Agenda item

            The Committee considered the undernoted report:

 

 

“1.0     Purpose of report

 

1.1       The Council’s Capital Programme is a rolling programme of investment which either improves existing Council facilities or provides new facilities. This report provides –

 

·         an update on the planned 2012/13 capital expenditure (as reported in Quarter 3) which was presented to Committee on 22^nd June 2012

·         update on the current status of capital projects

·         the proposed rolling Capital Programme from 2013/2014 onwards including proposed recommendations for movement between the Capital Programme stages and proposed new emerging projects

·         specific recommendations relating to cost increases

·         implications for future capital investment decisions

 

 

 

 

2.0       Relevant Background Information

 

            Capital Programme - Update on 2012/13 Planned Capital Expenditure

 

2.1       There has been significant movement on the Capital Programme since its approval by SP&R Committee in June 2012. Many projects have progressed both on the ground and also in the necessary preparatory work required to deliver them. Major capital projects including the £4million upgrades to Dunville and Woodvale Parks and the £3million upgrade to the Mary Peters Track are nearing completion. The Duncrue Fuel Station has been completed, the Mountain Bike Trail at Barnett Demesne has been completed and contracts have been awarded for the works on the John Luke Bridge and the Hammer pitch.

 

2.2       Preparatory work is also well advanced for a wide range of projects including new pitches and changing facilities under Phase 1 of the Pitches Strategy, the Girdwood Community Hub, the Connswater Community Greenway and and the relocation of the Belfast Welcome Centre which are both due to go on ground in April. In addition finalisation work is ongoing on a number of projects including the City Hall and the Ulster Hall which continue to take up officer time.

 

2.3       However as reported to Committee in February 2013, the forecast expenditure on capital schemes in 2012/13 is £9.6magainst the planned expenditure of £19.4m. The major reasons for the expenditure variance (£9.8m) are outlined below.

 

2.4      

Schemes	Underspend 2012/13	Reason
Waterfront Exhibition Centre	£1,855,000	Dependent on external funding (ERDF) Commencement delayed
Proposed Bayshore development at Loughside	£1,750,000	No longer viable due to planning delays of nearly 3years which culminated in the withdrawal of ASDA and the subsequent refusal of planning permission
Super-connected Cities	£1,000,000	DCMS required a revised business plan due to State Aid issues. Starting in 2013/14
Vehicles	£700,000	Spend split over 3 years
Skegoniel Site	590,000	Project not progressed
Mercury Abatement	550,561	Anticipated cost reduced and programme extended to 2013/2014
Roselawn Site Development (Y)	460,000	Work delayed due to planning considerations
Welcome Centre	450,000	Project delays – now starting in 2013/14
Woodvale Park	423,520	Spend moved into 2013/14
Tropical Ravine	395,000	Additional funding application stage introduced
ICT Projects	362,000	Reduced spend forecast
Andersonstown/ Whiterock Handball Courts	295,000	Project superseded due to work on the wider leisure transformation programme
Alleygates (Phase 3)	280,000	Commencement moved into 2013/14
Public Convenience Strategy	235,000	Project not progressed
City Hall major works	156,920	Reduced spend forecast
Community Gardens	150,000	Delayed
Duncrue Fuel Station	148,976	Delayed
Total	£9,801,977

 

 

2.5       Members are asked to note that this underspend will not affect the overall capital expenditure budget which is programmed to be spent over a number of years and for which the Council has approved the necessary finance. This differs from revenue expenditure which is only available within a designated financial year and cannot be carried forward in the same way.

 

            Rolling Capital Programme 2013/14 onwards

 

2.6       Members will acknowledge that there is increasing demand on the Council to deliver projects within increasingly scarce financial resources. The SP&R Committee is the Council’s investment decision maker. In order for the Council to ensure that it is able to monitor all capital spend, all capital related decisions must be taken to SP&R Committee.  

 

2.7      Members are aware that they have already agreed a Stage process for capital programme projects at their meeting on 22^nd June and  further agreed in November 2012 that all capital projects (capital programme, Belfast Investment Fund etc.) must go through this Stage process where decisions on which projects progress are taken by SP&R Committee. 

 

2.8      Members are asked to note that there are a number of projects currently on the Capital Programme which pre-dated this approval process which means that these projects do not have the required business cases.  It is therefore proposed that all projects on the Capital Programme are regularised within the new approval process. This will enable Members to have better financial control of projects and will allow Members to properly consider the opportunity costs of approving one capital project over another capital project. Importantly it will also enable Members to focus on delivering the projects which can have maximum benefits and investment return for the city and local areas.

 

2.9       The Capital Programme (copies of which have been circulated for Members information) has therefore been reconfigured to reflect the 3 approval stages as agreed –

 

·         Committed projects (Stage 3) - projects which have completed a Full Business Case (FBC) and where approval has already been obtained by SP&R to proceed to tender. These projects will be at the tender award, contract or construction stage.  See Appendix A

·         Uncommitted projects (Stage 2) –projects where an SOC has been agreed by Committee and work on the project is being progressed through the development of an Outline Business Case (OBC), but they have not yet been developed to a stage where permission could be sought from SP&R to proceed to tender.  See Appendix B

·         Emerging proposals (Stage 1) –proposals which require completion of a Strategic Outline Case (SOC) before they could be considered further by SP&R Committee. See Appendix C

 

2.10     As part of this reconfiguration it is proposed that some projects are dropped down a Stage or are removed from the Capital Programme.  A summary of these movements is provided below.

 

            Projects recommended to drop down a Stage

 

2.11     Members are asked to note that all these projects were previously at Stage 2- Uncommitted projects and it is recommended that they drop to Stage 1 – Emerging Projects.  In keeping with the Stage approval process agreed by Members this will require that an SOC to then be completed for each project.

 

Project            Recommended New Stage

 

Project	Recommended New Stage
Floral Hall	Stage 1 – Emerging project
Skegoneil site	Stage 1 – Emerging project
MUGA Springfield Road	Stage 1 – Emerging project
New cemetery	Stage 1 – Emerging project
Public convenience strategy	Stage 1 – Emerging project
Roselawn extensions (SectionZ1- 2015, Section Z2 -2020, Section Z3 – 2025, Section Z4 -2030)	Stage 1 – Emerging project
Gasworks Northern Fringe Infrastructure	Stage 1 – Emerging project
Maysfield demolition/clearance	Stage 1 – Emerging project
North Foreshore site infrastructure	Stage 1 – Emerging project
Springvale recycling centre	Stage 1 – Emerging project

 

            Projects recommended to be removed from the Capital Programme

 

2.12     It is recommended that the following projects are removed from the Capital Programme as they are either no longer deliverable or have been superseded by other projects.

 

Project	Comment
Loughside (Bayshore development)	No longer viable due to planning delays of nearly 3years which culminated in the withdrawal of ASDA and the subsequent refusal of planning permission. To be considered as part of the leisure transformation programme
Andersontown/Whiterock Handball Courts	To be considered as part of the wider leisure transformation programme
SliabhDubh Playground	Land contaminated and no external funding available
Shore Road Pitches (Malachians/Old Grove)	Project originally due to be funded under SportNI Community Capital but was application was turned down.  Funding secured from other sources including LIF

 

            Projects recommended to be added to the Capital Programme

 

2.13     It is recommended that the following projects are added to the Capital Programme Stage 1 – Emerging Projects. These proposals have emerged through Area working Groups, other consultations or service requirements. 

·         Connswater 3G pitch – emerged through Area Working Group discussions

·         Cathedral Gardens – alignment with Streets Ahead and part of the wider University of Ulster regeneration

·         ICT strategy  - emerging ICT requirements

·         Accommodation strategy – to look at options for the Council’s future accommodation needs in light of current lease arrangements and impact of RPA etc

·         Commercial waste bin weighing system – to help meet EU recycling targets

·         Loughside Playing Fields – to look at the sports & leisure component of the previous Loughside proposal

 

2.14     Members will be aware that the Connswater Greenway Project was initially part funded by the Council through the then City Investment Fund. This has now been transferred to the Capital Programme with the agreement of all the funding partners. The effect of this project transferring significantly increases the gross capital expenditure planned within the Capital Programme but does not impact on overall council expenditure.

 

            Updates on capital projects and increased project costs

 

            Pitches Strategy

 

2.15     SP&R agreed in March 2011 that £10m was recommended to be allocated within the Capital Programme for the implementation of the pitches strategy for 2011-2014 for the delivery of the 10 pitches agreed under Phase 1. Within this estimate, £750,000 was ringfenced for capital enhancements to school pitches. It should be noted that this £10m was a notional estimate that was not subject to an economic appraisal or Gate review.  Since this time there has been ongoing consultation in relation to the location, scope and specification of the pitch and pavilion provision. This has an impact on the overall costs and last June Members agreed that an additional ‘uncommitted’ £5million be allocated against this programme of works.  

 

2.16     Members are asked to note that discussions are ongoing with the GAA. As part of these discussions the GAA has committed in principle to contribute £1million however it should be noted that no written confirmation or letter of offer has been received as yet. 

 

2.17     Members are asked to note that final decisions still have not been taken in relation to the following;

 

·         location of the  Falls pavilion

·         integrating rugby, soccer and Gaelic games at Cherryvale

·         location of pavilion at Ballysillan

 

There are also a number of technical issues at Ormeau Park which need to be resolved along with the linkages of this location and Cherryvale

 

2.18     The Playing Pitches Strategy is a key project under the Investment Programme.  The average pitch takes about 6 months to construct and a pitch and pavilion will take about 12months from start on site. There is additional time to be taken into consideration in relation to procurement.  However the ongoing delay in taking these decisions is having an impact on the overall delivery of the Pitches Strategy and any further delays will subject the Council to considerable reputational risk. This presents a number of options for Members –

 

·         Agree a definitive gross capital expenditure allocation of £15million for the pitches strategy and agree that Officers continue to progress discussions with the GAA to secure £1million of funding.  Members are asked to note that if this funding is not secured this will have am impact on the scope of work which can be delivered at

·         Agree a definitive cut-off date of end of April whereby all decisions on all pitches and pavilions will be taken and after which subsequent significant changes cannot be made to proposals.

 

At this stage if decisions are not taken by this cut-off date then it is recommended that the  sites where agreement has been reached and which are ready to proceed are progressed.  This may have an impact on the deliverability of those sites where agreement has not been reached as resources may no longer be available to deliver these

 

            Waterfront Exhibition and Conference Centre

 

2.19     Members will be aware that one of the major projects under the Investment Programme is a proposed extension to the Waterfront to provide dedicated exhibition and conference facilities. An options appraisal had identified the Waterfront as the preferred location.

 

2.20     The initial budget for this project was set at £20m. Discussions with NITB had identified £12m of external funding (£10m from the ERDF and £2m from the NITB’s Tourism Development Scheme) towards this with the balance of £8m being funded through the Council under the Capital Programme. 

 

2.21     A subsequent capacity study has established that while this would permit a centre to be constructed (c9,000m2 floor area), it would not deliver the optimum space provision (c11,300m2 floor area) requirement, specification quality and technical standards which would fully meet the demands of the conference & exhibition market and enable Belfast to effectively challenge other competing facilities for business.

 

2.22     The budget to deliver a facility that will meet these demands is £30m.  DETI have advised that there is an opportunity for additional external funding to be secured (subject to an article 55 state aid assessment) of an additional £5m from the ERDF and £4m from the NITB’s Tourism Development Scheme.  This will require an additional £3million of Council capital funding in order to address the balance. The Council’s overall commitment to this project will then be £11million.

 

            Innovation Centre

 

2.23     The gross capital estimate for this is project has been increased from £8m to £9.1m to reflect the increase in the lettable footprint of the project from 30,000s sq ft to 35,000 sq ft. The additional capital cost will be 75% funded.

 

2.24     Members will acknowledge that when projects are initially brought to Committee many of the figures cited are ‘ballpark/notional’ estimates only and that estimates are only ever as accurate as the information on which they are based.  This reinforces the need to ensure that all capital projects go through the Stage approval process previously agreed by Members as this will bring a robustness to the process and will ensure that costs are challenged and assessed at each stage.  

 

            Capital Financing –Capital Programme 2013/14

 

2.25     The Council incurs capital expenditure and capital financing costs in the delivery of its capital programme.

 

·         Capital Expenditure is the expenditure incurred in the actual delivery of contracts e.g. the actual payments to the contractor for a construction contract. 

·         Capital Financing is the method the council uses to fund the capital expenditure. The capital financing costs include loan repayments (principle and interest) and revenue contributions (cash payments to repay or avoid taking out loans).

 

2.26     At its meeting on 25 January 2013, the Strategic Policy and Resources Committee approved a capital financing budget of £10.14m for inclusion in the 2013/14 revenue estimates. The £10.14m budget was set at a level which would meet the financing costs arising from the capital programme in 2013/14 - 2015/16, as part of Investment Programme, without the requirement for an increase in the District Rate.

 

2.27     The delivery of the Capital Programme element of the Investment Programme will be matched by a phased increase in capital financing charges up to the £10.14m budget over the life of the programme as all schemes within the programme are financed. The phased impact of the capital programme on the capital financing budget provides the opportunity for the council to allocate an element of the 2013/14 capital financing budget to finance feasibility works and non recurring schemes.

 

Feasibility Fund 2013/2014

 

2.28     The incremental nature of the Investment Programme means that there is the opportunity for the Council to ring fence part of the capital financing budget to provide a Feasibility Fund. The Feasibility Fund enables initial feasibility work to be undertaken on proposed projects to bring them to a point where Members can decide if they should be progressed as Capital Schemes, or Belfast Investment Fund (BIF) schemes. It is recommended that the contribution to the feasibility fund for 2013/14 be capped at £500k.

 

            Non-recurrent projects

 

2.29     In June 2012 Committee approved a programme of non recurring maintenance projects to be funded from the capital financing budget. The balance of these projects will be completed in 2013/14 requiring an allocation of £944,280.

 

2.30     Table 2 below summarises the outstanding loans and planned capital expenditure which will require financing up to 2015/16. The expenditure covers all schemes detailed in Appendices A and B with the exception of the Olympia and Andersonstown Regeneration projects.

 

2.31     Table 2 - Capital Expenditure to 2015/16

 

Outstanding Loans @ 31.03.13	£21,216,650
Capital Expenditure 2012/13	£9,530,000
Capital Expenditure 2013/14	£13,724,360
Capital Expenditure 2014/15	£20,613,280
Capital Expenditure 2015/16	£10,194,770
Total Capital Expenditure	£75,279,060

 

2.32     Table 3 below provides a summary of the allocation of the capital financing budget for the above expenditure together with other non recurring schemes. From the table it can be seen that the total amount of the capital financing budget used to repay loans increases from £3m in 2013/14 to almost £6m in 2015/16. This means that by 2015/16 the Council will have just over £3.1m available to finance future borrowing to the amount of £33m. With the current capital financing budget of £10.4m, Members will have £33m available to finance the future leisure estate and the Emerging Projects detailed in Appendix C. This figure is clearly insufficient to cover future capital expenditure requirements. It is proposed that a detailed future capital financing report will be presented to the Committee in April. The report will consider various options available to Members including:

 

·         Increasing the capital financing budget through:

o   efficiency savings in revenue budgets

o   increasing  the district rate

o   diverting financing from the Belfast Investment Fund.

·         Restricting the number of projects being progressed the Emerging Projects list.

·         Sourcing alternative sources of financing

 

The report will also discuss the potential impact of the boundary changes which will lead to an enhanced ratebase but which will also result in increased borrowings associated with transferring assets. 

 

2.33     Table 3 - Capital Financing to 2015/16

 

	2013/14	2014/15	2015/16
Loan Repayments
Existing Loan Repayments	£2,004,360	£3,023,360	£4,588,360
New Loans: Committed Schemes	£950,000	£1,100,000	£700,000
New Loans: Uncommitted Schemes	£69,000	£465,000	£635,000
Total Loan Repayments	£3,023,360	£4,588,360	£5,923,360
Revenue Funding
Committed Schemes	£3,094,611	£2,030,000	£500,000
Uncommitted Schemes	£92,711	£92,400	£20,000
Non Recurring Maintenance	£944,280	£0	£0
Feasibility	£500,000	£500,000	£500,000
Total Revenue Funding	£4,631,603	£2,622,400	£1,020,000
Less Capital Financing Budget	£10,140,000	£10,140,000	£10,140,000
Available Financing Budget	£2,485,038	£2,929,240	£3,196,640

 

            Next steps

 

2.34     As outlined in 2.6 above, Members will acknowledge the increasing demand which is being placed on the Council to deliver projects within increasingly scarce financial resources.  Going forward, this will present a greater challenge to Members in terms of competing priorities both at a local area and a city level.  As Members are aware there is an opportunity cost of approving one project which means that something else will fall down the list and will not proceed.

 

2.35     Members agreed last month at Committee that the role and remit of the Area Working Groups should be reviewed and that the AWGs should begin to address overall plans for their area.  To this end further work is intended with Jon Huish to agree comprehensive area plans that link to an overall community plan and includes high level outcomes together with practical on the ground projects.  This will ensure that Members can use their civic leadership role and continue to best facilitate the shared political ambition by delivering those projects which will have maximum benefit  at a local level in line with the investment principles that were agreed by Members that underpin the Council’s Investment Programme and in turn the Capital Programme of –

 

-          Balanced investment across the city

-          Good relations and equality

-          Partnership and integration

-          Value for money

-          Sustainability

 

The work on progressing the development of local area plans will be undertaken in parallel with, and link to, the ongoing work which is being taken forward on Member development, the review of the Council’s governance structures and work on the development of a community plan. 

 

2.36     It is recognised that the Council has a number of different funding streams with their own separate processes each of which fund different types of project and that this can be a complex area to understand. It is therefore proposed to hold a workshop as part of the Member Development Programme, to which all Members will be invited, in order to update Members on the Council’s core funding streams including the Capital Programme, the Local Investment Fund, the Belfast Investment Fund and the Feasibility Fund.

 

3.0       Recommendations

 

3.1       Members are asked to note the contents of this report and

 

·         agree the movements in the capital programme as outlined in 2.11 and 2.12

·         agree the proposed new projects to be added as Stage 3 – Emerging projects as outlined in 2.13

·         Pitches  strategy - agree a definitive gross capital expenditure allocation of £15million for the pitches strategy and agree a definitive cut-off date of end of April whereby all decisions on all pitches and pavilions will be taken and after which subsequent significant changes cannot be made to proposals.  It is recommended that if decisions are not taken by this cut-off date then the  sites where agreement has already been reached and which are ready to proceed are progressed

·         Waterfront and Innovation Centre - approve the additional net capital expenditures of £3m for the Waterfront Conference and Exhibition Centre and £275,000 for the Innovation Centre  

·         agree that £500,000 from the capital financing budget be ringfenced for Feasibility Fund

·         agree the allocation of £944,280 to be spent on the remaining non –recurrent maintenance projects which were agreed by Committee in June 2012

·         note that a detailed future capital financing report will be brought to Committee in April  

·         agree that officers work with Members to agree how the Stage approval process can be aligned with the work of the Area Working Groups and the development of local area plans

·         note that a workshop will be organised as part of the Member Development Programme, to which all Members will be invited, to update Members on the Council’s funding streams including the Capital Programme, the Local Investment Fund, the Belfast Investment Fund and the Feasibility Fund.”

 

            During discussion, the Chief Executive and Chief Officers answered a number of questions in relation to the reasons for the proposed realignment for a number of projects within the Capital Programme.  The conference centre at the Belfast Waterfront Hall was also discussed and the Chief Executive undertook to arrange for a fuller briefing to be provided on the Waterfront Hall proposals.

 

            After further discussion, the Committee adopted the recommendations, subject to the Sliabh Dubh Playground project remaining on the Capital Programme as a Stage 1, Emerging Project.