Issue - meetings

Prior to consideration of the budget related reports, of which the Capital and Investment Strategy was the first, the Chief Finance Officer (CFO) made a presentation to the Council, which provided information about the strategic context within which the budget had been prepared, the medium-term financial plan, the robustness of the estimates, adequacy of reserves and budget risks. 

The Council considered a report on the Council’s capital and investment strategy, which gave a high-level overview of how capital expenditure, capital financing and treasury management activity contributed to the provision of local public services along with an overview of how associated risk was managed and the implications for future financial sustainability.

Decisions made now, and during the period of the strategy on capital and treasury management would have financial consequences for the Council for many years into the future. The report therefore included details of the capital programme, any new bids/mandates submitted for approval plus the requirements of the Prudential Code and the investment strategy covering treasury management investments, service investments, and commercial investments.  The report had also covered the requirements of the Treasury Management Code and the prevailing DLUHC Statutory Guidance.

Councillors noted that in order to achieve the ambitious targets within the Corporate Plan, the Council needed to invest in its assets, via capital expenditure, which was split into the General Fund (GF) and Housing Revenue Account (HRA).

All projects, regardless of the fund, would be funded by capital receipts, grants and contributions, reserves, and finally borrowing.  When preparing the budget reports, it was not known how each scheme would be funded and, in the case of regeneration projects, what the delivery model would be.  The report showed a high-level position.  The business case for each individual project would set out the detailed funding arrangements for the project.

The Council noted that some capital receipts or revenue income streams might arise as a result of regeneration schemes, but in most cases the position was currently uncertain, and it was too early at this stage to make assumptions.  It was likely that there would be cash-flow implications of the development schemes, where income would come in after the five-year time horizon of the report and the expenditure incurred earlier in the programme.

The Council had an underlying need to borrow for the General Fund capital programme of £286 million between 2022-23 and 2027-28.  Officers had put forward bids, with a net cost over the same period of £10 million, increasing this underlying need to borrow to £296 million should these proposals be approved for inclusion in the programme.

The capital programme included several significant regeneration schemes, which it was assumed would be financed from GF resources.  Detailed funding proposals for each scheme would be considered when their Outline Business Case was presented to the Executive for approval.

The main areas of expenditure (shown gross), as set out in the report, were:

·       £274 million Weyside Urban Village (WUV)

·       £62 million strategic property purchases

·       £32 million North Downs Housing (NDH)

·       £28 million  ...  view the full minutes text for item 118

Decision:

Subject to Council approving the budget on 8 February 2023:

1)    That the £500,000 allocated in respect of the Bus Station relocation scheme (Scheme no. P17 (p)) be removed from the provisional capital programme.

2)    That the new bids, as shown in paragraph 4.13 of this report be approved for inclusion in the capital programme as indicated.

Recommended to Council on 8 February:

1)    That the General Fund and HRA capital estimates, as shown in appendices 2 and 3, as amended to include such bids as may be approved by the Executive at its meeting on 26 January 2023, be approved

2)    That the Minimum Revenue Provision policy, referred to in section 5 of this report, be approved.

3)    That the capital and investment strategy be approved, specifically the investment strategy and Prudential Indicators contained within the report and in Appendix 1.

4)    That the updated flexible use of capital receipts policy at Appendix 8 be approved.

Reason(s):

·         To enable the Council to approve the capital and investment strategy for 2023-24 to 2027-28

·         To enable the Council, at its budget meeting on 8 February 2023, to approve the funding required for the new capital schemes propose

Other options considered and rejected by the Executive:

None.

Details of any conflict of interest declared by the Leader or lead councillors and any dispensation granted:

None.

The Chairman advised that this report had also been considered by the Corporate Governance and Standards Committee on 19 January 2023 and the Joint Executive Advisory Board on 24 January 2023. The comments arising from those two meetings were set out in the Supplementary Information Sheet.

The Deputy Leader of the Council and Lead Councillor for Finance and Planning Policy introduced the report.

The Executive heard that the Local Government Finance Act 2003 required all councils to have an approved investment strategy that paid regard to the CIPFA Management Code of Practice and the CIPFA Prudential Code.

The Council had an ambitious capital programme supporting investment into services and standalone projects supporting its corporate objectives of regeneration, delivering homes and the infrastructure to enable the local economy to fulfil its potential. There was currently a high risk to the affordability of the Council’s capital programme as borrowing would need to increase significantly and external funding sources utilised despite the volatility of interest rates.  Those projects set out in the provisional capital programme would require further Executive endorsement before they could be progressed. New project proposals were set out in the report including, significantly for the General Fund, upgrades to the Spectrum Leisure Centre and funding to facilitate the operational move of the depot. Both projects would undergo business case scrutiny, including potentially repositioning the depot cost to the Weyside Urban Village Project.

There would be a further £20 million investment in the Council’s housing stock during the period 2023-24 adding to the £24.5 million spent during 2022-23 which would be funded from reserves. There would be £145 million remaining in the Housing Revenue Account Business Plan to spend either on further improvements or acquiring additional stock, potentially from Guildford Park Road or Weyside Urban Village.

The capital programme would have revenue implications for up to fifty years with regard to infrastructure projects. The Chief Finance Officer must be assured that the programme was prudent, affordable and sustainable. Therefore, the report was measured against several prudential indicators as set out in the report.

Although the Council was experiencing financial pressure due to the external economic circumstances, there had been benefits such as the increase in value of the asset base in the last year by around £60 million, whilst debt had reduced by £40 million. The net asset position was over three-quarters of £1 billion, whilst peak borrowing was projected to remain under 30%.

The Executive was asked to consider removing the relocation of the bus station budget as, although there was uncertainty over the future redevelopment of North Street, the Council would not undertake such a project independently.

The prudential indicators, minimum revenue provision policy and the Capital and Investment Strategy remained unchanged. The flexible use of capital receipts policy was updated to cover costs associated with the collaboration with Waverley Borough Council.

There was a provisional capital entry in the report of £1.35 million to spend on North Street by 2030 which was queried. There would be a thorough  ...  view the full minutes text for item 78

The Council considered a report on the capital and investment strategy, which gave a high-level overview of how capital expenditure, capital financing and treasury management activity contributed to the provision of local public services along with an overview of how associated risk was managed and the implications for future financial sustainability.

Decisions made now, and during the period of the strategy on capital and treasury management would have financial consequences for the Council for many years into the future. The report therefore included details of the capital programme, any new bids/mandates submitted for approval plus the requirements of the Prudential Code and the investment strategy covering treasury management investments, service investments, and commercial investments.  The report had also covered the requirements of the Treasury Management Code and the prevailing Statutory Guidance.

Councillors noted that in order to achieve the ambitious targets within the Corporate Plan, the Council needed to invest in its assets, via capital expenditure, which was split into the General Fund (GF) and Housing Revenue Account (HRA).

All projects, regardless of the fund, would be funded by capital receipts, grants and contributions, reserves, and finally borrowing.  When preparing the budget reports, it was not known how each scheme would be funded and, in the case of regeneration projects, what the delivery model would be.  The report had showed a high-level position.  The business case for each individual project would set out the detailed funding arrangements for the project.

The Council noted that some capital receipts or revenue income streams might arise as a result of regeneration schemes, but in most cases the position was currently uncertain, and it was too early at this stage to make assumptions.  It was likely that there would be cash-flow implications of the development schemes, where income would come in after the five-year time horizon of the report and the expenditure incurred earlier in the programme.

The Council had an underlying need to borrow for the GF capital programme of £298 million between 2021-22 and 2026-27.  Officers had put forward bids, with a net cost over the same period of £16.5 million, increasing this underlying need to borrow to £315.5 million should these proposals be approved for inclusion in the programme.

The capital programme included several significant regeneration schemes, which it was assumed would be financed from GF resources.  However, subject to detailed design of the schemes, there might be scope to fund them from HRA resources rather than the GF resources in due course.  Detailed funding proposals for each scheme would be considered when their Outline Business Case was presented to the Executive for approval.

The main areas of expenditure (shown gross), as set out in the report, were:

·       £218 million: Weyside Urban Village (WUV)

·       £63.5 million: strategic property purchases – it was proposed to widen the remit of this fund to allow redevelopment opportunities (for example estate redevelopments)

·       £32 million: North Downs Housing (NDH)

·       £28 million: Ash road bridge and footbridge

As part of the savings programme and in realigning the  ...  view the full minutes text for item 97

Decision:

Subject to Council approving the budget on 9 February 2022:

1.     That the following schemes be removed from the capital programme:

a)    SMC Ph 3 - £5.895 million, keeping £150,000 on the provisional programme.  The £5.895 million will move onto the capital vision

b)    Stoke Park masterplan enabling costs – PL56(p) - £500,000 – will move to the vision and come back with an updated business case

c)     Sports Pavilions replace water heaters (PL58(p)) £154,000 – will come back with a further bid if required

2.     That the new bids, as shown in Appendix 2 to the report submitted to the Executive be included in the provisional capital programmes.

3.     That £10.124 million for Foxburrows scheme be transferred from the HRA provisional programme to the HRA approved programme.

4.     That the affordability limit for schemes to be funded by borrowing be agreed as set out in paragraph 4.31 of the report and in Appendix 1 thereto.

5.     That the remit of the Strategic property fund budget be widened to allow estate redevelopments to be funded from the budget.

The Executive made the following recommendations to Council (9 February 2022):

1.     That the General Fund and HRA capital estimates, as shown in Appendices 3 to 12 to the report be approved, as amended to include the bids approved by the Executive at its meeting on 25 January 2022.

2.     That the Minimum Revenue Provision policy, referred to in section 5 of the report, be approved.

3.     That the capital and investment strategy be approved, specifically the investment strategy and Prudential Indicators contained within the report and Appendix 1.

4.     That the updated flexible use of capital receipts policy at Appendix 17 be approved.

Reasons:

1.     To enable the Council to approve the capital and investment strategy for 2022-23 to 2026-27

2.     To enable the Council, at its budget meeting on 9 February 2022, to approve the funding required for the new capital schemes proposed

Other options considered and rejected by the Executive:

None.

Details of any conflict of interest declared by the Leader or lead councillors and any dispensation granted:

None.

The capital and investment strategy gave an overview of how capital expenditure, capital financing and treasury management activity contributed to the provision of local public services.  The strategy also detailed how associated risks were managed and the implications for future sustainability. Decisions made presently and during the period of the strategy on capital and treasury management would have financial consequences for the Council for many years into the future.

The Executive considered a report which included details of the capital programme, new bids or mandates submitted for approval; plus the requirements of the Prudential Code and the investment strategy covering treasury management investments, service investments and commercial investments.  The report also covered the requirements of the Treasury Management Code and the prevailing Department for Levelling Up, Housing and Communities (DLUHC) Statutory Guidance.

The Lead Councillor for Resources introduced the report.

Capital and the treasury were heavily interlinked. The strategy included non?commercial and investment information as required by the government and the Chartered Institute of Public Finance and Accountancy (CIPFA). The report included the General Fund and the Housing Revenue Account (HRA) capital programmes. The revised CIPFA prudential and treasury codes had been published in December and the changes would be incorporated in the 2023-24 report. The Government had announced an extension to the use of flexible capital receipts policy and the Executive was asked to approve this for use against the Council’s transformation programmes. There were new bids to the General Fund of £16.6 million over the five-year period increasing the Council’s underlying need to borrow to £316 million. The affordability calculation had been updated for the year showing the net cost of the non-income generating schemes and the availability of in year resources to fund borrowing costs. There were risk indicators throughout the report and appendices as were prudential indicators.

The HRA capital programme was anticipating a £24.5 million spend on renovation and repairs of the Council’s housing stock due to changes in legislation and to catch up following delays during the past two years caused by the pandemic. A number of other smaller schemes were progressing whilst some needed additional budget. Those schemes could be moved from the provisional budget to be delivered.  The investment budget stood at £1.2 million for 2022-23 and interest paid was £5.74 million, £5 million of which was in the HRA.

The Joint Executive Advisory Board (JEAB) had been invited to consider this report at its meeting held on 10 January 2022 and the comments arising were set out in the Supplementary Information Sheet. Councillor Ruth Brothwell chaired the JEAB meeting and was in remote attendance. Councillor Brothwell confirmed that the JEAB review of the report had been thorough and had nothing further to add.

At its meeting held on 20 January 2022, the Corporate Governance and Standards Committee had considered the Capital and Investment Strategy and had endorsed the recommendations to the Executive and Council (as set out in the Executive report), and the comments arising during the debate were set  ...  view the full minutes text for item 65

The Committee considered a report on the Council’s capital and investment strategy, which gave a high-level overview of how capital expenditure, capital financing and treasury management activity contributed to the provision of local public services along with an overview of how associated risk was managed and the implications for future financial sustainability.

Decisions made now, and during the period of the strategy on capital and treasury management would have financial consequences for the Council for many years into the future. The report therefore included details of the capital programme, any new bids/mandates submitted for approval plus the requirements of the Prudential Code and the investment strategy covering treasury management investments, service investments, and commercial investments.  The report had also covered the requirements of the Treasury Management Code and the prevailing Statutory Guidance.

The Committee noted that in order to achieve the ambitious targets within the Corporate Plan, the Council needed to invest in its assets, via capital expenditure, which was split into the General Fund (GF) and Housing Revenue Account (HRA).

All projects, regardless of the fund, would be funded by capital receipts, grants and contributions, reserves, and finally borrowing.  When preparing the budget reports, it was not known how each scheme would be funded and, in the case of regeneration projects, what the delivery model would be.  The report showed a high-level position.  The business case for each individual project would set out the detailed funding arrangements for the project.

The Committee noted that some capital receipts or revenue income streams might arise as a result of regeneration schemes, but in most cases the position was currently uncertain, and it was too early at this stage to make assumptions.  It was likely that there would be cash-flow implications of the development schemes, where income would come in after the five-year time horizon of the report and the expenditure incurred earlier in the programme.

The Council had an underlying need to borrow for the GF capital programme of £298 million between 2021-22 and 2026-27.  Officers had put forward bids, with a net cost over the same period of £16.5 million, increasing this underlying need to borrow to £315.5 million should these proposals be approved for inclusion in the programme.

The capital programme included several significant regeneration schemes, which it was assumed would be financed from GF resources.  However, subject to detailed design of the schemes, there might be scope to fund them from HRA resources rather than the GF resources in due course.  Detailed funding proposals for each scheme would be considered when their Outline Business Case was presented to the Executive for approval.

The main areas of expenditure (shown gross), as set out in the report, were:

·       £218 million: Weyside Urban Village (WUV)

·       £63.5 million: strategic property purchases – it was proposed to widen the remit of this fund to allow redevelopment opportunities (for example estate redevelopments)

·       £32 million: North Downs Housing (NDH)

·       £28 million: Ash road bridge and footbridge

As part of the savings programme and in realigning  ...  view the full minutes text for item 52