TRAFFORD COUNCIL

Report to:Executive and Council Meeting

Date:24February 2010

Report for: Decision

Report of: Executive Member for Finance and Director of Finance

Report Title

CAPITAL INVESTMENT PROGRAMME AND PRUDENTIAL INDICATORS 2010/13

Summary

This report consists of two main areas for the Executive to consider:-
Capital Investment Programme – this report highlights the level of resources forecasted to be available for capital investment purposes during the period 2010 -13. A total of £113.7m is forecast to be available.
New schemes with a value of £19.6m are recommended for approval. If agreed this would result in a total Investment Programme of £115.5m.
This is £1.8m in excess of the forecast resources but close monitoring of progress on schemes as well as capital receipt realisation will ensure expenditure is matched to resources over the medium term.
Prudential Indicators – the Council is required to set indicators in accordance with the CIPFA Prudential Code which are designed to support and record decisions taken on affordability, sustainability and professional good practice and these are outlined at Appendix 5.

Recommendation(s)

  1. That the Executive approve :
a)the Capital Investment Programme as detailed in the report; and
  1. That the Executive recommends the Council to approve the :
a)Capital Investment Programme in the sum of £115.5mfor the period 2010-13
b)Prudential Indicators as set out in Appendix 5.

Contact person for access to background papers and further information:

Name: Graeme Bentley

Extension: 4336

Background Papers:Report to Executive on 14 December 2009

1.Background

1.1The impact of the current financial climate and recent recession has been reported upon on a regular basis. In respect of the Council’s Capital Programmethe effects are two-fold. Firstly the level of internal resources generated from land sales has been affected because of the difficulties in selling surplus assets inthe current property market. Secondly, it is anticipated that at a national level the amount of capital investment will be reduced significantly. The next Comprehensive Spending Review,possibly later this year, will give a firmer indication of the impact of this on the Council.

1.2Despite the current resourcing difficulties capital expenditure continues to be a priority for a number of reasons. It supports much needed jobs, with a large amount of work already being placed with local contractors. Also investment in public buildings and infrastructure is crucial in ensuring facilitiesused by the public are kept open as lack of investment will lead to health and safety issues and potential closures. It is even more of a priority that in the short term the Council’s capital investment plans support both our local residents and business community.

1.3This report provides an update on:-

The estimated level of resources available to support the Programme, including the current resource shortfall (Appendix 1)

Evaluation of Capital Bids (Appendix 34)

The updated 2010/13 Capital Programme

Risk Assessment

Prudential Indicators 2010/13 (Appendix 5)

2.Available Capital Resources

2.1The Capital Programme is resourced by a combination of resources. The Council has discretion over the use of internally generated capital resources which mainly include capital receipts from the sale of surplus assets and prudential borrowing. During the course of 2009/10 capital receipt projections have been included in the quarterly capital monitoring reports and these have shown a deterioration in estimated receipts due to the continuing impact of the economic recession and also decisions not to dispose of certain assets, for example those linked to the Old Trafford Masterplan. At this stage no estimates of capital receipts have been included for 2012/13 mainly because of the work on the long term accommodation strategy, which will include an asset strategy review.

2.2The reduction in estimated resources has given rise to a deficit on the current Programme of £6.2m. In December the figure reported to the Executive was £4.2m but since then this has increased due to the decision in respect of the Old Trafford Masterplan (£1.6m) and a further deterioration in estimated capital receipts (£0.4m).

2.3The Council receives external support from the Government towards a number of projects and this support is ring-fenced to particular areas of activity for which the Council does not have any discretion over its use eg school improvements, highways and housing. A number of assumptions have been made on the additional level of external support that can be expected and some provisional estimates of grant made but these are subject to change following the next Comprehensive Spending Review, possibly later in the year.

2.4 An estimate of the total resources available to support the overall Capital Programme is shown in the table below:

Table 1 : Estimate of Available Capital Resources 2010/13 / 2010/11 £m / 2011/12 £m / 2012/13 £m / Total £m
Borrowing / 8.2 / 3.2 / 11.4
Capital Grants and Contributions / 57.1 / 14.5 / 16.1 / 87.7
Revenue/Reserves / 1.0 / 0.4 / 0.5 / 1.9
Capital Receipts / 4.4 / 6.5 / 1.1 / 12.0
LSVT VAT Income (appendix 1 note 3) / 4.3 / 4.3
Deficit c/f from 2009/10 / (3.6) / (3.6)
Total Resources / 71.4 / 24.6 / 17.7 / 113.7

3.New Bids

3.1Notwithstanding the deficit position on the current Programme, a number of new capital bids have been received with a total value of £48.8m. Therefore the opportunity has been taken to reviewnot just the new bids but also of uncommitted schemes in the current programme that are supported by internal resources. The objective of the review was to identify priorities that were affordable given the constraints on capital resources and included at Appendix 1is a summary position detailing the resources available to support new capital schemes. This shows total (internally generated) resources of £17.7m over the next three years.

4.Evaluation of Capital Bids

4.1Capital projects with a value of £68.5m were evaluated comprising of new bids of £48.8m and uncommitted schemes in the current programme of £19.7m (See Appendix 2). All bids have been evaluated in accordance with the prioritisation criteria included in the Capital Strategy and detailed in Appendix 3. The justification for each bid has been considered carefully and the risk associated with not undertaking proposals has also been evaluated.

4.2Appendix 4 provides details of those schemes recommended for approval to be financed from internal capital resources.

5.Indicative Budget 2010/13

5.1 The following table provides an update on the overall Capital Programme. It must be noted that at this stage the figures do not include the long term accommodation project. This is currently part way through the procurement stage and it is expected that final decisions will be made in June when the scheme will be added to the Capital Programme. The borrowing costs on the scheme are already included in the MTFP.

Table2 : Updated Capital Programme 2010/13 / 2010/11 £m / 2011/12 £m / 2012/13 £m / Total £m
Current Capital Programme / 74.5 / 22.4 / 96.9
Add New Grant Funding / 1.7 / 0.4 / 11.5 / 13.6
Add Revenue Contribution – Highways – (subject to affordability) / 0.5 / 0.5
Add Primary Capital Strategy – Phase 2 (note 1) / 4.6 / 4.6
Uncommitted projects in the existing programme (appendix 2) / (13.0) / (6.7) / (19.7)
Add Recommended New Schemes (appendix4) / 11.8 / 5.3 / 2.5 / 19.6
Updated Capital Programme / 75.0 / 21.4 / 19.1 / 115.5

Note 1 – A report on shortage of primary school places was considered by the Executive in June 2009. Since then the Government announcednew funding to enable local authorities to provide extra primary school places; Trafford’s allocation was £1m which is insufficient to meet costs. Therefore an updated assessment on need and cost is being carried out currently and will be reported upon in due course. For the purpose of the capital programme broad assumptions on cost have been assumed in the figures above and that these will be covered by a combination of grant and capital receipts from the sale of surplus sites. Any remaining balance to be covered by prudential borrowing financed by Dedicated Schools Grant (DSG). As mentioned, details are being worked up currently and discussions with the Schools Funding Forum will need to take place if costs are to be partly financed via DSG.

5.2The value of the recommended Programme of £115.5m exceeds the available resources as detailed in Table 1 by £1.8m., with the estimated deficit in 2010/11 being £3.6m. Rather than reduce investment plans to match precisely with the annual resource assumptions it is recommended that the investment programme is agreed as per Table 2 above. This is because the deficit will be largely recovered in 2011/12 and in any event some slippage in 2010/11 may occur. If a deficit does arise in 2010/11 temporary financing will be applied in that year and recovered in 2011/12. This position will be monitored during the year with an update on the position reported in the quarterly capital monitoring reports.

5.3If the proposals are agreed then the overall Programme can be summarised in the following table:

Table 3: Broad categorisation of spend / 2009-10 / 2010-11 / 2011-12 / 2012-13
£m / £m / £m / £m
Schools / 17.3 / 47.2 / 15.0 / 13.3
Highways and Footpaths / 10.3 / 9.4 / 1.6 / 1.6
Schemes protecting the Asset Base / 3.9 / 3.4 / 0.9 / 1.5
Housing / 4.4 / 3.5 / 2.2 / 2.0
Adult Social Care / 2.2 / 1.0 / 0.2 / 0.2
Information Communications Technology / 1.4 / 1.8 / 1.2 / 0.0
Town Centre Regeneration / 1.1 / 6.7 / 0.0 / 0.0
Other / 1.8 / 2.0 / 0.3 / 0.5
Total / 42.4 / 75.0 / 21.4 / 19.1

6.Risk Assessment

6.1The major areas of risk are:

Capital Receipts - Members are aware that the property market is still in a fragile state and that the lack of property transactions makes valuation and forecasting of values and receipts difficult in the current climate. Whilst some upturn in the market is expected the position will be monitored closely. Any significant adverse variations may require schemes to be temporary halted.

LSVT VAT Receipts(See Appendix 1note 3) - The Council has an ongoing contingent liability in respect of asbestos on former council houses for a further 26 years and any costs will have to be financed from these receipts. Monitoring will be undertaken of the level of income receivable and any asbestos claims values, particularly resulting from the demolition of four multi-storey blocks as part of the Old Trafford Masterplan project.

Primary School Strategy–There is a risk that the Schools Funding Forum do not agree to anyprudential borrowing proposals in respect of primary school places, in which case there would be a resourcing shortfall on this major project. Until updated capital allocations are made available by the DCSF following the next spending review this will not be known. A further report will be presented to the Executive shortly.

7.Prudential Indicators

7.1The Council is required to set indicators that are designed to support and record decisions taken on affordability and sustainability. There is also a requirement to impose limits on the Council’s treasury management activities to ensure decisions are made in accordance with professional good practice and risks are appropriate (These are included in the Treasury Management Strategy Report). The Director of Finance will monitor these and report on them at appropriate times. The Council can revise these indicators and limits at any time.

7.2All the indicators take account of the proposals in this report and a list of Prudential Indicators is included atAppendix 5.

8.Conclusions

8.1This report has identified the level of resources to support new capital investment. The Executive are requested to approve the changes to the Capital Investment Programme, as summarised in paras. 5.1 and 5.3, and to approve the Council’s prudential indicators for 2010/11 to 2012/13.

Financial Impact: / Capital expenditure can be contained within available capital resources
Efficiency Savings: / A number of proposals will generate cashable efficiency savings.
Legal Impact: / This action is in compliance with legislation and appropriate guidance
Human Resources Impact: / N/A
Asset Management Impact: / A number of schemes will protect the asset base
E-Government Impact: / A number of schemes have E-Government implications
Risk Management Impact: / A number of risk areas have been identified which will be managed appropriately. They include VAT, over-programming risk, capital receipts.
Health and Safety Impact: / A number of schemes will assist in improving health and safety

Other Options

All capital proposals submitted have been subjected to the prioritisation process included in the Capital Strategy, this includes a requirement for all schemes to have under gone an options appraisal.

Consultation

In recommending the schemes in the report for inclusion to the Capital Investment Programme, proposals have been the subject of review by CMT and Executive Briefing.

Reasons for Recommendation

The schemes recommended for inclusion to the Capital Investment Programme are those that meet the priorities included in the Capital Strategy and MTFP.

Finance Officer Clearance(type in initials)………ID………

Legal Officer Clearance(type in initials)…….BD…

DIRECTOR’S SIGNATURE(electronic)………………………………….…………….….………………

APPENDIX 1
Internal Resource Availability
2010/11 £000 / 2011/12 £000 / 2012/13 £000 / Total £000
Estimated Resources Available
Capital Receipts (note 1) / 4,400 / 6,500 / 1,100 / 12,000
Borrowing / 8,232 / 3,165 / 11,397
Less already committed (note 2) / -8,703 / -1,230 / -9,933
Add use of LSVT VAT Receipts (note 3) / 4,250 / 4,250
Add Performance Reward Grant (note 4) / 0
Total Resources Available / 8,179 / 8,435 / 1,100 / 17,714
Note 1: Includes £2.5m in respect of Urmston Town Centre
Note 2: Comprises estimated deficit in 2009/10 of £3.6m and £4.2m of committed schemes in 2010/11
Note 3:As part of the Housing Stock Transfer Agreement in 2005, Trafford Housing Trust (THT) will benefit from the reimbursement of VAT incurred on the ten year refurbishment programme. We negotiated a share of 67% of these VAT proceeds to be paid to the Council, estimated to be £20m over the ten year period. The proceeds can only be used to support capital related expenditure and the first call on the monies is for the indemnities given to THT as part of the stock transfer; the major component is to underwrite all costs related to asbestos treatment / removal.
So far £11.1m has been received with £0.8m already paid to THT for asbestos removal and £2m released in 2006/07 for highways, leaving a current balance of £8.3m. The only known major call currently against the asbestos warranty will relate to the work on the Old Trafford Masterplan and the demolition of four tower blocks and walk-up flats. The results of surveys are awaited which will identify the likely cost of asbestos removal at these blocks. The Council will have an ongoing contingent liability in respect of asbestos on former council houses for a further 26 years.
Note 4: in previous discussions with partners it was agreed (not sure if formal) that 25% of reward should be shared amongst partners who achieved the reward grant. The remaining 75% to be distributed in consultation with partners.
APPENDIX 2
Uncommitted Capital Projects that are supported by internal capital resources 2010/13
2010/11 £000 / 2011/12 £000 / 2012/13 £000 / Total £000
Schemes in Capital Programme - not contractually committed:-
Statutory/Contractual Schemes:
Stretford HS Sports Facilities / 3,197 / 3,197
Coroners Accommodation / 110 / 110
DDA Compliance / 250 / 250 / 500
AGMA Archive Service / 200 / 200
Crematorium EPA Emission Abatement / 425 / 385 / 810
Health & Safety Schemes:
Asbestos Management / 55 / 55
Schemes that protect the asset base
PublicBuilding Repair Works / 1,329 / 1,329
Building Services (Mechanical & Electrical) / 1,740 / 1,740
Local Transport Plan - Supported Borrowing (PB) / 1,856 / 1,800 / 3,656
Highways Related Schemes (PB) / 5,200 / 5,200
Invest to Save Schemes:
Specialist Housing Scheme / 700 / 700
Other Priorities:
SSCF Schemes / 132 / 132
Broadheath Community Centre / 124 / 124
WaltonPark Leisure Centre / 500 / 500
Additional BurialLand (Purchase/Infrastructure) / 250 / 403 / 653
LongfordPark - HLF Funding / 100 / 100
ICT Development / 630 / 630
Uncommitted Schemes Total / 12,977 / 6,659 / 0 / 19,636

APPENDIX 3

Capital Strategy Prioritisation Criteria

All uncommitted projects and new bids have been prioritised in accordance with the criteria included in the Capital Strategy. The Strategy provides the framework and identifies the priorities that the current capital programme is based on. It was adopted in February 2007 with the purpose of giving clear direction for the Council’s capital investment plans. It details the key corporate objectives and how capital priorities will be identified to assist in delivering the objectives. The current Strategy ensures that capital spending decisions are based on the following:-

  • Supporting the achievement of corporate objectives and key priorities;
  • Ensuring the right capital assets are fit for purpose for the Council and partners;
  • Supporting the priorities in the Asset Management Plan;
  • Ensuring health and safety and other schemes of a statutory nature are delivered;
  • Supporting the Medium Term Financial Strategy (MTFS) by ensuring that capital investment decisions are not taken in isolation from revenue spending
  • Supporting the efficiency agenda.

All available resources have been allocated for the period 2009-12 on the basis of this Strategy, with the following prioritisation:

  • Schemes of a mandatory nature e.g. health & safety;
  • Invest to Save
  • Supporting the Asset Base (backlog maintenance)
  • Council priorities
  • Other remaining projects

In July 2009 it was noted by the Executive that the update of the Strategy be deferred until the outcome of the next Government Spending Review given the expectation that allocations will be lower than current levels and that would be an opportune time to review the Strategy.

APPENDIX 4
Capital schemes for approval 2010/13
2010/11 £000 / 2011/12 £000 / 2012/13 £000 / Total £000
Estimated Resources Available(See Appendix 1) / 8,179 / 8,435 / 1,100 / 17,714
Recommended Capital Proposals:-
Statutory/Contractual Schemes:
Stretford HS Sports Facilities / 3,197 / 3,197
Coroners Accommodation / 450 / 450
Crematorium EPA Emission Abatement / 425 / 385 / 810
Disabled Facilities Grants/Other Grants / 1,000 / 750 / 500 / 2,250
Schemes that protect the asset base
Asset Management Schemes (In part) / 2,092 / 925 / 1,500 / 4,517
Highway Related Schemes / 5,500 / 5,500
Invest to Save Schemes:
Specialist Housing Scheme / 700 / 700
Other Priorities:
Walton Park Leisure Centre (In part) / 100 / 100
Additional BurialLand (Purchase/Infrastructure) / 250 / 403 / 653
LongfordPark / 150 / 150
ICT Development - CRM Upgrade / 630 / 630
Foster Carers - Household extension / 45 / 45
Carrington Waste and Rock Salt Rainfall Protection Scheme / 210 / 210
Parks Infrastructure / 250 / 250
ICT Schemes (In part) (Agile Working Pilot) / 90 / 90
TOTAL NEW SCHEMES / 11,792 / 5,275 / 2,485 / 19,552
SURPLUS/(DEFICIT) / (3,613) / 3,160 / (1,385) / (1,838)

APPENDIX 5

Trafford MBC Prudential Indicators

Indicator 1: CAPITAL EXPENDITURE

The table shows the actual level of capital expenditure that was incurred in 2008/09 and estimates for 2009/10 and the next three years.

2008/09
Actual
£m / 2009/10
Revised
£m / 2010/11
Estimate
£m / 2011/12
Estimate
£m / 2012/13
Estimate
£m
Total Expenditure / 42.3 / 42.4 / 75.0 / 21.4 / 19.1

Indicator 2: CAPITAL FINANCING REQUIREMENT (CFR)

The table below reflects the estimated need to borrow for capital investment i.e. the anticipated level of capital expenditure not financed from capital grants and contributions, revenue or capital receipts.The actual calculation of the CFR is derived from the balance sheet as at 31/3/09.Estimates of the end of year capital financing requirement for the current and future years are:-