due course;

 

(iii)    the full revenue consequences of all schemes involving capital expenditure be detailed when authority is being sought from both the controlling Committee and the Strategic Policy and Resources Committee itself;

 

(iv)    a detailed report outlining the history behind the inclusion of the 2012 Elite Sports Facilities in the Capital Programme be submitted to the Committee for consideration; and

 

(v)     the same process which had been agreed earlier in the meeting for considering the Revenue Estimates 2009/10, that is, the briefing of individual Party Groups followed by discussions among the Party Group Leaders before formal consideration by the Strategic Policy and Resources Committee, to be utilised for agreeing the financing of the Capital Programme 2009/10 and future years.