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PRUDENTIAL BORROWING

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PRUDENTIAL BORROWING

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    1. PRUDENTIAL BORROWING What it can do for you - Unravelling the process including Case Studies Paul McGrady Denbighshire County Council

    2. WHAT IMPACT HAS PRUDENTIAL BORROWING HAD ON DENBIGHSHIRE COUNTY COUNCIL? What changes have we made? What benefits have we seen? What lessons have we learned? What have we achieved with it?

    3. PRUDENTIAL BORROWING = Freedom! (Well) With great power comes great responsibility (Spidermans Uncle)

    4. 1996 2001 2008

    7. What did we do? Prioritisation methodology Single process for approval Ensured process was clear and transparent AND ENFORCED IT

    8. Outline Business Case Pre Appraisal and Initial Score (Officer Group) Business Case Full Appraisal (Capital Strategy Group) Approved

    10. Benefits Capital has a higher profile Projects are better designed and costed More work is done early on The approval process is clear, transparent and consistent Encouraged creativity and flexibility Better value for money Members felt more engaged and informed More focus on financial impact of project (especially revenue)

    11. Lessons and Ongoing changes Managers need support in producing robust business cases Cant manage a project and do the day job Members and senior mangers need to buy in to the process Projects must be robustly challenged as early as possible Managers need a better understanding of risk Clarity on how prudential borrowing is costed and repaid (efficiencies and repayments) Better integration of AMP and business planning Need to spend more money up front

    12. Case Study 1: Scala Cinema and Arts Centre Former cinema owned by Denbighshire County Council Proposal to convert to new facility 1 full time cinema screen 1 cinema / theatre with retractable seating Community rooms Bar / caf Tourist information Shop Run by independent trust Wales only all digital cinema High profile locally and nationally

    14. By the time we introduced our new process Lottery funding had paid for all feasibility and design work Fully costed 3.4m project developed Funded by Physical Regeneration Fund 1.5m DET (WDA) 0.3m Other 0.1m Denbighshire County Council 1.4m Prestatyn Town Council 0.1m

    15. Council had the funding Members prepared to allocate it to the project BUT They agreed to put it through the new process It scored poorly as it did not meet corporate priorities Members withdrew funding after a very long and heated debate Project was about to collapse

    16. What did we do? PANIC for a bit Meet the funders Persuade the Assembly not to pull the plug just yet Put up with the headlines in the local press

    17. AND THEN WHAT? After a lot of discussion Prestatyn Town Council agreed to support 1.1m borrowing Nobody knew how to go about it or what to do next as it had not been done on this scale in Wales before Involved Legal (internal and external) Wales Audit Office Welsh Assembly Government Town Councils Auditors

    18. Town Council could only borrow with WAG approval (unlikely to be given before funding deadline) County Council therefore borrowed the money to complete the project Signed separate legal agreement with the Town Council to give us a grant for 26 years We ran various models to decide what the value of the payments should be

    19. Main Risks and Issues Maturity loan -v- annualised payments Modelled various options Risk of default Statutory body Guaranteed income Risk of closure Robust business plan Agreement not linked to ongoing use

    21. Case Study 2: Housing Stock Business Plan Housing Stock 3500 Must meet Welsh Housing Quality Standard by 2012 (stricter than English requirements) Stock condition survey showed the need for about 171m investment over 30 years

    22. Solution? TRANSFER

    23. BUT In a survey of tenants: 74% said DIM DIOLCH

    24. Then along came Prudential Borrowing Possibility of retaining the stock

    25. Developed 30 year Business Plan to include achievement of WHQS It was the first in Wales Developed and submitted before WAG published theirs (which was larger and more complex) External review by consultants concluded it was OK

    26. WAO were non-committal WAG were uncertain Eventually received formal approval and required to review every 5 years Formally approved by members Monitored monthly, reviewed annually

    27. Results No real complaints over rent increases All increases go through tenants forum (they have expressed concern but can see the benefits) Achieved to date: 2,700 properties have had new windows and doors 1,100 properties have had new central heating 660 properties have had major refurbishments Window and heating contracts nearly complete, refurbishments will continue at about 500 per year Means we will retain the stock achieve the standard on time Achieve benchmark rent

    28. Summary Acted as a catalyst to change Allowed us to access significant additional funds Improved services for the people of Denbighshire

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