Capital Plan Summary Report
Argyll and Bute Council · 15 February 2024
Back to Budget Pack — 15 February 2024 and its agenda
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ARGYLL AND BUTE COUNCIL COUNCIL FINANCIAL SERVICES 22 FEBRUARY 2024 CAPITAL PLAN SUMMARY REPORT 1. EXECUTIVE SUMMARY 1.1 This report details the revisions proposed to the capital plan approved in February 2023 for the period 2024-25 to 2025-26 and extends the capital plan for a further year to 2026-27. The revisions are based on updated capital funding assumptions, phasing and cost changes. 1.2 The Council has experienced a reduction in the level of its General Capital Grant settlement over the last five years, falling from £12.262m in 2019-20 to £8.834m in 2024-25 which has put significant pressure on the ability to deliver the capital programme. This pressure is amplified further by the impact of the COVID-19 pandemic along with the UK exit from the European Union, the Russian invasion of Ukraine and sanctions on Russian owned entities which have resulted in significant price increases as well as disruptions to the supply chain and longer lead in times. These all have an effect on the overall contract price and make it extremely challenging to manage expenditure and the availability of supply across the life of the programme. 1.3 In February 2023 the Council approved estimated capital grant settlements for 2024-25 and 2025-26 of £9.771m to reflect what was actually received in 2023- 24. This estimation was based on the Capital Spending Review undertaken by Scottish Government which advised that the capital settlements were likely to stay constant over the next five years. 1.4 The settlement received for 2024-25, excluding any ring-fenced funding, was £8.834m therefore £0.937m less than anticipated. However the 2023-24 final settlement was £0.046m higher than budgeted for within the capital programme therefore this can offset the £0.937m reduction resulting in a funding gap of £0.891m each year. This equates to a decrease across the already approved capital programme of £1.782m for 2024-25 and 2025-26 combined. 1.5 In addition to the £8.834m general capital grant there is ring-fenced funding of £0.379m for Walking Cycling & Safer Streets which will also be built into the capital programme. 1.6 The amount of capital resources allocated to Private Sector Housing Grant (PSHG) is £1.033m per annum, similar to previous years. However, it should be noted that the amount received from Scottish Government in relation to this is only £0.941m therefore an additional allocation of £0.276m over the three year capital programme is passed to Private Sector Housing Grants. 1.7 Restricted capital funding of £5.122m is noted within Appendix 2. This relates to income which is restricted to specific projects and has been matched with expenditure against the project, thereby showing the gross cost of the project.
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1.8 The capital plan as at December 2023, including the new block allocation for 2026-27, has been compared to the estimated funding and there is a gap up to 2026-27 of £2.076m. After adjusting for the anticipated shortfalls and cost pressures as detailed within section 3.5 of this report, the total gap within the capital programme is £29.843m.
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ARGYLL AND BUTE COUNCIL COUNCIL FINANCIAL SERVICES 22 FEBRUARY 2024 CAPITAL PLAN SUMMARY REPORT 2. INTRODUCTION 2.1 This report details the revisions proposed to the capital plan approved in February 2023 for the period 2024-25 to 2025-26 and extends the capital plan for a further year to 2026-27. The revisions are based on updated capital funding assumptions, phasing and cost changes. 3. DETAIL 3.1 Estimated Capital Funding 2024-25 to 2026-27 3.1.1 Funding for the capital plan comes from the Scottish Government (General Capital Grant and Specific Ring-Fenced Capital Grants), other capital grants, capital receipts from asset disposals, revenue contributions to capital, prudential borrowing and borrowing funded by the loan charges provision in the revenue budget. 3.1.2 The Local Government Finance Circular published on 19 December 2023 provides detail of the provisional total capital funding allocations for 2024-25. The provisional total funding allocations form the basis for the annual consultation between the Scottish Government and COSLA ahead of the Local Government Finance (Scotland) Order 2024 presented to the Scottish Parliament. The Finance Order is due to be laid in Parliament on 7 February with Stages 1-3 between 8 February and 27 February with the Finance Order Debate taking place on 28 February. 3.1.3 The General Capital Grant allocation for 2024-25, excluding any ring-fenced funding amounts to £8.834m which includes a general capital grant flooding allocation of £0.156m. 3.1.4 The estimated General Capital Grant for 2026-27 is based on the 2024-25 settlement of £8.834m therefore comparing this to the settlement for 2023-24, and again taking into account the flooding allocation of £0.156m, this results in a decrease of £0.891m in 2026-27. The Scottish Government had previously advised that the indicative General Capital Grant settlements up to 2025-26 would remain constant at the same level as the 2021-22 settlement, however the settlement for 2024-25 has proven this not to be the case. 3.1.5 The amount of capital resources allocated to Private Sector Housing Grant (PSHG) is £1.033m per annum. This amount has remained at the same level since 2016-17. The settlement from the Scottish Government includes an allocation of £0.941m for Private Sector Housing therefore £0.092m less each year than what is currently built in to the budget position. To reduce the allocation by £0.092m each year would result in a saving of £0.276m across the
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three year capital programme. Members may wish to review the amount allocated to PSHG. 3.1.6 As part of the revision to the funding assumptions for the capital plan, a detailed review of anticipated capital receipts has been undertaken by Commercial Services. During 2023-24 the level of capital receipts has fallen below what was estimated which has an impact on the funding of the capital programme. However, adding on the anticipated capital receipts for 2026-27 there is an estimated overall increase in sales income across the capital programme of £0.499m. The estimated level of receipts will be kept under review as market conditions change, as will values following due diligence undertaken by prospective purchasers on the condition of asset. The assets to be disposed of are listed in Appendix 1. 3.1.7 The restricted capital funding of £5.122m is noted within Appendix 2. This relates to income which is restricted to specific projects and has been matched with expenditure against the project, thereby showing the gross cost of the project. 3.1.8 Included in the funding table below is prudential borrowing in relation to the Harbour Investment Programme. The Council is currently working to a ten year asset management plan for Piers and Harbours which is being funded through prudential borrowing utilising a fee increase over and above inflation to pay for the loan charges incurred. 3.1.9 There is also funding from the loans fund review, earmarked reserves, COVID- 19 funding and previously agreed additional funding allocations made. 3.1.10 The estimated capital funding to 2026-27 is set out in the table below. 2023-24 £m 2024-25 £m 2025-26 £m 2026-27 £m Total £000 General Capital Grant 9.569 9.569 9.569 8.678 37.385 Change to General Capital Grant - Post Budget 2023-24 0.047 0.046 0.046 0.139 Change to General Capital Grant - Post Budget 2024-25 -0.937 -0.937 -1.874 General Capital Grant Flooding Allocation 0.155 0.156 0.156 0.156 0.623 Specific Scottish Government Grants 0.376 0.379 0.755 Campbeltown Flood Scheme Allocation 5.424 0.618 6.042 Local Government Pay Deal 2.131 2.131 Additional Scottish Government Grants 5.879 0.364 0.391 6.634 Capital Grant - Area Control Accounts 0.051 0.051 Less Allocation to Private Sector Housing Grants -1.033 -1.033 -1.033 -1.033 -4.132 Capital Receipts 0.484 0.750 0.750 0.400 2.384 Capital Receipts - Vehicles 0.027 0.027 Capital Receipts - HWD 1.000 1.000 Restricted Funding/Ring Fenced Capital Grant 1.485 2.553 0.084 4.122 Harbour Investment Programme 3.200 24.110 39.000 17.585 83.895
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TIF - Borrowing paid from NDR 0.113 0.563 0.676 Prudential Borrowing/Borrowing supported by loans charges 3.276 17.004 1.393 21.673 Additional Funding from Revenue 0.142 0.142 Funded by Reserves 1.009 2.296 0.191 3.496 Loans Fund Review 2.694 1.331 0.000 4.025 COVID Funding 0.095 0.558 0.279 0.932 Unallocated General Fund 7.759 1.042 0.000 8.801 Service Concessions 4.772 4.816 0.550 10.138 Funding Consistent with Revenue Budget 48.655 63.567 51.057 25.786 189.065 3.2 Summary of Capital Plan reported as at 31 December 2023 3.2.1 The capital plan included in the December capital monitoring is summarised in the table below: 2023-24 £m 2024-25 £m 2025-26 £m 2026-27 £m Total £m Executive Director - Douglas Hendry: Education 6.037 5.006 3.521 0.000 14.564 Facility Services - Shared Offices 1.910 3.343 0.977 0.000 6.230 Major Projects/CHORD 8.989 2.461 0.105 0.000 11.555 Executive Director - Kirsty Flanagan: ICT 1.474 1.593 1.221 0.000 4.288 Roads and Infrastructure 24.731 46.640 44.028 17.623 133.022 Development and Economic Growth 3.424 2.653 0.000 0.000 6.077 Health and Social Care Partnership 0.972 2.085 0.477 0.000 3.534 Live Argyll 1.084 0.636 0.427 0.000 2.147 Total 48.621 64.417 50.756 17.623 181.417 3.3 Proposed Revisions to Capital Plan 3.3.1 As part of the capital planning process, departments reviewed the approved capital plan in terms of the timing and cost of projects and updated the Priority Investment Plans (PIPs) accordingly. 3.3.2 The main adjustments reflect: Adding in a further year of flood prevention funding which is now £0.156m (2024-25 and 2025-26 allocations need to be increased by £0.001m). The inclusion of new funding for Cycling Walking Safer Streets totalling £0.379m. The inclusion of new funding for Community Bus Fund in 2023-24 of £0.233m.
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The inclusion of new funding for Nature Restoration Fund in 2023-24 of £0.489m. All of these amounts above result in additional funding and additional expenditure so has no overall impact to the budget gap. 3.3.3 Other amendments include re-profiling of anticipated expenditure across the programme. The revisions are summarised in the table below. 2023-24 £m 2024-25 £m 2025-26 £m 2026-27 £m Total £m Executive Director - Douglas Hendry: Education 0.000 0.000 0.000 0.000 0.000 Facility Services - Shared Offices 0.000 0.000 0.000 0.000 0.000 Major Projects/CHORD 0.000 0.000 0.000 0.000 0.000 Executive Director - Kirsty Flanagan: ICT 0.000 0.000 0.000 0.000 0.000 Roads and Infrastructure 0.233 0.001 0.001 0.156 0.391 Development and Economic Growth 0.489 0.379 0.000 0.000 0.868 Health and Social Care Partnership 0.000 0.000 0.000 0.000 0.000 Live Argyll 0.000 0.000 0.000 0.000 0.000 0.722 0.380 0.001 0.156 1.259 3.4 Proposed Block Allocations 2026-27 3.4.1 The block allocation to Services for 2026-27 is based on the General Capital Grant award for 2024-25 of £8.834m less the flooding allocation of £0.156m and adjusted to remove the PSHG allocation of £1.033m leaving a block allocation available to spend on capital projects of £7.645m. 3.4.2 The block allocation is allocated to services based on a proportionate percentage basis. Services have each prepared PIPs in which they outline the projects they would propose to spend their block allocation on. 3.5 Cost Pressures and Risks 3.5.1 As capital projects are based on cost estimates at a point in time, there is always a risk they will cost more than originally planned, particularly where there has been project delays. Where there are major change projects there is a high likelihood of the project requiring more budget than is currently in the capital programme which has been emphasised over the last three years with projects still catching up from the impact of COVID-19. 3.5.2 Although the direct impact of COVID on most local services has reduced or even ceased altogether over the last 12 months, COVID-19 in conjunction with
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the UK exit from the European Union and the Russian invasion of Ukraine, continues to affect worldwide supply chains. This has the impact of reducing the availability of supplies and materials resulting in cost increases through a combination of higher prices and longer materials delivery lead times. In recent years additional funding of £10.803m has been allocated to the capital programme for this purpose which has mitigated the impact to date however, as detailed in the table below, £2.703m remains unallocated to projects facing inflationary pressures. Funding for Capital Inflationary Pressures £m COVID-19 Funding 0.257 February 2021 Budget Meeting - Capital Cost Pressures 4.646 February 2022 Budget Meeting - Capital Cost Pressures 3.900 February 2023 Budget Meeting - Capital Cost Pressures 2.000 Total Additional Funding Allocated to Capital 10.803 Allocated to Projects within Capital Programme (5.779) Committed for future years (2.321) Balance Remaining 2.703 3.5.3 At the budget meeting in February 2023 additional funding was allocated to Rothesay Pavilion which will allow the project to progress towards success by supporting completion of Stage 1. This stage of the project is currently on time and to budget. At February 2023, the costs to complete stages 2 and 3 were £13.1m. These estimates were based on January 2023 prices and were not market tested at that point. Policy and Resources Committee subsequently endorsed £9m of Rural Growth Deal Funding to be used for Rothesay Pavilion which would leave a gap of £4.1m. However, current estimates to complete stages 2 and 3 are now £20.125m, therefore increasing the gap from £4.125m to £11.559m. Existing funders may contribute circa £2.7m which would reduce the gap to £8.859m, however, this funding is not certain. It should also be noted that these figures will not be certain until after the tender exercise is complete on 26 April. 3.5.4 3.5.5 The Councils bid to the Scottish Government’s Learning Estate Investment Programme (LEIP) for funding for a new school campus on Mull was successful. While this is good news and will provide welcome investment in the school estate it does come with a financial pressure that will require to be funded if the project is to proceed. The Scottish Government will fund up to 50% of eligible costs therefore the Council will be required to fund in excess of £20m. £9m of earmarked reserves were previously allocated for this project therefore leaving a pressure of circa £11m. Detail regarding this potential project is included in Appendix 4. Surveys have been completed across the Council’s Learning Estate in relation to Reinforced Autoclaved Aerated Concrete (RAAC) with only 1 building confirmed as having it present with steps underway for its removal. This will include a decant of the students for approximately 9 months plus total removal and replacement of the roof during 2024. The estimated costs associated with this are £3m which will require additional funding.
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3.5.6 As a result of a significant weather event on 7 October 2023, Argyll and Bute Council activated the Bellwin scheme in relation to the recovery costs associated with the incident. The funding from this scheme is welcomed however eligibility criteria of costs are restrictive. Capital expenditure does not qualify therefore any long term replacements to infrastructure such as bridges cannot be claimed through the scheme. Works to the value of £3.248m have been identified in the short term with future long term works costing circa £1.1m being identified, both will require capital funding. 3.5.7 The Capital Programme has been structured to address the majority of the Council’s high risk assets. In 2024-25, service asset managers will develop business cases and plans to tackle the other high risk assets which are not addressed by projects within the Capital Programme for 2024-25 to 2026-27. 3.6 Comparison of Revised Plan to Estimated Capital Funding 3.6.1 The capital plan as at 31 December 2023, including the new block allocation for 2026-27, has been compared to the estimated funding (noted in section 3.1). 2023-24 £m 2024-25 £m 2025-26 £m 2026-27 £m Total £m Capital Plan as at December 2023 48.621 64.417 50.756 17.623 181.417 Proposed revisions to capital plan 0.722 0.380 0.001 0.156 1.259 Estimated future years block allocation 7.645 7.645 Projected overspend as at December 2023 0.024 0.458 0.000 0.338 0.820 Total Revised Plan 49.367 65.255 50.757 25.762 191.141 Total Revised Funding 48.655 63.567 51.057 25.786 189.065 Total Surplus / (Gap) (0.712) (1.688) 0.300 0.024 (2.076) 3.6.2 The total gap currently within the capital programme to 2026-27 is £2.076m. Various elements contribute to this gap as summarised in the table below. After adjusting for the cost pressures identified within section 3.5.1 of this report, the total gap within the capital programme is £29.843m, see table below. Summary Detail £m Projected overspend as at 31 December 2023 As reported in December Capital monitoring report there is an anticipated overspend of £0.820m in the Capital Plan. This is made up of Campbeltown Flood Scheme (£0.710m) and Waste POPs Infrastructure (£0.110m). (0.820) 2024-25 Capital Grant Funding adjustment due to reduction in General Capital Grant received for 2024-25. (0.891) 2025-26 Capital Grant Capital grant was estimated at the same level as the 2023- 24 reduced settlement however there has been a decrease in the 2024-25 settlement. (0.891)
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Capital Receipts Adjustments within existing programme Additional capital receipts for year 3 of the programme. 0.499 Vehicle Sales Vehicle Sales as at December 2023 have been received totalling £0.027m which were not previously built into the funding. 0.027 Total Surplus / (Gap) prior Cost Pressures (2.076) Cost Pressure The removal of RAAC from 1 school within Councils Learning Estate as detailed in paragraph 3.5.5. (3.000) Cost Pressure The additional costs associated with the weather incident in October 2023 which are not covered by the Bellwin Scheme as detailed in paragraph 3.5.6. (4.348) Cost Pressure Stage 2 and 3 of Rothesay Pavilion assuming funding will be received from external bodies and that costs will not rise as part of tender exercise as detailed in paragraph 3.5.3. (8.859) Other Potential Pressures Council contribution to new school campus funded through LEIP as detailed in paragraph 3.5.4. (11.560) Remaining Surplus / (Gap) (29.843) 3.6.3 Council should give consideration as to how to fund the £29.843m gap within the capital programme. It should be noted that this gap assumes that external funders will provide £2.7m in additional funding towards the completion of Rothesay Pavilion. 3.7 Funding Options Identified to reduce gap and address pressures 3.7.1 The following are options Members may wish to consider to help bridge the gap in the capital programme: Remove LEIP and undertake refurbishment works with the £9m earmarking already set aside 11.560 Use some of one-off Strathclyde Pension Fund Gain 2.000 Use some Crown Estate Allocation from 24-25 and 25-26 2.000 Earmarked Reserves released to the General Fund (refer to Reserves and Balances report within budget pack for detail) 2.212 Use Asset Management Fund 2.070 Use Capital Contract Increases towards Forecast Overspend 0.820 Total Funding Options 20.662 This would still leave a gap of £9.181m that will require additional funding. 3.7.2 Further funds that may be considered are noted in the table below. Use Capital Contract Increases remaining balance 1.883 Priority Investment Fund 6.150 Pension Fund Gain Remaining Balance 3.750 Total Funds 11.783
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Note that the utilisation of the £1.883m balance for capital contract increases should be done with caution as projects continue to see substantial price increases since initial tenders were undertaken. The removal of this Fund could result in existing projects no longer being able to reach completion. 3.7.3 A further option is that the PSHG allocation could be reduced to match the actual funding received from the Scottish Government which would generate a saving of £0.276m across three years. 3.7.4 Borrowing could be taken out to cover the gap in the programme however this creates a revenue cost. Every £1m of borrowing for the capital programme creates a revenue pressure of circa £0.064m on average per annum. 3.8 Updated Capital Plan 3.8.1 The table below shows a summary of the updated capital plan and further detail is contained within Appendix 3. This excludes the anticipated shortfalls and cost pressures identified as these are subject to Member approval. 2023-24 £m 2024-25 £m 2025-26 £m 2026-27 £m Total £m Executive Director - Douglas Hendry: Education 6.037 5.006 3.521 1.988 16.552 Facility Services - Shared Offices 1.910 3.343 0.977 0.382 6.612 Major Projects/CHORD 8.989 2.461 0.105 0.000 11.555 Executive Director - Kirsty Flanagan: ICT 1.474 1.593 1.221 0.688 4.976 Roads and Infrastructure 24.988 47.099 44.029 21.940 138.056 Development and Economic Growth 3.913 3.032 0.000 0.000 6.945 Health and Social Care Partnership 0.972 2.085 0.477 0.382 3.916 Live Argyll 1.084 0.636 0.427 0.382 2.529 Total 49.367 65.255 50.757 25.762 191.141 4. CONCLUSION 4.1 4.2 The capital plan funding assumptions have been updated, the plan extended for a further year and block allocations allocated to services for the additional year. Taking into consideration the current capital programme and cost pressures there is a reported gap of £29.843m. If borrowing was taken out to fund this gap every £1m of borrowing for the capital programme creates a revenue pressure of circa £0.064m on average per annum. The capital programme faces other significant pressures in the years beyond 2024-25 with the key areas highlighted within section 3.5 of this report. Consideration should also be given as to how these can be funded and the further pressures highlighted within the PIPs.
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4.3 Estimated funding for the 2026-27 capital programme has been based on the General Capital Grant received in 2024-25. The Scottish Government has previously confirmed that the indicative General Capital Grant settlements up to 2025-26 will remain constant at the same level as the 2021-22 settlement however the reduction in 2024-25 has proved this is not the case. 5. IMPLICATIONS 5.1 Policy – Sets out the approach to capital planning. 5.2 Financial – Outlines the funding and commitments for the capital plan 2024-27. 5.3 Legal - The funding for new expenditure may not address all the Statutory and Regulatory requirements in relation to Health and safety. 5.4 HR - There are risks that the funding available will have an impact on the sustainability of the Property Design Team and the design team within Roads and Amenity Services. 5.5 5.5.1 5.5.2 5.5.3 Fairer Scotland Duty – None. Equalities – None. Socio-Economic Duty – None. Islands Duty – None. 5.6 Climate Change – The Council is committed to addressing climate change and reviews of how Services are delivered is ongoing within the available budget resources. 5.7 Risk - There are risks around level of capital receipts which could result in red risk assets not being addressed. 5.8 Customer Service – None. 5.9 The Rights of the Child (UNCRC) - None Kirsty Flanagan Executive Director/Section 95 Officer 6 February 2024 Councillor Gary Mulvaney - Policy Lead for Finance and Commercial Services APPENDICES: Appendix 1 - Proposed Asset Disposals Appendix 2 - Restricted Funding Appendix 3 - Proposed Capital Plan 2024-27 Appendix 4 – LEIP For further information please contact Anne Blue, Head of Financial Services anne.blue@argyll-bute.gov.uk
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Appendix 1 - Proposed Asset Disposals Property Glencreran Schoolhouse Land at Former Police Station, Garelochhead Site of former Cowal Teacher's Centre, Sandbank Ground at Baliscate Roads Depot Ashfield Primary School Bridge of Orchy School Auchenlochan access Shop, 3 Montague Street Ground at 26B Hillfoot Street Area of ground adjoining Pier House Fionnphort, Isle of Mull Land at Broom Road, Ardchonnel Primary School Former Girl Guide Hut, Dunclutha Lane Former Erray Road Depot Former Registrar Office, Witchburn Road Witchburn Road site, former Finance Office Ground at 125 Frederick Street Former Appin Roads Depot Blairvadach site, Shandon, Helensburgh (Phase 2) Dunclutha Children's Home Site behind former Lochgilphead High School (site 2) Former Lochgilphead Primary School
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Appendix 2 - Restricted Funding 2023-24 £m 2024-25 £m 2025-26 £m Total £m Education Scottish Government Island Funding - Tigh Na Rhuda 0.000 0.000 0.050 0.050 Education Total 0.000 0.000 0.050 0.050 Roads & Infrastructure Services STTS 0.387 0.000 0.000 0.387 Rural Growth Deal - Public Convenience Upgrades 0.200 0.000 0.000 0.200 Roads & Infrastructure Services Total 0.587 0.000 0.000 0.587 Development & Economic Growth H&L Cycleways 0.150 0.000 0.000 0.150 SPT Cycleways 0.000 0.290 0.000 0.290 SPT Bus Infrastructure 0.000 0.025 0.000 0.025 Coastal Communities Funding (Crown Estate) 0.605 0.000 0.000 0.605 Rural Growth Deal - RGD Projects 0.137 0.000 0.000 0.137 Rural Growth Deal - Dunoon STEM Hub 0.000 1.750 0.000 1.750 Waitrose Section 75 - RGD - Clyde Engineering 0.025 0.000 0.000 0.025 Scottish Island Fund - Tobermory Rails Phase 2 0.250 0.000 0.000 0.250 Development & Economic Growth Total 1.167 2.065 0.000 3.232 Major Projects Helensburgh Waterfront Development 1.000 0.000 0.000 1.000 Kilmory Business Park -0.522 0.488 0.034 0.000 Rothesay Pavillion 0.253 0.000 0.000 0.253 Major Projects Total 0.731 0.488 0.034 1.253 TOTAL FUNDING 2.485 2.553 0.084 5.122
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CAPITAL PLAN 2023 - 2027 APPENDIX 3 Overall Summary Service 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s Total Education 6,037 5,006 3,521 1,988 16,552 Shared Offices 1,910 3,343 977 382 6,612 ICT 1,474 1,593 1,221 688 4,976 RIS 24,988 47,099 44,029 21,940 138,056 DEG 3,913 3,032 0 0 6,945 HSCP 972 2,085 477 382 3,916 Live Argyll 1,084 636 427 382 2,529 CHORD 8,989 2,461 105 0 11,555 Overall Total 49,367 65,255 50,757 25,762 191,141
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CAPITAL PLAN 2023 - 2027 APPENDIX 3 Education Category Service Project 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s Total £000s Asset Sustainability Education Asbestos Control/Removal Works 7 0 0 0 7 Block Allocation - Education 216 866 520 1,988 3,590 Digital Inclusion 20-21 9 0 0 0 9 Free School Meals 379 900 1,495 0 2,774 Homeless Houses - Housing Quality Standard 1 0 0 0 1 Internal Refurbishment Budget 7 0 0 0 7 Primary Schools 3,370 2,420 1,280 0 7,070 School Houses - Housing Quality Standard 13 0 0 0 13 Secondary Schools 852 820 226 0 1,898 Asset Sustainability Total 4,854 5,006 3,521 1,988 15,369 Service Development Education Bowmore Primary School - Gaelic Medium Grant 38 0 0 0 38 CO2 Monitoring - Covid Mitigation in Schools 113 0 0 0 113 Early Learning and Childcare - 1140 Hours 320 0 0 0 320 Service Development Total 471 0 0 0 471 Strategic Change Education Campbeltown Schools Redevelopment 38 0 0 0 38 Dunoon Primary School 234 0 0 0 234 Kirn Primary School 34 0 0 0 34 Replacement of Oban High School 406 0 0 0 406 Strategic Change Total 712 0 0 0 712 Overall Total 6,037 5,006 3,521 1,988 16,552
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CAPITAL PLAN 2023 - 2027 APPENDIX 3 Shared Office Category Service Project 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s Total £000s Asset Sustainability Shared Offices Argyll House, Dunoon 9 0 0 0 9 Asbestos Capital Property Works 51 0 0 0 51 Block Allocation 152 298 427 382 1,259 Bowmore Area Office 76 0 0 0 76 Burnett Building 3 107 0 0 110 Capital Property Works 38 0 0 0 38 Fire Risk Assessment Works 14 0 0 0 14 Helensburgh and Lomond Civic Centre - Emergency Heating Pipework 130 0 0 0 130 Hill Street Dunoon Rewire 33 0 0 0 33 Kilmory Castle 0 1,409 0 0 1,409 Legionella Control Works 144 0 0 0 144 Manse Brae Roads Office 2 0 0 0 2 Our Modern Workspace 683 480 0 0 1,163 Asset Sustainability Total 1,335 2,294 427 382 4,438 Strategic Change Shared Offices Campbeltown Office Rationalisation 1 0 0 0 1 Clean Energy - NDEEF1 224 143 0 0 367 Clean Energy - NDEEF2 50 540 550 0 1,140 Helensburgh Office Rationalisation (FPB,REC) 300 0 0 0 300 Net Zero 0 366 0 0 366 Strategic Change Total 575 1,049 550 0 2,174 Overall Total 1,910 3,343 977 382 6,612
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CAPITAL PLAN 2023 - 2027 APPENDIX 3 Major Projects Category Service Project 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s Total £000s Strategic Change CHORD CHORD - Dunoon 27 0 0 0 27 CHORD - Helensburgh -Public Realm Imprv 28 0 0 0 28 CHORD - Oban 626 0 0 0 626 CHORD - Rothesay 6,737 1,973 71 0 8,781 Helensburgh Waterfront Development 977 0 0 0 977 HWD - FFE 34 0 0 0 34 Kilmory Business Park Phase 2AA 560 488 34 0 1,082 Strategic Change Total 8,989 2,461 105 0 11,555 Overall Total 8,989 2,461 105 0 11,555
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CAPITAL PLAN 2023 - 2027 APPENDIX 3 ICT Category Service Project 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s Total £000s Asset Sustainability ICT Block Allocation - ICT 0 132 0 688 820 PC Replacement 518 648 669 0 1,835 Server Sustainability 352 425 400 0 1,177 Telecomms Network 256 72 152 0 480 Asset Sustainability Total 1,126 1,277 1,221 688 4,312 Service Development ICT Applications Projects 348 316 0 0 664 Service Development Total 348 316 0 0 664 Overall Total 1,474 1,593 1,221 688 4,976
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CAPITAL PLAN 2023 - 2027 APPENDIX 3 Roads and Infrastructure Services Category Service Project 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s Total £000s Asset Sustainability RIS Block Allocation 0 0 4,268 3,823 8,091 Bridge Strengthening 373 1,313 0 0 1,686 Bute Sea Wall Repairs 59 621 0 0 680 Coastal Change Adaptation 41 246 0 0 287 Coastal Protection 6 193 0 0 199 Environmental Projects 200 821 0 0 1,021 EV Quick Chargers 62 0 0 0 62 Footway Improvements 450 300 0 0 750 Glengorm - Cell and Transfer Station (PB) 89 0 0 0 89 Helensburgh CHORD - Signage etc 10 0 0 0 10 Helensburgh Flood Mitigation 1 427 0 0 428 Investment in Active Travel 189 200 0 0 389 Lighting 440 600 0 0 1,040 Local Bridge Maintenance Fund 173 4,827 203 0 5,203 Play Park Renewal 0 547 391 0 938 Public Convenience Upgrades 282 0 0 0 282 Roads Reconstruction 7,419 8,000 0 0 15,419 Roads Reconstruction - Helensburgh CHORD 47 0 0 0 47 Roads Reconstruction - Oban CHORD 3 0 0 0 3 Tobermory Car Park 96 0 0 0 96 Asset Sustainability Total 9,940 18,095 4,862 3,823 36,720 Service Development RIS Fleet Management 325 1,180 0 0 1,505 Fleet Management - Prudential Borrowing 1,941 246 0 0 2,187 Lismore Ferry Replacement 15 20 0 0 35 Lochgilphead Depot Rationalisation 33 0 0 0 33 Oban Depot Development 9 0 0 0 9 Preliminary design for Regional Transport projects (tif) 16 0 0 0 16 Service Development Total 2,339 1,446 0 0 3,785 Strategic Change RIS Harbour Investment Programme PB 3,200 24,110 39,000 17,585 83,895 Street Lighting LED Replacement 61 613 0 0 674 Strategic Change Total 3,261 24,723 39,000 17,585 84,569 Overall Total 15,540 44,264 43,862 21,408 125,074
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CAPITAL PLAN 2023 - 2027 APPENDIX 3 Development and Economic Growth Category Service Project 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s Total £000s Service Development DEG Ardrishaig North Active Travel 112 13 0 0 125 Cycleways - H&L (FSPT) 300 290 0 0 590 Dunoon Cycle Bothy 292 12 0 0 304 Dunoon STEM Hub 713 1,750 0 0 2,463 Gibraltar Street Public Realm Improvements 222 0 0 0 222 Helensburgh Public Realm - Arts Strategy Fund 50 0 0 0 50 Hermitage Park 26 0 0 0 26 Rural Growth Deal 162 0 0 0 162 SPT - bus infrastructure 0 25 0 0 25 Town Centre Funds 718 0 0 0 718 Service Development Total 2,595 2,090 0 0 4,685 Strategic Change DEG 01 TIF - Lorn/Kirk Road 1 0 0 0 1 09 TIF - Oban Airport Business Park 56 45 0 0 101 TIF - Halfway House Roundabout 56 518 0 0 574 Strategic Change Total 113 563 0 0 676 Overall Total 2,708 2,653 0 0 5,361
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CAPITAL PLAN 2023 - 2027 APPENDIX 3 Health & Social Care Partnership Category Service Project 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s Total £000s Asset Sustainability HSCP Ardfenaig 27 0 0 0 27 Block Allocation 0 1,058 184 382 1,624 Capital Property Works 79 0 0 0 79 Digitalising telecare 100 0 0 0 100 East King Street Childrens Home 58 0 0 0 58 Glencruitten Hostel 81 36 143 0 260 Gortonvogie 1 0 0 0 1 Greenwood/Woodlands 216 0 0 0 216 Lochgilphead Resource Centre 16 0 0 0 16 Shellach View 144 0 0 0 144 Struan Lodge Boiler 59 0 0 0 59 Tigh An Rudha HFE 109 991 150 0 1,250 Tobermory Top Flat 28 0 0 0 28 Asset Sustainability Total 918 2,085 477 382 3,862 Service Development HSCP Dunclutha Childrens Home 54 0 0 0 54 Service Development Total 54 0 0 0 54 Overall Total 972 2,085 477 382 3,916
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CAPITAL PLAN 2023 - 2027 APPENDIX 3 Live Argyll Category Service Project 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s Total £000s Asset Sustainability Live Argyll Aqualibrium 343 48 40 0 431 Capital Property Works 52 317 213 382 964 Corran Halls Gaelic Centre 113 46 84 0 243 Kintyre Community Education Centre - Lift Shaft Refurbishment 2 0 0 0 2 Lochgilphead Community Ed Centre 122 200 40 0 362 Lochgilphead Library Relocation 14 0 0 0 14 Riverside Leisure Centre - Health Suite Upgrade 204 0 0 0 204 Riverside Leisure Centre - Spa Pool Upgrade 17 0 0 0 17 Rothesay Swimming Pool 40 25 50 0 115 The Moat Centre 77 0 0 0 77 Victoria Halls, Helensburgh 78 0 0 0 78 Asset Sustainability Total 1,062 636 427 382 2,507 Service Development Live Argyll Riverside Leisure Centre Refurbishment 1 0 0 0 1 Service Development Total 1 0 0 0 1 Strategic Change Live Argyll Carbon Management 21 0 0 0 21 Strategic Change Total 21 0 0 0 21 Overall Total 1,084 636 427 382 2,529
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APPENDIX 4 1.0 EXECUTIVE SUMMARY 1.1 The purpose of this report is to update Committee on the Council’s Learning Estate Investment Programme (LEIP) project to deliver a New Campus on Mull. Mull was chosen to be the Council’s sole bid to LEIP and priority for strategic investment due to being the only secondary school in our region to be graded as ‘Poor’ in terms of learning suitability. 1.2 The successful LEIP announcement was made on 30th October, approximately a year later than the Scottish Government (SG) had originally outlined that they would make a decision. Since the announcement the project delivery team have been re-mobilised to commence the initial stages of the project and respond to the SG offer of LEIP funding. 1.3 This report provides an update in terms of the project and importantly the new financial environment and economic considerations that must be considered. Currently, there is no site selected for a new campus on Mull and extensive community engagement, design development and a full options appraisal would be required to progress with the project to an Outline or Full Business Case position. This would be an intensive pre-construction phase taking place during 2024 and most of 2025. 1.4 The project team have been working closely with Hub North and the Northern Alliance – who also supported the original bid. These organisations, jointly owned by the Council’s (and other public sector partners) and private sectors, are responsible for working collaboratively and delivering community infrastructure in our region. This partnership is particularly relevant to LEIP given 5 of the 10 national projects have been earmarked for the ‘North’ and there are significant collaboration opportunities with working inter-authority with partners in Orkney, Moray, Shetland and Aberdeen City in developing our LEIP projects. A programme approach is currently being considered for these Council’s to deliver efficiency in terms of design development, purchasing materials, economies of scale, contract labour and sharing best practices. 1.5 Even with regional collaboration, the delivery of a new campus on Mull will be one of the most significant projects in terms of cost and complexity the Council has delivered for many years. The funding offered by the SG is not a grant nor is it for the full cost of the building – it will cover up to 50% of eligible costs and SG will then offer financing for this sum over 25 years. This means the entire design, land acquisition (if required) and build costs will require to be met -up front - by the Council with up to 50% being recouped in coming years. Building modern schools to high digital and environmental standards comes at a cost ARGYLL AND BUTE COUNCIL COUNCIL BUDGET COMMERCIAL SERVICES / EDUCATION / FINANCE 22nd FEBRUARY 2024 Learning Estate Investment Programme (LEIP) – Mull Campus Update
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APPENDIX 4 premium and this increases when island weighting is applied due to logistical challenges of getting labour and materials to site. Overall affordability of the project must be considered closely by Members and is referred to in this report. 1.6 Affordability of this project was a key consideration when the bid was submitted in October 2022 and at that point was already stretching upper tolerance levels. The updated cost plan and programme that has been worked on since the October 2023 announcement indicates that overall cost will have increased by around 10% and forecast opening of October 2028. Through a combination of the increased costs / timescales caused by the funding announcement, increased construction inflation, worse than anticipated budget settlement and other capital budget pressures Officers are of the view that the project would only remain affordable if Members are prepared to take hard decisions to reduce other Council areas of capital and / or revenue spend. 1.7 It is acknowledged if a decision is taken to not proceed with the LEIP Project this would be disappointing for many on Mull and surrounding islands however as an alternative, a package of significant upgrading works to the existing Tobermory Primary and High School would be required. These would be funded from the £9m previously earmarked for LEIP and works are likely to include: A. Works to enhance Building Fabric improving condition and prolonging life of the asset a. Partial re-roof b. Roughcast improvements c. Solar Panels and energy efficiency works d. Drainage works e. Partial rewire f. LED Lighting g. Ventilation upgrades h. Address remedial damp areas B. Minimum works to enhance learning and teaching spaces to improve suitability a. Partial redecorations in areas b. Additional Support Needs (ASN) upgrades c. Home economics lab refurbishment d. Science Lab refurbishment e. Technical lab refurbishment f. External landscaping for social / learning space 2.0 RECOMMENDATION As per the recommendations in the Introductory Report of Budget Pack, the Council are recommended to:- 2.1.1 Note the successful award of a major bid funding bid; 2.1.2 Note the funding provided by Scottish Government is not a capital grant for full cost of project – in summary SG will provide up to 50% of eligible
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APPENDIX 4 costs over a 25 year period following completion. The Council will require to pay the total cost up front; 2.1.3 Note due to the 1 year time delay of LEIP announcement the requirement to open the new Campus by December 2027 (which was the original timescale) cannot be met – now forecast for October 2028 at earliest; 2.1.4 Note the updated timescale programme forecast as outlined at Appendix A + B; 2.1.5 Consider overall affordability of project as outlined at Appendix C and determine whether: (A) Proceed with the LEIP Project in the knowledge that Members will be required to take hard decisions to reduce other Council areas of capital and / or revenue spend, in future revenue budgets / capital programmes. Or (B) Not to proceed with the current LEIP Project based on current capital affordability considerations and as an alternative deliver a programme of significant building fabric upgrade works to (a) prolong the operational life and (b) enhance learning and teaching spaces of the existing school buildings (Primary and Secondary) at Tobermory using £9m of previously earmarked funds.
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APPENDIX 4 3.0 INTRODUCTION 3.1 In June 2022 the Scottish Government (SG) invited bids from Local Authorities for funding from their Learning Estate Investment Programme (Phase 3). This is the SG main investment programme for improving education buildings and there is unlikely to be any new funding in the lifetime of this current government. 3.2 Argyll and Bute Learning Estate Strategy identified Tobermory High School as its number one priority to pursue strategic change / investment and submitted a bid for A New Campus on Mull on 31 October 2022. The school in its current condition is lowest scoring of all secondary schools in terms of its suitability to provide modern learning facilities. Investment – LEIP or otherwise is required for this school. 3.3 The Mull bid was one of thirty-six (36) made by other Local Authorities across Scotland. The announcement was received on 30 October 2023 confirming Mull was one of the ten successful bids investing approximately £400m in the Learning Estate across the country. Other successful island bidders included Orkney and Shetland. 4.0 RECOMMENDATION As per the recommendations in the Introductory Report of Budget Pack, the Council are recommended to:- 4.1.1 Note the successful award of a major bid funding bid; 4.1.2 Note the funding provided by Scottish Government is not a capital grant for full cost of project – in summary SG will provide up to 50% of eligible costs over a 25 year period following completion. The Council will require to pay the total cost up front; 4.1.3 Note due to the 1year time delay of LEIP announcement the requirement to open the new Campus by December 2027 (which was the original timescale) cannot be met – now forecast for October 2028 at earliest; 4.1.4 Note the updated timescale programme forecast as outlined at Appendix A + B; ARGYLL AND BUTE COUNCIL COUNCIL BUDGET COMMERCIAL SERVICES / EDUCATION / FINANCE 22nd FEBRUARY 2024 Learning Estate Investment Programme (LEIP) – Mull Campus Update
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APPENDIX 4 4.1.5 Consider overall affordability of project as outlined at Appendix C and determine whether: (A) Proceed with the LEIP Project in the knowledge that Members will be required to take hard decisions to reduce other Council areas of capital and / or revenue spend, in future revenue budgets / capital programmes. Or (B) Not to proceed with the current LEIP Project based on current capital affordability considerations and as an alternative deliver a programme of significant building fabric upgrade works to (a) prolong the operational life and (b) enhance learning and teaching spaces of the existing school buildings (Primary and Secondary) at Tobermory using £9m of previously earmarked funds. 5.0 DETAIL 5.1 Since the LEIP announcement of 30th October the Council have been moving at pace to mobilise the Project Delivery Team and update the project details and forecasts. Consideration needs to be given to the following:- A – Conditions of funding 5.2 Unlike previous and other funding delivery models, LEIP is not a grant nor does it address total cost of a project. The LEIP funding will cover up to 50% of eligible costs and SG will then offer financing for this sum over 25 years. This means the entire design, land acquisition (if required) and build costs will require to be met -up front - by the Council with up to 50% being recouped in coming years. Building modern schools to high digital and environmental standards comes at a cost premium and this increases when island weighting is applied due to logistical challenges of getting labour and materials to site. Overall affordability of the project must be considered closely by Members and is referred to in this report at Section C. Given the nature of the LEIP funding structure, this will be one of highest value projects the Council has ever delivered in terms of up-front costs so strong commitment to the project and its resourcing is required. 5.3 The LEIP funding model is also predicated on achieving a number of quality, environmental, space, function and condition standards. In effect, this will create a high standard of building that should be sustainable and flexible – this is a higher benchmark standard to any new buildings (including schools) the Council has delivered in recent years. Ensuring the buildings are digitally enabled and support local economic development is also encouraged. The full list of conditions is as follows:- Internal Environmental Quality (suitable internal environment for building users is vital for their health, wellbeing and learning. Internal Monitoring (use of sensors to ensure the highest quality internal environment is delivered as a response to Covid 19 in terms of ventilation and CO2 levels)
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APPENDIX 4 Zero Emissions Heating Electrical Vehicle Charging Healthier Learning Environments Infrastructure Technology Scottish Government (SG) funding will be available through the Outcomes Based Funding (OBF) model. The outcomes include: Condition - Local authorities must provide evidence, through their annual returns that the facility is kept in condition A or B for a period of 25 years. Energy Efficiency Digitally Enabled Learning Economic Growth Construction Embodied Carbon 5.4 It should be noted that not all costs are LEIP ‘eligible’. It therefore needs to be considered during the design development phases and in context of overall affordability that spend on ‘non-eligible’ costs such as purchasing of land (if required), creation of non -learning space (for example Customer Contact Point) or Hostel would not be funded by LEIP and therefore would need to be met solely by Council or other funding source. 5.5 Despite the approx. 1-year delay on announcement of LEIP one of the core funding criteria has been to open the new campus to learners by the original December 2027 timeframe. The programme outlined in the Mull Campus bid was already ambitious and the additional announcement delay has added significant pressure to meet this timescales. Our updated Programme indicates that a Mull bid would now be unable to make this December 2027 timescale and now forecasting an opening of October 2028. This is a risk to the project but one the Government and Scottish Futures Trust have indicated they would be willing to have dialogue with Council’s on their ability to adhere to this or other criteria. 5.6 The SG and Scottish Futures Trust (SFT) have also intimated that a project on Mull may be eligible for additional funding due to island locational factors. Whilst this additional ‘locational uplift’ is not currently written into the conditions of funding or LEIP agreement they have confirmed there is precedent with other rural and island LEIP projects and it is likely these would be available to this project on Mull. Locational factors would cover the known additional costs that relate to construction in island or rural areas such as cost of raw materials, costs of labour, travel, extra build time, extreme weather and waste disposal. If successful in agreeing terms, the locational uplift would not cover the entire ‘island weighting’ factor but it would meet 50% of it. At present we forecast this locational uplift could be up to £3.5m (max) but this figure cannot be confirmed or accounted for in full until more detailed design work is completed due in 2025 and agreement with SG is reached at that time. B- Programme
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APPENDIX 4 5.7 Given the approximate 1 year delay in funding announcement the team have updated the project delivery plan can be found at Appendix A – Proposed Programme Business Case to Delivery and Appendix B – Tracker / Gant with key milestones being as follows:- Q1/ Q2 2024 – Consultations begin (community / statutory) Q2 2024 – Site Selection process begins Q2 – 2025 – Design development, cost plan begins (RIBA Stage 2) Q4 – 2025 – Planning, detailed cost, contracts to construct (RIBA Stage 4) Q4 2026 to Q4 2028 – Construction October 2028 new campus open 5.8 The Programme also includes the close and partnership working with Hub North and the Northern Alliance – who also supported the original bid. There is an agreed ‘Northern Programme Approach’ where there will be inter-authority collaboration with partners from Orkney Island Council, The Moray Council, Shetland Island Council and Aberdeen City Council in developing our LEIP projects. The Northern programme approach is currently being developed and anticipate working with these Council’s will deliver efficiency and good practice in terms of design development, purchasing materials, economies of scale, contract labour and sharing best practices. For example – joint commissioning of architectural is being looked at and input and purchasing of high value generic items like doors or windows. C – Cost and affordability 5.9 Creating modern schools has traditionally been some of highest value projects the Council delivers. Building modern schools to high digital and environmental standards as required by LEIP comes at a cost premium and this increases when island weighting is applied due to logistical challenges of getting labour and materials to site. Overall affordability of the project must be considered closely by Members and is referred to in this report. 5.10 The full Council made an express decision to support the bid for LEIP at their meeting on 29 September 2022. This included commentary from the Council’s Section 95 Officer. Given the passage of time and updated financial landscape an update of this advice is contained at Appendix C. 5.11 Affordability of this project was a key consideration when the bid was submitted in October 2022 and at that point was already stretching upper tolerance levels. Following an update forecast in December 2023, the total forecast project cost now sits at £39.12m. It must also be noted that this £39.12m is a justified projection based on the information currently available and the timescales linking construction to inflation. The forecast price and proportion the Council will be responsible for funding will fluctuate depending on a number of material factors:- What site is selected – some sites may be more or less expensive to develop (eg is there power, water, rock, roads, peat)
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APPENDIX 4 Is a land purchase or compulsory purchase required (SG wont fund land purchase) Design and function of new campus – materials and variety of uses will influence cost and SG funding Scottish Government funding is ‘up to’ 50% of eligible costs (lower offer than 50% of total project cost may be made) Efficiencies driven from Regional Programme Approach or Uplift in metrics from Scottish Government (additional funding) due to ‘Locational Factors’ – cannot quantify or account for these at this stage until detailed design completed 5.12 Notwithstanding these variable factors the £39.12m is a justified cost based on experience developing LEIP Projects across the Country plus addition of a ‘island weighting’ factor. The LEIP3 Projects in Orkney and Shetland that are similar in scope and stage to Mull, and both currently forecast over the £40m mark. It should therefore be considered this is the region of total cost and total outlay by our Council. 5.13 The recently updated cost plan and programme that has been worked on since the October 2023 announcement indicates that overall cost has increased by around 10% since the forecast provided at the time of the bid (1 year delay in announcement). Through a combination of the increased costs / timescales caused by the funding announcement, increased construction inflation, worse than anticipated budget settlement and other capital budget pressures Officers are of the view that the project would only remain affordable if Members prepared to take hard decisions to reduce other Council areas of capital and / or revenue spend. 5.14 Progressing to Outline Business Case or Full Business Case would require investment of several million pounds and require high degree of consultation and engagement with the community which if not progressed to construction would be abortive costs and unrealistically raise expectations. D – Alternative Learning Estate Improvements 5.15 It is acknowledged if a decision is taken to not proceed with the LEIP Project this would be disappointing for many on Mull and surrounding islands however as an alternative a package of significant upgrading works to the existing Tobermory Primary and High School would be required. These would include: A. Works to enhance Building Fabric improving condition and prolonging life of the asset a. Partial re-roof b. Roughcast improvements c. Solar Panels and energy efficiency works d. Drainage works e. Partial rewire f. LED Lighting g. Ventilation upgrades h. Address remedial damp areas
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APPENDIX 4 AND B. Minimum works to enhance learning and teaching spaces to improve suitability a. Partial redecorations in areas b. Additional Support Needs (ASN) upgrades c. Home economics lab refurbishment d. Science Lab refurbishment e. Technical lab refurbishment f. External landscaping for social / learning space 5.16 The value of this work will be in the region of £9m. These can be funded by existing earmarkings previously allocated for LEIP. 6.0 CONCLUSIONS 6.1 The successful bid for LEIP funding has been a welcomed opportunity to closely consider the development of new learning estate on Mull. The Council has a strong track record of building new schools over the past 15 years however for reasons set out in Para 1.6 above, the overall increased costs / timescales caused by the funding announcement, increased construction inflation, worse than anticipated budget settlement and other capital budget pressures Officers are of the view that the project would only remain affordable if Members are prepared to take hard decisions to reduce other Council areas of capital and / or revenue spend. 6th February 2024 For further information contact: Policy Lead for Education – Councillor Yvonne McNeilly Policy Lead for Commercial Services & Finance – Councillor Gary Mulvaney Executive Director with Responsibility for Commercial Services & Education – Douglas Hendry Executive Director for Financial Services + S95 Officer – Kirsty Flanagan Head of Commercial Services – Ross McLaughlin Head of Education and Lifelong Learning + Chief Education Officer – Jen Crocket Head of Education – Learning and Teaching - Wendy Brownlie Head of Financial Services – Anne Blue Appendices Appendix A – Proposed Programme Business Case to Delivery Appendix B – Tracker / Gant Programme Appendix C – Finance / Affordability Update
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APPENDIX B LEIP 3 Programme New Schools Draft Tracker Programme Rev 01 30th November 2023 Summary Programme Briefing New Mull Campus KEY: OBC APPROVAL FBC APPROVAL SSPS Briefing: hub North Development brief, consultation, vision, RIBA Stage 1 design STAGE 1: hub North Stage 1 (incl RIBA Stage 2 design and developed cost plan) STAGE 2: hub North Stage 2 (RIBA Stage 4 design and contract signature) Q1 Q2 Q3 Q4Q3 Q4 Q1 Q2 Q3 Q4 2027 Q1 Q2 Q3 Q4 Q1 2028 Q2 2029 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2023 2024 2025 2026 Consultations/Site Agreement STAGE 1 STAGE 2 CONSTRUCTION DEMO & PITCHES
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APPENDIX C Financial and Budget Position Part of the Council Report of 13 September 2022, requested agreement to move ahead with a bid to the Scottish Government LEIP funding programme to deliver a new Campus on Mull. The Council was advised on 30 October 2023, that the bid was successful. This fund would contribute up to 50% of the eligible costs of the project over a 25 year period, and the paper included a financial report at Appendix B. The forecast cost of a new campus at that time was £35.5m, which did not include any land purchase costs, if required. Table below shows funding options presented at that time as well as an updated position: Original Option A £000 Original Option B £000 Updated Position £000 Assumptions Cost of Construction* 35,500 35,500 39,120 As per estimates. Estimated Cost of Land 1,000 As per estimates LEIP earmarking (1,000) (1,000) (1,000) Agreed as part of February 2022 budget. Capital Grant Saving over 5 years (estimate) (3,000) This amount would need to be top-sliced from the general capital grant – for illustrative purposes only, would require a Council decision. Use of Service Concessions one-off gain in 22-23 (6,750) (8,000) Updated – using full amount of one-off Service Concession gain allocated for learning estate – for illustrative purposes only, would require a Council decision. Net capital after funding options applied 34,500 24,750 31,120 Cost of borrowing Net Capital Cost over 60 years 1,853 1,330 1,672 Based on 31,120 over 60 years Revenue Saving in Energy Costs (35) (35) 0 Estimated saving in energy costs due to more efficient building. LEIP Income (25 years) (710) (710) (782) Assumed 50% paid equally over 25 years. Net Cost of Borrowing (first 25 years) 1,108 585 890 Net Cost of Borrowing (remaining 35 years) 1,818 1,295 1,672 *The cost of construction does not include any fixtures and fitting, IT and equipment. Costs associated with any additional staffing resource for the project are also not included. The delay in the decision from the Scottish Government on the bid has meant that the cost of the project has risen to £39.120m, excluding any land purchase costs. Additionally, the following negative fiscal issues have arisen since the original report was presented:
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The General Capital Grant from Scottish Government for 2024-25 was £0.937m lower than the previous year. As we set a 3 year capital programme this impact is doubled for years 1 and 2 where the budget has already been set therefore causes a gap in the capital programme of almost £1.9m. Note that due to this reduction we have removed the £3m capital grant skimming detailed in the original option shown in the table above, therefore increasing the pressure further. Construction Sector Inflation has slowed from the unprecedented rises we saw through 2020-2023 which were at times around 15%. Construction cost inflation in Scotland has been rising around 5% per annum in the past 12 months however some forecasters predict there may be a stabilising of around 3.5% in future years. However as we have seen, this can fluctuate greatly due to global or external factors linked to supply of material, energy and labour. Notwithstanding this, given this project would take some time to complete there is a high risk that costs will increase beyond the latest figures noted in the table above; Recently there have been a number of pressures on the Capital Budget: o Surveys of the Councils Learning Estate have identified RAAC in one building which must be removed. Estimated costs associated with this are £3m. o As a result of a significant weather event on 7 October 2023, Argyll and Bute the Council activated the Bellwin scheme in relation to the recovery costs associated with the incident. Capital expenditure does not qualify therefore any long term replacements to infrastructure such as bridges cannot be claimed through the scheme resulting in an estimated pressure of £4.348m. o As a result on ongoing rises in inflation the costs associated with Rothesay Pavilion continue to rise. It is uncertain at this stage the full financial impact this is estimated to be circa £8.425m. Should the Scottish Government fund 50% of the project then based on the updated figures above the Council would need to fund £11.560m (this would be subject to any locational uplift being applied by Scottish Government). Through a combination of the increased costs / timescales caused by the funding announcement, increased construction inflation, worse than anticipated budget settlement and other capital budget pressures Officers are of the view that the project would only remain affordable if Members are prepared to take hard decisions to reduce other Council areas of capital and / or revenue spend. If Members decided not to proceed with the LEIP project, it should be noted that while this will reduce the pressure on the capital programme there will still be a requirement to utilise the £9m earmarking for a package of significant upgrading works to the existing Tobermory Primary and High School.