DRAFT
MEDIUM
TERM FINANCIAL STRATEGY STATEMENT
CAPITAL
ESTIMATES 2016/17 ONWARDS
INDEX:
1 INTRODUCTION.. 2
2 THE PROGRAMME.. 3
3 FUNDING.. 5
TABLES:
Table 2:
Committee Summary of the Capital Programme.. 4
Table
2: Resources Available to the Capital Programme.. 6
1.1 This financial strategy statement is one
of two that aim to support the Council’s corporate objectives as identified in
the strategic plan 2015 – 2020. Where they relate to the Council’s capital
programme, the major issues relating to resources in the medium term are set
out in this statement. For matters relating to the revenue activity see the
separate strategy statement on revenue.
1.2 Set out in this strategy statement is an
overview of the capital plans of the Council and the criteria by which such
plans are developed and approved. The success of the programme is dependent
upon the Council’s ability to generate the resources required to finance the
plans.
1.3 Although this document is developed for
the medium term the Council reviews its strategy and therefore this statement
on an ongoing basis and considers its effectiveness at least quarterly. This
enables the plans to remain current and reflect changes in circumstances which
impact upon the Council’s strategic priorities. The annual review is completed
to coincide with the annual review of the strategic plan to enable changes to
be appropriately reflected in both documents.
1.4 The capital strategy and this statement
are in compliance with the guidance set out in the Prudential Code for Capital
Finance in Local Authorities. This code of practice is published by the
Chartered Institute of Public Finance and Accountancy and covers the full range
of capital planning activities. Compliance with the code is a statutory
requirement and the Council’s medium term financial strategy has been developed
to ensure compliance. In summary the relevant objectives of the code are:
1) To ensure, within a clear framework, that
capital expenditure plans are affordable, prudent and sustainable;
2) That treasury management decisions are
taken in accordance with good professional practice;
3) That local strategic planning, asset
management planning and proper option appraisal are supported; and
4) To provide a clear and transparent
framework to ensure accountability
2.1 The strategy for the capital programme
requires consideration at two levels, managing the overall programme and
details of the specifics of individual schemes.
2.2 The overall programme must be considered
in terms of the prudential borrowing principles of affordability, prudence and
sustainability. At the overall programme level the relative priority of
schemes, as they enahnace the provision of corporate or service based
objectives is also considered.
2.3 The inclusion of specific capital schemes
within the overall programme requires an option appraisal, at scheme level,
that is based on affordability in revenue and capital terms. This should
include whole life costs, project timelines and risk assessments.
2.4 Schemes will be appraised using three approaches:
1)
Where schemes
fit within a specific strategy and resources are available within the capital
programme for that strategy, such as the Asset Management Plan, .the schemes
would also be subject to appraisal and prioritisation against the objectives of
that strategy. These schemes must be individually considered and approved by
the relevant service committee following the approval of the full programme.
2)
Where schemes
can be demonstrated to be commercial in nature and require the use of
prudential borrowing, a business case must first be presented to the relevant
service committee. The relevant service committee will recommend approved
proposals to the Policy and Resources Committee for final approval of the
prudential borrowing.
3)
Where schemes do
not fit within the criteria above but an appropriate option appraisal has been
completed, evaluation and prioritisation will remain as previously approved by
Council and set out below.
1st For statutory
reasons;
2nd Fully or partly
self-funded schemes focused on strategic plan priority outcomes;
3rd Other schemes
focused on strategic plan priority outcomes; and
4th Other
priority schemes with a significant funding gearing
2.5 The Council is committed to maintaining
its ambition and aspiration to deliver its priorities and has identified that
his will lead to a significant need for capital investment in the future. This
includes those schemes currently in the capital programme along with the
infrastructure schemes needed to achieve the housing and business growth
required for the borough.
2.6 It is expected that infrastructure schemes
will be funded directly from the benefits gained from the development however
viability assessments of expected developments suggest that there will be a
funding gap. The Council is preparing to support that infrastructure need in
order to deliver its strategic priorities.
2.7 In addition the Council is constantly
focused on the need for efficiency in the use of resources and the delivery of
services. It is aware of the need to diversify the sources of income obtained
outside of the reducing support from central government. One aspect of this is
to take a commercial approach to the provision of services that have displayed
increased demand and higher cost over the last five eyars. As this may require
capital investment the Council has agreed to allow borrowing to achieve this
objective subject to:
1)
A business case
and successful implementation fo savings that cover the cost of borrowing; and
2)
Ensuring the
principles set out in paragraphs 1.4 and 3.# are achieved.
2.8 The programme for the period 2016/17 to
2020/21 currently focuses on a series of projects providing investment in the
property assets, core funding for affordable housing and support the
commercialisation strategy.
2.9 Table 1 below summarises the five year
programme by service committee.
CAPITAL PROGRAMME /
|
2016/17
|
2017/18
|
2018/19
|
2019/20
|
2020/21
|
COMMITTEE
|
£,000
|
£,000
|
£,000
|
£,000
|
£,000
|
|
|
|
|
|
|
Policy & Resources
|
12,926
|
10,350
|
9,325
|
300
|
275
|
Communities Housing & Environment
|
3,588
|
7,475
|
1,450
|
1,450
|
1,450
|
Heritage Culture & Leisure
|
2,847
|
1,875
|
2,866
|
564
|
90
|
Strategic Planning Sustainability & Transportation
|
1,469
|
0
|
0
|
0
|
0
|
|
0
|
0
|
0
|
0
|
0
|
Total
|
20,830
|
19,700
|
13,641
|
2,314
|
1,815
|
Table 2: Committee
Summary of the Capital Programme.
3.1 The medium term financial strategy takes a
flexible approach to funding the capital programme. As resources from capital
receipts have become uncertain the Council has provided support for core
programmes from other resources. The main resource available to the capital
programme is now New Homes Bonus.
3.2 The new homes bonus is an identifiable
value enabling medium term planning but has an uncertain future as the
government is completing a review of the affordability of the Bonus and
effectiveness of the incentive it creates. This is tied to the future changes
planned for business rates.
3.3 In the past the programme has benefitted
from the sale of surplus assets. The Council no longer holds many assets of
significant value that are surplus to operational or commercial need. As a
result the funding from capital receipts has reduced to occasional resources
from the sale of small assets.
3.4 Originally in 2012/13 the Council approved
the use of prudential borrowing for the following activities:
1)
Acquisition of
commercial property;
2)
Acquisition of
property to alleviate homelessness; and
3)
Action to enable
stalled development to progress.
3.5 The use of prudential borrowing is subject
to an approved business case that evidences a benefit above that required to
repay any debt over the life of the activity. The additional benefit may be
financial or nonfinancial but must support the objectives of the strategic
plan.
3.6 Due to uncertainty of future funding the
Council maintains a principle of prior funding of schemes. Although commitment
to a scheme is given by its inclusion in the programme the strategy requires
that fudning is identified in advance of formal commencement of the work. The
quarterly monitoring of the capital programme enables Policy & Resources
Committee to take effective decisions based on current levels of funding before
major projects commence.
3.7 Table 2 below identifies the current
funding assumptions:
|
2016/17
|
2017/18
|
2018/19
|
2019/20
|
2020/21
|
STRATEGIC ISSUES
|
£,000
|
£,000
|
£,000
|
£,000
|
£,000
|
|
|
|
|
|
|
Balance B/Fwd
|
9,812
|
|
|
|
|
Use of Earmarked Reserves
|
4,306
|
4,998
|
2,720
|
1,971
|
1,456
|
Capital Grants
|
450
|
450
|
450
|
450
|
450
|
Capital Contributions
|
1,000
|
1,000
|
0
|
|
|
Prudential Borrowing
|
11,950
|
15,525
|
11,000
|
|
|
Total
|
27,518
|
21,973
|
14,170
|
2,421
|
1,906
|
Table 2: Resources
Available to the Capital Programme.