The Capital Programme
Overview
Maintaining and improving the Council’s
infrastructure requires considerable resources and typically it
covers three types of investment:
- Premises
- Information and communication systems
- Vehicles and equipment.
Investment in such infrastructure qualifies as
capital expenditure when it results in an asset that cost over £10k
and has a useful life of more than one year. It can be funded
from loans, capital receipts, capital grants and contributions from
revenue.
Assets bought in this way form part of the
‘worth’ of the organisation, appearing on its balance sheet for
years to come until disposed of. Due to the longer term
nature of capital projects and the different funding sources that
are available the capital budget is shown separately to the revenue
budget.
The Property Portfolio (excluding housing)
The Council owns many properties from which
its services are delivered, these include office accommodation,
visitor information centres, leisure facilities and entertainment
venues. As the Council evolves it needs to ensure that its
premises remain fit for purpose which means that properties need to
be sold or their use converted as they become unsuitable and new
premises acquired. The approach to the future development of
premises to meet the needs of the Authority is set out in the
Council’s Asset Management Strategy (AMS), which outlines the
approach to the management of its property portfolio.
In line with best practice the premises
element of the capital programme is developed in line with the
Asset Management Strategy, which considers the strategic needs of
the Council as well as the ongoing maintenance demands of the
existing properties. It also takes account of external factors such
as the demands of legislation, such as the Disability
Discrimination Act 1995 (DDA), which required service providers to
make 'reasonable adjustments' to the way they deliver their
services so that disabled people can use them. This has
required significant investment to modernise our properties to
enable access to be granted to disabled people, but there are still
some properties where physical limitations mean that suitable
adaptations have not been possible.
The AMS has been developed to enable the
Council to move towards a property portfolio that is fit for
purpose and able to deliver its aspirations for future service
delivery as set out in the Corporate Plan and to meet existing and
planned services. The Budget and this Medium Term Financial
Plan present the financial implications that are associated with
the implementation of the AMS.
Information, Communications and Technology
Systems
The Council has a Service Development
Programme Board, which sets the strategy and direction for
information and communication systems and agrees the planned
investments in this area. This allows a consistent approach to
using improvements in technology to deliver efficiencies through
the streamlining of processes and the avoidance of duplication.
The Council has been very proactive in this
area and a great number of its process are now able to be completed
electronically as a result of having invested in electronic
payments and booking systems, document imaging and workflow
systems, the Council’s website as well as Digital TV.
Investments in technology will continue to
feature as part of the Council’s strategy where it supports mobile,
remote and home working, reducing the demand for filing storage and
enabling a more flexible approach to service delivery. These
investments can make a significant difference to our customers too,
with new Customer Relationship Management and Automated Call
Distribution systems forming the backbone of the Service Centre and
Gateway, the level of services that can be offered at a single
point of contact have increased enormously.
Vehicles and Equipment
The Council’s refuse collection and grounds
maintenance vehicles represent the majority of the Council’s assets
in this category; the numbers of which are based on the minimum
needed to maintain a fleet that can deliver a comprehensive service
to Thanet’s residents over the course of the working week.
Currently a plan is being developed for the establishment of a
formal replacement programme to fund the future purchase of these
vehicles as the current ones come to the end of their useful life,
although this will depend upon the revenue resources
available. If such an approach is appropriate, this will
feature as part of the next Medium Term Financial
Plan.
Council Housing
The Government has determined that all council
dwellings should meet minimum criteria by 2010. The Council
is well on the way to achieving this, and only 15 properties remain
below the decent homes standard through tenant choice. These will
be brought up to standard as soon as they become vacant (or before
if necessary to meet the target date).
Developing the Medium Term Capital
Programme
The Capital Budget Strategy
The Capital Programme has been developed
following the principles that are laid out in the Council’s capital
budget strategy, which is shown below.
The Capital Budget Strategy is:
- To maintain an affordable three-year rolling
capital programme which takes into account any decisions or actions
which may have a material impact on years four and five.
- To ensure capital resources are aligned with
the Council’s strategic vision and corporate priorities.
- To undertake Prudential Borrowing only where
there are sufficient monies to meet in full the implications of
capital expenditure, both borrowing and running costs.
- To maximise available resources by actively
seeking external funding and disposal of surplus assets.
- To engage local residents in the allocation
of capital resources.
Planned Investments
The main capital projects that are contained
within these programmes are outlined below:
Property
The main capital scheme in the 2008-2011
Capital Programme is the provision of improved swimming and leisure
facilities, which will require a significant amount of capital
investment. Other accommodation projects include the
rationalisation of the Council’s office accommodation into its main
offices in Margate. Aside from works on Council premises
significant sums are to be set aside for investment into the area
such as improvements around the coast and harbour areas;
development of the stage landing area in Ramsgate; and works to
improve parks and open spaces.
In addition to the amounts in the main capital
programme, the Council has also set aside capital funds for
investing in its allotment sites, which will be funded from the
proceeds from the disposal of the Manston Road Allotment site.
Information, Communications and
Technology
To date the use of technological advances such
as fully integrated workflow systems for office administrative
processes has enabled a significant amount of time to be saved, and
in some cases has led to financial savings where staff numbers are
able to be reduced. The Council is embarking on the next
phase of this work, which will see its planning services,
environmental services, human resources, Member enquiries and
Freedom of Information enquiries improved through the introduction
of scanning and workflow technology.
Vehicles and Equipment
The three year capital programme continues to
provide for investment into the Council’s waste and grounds
maintenance services, which needs to maintain its specialist fleet
of vehicles to be able to meet the needs of existing services, as
well as the new commitments to increasing the access of green
recycling services to all Thanet residents.
Grant Funded Projects
The Council has plans for a number of schemes that will be fully
or part funded by grant. The most significant of these is the
provision of Disabled Facility Grants which are provided to
residents as a financial contribution for adaptations to their
homes, such as to assist with mobility difficulties. Funds
are also set aside for the Margate Renewal Partnership which is
working on regenerating Margate Old Town and the Harbour area;
the Townscape Heritage Initiative Scheme, where the Council
is match funding Heritage Lottery Funding towards refurbishment of
buildings within Thanet; and Regional Housing Board Funding from
Central Government for maintaining decent home standards for
vulnerable owner occupiers.
Council Housing
Continual investment is planned to maintain
and improve the Council’s housing stock, in order to ensure that it
is able to meet the Government-set target of 100% of all homes to
meet the decent homes standard by 2010. The capital programme
over 2008-2011 continues to reflect the Council’s commitment to its
role as social landlord with substantial sums provided for capital
works on its council houses.
Details of the planned capital projects for
the next three years are summarised later in Table 11.
Capital Funding Sources
The capital investment proposals contained
within this MTFP reply upon an overall funding envelope made up of
a number of sources, including borrowing, capital receipts, capital
grant and revenue contributions. For investment in our
housing stock the Council receives a Major Repairs Allowance that
is paid as part of the calculation of the Housing Revenue Account
Subsidy, which is paid into the HRA Major Repairs
Reserve.
Borrowing
In 2004 a new system governing the access to
loan capital for Local Authorities was introduced, which is known
as The Prudential Code. This allows the Council to borrow to
meet its capital expenditure requirements provided that it is based
on capital investment plans that are affordable, sustainable and
prudent over the medium term; and the Council has to complete a
range of calculations (Prudential Indicators) as part of its annual
budget setting process to evidence this. These make sure that
the cost of paying for interest charges and repayment of principal
by a minimum revenue contribution (MRP) each year is taken into
account when drafting the Budget and Medium Term Financial
Plan.
Up until 2007/08, although the Council has
carried out capital schemes under the prudential borrowing rules,
due to the level of cash balances the Council held, no new external
borrowing was required. However, due to the profile of
existing debts a loan of £4m was secured in January 2008 and it is
probable that a further loan of a similar size will be taken out
during 2008/09, the implications of which have been carefully
considered and reflected, where appropriate in the Council’s
published Prudential Indicators, which are presented as part of its
Annual Budget Report.
HRA Supported Borrowing
The Council is able to borrow to fund capital
expenditure on its houses, which creates interest costs which have
to be charged to the HRA. The revenue cost of borrowing is
supported in the HRA Subsidy, which is assumed to be fully utilised
over the medium term.
Capital Receipts
When a fixed asset is sold, provided that the
sale income is £10k or more, then it has to be treated as a
‘capital receipt’, which means that it can only be used to fund
capital expenditure. All of the receipts from the
disposal of an asset on the Council’s General Fund (i.e. for its
main services) can be kept by the Council, but the Council is
required by law to set aside 75% of the proceeds from the sale of
HRA dwellings and so can only keep 25%. The “pooled receipts”
which are set aside have to be paid over to the Government, who
then allocate them back to councils according to need.
The 25% of the receipts that the Council keeps
can be used for either General Fund assets or HRA assets. For other
HRA assets the pooling rate is 50%, however the Council has set a
capital allowance which ensures that the capital receipt may be
retained in full by the Council for use for provision of affordable
housing including meeting the decent homes standard and for
regeneration.
The Asset Management Strategy (AMS)
The Council’s planned level of capital
expenditure means that significant levels of asset sales are
required. The AMS provides a framework for determining which
of the Council’s assets are suitable for disposal in order to fund
new investments that will ensure that its property portfolio is fit
for purpose. Over the course of this Medium Term Financial
Plan the AMS has enabled the identification of a number of assets
that can be disposed of without any detriment to service delivery,
and yet improve the overall value for money represented by the
Council’s assets. A list of potential disposals for the first
year of this medium term plan has been presented as part of the
Annual Budget Report, work is underway to bring forward a list of
possible disposals for years 2 and 3 of this plan during
2008/09.
Capital Grant
The Council receives additional grant funding
for a variety of purposes and from a range of sources, including
the Central Government, European Regional Development Fund,
Heritage and Lottery Funds and the South East European Development
Agency (SEEDA). Many of these relate to regeneration projects
for the area and typically have conditions attached to them that
govern their use. Many grants that are expected to be
received over the next three years require an element of ‘match
funding’ by Thanet; such as the Disabled Facility Grants (DFGs)
where Thanet is expected to pay 40% of the costs of the projects
with 60% coming from Central Government Capital Grant.
Revenue Contributions
General Fund Contributions
Although the Council can use its General Fund
revenue funds to pay for capital expenditure, as it has in the
past, the current financial constraints that are on the Revenue
Budget means that this is not an affordable option in the medium
term.
HRA Contributions
Funding for capital expenditure on houses can
be met from within the HRA and a small amount of such funding is
anticipated at least in the first year of this Medium Term
plan. The future funding requirements will be informed by the
revised 30 year HRA business plan.
Capital Reserves
HRA Capital Reserves
The Major Repairs Allowance that is contained
within the HRA Subsidy is exclusively available for use on HRA
capital expenditure. This MTFP assumes that the annual amount
received will be used in full. For the purposes of the estimates in
this document the amounts for the three years have been based on
the notified amount for 2008/09 of £2.231 million and £2.240
million and £2.254 million for 2009/10 and 2010/11
respectively.
Capital Projects Reserve
In the last Medium Term Financial Plan (2007 –
2011) it was proposed to maintain capital reserves at no less than
£500k, with a preferred target of £1m. However, over the
course of developing the 2007/08 capital budget, reflecting the
Council’s strategic vision and corporate priorities it was agreed
that these reserves be fully utilised.
There are currently no plans to restore this
reserve as a contingency, as the financial risk assessment carried
out as part of the General Fund Reserves indicates that there would
be sufficient General Reserves to cover unanticipated capital
contingency costs.
The investment plans and the use of the
different funding streams produce the budget for the General Fund
Capital Budget that is shown in Table 11.
Table 11 - The Medium Term General
Fund Capital Budget
|
|
2008/09
|
2009/10
|
2010/11
|
|
|
£’000
|
£’000
|
£’000
|
|
Premises
|
2,390
|
2,950
|
1,200
|
|
Information Systems & Technology
|
244
|
100
|
40
|
|
Vehicles and Equipment
|
570
|
170
|
195
|
|
Infrastructure
|
219
|
0
|
0
|
|
Improving Buildings to Assist Disabled
Persons
|
1,050
|
1,050
|
1,050
|
|
Allotments
|
617
|
0
|
0
|
|
Area Enhancement
|
536
|
300
|
325
|
|
Parks and Open Spaces
|
75
|
75
|
0
|
|
Private Sector Housing
|
1,400
|
1,400
|
1,761
|
|
Total Capital Expenditure
|
7,101
|
6,045
|
4,571
|
|
Funded From:
|
|
|
|
|
Borrowing
|
475
|
0
|
0
|
|
Capital Receipts
|
4,590
|
4,095
|
2,260
|
|
Capital Grants
|
2,036
|
1,950
|
2,311
|
|
Contributions from Revenue
|
0
|
0
|
0
|
|
Total Funding
|
7,101
|
6,045
|
4,571
|
The plans that exist for capital investment
into the Council’s housing stock are reflected in Table 12.
Together the information in Table 11 and Table 12 comprises the
Medium Term Capital Programme for the Council.
Table 12 - The Medium
Term Housing Revenue Account Capital Budget
|
|
2008/09
|
2009/10
|
2010/11
|
|
|
£’000
|
£’000
|
£’000
|
|
Schemes slipped from 2007/08
|
589
|
0
|
0
|
|
Annual Programmes
|
3,060
|
3,264
|
3,023
|
|
‘One Off’ Schemes
|
654
|
0
|
0
|
|
Capital Salaries
|
220
|
226
|
231
|
|
Total Capital Expenditure
|
4,523
|
3,490
|
3,254
|
|
Funded From:
|
|
|
|
|
HRA Major Repairs Reserve
|
2,231
|
2,240
|
2,254
|
|
HRA Supported Borrowing
|
1,703
|
1,250
|
1,000
|
|
HRA Contributions from Revenue
|
589
|
0
|
0
|
|
Total Funding
|
4,523
|
3,490
|
3,254
|