Composite Capital Budget 2023-28 & Housing Investment Programme 2023-28 - Monitoring Report No. 3
Perth and Kinross Council · 31 January 2024
Back to Finance and Resources Committee — 31 January 2024 and its agenda
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PERTH & KINROSS COUNCIL Finance & Resources Committee 31 January 2024 COMPOSITE CAPITAL BUDGET 2023/28 & HOUSING INVESTMENT PROGRAMME 2023/28 – MONITORING REPORT No.3 Report by Head of Finance (Report No. 24/41) 1. PURPOSE 1.1 This report provides a summary position to date for the 5-year Composite Capital Budget and the 5-year Housing Investment Programme for 2023/24 to 2027/28 and seeks approval for adjustments to the programmes. 2. RECOMMENDATIONS 2.1 It is recommended that the Committee: (i) notes the contents of the report. (ii) approves the proposed adjustments to the five-year Composite Capital Budget 2023/24 to 2027/28 set out in Sections 5 and 6 of the report and summarised in Appendices I and II. (iii) approves the proposed adjustments to the Housing Investment Programme Budget 2023/24 to 2027/28 set out in Section 7 of the report and summarised in Appendix III. 3. STRUCTURE 3.1 The report is structured over the following sections: • Section 4: Background / Main Issues • Section 5: Composite Capital Programme – Gross Capital Resources • Section 6: Composite Capital Programme – Expenditure • Section 7: Housing Investment Programme • Section 8: Summary 4. BACKGROUND / MAIN ISSUES 4.1 The Finance & Resources Committee approved an updated five-year gross Composite Capital Budget for 2023/24 to 2027/28 totalling £623,484,000 and a five-year gross Housing Investment Programme for 2023/24 to 2027/28 totalling £92,205,000 at its meeting on 22 November 2023 (report 23/316 refers). 4.2 This report advises on expenditure to 30 November 2023, and the latest estimate of the projected outturn for each of the years to 2027/28 for the Composite Programme and for the Housing Investment Programme.
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5. COMPOSITE CAPITAL PROGRAMME – GROSS CAPITAL RESOURCES 5.1 The current estimated total gross capital resources (which includes movements in Capital Receipts, Capital Grants, Contributions and borrowing) available over the five years 2023/24 to 2027/28 amount to £623,916,000. 5.2 Movements from the revised Composite Capital Budget approved on 22 November 2023 for the five years are summarised in the table below, and the constituent elements for each year are shown in Appendix I. Total Gross Composite Capital Resources Approved 22 November 2023 Current Estimate Movement £’000 £’000 £’000 2023/24 196,328 191,182 (5,146) 2024/25 201,340 199,095 (2,245) 2025/26 111,750 97,252 (14,498) 2026/27 65,582 72,809 7,227 2027/28 48,484 63,578 15,094 Total 623,484 623,916 432 5.3 The overall movement in total Gross Resources for the 5 years 2023/24 to 2027/28 shown at Section 5.2 above can be summarised as follows: £’000 Increase in Ring-Fenced Receipts (Section 5.4) 9 Increase in Capital Grants (Section 5.5) 305 Increase in Third Party Contributions (Section 5.6) 57 Increase in Borrowing Requirement (Section 5.7 and 5.8) 61 Increase in Gross Capital Resources (Section 5.2) 432 5.4 There has been some rephasing of General Fund and Commercial Property receipts across the 5-year programme but no change to the overall totals under each category. However, there is an increase in Ring-Fenced receipts of £9,000 in the current year (disposal of recycling containers). 5.5 The Scottish Government have announced the allocation of the Inspiring School Age Childcare Spaces programme grant, with the Council being allocated a Capital Grant of £105,000 in 2023/24 (Section 6.2.2 refers). In addition, the Scottish Government has also allocated a further £200,000 in 2023/24 under the Cycling Walking & Safer Streets programme (Section 6.3.2 refers). 5.6 Third Party Contributions have increased by £57,000 in 2023/24, relating to Structural Maintenance (£28,000, Section 6.3.3 refers), Community Greenspace (£4,000) and Property Compliance works at Perth Concert Hall (£25,000).
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5.7 The projected borrowing requirement in 2023/24, which is effectively the balancing item for resources, is £142,121,000. This is £4,628,000 lower than the borrowing requirement approved by the Committee on 22 November 2023. 5.8 The total new borrowing requirement in the subsequent years 2024/25 to 2027/28 has increased by £4,689,000 to £355,916,000, resulting in an overall increase of £61,000 in the total level of borrowing across the whole 5-year programme. The movement in borrowing is summarised as follows: 2023/24 2024/25 2025/26 Later Years Total £’000 £’000 £’000 £’000 £’000 Increase in Prudential Borrowing – Recycling Containers Replacement Programme (net of receipts) (Section 6.3.7) 46 15 0 0 61 Movements arising from re- phasing of expenditure and receipts (Appendix II) (4,674) (2,159) (14,498) 21,331 0 Increase/(Decrease) in Borrowing Requirement (4,628) (2,144) (14,498) 21,331 61 5.9 The chart below shows the Capital Resources required to fund the 2023/24 Composite Capital Programme following the proposed budget adjustments detailed in this report. 74.3% 21.7% 0.1% 1.5% 1.0% 1.4% 4.0% Projected Capital Resources 2023/24 (December 2023) Borrowing (£142.121M) Grants (£41.479M) Tay City Deal (£0.267M) Developer Contributions (£2.847M) Third Party & Revenue Contributions (£1.822M) Receipts (£2.646M) £Million
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6. COMPOSITE CAPITAL PROGRAMME – EXPENDITURE 6.1 Total Expenditure and Proposed Budget Adjustments to the Current Programme 6.1.1 Total expenditure (net of grants and contributions) to 30 November 2023 on the Composite Capital Programme is detailed in Appendix II and summarised as follows: Projected Outturn (£’000) Net Expenditure to 30 November 2023 (£’000) % of Projected Outturn Education & Children’s Services 56,744 29,132 51% Communities 102,371 55,050 54% Health and Social Care 1,303 403 31% Corporate & Democratic Services 9,382 3,828 41% Total Net Capital Expenditure 169,800 88,413 52% 6.1.2 A comprehensive monitoring exercise has been carried out, which is detailed in Appendix II. The most significant features are discussed below. 6.1.3 In common with all Scottish local authorities and public and private sector bodies, the Council has experienced significant inflationary pressures on the delivery of its Capital investment programme over the past few years. 6.1.4 The Building Cost Information Service (BICS) publish well established cost indices for the construction industry. The BCIS All-in Tender Price Index, which shows the general movement on construction pricing, currently forecasts a 4.0% increase in construction costs in the current year compared to 9.4% last year, indicating a continuing slow down in construction inflation. However, the current conflict in the Middle East may significantly impact both haulage costs for raw materials and fuel costs and the situation will be kept under review. 6.2 Education and Children’s Services 6.2.1 The Executive Director (Education & Children’s Services) has reviewed the programme for their Service and proposes the following budget adjustments. 6.2.2 The Scottish Government have provided a grant of £105,000 towards Inspiring School Age Childcare Spaces with the expenditure budget for Investment in the Learning Estate increased to reflect the funding. The grant will be used to support projects which expand and improve school-age childcare at Letham Primary School, Fairview School and also to support the Westbank Outdoor Project. 6.2.3 The remaining movements all reflect the realigning of existing budgets and programmes of works, the most significant of which are summarised below:
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Project 2023/24 £’000 2024/25 £’000 Later Years £’000 Description Blairgowrie Recreation Centre (950) 950 0 Rephasing of budget to align with latest estimated cashflow from the contractor. There is no change to the planned completion date. New Primary School at Bertha Park site (500) (7,500) 8,000 Programme revised in line with current/anticipated housebuilding in the catchment area. Zoning of some pupils may be required in the intervening years. Perth Grammar School (620) 620 0 Planned works rephased by one year to reflect diversion of resources towards replacement of Reinforced Autoclaved Aerated Concrete (RAAC) roof during 2023. 6.2.4 On 2 November 2022, the Learning and Families Committee approved the catchment for a new primary school at Bertha Park site, with a target completion date of August 2026. (Report No. 22/265 refers). The Council continues to analyse house building data in the catchment area and the forecast pupil numbers generated from the new housing. Given the recent economic slowdown in house building and the localised pupil numbers to date, a review of the timescales associated with the need for a new primary school in this area is being undertaken. The outcome of this review will be reported to the Finance & Resources Committee at a future date. In the meantime, the project’s budget has been rephased by 2 years pending the outcome of the review with the recognition that there may be some additional revenue costs from re-zoning pupils, where necessary, during this period. 6.2.5 All of the above proposed adjustments have been reflected in Appendices I & II. 6.3 Communities 6.3.1 The Executive Director (Communities) has reviewed the programme for their Service and proposes various budget adjustments, the most significant of which are described below. 6.3.2 Within Traffic & Road Safety, the Scottish Government has provided additional grant funding of £200,000 under the Cycling, Walking and Safer Routes programme. It is proposed that this is allocated to the Schools Road Safety Measures programme (£66,000) and the Cycling Walking & Safer Routes programme (£134,000). Itis also proposed to move £119,000 of the budget for the 20mph Signage Programme (Schools) from the current year to next year to focus resources on the delivery of grant funded Road Safety Measures.
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6.3.3 An additional £28,000 of Third-Party Contributions have been received towards the Structural Maintenance programme in 2023/24. This comprises £14,000 from the Forestry Commission for Timber Routes and £14,000 towards road adoption. 6.3.4 Within Asset Management – Bridges, a review has been carried out to assess the work that can be completed in the current year and future years with the current staff capacity. Accordingly, it is proposed that the budgets for Dalhenzean Culvert (£279,000) and Dunkeld Golf Course Bridge (£225,000) are transferred back to the Bridge Refurbishment Programme, as there is currently no work scheduled on these projects within the current capital programme. It is, therefore, proposed to rephase a total of £498,000 across the Bridge Refurbishment Programme as set out in the table below to better reflect the ability for works to be scheduled: 2023/24 £’000 2024/25 £’000 2025/26 £’000 2026/27 £’000 2027/28 £’000 (142) 245 126 127 (356) 6.3.5 Within Improvement Schemes, it is proposed to transfer £190,000 from the current year into next year, to allow a review of any further works required once the A977/B9097 junction alignment works have been assessed for their effectiveness. 6.3.6 Within Other Planning Projects, it is proposed that the 2023/24 budget for Perth Eco-Innovation Park of £3,000,000 is moved to next year as there is no anticipated expenditure in the current year pending ongoing discussions with the landowners. Consequently, the Tay Cities Deal funding of £990,000 also needs to be re-phased. 6.3.7 Within the Prudential Borrowing Projects budget, it is proposed to increase the borrowing for Recycling Containers, Oil Banks & Battery Banks by £70,000 over this year and next year to purchase additional skips and cardboard compactors to facilitate the twin stream recycling project. This is offset by an increase of £9,000 in the income received from the disposal of replaced containers, which reduces the required increase in borrowing. 6.3.8 All the above proposed adjustments, together with other small movements, have been reflected in Appendices I & II. 6.4 Corporate & Democratic Services 6.4.1 The Chief Operating Officer has reviewed the programme for their Service. There are only small movements proposed, and these have been reflected in Appendix II. 7. HOUSING INVESTMENT PROGRAMME 7.1 The total current estimated expenditure, net of contributions, for the Housing Investment Programme over the 5 years 2023/24 to 2027/28 remains unchanged at £92,205,000. Movements from the previous estimates
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approved by the Committee on 22 November 2023 are summarised in the table below and detailed in Appendix III. Approved 22 November 2023 Current Estimate Movement £’000 £’000 £’000 2023/24 22,238 18,738 (3,500) 2024/25 13,503 18,831 5,328 2025/26 17,253 17,248 (5) 2026/27 17,644 16,283 (1,361) 2027/28 21,567 21,105 (462) Total 92,205 92,205 0 Total Expenditure to 30 November 2023 (Housing Investment Programme) 7.2 Net expenditure for 2023/24 to 30 November 2023 amounts to £12,454,000 and receipts amount to £8,000. Therefore, the borrowing requirement for the year to date is £12,446,000. 7.3 The Executive Director (Communities) has reviewed the Housing Investment Programme and proposes the budget adjustments outlined below. 7.4 It is proposed to transfer £462,000 from the New Build Future Developments Budget in 2027/28 to the Council House Buy-Back programme in 2023/24 to reflect the additional properties being purchased in the current year. This exceeds the target of 30 properties to be purchased this year. 7.5 Phase 4 of the Central Heating programme is concluding with Phase 5 now due to commence. In order to facilitate this, it is proposed to re-allocate amounts from the Scottish Housing Quality Standard (SHQS) Future Developments budget to the Central Heating budget with phasing as follows: 2023/24 £’000 2024/25 £’000 2025/26 £’000 2026/27 £’000 Central Heating 71 620 620 811 SHQS Future Developments 0 0 0 (2,122) 7.6 Based on the number of installations now expected within the Energy Efficiency measures programme, it is proposed that £625,000 of the budget is accelerated from 2025/26 and £45,000 is accelerated from 2024/25 into the current year (£670,000). 7.7 Delays have arisen in commencing the contract for works on Multi-Storey Flats with improvement works unlikely to start in the current year due to the significant investigatory work required to ensure the works meet new climate change targets and to allow for a full scope of works to be established. It is, therefore, proposed that £1,815,000 of this budget is moved into next year. Similarly, the only costs anticipated to be incurred in the current year towards the St Catherine’s Square Redevelopment are professional fees, and it is proposed that the remainder of the budget (£2,975,000) is moved from the current year to next year.
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7.8 The remaining minor budget adjustments are proposed: Project 2023/24 £’000 2024/25 £’000 Later Years £’000 Description General Capital Works 50 0 0 Fund the cost of Alyth Pumping Station and Rorrie Terrace adoption works from SHQS Future Developments budget. SHQS Future Developments 0 0 (50) Lynedoch Road New Builds 37 0 0 Fund additional works instructed throughout the construction at Lynedoch Road from New Build Future Developments budget. New Build Future Development 0 (37) 0 7.9 The above proposed adjustments do not impact the borrowing requirement over the 5-year programme. However, there is an increase in capital receipts of £8,000 in the current year, therefore, the total borrowing requirement has reduced by this amount to £80,704,000. 8. BUDGET OVERVIEW 8.1 The projected net expenditure outturn in 2023/24 for the Composite Capital Budget is £169,800,000 and represents 95% of the original 2023/24 budget approved on 26 April 2023 (£178,033,000). The revised budget is based on the latest projections of expenditure and all budget adjustments outlined within this report. 8.2 Net expenditure to 30 November 2023 on the Composite Capital Budget is £88,413,000 and represents 52% of the proposed revised budget for 2023/24 of £169,800,000. This level of expenditure is higher than normal at this stage of the financial year, and reflects several large projects currently on-site, notably Destiny Bridge (formerly the Cross Tay Link Road project); the Perth High School replacement project and Blairgowrie Recreation Centre. 8.3 The projected net expenditure outturn in 2023/24 for the Housing Investment Programme is £18,738,000 and represents 92% of the original 2023/24 budget approved on 26 April 2023 (£20,422,000). The reduction reflects the rephasing of expenditure on the Multi-Storey Flats and St. Catherines Redevelopment projects from the current year into 2024/25. 8.4 Net expenditure to 30 November 2023 on the Housing Investment Programme is £12,454,000 which represents 66% of the proposed revised budget for 2023/24 of £18,738,000. 8.5 The Council’s total Borrowing Requirement to 30 November 2023, based on the Composite and Housing Investment Programmes, is £85,721,000. The estimated overall Council Borrowing Requirement for 2023/24 as a whole has reduced by £8,136,000 to £158,796,000 as a result of the monitoring
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adjustments reflected within this report. Over the whole 5-year programme, there is only a small increase of £61,000 in the overall level of borrowing, relating to Communities Prudential Borrowing projects. 8.6 While the projections have been based on a comprehensive monitoring exercise, they continue to remain subject to uncertainty due to ongoing inflationary pressures in the current economic environment. Author(s) Name Designation Contact Details John Jennings Senior Accountant CHXFinance@pkc.gov.uk Approved Name Designation Date Stewart MacKenzie Head of Finance 18 January 2024 Clare Mailer Director (Strategy, People & Resources)
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ANNEX 1. IMPLICATIONS, ASSESSMENTS, CONSULTATION AND COMMUNICATION Strategic Implications Yes / None Community Plan / Single Outcome Agreement None Corporate Plan Yes Resource Implications Financial Yes Workforce Yes Asset Management (land, property, IST) Yes Assessments Equality Impact Assessment Yes Strategic Environmental Assessment Yes Sustainability (community, economic, environmental) Yes Legal and Governance None Risk None Consultation Internal Yes External None Communication Communications Plan None 1. Strategic Implications Corporate Plan 1.1 The Council’s Corporate Plan 2022 – 2027 lays out seven outcome focussed strategic objectives which provide clear strategic direction, inform decisions at a corporate and service level and shape resources allocation. They are as follows: • Tackling Poverty • Tackling climate change and supporting sustainable places • Growing a sustainable and inclusive local economy • Enabling our children and young people to achieve their full potential • Protecting and caring for our most vulnerable people • Supporting and promoting physical and mental wellbeing • Placing communities at the heart of how we work 1.2 This report relates to all of these objectives. 2. Resource Implications Financial 2.1 There are no direct financial implications arising from this report other than those reported within the body of the main report.
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Workforce 2.2 There are no direct workforce implications arising from this report other than those reported within the body of the main report. Asset Management (land, property, IT) 2.3 There are no direct asset management implications arising from this report other than those reported within the body of the main report. 3. Assessments Equality Impact Assessment 3.1 Under the Equality Act 2010, the Council is required to eliminate discrimination, advance equality of opportunity, and foster good relations between equality groups. Carrying out Equality Impact Assessments for plans and policies allows the Council to demonstrate that it is meeting these duties. 3.2 The information contained within this report has been considered under the Corporate Equalities Impact Assessment process (EqIA) and has been assessed as not relevant for the purposes of EqIA. Strategic Environmental Assessment 3.3 The Environmental Assessment (Scotland) Act 2005 places a duty on the Council to identify and assess the environmental consequences of its proposals. 3.4 The information contained within this report has been considered under the Act. However, no action is required as the Act does not apply to the matters presented in this report. Sustainability 3.5 Under the provisions of the Local Government in Scotland Act 2003 the Council has to discharge its duties in a way which contributes to the achievement of sustainable development. In terms of the Climate Change Act, the Council has a general duty to demonstrate its commitment to sustainability and the community, environmental and economic impacts of its actions. 3.6 The information contained within this report has been considered under the Act. However, no action is required as the Act does not apply to the matters presented in this report. 4. Consultation Internal 4.1 The Chief Executive and the Executive Directors have been consulted in the preparation of this report.
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2. BACKGROUND PAPERS No background papers, as defined by Section 50D of the Local Government (Scotland) Act 1973 (other than any containing confidential or exempt information) were relied on to any material extent in preparing the above report. 3. APPENDICES • Appendix I – Composite Capital Programme - Estimated Capital Resources 2023/24 to 2027/28 • Appendix II – Composite Capital Programme - Summary of Capital Resources and Expenditure 2023/24 to 2027/28 • Appendix III – HRA Capital Investment Programme – Summary of Capital Resources and Expenditure 2023/24 to 2027/28 • Appendix IV – Significant Capital Projects Progress Update