To consider the report.

The Chairman mentioned that he had requested that this item be brought to the Panel as there had been reduced cash flow balances and a potential increase in corporately funded capital projects and reassurance was required to ensure the Council held sufficient reserves to cover known risks.

He mentioned that it would be useful to have a pen picture of the situation to reassure people that the Council’s resources were going to meet the ebb and flow of everyday expenditure, able to fund medium sized projects and provide insight into larger capital spend projects that were significant for an organisation this size.

The Lead Member for Finance Cllr Saunders, informed the Panel that it would be useful if he could summarise the policy elements on behalf of Cabinet and that officers provide answers to any questions on implementation.  He mentioned that there were three important parts to the story.

First there was what policy had previously been adopted that had left with significant cash buffers being reduced that resulted in Cabinet giving delegated authority to himself and officers to borrow as necessary £15 million before the end of this financial year.

Secondly what we are anticipating to endeavour next year that would need to go into the budget build.

Thirdly an indication of the flight path for the more substantial cash flow implications of the regeneration programme. 

Cllr Saunders informed the Panel that over the last few years the Council had decided to make a number of strategic capital expenditure, such as school expansion and new library.  Historically loans would have been taken to fund these projects however it had been decided that instead of loans the Council would use its reserves to fund capital projects saving about £150k in interest rates.  The Panel were informed that as demonstrated in the Financial Update reports this policy was not sustainable and thus it had been decided to borrow up to £15 million a required.

The Chairman used the analogy of a homeowner using their current account to purchase white goods but as their balance approached zero they would ask the bank for an overdraft.

Cllr E Wilson questioned why funding from the LEP for projects was considered RBWM money.  The Panel were informed that LEP funding was ring-fenced for specific projects, however RBWM was the accountable body for holding and distributing the funds.

Cllr E Wilson commented that we were borrowing money from the LEP and Cllr Saunders informed that he would not describe it in that way, it was similar to the DSG were funding was restricted for certain usage but did go through our cash balances.

Cllr Saunders informed that it as unfortunate that this had been raised before next years budget build process had been completed as the Budget report will have cash flow movement for the coming year.  The Council could not ignore cash flow travel over the next 12 months and the budget would show implications for projects approved for the year.  We could not at this stage say what borrowing above the £15 million may be required for 2017/18.

The Chairman mentioned that we may go into short term debt to offset future revenue and that we were not selling our assets to fund todays projects.  The Chairman questioned if we were maintaining our capital integrity in the medium term.

The Chairman mentioned that we have retained assets, such as Brocket, to bring in long term revenue rather then selling for short tern gain.  Whilst also selling certain assets, such as the leisure centre, but re-invested into other assets to enhance our future portfolio.   We may have to make bold decisions with our assets in the future.

Cllr Carroll asked when we were investing into regeneration projects did we have a target date when they would provide capital receipts.  Cllr Saunders informed the Panel that the Budget paper would bring to life the issues discussed today.  The Council did not rush into every opportunity, for example did not compete for the bowling green, as we would only make purchases were the opportunities were fully returnable.  The Council had not become a property developer who took big risks.  There was also investment being put in early so that future projects could be realised for example improving car parks before demand increased.

The Panel were informed that there were also capital projects being invested in that would not provide a capital receipt but were justifiable, such as investing in our schools and the redevelopment of York House.

Cllr E Wilson mentioned that it was important to make it clear to the public why the Council required a £15 million loan, it could be seen that the Council was facing financial difficulties rather then the loan being offset by future revenue.  He also mentioned that the public may question the expenditure on expensive consultants when they do not see investment in improving the condition of our highways.

Councillor Saunders responded that a little knowledge could be dangerous and thus Members and officers would  seek to explain clearly and honestly what is being planned.  It was important that we get a clear, simple and understandable message across.

Cllr E Wilson asked if the pre feasibility fees came out of the current years revenue budget.  The Panel were informed that they did not come from the revenue budget they were capitalised or charged to the development fund.

The Chairman thanked Cllr Saunders for presenting the item and said it was an important issue that the Panel would review again when appropriate.