Preparing for self financing
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Preparing for self financing. John Bibby Director of Housing & Community Services City of Lincoln Council & Secretary Association of Retained Council Housing (ARCH) . My brief. Self financing from ARCH point of view The view from Lincoln as an example: Sustainability on current figures

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Preparing for self financing

Preparing for self financing

John Bibby

Director of Housing & Community Services

City of Lincoln Council

&

Secretary

Association of Retained Council Housing (ARCH)


My brief

My brief

  • Self financing from ARCH point of view

  • The view from Lincoln as an example:

    • Sustainability on current figures

    • Preparations we are making

    • Risks/opportunities

    • Key issues from Lincoln’s perspective


The arch perspective

The ARCH perspective

  • Argued for reform of HRA finance system

  • Welcome proposals for self-financing

  • Final settlement may not be as good as original prospectus

  • But compared to staying with current system over a long term represents a good deal for majority of stock retained authorities

  • Some authorities will face real challenges in short term

  • Real opportunity to provide sustainable long term future for Council housing


The arch perspective1

The ARCH perspective

  • Comparisons between 2010 “prospectus” & February “settlement”

  • No real surprises/some concerns:

    • RTB receipts remain pooled

    • Inclusion of allocation for aids & adaptations

    • Acknowledgement of impact of planned demolitions

    • Uplift in M&M allowances broadly similar

    • Withdrawal of HRA PFI from deal

    • Potential to re-open settlement (is this good or bad?)

    • Net exchequer receipt of £6.5m compared to £4.8m

  • Arguments about basis of settlement are over

  • Begin planning implementation & financing the settlement


The view from lincoln

The view from Lincoln


Lincoln facts figures

Lincoln: facts & figures

7,940 council properties

Self-financing valuation £60.3m

Indicative borrowing limit £60.3m

Subsidy Capital Financing Requirement £41.1m

Self financing settlement £19.2m

Actual opening debt below subsidy settlement by c£8m giving some headroom from outset

Average rent £59.80 compared to Formula rent £61.00 (11/12)

Rental income £24,718m (11/12)

Decent Homes met by December 2010 with ongoing potential non-decent homes arising in future years


Lincoln our approach 1

Lincoln: Our approach (1)

Accept shape of final deal is clear (but final figures may change)

No choice about entering self financing

Start reviewing and updating our Business Plan

Housing Business Plan must be a “real” plan

Looking at self-financing to provide opportunities for “real” long term business planning:

Future pro-active asset management of property & land

Opportunities for estate regeneration & redevelopment

Asset disposal and acquisitions

New build?

Shape of capital programme & “local offer” on Home Standard & Service Standards


Lincoln our approach 2

Lincoln: Our approach (2)

Develop/refine Asset Management Strategy, Treasury Management Strategy & Risk Management Strategy

Set up Self-financing Implementation Team (S-fit):

Multi-disciplinary finance, housing, property, maintenance

Identify any capacity issues& support requirements taking into account general fund cuts in back-office support

External support

Develop financial modeling & key assumptions/risks


Lincoln our approach 3

Lincoln: Our approach (3)

Analyse the settlement:

Test debt settlement for sustainability

Update expenditure assumptions

Update income assumptions

Model impact of RTB sales/receipts

Confirm planned demolitions/remodelling

Consider treasury management approach:

Review technical & accounting arrangements and impact of CIPFA guidance

Model impact on HRA & General Fund

Consider impact on debt pooling arrangements, depreciation & introduction of memorandum balance sheet

Identify key financial decisions on run-up to implementation

Borrowing strategy, use of reserves & any “headroom” between SCFR & actual debt


Lincoln our approach 4

Lincoln: Our approach (4)

Identify asset management challenges & opportunities:

Revisit stock condition data and investment requirements over next 30 yrs

Update costs of maintenance of minimum Decent Homes Standard

Cost out affordability of any “Local Offers” over and above Decent Homes Standard

Update cost of health & safety and other works:

Asbestos management/fire prevention works

HHSRS/Energy efficiency

Revisit R&M procurement strategy

Longer term financial planning & assurance over rental income stream may give opportunities for procurement savings

Explore opportunities for collaboration with Registered Providers, private developers for regeneration/remodelling of estates


Lincoln in self financing debt profile

Lincoln in self financing (Debt profile)


Lincoln in self financing capital programme v resources

Lincoln in self financing (Capital programme v resources)


Lincoln in self financing hra cashflow balances

Lincoln in self financing (HRA cashflow/balances)


Lincoln summary outputs 1

Lincoln: Summary outputs (1)

Total capital need of £294m over 30 years but review of phasing of investment need underway.

Initial 5 year capital programme potential of £52.4m (£9.9m pa compared to £8.5m)

Debt able to be paid down by year 20 (but case for maintaining debt at managed level with commitment of rental surpluses to expanded programme)

Delivery of capital and debt planning would leave HRA revenue reserve in substantial surplus in year 30

Actual opening debt below SCFR giving some further headroom in plan from outset


Lincoln summary outputs 2

Lincoln: Summary outputs (2)

Although settlement numbers will no doubt change members and tenants need to begin to make decisions about use of headroom & priorities in the Business Plan between:

Further investment in stock (revised local offer on Home Standard over & above Decent Homes)

Further investment in services (re-instating some of management services cut in 2006 to make DRF contribution to support stock retention)

Potential small new build programme

Combination of all 3

Key financial outputs can be worked up

Preparing for transaction (PWLB/Private market/mix)

Debt charges (de-pooling HRA)

Depreciation (approach/CIPFA guidance)


Lincoln key issues

Lincoln: Key issues

Review of phasing of investment needs

Confirmation of intention & timing of property disposals/demolitions/re-modelling

Splitting of debt into separate HRA pool

Financing the transaction (indicative £19.2m)

Tenant & member attitude to the settlement

“Preparing for self-financing – not long left”


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