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; and
• Vehicles and equipment.   

Investment in such infrastructure qualifies as capital expenditure when it results in an asset that costs 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.

Impact of the Current Economic Climate

Since drafting the previous (2009-2011) MTFP, the deterioration in the national economic position has had a serious impact on the Council’s capital plan. The plan that was presented relied upon significant levels of capital receipts being generated from the sale of surplus Council assets. However, with the downturn in the property market, many of the proposed disposals are being held back until more realistic sales prices can be generated. As a result the planned capital investments have had to be scaled back accordingly. The capital programme thus presented in this MTFP is therefore a realistic one which recognises the current market conditions. The plan does reflect a slow upturn in the market in future years.

Consideration for the Environment

The Council is committed to reducing its carbon footprint, and acting responsibly in respect of its use of natural resources, accordingly all future capital investments will be done to either assist in the delivery of the Climate Change Strategy, or with due regard for its aims.

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 AMS, 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. For example, it considers the requirements of 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, although 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.

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 (and indeed affordable), this will feature as part of the next Medium Term Financial Plan.  

Information, Communications and Technology

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 processes 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: new Customer Relationship Management and Automated Call Distribution systems form the backbone of the Service Centre and Gateway, and as a result, the level of services that can be offered at a single point of contact have increased enormously.   Due to work with regard to shared services, a reserve has been set up whereby a sum of £30k per annum will be set aside towards system developments associated with shared services.

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 five-year rolling capital programme.

• 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 where appropriate.

Planned Investments

The main capital projects that are planned for in the medium term are outlined below:

Corporate Plan Schemes - Within the Corporate Plan are a number of projects that have associated capital expenditure. The Corporate Plan was prepared following extensive consultation and therefore the associated capital projects were treated as priority against the available funding. The projects include providing fish landing or market or restaurant facilities; Ramsgate swimming pool; improving 215 listed buildings in the Ramsgate Townscape Heritage; developing and improving play areas in Margate and Ramsgate and extending CCTV coverage.

Service-Led Capital Schemes – The running of a district council requires ongoing investment in assets that are used to deliver the business. Schemes put forward for which significant capital funding will be required include cremator works, the Military Road arches and various infrastructure works at the Port and Harbour. A review is being undertaken with regards to the cremator works to compare the option of purchasing against leasing and this review may well change the amounts within the Capital Programme for these works.

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 (DFGs) which are provided to residents as a financial contribution for adaptations to their homes, such as to assist with mobility difficulties.  Councils can claim 100% of Communities and Local Government funding for each DFG without a need to match fund up to the total value of Government grant awarded. However, the Council intends to maintain its match funding of £400k per annum towards the programme.

The Council has been successful in a bid of £3.8m from the DCMS’s Sea Change programme towards the first phase of development of Dreamland into a park of ‘thrilling historic rides’. This phase of the project will include the restoration of the Scenic Railway to operational status, provide approximately 66% of the amusement park and the restoration of the exterior of the cinema building. Some additional funding is also required to meet the full cost of this project and discussions are ongoing around the available funding options. For the purposes of the 2010/11 draft budget it has been assumed that the Council’s contributions will be £1m from prudential borrowing.

Other capital grant funded projects included private sector housing, historic town centre and planning projects.

Council Housing – A stock condition survey has recently been undertaken and the results of this have been used to determine the HRA Capital Programme. This ensures that the Council meets Decent Homes standard and provides a continuing maintenance scheme for the housing stock.

The redevelopment of Newington Centre is continuing and as the HRA will continue to own the shops within the development, the cost of rebuilding the shops and the rental income derived from them will fall to the HRA.

There has been a high level of Anti-Social Behaviour surrounding Trove Court and Kennedy House and it is therefore proposed to consult with tenants regarding introducing a concierge scheme. A capital budget has therefore been included within the HRA Capital Programme for equipment costs in anticipation of the project being supported by the tenants. 

The Council has been successful in its bid for Capital Grant to build new houses. A capital budget has therefore been included within the HRA Capital Programme for building five new units.

Details of the planned capital projects for the next five years are summarised later in Table 12.

Capital Funding Sources

The capital investment proposals contained within this MTFP rely 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. This 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. 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. Over the course of this MTFP, prudential borrowing has been assumed for the cremator works, works at the Port and Harbour and also for Dreamland.

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

Capital receipts are generated when a fixed asset is sold and the receipt is more than £10k. Capital receipts 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. The affordability of the Capital Programme has been based on the assumption of a certain level of capital receipts being generated, however, the current economic climate has resulted in falling sales values and consequently some of the planned asset disposals have had to be put on hold until the property market picks up. The Capital Programme will therefore be reviewed once future capital receipt projections are more certain. 

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. 

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 small amounts of such funding are anticipated in 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. 

Capital Projects Reserve – Any surplus arising on the 2009/10 Capital Programme will be set aside in this reserve to provide additional flexibility.

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 12.

Table 12

The Medium Term General Fund Capital Budget

The plans that exist for capital investment into the Council’s housing stock are reflected in Table 13.  Together the information in Table 12 and Table 13 comprises the Medium Term Capital Programme for the Council.

Table 13

The Medium Term Housing Revenue Account Capital Budget

Partnerships

It is stated in the Corporate Plan 2007-11 that ‘we have tried to be clear and specific about what the Council can deliver directly itself, but the plan also includes inspirations that can only be delivered through effective partnership working with other organisations and the community.’

A register of partnerships is maintained to provide an overview of the range of collaborations in which the authority has an interest. The Council has also developed a Partnership Framework. This document has been developed as a guide to use when working in partnership. It demonstrates the governance arrangements that we are committed to as a Council and allows our partners and the public to see the key principles and standards that we aim to achieve.

The current partnerships that we are involved in will be built upon, and we will develop new ones using this Framework to bring greater benefits to our local community, as we work to achieve our common aims to create and sustain a better quality of life for all our residents. Some of the Council’s major partnerships are described below:

Table 14

Key Council Partnerships

Next: Treasury Management

• Introduction
• Executive Summary
• Local Government Finance Environment
• Local Government Act 2007
• Value for Money
• The Local Context
• Developing Financial Plans
• General Fund Revenue Account
• Housing Revenue Account
• Capital Programme
• Treasury Management

Financial Services

E-mail:

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thanet.gov.uk

Tel: 01843 577000