Future capital programme
During the period covered by this strategy, there will be a need for some items of capital investment to be made in order to ensure continued service delivery or to comply with statutory requirements or to ensure health and safety of staff and public. Examples of these include:
- operational building repairs and maintenance
- replacement of vehicles, plant and equipment required to deliver services
- disabled facilities grants
It may be possible to extend the lives of some of the vehicles, if they are in a fit condition when their replacement date is reached. Similarly some of the maintenance/improvement works to our operational properties may be capable of being deferred. Periodic stock condition surveys will inform any decisions in this regard. Additionally, some properties may be deemed surplus to operational requirements and eligible for disposal in their current condition.
In addition to the essential works outlined above, there are significant amounts of expenditure which need to be incurred:
- in respect of the commercial portfolio in order to keep properties in a state of repair such as to continue to obtain a reasonable rental income
- to maintain various engineering structures such as walls, bridges, drains, and reservoirs to ensure safety to the public
Over the period 2015-16 to 2018-19 it is estimated that £3.47 million (commercial properties) and £2.10 million (engineering structures) need to be spent.
Funding for additional projects not essential to operational continuity will depend on capital receipts from asset sales. Reports concerning proposed asset sales were considered and recommendations approved by the Cabinet on 12 November 2014.
Work is ongoing to compile a basic programme containing those projects which it can be foreseen will be necessary to ensure service delivery or to comply with statutory requirements or ensure health and safety. The programme will also contain projects which are fully funded by external parties and which meet corporate priorities. The overall size of the programme will be determined by the resources estimated to be available to fund it.
It will be essential to apply a robust prioritisation process to determine which projects are included in the capital programme and are subsequently proceeded with. No projects should be considered in isolation. They must be required to be measured against all other competing projects to determine which should go forward. This process should also apply to any projects which are proposed subsequent to the approval of the programme, to ensure that only those projects with a high priority are proceeded with and funds are not diverted to projects of a lesser priority.
Funding for this basic programme is likely to be available to some extent from the following sources:
- further capital receipts from asset sales
- Right to Buy capital receipts
- government grants
- other external contributions
All of the above funding sources are likely to be limited so the programme can only include affordable basic projects.
Current estimates of the amount required to be invested in projects to ensure continued service delivery compared with forecasts of likely receipts from asset sales and other available resources indicate that there may be insufficient resources available to fund all of these requirements in the short term. If significant sales of assets cannot be achieved within this timeframe, we may have to review its stance with regard to borrowing, if this proves to be the only practical means of funding necessary investment, particularly if a major unforeseen item of capital expenditure were to materialise, for example major repairs to enable an operational building to continue to be used or new legislation requiring capital spending.
The Cabinet considered two reports concerning our capital investment needs over the period 2015-16 to 2018-19 and how the consequent expenditure could be funded. Owing to the significance of these reports and as an aid in understanding the detailed issues they have been included as annexes to this capital strategy:
- Annex B: The Newcastle capital investment programme (Cabinet 5 February 2014)
- Annex C: Funding the council's capital programme (Cabinet 15 October 2014)
In summary, the first report set out the investment needed over the four year period 2015-16 to 2018-19, totalling an estimated £18.859 million, in order to maintain service continuity and for health and safety reasons and to safeguard income from the commercial portfolio. It highlights the very significant shortfall in resources available to finance this investment and sets out a number of strategies for dealing with this. The second report set out options for funding the capital investment identified in the first report. It concluded that the only realistic option to meet investment needs is a systematic programme of surplus land disposal, which will also enable us to deliver our policy objective of bringing forward more affordable and social housing by the release of some of our land holdings. The alternative of borrowing to part fund the programme is seen to be a more expensive option owing to the cost of servicing the debt. Accordingly, Cabinet resolved: "that Cabinet agrees with the principle that the council, as a first resort, will seek to fund its future known capital programme needs through the annual asset management planning process by the identification of land or property in its ownership that is capable of and appropriate for disposal."