Meeting documents

Councillor Mordue

Cabinet Member for Finance, Resources and Compliance

 

To consider the attached report.

 

Contact Officers: Andrew Small (01296) 585507 / Isabel Edgar Briancon (01296) 585862

(a)       Decision(s)

 

That Council be recommended to:-

 

(1)  Make a provision of £3.6 million within the Capital Programme for the procurement and purchase of a new waste collection fleet, subject to OJEU and the satisfactory conclusion of negotiations.

 

(2)  Approve a capital budget of £9.2 million for option 1 and option 1a in the report submitted for the depot development project in order to provide certainty of compliance with statutory and regulatory obligations relating to waste collection, waste transfer and fleet parking.

 

       (It being noted that a review of the depot development project will be undertaken before the implementation of option 1 to ensure that the requirements have not significantly changed regarding staff parking and waste storage at the site, and to identify other improvements or use of this area of the site following expiry of the tenancies of the existing units in December, 2018).

 

(3)  Permit additional borrowing up to a maximum of £12,860,000 in order to fund these schemes, whilst recognising that these amounts may be reduced when a review of capital resources takes place later this financial year as part of the normal budget development process.

 

(4)  Require officers to make the necessary adjustments to the Council’s Treasury Management Strategy and Medium Term Financial Plans for 2017/18 and beyond, consistent with the above.

 

(b)       Reason(s) for Decision(s)

 

            Full depot and waste transfer infrastructure will give the Council certainty regarding health and safety and environmental compliance in the mid term and will allow for growth in households and accommodate additional waste during this period.

 

            The enhanced waste workshop will give the Council flexibility in managing its own fleet and improve operations by reducing vehicle down time.  In addition, the workshop allows for income generation from HGV testing and expansion for taxi and privately owned vehicle MOTs.

 

            Changing the procurement approach for the fleet from leasing to outright purchase will save the Council around £300,000 per annum from reduced borrowing costs and will contribute to paying off the capital loan for the depot infrastructure.

 

(c)       Alternative Options Considered

 

            To do nothing.  However, currently the site is not fit for purpose and has been identified through the business risk assurance assessment as the Council’s primary health and safety risk.

 

Alternative sites to which the depot might possibly be transferred have been researched.  However given growth and land constraints, no suitable alternative site was identified that met the Council’s requirements.

 

(d)       Relevant Scrutiny Committee

 

            Finance and Services.  That Committee received a similar report at its meeting on 4 October, 2016 and supported the proposals.  However as the recommendations will be considered by full Council, they are not subject to call-in. 

 

(e)       Conflicts of Interest / Dispensation(s)

 

None.

 

 

Cabinet received a report on the business needs and benefits of redeveloping the waste and recycling depot at Pembroke Road and the capital investment required to put in place the infrastructure necessary to meet the regulatory and growth needs of the Vale.  The report also covered a proposal for replacement of the vehicle fleet.  In relation to both issues, a schedule showing the projected rate of return was submitted as part of the confidential agenda.

 

The need to redevelop the depot was driven by the following factors:-

 

The need to address health and safety risks

 

The current constraints on the site and the configuration posed considerable risks, in particular because of the inadequate segregation of vehicles and people.  The Workplace (Health, Safety and Welfare) Regulations 1992 made clear recommendations concerning the operation of traffic routes on site, but the existing configuration and condition of the site did not comply in a number of key respects.

 

The need to address environmental risks

 

The depot site was bordered to both the north and south by rivers and the water table was relatively close to the surface.  This posed a risk of flooding to the site.  Despite recent attenuation works to cover a one in 100 year event, the site had to be closed temporarily following a flooding incident in 2014.  In addition, there were identified risks associated with pollution from diesel and detergents escaping into the watercourses because of inadequate drainage.

 

Operational improvements

 

The current site configuration did not lend itself to effective operational management. All operational activities were currently managed in an area of less than 2 acres, hence the requirement to park all HGVs off site during the past 3 months.  Other Council owned vehicles were parked within operational areas and roadways and resulted in further constrictions on the effective management of the site.

 

The need to accommodate the growth of the District

 

Recent demographic projections showed that the population of the District would increase as a result of the construction of around 33,000 new homes between 2011 and 2031.  Assuming growth of around 1,500 new homes per year, this would increase the requirements of the waste collection and recycling service in terms of the volumes of waste, number of HGVs and the number of staff.  The current size and configuration of the depot did not allow for this growth and all recent works undertaken in 2012 were now at capacity.

 

Existing disrepair

 

There were repair and investment requirements on the current site which needed to be addressed.  The yard also required major resurfacing as its current condition contributed to the pollution risks identified above.

 

Income generation and development costs

 

The redevelopment of Pembroke Road would allow new commercial opportunities to be developed as well as efficiencies and savings to be made elsewhere in the waste and recycling budgets.

 

The provision of an enhanced workshop would achieve total expected income/savings in year one of £364,000 net, increasing to £837,100 net in year ten.  This figure was primarily made up of savings in vehicle maintenance paid to third party suppliers, income generation from increased taxi and private vehicle MOTs and income from an authorised testing facility for commercial HGV MOTs.

 

Fleet procurement

 

Currently AVDC had a mixed waste collection fleet primarily leased over a six year period.  The lease for some of the vehicles was due to expire imminently and other fleet, owned outright by the Council had come to the end of its operational life.  It was felt that now that the Council was no longer required to tip waste into landfill on a regular basis, it would be prudent that all the fleet was purchased outright by the Council.  Current leasing costs were £864,000 per annum.  Although subject to a full OJEU procurement process, it was anticipated that the capital costs for a fleet would be in the region of £3.6 million with a payback period of seven years (the typical operating life of a refuse collection vehicle).  It was estimated that savings would amount to £300,000 per annum.

 

Some of the fleet leases were not due to expire until 2018. However due to persistent vehicle breakdowns and inflexibility of the vehicle configuration, that procurement of the fleet needed to be brought forward in order to meet the on-going operational demands of the service.

 

Depot development cost

 

The Pembroke Road development would provide a mid term option to accommodate around ten year’s growth.  The depot design was submitted as part of the Cabinet report.  The total capital cost of the full redevelopment was circa £9.2 million, including professional fees and a contingency.

 

The depot design had been costed in two parts – option 1 and option 1a.  This would allow for a review towards the end of the 18 months development project to re-evaluate the needs of staff parking and complete build of the bulky waste storage shed, provide the necessary highways changes to manage vehicle access to the site and improve sight lines on the chicane roadway.  Also this would allow some income generation to continue from existing tenants in two of the units in Pembroke Road until their lease expired in late 2018.

 

The Cabinet report included a full budget breakdown, but the following was a summary of the net revenue impact of the capital loan:-

 

 

A similar report had been considered by the Finance and Services Scrutiny Committee and the proposals had been supported.

 

Summary

 

In November, 2011, approval had been given for the refurbishment of Pembroke Road and for negotiations to be commenced with Aylesbury Vale Estates (AVE) in relation to a land transfer (from AVE to AVDC).  These negotiations had been suspended temporarily while the Council reconsidered its position with regard to its longer term waste strategy and possible alternative locations for a waste transfer station and vehicle depot.  However, after an extensive period of research and the development of a business case for an enhanced vehicle maintenance workshop, Pembroke Road had been identified as the most suitable location for the Council’s mid term needs (ten years).

 

Pembroke Road had been acquired from AVE in July, 2016 and work had been underway to produce a layout and costings.  Pembroke Road was primarily a vacant site and many of the existing units were in a state of disrepair.  The existing tenancies had been factored into the phasing of the depot redevelopment.

 

The investment proposals for Pembroke Road required a Capital Programme provision of up to £9.2 million, of which £1.9 million would only be required if there was sufficient evidence of the demand and take up for the expanded vehicle testing facilities included within the proposal.  The business case was predicated on all the required resources being borrowed, with the repayment cost being borne by the General Fund.

 

The proposal to purchase rather than lease the new refuse freighter fleet would require a further £3.6 million (subject to full OJEU procurement).  The savings from this proposal (borrowing costs being lower than leasing costs) would help to mitigate the revenue repayment costs of the borrowing.

 

The estimated net annual revenue repayment costs for the two combined schemes initially amounted to £489,000 per annum, but would reduce over time as the borrowing was repaid.  Crucial to the business case and assumed within the net revenue cost above was £364,000 of savings from the internalised maintenance and income from expanding vehicle testing and MOT operations.  If not achieved as projected, this would increase the net revenue cost to the organisation.  The Capital Programme therefore required provision £12,860,000 funded by new borrowing and £489,300 in the revenue budget for 2017/2018.

 

These sums might potentially be reduced when a review of capital resources took place later this year as part of budget setting.  This might identify unallocated capital resources which could be allocated to this scheme in lieu of borrowing.  However this could not be guaranteed, hence approval being sought for the maximum borrowing requirement.

 

RESOLVED –

 

That Council be recommended to:-

 

(1)  Make a provision of £3.6 million within the Capital Programme for the procurement and purchase of a new waste collection fleet, subject to OJEU and the satisfactory conclusion of negotiations.

 

(2)  Approve a capital budget of £9.2 million for option 1 and option 1a in the report submitted for the development project in order to provide certainty of compliance with statutory and regulatory obligations relating to waste collection, waste transfer and fleet parking.

 

(it being noted that a review of the depot development project will be undertaken before the implementation of option 1 to ensure that the requirements have not significantly changed regarding staff parking and waste storage at the site, and to identify other improvements or use of this area of the site following the expiry of tenancies of the existing units in December, 2018)

 

(3)  Permit additional new borrowing up to a maximum of £12,860,000 in order to fund these schemes, whilst recognising that these amounts may be reduced when a review of capital resources takes place later this financial year as part of the normal budget development process.

 

(4)  Require officers to make the necessary adjustments to the Council’s Treasury Management Strategy and Medium Term Financial Plans for 2017/2018 and beyond, consistent with the above.