Agenda item

To consider a report by Councillor Julian Thompson-Hill, Lead Member for Finance, Performance and Strategic Assets (copy enclosed) detailing the latest financial position and progress against the agreed budget strategy.

RESOLVED that Cabinet –

(a)       note the budgets set for 2019/20 and progress against the agreed budget strategy, and

(b)       approve the transfer of cash funds from the Savings Achievement Contingency to Leisure Services to offset the need to allocate the Prudential Borrowing savings to the SC2 rather than the delay to setting up the Alternative Delivery Model.

Councillor Julian Thompson-Hill presented the report detailing the latest financial position and progress against the agreed budget strategy.  He provided a summary of the Council’s financial position as follows –

·        the net revenue budget for 2019/20 was £198.538m (£194.418m in 2018/19)

·        an overspend of £1.733m was forecast for service and corporate budgets

·        detailed required savings and efficiencies of £5.672m including corporate savings identified in 2018/19 (£0.5m), schools savings of 2% (£1.32m) and service efficiencies and savings (£3.852m)

·        highlighted current risks and variances relating to individual service areas including changes following the Senior Leadership Team restructure and the budget impact following the transfer of School Transport from Highways and Environmental Services to Planning and Public Protection, and

·        provided a general update on the Capital Plan, Housing Revenue Account and Housing Capital Plan.

Cabinet was also asked to approve the transfer of cash funds from the Savings Achievement Contingency to Leisure Services to offset the need to allocate the Prudential Borrowing savings to the SC2 rather than the delay to setting up the Alternative Delivery Model (ADM).

By way of background Councillor Thompson-Hill advised that the original business case for SC2 had been predicated on a declining subsidy until break-even was reached in year 5.  A budget loss of £378k had been shown in the first year with a number of options identified to minimise that loss including to delay Prudential Borrowing – that decision had been taken given that it was a new business venture and the likelihood there would be variances.  However following a savings review it was apparent that the total saving of £850k relating to the ADM proposal would not be achieved in full and as a Council it was decided to use the lever of the delay to Prudential Borrowing to enable the ADM saving of £850k to be taken as part of the 2019/20 budget process, thus reducing the need for service cuts elsewhere.  Consequently it was proposed that £612k be used from the contingency fund created for unachieved savings to meet the year 1 funding shortfall for SC2.  To provide some future assurance for SC2 the service had been clear that the situation would not reoccur in the next financial year given the measures put in place.

Cabinet acknowledged that as a Council they had been made aware of the potential financial risks and variances at the outset for SC2 and had planned mitigation measures in order to address them.  Cabinet also commended the facility which provided an exciting and unique attraction and acknowledged the wider benefits to the economy and other local businesses.  During the ensuing debate further clarification was sought regarding the reasons for the increase in the budget loss for the first year together with assurances in terms of future years’ financial trading figures and ensuring the facility’s continued long term success.

Councillor Thompson-Hill responded to the issues raised as follows –

·         based on current figures and the amended business case there was confidence that SC2 would be cost neutral by year 5 – as an attraction the facility was already a success: visitor numbers had been high and the facility well received with the pool operating at or near capacity during most of the trading period

·         a combination of factors had contributed to the funding shortfall including (1) loss of the Easter trading period for the outdoor Splash Pad and associated projected income (2) Laser TAG having not attracted the numbers predicted but as a result of marketing a growth was predicted going forward, and (3) secondary visitor spend (food/drink, etc.) had not generated as much income as anticipated which was expected to increase through additional marketing

·         savings had been made from streamlining the staffing structure and further assurance could be taken that from year 2 the facility would benefit from a full year impact of staff efficiencies and operation of the Splash Pad, and increases in growth with targeted income from Laser TAG and secondary spend; there would also be additional VAT savings for the company which collectively should meet the planned deficit for the second year

·         in terms of 2021, savings to the Council would be derived from when the ADM started trading and it was accepted that as a leisure business profits could fluctuate, just as they could if leisure services remained in-house, and if pressures arose they would need to be addressed

·         it was confirmed that the Strategic Investment Group would be reviewing the business case for SC2 early in the new year.

In responding to questions from non-Cabinet members Councillor Thompson-Hill –

·         referred to the number of options identified to mitigate the shortfall in the trading position of SC2 in year 1.  The lever to defer Prudential Borrowing costs could only be used once and the decision had been taken to use it to enable the ADM saving of £850k to be taken as part of the 2019/20 budget and mitigate funding cuts in other services rather than put it aside to cover any potential losses on SC2, the recommendation was to transfer cash funds from the Savings Achievement Contingency for that purpose

·         in terms of staff efficiencies the business case had suggested a staffing structure covering numbers and required functions, as the situation developed the management team put in place the most efficient staffing structure to operate the service at the most economic cost which had resulted in savings.  The Managing Director Denbighshire Leisure Limited added that some seasonal staff were employed because the facility itself had seasonal trends.  However contracted staff were employed who were relocated to other sites when not working at SC2 rather than using casual staff because it was better to invest in the staff that were employed rather than continually appoint new staff each season.  Some staff had been lost in terms of the range of staff appointed for various different reasons – however the current operating hours term time were as per the business case.

Councillor Meirick Davies referred to the new building for Ysgol Llanfair and asked whether any action was being taken to recoup costs associated with changes to the foul drainage system as a result of advice received from Welsh Water.  Councillors Julian Thompson-Hill and Huw Hilditch-Roberts explained that Welsh Water had advised that the plans were indicative and therefore the Council would be unlikely to recoup any additional costs incurred as a result.  The Leader added that the priority was to complete the work and then revisit the issue and take legal advice.

RESOLVED that Cabinet –

(a)       note the budgets set for 2019/20 and progress against the agreed budget strategy, and

(b)       approve the transfer of cash funds from the Savings Achievement Contingency to Leisure Services to offset the need to allocate the Prudential Borrowing savings to the SC2 rather than the delay to setting up the Alternative Delivery Model.