Agenda item

To consider the attached report.

The Executive Board APPROVED the Financial Strategy of the City Deal Partnership.

The Executive Board considered a report which set out a proposed Financial Strategy for the City Deal partnership.

Chris Malyon, Chief Financial Officer at Cambridgeshire County Council, presented the report and highlighted the following proposals that would form the foundation to the City Deal partnership’s Financial Strategy:

·         the City Deal partnership would continue with operational and programme proposals;

·         the operational budget would be funded through New Homes Bonus and interest in balances;

·         the programme would be funded through the City Deal Grant, Section 106 Agreement funding and any other funding sources directly attributable to projects within the programme;

·         use of New Homes Bonus to fund transport infrastructure investments within the programme would need specific approval of the Executive Board;

·         the cost of providing support services, such as finance, democratic services and legal costs, would be resourced from the operational budget;

·         the local councils would retain all New Homes Bonus funds until they were required;

·         the accountable body would allocate interest on net cash balances to the operational budget;

·         any proposal for new investment would be supported with a robust business case proportionate to the size of investment required and set out how the proposal achieved the agreed aims of the City Deal.

Councillor Lewis Herbert, Chairman of the Executive Board, was keen that the City Deal managed the transport related aspects of the City Deal’s finances with other contributions such as Section 106 Agreement funding and other additional grant funding or external funding streams.  He was also keen to ensure that the New Homes Bonus element was managed transparently in view of it having to be accounted back to each partner Council as providers of that aspect of the City Deal’s budget.

Councillor Francis Burkitt highlighted a funding gap in the first tranche of the City Deal programme, consisting of approximately £20 million, but also referred to possible Section 106 Agreement contributions in the report of approximately £40 million for the first tranche of the scheme.  He made the point that if this Section 106 Agreement contribution was not received, there would actually be a £60 million funding gap in the tranche 1 programme.

Mr Malyon explained that the projections for the Section 106 Agreement contributions had been calculated based on assumptions and understandings of when developments were expected to occur.  He highlighted that there was a difference in funding of a programme compared to cash received and made the point that the report referred to the overall funding position.  Mr Malyon added that the Board may need to consider taking a decision to borrow against receipts in the future before Section 106 Agreement funding was physically received, which he said was normal practice for the County Council when developing transport schemes for example.

Councillor Burkitt asked when the Board would need to take a final decision regarding which underfunded aspect of its tranche 1 programme would need to be removed should additional funding streams not be identified, principally around the £20 million shortfall that was currently identified.  Mr Malyon explained that this would form part of the annual budget setting process but that it would ultimately be a decision for the Board as part of considering the City Deal’s budget.

Mr Malyon highlighted that the future of New Homes Bonus funding was still unclear following the Government’s consultation in March 2016 to which no outcomes had been published or shared at this stage.  He said that there would be changes resulting from the consultation and he anticipated these having a huge impact on that aspect of the City Deal’s funding. 

Mark Reeve agreed that cash flow was a significant issue, particularly in respect of the large projects in the tranche 1 programme.  He asked at what point cash flow would become a factor in the Board’s thinking considering the reality that there was uncertainly regarding other contributions, New Homes Bonus and the local economy.  He said that a plan needed to be established at an early stage to identify how borrowing would be acquired.

Councillor Herbert acknowledged the concerns that had been raised and was content with looking into the figures in more detail, but did not think they were fundamental concerns at this stage of the programme and expected the budget as set out in the report to change significantly as schemes developed.  He highlighted the benefits of Section 106 Agreement and New Homes Bonus funding as being flexible, additional funds and agreed that risk-based borrowing would also be an option.

Mr Reeve acknowledged that the principle of borrowing had not necessarily been considered by the Board yet and said it was something that should be looked at, highlighting that there were opportunities for private finance that could be explored as part of that. 

The Executive Board APPROVED the Financial Strategy of the City Deal Partnership.