Agenda item

            The Committee considered the undernoted report:

 

“1        Relevant Background Information

 

1.1       This report provides members with an update on the current position with regard to the revenue estimates for 2015/16 and the key issues to be considered before setting the district rate for 2015/16. Members are asked to note that a final decision on the estimates and the district rate cannot be made until there is clarity on the amount of funding for transferring functions and  the level of de-rating grant. A further Committee meeting is scheduled for 30 January.

 

2          Key Issues

 

            Summary Position

            Table 1 below summarises the current revenue estimates position, based on a zero increase in the district rate for 2015/16.

 

Table 1

Summary Revenue 2015/16 Revenue Estimates Position

 

Cost Increases
Increase in Departmental Estimates	£9,266,997
Transfer of Functions Funding Gap	£1,023,653
Regeneration Resource	£448,895
Political Assistance	£175,000
Capital Financing – Transferring Loans	£677,319
Capital Financing – Leisure Efficiencies	£765,951
Capital Financing – Rate Base	£2,000,000
Total Increased Costs	£14,357,815
Financed By:
Additional Rates Income	-£13,400,133
Additional De-Rating Grant	-£461,046
Applied Reserves	-£496,636
Balance	Nil

 

2.1       There are two key elements to setting the district rate and the estimates. The first part of the report deals with the amount of rates income which will be generated from the rate base and the second part deals with all the elements which make up the Council’s estimates.

2.2       Rate Income

 

            This will be the first rate set for the new Council. This means that the rate base now includes all domestic and non-domestic properties transferring from Lisburn and Castlereagh. The final Estimated Penny Product (EPP) provided by Land and Property Services (LPS) and validated by Council officers and the Institute of Revenue, Rating and Valuation (IRRV) is £5,616,420.  This means if the Council was to set a zero rate an additional £13,400,133 of rates income would be raised, bringing the total rates income to £143,116,491 for the new boundary area in 2015/16.

 

2.3       De-Rating Grant

 

            In addition to district rate income the Council also receives an industrial de-rating grant from DOE. The de-rating grant compensates the Council for the loss of rate income due to the statutory de-rating (lowering of rates) of certain properties.  LPS has notified the Council that the de-rating grant will increase by £461,046.

 

2.4       The DOE, however, have also advised, in their draft 2015/16 budget, that the de-rating grant will be subject to budget cuts. We have been advised that this would mean a reduction of £1,249,902. This is one of the key issues which needs to be resolved prior to the setting of the district rate.

 

2.5       DEPARTMENTAL ESTIMATES

 

            The major driver of growth in the revenue estimates is the impact of the boundary changes. Departmental estimates for 2015/16, including provision for the new areas, have increased by £9.3m (7.87%) 

 

2.6       Table 2 below shows the main pressures on departmental estimates in 2015/16. The key items are discussed below.

 

            Table 2

            Departmental Budget Pressures 2015/16

 

Staff Transferring from Lisburn and Castlereagh	£3.28m
New Posts for LGR	£0.72m
Employee Pay Rise and Pension Costs	£2.43m
Transferring Assets Repairs and Maintenance	£0.33m
New Council Members Allowances	£0.52m
Waste Convergence and Disposal Costs	£4.29m
Cuts to Government Grants	£0.28m
Ulster Orchestra	£0.15m
Total Expenditure Pressures	£12.10m
Less
Leisure Transformation Year 1 Efficiencies	-£0.77m
Corporate Efficiencies	-£2.08m
Net Impact on Departmental Budgets	£9.25m

 

2.7       Staff Transferring from Lisburn and Castlereagh (£3.28m): The details of all 141 staff from the Lisburn and Castlereagh Councils who will transfer to Belfast on the 1 April 2015, under the LGR transfer scheme, have been received and validated by the Human Resources Section. The costs associated with these transfers have been incorporated into the revenue estimates and the detail of the posts to be added to the establishment is included as Appendix 1.

 

2.8       New Posts for LGR (£720k): In addition to the transferring posts, the departmental estimates include the funding for 17 posts required to ensure the delivery of services on a converged basis. Details of these posts are included as Appendix 2.

 

2.9       Employee Pay Rise and Pension Costs (£2.43m): This covers the increase in employee costs arising from the national pay settlement and the increased NILGOSC pension contribution costs arising from compliance with the auto enrolment pension regulations.

 

2.10     Transferring Assets Repairs and Maintenance (£330k): This is the increase in existing planned maintenance budgets required for the annual maintenance and upkeep of assets transferring to Belfast.

 

2.11     New Council Members Allowances (£520k): The central government funding provided for Members allowances during the Shadow Council will end at the 31 March 2015, resulting in an increase in the net expenditure requirements for 2015/16.  

 

2.12     Waste Convergence and Disposal Costs (£4.29m): This includes the provision of waste management services to the new boundary area, including the additional recycling, haulage and landfill gate fee costs. It also includes the increased costs associated with the implementation of the waste plan to ensure the Council’s compliance with statutory waste management targets.

 

2.13     Cuts to Government Grants (£284k): This is the loss of income from existing grant funding streams provided to the Council by the DOE, which the DOE have advised will cease in its revised budget proposals for 2015/16. Further detail is provided in Appendix 3. 

 

2.14     Ulster Orchestra (£150k): This represents the additional cost of the free use of the Ulster Hall which will be considered by Members as part of the rate setting process.

 

2.15     Leisure Transformation Year 1 Efficiencies (£766k): These are the first year savings arising from the leisure transformation programme which will be transferred to the capital financing budget as part of the leisure estate capital financing strategy.

 

2.16     Corporate Efficiencies (£2.084m): These are the savings generated through the corporate efficiency programme and include cost reductions in security, energy management, fleet and procurement contracts as well additional external income generation. The delivery of these savings ensures that the Council has met its commitment as part of the Investment Programme to deliver £20m of efficiency savings by 2015.

 

2.17     Operational Impact of Service Convergence

 

            The following paragraphs provide a summary of some of the key convergence issues which have affected the departmental estimates for 2015/16. Separate reports will presented to the Transition Committee outlining the detailed arrangements for service convergence at the 1 April 2015.

 

2.18     Development Dept: 8 community assets will transfer from Castlereagh. This includes 5 directly managed assets and 3 managed under lease and funding arrangements. In addition 25 community organisations will come into the new boundary area and currently 17 are supported by a council grants programme.

 

2.19     H&ES Department: The extended boundary will mean the provision of Council services to an additional 21,000 households, 53,000 citizens residing in approximately 690 streets and the transfer of approximately 800 businesses and 160 commercial waste customers.

 

2.20     It is estimated that:

·        the number of noise complaints and public health and housing complaints will increase in line with the population increase i.e. by 20%.

·        an additional 1.5 million bin collections per year with an additional 21,000 tonnes of waste collected, treated/recycled and disposed of as appropriate. 

·        the number of bulky household waste collections per annum will rise by 20% to 50,000

·        approximately 312 additional miles to be cleansed weekly along with an additional 270 litter bins to be emptied and maintained. 

·        Pest Control service requests will increase by approximately 18% to 5402 per annum and that there will be a 28% increase in the number of manholes to be baited from 66,715 per annum.

·        an additional 800 premises (food and other business) will require inspection by the Environmental Health service.

·        Building Regulations workload is anticipated to increase by an additional 33%

·        additional licensing functions, which include enforcement and administration, will be required for 30 licensed premises, 1 Outdoor licence, 2 Amusement Permits, 5 petroleum licences and 8 Street Trading licences

·        at least 32 dangerous or dilapidated buildings have been identified.. These will be triaged against the impact matrix and then built into future submissions for additional funding should it arise or, where the Council can take action.

 

2.21     Parks and Leisure Department: In 2015/16 an additional 7 pitches, 4 MUGAs, 10 parks, and 15 playgrounds, 1 allotment site, 1 cemetery, 2 bowling green’s and 1 BMX track, visitor centre, cottage and barge and 7 pavilions will transfer to Belfast.

 

2.22     19,400m of pathways plus additional structures (e.g. bridges, fences) and significant tree stock will also transfer.

 

2.23     In addition to the physical portfolio, it is estimated that the transferring new boundary area will include approximately 60 sporting organisations, 3 Post- Primary Schools, 18 Primary Schools, a wide range of community development organisations and 9 bonfire sites.

 

2.24     Property and Projects Department: At the 1 April, an additional 51 sites will transfer to Belfast representing a 20% increase to the BCC Estate. (BCC currently has 264 sites).

 

2.25     TRANSFER OF FUNCTIONS

            Off Street Car parking and Planning

 

            At the 1 April 2015 Off Street Car Parking and Planning will transfer to the Council. As part of the rate setting process the Shadow Strategic Policy and Resources Committee will have to agree cash limits for the transferring functions.

 

2.26     Off Street Car Parking operates at a surplus i.e. the income from car parking charges and penalty charge notices exceeds the running costs of the service, whereas Planning operates on a deficit basis i.e. the income from planning fees does not cover the running cost of the service.. 

 

2.27     The arrangements for the transfer of functions to local government include the transfer of associated budgets. The DOE envisage that any funding for transferring services will be made on the basis of the net funding of all services transferring.

 

2.28     A core principle of the transfer arrangements was that the transfer should be rates neutral. However as the Deloitte report (considered by the Committee at its meeting in November 2014) highlights, central government has changed this position to being budget neutral. The implication of this is that if costs are incurred by the Council which have not been  budgeted for by central government then no funding associated with this expenditure will transfer. The cuts to central government funding have also increased the risk that the final figures agreed by the Executive for funding to be transferred to local government will be less than the resources required to deliver the transferred services.

 

2.29     As part of the development of revenue estimates for the car parking and planning service, officers have been engaging with the DOE and DRD to obtain information on income trends, staffing levels, productivity, contract and overhead costs. On the basis of this information revenue estimates have been developed by officers for each of the transferring functions.

 

2.30     This process has identified areas where costs which will be incurred by the Council are not covered by the proposed central government funding transfer and which will present a funding gap for which provision will need to be made within the revenue estimates. 

 

2.31     The current position with regard to the transfer of functions estimates and the funding gap is shown in Table 3 below.

     

 

Table 3

Transfer of Functions Funding Gap

 

Net Expenditure	BCC Estimate	Proposed Central Govt. Funding	Funding Gap
Planning	£1,493k	£605k	£888k
Off Street Car Parking	-£1,345k	-£1,480k	£135k
Total	£148k	£875k	£1,023k

 

2.32     While the funding gap of £1,023k has been included in the draft revenue estimates it should be noted that the final decision regarding the funding to transfer to local government has still not been made by the Executive and is not expected until later in January 2015. Appendix 4 provides a summary of the key funding gaps.

 

2.33     Regeneration

 

            Members will be aware that as part of the preparatory work for the transfer of regeneration powers a significant shortfall had been identified in the proposed transfer of resources to support City Regeneration. While the transfer of regeneration will not now take place until 1 April 2016 it would be prudent for the Council to ring fence resources for regeneration during 2015/16 which could be used to support the preparation for the transfer of regeneration powers and the City Centre regeneration plans. A separate budget of £449k has been included in the estimates for regeneration.

 

2.34     Political Assistance

 

            The draft estimates include growth of £175k for political assistance. This will be used to the work of party groups and not individual Members.

 

2.35     Capital Financing

 

            A separate Capital Programme report is being considered by Members at this Committee meeting.

 

2.36     The capital financing budget for 2015/16 proposed in the revenue estimates is summarised in Table 4 below.

 

Table 4

Capital Financing Budget 2015/16

 

Existing (Capital Programme) Budget 2014/15	£10.137m
Existing (Leisure Estate) Budget 2014/15	£3.230m
	£13.367m
Increase:
Growth to cover Lisburn/Castlereagh Loans	£0.677m
Growth Leisure Transformation Savings Year 1	£0.766m
Growth Leisure Estate (From New Rate Base)	£2.000m
Total Capital Financing Budget 2015/16	£16.811m

 

2.37     Application of Credit Balance from Reserves

 

            The Strategic Policy and Resources Committee agreed the funding of running costs for 2 projects - Public Bike Hire and Innovation Centre, on an incremental  reducing  balance basis. The application of a credit balance transfer from reserves of £497k has been included in the draft estimates to ensure that these costs are not added to the district rate in 2015/16.

 

2.38     Summary

 

            While significant progress has been made in the development of the 2015/16 revenue estimates, there are a number of decisions to be made by the Executive which would have a material impact on the level of the district rate for 2015/16. These can be summarised as:-

·        With the exception of those grant funding streams which the DOE have proposed to cease, the impact of the central government funding cuts on the Council for 2015/16 will only become clear when the Executive Departmental Budgets are agreed.

·        The level of funding for transferring functions has yet to be agreed by the Executive and the current estimated funding gap of £1m could therefore increase.

·        The level of de-rating grant which the DOE pays to the Council to compensate it  for the loss of rate income due to the statutory de-rating (lowering of rates) of certain properties is under consideration by the DOE as part  of the central government cuts.

 

3          Recommendations

 

            In view of the uncertainty regarding central government funding for 2015/16, Members are asked to note the progress on the development of the revenue estimates and the proposals outlined in the paper. A further Committee meeting is scheduled for 30 January. If the details are available in regards to the central government funding position Members will be requested, at this meeting, to agree the revenue estimates and district rate for 2015/16.”

 

            The Director of Finance and Resources outlined the main aspects of the report and provided a detailed presentation on the rates setting process.  He pointed out that the Department of the Environment had revised its estimate of the cost of the transfer of functions and that an additional £735,554 was required to run a ‘fit for purpose’ planning function.

 

            After a lengthy discussion, the Committee adopted the recommendations and agreed that the Chief Executive should write to the Minister for the Environment on behalf of the Committee to highlight the issues with funding a ‘fit for purpose’ planning function.

 

(Councillor McAteer, Deputy Chairman, in the Chair.)