Purpose

The report considers the Capital
Strategy for 2025/26, prior to its submission to Council for approval.

 

Regulations require the Council
to prepare and formally approve a Capital Strategy.  The document for 2025/26 is attached as
Appendix A to this report for consideration by the Executive before being
submitted to Council for approval.

 

The Capital Strategy gives a
high-level overview of how capital expenditure, capital financing , asset
management and treasury management activity contribute to the provision of
services along with an overview of how associated risk is managed and the implications
for future financial sustainability.

 

The main highlights in the
Capital Strategy are:

 

i)      
The 5-year programme contains capital
expenditure of £85.9 million (compared to £82.3million in the previous
Strategy).  Kay points included are:

 

·     
Completion of Fareham Live and demolition of
Osborn Road car park

·     
Construction of Assheton Court sheltered housing
apartments

·     
Holly Hill Woodland Park Restoration

·     
Fareham Park Vision

·     
Aeronautical Ground Lighting at Daedalus

·     
Land purchase for Nutrient Mitigation in
Stubbington

·     
Vehicle purchases for the introduction of
Simpler recycling

 

ii)     
New Schemes that are proposed since the
2024/25 Capital Strategy are listed at paragraph 30.  There is currently no provision in the
programme for the Town Centre Regeneration requirements which will be subject
to a separate report.

 

iii)    
The revised level of capital expenditure
estimated for 2024/25 is £30 million (previously £16.4
million).  This significant increase
reflects streams of external funding that the Council has been successful in
attracting, such as from Homes England for Assheton Court housing, or is
pursuing , such as Lottery Grant funding for Holly Hill Woodland Park.  The current estimate is that only £2.3
million of the spend will need to be met by new borrowing.

 

iv)   
However, there are a number of
pressures highlighted in the Capital Strategy, not least for the General Fund
asset management and replacement plans. 
In particular, the estimated provisions for vehicle replacement and ICT
development are such that it is proposed that Revenue Contributions to
Capital are now increased by £225,000 to £1.3 million a year.  This is covered by the Revenue Budget report
at the same meeting.

 

v)     
There are also a number of
pressures on the HRA element of the Capital Strategy.  In particular, the value of the planned
maintenance of the stock has been increase from £3million to £4million and is
one of the reasons that no further funds are being put aside the HRA debt at this
moment.  This will be covered further in
the HRA budget to the February Committee.

 

vi)   
The funding of the 5-year Strategy relies
on forecasts of resources that are not yet in place.  These total £64 million (75% of the
programme).

 

vii)  
A high-level review of future funding
requirements has also identified a capital funding requirement of £229
million over the next 30 years.

 

viii)  The
Strategy proposes some policy clarifications.  This includes expanding the capitalisation of
officer salary costs that are directly attributable to capital schemes, to now
be considered as part of the total project costs.

 

A separate report proposing the
Treasury Management Strategy and Investment Strategy for 2025/26 will be
presented at the February meeting of the Executive.  The value of the Council’s investment
property portfolio is covered in the Capital Strategy and is estimated to
have a value of £66 million.

 

 

 

 

Decision

RESOLVED that the Executive:

 

(a)  endorses
the draft Capital Strategy for 2025/26, attached as Appendix A to the report;

 

(b)  agrees
the Capital Programme for the period 2024/25 to 2028/29, amounting to £85.9
million as set out in Annex 1 of the Capital Strategy; including the 2 new
scheme listed at paragraph 30;

 

(c)  approves
the use of £800,000 retained business rates in the Enterprise Zone for the
Swordfish Business Park masterplan, and a further £820,000 for access road
improvements;

 

(d)  submits
the Capital Strategy for 2025/26 to Council for approval;

 

(e)  notes
the future policy change to expand capitalisation of permitted officer salary
costs;

 

(f)  
notes the increased projected costs and contract
variations that have arisen for the AGL scheme at Daedalus, and the proposed
funding source; and

 

(g)  approves
the recommendation arising from the negotiations detailed in confidential
Appendix B.