York Council unsure about way ahead. Call for moratorium on new expenditure

Post coronavirus strategy confirms major financial issues.

The Council has published a review of its response to the Coronavirus crisis. It will be discussed at a “virtual” Executive meeting next week.

 The review mostly looks backwards and therefore contains little that is new.

The report does, however, say, “Further work is needed to accurately assess the impact, then to identify and plan the city’s response. It should be noted that, based on the financial information in this report, and the expected increase in demand for services as we start to move out of lockdown, this work will involve reprioritising council budgets, focussing resource on where there are greatest challenges and providing a new strategic plan for the council to work to over the coming months. It is quite possible that there will be some previous priorities that can’t be delivered in the same way in the light of our new operating context.

 A Recovery Plan is being developed (aligning with regional recovery activity through the LRF) which will outline the risks and challenges of the emerging situation, with actions in response and opportunities based on lessons learned during the emergency response. Clearly, this plan will take into consideration and align with Government advice and national plans for recovery. It will be used to inform a review of the existing Council Plan in order to produce an Operational Recovery Plan to guide the council over the next 6 – 9 months”.

That is the right approach.

There needs to be an immediate moratorium on taking on new expenditure. An “approvals committee” should be set up which can publicly test any new expenditure proposals.

York Council budget position 30th April 2020

The Councils initial assessment of its financial position may produce accusations that it is very much a “worst case” scenario. The government has today confirmed that in total it will grant £10.5 million to help the Council offset its estimated £35 million exposure.  Much of the defict assumes a high level of non payment of Council Tax and business rent.

There is a stark warning of cash flow problems later in the year “the Council would have to concentrate on providing statutory services only”. That would be bad news for services like leisure, with some facilities likely to close.

On its capital programme the Council promises a project by project review. “this will include considering the overall purpose of the scheme and whether they are still financially viable given the risk to the overall economy. This is particularly crucial for those schemes that assumed the generation of capital receipts to fund expenditure”.

The report is silent on the consequences of some schemes that area now past the point of no return.

Recent increases in the Council’s commercial portfolio are not analysed but there are fears of a forced “fire sale”.

Empty offices at the community stadium site (underwritten by the Council) could remain empty for years, while the pipeline sales of empty former social care buildings could also fall through. Options for cutting back on the £20 million Guildhall refurbishment project will need to be considered.

The Community Stadium itself, although outsourced, is dependent on other activities on the site to cover its running costs.

It seems certain that there will be delays on the York Central regeneration project while the £14 million new multi storey car park on St Georges Field will no doubt be shelved together with the rest of the Castle Gateway project.

Other cherished capital investment projects, which involved increased debt, and therefore increase the day to day running costs of the Council, will have to go “on hold”.

No new contracts should be let unless they direct address the adverse consequences of the health crisis.

Much more on this and the implications for other public services in the City will become apparent over the next few weeks.

York “in hock” for generations?

One of the reports least likely to be subject to detailed scrutiny, as the York Council prepares its budget for next year, is the upward trend in interest charge commitments

By 2022, the amount borrowed by the Council is set to escalate to over £178 million a year. Total debt will reach over £1/2 billion the following year.

This is by far the largest liability the Council has had since it became a unitary authority over 20 years ago.

With interest rates on borrowing by Councils now standing at around 3.5%, it means that, within the next 5 years, the proportion of the Council Tax collected in the City, and used to service debt charges, will increase for 12% this year to 23%. That figure assumes that there will be no increase in interest rates.

In practice the trend means that there will be less money available to spend on street level public services.

So, should we be worried?

At one level, no.

The forecast expenditure, although much closer to the legal borrowing limit, will still be within the ceiling in 2024.

But there is more to it than that.

It is not just principal and interest repayments which erode the flexibility available on the Councils revenue account. New services often bring additional running costs. The Council has forecast zero net expenditure on some high risk investments (e.g. the commercial office space at the Community Stadium, the “business club” being set up at the Guildhall and the Castle Mills development).  If it got any of these decision wrong, then taxpayers face a big hit.

What is the additional investment big spent on.

A list of new items being considered tomorrow (Thursday) can be found by clicking here. There are dozens of other items which have already been agreed.

So, is that the extent of the risk?

Unfortunately no. There are several investments that the Council wants to make but for which it has not yet made full financial provision. By far the largest is the York Central project.  This could add tens of millions to the programme depending on what financial backing central government decides to offer.

The dualling of the northern by pass is also still not fully funded. Such plans as have been published omit, for example, flyovers at key junctions and across the river. Both could add tens of millions to the costs.

Could we make savings?

29 Castlegate – £1/4 million repair bill

Certainly. The Council has taken on the risk at several developments which the private sector considers to be nonviable.  This started when the Council underwrote the office development at Monks Cross, a similar logic was applied to the £20 million Guildhall scheme and most recently we saw the £44 million Castle Piccadilly project brought “in house”. A similar decision was taken on the housing development at Lowfields.

This year £270,000 will be spent on repairing and remodelling 29 Castlegate – an obvious project on which to seek a commercial partner.

Successive generations will end up paying the additional annual £2.8 million interest charges on this year’s new project list unless a more prudent approach is adopted by Councillors.

4% increase in Council Tax in York

Budget plans for next year published as residents say  highways maintenance is top priority for them

York residents will have a month to comment on the York Councils budget plans for the next financial year.

Plans for some of the key expenditure areas were published over the weekend.

Council Tax will increase by 3.99% with 2% of the increase being earmarked for social care services. The latter will get a £4.5 million boost.

The results of the Councils consultation on budget options are also published. Only 691 residents responded. Their top expenditure priority was, unsurprisingly, road and path repairs.

The Council plans to make £4 million in savings although many of these are, largely opaque, financial management tweaks.

Council staff will get a 2% pay increase.

£11 million will be invested in services as part of the Council budget plans.

  • As much as £1 million will be invested in a new waste and street environment services. This is in addition to capital investment of £6 million on new refuse collection vehicles.
  • Capital investment of over £12 million will support, repair and improve the highways network. This includes £275,000 for the creation of a reactive pothole repair team,
  • A long term investment of £3 million in planting more trees is proposed as part of the “northern forest”
  • Borrowing for house building results in a £1.5 million bill for interest charges on money already borrowed although £7 million is also allocated for modernisation works to the Council housing stock

Corporate

Savings include centralising communications budgets, fee increases and “making best use of Council assets”.

Growth includes £141,000 extra for Councillors pay and £80,000 for   an “organisational development programme to ensure delivery of key Council priorities”

As well as the welcome commitment to invest more in highways maintenance there are some, surprises in the capital programme . There is £100,000 for a trial of robotics monitoring of social care clients. It will utilise AI. £230,000 is earmarked to replace rising bollards on Bishophill, while a whopping £6.6 million will go on new refuse collection vehicles. This, in effect, confirms that the reason for the multiple vehicle failures last year was poor replacement programming (3 of the new vehicles will be electric powered).

29 Castlegate

More is to be spent maintaining and extending the electric car recharging network. £270,000 is to be spent renovating 29 Castlegate which has been empty for several years. The report says “The condition of the building both internally and externally is deteriorating whilst unoccupied” (Quelle Surprise!)

Theatre Royal

The York Theatre Royal will get another £500,000 to spend on heating, lighting and access improvements. (NB. The Theatre received a £770,000 grant 3 years ago to complete refurbishment work & was supposed to be self-supporting by now).

Installing “hostile vehicle” prevention barriers in the City centre will cost £1.6 million.

Health and Adult Social Care.

Savings include changes at Yorkcraft and revised charging arrangements.

Growth mainly reflects price increases from suppliers and increased demands from an ageing population.

Children and Education

Savings include reducing child placement costs & less for community centre maintenance.

Growth  items include an extra £250,000 for “safer communities” and £50,000 to create a Mental Health early intervention fund.

Environment and Climate change

Savings: Increases in fees and parking charges including evening charges, Minister badges and an “additional diesel duty” in 2021.

Growth items extra litter /poop scoop bins, better tree maintenance (halleluiah!), “ review of waste collection, including plastics and food waste” and including  adding two extra green waste collections each March from 2021 onwards, additional staffing on waste rounds, improved city centre cleaning, effective weed control (praise the Lord!), another study into re/opening Haxby railway station (the fourth in  the last 2 decades) and additional Taxi Licensing enforcement .

Housing

Savings  Extended use of smart mobiles, reduced use of sub-contractors, reduced void times plus new James House rents,

Growth   Electrical safety check programme, water hygiene testing, quicker repairs & “improving the care of estates

Capital investments include an average of £8 million a year to be invested in Council house modernisation and building insulation programmes.

NB. The report pointedly does not make any reference to Council House rent levels.

We will publish other details as they become available  

Council Tax in York – value of exemptions published

Student accommodation costs taxpayers £18 million over 5 years.

The York Council has published a table showing the amount of Council Tax not collected over the last 5 years because of approved “exemptions”.

The amount not collected totals £34 million.

By far the largest proportion of this is accounted for by student occupied accommodation. This accounts for around £18 million of the total. Central government claims that this is recognised in the grant distribution formulae which is aimed at equalising resources between different Councils (and is effectively funded from income tax). However the precise make up of individual central government council support grants is largely opaque.

 The figure is likely to re-energise the claims of those who feel that student accommodation should attract either Council Tax or Business Rates payments.

Other reasons why properties did not attract Council Tax liability included:

  • Empty and unfurnished property (£4.5 million)
  • Awaiting probate (£1.9 million)
  • Student halls of residence (£1.7 million)
  • Occupation by members of the armed forces (£2.9 million)
  • Property occupied by people with a mental handicap (£2.3 million)

Council Tax exemptions click to access

Council Tax exemptions click to access

Footnote
There are three main reform options for Student flat exemptions

1. Charge each student Council Tax with benefits (rebate) available to those on low incomes. This is essentially the position at non-student occupied private sector lettings. OR

2. Levy Business Rates on exempt student occupied properties. Some private landlords might qualify for small business rate relief. OR

3. Make the additional grant, that central government says it pays Councils with a high student population, entirely transparent. Residents should be able to understand and audit the assumptions behind the figures. OR

4. Leave things as they are which means that some residents – who may have no more income than many students – may pay more for local public services subsidising, not students, but private landlords.

There is a good argument for 3 above given that most landlords do pay tax on their incomes and it is a system that should be easy to implement.

Lib Dems reveal York Council budget plans

Council Tax would be frozen and £3million of service cuts would be reversed under budget plans revealed by York’s Liberal Democrat Group.

The proposals, which will be tabled at City of York Council’s budget meeting on Thursday, would see a new £500,000 community fund created for residents to spend locally plus extra investment to boost recycling and tackle climate change.

LibDem budget plan would eliminate poor road surfaces in York

LibDem budget plan would eliminate poor road surfaces in York

The Lib Dem plans would see the controversial £3.3million ‘Reinvigorate York’ scheme – which funded the unpopular King’s Square revamp – cancelled and a reduction in funding on a new multi-million pound council IT project. Labour’s new £70,000-a-year ‘Head of Transformation’ would also face the axe and the number of Cabinet Members would be reduced.

Main Points of the Lib Dem amendment:

  • Accept the government’s grant to freeze council tax for all households in York.
  • Reverse £3million of Labour’s cuts to areas including community centres, youth services, children’s centres, social care, support to carers, grants to voluntary groups, litter and salt bins, road gully cleaning and road repairs.
  • Keep the ‘Minster Badge’ discounted parking scheme for residents which Labour plan to scrap.
  • Set-up a new £500,000 community fund for residents to spend on local priorities under a revamped Ward Committee system.
  • Cut borrowing for schemes such as ‘Reinvigorate York’, Labour’s new 5-year £6.1million IT project, and the proposed ‘Digital and Media Hub’.
  • Make savings by scrapping Labour’s ‘Delivery and Innovation Fund’ and ‘Economic Infrastructure Fund’, reducing Cabinet Members by two, and removing the Assistant Director of Transformation and Change post.
  • Extra investment to boost recycling by reviewing facilities at Towthorpe and in the west of York, introduce a new scheme to cut overall council carbon emissions over the next 10 years, and reinstate winter green bin collections.
  • Reduce cuts to youth and children’s services in 2014/15 and restate a commitment to stop Labour’s plans to close children’s centres after 2015.

(more…)

York Council budget choices – Parties refine proposals

It is becoming clearer what each individual party group will propose when the York Council budget is decided on Thursday.

Both Liberal Democrats and Tories look likely to back a freeze on Council Tax levels.

Labour though are likely to overrule this as they still have a small majority on the Council.

The real interest will be that this could be the first glimpse of what may be in store for the City after the 2015 Council elections.

2014 Budget choices Click to enlarge

2014 Budget choices Click to enlarge

Labour is likely to lose its overall majority then, so some of the changes in priorities will probably become a reality in little over 12 months time.

The main differences between the parties are likely to revolve around how much money they believe the council should borrow.

Interest payments have spiralled over the last 3 years so the postponement of some “vanity project” capital schemes will be on the cards.

Last minute attempts to halt the roll out of 20 mph signs and more ANPR “spy” cameras are likely.

Both opposition parties are likely to call for the immediate reopening of Lendal Bridge.

The LibDems will seek to have the £1.3million, gained through camera fines, used to bring road surfaces back to an acceptable condition.

We will update the list as and when the details of budget amendments become public.