We have been asked to provide a little more detail on our capital schemes and how they impact on our revenue budget. We are consulting on our proposed budget for next year.
We have to make £15m savings in our budget next year and further savings on top of these in future years. These savings come from our revenue budget which is the money that we spend on services. We fund services through grants from the government, council tax, business rates and charges we make for some services.
When we spend money on building or improving physical assets (like buildings or roads)that benefit our citizens and will continue to have a value in future years; we describe the spending as capital. We fund capital through grants (from the government or other sources), by selling land or buildings and by borrowing. When we borrow money, the cost of paying the debt (including interest and debt repayment) comes from our revenue budget. We cannot borrow for spending on revenue services or use capital money for revenue spend.
Why we borrow money
We often borrow money to invest in projects that will generate additional revenue. For example, overall, we have borrowed £1.6m to build and refurbish Garrick Street multi-storey car park. That costs us £110k per year but the car park generates £1m per year in income.
We also borrow money to invest in projects that are important for the county. For example we are committed to borrow £10.1 m to invest in delivering superfast broadband for the county which is matched by Government funding of £10.1m. That will cost us £610k per year. We think it is vital to the future of the county that homes and businesses have access to decent broadband and so we think it’s worth the investment.
We can borrow money at very low interest rates and often take out loans that will be paid back over the expected life of the asset, for buildings this can be 25 years, like a mortgage, which can reduce the amount the council needs to pay in each year. All local authorities do this. We are paying back loans taken out by councils before Herefordshire Council was created.
It costs us around £15m per year to fund the repayments and interest on our current borrowing, some of which has saved us money from other budgets, such as LED lighting and others that generate income such as Garrick Street car park.
Table: schemes we have funded since 2008/09.
All schemes funded between 2008/9 and 2013/14 inclusive71.95.06
|Scheme||Capital cost £m|
|Revenue cost £m|
|Refurbishing Hereford Leisure Pool
Improved and increased the life of this important local leisure facility.
|Garrick House Multi Story Car Park
Improved and increased the life of this important city centre car park enabling the council to continue to raise income which can be spent on other services.
|Customer Reorganisation Project
Reducing our administration costs by implementing new technology
|LED street lighting
Reducing the amount we spend on electricity each year
|Solar photovoltaic panels
Reducing the amount we spend on electricity each year
Facilitating new housing and creating new jobs
|Herefordshire Connects – supporting re-organisation||6.6||0.46|
|Accommodation Strategy – rationalising our office and other accommodation and reducing our on-going costs||17.9||1.25|
|Masters House – Ledbury
This scheme has retained and improved an important historic building in Ledbury and will be a focus for providing key local services including the library.
The construction of this brand new crematorium has significantly improved the quality of this important service for local people.
|Rotherwas Relief Road
The Council’s contribution enabled a significant contribution from Government to complete this important section of road which improves access for 125 businesses to the motorway network and protects over 2,500 jobs
This important scheme provides cycle and walking access from Rotherwas Industrial Estate to the North of Hereford and allowing people to cycle to work.
|Hereford Enterprise Zone
This scheme at Rotherwas Industrial Estate is providing much needed investment into land and buildings to generate additional jobs for local people.
|Herefordshire Connects Improved ICT facilities for service users and staff to support service improvement and cost reduction.||1.1||0.08|
|Highways – improving our road network||1||0.07|
|Merton Meadow replacement car park – increasing our income||1||0.07|
|Capitalised revenue costs – defraying some of the cost of making the organisation more efficient that will reduce our administration and management costs in the future||0.9||0.07|
|Ross Info and Library
This scheme allowed the Ross Info and Library to be co-located in a single building providing improved services for local people at reduced cost.
|Hereford City Centre Refurbishment
This scheme enabled the resurfacing of Widemarsh Street to improve the shopping and visitor experience for this historic street in the City Centre.
|Unavoidable Maintenance of Small Holdings
This investment in the Council’s land holdings has ensured that farms and other buildings are fit for occupation.
|Capitalisation direction - redundancy costs defraying some of the cost of making the organisation more efficient that will reduce our administration and management costs in the future||1.1||0.08|
|Prospect Wall Repairs
This was an essential repair to an important wall in Ross-on-Wye to retain public safety.
|Low Cost Home Ownership||0.5||0.04|
|Individual scheme spend less than £500k in total - numerous schemes that benefit Herefordshire Citizens and/or reduce our costs||10.9||0.76|
|All schemes funded between 2008/9 and 2013/14 inclusive||71.9||5.06|
*In reality we work hard to keep our interest payments as low as possible. For simplicity these figures assume a 4% interest rate and a 25 year loan period