124 REPORT B4 EAST AYRSHIRE COUNCIL
CABINET – 4 MARCH 2020
ASSET MANAGEMENT FRAMEWORK AND CAPITAL INVESTMENT PLAN
Report by the Depute Chief Executive - Safer Communities
PURPOSE OF THE REPORT
1. The purpose of the report is to update the Capital Investment Plan in line with the Asset Management Framework and ask cabinet to agree to re-profile the current allocations and include additional investment areas.
RECOMMENDATIONS
2. Members of Cabinet are asked to:
(i) Agree the investment priorities across the asset groups and approve the updated capital expenditure profile at Appendix 1 in line with the Treasury Management Plan and Revenue Budget.
(ii) Agree to include an additional £36.000m to support the strategic investment on the Roads and Bridges network as part of the proposed 10 year capital plan, recognising the need for ongoing investment over 20 years to address the currently identified issues on bridges.
(iii) Agree to increase the Council’s capital allocation for Doon Academy Campus Development to £30.000m recognising that any funding from the Government will be based on future revenue funding. Further ask the Depute Chief Executive Economy and Skills to continue to pursue a funding bid as part of the next phase of Schools for the Future Funding.
(iv) Recognise the need for further future school investment to support the development of projects in the North West Kilmarnock and Stewarton to address the longer term condition and suitability of the school estate as well as maximise potential place based opportunities. This would be dependent on successful submissions to the Scottish Government Schools of the Future Fund.
(v) Agree to retain £1.000m in the schools contingency fund to recognise the early stages of development for Dunlop, Catrine and Fenwick Early Years projects out with the existing scope of the £21.600m Early Years grant.
(vi) Note the progress on developing the Ayrshire Growth Deal projects and the Council’s total contribution of £7.500m for the £24.500m NERD Project, £4.000m for the £16.000m Moorfield phase 3 and the AMIC project will be developed from £23.500m external funding.
(vii) Approve the appointment of a specialist services team for the NERD Project through the Crown Commercial Service (CCS) Framework RM3741 – Project Management and Full Design Team Services and for the development of current proposals to a RIBA Plan of Works Stage 2 – Concept Design at an indicative cost of £0.200m. 125 REPORT B4
(viii) Note the ongoing development at Rowallan Park with the construction of the catering Central Production Unit and potential sale of land and agree that future speculative development will be focused on the Moorfield estates.
(ix) Note the allocations from the Kilmarnock Town Centre Regeneration Fund by £0.400m for the potential purchase of the RBS building; £3.165m for the refurbishment of the Multi- storey Car Park. Agree to retain £1.000m for future regeneration support for future projects including £0.200m to create additional parking areas for the town centre.
(x) Note the reallocation of the Economic Regeneration and Development Fund with £5.000m for the Palace Theatre and £1.500m to support the Creative Industries Hub Project. Agree to retain a future balance of £8.000m in the Economic Regeneration Fund with this provisionally allocated to £5.000m in recognition of the need to redevelop Civic Centre buildings in John Dickie Street and £3.000m for King Street Developments.
(xi) Note the ongoing development of the community wellbeing hub model through the Health and Social Care Partnership, within the Caring for Ayrshire Strategy. Continue to work with partners to support project development and recognition of the opportunities for place based integration of facilities and services across our communities in Kilmarnock, Stewarton, Dalmellington and Cumnock. Reallocate £10m from the Economic Regeneration and Development Fund towards a forward commitment to support the ongoing work on the Wellbeing Hub model.
(xii) Agree to reduce the remaining allocation for the Transformation Fund to £2m creating a separate allocation of £2m for demolition and surplus site remedial works.
(xiii) Agree to extend the annual allocations within the 10 year programme for ICT investment (£1.250m p.a.), refurbishment and component renewal (£1.500m p.a), cemetery improvements (£0.100m p.a.) and private sector housing grants (£0.800m p.a.)
(xiv) Agree to invest a further £1.760m to extend the total investment in telecare in line with projected increased demand and the transition from analogue to digital by 2025. This includes an allocation of £0.150m to meet the Council’s obligations to support Registered Social Landlords.
(xv) Agree to the increase the Energy Efficiency Fund by £4m and rename as a Sustainability / Carbon Zero Fund to be utilised to support the implementation of actions to mitigate climate change.
(xvi) Reprofile the fleet investment allocation to support an ongoing annual replacement of fleet in line with the strategic fleet investment and overall reduction. This will be part offset by future capital receipts and revenue funding.
BACKGROUND
3. As part of the Council’s Transformation Strategy, the Property and Estate workstream identified the need to establish an overarching Asset Management Framework that draws together a number of important asset areas into a single framework to ensure effective management, improvement and long term investment for the Council’s Asset Base. Cabinet at its meeting on 1st May 2019 agreed the Asset Management Framework and current Capital Investment priorities.
126 REPORT B4 4. The Local Government in Scotland Act (2003) provides the legal framework for both the Prudential Code and the Council’s arrangements in respect of Best Value. Under the Prudential Code, local authorities are authorised to make capital investments where it can be demonstrated that these investments are affordable, prudent and sustainable.
5. Scottish Local Authorities are required by regulation to have regard to the Prudential Code when carrying out their duties under Part 7 of the Local Government in Scotland Act 2003. The Prudential Code plays a principle role in capital finance as local authorities determine their own programmes for capital investment that are central to the ongoing delivery of quality public services.
6. The framework which the Prudential Code has established should support local strategic planning, local asset management and proper option appraisal. To achieve this the local authority is required to consider capital expenditure and investment plans against the overall strategic aims and available resources and ensure that decisions are made with due regard to the medium to longer term financial implications and potential risks to the organisation.
7. This Asset Management Framework and Capital Investment Plan, sets out the Council’s asset management priorities and Capital Investment Strategy for managing and modernising its assets, and importantly, how this approach is aligned to the wider strategic objectives of the Council and its Community Planning partners to address future risks and opportunities.
ASSET MANGEMENT FRAMEWORK 8. Asset Management principles are well embedded across the council and are the basis of a number of service asset plans reported to cabinet and were set out as part of the asset strategy in 2009 along with the initial 10 year Capital investment Plan.
9. The vision for the Council’s assets is that ‘East Ayrshire has safe, sustainable and efficient assets that meet the needs of its existing and future users and communities’. The development of an Asset Management Framework will contribute to the achievement of this vision, and importantly will also help the Council achieve the objectives set out in our 2017- 2022 Transformation Strategy to maximise the outcomes and benefits of our capital and revenue spend.
10. It is recognised that effective asset management assists in the delivery of sustainable communities whilst providing value for money for the public purse. The Council has a strategic responsibility to ensure that all council’s physical assets remain fit for purpose and support services in delivering for our communities through ongoing support and strategic investment in our assets.
11. The strategic objectives of the Asset Management Framework are:
To maintain and enhance a flexible portfolio of assets that are fit for purpose and will allow our people to deliver services in transformational and innovative ways;
To review and rationalise the Council’s asset base as part of service redesign ensuring that their use continues to be efficient and effective and delivers best value.
To use our assets in support of the Council’s wider aims recognising the value of partnership in a place based approach to facilitating community led regeneration.
127 REPORT B4 To ensure that our assets are subject to critical review and challenge, considering the outcomes and benefits along with whole life cost and long-term investment needs.
To provide a clear rationale for future capital investment, building in financial and operational sustainability while working towards being carbon neutral.
Managing, reporting and analysing asset information to ensure decisions are evidence based and can maximise the leveraging of new and extra funding.
12. Alternative delivery models, including partnerships with other public bodies, are now being used more regularly and are demonstrating different ways of achieving strategic objectives. The Council has extensive experience in developing assets in partnership with others and the need to strengthen and develop this approach is essential along with commitment from partners to further explore opportunities for shared use of assets and integrating future investment priorities, to maximise value for money.
13. The overall Framework aligns to a range of additional documents that provide more detailed information, priorities and operational plans on individual asset types and sets this within the strategic context. It also sets the wider asset management principles that establish the approach of effective asset management;
Improve Asset Performance, Improve Asset Value, Effectively Manage Risk Enhance Growth and improvement Evidence Reliable Decision Making Grow Stakeholder confidence and reputation
14. The Framework therefore sets out the links between the strategic objectives of Asset Management to the aims of the Community Plan, the Transformation Strategy and the Council’s strategic priorities. There are 8 asset types included in the framework:
1. Housing Estate 2. Roads Infrastructure 3. Culture and Community Assets 4. Wellbeing, Sport and outdoor estate 5. Business Growth portfolio 6. Learning estate 7. Corporate estate 8. Transport Fleet
15. This report provides an update on the areas of the Asset Management Framework, current project progress, additional demands and reprioritisation of investment following the review of current capital allocations.
16. A number of action areas were noted in last year’s report that would support the ongoing development of our assets, identify future spending needs, opportunities for external funding and the business case development for future consideration. An update on these areas is noted below;
The updated Housing Needs and Demand Assessment has been completed and reported to Cabinet in November 2019. This continues to inform the priorities set out in the Local Housing Strategy, and in turn, the Housing Asset Management Framework, 128 REPORT B4 Strategic Housing Investment Plan and Housing Improvement Programme annual reviews
The recent increased investment in the Roads network has demonstrated significant value, with improved resident satisfaction and reduced pot holes. The further investment needs and re-profiling to meet ongoing Roads and Bridges improvements is recommended as part of this Cabinet Agenda.
East Ayrshire Council has continued to work towards the full roll out the Early Years Expansion this year, not only delivering the extensive investment in facilities but the planning and preparation of the transformation of this service.
The Council was unsuccessful in the first application for funding in 2019 as part of the Scottish Learning Estate funding although officers are continuing to work with the Scottish Government and SFT colleagues to submit a bid for phase 2 funding in 2020.
The Property Management Plan was agreed by Cabinet in June 2019 with a further update in November 2019 that provided analysis of the operational estate, highlighting actions to address all priority buildings.
Further progress was seen with the CARS funded project in Mauchline generating £1.800m additional investment from Historic Environment Scotland to the area within the context of the Local Development Plan.
Cabinet have noted a number of updates in the past 12 months following the allocation of £1.700m Government funding for Town Centre Regeneration. This has also generated a further £1.000m funding from the Regeneration Capital Grant Fund for the Creative Industries Hub as part of this strategic review.
The Leisure Trust Facilities Review was set out at Cabinet in December 2019 with consultation and engagement activity expected to report by summer 2020.
The Health and Social Care Property and Asset Management Group was established with significant community consultation to progress the review of needs of the Cumnock and Stewarton Localities as part of the wider Caring for Ayrshire programme, which has now extended to all main hub communities.
The Ayrshire Growth Deal progressed with the initial Business Cases developing towards the design stage, including the development of the National Energy Research Demonstrator facility being supported by expertise from the Energy Technology Partnership from The University of Strathclyde.
A review of the leased property portfolio has been established in conjunction with internal audit to consider our future approach. This will align with the position agreed in the Management Review proposal to realign the Estates service within Facilities and Property Management for March 2021.
17. The Council is also reviewing its Local Development Plan and with the Council as a primary property developer and land owner, involvement and consideration of the above issues is vital. The connections to the Council’s Asset Management Framework and Capital Investment plans should be reflected in the development of the Local Housing Needs assessment, business and industrial requirements as well as landscape and urban development opportunities to ensure the overall council investment supports our local communities. 129 REPORT B4 CAPITAL INVESTMENT PROGRAMME
18. The Council has invested in our assets with a rolling 10 year Capital Investment programme established in 2009 with previous reports to Cabinet detailing that investment and the alignment of individual projects to the wider objectives of the Council. Over the past 10 years since 2009-2010 the council has invested £592.161m with a further commitment outlined in this report for the next ten years of a further £552.133m giving a long term investment of over £1.144 billion.
19. The Asset Management Framework builds on this successful delivery and brings it into an overarching strategic context for the current and future investment priorities, providing the Council with a clear link between our assets, ongoing capital investment and the strategic direction of the organisation.
20. The overall Capital investment levels within the Asset Management Framework align with Council’s Treasury Management Strategy that is also reported as part of this Cabinet agenda. The 2020/21 Treasury Strategy Statement identifies that for the period between 2020/21 and 2024/25 the Council has a net financing or borrowing requirement of £291.982m. This includes the capital expenditure planned for both the General Fund and HRA, which is not paid for from grants, the application of capital receipts or through in year charges to revenue.
21. This delivers a General Fund capital investment of £377.074m over the next 10 years and an investment through the Housing Revenue Account of £175.059m with external funding of £254.824m. The programme outlined in the Asset Management Framework is within this overall allocation.
22. As noted in the previous report presented to Cabinet in May 2019 this report is now being presented to cabinet and Council to be considered with the revenue budget planning and treasury management reports to ensure alignment of future investment priorities and decisions.
23. It is recognised that capital funding has come from external sources including the general grant as well as specific government funding for key strategic priorities, including Early Year’s expansions, community and heritage regeneration, housing investment and the Ayrshire Growth Deal. There remains further opportunities for external funding and the Council capital investment should ensure this is maximised at every opportunity. This includes areas around Economic Regeneration, Heritage, the Education Estate, Sustainability/Carbon Zero and the outdoor estate.
24. As with all previous capital investment activity it should be noted that any allocations for future schemes or those still at the early stages of development included within the report are forecast estimates for indicative purposes only and may be subject to rephasing and flexibility depending on the maturity of the project development, emerging priorities, both in terms of legislation and policy; market conditions at the time of tender and construction, and projected inflationary increases where relevant. Similarly, timescales are also shown for indicative purpose only at this stage and are extremely sensitive to a number of factors both internal and external; many of which are outwith the Council’s control.
25. Appendix 1 provides an updated profile of the allocated capital spend agreed as part of the Asset Management Framework and Capital Report agreed by Cabinet on 1st May 2019. This update reflects adjustments in timing of projects, realignment of previous allocations plus additional allocations to meet future commitments.
26. The overall investment plan remains in line with the project priorities established through the previous Asset Management Framework and further detail is provided later in the report under 130 REPORT B4 each asset category. There are three significant areas requiring future investment that offer wider benefit across a number of aspects of the Asset Management Framework and demonstrate the value of considering the interrelation of the asset categories. a. The Roads infrastructure are the arteries that provide the socio-economic links across all our communities. Ensuring effective maintenance and investment in the condition and suitability of the road network improves safety, encourages business investment, builds community resilience, creates a fresh environment as well as providing a positive experience for commuters and visitors alike. It supports the efficient use of our fleet, connects communities to the learning and cultural estate and offers opportunities to access our outdoors. The Council’s investment in our Roads and Bridges infrastructure provides a strong base for communities to connect.
b. Our Town Centres remain the heart of our communities, they offer a blend of recreational, business, cultural and wellbeing facilities. They reflect the identity and aspirations of a community and can bring together all ages, diverse groups and organisations. The positive face of our town centre reflect our cultural and heritage assets alongside corporate and wellbeing facilities, strengthening business opportunities as well as creating imaginative public realm. The council’s investment in our Town Centres is a catalyst for regeneration, inward investment and community empowerment.
c. Important buildings in every community have always provided the focal point where community life is centred, strengthening and creating personal and collective value. As ‘principles of place’ continue to offer opportunities for services to work differently, co- locate and consider local needs, new buildings must reflect more than their operational function. As we plan for future investment in new schools, wellbeing facilities, cultural and sports facilities the Council’s leadership in building facilities for our communities and not services can be further strengthened. The Barony Campus, Doon Campus, The Galleon, The Palace Theatre and Wellbeing Hubs should all offer a vision for the future, with ambition around sustainability, digital technology, positive wellbeing spaces and integration across all place based services.
PROGRAMME AND RISK MANAGEMENT
27. The Asset Management Framework provides the overarching structure of our approach, focusing on the asset management principles and a strong evidence base, setting out our priorities to support decision making, future investment as well as meeting ongoing operational demands. This recognises three layered approaches to ensure effective decision making:
Maintain and protect; delivering on a daily basis and meeting core obligations Review and Improve; assessing information and service needs for future priorities Invest and Develop; delivering value in capital investment and whole life of the asset
28. The Framework sets out the structure of governance and project management for the capital programme within strategic areas. The well-established Programme board approach as well as ensuring the effective delivery of the current programme will provide the operational oversight for prioritising and assessing future needs. In 2019/20 additional areas of focus have been developed and arrangements have been put in place to strengthen the programme management including:
Ayrshire Growth Deal Health and Social Care Property and Asset Management Group 131 REPORT B4 Town Centre Regeneration Leisure Trust Programme Board Asset Investment Group
29. The Council’s Performance Framework has a number of indicators linked to the management of our asset and are noted in the table below.
Performance Management - Assets
2015/16 2016/17 2017/18 2018/19 / Trend Proportion of operational accommodation that is: In a satisfactory condition 97.2% 98.2% 98.0% 99.1% Suitable for its current use 81.6% 81.4% 83.7% 88.6% Occupancy rates for office 17.8 18.1 19.8 17.2 accommodation expressed as sq. m per FTE Extent of operational portfolio 322,682 316,827 315,477 299,559 expressed in sq. m Percentage of council buildings in 83.2 82.8 86.1 88.1% which all public areas are suitable for and accessible to disabled people Emissions – actual energy usage 57.9 kg 51.6 kg 47.9 kg 40.8kg (CO2/m2) across the Council estate Emissions – overall energy usage 20,509 18,180 16,117 13,182* (CRC return) tonnes tonnes tonnes Tonnes Percentage of schools graded A or B 96.3 98.1 98.1 96.1 (good or satisfactory) Percentage of schools with occupancy levels above 61% - Primary 73.8 69.1 73.2 80.0 Secondary 66.6 55.5 66.6 75.0 Number of attendances per 1,000 2,383 2,416 2,195 2,243 population – pools Number of attendances per 1,000 9,130 7,831 6,498 6,081 population – indoor sports & leisure facilities
improving declining
30. As part of the overall programme management for the significant and long term capital key areas of risk require to be continually monitored and managed. This is a key element of the Asset Management Plan approach.
31. The recent approach to delivery of this extensive programme has involved a wide range of options to meet the needs of individual projects and programmes. From inhouse design and traditional construction tendering to partnership agreements for housing and design led procurement route for the Barony Campus. The Council continues to explore and utilise a range of procurement routes through the Commodity Strategy development and will remain focused on utilising the most effective route, recognising the resources available, the expertise needed and the longer term added value of the project.
132 REPORT B4 32. A number of projects are at the early development stage and require establishment and development of clear business case assessments, wide engagement with stakeholders and a high degree of imaginative and creative input to align with new ways of working, place based approaches and delivering carbon neutral. It is recognised that early engagement, utilising expertise in these areas will strengthen the outcomes of the project. The NERD project, the Doon Campus development, Kilmarnock Town Centre and the Wellbeing Hubs all require early specialist development resource to help define the outcome and deliverables of each project. This requires the budget allocations of programme management, design and development fees, in some cases, prior to full project approval or contract award. This can help maximise external funding but would require the Council on some cases to underwrite the risk of up to 0.25% of project costs.
33. As noted elsewhere in the report the financial risks associated with borrowing costs, market costs for projects have seen recent increases and with further uncertainty with the implications of Brexit there remains a need to closely monitor the overall programme and individual project budgets. In addition a number of development areas as noted above in terms of design risk also require to be factored in, for example the wider industry response to the construction quality issues, the introduction of digital solutions including Building Information Management and the need to innovate to address Carbon Zero. The Facilities and Property Management team have identified these three areas as part of the development for inhouse resources and strengthening the skill base of staff. This has included investment in training on the Passivhaus approach. It is also anticipated this will provide greater flexibility to increase the use of inhouse skills for future project delivery.
ASSET MANAGEMENT FRAMEWORK CATEGORIES
34. The following sections provides an update on each of the asset category areas, highlighting progress areas and sets out the priorities for future capital investment.
133 REPORT B4 HOUSING ESTATE
The Council’s social housing portfolio extends to 12,222 council houses. This figure includes 24 Adult Supported Units, 437 supported accommodation units for older adults, 8 units of interim ‘moving on’ accommodation and 73 temporary furnished flats.
Our investment aims in respect of the housing estate are:
1) Ensuring that the Council has a sustainable, good quality, energy efficient housing stock within safe, healthy and vibrant communities.
2) Delivering a Housing Asset Management Framework for managing property assets to ensure they contribute efficiently and effectively to the Council’s aims and objectives, both now and in the future.
35. The Housing Asset Management Framework (HAMF), Housing Investment Programme (HIP), Strategic Housing Investment Plan (SHIP) continue to be reported through Cabinet on an annual basis in November of each year, and the SHIP is submitted to the Scottish Government in accordance with the Scottish Government’s guidance that is issued annually. This Framework provides a clear rational and strategic focus for managing the Council’s housing stock and for aligning the associated investment based on identified housing need within our communities.
36. The Scottish Government’s target is 50,000 affordable homes to be delivered by 2021, with the Scottish Government’s Discussion Paper Housing to 2040 currently out to consultation. East Ayrshire Council, through the SHIP programme, is expected to deliver 985 new homes over a five year period, with a further 105 homes currently on site by the Council and two RSL partners. 1323 new or reconfigured Council homes have been completed since 2006, including the first development to be delivered in partnership with the Council’s framework Developer, CCG, at Cassillis Court in Dalrymple, along with the award-nominated assisted living development at Andrew Nisbet Place in Hurlford. Construction work continues with significant progress being made on site during 2019 at the Council’s developments at Tinto Avenue in Kilmarnock, Carskeoch Drive in Patna, David Dale Avenue in Stewarton and Fraser Walk in Kilmarnock, as well as Cunningham Housing Association‘s sites at Dalsalloch in Auchinleck, and Longpark Phase 7 in Kilmarnock, as well as Atrium Homes’ development at Sunnyside Square in Shortlees.
37. In 2018, the updated Housing Needs and Demand Assessment was published, and alongside the revised Local Housing Strategy 2019-24, the proposals were presented to Cabinet in November 2019. These documents set out how the Council, its Community Planning and Registered Social Landlord (RSL) Partners, will take forward a range of initiatives designed to ensure the Council has a sustainable, good quality, energy efficient housing stock within safe, healthy and vibrant communities.
38. The current SHIP 2020-25 includes projects with a total potential capacity for delivering up to 985 new, rehabilitated and acquired affordable homes in East Ayrshire over the 5 year period to March 2025, including 895 new or rehabilitated homes to include 50 purchased through open market purchases by the Council and 40 being purchased by RSL partners. This programme is supported by the Council’s capital invest of over £90m.
134 REPORT B4 ROADS INFRASTRUCTURE
The Ayrshire Roads Alliance (ARA) is the roads authority for both East and South Ayrshire Council areas. In East Ayrshire, ARA is responsible for over 1,200 km of carriageways, 946 km of footways, 21,406 streetlights, 72 traffic signals and 768 bridges and 115 additional structures.
Our investment aims in respect of the Roads Infrastructure are as follows:
1) Investment to maintain the roads and bridge network 2) Climate change mitigation, active travel and flood prevention 3) Support connectivity and economic activity
39. The Roads network provides the basis for economic and community activity and connectivity across East Ayrshire. The Council has successfully delivered an increased investment over the past two years with £12.000m invested in improving the quality of our road network resurfacing over 120km of the road network improving the Road Condition Index (RCI) and resurfacing 10% of the road network. The Roads Asset Management Plan sets out the assessment, needs and prioritisation of the roads network improvements and the outcome of focused inspection on the Bridge network to prioritise additional investment.
40. As noted in last year’s report this report presents an increased level of investment over the next 5 years to continue the priority of investing in the Road network and in addressing longer term investment needs of the extensive bridge infrastructure. The Roads Asset Management Plan presented to this cabinet highlights the project priorities over the next 5 years.
41. 644 Bridge inspections have been carried out in 2019 this has highlighted £53.8m of maintenance works to the statutory road network and £1.75m for other structures the council is responsible for. It is proposed to allocate an additional £24m across the 10 year capital programme to address priority areas and establish a long term investment plan for bridges and other structures. This will be progressed on a prioritised risk basis with the proposed medium term investment based on the development of a programme management approach for significant bridge improvement projects. This is would be the first phase priorities of the total £53m investment identified as needed based on current reports. It is proposed to review the investment level and priorities following the principle inspection programme after each 5 year period.
42. As noted the recent increased investment has seen improvement in the condition of the roads network. Resurfacing provides the most effective and efficient method of prolonging the life of the road network along with improvements to gullies and other infrastructure. It is proposed to continue this level of investment over the next 5 year’s by which time 40% of the current road network will have been resurfaced within a 10 year period. This is aimed at addressing the worst of the current condition, is reflected in a reduced number of insurance claims as well as recognising the impact changing weather and climate change is having on the road network.
43. A range of other schemes are also being progressed to mitigate flooding, improve road safety and connectivity. The Ayrshire Roads Alliance has been successful in attractive external funding for a number of schemes including £3.700m for the current flood mitigation scheme at New Cumnock that is anticipated to be fully completed in early 2021.
44. The replacement of street lighting has been delayed in 2019, with capital allocation being reprofiled for all replacement to be completed by 2021/22. As previously note this is on a spend to save basis as well as reducing the council’s carbon footprint with reduced energy cost, replacement and maintenance costs.
135 REPORT B4 45. As previously reported to and agreed at Cabinet in January 2020 investment of £3.165m is required to upgrade and address deterioration in the Kilmarnock Multi storey car park. As the cabinet report highlighted this facility provides a large percentage of parking spaces to the town centre helping promote and facilitate access to the retail and community activity in the area.
CULTURE AND COMMUNITY ASSETS
Our Culture and Community estate includes 45 sites that includes some nationally significant heritage and culture buildings as well as a wide range of community facilities, open space and cemeteries.
Our investment aims in respect of the community and heritage assets are:
1) Maintain our cultural heritage through conservation, enhancing access and interest. 2) Improve the quality of open spaces and parks, engaging communities to maximise the potential to enhance our environment. 3) Ensure that there is sufficient long term provision for cemetery grounds and that cemeteries are a tranquil and safe place to visit.
46. The current capital programme continues to invest in maintaining and improving our local Culture and heritage. Work continues at Dean Castle on this long term restoration project with the contractor on site to undertake the restoration of the Castle and adaptation of facilities to support the establishing of a 5 star visitor attraction as part of a £10.5m project supported by the Heritage Lottery and Historic Environment Scotland. This builds on the previously completed improvements across The Dean Castle Park creating new accessible visitor facilities and greater opportunities to expand access to more areas of the park through a new path network. This will be further enhanced by the development and progress of Kilmarnock’s Green infrastructure project that is anticipated to bring an investment of between £15m and £20m by 2023 to improve the infrastructure of the town for sustainable travel. Officers continue to progress bids for external funding needs to be secured for this project.
47. The Council has also supported major investment in the restoration and conservation within our town centres. Investment in The Ingram Business Centre, Opera House and Johnnie Walker Bond, public realm improvements as well as new facilities at Rothesay House and the redevelopment of Cumnock Town Centre continuing to grow the activity and footfall in our town centres.
48. Supporting our town centres continues to be a focus of the asset investment and the Capital programme has further allocations of funds to support regeneration, recognising the historic nature of our towns and villages. The Galston Local office project has progressed with extensive community engagement with the project plan at detailed design stage with the project anticipated to be complete during 2021.
49. In 2019 the Council received £1.7m of grant funding to invest in improving the Town Centre landscape and as noted in previous cabinet reports a range of projects have benefited from this investment across East Ayrshire and with a successful RCGF application the Creative Industries Hub in Kilmarnock has also received £1m RCGF funding and this is supported by a capital allocation of £1.5m from the Council’s Town Centre regeneration Fund. As the £1.7m funding has been time limited to financial year 2019/20 Cabinet also recognised the need to continue to support longer term projects including the reallocation of £0.400m to support Celebrate Kilmarnock’s ambition for the unused RBS building in the town centre. Therefore the Kilmarnock Town Centre Regeneration Fund will retain a £1.000m balance to support additional projects that will be brought to cabinet as detailed proposals are developed.
50. Our Heritage and Cultural estate offers substantial opportunity to leverage external funding and the approach taken in both the Dean Castle and the CARS projects has highlighted this. 136 REPORT B4 The Dean Castle Projects generating £6m of external funding through the work of the Leisure trust with Heritage Lottery and Historic Environment Scotland and Mauchline CARS receiving £1.8m from Historic Environment Scotland. Maintaining and preserving these historic buildings requires a specialist and delicate approach and close working with these National organisations continues to improve our approach to these buildings. The Leisure Facilities Plan will further identify priorities for the Heritage and Cultural estate.
51. Following the outcome of the Property Management Plan update presented to Cabinet in November 2019, the Palace Theatre and Grand Hall complex is identified as requiring extensive improvement and remedial work to stop ongoing deterioration to the façade as well as the need for internal improvement and upgrading of components. Cabinet agreed that an allocation of £5m is provided to support the development of a scheme that would address the long term needs of the facility and align it with the aspirations of the town centre. A strategic Leisure Trust Programme Board has been established that in addition to monitoring progress on current projects including the Dean Castle will also consider the development of new projects and progress the business case for the Palace Theatre.
52. The Council’s Community Asset Transfer approach remains an essential element of managing the overall asset base across the council. This has developed in line with the Community Empowerment legislation and as well as supporting our communities in taking responsibility for the activities in our local communities has also reduced existing property issues with the council’s estate. The Council has also supported these community organisations to apply for additional investment funding not available to the Council.
53. The progress on remediation of the previous coal sites continues to mitigate the effects on the landscape. The Council’s £10m investment to address the associated risks and support regeneration and restoration of the local environment is now in the final stages of delivery.
WELLBEING, SPORT AND OUTDOOR ESTATE
Our wellbeing and sport facilities include 18 sites that support a variety of aspects from the corporate parenting role to older people residential and day care facilities to community sports and recreation.
Our investment aims in respect of the wellbeing facilities are as follows:
1) Provide and maintain first class sports and leisure facilities that will encourage active lifestyles and make a positive impact on the health and wellbeing of all our people. 2) Ensure that residents with additional support needs have access to high quality supported accommodation 3) Support the strategic aims of the integration Joint Board and the Health and Social Care Property Asset Management Strategy
54. Supporting the integration of the Health and Social Care Partnership in delivering its strategic objectives remain an important focus in the development of the asset investment plans. The Council’s role as corporate parent has been supported by investment in children’s home facilities in recent years and community wellbeing facilities for day care. New opportunities however continue to develop around new models of care and support for adults with additional support needs being able to live within their community. The recent opening of Andrew Nisbet Place in Hurlford, as well as Lilyhill Gardens in Kilmarnock, that opened in 2015, provide supported accommodation that enhances and extends the range of available housing solutions for adults with additional support needs to live independently within their own communities. Further assisted living developments are contained in the SHIP 2020-25 for delivery in Auchinleck, Mauchline and New Cumnock.
137 REPORT B4 55. The strategic direction of supporting older people to remain in their home continues to be supported through the capital investment plan. £7.500m has been allocated across next 10 years to private sector housing grants, and this is proposed to be extended as part of the annual allocation until 2030. Telecare investment is a key driver in the success of care at home, however due to a required change over from analogue to digital by 2025 all existing equipment will require to be upgraded and with a review of projected demand it is recommended to increase the future allocations, with £1.200m required to address the transfer to digital over the next two financial years and an updated and extended profile to include the growing demand up to 2030 of £0.550m.
56. Through the Health and Social Care Property and Asset Management Strategy the care needs have been reviewed across a number of localities including Cumnock, Stewarton, Central Kilmarnock, Doon Valley and Irvine Valley with the early stage development of future business cases. This is a critical element of the development of the wider Caring for Ayrshire Review being undertaken through NHS Ayrshire and Arran reviewing all health and care settings and wellbeing services. A Property and Asset Management Board has been established in line with the Council’s programme management principles and collegues continue to work in partnership to maximise the opportunities across the whole capital programme.
57. Following the Regeneration of Kilmarnock Town Centre report presented to Cabinet in June 2019 the Council recognised that the development of a Health and Wellbeing Hub in Kilmarnock is a key part of this wider strategic agenda above, as well as contributing to the regeneration of Kilmarnock Town Centre. As noted in that report to assist in the wider funding of this project it is proposed to allocate an initial £10m to demonstrate the Council’s commitment to support this agenda.
58. The capital investment plan already included an allocation for the Galleon refurbishment and options have been considered for refurbishment and alternative replacement, however at the Cabinet in June 2020 it was proposed the refurbishment option is pursued and collegues are currently undertaking feasibility assessments and working up proposals to be brought back to cabinet. It is recognised that the integration and added value of investment around the wellbeing hub developments and the facilities at the Galleon offer greater synergy and the Project Boards are working together to ensure alignment.
59. A majority of the Council’s sport and leisure facilities are managed and operated by the Leisure Trust, with some community run venues. This partnership with the Council has allowed a focus on developing sport and leisure services from a range of facilities including the extensive investment in the school estate, the state of the art Ayrshire Athletics Arena and integrated community hubs including North West Area Centre, Shortlees Campus and Patna Campus. The Leisure Trust are currently consulting on a facilities review and this will be reported to Council during 2020. In conjunction the Council and Leisure Trust have reviewed the usage and letting arrangements across the Council and proposals will be brought forward in 2020 to ensure the community activity continues to be maximised across the significant investment in our estate, while ensuring efficient use of the overall estate. The opening of the Barony Campus will also provide a new opportunity to create a genuinely world class venue that will attract significant interest and usage beyond the school day.
60. Our outdoor estate is extensive and includes the Council’s 45 cemeteries. A programme of cemetery improvements has also been committed as part of the investment plan with further prioritised work at Auchinleck, Cumnock, Muirkirk and Riccarton is being progressed.
61. A review of the outdoor space across all our communities has also been established with Housing and Communities, Facilities and property Management and Ayrshire Roads Alliance coming together to develop further an integrated asset management plan approach on a 138 REPORT B4 locality or community basis. The outcome of this review will be reported to Cabinet during 2020.
ECONOMIC GROWTH PORTFOLIO
The Council’s Economic Growth portfolio comprises 178 non-operational (leased) property assets with over 300 leases including shops, business centres, industrial units, offices and industrial ground. These are leased to commercial organisations, charities and voluntary groups, which helps to support the Council’s economic development objectives.
Our investment aims in respect of the economic growth estate are as follows:
1) Maximise the value of the non-operational and Economic Growth portfolio. 2) Develop and expand the range of commercial and industrial premises in East Ayrshire to maximise the wider economic benefits to the area. 3) Promote and encourage Town Centre regeneration and investment
62. The Council’s Economic Growth portfolio offers opportunities for investment that support local economic regeneration and business growth and is linked to the regional ambitions within the Ayrshire Growth Deal.
63. In March 2019, the Secretary of State for Scotland David Mundell MP, Cabinet Secretary for Transport, Infrastructure and Connectivity Michael Matheson MSP and the Council leaders from each of the three Ayrshire local authorities signed the Heads of Terms for the Ayrshire Growth Deal (AGD) that will see the UK Government and Scottish Governments invest over £251.000m into Ayrshire. The commitment for the Scottish and UK governments to support the Ayrshire Growth deal further strengthens the opportunities and amplifies the local investment from the Council. The projects within the growth deal supported by the Council’s capital investment will include The Halo Kilmarnock which will transform the former Johnnie Walker site; The National Energy Research and Demonstrator Project in Cumnock, which will develop new technologies for energy generation and storage; The Ayrshire Engineering Park which will provide expansion and development of Moorfield Industrial Park in Kilmarnock; Ayrshire Manufacturing Investment Corridor, for the food and drink sector, with an innovation hub focused on the dairy sector. The financial support of the Council to these projects is included in the investment plan with £4m supporting the £16m Moorfield Development, £7.5m supporting the £24.5m NERD with the Ayrshire Manufacturing Investment Corridor being fully externally funded. The allocations have been reprofiled based on initial expectations of project and construction spend, and it is noted that the grant conditions will include the council delivering the projects with grant funding then claimed on a retrospective basis.
64. The National Energy Research Demonstrator Project (NERD) in Cumnock aims to transform energy production, distribution and connections within the Cumnock area and be an exemplar to Scotland and the UK in transitioning to a low carbon society. The NERD project is to be implemented on a phased basis; with the Centre of Excellence and demonstrator houses to be developed as the first phase, with the remainder of the research projects being carried out on a phased approach throughout the lifetime of the project.
65. The Council’s own Architecture and Asset Planning Team, within F&PM, are currently taking a lead role on developing a suitable design solution for the NERD project. However given the specialised nature of the project it is clear that there are key elements of the design, particularly in relation to Passivhaus, BREEAM and Smart Energy Systems, that are highly specialised in nature and therefore out with the skill set of existing professional services staff.
66. Discussions with advisors currently supporting the City of Edinburgh Council with delivering the first school projects in Scotland to a Passivhaus standard highlight a distinct skills shortage; 139 REPORT B4 particularly in relation to Passivhaus accredited designers and access to cost advice that supports the development of cost plans for highly sustainable building design. Given the shortage of skills it is therefore recommended that the Council seek to appoint the specialist advisors known to have expertise in this area to support the Council’s own design team with developing proposals for the NERD project. The intention is for these appointments to also act as a learning opportunity to support the development of the Councils own professional services staff that are currently training to be accredited Passivhaus designers.
67. Research has shown that the specialist services required to support the NERD Project can be procured through the Crown Commercial Service (CCS) Framework RM3741 – Project Management and Full Design Team Services; with a fee bid subsequently submitted by Faithful+Gould of approximately 10% to provide all of the Core Services required for the project. Given timescale pressures and the limitations in terms of supply it is therefore recommended that the necessary appointments are made through Lot 1 of the CCS Framework RM3741 on a direct award basis based on the NEC3 Professional Services Agreement.
68. A number of initial workshops facilitated by the Architecture and Asset Planning Section have taken place to date with key stakeholders, and it is the intention of the project leads to continue these workshops in partnership with the appointed specialist services team to develop the strategic brief and design through the necessary RIBA Plan of Work stages to coincide with the appropriate approval gateways. The first of these gateways is the RIBA Plan of Work Stage 2 – Concept Design sign-off which is anticipated to be completed by the 31 July 2020, which it is hoped will coincide with the approval of the Outline Business Case by the UK Government.
69. It is acknowledged that there is a risk that the outline business case may not be approved resulting in abortive work, or that the decision making process may take longer than anticipated. However, it is recommended that in the interests of the project, and maintaining progress, that design development is taken to at least a RIBA Stage 2 – Concept Design; with a final decision to proceed to the next stage taken at that time. It is anticipated that the costs of developing designs to the RIBA Stage 2 – Concept Design will be in the region of £0.200m which will be initially funded from the Council’s capital allocation for the project.
70. Whilst it is acknowledged that £0.200m does represent a significant investment, the information obtained by taking the project to a RIBA Stage 2 – Concept Design will have advantages not only in terms of the on-going dialogue with the UK Government on the Outline Business Case, but will also assist with final decision making on the location for the Centre of Excellence; with the preferred site currently being land at the Knockroon Estate owned by the Princes Foundation.
71. The Moorfield development continues to progress its staged development with further units operational in 2019 and current construction of 2 additional units due to be complete in Autumn 2020. As part of the previous Capital Investment Plan it was proposed to develop a unit at Rowallan Business Park based on a spend to save allocation of £1.2 million. As noted in a previous Cabinet the Council has utilised part of the site at Rowallan to develop the Council’s Catering Central Production Unit, with the opportunity to dispose of the remaining plots. It is therefore proposed to focus future speculative development and investment on the Moorfield sites.
72. It is recognised that in addition the significant investment in the above projects to support growth the council has an investment property portfolio of 178 sites with over 300 leases to local businesses and other community organisations across the authority area. A review of the requirements and opportunities of the leased property portfolio was highlighted in the Property Management Plan and a review is currently being undertaken recognising that the 140 REPORT B4 Council’s recent Management Review will transfer the estates function to Facilities and Property Management for March 2021.
LEARNING ESTATE
Our learning estate includes 48 sites accommodating our schools and early childhood centres, although these buildings also provide a wide variety of community access and support to other services including some corporate facilities.
Our investment aims in respect of the learning estate are as follows:
1) Improve the condition and suitability of the learning estate to provide the best learning environment for all. 2) Maximise the wider community benefits of our investment by encouraging greater community engagement in the learning estate. 3) Develop a wide range of new and high quality facilities to support Early Years expansion, developing our young workforce and improve inclusion.
73. The Learning estate accounts for the largest element of the overall operational estate of the Council in terms of scale and investment demand. Through the School Estate Management Plan, and the rationalisation of the school estate, the past 5 years has seen the most ambitious investment in the school estate across East Ayrshire. This has provided vital improvement in condition and suitability and improvements in utilisations of the school estate, supporting the Council’s commitments to raise educational attainment and improving opportunities for all.
74. The completion of the Barony Campus for August 2020 is the single largest investment in the Council’s history of £68m and will be in a unique position to offer magnificent facilities for our young people and the wider communities across East Ayrshire, with construction progressing well.
75. The current investment programme continues to progress with new facilities opened at Bellsbank in February 2020 and Loanhead Primary School refurbishment and extension due to open in August 2020. Decant arrangements at the previous Kirkstyle Primary will then allow Crosshouse Primary project to be taken forward during 2020/21.
76. Over the past 2 years the Council have consulted, designed, developed and delivered a major transformation agenda to meet the expansion of Early Years to 1140 hours. In addition to delivering the operational changes with staff and parents/carers, and introducing new areas including lunch services, a capital investment of £21.6m has been received. This investment has delivered 28 different project across East Ayrshire including 3 brand new facilities in Stewarton, Kilmaurs and Netherthird due to open in April 2020. Although the Council are on target to deliver the 1140 hours service for August 2020 there are three facilities that remain to be completed. Due to a range of factors the scope of the Dunlop, Catrine and Kilmaurs projects has changed since the project was established and remain at the early development stage. There is an allocation within the £21.6m to cover aspects of these projects however it is recognised that there remains some uncertainty on the final design and construction requirements. It is therefore proposed to retain a contingency balance of £1.000m within the programme while these projects are developed to detailed design stage.
77. The significant investment in education facilities has, as noted earlier, not only helped improve the learning environment for our young people but created community facilities that offer a wider range of access, opportunities and connections across all our communities. This includes state of the art sports facilities with new all-weather facilities for hockey and rugby at Stewarton 141 REPORT B4 and Cumnock, establishing new community run facilities and a clear focal point to develop our communities’ ambitions.
78. The focus for 2020/21 will be on the completion of the existing projects already on site and the development of more detailed plans for future projects within the programme. A key priority is the development of detailed project plans and design brief for Doon Campus Development. The Council continues to liaise with SFT and the Scottish Government on future funding for the school estate, however it is noted any funding will be through future revenue funding. The detail of the proposed funding continues to be refined however key to funding will be maintaining A/B condition in future years, investing in digital infrastructure, ensuring construction quality and delivering a step change in energy efficiency for the new facilities.
79. It is recognised in the School Estate Management Plan that although the Council has been successful in improving the school estate significantly over the past 10 years and with the projects completing over the next 2 years, achieving A/B condition and suitability; maintaining this in future years will continue to be a challenge and require further short term, medium, term and long term investment plans. Through the Property Management Plan the existing programme focuses on the priority areas however a number of remaining buildings will require replacement/refurbishment over the next 5-15 years. It is therefore noted in this report that further business cases should be developed recognising the current opportunity to submit bids to the Government’s Schools for the Future funding. Although a number of other buildings will require investment it is recognised that North West Kilmarnock and the Stewarton Area continue to see opportunities to redesign in line with the place principles and as noted potential synergy with the wellbeing approach.
80. Following the development of The Property Management Plan a number of schools have been identified as priority for roll out of the Property Pledge, this has included Onthank Primary, Hillhead Primary, Ochiltree Primary, Dalrymple Primary and Drongan Primary recently. As well as providing essential investment in the internal fabric and condition of the schools, a new partnership approach will be developed to ensure a collective ownership to encourage positive change in maintaining and valuing or built environment. Current allocations for improvement works have been consolidated and with the component renewal investment will be reviewed with an updated priority improvement programme to be reported as part of the proposed Property Management Plan.
142 REPORT B4 CORPORATE ESTATE
Our corporate estate includes 29 sites that provide our corporate office accommodation with back office and corporate functions as well as facilities for Council staff working in community based services. This also includes our support facilities and depots for operational services.
Our investment aims in respect of the corporate estate are as follows:
1) Rationalise and reduce the amount of buildings used by the Council. 2) Improve our facilities to support smarter working and service redesign. 3) Maximise opportunities for partnership working and income generation.
81. The Council has committed capital investment in the corporate estate to support the efficient and effective delivery of Council services. As is outlined in the Transformation Strategy; Smarter working; rationalising our estate as staff numbers reduce and service redesign is implemented; a move to digital services; a focus on place based working and increasing opportunities for shared use of assets across community planning partners continue to offer greater value and improvements in performance across our Corporate Estate. 82. During 2019/20 there has been an extensive and complex programme of staff moving towards smarter working with over 1000 staff relocating across Kilmarnock Town Centre, including over 200 staff coming from NHS facilities to support the integration of the Health and Social Care partnership. This included relocations with demolition of Greenholm Street and the temporary office arrangements at Kirkstyle being transferred and the facilities being utilised as decant facilities for Loanhead and next year Crosshouse. During 2020 smarter working principles will be extended to all Council offices as well as linking to wider place based principles across a range of local community facilities and depots. 83. The refurbishment and component renewal budget continues to support the ongoing maintenance and lifecycle management of our facilities and with the investment supporting all Council buildings across the Asset Portfolio. The Property Management Plan reported to Cabinet sets the priorities for this spend. This budget is being extended for the full 10 year programme to support the ongoing demand for repair and investment in our property assets. 84. Works are ongoing with the development of new depot locations in the south of the authority. At Ayr Road in Cumnock a phased programme of works is progressing to provide accommodation for Outdoor Services, East Ayrshire Woodlands and Housing Asset Services, all currently located at Thistle Park. In addition there is an opportunity for Transport Services to make use of the facilities. As Thistle Park is currently leased, moving to Ayr Road will provide efficiencies. 85. At present external car park and compound areas have been completed with works to reroof and re-clad areas of the existing building due to commence in the near future. Tenders for internal refurbishment are in preparation. 86. At the Caponacre Estate in Cumnock plans are being progressed for the new waste and recycling facility. The improved facilities will allow better public access and provide Waste Management with the ability to accept wider range of recyclits than is presently the case at Garlaff. Materials can then be bulked for processing at Western Road, Kilmarnock. Moving from recycling at Garlaff to the creation of a Council owned and run facility at Caponacre will provide efficiencies. 87. The project is at a technical design stage has been submitted for a planning application. Tenders for construction works are currently being prepared. 143 REPORT B4 TRANSPORT AND FLEET
The Council’s transport fleet is comprised of 549 vehicles. Reflecting the complexity of the Council’s business, there are no fewer than 37 separate vehicle classifications.
Our investment aims in respect of the transport fleet are as follows:
1) Optimise the size of the vehicle fleet using utilisation data and the application of minimum acceptable utilisation levels to challenge the need for vehicles and reduce the need for the future size of the fleet. 2) Invest in a greener, more efficient fleet to improve air quality through lower emissions and reduce running costs and working to the Scottish Government’s target of 2032 for all new vehicles to be zero emission.
88. As noted as part of the Council’s budget report and Transformation plan agreed in February 2019 a review of the transport fleet has been undertaken and a primary aspiration is to improve optimisation and increase the green fleet utilised by the Council, with a spend to save capital investment agreed to take this forward. The Council currently has 69 electric vehicles with a further 13 being purchased by the end of 2020/21. The increasing use of green fleet will be within a longer term aim of reducing our overall fleet by over 10%. The transport service are currently working with services to map existing fleet, managing replacement and analysing current usage to reduce overall vehicles. The roll out of improved sharing of pool vehicles across service based in the town centre is anticipated during 2020. The capital allocation and profile proposed in 2019 has been reviewed to reduce the overall borrowing implications as it is anticipated the profile of capital spend, a reduction in fleet numbers and potential capital receipts from sales will improve the overall financial position of the council. Proposals will be taken forward following consultation with service.
89. External investment has also been received to support the wider roll out of electric charging stations with a range of Council buildings hosting the new chargers. A new flagship model for fast electric chargers is now operational at Ayrshire Athletics Arena. This further enhances the opportunities for the Council fleet as well as public charging and is providing significant profile towards the Council’s climate change agenda.
CLIMATE CHANGE
90. The Council through its Climate Change Declaration reported to Cabinet in November 2019 set out its approach to developing a Climate Action Plan through a working group with elected members and young people to set an ambition to meet the overall net zero ambition by setting out a roadmap to deliver significant change over the next 10 years.
91. It is recognised that key areas of the council’s emissions are linked to our asset base; our buildings, our homes, our fleet, the materials we use, what we recycle and what we waste. As part of the capital programme in 2015 the council committed £5m through the Energy Efficiency Fund which has already contributed to a significant improvement with our carbon output reducing by 23%. However it is recognised a greater degree of action is needed and it is recommended the Energy Fund is increased as part of the General Capital Fund by a further £4m to support future investment to support actions to achieve net zero carbon where additional investment can reduce our carbon output in our buildings, vehicles and reducing waste.
CAPITAL INVESTMENT STRATEGY
92. The Prudential Code sets out that in order to demonstrate that the Council takes capital expenditure and investment decisions in line with strategic and service objectives and takes 144 REPORT B4 account of stewardship, best value, prudence sustainability and affordability, it should have in place a Capital Strategy:
93. The Capital Strategy should form part of the authority’s integrated revenue, capital and balance sheet planning and is intended to give a high level overview of how capital expenditure, capital financing and treasury management activity contribute to the overall provision of services along with an overview of how the associated risk is managed and the implications for future financial sustainability.
94. As a result the Capital Strategy should set out the long term context in which capital investment and expenditure decisions are made and give due consideration to both risk and reward and impact on the achievement of priority outcomes.
Overview of capital investment
95. The following tables summarise the Council’s capital investment programmes, together with estimated funding streams for the period 1 March 2019 until 31 March 2030. The gap between planned expenditure and estimated funding represents the underlying borrowing requirement of the Council. Full details of project spend are set out in Appendix 1.
2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 Est. Est. Est. Est. Est. Est. £m £m £m £m £m £m Total Expenditure 121.896 96.185 107.931 106.558 81.437 74.719
Total Funding 41.069 39.144 28.923 31.427 36.285 39.069
Required 80.827 57.041 79.008 75.131 45.152 35.650 Borrowing
Loans Fund Advances and Repayment of Principal
96. The Local Authority (Capital Financing and Accounting) (Scotland) Regulations 2016 – Loans Fund Accounting require local authorities to make loans fund advances each year for expenditure of, or lending by the local authority which it has determined should be met from borrowing as permitted by Regulation 2.
97. Loans fund advances are repaid over the assumed useful life of the asset created or enhanced by the expenditure. Cabinet considered and approved a revised methodology for calculation of loans fund repayments in February 2018. In broad terms most advances will be repaid over 40 years.
98. Repayments of loans fund advances form the principal element of the capital financing charge made to the General Fund and Housing Revenue Account along with an allocation of interest (due on external debt) and expenses.
99. The forward estimate of principal repayments arising from prior year expenditure and expenditure forecast for 2020/21 onwards is summarised below. The full detail of this can be found in the Treasury Management Strategy Statement. Advances Later Repaid - 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 Years Principal Act. Est. Est. Est. Est. Est. Est. 145 REPORT B4 £m £m £m £m £m £m £m General Fund 7.744 8.172 8.398 8.463 8.990 8.917 417.312 HRA 3.007 3.437 3.780 4.200 4.713 4.544 200.404 Total 10.751 11.609 12.178 12.662 13.703 13.461 617.716
Borrowing to Fund the Capital Programme
100. In order to raise the cash required to pay for the acquisition or creation of capital assets it is necessary to borrow. There are two types of borrowing:
External – where loans are taken usually from the Public Works Loan Board but this can also be from commercial banks and financial institutions.
Internal - where the Council uses resources such as reserves and balances to finance capital expenditure. In the current economic climate this is a prudent use of Council resources as it reduces the exposure to counterparty risk and, as investment returns are currently low, reduces the cost of carrying additional debt at higher interest rates.
101. The following table shows the relationship between borrowing, reserves and capital expenditure already incurred and planned which has still to be financed - the Capital Financing Requirement (CFR).
2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 Est. Est. Est. Est. Est. Est. Capital £m £m £m £m £m £m Position: CFR at 1 April 393.637 463.713 509.145 575.975 638.444 669.892 Principal (10.751) (11.609) (12.178) (12.662) (13.703) (13.461) Repaid New 80.827 57.041 79.008 75.131 45.152 35.650 Expenditure Closing CFR 463.713 509.145 575.975 638.444 669.892 692.081 at 31 March
Borrowing
Position: External Debt 322.139 395.573 447.905 522.361 592.723 631.608 at 1 April New external Debt 102.136 94.362 83.626 76.689 46.950 29.799 (estimate) Debt (29.126) (42.031) (9.169) (6.328) (8.064) (6.509) repayments Closing 395.573 447.905 522.361 592.723 631.608 654.899 External Debt
Over /(Under) (68.139) (61.241) (53.614) (45.721) (38.285) (37.183) Borrowed
Reserves and 68.139 61.241 53.614 45.721 38.285 37.183 Balances:
146 REPORT B4 102. The Treasury Management Strategy assumes that internal borrowing will continue to be utilised at a level equal to the available reserves and balances. In practice it is usual for the Council to have other short term balances which typically arise from movements in working capital and accounting charges which do not require cash payments, such as loans fund principal repayments.
103. As a result, the actual level of external borrowing may vary above or below the estimated amount in any year. This will be monitored as part of the wider approach to treasury activity with the actual level and timing of borrowing being phased appropriately.
Revenue Impact of Capital Investment Programmes (Affordability)
Capital Financing Costs
104. The fundamental objective when considering the affordability of the Council’s capital investment plans is to ensure that the cost of servicing the debt incurred remains within sustainable limits.
105. To achieve this it is important that there is a clear linkage between the longer term capital investment proposed and the revenue implications of this - the capital financing costs or debt charges. These are made up of:
Repayment of loans fund principal Interest (payable on external borrowing) Expenses (bank charges, support costs etc.)
106. The following tables sets out the current forecast position.
General 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 Fund Est. Est. Est. Est. Est. Est. £m £m £m £m £m £m Principal 7.744 8.172 8.398 8.463 8.990 8.917 Interest 11.747 13.142 14.903 16.388 17.183 17.290 Total 19.492 21.314 23.302 24.851 26.173 16.207
Housing 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 Est. Est. Est. Est. Est. Est. £m £m £m £m £m £m Principal 3.007 3.437 3.780 4.200 4.713 4.544 Interest 4.610 5.366 6.116 7.046 7.665 7.992 Total 7.617 8.802 9.896 11.246 12.378 12.536
107. The figures shown above form part of the budgets which underpin the setting of the Council Tax and Housing Rent levels for 2020/21, whilst later financial year figures will be incorporated into the medium term planning assumptions.
Revenue costs from Spend to Save Capital Schemes
108. Capital financing costs where the capital expenditure has been approved on spend to save principles are charged direct to the appropriate service revenue account in the expectation that 147 REPORT B4 savings released or income generated will be at least equal to the costs of servicing the debt. These are currently projected as being:
Spend to Save Capital Financing 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 Costs Est. Est. Est. Est. Est. Est. £m £m £m £m £m £m Principal 1.145 1.036 0.934 0.807 0.778 0.769 Interest 0.719 0.741 0.832 0.951 1.199 1.538 Total 1.864 1.777 1.766 1.758 1.978 2.307
New and Recurring Revenue Costs
109. In addition to the capital financing costs implicit with a decision to incur borrowing consideration also needs to be given to any revenue consequences arising from a capital project.
110. These will include any additional costs from commissioning or operating a new facility plant or vehicle together with the ongoing maintenance and compliance with all statutory requirements.
111. Where revenue consequences cannot be met from existing departmental budgets Depute Chief Executives and Directors are required to seek formal adjustment to the allocated budgets, prior to committing capital budgets.
Commercial Investment Activities
112. The Transformation Strategy has identified, as part of the wider review of property and estate, the need to consider the potential capacity to maximise the strategic, community, economic, commercial, and financial and risk management benefits
113. The transformation strategy further recognises that income generation can be an additional tool to doing more with less and consequently will explore opportunities where a more commercial approach can be used to reduce costs and generate additional grant income.
114. To date acquisition of property has predominantly been undertaken to support service delivery rather than for investment or regeneration purposes. Prior to undertaking any extensive programme of commercial or investment acquisition it will be necessary to develop a property investment strategy for the Council which should address the following:
The objectives for acquiring commercial property investments The criteria for investment acquisition Risks to the Council and a programme of risk mitigation and control The overarching governance framework for acquisition, management and disposal
Section 95 Officer Assurance
115. The capital investment plan and capital strategy has been prepared in line with the requirements of the 2018 CIPFA Prudential Code and 2018 CIPFA Treasury Management Code of Practice.
116. The Depute Chief Executive and Chief Financial Officer views the capital investment to be prudent and affordable and confirms that the revenue implications have been incorporated into the forward financial planning for the Council. 148 REPORT B4
FINANCIAL IMPLICATIONS
117. The Capital investment plan outlined delivers an overall investment of £552.161m over the next 10 year programme which added to the last 10 year programme of £592.133m shows and overall investment of almost £1.144billion.
118. As noted in the report the total capital allocations are within the funding envelope set out through the Council’s revenue budget and treasury management plan.
EQUALITY IMPACT ASSESSMENT IMPLICATIONS
119. The development of individual business cases and project briefs within the Asset Management Framework will consider the requirements of the Equality Impact Assessment (including socio- economic impacts).
LEGAL IMPLICATIONS
120. There are no specific legal implications with this report.
COMMUNITY PLANNING IMPLICATIONS
121. The Asset Management Framework directly supports the delivery of the Community Planning themes and strengthens the opportunities for shared use of assets and future alignment of investment under the principles of the place.
122. It is important to recognise the opportunity to maximise future investment in our assets across community planning partners, other public sector organisation and local community and third sector organisations requires a commitment from all organisations to work closely in establishing priorities and the development of shared business cases and delivery models that deliver on the wider outcomes for our communities.
TRANSFORMATION IMPLICATIONS
123. The Asset Management Framework and Capital investment strategy directly support the Transformation workstreams
Workstream 2: Workforce Planning, Cultural Change and Service Re-design Workstream 3: A digitally connected East Ayrshire Workstream 5: Property and Estate Rationalisation
RISK MANAGEMENT IMPLICATIONS
124. A number of principle risks are included in the report in relation to affordability in the event of potential inflation and interest rate rises which are reflected in the Treasury Management strategy. Project Management risks, market risks and insurance risks that are managed and assessed through the project management principles and programme board structure.
Katie Kelly Deputy Chief Executive – Safer Communities 149 REPORT B4
Implementation Officers Andrew Kennedy, Head of Facilities and Property Management, Telephone 01563 576089
150 REPORT B4 Prior PROJECT Years 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 TOTAL £m £m £m £m £m £m £m £m £m £m £m £m £m TOTAL PRIOR PROJECTS 189.949 189.949 CONTINUATION PROJECTS Learning Estate Barony Campus 35.202 30.279 2.519 68.000 Lainshaw Primary Reconfiguration 0.500 0.500 Crosshouse Primary School and Communications Centre 0.001 0.050 4.099 2.050 6.200 Dunlop Primary Extension & ECC 0.280 0.050 2.247 1.123 3.700 Loudoun Academy Refurbishment 0.796 0.050 1.188 1.188 1.188 4.410 Stewarton Academy Extension & Refurbishment 1.446 0.300 1.000 6.465 6.464 15.675 St Sophia's Primary School 0.422 0.100 0.000 2.020 1.058 3.600 Loanhead ECC and Primary Refurbishment 0.456 2.435 2.509 5.400 Nether Robertland Primary Refurbishment 0.001 0.036 0.500 0.609 0.704 1.850 Logan Primary Refurbishment 0.276 0.115 0.150 0.150 0.690 Hillhead Primary Refurbishment 0.000 0.100 0.350 0.450 Kilmaurs Primary Refurbishment 0.000 0.010 0.500 0.530 1.040 Netherthird Primary School 0.064 2.000 5.500 2.750 10.314 Bellsbank Primary Replacement 0.350 5.800 0.130 6.280 Doon Campus Development 0.000 3.000 12.000 15.000 30.000 Future Schools Fund: North West Kilmarnock 0.000 5.000 18.000 9.000 32.000 Future Schools Fund: Stewarton / Lainshaw 0.000 5.000 10.000 15.000 Education / Early Years Contingency 0.000 0.500 0.500 1.000 Early Learning and Childcare 1140 Expansion 7.810 8.100 5.700 21.610 Business Growth Kilmarnock Town Centre Regeneration 0.500 0.500 0.500 0.500 2.000 Moorfield Additional Units 0.000 1.050 1.050 Moorfield Development 0.000 3.000 1.920 4.920 Economic Regeneration and Development Fund 1.600 0.500 0.500 1.000 3.000 3.500 10.100 Town Centre Fund 0.000 0.851 0.850 1.701 Dunlop Street / Strand Street 0.029 0.200 0.771 1.000 Creative Industries Hub 0.000 1.500 1.500 Ayrshire Growth Deal National Energy Research and Development Centre (NERD) 0.000 0.500 0.500 9.333 4.667 1.900 1.900 1.900 1.900 1.900 24.500 Halo Project - Phase 1 0.753 0.624 0.623 2.000 Ayrshire Manufacturing Investment Corridor (AMIC) 0.000 0.500 9.000 4.500 3.500 3.000 3.000 23.500 Ayrshire Engineering Park (Moorfield Phase 3) 0.000 0.400 2.400 1.200 3.000 3.000 3.000 3.000 16.000 Corporate Estate ICT Programme 6.650 1.200 1.200 1.200 1.250 1.250 1.250 1.250 1.250 1.250 1.250 1.250 20.250 Refurbishment and Component Renewal 6.720 1.500 1.500 1.500 1.500 1.500 1.500 1.500 1.500 1.500 1.500 1.500 23.220 Energy Efficiency / Sustainability / Carbon zero 1.945 0.400 0.500 0.500 0.397 0.600 0.600 0.600 0.600 0.600 0.500 0.500 7.742 Caponacre Depot (Part Self Funded Scheme - Below) 0.000 0.250 2.550 2.800 Transformation Strategy Fund 4.446 0.500 0.500 0.500 0.500 6.446 Risk Management Centre Equipment Upgrade 0.300 0.100 0.400 Demolition and Surplus Site Remedial Works 0.000 0.145 0.145 Redevelopment of Vacant Sites 0.000 1.000 0.500 0.500 2.000 CCTV Improvements - Town Centres 0.000 0.200 0.200 Culture and Community Assets Galston Local Office 0.767 0.350 2.333 3.450 Other Cemetery Improvements 0.100 0.100 0.100 0.100 0.100 0.100 0.100 0.100 0.100 0.100 0.100 0.100 1.200 Environmental Risk Management and Flood Risk Fund 8.000 2.000 10.000 Dean Castle / Keep Match Funding 3.000 3.000 Dean Castle Country Park 0.626 0.626 Dalmellington / Waterside CARS 0.000 0.100 0.100 0.200 2-4 John Finnie Street 0.004 0.216 0.220 Palace Theatre Upgrade 0.000 5.000 5.000 Roads Infrastructure Roads & Transportation Programme 48.736 3.555 6.000 5.000 5.000 3.000 3.000 3.000 3.000 3.000 3.000 3.000 89.291 Bridge Improvement Programme 0.000 2.000 3.000 3.000 4.000 4.000 2.000 1.500 1.500 1.500 1.500 24.000 New Cumnock Flood Scheme 1.533 0.600 2.034 2.034 6.200 Multi Storey Car Park 0.000 1.582 1.583 3.165 Transport Fleet Fleet 0.000 2.000 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 8.000 Wellbeing Projects Galleon Centre 0.150 7.000 6.700 13.850 Health and Wellbeing Hub 0.000 2.500 2.500 5.000 10.000 Private Sector Housing Grant - Disabled Adaptations 3.450 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 10.050 Private Sector Housing Grant - Improvement 1.200 0.200 0.200 0.200 0.200 0.200 0.200 0.200 0.200 0.200 0.200 0.200 3.400 Telecare 0.760 0.150 0.750 0.750 0.165 0.170 0.175 0.180 0.185 0.190 0.195 0.200 3.870 North West Area Centre 0.000 0.223 0.223 Health and Social Care Management System 0.700 0.042 0.742 TOTAL INDICATIVE EXPENDITURE 329.522 65.084 58.208 65.544 63.059 57.687 42.925 36.930 14.435 11.440 11.345 9.450 765.628
SELF FUNDED PROJECTS Rowallan Park / Moorfield 0.000 1.200 1.200 Caponacre Depot 0.867 0.817 0.817 2.500 ICT Fibre Connection 0.000 0.120 0.120 Street Lighting LED 0.685 0.200 2.018 2.018 4.920 TOTAL SELF FUNDED PROJECTS 1.552 1.137 4.034 2.018 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 8.740
HOUSING Strategic Housing Investment Plan (SHIP) 35.719 16.663 23.089 26.219 6.470 14.514 1.704 124.378 Housing Investment Programme (HIP) 16.557 17.280 17.280 17.280 17.280 17.280 102.957 TOTAL HOUSING 52.276 33.943 40.369 43.499 23.750 31.794 1.704 0.000 0.000 0.000 0.000 227.335
TOTAL 331.074 118.496 96.184 107.930 106.558 81.437 74.719 38.634 14.435 11.440 11.345 9.450 1,001.703 Prior PROJECT Years 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 TOTAL £m £m £m £m £m £m £m £m £m £m £m £m £m TOTAL PRIOR PROJECTS 189.949 189.949 CONTINUATION PROJECTS Learning Estate Barony Campus 35.202 30.279 2.519 68.000 Lainshaw Primary Reconfiguration 0.500 0.500 Crosshouse Primary School and Communications Centre 0.001 0.050 4.099 2.050 6.200 Dunlop Primary Extension & ECC 0.280 0.050 2.247 1.123 3.700 Loudoun Academy Refurbishment 0.796 0.050 1.188 1.188 1.188 4.410 Stewarton Academy Extension & Refurbishment 1.446 0.300 1.000 6.465 6.464 15.675 St Sophia's Primary School 0.422 0.100 0.000 2.020 1.058 3.600 Loanhead ECC and Primary Refurbishment 0.456 2.435 2.509 5.400 Nether Robertland Primary Refurbishment 0.001 0.036 0.500 0.609 0.704 1.850 Logan Primary Refurbishment 0.276 0.115 0.150 0.150 0.690 Hillhead Primary Refurbishment 0.000 0.100 0.350 0.450 Kilmaurs Primary Refurbishment 0.000 0.010 0.500 0.530 1.040 Netherthird Primary School 0.064 2.000 5.500 2.750 10.314 Bellsbank Primary Replacement 0.350 5.800 0.130 6.280 Doon Campus Development 0.000 3.000 12.000 15.000 30.000 Future Schools Fund: North West Kilmarnock 0.000 5.000 18.000 9.000 32.000 Future Schools Fund: Stewarton / Lainshaw 0.000 5.000 10.000 15.000 Education / Early Years Contingency 0.000 0.500 0.500 1.000 Early Learning and Childcare 1140 Expansion 7.810 8.100 5.700 21.610 Business Growth Kilmarnock Town Centre Regeneration 0.500 0.500 0.500 0.500 2.000 Moorfield Additional Units 0.000 1.050 1.050 Moorfield Development 0.000 3.000 1.920 4.920 Economic Regeneration and Development Fund 1.600 0.500 0.500 1.000 3.000 3.500 10.100 Town Centre Fund 0.000 0.851 0.850 1.701 Dunlop Street / Strand Street 0.029 0.200 0.771 1.000 Creative Industries Hub 0.000 1.500 1.500 Ayrshire Growth Deal National Energy Research and Development Centre (NERD) 0.000 0.500 0.500 9.333 4.667 1.900 1.900 1.900 1.900 1.900 24.500 Halo Project - Phase 1 0.753 0.624 0.623 2.000 Ayrshire Manufacturing Investment Corridor (AMIC) 0.000 0.500 9.000 4.500 3.500 3.000 3.000 23.500 Ayrshire Engineering Park (Moorfield Phase 3) 0.000 0.400 2.400 1.200 3.000 3.000 3.000 3.000 16.000 Corporate Estate ICT Programme 6.650 1.200 1.200 1.200 1.250 1.250 1.250 1.250 1.250 1.250 1.250 1.250 20.250 Refurbishment and Component Renewal 6.720 1.500 1.500 1.500 1.500 1.500 1.500 1.500 1.500 1.500 1.500 1.500 23.220 Energy Efficiency / Sustainability / Carbon zero 1.945 0.400 0.500 0.500 0.397 0.600 0.600 0.600 0.600 0.600 0.500 0.500 7.742 Caponacre Depot (Part Self Funded Scheme - Below) 0.000 0.250 2.550 2.800 Transformation Strategy Fund 4.446 0.500 0.500 0.500 0.500 6.446 Risk Management Centre Equipment Upgrade 0.300 0.100 0.400 Demolition and Surplus Site Remedial Works 0.000 0.145 151 0.145 Redevelopment of Vacant Sites 0.000 1.000 0.500 0.500 2.000 CCTV Improvements - Town Centres 0.000 0.200 REPORT0.200 B4 Culture and Community Assets Galston Local Office 0.767 0.350 2.333 3.450 Other Cemetery Improvements 0.100 0.100 0.100 0.100 0.100 0.100 0.100 0.100 0.100 0.100 0.100 0.100 1.200 Environmental Risk Management and Flood Risk Fund 8.000 2.000 10.000 Dean Castle / Keep Match Funding 3.000 3.000 Dean Castle Country Park 0.626 0.626 Dalmellington / Waterside CARS 0.000 0.100 0.100 0.200 2-4 John Finnie Street 0.004 0.216 0.220 Palace Theatre Upgrade 0.000 5.000 5.000 Roads Infrastructure Roads & Transportation Programme 48.736 3.555 6.000 5.000 5.000 3.000 3.000 3.000 3.000 3.000 3.000 3.000 89.291 Bridge Improvement Programme 0.000 2.000 3.000 3.000 4.000 4.000 2.000 1.500 1.500 1.500 1.500 24.000 New Cumnock Flood Scheme 1.533 0.600 2.034 2.034 6.200 Multi Storey Car Park 0.000 1.582 1.583 3.165 Transport Fleet Fleet 0.000 2.000 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 8.000 Wellbeing Projects Galleon Centre 0.150 7.000 6.700 13.850 Health and Wellbeing Hub 0.000 2.500 2.500 5.000 10.000 Private Sector Housing Grant - Disabled Adaptations 3.450 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 0.600 10.050 Private Sector Housing Grant - Improvement 1.200 0.200 0.200 0.200 0.200 0.200 0.200 0.200 0.200 0.200 0.200 0.200 3.400 Telecare 0.760 0.150 0.750 0.750 0.165 0.170 0.175 0.180 0.185 0.190 0.195 0.200 3.870 North West Area Centre 0.000 0.223 0.223 Health and Social Care Management System 0.700 0.042 0.742 TOTAL INDICATIVE EXPENDITURE 329.522 65.084 58.208 65.544 63.059 57.687 42.925 36.930 14.435 11.440 11.345 9.450 765.628
SELF FUNDED PROJECTS Rowallan Park / Moorfield 0.000 1.200 1.200 Caponacre Depot 0.867 0.817 0.817 2.500 ICT Fibre Connection 0.000 0.120 0.120 Street Lighting LED 0.685 0.200 2.018 2.018 4.920 TOTAL SELF FUNDED PROJECTS 1.552 1.137 4.034 2.018 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 8.740
HOUSING Strategic Housing Investment Plan (SHIP) 35.719 16.663 23.089 26.219 6.470 14.514 1.704 124.378 Housing Investment Programme (HIP) 16.557 17.280 17.280 17.280 17.280 17.280 102.957 TOTAL HOUSING 52.276 33.943 40.369 43.499 23.750 31.794 1.704 0.000 0.000 0.000 0.000 227.335
TOTAL 331.074 118.496 96.184 107.930 106.558 81.437 74.719 38.634 14.435 11.440 11.345 9.450 1,001.703