Corporate Capital Strategy 2006, and the 3 Year Forward Capital Programme 2007/10

REPORT TO CABINET

 

10 JANUARY 2007

 

CORPORATE CAPITAL STRATEGY 2006, AND THE 3 YEAR FORWARD CAPITAL PROGRAMME 2007/10

 

SUMMARY REPORT

 

 REPORT OF THE DIRECTOR OF CORPORATE RESOURCES

 

 

 

1.         PURPOSE OF REPORT

 

This summary report provides an overview of the Capital Programme for the next 3 years, and submits for Member approval details of schemes arising from the Capital Strategy process.  These investments are to be funded from the Corporate Capital Resource Pool (CRP) element of the Single Capital Pot (SCP).

 

Last year Members pre-approved a range of schemes as part of a 3-year rolling process.  The intention has always been that these would be annually reviewed to take account of changing resource levels and changing priorities.  This review has been carried out, resulting in recommendations that some additional investments are made, and that some pre-approved investments are revised. 

 

2.         AIMS OF THE CAPITAL STRATEGY PROCESS

 

The aims of the Strategy are:

 

·        working to ensure the corporate integration of Service Programmes

 

·        making use of Asset Management Plans so that maintenance requirements form the basis for the prioritisation of the schemes

 

·        using ‘Invest to Save’ powers where possible, and delivering Gershon efficiencies

 

·        aiming to create a CRP of at least £5m per year, subject to balancing the Capital Programme by reasonable but challenging assumptions on the level of Capital receipts.

 

3.                  KEY PRINCIPLES

 

The key principles for this Strategy are:

 

 

 

 

·           a recognition that the majority of the Council’s Capital Programme of around £300m per year is outside of this Single Capital Pot process

 

·           that Capital needs must initially be met from the available specific funding streams (e.g. Decent Homes, the Local Transport Plan)

 

·           that should specific funding streams not be available the need to retain the Asset has to be justified

 

·           only after all other funding avenues have been explored will CRP funding be considered.

 

4.         SIZE OF THE CORPORATE RESOURCE POOL

 

The Corporate Resource Pool (CRP) is expected to amount to around £21m for the period 2007/10.

 

This has been derived from the Single Capital Pot (i.e. Government backed borrowing), which will be around £64m over the next 3 years, from which the earmarked elements of £56m, being the Housing and Highways elements, need to be deducted.  The investment of these resources will be considered by reports to Cabinet, dealing with the Neighbourhoods Investment Programme and the Local Transport Plan respectively.  This will leave only £8m over the period for the CRP. 

 

This can be increased by supplementing it with additional Capital receipts over the 3 year period of £13m, making a total of £21m available to the CRP.  However, receipts targets are already significant, and although achievable they will be challenging, particularly given pressures for earmarking, the impact of revised planning guidelines on affordable housing, and the levelling off of the property market.  It is therefore proposed that schemes are only commenced when there is some certainty regarding the deliverability of specific receipts (to be managed by the Director of Corporate Resources in consultation with Members).

 

5.         PRIORITISATION OF BIDS AGAINST THE CRP

 

Bids from the Directorates are set out in a more detailed report, together with information on the impact that these schemes will have.  This report is available on request from the Director of Corporate Resources. 

 

The schemes recommended for approval total £21m over 3 years and are summarised below:

 

 

 

 

 

Table 1 – 2007/10 Schemes recommended for approval

 

 

As part of last years budget process Cabinet pre-approved Priority schemes for 2007/08 and 2008/09.  At that time Members reserved the right to review these approvals.  In support of this process, all these approvals have been reviewed and re-prioritised by both Directorates, and the Capital Strategy Group (CSG).

 

A further corporate process has been undertaken by CSG, with Directorates prioritising their own Capital bids for 2009/10 against the CRP.  The nature and range of these proposed investments is broadly similar to that approved by Members in previous years.  These new investments are also summarised in Table 1 above, more details of which can be found at Appendix A to this summary report (and also by Directorate in the more detailed report).  The more detailed report and its appendices detail the Directorate bids and these have been discussed with respective portfolio holding Members.

 

6.                  IMPACT UPON BACKLOG MAINTENANCE

 

The direct impact that the CRP has had upon the Backlog maintenance position of the Council is difficult to gauge, as the position will change from year to year as buildings are disposed of, and as other related strategies such as Building Schools for the Future play their own part.  That said, Appendix B shows how the position has improved in recent years in overall terms, and also in respect of the most urgent categories.

 

7.         FURTHER CONSIDERATIONS

 

Each allocation approved means that the funds available for other priorities are reduced.  Efforts need to be made therefore to ensure that the right allocations are made to the correct priorities at the right time.  This would typically be those that are most urgent or that are inescapable, and which have no other opportunity to attract funding.  Members are therefore presented with choices in this regard.

 

Highways

 

Worthy of mention in this context is Highways.  Over the years 2003/07 around £5m will have been allocated from the CRP, and it is the largest planned recipient for 2007/08 and 2008/09.  If future Highways needs are addressed via a PFI deal, and taking account of the improvement in the Revenue position (an additional £8m from 2009/10), then continued funding of Highways from the CRP could be re-considered, particularly in 2008/09.  If this report is approved as it stands, Highways will be allocated a further £2.9m over the period 2007/09.

           

Community Buildings

 

An investment of £400k over and above the original £100k is being     recommended for Community Buildings in 2007/08.  Resources for this are being derived from the rationalisation process that is underway, with a view to creating a smaller, but better quality portfolio of community buildings across the city.  The precise nature of the re-investment will be the subject of a further more detailed report to Cabinet in due course.

 

Learning Disability Strategy

 

Funds amounting to £1.4m have been received from the NHS to finance this strategy.  This report is formally acknowledging the source of funds, whilst the precise application of the funds will be dealt with by a separate report to be brought before Members in due course.

 

Manor Lodge

 

A potential need to invest £200k in supporting a scheme (subject to a Heritage Lottery bid) at Manor Lodge has been identified, which has not been fully funded as part of this process (£80k is currently recommended for approval within the 2008/09 bids).  Should this require additional Capital funding within the 2007/10 period then it would need to take place at the expense of another priority, or be funded by alternative means.

 

ICT infrastructure and ‘Invest to Save’

 

In addition to the usual bids submitted to the CRP, funding is required to deliver Corporate ICT infrastructure improvements.  A strategy is currently under development to determine the scope and cost of this, and the extent to which it can be self-financing via invest to save.  In the meantime, a further £1m has been included to be funded from the CRP in 2009/10.

 

Sheffield Theatres

 

The proposal to include the Council’s contribution towards the upgrading of facilities at the Crucible Theatre is in line with the original strategy adopted by the Council in 1999/00.  At that time the need to ensure that the cultural assets in the Heart of the City continued to provide the economic and environmental benefits that exist from having a thriving and varied cultural offering was recognised.  The whole issue of the Tudor Square area and the contribution it can make to the overall step change that is occurring across the Heart of the City in terms of architectural and public realm presentation is now on the agenda, and the Crucible is a key element of that which already has a national and international profile, one we need to maintain.  The contribution of £2.5m is towards an overall scheme value of approximately £12m.  Funds are already earmarked from the Arts Council towards this project and the planning process is well advanced, therefore it is anticipated that the contribution will be required during the life of this Capital strategy.

 

 

8.         SUMMARY

 

It needs to be recognised that this is a rolling Programme that will be reviewed annually by both officers and Members.  This will allow Members the continued opportunity to review priorities and enable emerging issues to be considered, and incorporated as appropriate. 

The CRP has been extended over the period 2007/10 to £21m.  This is considered to be affordable, based upon the ongoing assessment of the Council’s ability to generate Capital receipts.  These funds are being invested in meeting Capital needs for which no other funding route is presently available.  Maintaining this level of investment cannot be guaranteed for future years, and rests to some degree upon receipts generated being used for general, rather than earmarked purposes.

 

9.         HUMAN RIGHTS, PROPERTY, ENVIRONMENTAL AND FINANCIAL IMPLICATIONS

 

9.1       This report is concerned with property and financial matters throughout.  However, it in itself has no direct or immediate implications for the Revenue Budget, in that it will be funded from Government backed borrowing, and Capital receipts.  However, over time, if the recommended schemes are approved it will have some impact, in that the present state of repair of various properties will be improved.  The specific Revenue implications of each investment will be considered, and addressed, by the Directorate and Service responsible, along with any arising human rights, or environmental implications.

 

10.       EQUALITIES IMPACT

 

10.1    This report deals with the Capital Strategy for 2006, and the use of Capital resources over the period 2007/10.  These resources are primarily aimed at tackling backlog maintenance, which can only have a positive impact upon equalities issues, for example, by improving public access to buildings.  However, the report itself does not deal with the specifics of these issues, they will instead be considered by Directorates and Services for each scheme as they are brought forward.  It is therefore considered that an Equalities Impact Assessment is not required for this report.

 

11.       RECOMMENDATIONS

 

It is recommended that Members:

 

·                     note that choices exist in the deployment of these resources

 

·                     agree the investment of Capital resources over the period 2007/09 of £14.503m in priority schemes, and pre-approve the investment of Capital resources in priority schemes totalling £6.970m for 2009/10

 

·                    agree to re-consider the allocations to Highways for 2008/09 at this time next year as further clarification emerges in respect of the potential PFI deal

 

·                    agree that the Prudential borrowing route be utilised where appropriate and consistent with the established principles (Cabinet 22 September 2004), to increase the scale of the available resources.  Further details will be included in the Capital Programme report to be presented to Council on 2 March 2007

 

·                    consider whether funding in support of the Manor Lodge historic site (being £200k in total) be made available from the CRP, subject to a successful Heritage Lottery Fund bid

 

·                    acknowledge funding to the tune of £1.4m for the Learning Disability strategy, being funds received for this purpose from the NHS.  This will be the subject of a separate report to Members in due course.

 

Members will retain the flexibility to annually review the future priorities and investments.

 

 

 

Eugene Walker

Deputy Director of Corporate Resources

December 2006