Housing Revenue Account Budget & Rent Levels 2025-2026 complete
Renfrewshire Council · 27 February 2025
Back to Council — 27 February 2025 and its agenda
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PROCEDURE TO BE FOLLOWED AT THE MEETING OF RENFREWSHIRE COUNCIL TO BE HELD ON 27 FEBRUARY 2025 DURING CONSIDERATION OF ITEM 5 CONCERNING THE HOUSING REVENUE ACOUNT BUDGET, RENT LEVELS 2025/2026 AND HOUSING CAPITAL INVESTMENT PLAN 2025/2026-2029/2030 The purpose of this note is to give Members advance notice of the procedure which Provost Cameron has agreed should be followed at the Meeting of the Council on 29 February 2024 viz: 1. The Convener of the Communities and Housing Policy Board (the Convener) will make her budget statement for financial year 2025/2026 and move as appropriate. She will then speak to the principal points of her proposals. The motion will require to be seconded. 2. For the purposes of the subsequent discussion and voting, the Convener's proposals will be taken as one motion. 3. An opportunity will then be given to the Leaders of the opposition groups and any other Members to move, and to have duly seconded, comprehensive amendments to the motion (i.e. taking together budget proposals, the rent levels and the capital investment plans). 4. The motion and any amendments will require to be produced in writing and a copy given to each of the Members present prior to being spoken to at the meeting. Provost Cameron may then adjourn the meeting for 20 minutes to allow Members to consider the terms of the motion by the administration and any amendments by the opposition groups or other Members. Corporate Meeting Rooms have been arranged for the adjournment as follows: Administration – Corporate Meeting Room 2, Labour - Corporate Meeting Room 1, Conservative – Corporate Meeting Room 3, Independents – Communications Room. 5. There shall be no formal restriction upon the length of time given to the Convener and the Leaders of the opposition groups and other Members to move their respective budget statements and speak in support of the principal points of their proposals. However, Provost Cameron shall have the power to require any person speaking to limit their speech in order to facilitate the conduct of the meeting. 6. Provost Cameron will then invite other Members to take part in the debate. 7. The debate will conclude with Provost Cameron giving the Convener an opportunity to reply. 8. A vote or votes will then be taken in accordance with the provisions of standing orders.
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___________________________________________________________________ To: Council On: 27 February 2025 ___________________________________________________________________ Report by: Director of Environment, Housing & Infrastructure and Director of Finance & Resources ___________________________________________________________________ Heading: Housing Revenue Account Budget & Rent Levels 2025/26 to 2027/28 and Housing Capital Investment Plan 2025/26 to 2029/30 ___________________________________________________________________ 1. Summary 1.1 This report details the proposed Housing Revenue Account (HRA) budget for financial year 2025/26 and sets out the information which allows consideration of a multi-year rent strategy for 2025/26 to 2027/28. 1.2 The report highlights the impact of economic pressures on the HRA and sets out any operational pressures that have emerged, and the adjustments to budgets and resources required to deal with these pressures. 1.3 The report also provides members with results from the consultation process with tenants, regarding the multi-year rent setting process. The consultation process provided two options for tenants to select from. 1.4 The majority of tenants (69%) support a 7.5% rent increase in 2025/26, 7.5% rent increase in 2026/27 and 7.0% in 2027/28 as opposed to (31%) who supported an 8.0% rent increase in 2025/26, 8.0% rent increase in 2026/27 and 7.0% in 2027/28. 1.5 The preferred option includes additional investment to double the capacity of the Neighbourhood improvements teams to four teams – one for every Local Area Housing Team - making environmental improvements to the grounds and areas around our homes. 1.6 The preferred option also includes additional investment to establish a £600,000 YouDecide Tenant Fund for tenants to decide how it is best spent over the three years from 2025 to 2028.
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1.7 The report also details the Housing Capital Investment Plan for 2025/26 to 2029/30, which will deliver a total investment of £292m in the Council’s housing stock over the 5-year period. It is anticipated that this level of investment will attract £34m of government grant for new builds and this results in a net capital programme amounting to £258m. 1.8 In setting the 2025/26 HRA budget, members may wish to consider the medium and longer-term financial context for the HRA and note the planning assumption of CPI+1% rent increases in the financial years beyond the 3-year period 2025/26 to 2027/28 as well as considering the ongoing risks and challenges outlined in this report. ___________________________________________________________________ 2. Recommendations It is recommended that the Council: 2.1 considers the report and approves the three-year rent strategy which includes an average weekly rent increase of £7.15, which equates to 7.5% for all house rents and lock-ups for 2025/26; 2.2 notes the findings of the recent Tenant Consultation exercise; 2.3 approves the Housing Revenue Account Budget for financial year 2025/26 as detailed in Appendix 2; 2.4 approves the Housing Capital Investment Plan 2025/26 to 2029/30 as detailed in Appendix 3 of the report; 2.5 approves the increased services charges for 2025/26 as detailed in section 4.11. within the report; and 2.6 notes the continuing requirement to achieve best value in the commissioning of works by having an optimum workflow over the 5 years of the investment plan and authorises the Director of Environment, Housing and Infrastructure to liaise with the Director of Finance and Resources to re-profile the capital programme and available resources, as necessary, in line with the appropriate limits established under the Council’s capital prudential framework arrangements. ___________________________________________________________________ 3. Background and Medium-Term Financial Context 3.1. The HRA operates a rolling 30-year Business Plan model, which is the standard operating practice amongst local authorities and Registered Social Landlords. The 30-year basis of the model reflects the need for a long-term planned approach to the replacement of major items such as rewiring, central heating, etc., aligned to the lifecycles of these elements. 3.2. The model ensures that planned rental income from the estimated 11,606 average number of lettable properties in 2025/26 is sufficient over the term of the plan to cover debt and servicing capital expenditure, including significant
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investment and regeneration initiatives, together with funding the annual costs of maintaining the housing stock and all HRA annual operating costs including staffing. 3.3. The Business Plan model is reviewed to take account of the adjusted base budget position from the previous year and to update any key assumptions, economic factors and known or emerging risks. This review process allows consideration to be given to the setting of rent levels for the forthcoming and future financial years through effective scenario planning. 3.4. The 30-year Business Plan model currently assumes 2.2% CPI (Consumer Price Index model) for the 2025/26 financial year, as in previous years, this reflected the rate in September of the current financial year. The Business Plan assumes that CPI is on a decreasing trend until reaching the Bank of England’s 2.0% target by 2026/27. 3.5. Different levels of inflation have been applied to the main cost drivers for 2025/26 to reflect the expected impact more accurately on Renfrewshire’s cost base. This is reviewed annually across the cost drivers to reflect the actual levels of inflation impacting on the base costs. Over the longer term, cost increases revert to the assumed CPI forecasts noted in 3.4. 3.6. In the past three-years while inflation on costs within the HRA has risen considerably, the HRA maintained lower than inflationary rent increases during this period to minimise the in-year impact further on our tenants. 3.7. The three-year rent strategy provides tenants with a longer-term perspective on planned rent increases, moving away from the previous annual proposals. However, these proposals introduce a risk that inflation could exceed the projected levels. While some contingency is included within the forecasts, the level of inflation will need to be closely monitored to determine if corrective action is required in future years. 3.8. Members will recall that following a strategic review of the HRA it was determined that there was capacity in the HRA to fund an additional £100m investment and regeneration programme over the next decade. Council approved the proposals to take forward this first phase of investment, focusing on eight areas and around 1,100 council properties. Members will also recall that the plan also includes over £30m of investment required in high-rise accommodation. The cost of repayment on borrowing to deliver this ambition increased because of the economic climate creating higher interest rates. To ensure sufficient funding in the long term, an assumption of 1% above CPI as an uplift to rents is assumed for every year beyond 2025/26 to 2027/28 across the 30-year plan. 3.9. If a tenant is in receipt of benefits covering housing costs, they will likely be mitigated from any increased costs. Renfrewshire has close to 76% of tenants in receipt of some form of support for their housing costs. A rent increase would result in some tenants receiving more Housing Benefit and some existing non-claimants becoming entitled to Housing Benefit. Therefore, unless their personal circumstances change, most tenants will continue to pay the same amount towards their rent, with Housing Benefit covering the
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remaining cost. The tenancy support fund established in 2023/24 to provide additional support to tenants in financial hardship remains within the budget proposals. ___________________________________________________________________ 4. HRA Budget Planning Assumptions for 2025/26 4.1. The rental income generated by the HRA must support service delivery, the costs of appropriately maintaining the housing stock, and the loan debt related costs to service the capital investment required in HRA assets. 4.2. The proposed budget adjustments for 2025/26 are shown across the high level HRA categories in summary form on Appendix 1 and analysed into the Policy Board revenue monitoring format in Appendix 2. To supplement the information contained in these appendices, additional contextual commentary is provided below, and this can be read in conjunction with Appendices 1 and 2. Revenue Expenditure 4.3. Supervision and Management includes the operational inflation and additional costs covering areas such as pay increases for housing staff, energy costs and insurance costs. Budget is also required for council tax, reflecting void levels which are forecast to reduce in year due to improved void performance targets. The impact of the changes to employer National Insurance contributions in 2025/26 is estimated to cost an additional £0.236m. This also includes both the allocation to increase the Neighbourhood improvements teams from two to four and £0.150m for year one of the YouDecide Tenant fund as per the budget consultation. The overall combined impact of these pressures and additional investment is an increased net budget requirement of £1.291m for 2025/26. The temporary removal of employer pension contribution budget of £1.029m in 2024/25 will require to be reinstated in 2026/27. 4.4. Housing Repairs and Maintenance is an area of budget that has been under considerable pressure due to both cost increases and post pandemic recovery demands. This includes pressures such as rising material, fuel, and labour prices to repair, maintain, and improve tenants’ homes. The budget has increased overall by £0.670m to take account of the very real and significant challenges around increasing costs. The temporary removal of Building Services employer pension contribution budget of £0.551m last year, will require to be reinstated in 2026/27. 4.5. The new grounds and estates maintenance standards, introduced in recent years are now fully implemented. An additional £0.046m has been added to the budget to cover inflation. 4.6. The void rent loss movement of £0.029m reflects the expected void rent loss projections based on the revised operational targets and the revised income collection levels. In terms of void rent loss, this reflects a targeted improvement in void performance from the 2024/25 budget.
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4.7. The bad debt provision has been increased by £0.140m, reflecting the increased income collection levels and to reflect the associated risk in relation to increasing levels of bad debt. This budget continues to include funding to provide support to tenants in financial hardship, as approved last year. In terms of bad debt levels, this reflects the same operational target as the 2024/25 budget. 4.8. The net financing costs Loan charges budget has reduced by £0.383m, and the Contribution to Capital Programme line has increased by £0.665m. The net £0.282m increase is managed through reserves movements and from the overall rent increase required in 2025/26. Revenue Income 4.9. The gross increase in Rental income (£3.770m), reflects the 7.5% increase on both house and lock-up rents. The stock movement assumptions for both houses and lock-ups are based on regeneration, demolition, and investment plans, reflected in the income assumptions. 4.10. In relation to lock-up rents, the average charge per lock-up is currently £23.15 per month and the 7.5% increase represents an average of £1.74 increase per month. A review of the existing lock-up portfolio is underway and a report on the findings of the review will be brought to the Communities and Housing Policy Board. 4.11. Other income increases by (£0.065m), reflecting minor adjustments, mainly for recovery of staffing related costs managed within the revenue expenditure budget but recovered by income. In last year’s Budget Proposals, we indicated the necessity to review the recharge models for the recovery of service charges. It was emphasised that the ongoing impact of increasing costs necessitated a review of the recovery models to ensure that costs are fairly allocated to the direct users of these additional services. In most cases, the operating costs still exceed the income recovery levels. Therefore, it is proposed to increase charges this financial year as we look to address the shortfalls across future years budgets as we transition back to full cost recovery models. Service Charge Owners Tenants 2024/25 2025/26 District Heating Calside 173 0 £13.59pm £25.11pm Sheltered Heating 0 191 £36.51pm £43.82pm Sheltered Laundrette 0 103 £2.94pm £3.52pm Laundrettes Council 0 1,704 £3.18pm £3.82pm Laundrettes Private 843 0 £16.46pm £19.76pm 4.12. The level of contingency held at the end of the year is forecast to be £5.158m within the HRA to meet future and unforeseen cost pressures, including the housing management ICT system replacement, and it is deemed that this revised level of reserves remains prudent. The housing management ICT system reserves will be utilised in part during the financial year as the project moves towards phase one implementation with drawdowns being reported to the Communities and Housing Policy Board.
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4.13. In the 2024/25 budget proposals, we noted a potential £2.000m cumulative budget deficit forecasted by 2027/28. Subject to approval, this deficit is now being addressed through the revised three-year rent strategy, which includes proposed rent increases to tackle the previously identified shortfall caused by prior years below inflation increases. ___________________________________________________________________ 5. Tenant Consultation for 2025/26 – 2027/28 Rent Increase 5.1 Renfrewshire Council has a statutory duty to consult tenants before increasing rents. To help inform the decision on rents for 2025 to 2028, consultation was undertaken during December 2024 and January 2025 involving discussion with tenant representatives and an online survey of Council tenants. 5.2 All tenants were advised by letter of the survey and by email to tenants where we hold an email address, and 1,031 tenants took part in the consultation. The survey was for a multi-year rent strategy with two options for tenants to select from. The result of the consultation was as follows: Option 1: Year % Votes Increase rent in (average £7.15 a week) 2025/26 7.5% Increase rent in 2026/27 7.5% 709 Increase rent in 2027/28 7.0% (69%) Neighbourhood improvements Double the capacity to four teams – one for every Local Area Housing Team - making environmental improvements to the grounds and areas around your homes. YouDecide Tenant Fund Establish a £600,000 YouDecide Tenant Fund for you to decide how it is best spent over the three years from 2025 to 2028. Option 1: Year % Votes Increase rent in (average £7.63 a week) 2025/26 8.0% Increase rent in 2026/27 8.0% 322 Increase rent in 2027/28 7.0% (31%) Neighbourhood improvements Double the capacity to four teams – one for every Local Area Housing Team - making environmental improvements to the grounds and areas around your homes. YouDecide Tenant Fund Establish a £1,500,000 YouDecide Tenant Fund for you to decide how it is best spent over the three years from 2025 to 2028. 5.3 The proposed rent increase of 7.5% in 2025/26 will allow the high level of planned investment to continue across the 30-year plan, and to continue to focus on this over the next 5 years to deliver improvements to energy efficiency, the delivery of the housing regeneration programme, and the implementation of the additional Neighbourhood improvement teams and YouDecide Tenant Fund set out above. ___________________________________________________________________
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6. Housing Capital Investment Plan – 2025/26 to 2029/30 6.1 Overview 6.1.1 The proposed Housing Capital Investment Plan for the 5-year period from 2025/26 to 2029/30 is attached at Appendix 3. The gross value over the 5- year period in the council’s housing stock is £292.432m. It is anticipated that this level of investment will attract £34.522m of government grant for new builds, etc., and this results in a net capital programme to be funded of £257.910m. The programme includes allowances for new build homes, related Scottish Government grants, regeneration and renewal, and the planned investment programmes required to ensure council house stock is maintained at the appropriate standards. 6.1.2 The planned net capital investment for each year is as follows: Financial Year Gross £m Income £m Net £m 2025/26 61.336 (5.000) 56.336 2026/27 67.620 (8.134) 59.486 2027/28 67.724 (4.618) 63.106 2028/29 42.498 (8.385) 34.113 2029/30 53.254 (8.385) 44.869 5-Year Total 292.432 (34.522) 257.910 The plan will be reviewed on an annual basis, incorporating an ongoing assessment of risk. 6.1.3 Authority is granted to the Director of Environment, Housing, and Infrastructure in consultation with the Director of Finance and Resources, to flexibly manage the capital investment programme as necessary to ensure optimum use of resources within the approved limits of prudential borrowing. It is proposed that this delegation remains in place over the life of the new 5- year plan detailed in Appendix 3. 6.1.4 The table below sets out the proposed composition of the plan for 2025/26 and how it will be funded. Financial Year 2025/26 Expenditure £m Income £m Net £m Planned Investment Programmes 34.431 0.000 34.431 Regeneration and New Build, etc. 26.905 0.000 26.905 Government New Build Grant 0.000 (5.000) (5.000) Other Income 0.000 (0.575) (0.575) CFCR 0.000 (4.934) (4.934) Prudential Borrowing 0.000 (50.827) (50.827) Total 61.336 (61.336) 0.000
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6.2 Planned Investment Programmes 6.2.1 Since achieving compliance with the Scottish Housing Quality Standard (SHQS) in April 2015, there has been an ongoing requirement to ensure that housing stock continues to be maintained at least at this standard. 6.2.2 The capital programme for 2025/26 to 2029/30 as per the attached Appendix 3 will deliver a total of £147.034m in planned investment programmes in existing housing stock, £31.821m in New Supply of housing stock outwith the regeneration areas and a further £113.577m included as part of the Regeneration and Renewal Plan including New Supply within regeneration areas. The capital programme for the same period will attract £34.522m of income from government grants. 6.2.3 The Council is required to ensure that the HRA has capacity to deliver on regulatory requirements and standards, including ensuring that properties meet requirements such as SHQS and EESSH. In March 2024, 85.75% of Council housing stock was compliant with the EESSH1 target (after applying allowable exemptions). 6.2.4 The Scottish Government had introduced a higher EESSH2 standard to be met by 2032, however, this has been suspended, and the review of 2023 introduced the Social Housing Net Zero Standard (SHNZS). The SHNZS proposes the replacement of EPC targets with a minimum heat demand target for homes to achieve and the replacement of heating systems with clean heating alternatives. The standard aligns with net zero requirements and fuel poverty targets. The consultation is complete, and the bill is progressing through its parliamentary stages. This bill, once enacted, will determine the final agreed targets for heat demand level and backstop dates for clean heating. This standard will impact on the housing asset management strategy post 2025, however current retrofit projects will be in line with expected standards. 6.2.5 The capital investment programme has an allowance of £28.473m for the investment requirements in high-rise properties over the next five years, including cladding, roofing, window and door replacements, foyer improvements and lift refurbishments. 6.2.6 There will continue to be a programme of heating renewals in 2025/26 as well as programmes of kitchen, bathroom, and rewiring combinations, in tenanted and void properties. 6.2.7 The main categories of planned investment programmes are: • External improvements, which include renewal of roofs, rainwater goods and external fabric; • Internal improvements, which include replacing or upgrading kitchens, bathrooms, electrical wiring, and heating systems; • Multi storey flat and sheltered housing improvements; • Other investment including disabled adaptations, asbestos removal and rotworks.
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6.2.8 The main elements of the planned investment programme for next year will include the following: 2025/26 Planned Improvements Number of Properties External fabric upgrading (existing stock) 250 External fabric upgrading (regeneration programme) 250 Window and door improvement programme 250 Kitchen, bathroom, and rewiring replacement 600 Heating renewals 750 6.3 New Build and Regeneration 6.3.1 The Housing Led Regeneration and Renewal Plan covering eight communities across Renfrewshire was approved by the Communities, Housing and Planning Policy Board on 18 January 2022. The Capital Investment Plan outlines the anticipated timetable for this significant regeneration programme for the next five years. 6.3.2 As part of the Housing-Led Regeneration and Renewal Programme, formal award of contract was issued to McTaggart Construction for the delivery of seventy new build Council homes for rent in the Howwood Road Area. 6.3.3 Over and above the Housing-Led Regeneration and Renewal Programme, a contract has also been entered into for the delivery of sixty-five new build Council homes in Gallowhill. 6.3.4 The Strategic Housing Investment Plan 2025-30 approved by the Communities and Housing Policy Board on 29 October 2024, includes provision for Scottish Government grant funding for Council new build projects within four of the eight Housing-Led Regeneration areas and two areas outwith, namely, Gallowhill and Foxbar. 6.3.5 The new build grant benchmark rate for local authorities is a 3-person equivalent benchmark of £87,763 per unit, adjusted according to the size of accommodation being delivered. The new build specification has been updated to include the quality measures required to maximise grant claims where possible (silver level as a minimum, balconies to flatted developments, space for home working / study, digital enablement, fire suppression and zero emission heating). These additional measures will incur higher capital costs but will also attract additional grant funding over and above the 3-person equivalent benchmark rate to assist the ongoing delivery of energy efficient affordable new build Council homes for tenants. ___________________________________________________________________
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Implications of the Report 1. Financial The report and appendices detail the proposed HRA budget and average weekly rent increase for 2025/26 and the Housing Capital Investment Plan for 2025/26 to 2029/30. 2. HR & Organisational Development While staffing budgets form a significant proportion of the Council’s revenue budgets, there are no direct staffing implications arising from the recommendations in this report as the expansion of the neighbourhood investment service will be provided to the service. 3. Community/Council Planning Community Plan Our Renfrewshire is thriving. Enabling communities to have their voices heard and influence the places and services that affect them by consulting tenants on the proposed changes to rents for 2025/26. The Council’s revenue and capital spend ensures that its facilities are fit for purpose and safe for the community, to maximise accessibility. Our Renfrewshire is well. Our Renfrewshire is fair. Our Renfrewshire is safe. Council Plan Reshaping our place, our economy, and our future Consulting tenants on the proposed changes to rents for 2025/26 including creating a YouDecide Tenant Fund. Improving and maintaining housing conditions for the benefit of tenants and providing assistance to tenants to mitigate the impacts of any Welfare Reform changes. Continuing housing regeneration programmes across Renfrewshire to create sustainable communities. Building strong, safe, and resilient communities Tackling inequality, ensuring opportunities for all Creating a sustainable Renfrewshire for all to enjoy Accessing supplementary external funding where available to support the achievement of the minimum energy rating under the Energy Efficiency Standard for Social Housing.
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4. Legal The council is required to set an HRA budget for 2025/26 and agree any rent changes for notification to tenants. The Council must give tenants at least 28 days’ notification in advance of any changes. 5. Property/Assets The report proposes the Housing Capital Investment Plan for 2025/26 to 2029/30. The capital expenditure noted in this report will result in lifecycle maintenance improvements to existing properties and replacement of ICT assets and infrastructure. 6. Information Technology ICT assets and revenue costs are included within these budgets, and the costs associated with the replacement of the Housing Management system including ongoing revenue and capital budget impacts. 7. Equality & Human Rights The recommendations contained within this report have been assessed in relation to their impact on equalities and human rights. No negative impacts on equality groups or potential for infringement of individuals’ human rights have been identified arising from the recommendations contained in the report. If required following implementation, the actual impact of the recommendations and the mitigating actions will be reviewed and monitored, and the results of the assessment will be published on the Council’s website. 8. Health & Safety The Capital Plan outlines investment in Council assets and facilities to ensure they remain safe and accessible in line with statutory obligations. 9. Procurement The proposed Capital Investment Plan for 2024/25 to 2028/29 will include procurement of contracts. 10. Risk The HRA Business Plan remains subject to a number of risks and economic factors such as interest rates and inflation. While these risks are reviewed as part of the HRA business planning process, a high level of uncertainty remains relating to external economic factors. This risk increases with the setting out of a 3-year rent strategy and will remain under review annually. 11. Privacy Impact There are no direct implications arising from the recommendations in this report.
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12. Cosla Policy Position Not applicable. 13. Children’s Rights There are no direct implications arising from the recommendations in this report. 14. Climate Risk Investment in Council assets improves energy efficiency, reducing the Council’s carbon footprint and helping it achieve its Net Zero by 2030 target. ___________________________________________________________________ List of Background Papers Housing Revenue Account Budget & Rent Levels 2024/25 and Housing Capital Investment Plan 2024/25 to 2028/29, 29 February 2024. ___________________________________________________________________ Author: Gordon McNeil, Director of Environment, Housing, and Infrastructure Author: Alastair MacArthur, Director of Finance& Resources