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Capital Programme Update - Quarter 3 2020-21

Minutes:

The Interim Chief Officer Finance, Performance and Change presented a report to comply with the requirement of the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Prudential Code for Capital Finance in Local Authorities 2017; provided an update of the Capital Programme for the period 1 April to 31 December 2020; sought approval for a revised capital programme for 2020-21 to 2029-30 and for Council to note the projected Prudential and Other Indicators for 2020-21.

 

The Interim Chief Officer Finance, Performance and Change reported that the Local Authorities (Capital Finance and Accounting) (Wales) Regulations 2003, as amended contain detailed provisions for capital finance and accounting controls, including the rules on the use of capital receipts and what is to be treated as capital expenditure.  Additionally, the Council manages its Treasury Management and Capital activities in accordance with associated guidance.  The Prudential Code for Capital Finance in Local Authorities requires Local Authorities to have in place a Capital Strategy which demonstrates that the authority takes capital expenditure and investment decisions in line with service objectives and properly takes account of stewardship, value for money, prudence, sustainability and affordability.

 

The Interim Chief Officer Finance, Performance and Change reported that Council on 26 February 2020, approved a capital programme as part of the Medium Term Financial Strategy, and was last updated on 21 October 2020.  She stated that the revised programme for 2020-21 totals £33.888m, of which £17.960m is met from the Council’s resources, with the remaining £15.928m met from external resources.  She summarised the position per Directorate and the current funding assumptions for the capital programme for 2020-21.  She provided detail of the projected spend on individual schemes within the programme compared to the budget available.  A number of schemes had been identified as requiring slippage into future years, which shows unprecedented levels of slippage as a result of the covid-19 pandemic.  At quarter 3, the total requested slippage is £14.536m in relation to:

 

·         Children’s Residential Accommodation Hub (£1.564 million)

·         Road Safety Improvements Heol Mostyn Junction (£0.540 million)

·         Economic Stimulus Grant (£0.887 million)

·         Coastal Risk Management Program – Porthcawl (£0.750 million)

·         Maesteg Town Hall Cultural Hub (£3.050 million)

·         Caerau Heat Network (£1.939 million)

 

The Interim Chief Officer Finance, Performance and Change reported that a number of new externally funded schemes and internally funded schemes have been incorporated into the capital programme:

 

·         Trem y Mor (£0.435 million)

·         Berwyn Centre and Ogmore Vale Washeries (£0.186 million)

·         Covid recovery for town centres (£0.360 million)

 

The Interim Chief Officer Finance, Performance and Change informed Council of minor additions to the programme as follows:

 

·         Porthcawl Resort Investment Focus - £0.074 million ERDF grant

·         ICF capital funding - £0.035 million for the purchase of 2 vehicles for

Social Services

·         Complex and Medical Needs Work in Schools - £0.025 million revenue contribution for provision of ALN at Cefn Cribwr Primary School

 

The Interim Chief Officer Finance, Performance and Change also informed Council that the following schemes have had material changes:

 

·         Active Travel Pencoed Technology Park

·         Cardiff Capital Region City Deal

·         Sustainable Transport Covid

 

The Interim Chief Officer Finance, Performance and Change also reported on the monitoring of Prudential and other indicators for 2020-21.  The Capital Strategy is intended to give an overview of how capital expenditure, capital financing and treasury management activity contribute to the provision of services along with an overview of how associated risk is managed and the implications for future sustainability.  A number of prudential indicators were included and approved by Council.  In line with the requirements of the Prudential Code, the Chief Finance Officer is required to establish procedures to monitor both performance against all forward-looking prudential indicators and the requirement specified.  She detailed the actual indicators for 2019-20, the estimated indicators for 2020-21 set out in the Council’s Capital Strategy and the projected indicators for 2020-21 based on the revised Capital Programme, which shows that the Council is operating in line with the approved limits.

 

The Interim Chief Officer Finance, Performance and Change reported that the Capital Strategy also requires the monitoring of non-treasury management investments and other long term liabilities.  She stated that the Council does have an existing investment portfolio which is 100% based within the County Borough and primarily the office and industrial sectors.  Income streams are spread between the single and multi-let office investments on Bridgend Science Park, the multi-let industrial estates and the freehold ground rent investments.  The total value of Investment Properties was £4.635 million at 31 March 2020.  She informed Council that it has a number of Other Long Term Liabilities included within the Capital Strategy, no new loans have been taken out in Quarter 3. 

 

A member of Council questioned the reason for the slippage of 34 weeks and unforeseen works to the clock tower on the Maesteg Town Hall scheme.  A member also questioned when EU funding would end and would the scheme be completed by then.  The Corporate Director Communities informed Council that a number of adjustments had been made to the Maesteg Town Hall scheme due to lockdown when the number of workers onsite had to be reduced due to their welfare and health and safety regulations.  The unforeseen works to the clock tower had added to the time, however the contract was progressing well and completion was expected by next spring.  The clock tower had to be shorn up and maintenance work was carried out to light the clock.  The Corporate Director Communities informed Council that the contract has a large contingency sum and spend was within that.  Work was also carried out to the Culper’s on the top of the roof, which was funded by the Welsh Government in the sum of £250,000.  She informed Council that the contractor had uncovered the history and features of the building.  The Cabinet Member Education and Regeneration informed Council that along with the Leader and Corporate Director Communities had had visited the site when allowed and stated that the site is busy, but safe and work is progressing.  He stated that the contractors are very dedicated, professional and flexible and have restored many of the original features of the building.    

 

A member of Council questioned whether the options appraisal on the Caerau Heat Network scheme would be funded from slippage on the scheme.  The Corporate Director Communities commented that the heat network scheme is an innovative but difficult scheme and that it would not be possible to get the mine water out due to the geology, which had not been unforeseen by the experts.  WEFO, the funders of the scheme are happy that an options appraisal is being looked at, which is scheduled for completion in 2023.  She stated that it was correct to stop the mine water project and to move forward with the options appraisal.  A member of Council referred to the significant amount of investment on the project, with a great deal of risk taken and the scheme should be the subject to an internal enquiry.  The Corporate Director Communities informed Council that the upfront funding was for bore holes, it was found that rock was very hard and it would be expensive to bore.  She stated that it is known that the mine water heat is reusable and a smaller scheme with smaller bores is being considered to heat Caerau Primary School and ground water heat would be used to heat the Tudor estate as opposed to mine water.  She also informed Council that the Council will be a contributor to decarbonisation and renewable energy.  The Cabinet Member Communities informed Council that he believed there would be an element of mine water technology, although geologically, it did not look like the authority would be able to do what it initially intended, but different technologies would be run side by side.  A member of Council was surprised that the geology of the area was untried and untested, given the area’s mining history and that survey records of mine shafts must exist.  The Corporate Director Communities assured Members that the council had worked with the Coal Authority on the project.  She stated that the bore holes would cost 3 times the amount of the estimate and that it was prohibitive to proceed with the larger scheme and that a smaller scheme would instead be pursued.             

 

A member of Council questioned the reaction of funders to the slippage in schemes and is there flexibility in the Waterton Active Travel scheme.  The Interim Chief Officer Finance, Performance and Change informed Council that the Welsh Government understands the need for flexibility and slippage.  The Corporate Director Communities informed Council there is no flexibility to the Active travel scheme and the Council has been asked to resubmit the scheme.  She stated that a number of grant funding offers are being received from the Welsh Government with a short turnaround for the submission of schemes and highlighted an example of a funding offer received on 28 January for an application for electric charging points for vehicles having to be committed by 31 March. 

 

A member of Council questioned whether the fund of £50,000 for community asset transfer needed to be more ambitious and increase year on year to encourage more asset transfers.  The Interim Deputy Chief Officer Finance, Performance and Change informed Council that there is sufficient amount of funding available for community asset transfers.  

 

The Mayor referred to the Capital Strategy and asked whether the potential for converting vacant office space into flats had been considered.  The Interim Chief Officer Finance, Performance and Change informed Council there exists an opportunity to learn lessons from the pandemic in looking at office accommodation. The Corporate Director Communities that she is to chair a corporate group for the corporate landlord function with responsibility for looking at solutions for a blend of homeworking and working in the office and she informed Council of her previous experience in rationalising office accommodation.  The Corporate Director Communities informed Council that she would provide Members with information on the rate of vacancies for office accommodation.  She also informed Council of the demand for start-ups for small office space which then creates a community of small businesses and incubation spaces.                         

 

RESOLVED:            That Council:

 

·         noted the Council’s Capital Programme for 2020-21 for the period to 31 December 2020;

·         approved the revised Capital Programme;

noted the projected Prudential and Other Indicators for 2020-21.                

Supporting documents:

 

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