Agenda item

The Head of Finance introduced the report which outlined the Authority’s capital and reserves position.  The report also explained the current borrowing context and sought approval from Members for officers to borrow up to £9m from the Public Works Loan Board (PWLB), when appropriate, using the best available loan option at the time of borrowing.

The Head of Finance drew Members’ attention to information within the report concerning capital.  She highlighted that the Authority had not received an annual capital grant from the Government since 2014 and that it was unlikely that such a grant would be reintroduced under the current financial constraints.  She informed Members that it was estimated that the current level of regular capital expenditure that was required (for fire appliances and operational equipment – with no allowance for IT replacement costs) was circa £1.5m to £2m at current costs. 

In relation to capital investment, the Authority had allocated £9m for the training centre project at Sadler Road and the Authority’s regular capital expenditure over the next four years was expected to be in the region of £7m.  Between £3.5m and £5.5m per new build (at current costs) was also needed to replace two or three of the Authority’s existing fire stations.  She highlighted that a significant proportion of this capital investment would need to be funded by borrowing.

The Head of Finance drew Members’ attention to the Authority’s reserves and informed Members that, based on the anticipated levels of capital investment, the reserves set aside for such purposes would be exhausted in 2019-20.  She explained that there was still a demand on the capital programme to keep investing to carry out work such as station refurbishments. 

She informed Members that the Authority’s outstanding debt at 31^st March 2017 was £1.9m.  She stated that interest rates were increasing and, with no annual capital grant funding, borrowing would be required.  She advised that the PWLB offered favourable interest rates and that there were three types of PWLB loans available: annuity, equal instalments of principal (EIP), and maturity.  The cost of each type of loan for the sum of £9m was contained within a table in the report, with interest rates included which were applicable as of 20^th November 2017.  A Member queried whether the interest rates would be fixed and the Head of Finance confirmed that they would.

A Member queried whether officers had considered leasing as an option. She also asked when officers would consider was the right time for the Authority to borrow.  The Head of Finance informed Members that leasing was an option officers considered and utilised when viable.  Officers were monitoring interest rates daily and were seeking permission from the Authority to borrow now so that a loan could be taken out at the optimum time.  She informed Members that she anticipated that it would be before the end of the financial year.  A Member indicated that the Authority must take the opportunity to borrow at the appropriate time and that she was satisfied that officers could be authorised to do so.

The Chair concluded that Members had expressed their views and Members were asked to vote on the recommendations.  The recommendations were unanimously approved by Members.

RESOLVED: That

[1]      the use of borrowing to fund the training centre project (and associated works) at Sadler Road to preserve reserves for other matters requiring capital expenditure be approved; and

[2]      the Head of Finance, in consultation with the Chief Fire Officer and Chief Executive, be authorised to borrow up to £9m from the Public Works Loan Board when the time is right and using the best available option at that time.