Report by the Chief Financial Officer to Strategy and Resources on 1st February 2021 (attached), and
(a) the Minute Extract of Strategy and Resources on 1st February 2021 (to follow).
The Committee considered a report by the Chief Financial Officer (circulated previously) regarding the 10 Year Capital Strategy for 2021 to 2031.
The Head of Resources highlighted the following:
· The Capital Strategy was reviewed annually by Full Council prior to each financial year. The Strategy set out the ‘governance arrangements’ for capital projects coming forwards as detailed in section 4.3.
· All capital projects required a business case, reviewing options, risks and associated costs. Project Appraisal Group (PAG) comprised of the; Chief Executive, Business Information Systems Manager, Head of Resources and Accountancy Manager who would then meet to score the proposed project.
· In addition to the original approval of the project, a separate approval would also be sought from the Committee and then Full Council to release the capital funds.
· Medium Term (2021-2025) as set out in the table in paragraph 4.4 set out the impact of capital financing need, impact this had on the annual borrowing cost and then the overall Medium Term Financial Strategy budget gap, including the additional borrowing.
· For 2022/23 current projections showed a medium term financial strategy budget gap of £2.3m increasing to £2.9m in 2024/25.
· The estimated Capital Financing Requirement (CFR) for March 2021 was £5.76m which increased to its peak in March 2025 at £18.79m. This substantial increase in CFR reflected the £38m capital programme over the medium term including the new Leisure Centre.
· The Council would receive an annual management fee in relation to the running of the new Leisure Centre to help offset an element of the borrowing costs.
In response to questions from the Committee, the Head of Resources confirmed that:
· Members were not involved in the procurement process but would be involved in considering the projects when the business cases were presented via the Strategy and Resources committee and then Full Council. The tender process was covered by specific governance arrangements. The procurement requirement for projects/purchases, as set out depending on financial cost, is covered on the table in section 4.3 of the report.
· The borrowing rates as used for the forecasts within the report are those from the Public Works Loans Board. The rates are set at the time that the loan is taken out, as with personal loans, the rate is dependent on the amount borrowed and the duration of the loan. Currently a rate of 1.7% was available if the loan was over 50 years. The budget had been modelled on the Leisure project using a rate of 3% as the rates were previously higher. As the rates were now cheaper it was prudent to take on the borrowing for the leisure centre.
· Longer Term (2025-2031) as set in the table in paragraph 4.5. The Council had identified two main areas of capital expenditure within the long term forecast which are necessary to maintain business as normal i.e. the vehicle replacement programme and the on-going maintenance of the ICT infrastructure. Leased vehicles were being considered for the Waste and Recycling service, rather than outright purchases. It was noted that electric or hybrid alternatives for these vehicles were currently more than double the purchase price. Vehicles used in Waste and Recycling were deemed to have a life of eight years, after which their maintenance costs resulted in them no longer being financially viable to retain.
· Each business case received was assessed on its own merits. If they were to bring in revenue streams which more than covered the borrowing costs on a project they might be favourable to the Authority to take on.
RESOLVED that the decisions and recommendations of the Strategy and Resources Committee be endorsed.