Rate Announcement 2015/16
ONCHAN DISTRICT COMMISSIONERS
LEAD MEMBER FOR
FINANCE AND GENERAL PURPOSES’
RATE ANNOUNCEMENT FOR 2015/16
As Lead Member for Finance & General Purposes, I wish to report on the projected financial result of the Authority’s rate borne activities for the financial year ended 31 March 2015 and on the budget for the forthcoming financial year ending 31 March 2016. On behalf of the board I wish to express the Commissioners’ appreciation to the Authority’s officers and staff for their endeavour and hard work during another challenging year.
This continues to be a challenging period for local authorities. Pressures are coming from the continuing economic situation and from changes to how Central Government is proposing to deliver services. The continuing drive in Central Government to reduce their expenditure will probably lead to more services being passed to Local Authorities for funding by the ratepayer.
The authority has continued to review its expenditure and how it can provide Value for Money services to the District. I am pleased to be able to report that when the charges imposed by or to be transferred from Central Government have been removed, our budgeted net rate borne expenditure is slightly below the net expenditure which we budgeted last year. This is despite inflationary pressures. The cost of our core services have therefore not contributed to the rate increase we have been required to make this year.
2. Transfer of Services
As it has been generally reported, the Department of Infrastructure are seeking to transfer a number of services to Local Authorities.
The proposal is that if the Local Authorities and the Department agree to the transfer these services, then the expected increase in the Waste Disposal charges imposed by Central Government will not be implemented for the forthcoming year.
Local Authorities have already budgeted for this increase in the Waste Disposal charge, so this one year freeze will provide the funds to meet the expected expenditure on the transferred services.
We feel that the transfer of services will have a positive outcome, as they will be performed and administered on a local level. We believe this will result in a better service and therefore better Value For Money for the residents.
3. Waste Disposal Charges
I would like to take the opportunity to explain the proposal from Central Government in detail.
As in previous years, one of the most significant effects of the policies implemented by Central Government is the increase in Waste Disposal charges.
Since the waste disposal charge escalator was introduced in 2013-14, the charge for disposing of domestic waste has increased from £35 per tonne to £79.50 per tonne in 2014-15. This is an increase of 127% and equates to an extra 24p on the rate, which is £37 to the average household, to meet the additional charge.
If the increase is to be implemented for 2015-16 then we anticipate that the charge will rise to £103 per tonne. This is a 194% increase since the start of the escalator, and an extra 38p on the rate, £59 to the average household. This will increase the Authority’s expenditure by almost £100,000 on the 2014-15 budget, which is a rate increase of an additional 14p, which adds £22 for the average household.
This cost to the authority for 2015-16, if the increase is implemented, is estimated to be £424,000. This is equivalent to 58p on the rate or £90 for the average household. As I mentioned earlier, this expenditure has been included in our budget. It will be used to either meet the increase in waste disposal charges, or the expenditure needed to provide the additional services passed to us from the Department of Infrastructure.
The Waste Disposal Charges escalator set by the Department of Infrastructure is due to run each year until 2018-19. We anticipate that our Domestic Waste Disposal Charges will therefore increase by a similar amount for each of these years.
As we did last year, I want to forewarn residents that these increases in expenditure will result in rate increases during this period. The increased Waste Disposal charges alone will result in increases in expenditure which equate to a 14p rate increase per annum. This is currently £22 per annum for the average household.
As we are aware of the increased disposal charges, we continue to offer bring bank sites where residents can recycle their waste. This has reduced the waste which is taken to the Energy from Waste plant, reducing our waste disposal charges at minimal cost to the ratepayers of the District
4. Overall Net Expenditure
The executive staff continue to review our net expenditure in order to identify savings where possible. Our aim is to provide Value For Money services, based on competitive costing but at no detriment to the quality of the service provided.
I am pleased to report that, when Central Government charges are excluded, the budget for the next financial year shows a small reduction in the net expenditure, compared to the current year’s budget. This is in the face of increased inflationary costs and whilst continuing to offer a quality, cost effective service to the community.
The management of our local Social Housing is an integral part of the authority’s work.
Housing is financed by the rents received, which pay for the administration and maintenance of the properties, as well as creating a housing reserve which is separate and ring-fenced from the rate borne reserves.
During the current financial year the authority has completed a project to create 5 much needed social housing apartments in the Old Police Station in Elm Drive. This is in addition to completing the three year project to externally refurbish 118 houses at a cost of nearly £4.5 million. In the forthcoming year we hope to advance another project on Marion Road to create further housing units. These projects have been funded partly from housing reserves and partly by borrowings to be financed from housing reserves.
As a housing authority we continue to run without a Central Government deficiency payment on our general housing stock.
We also continue to maintain our stock at a high standard as noted above. We endeavour to ensure, where possible, maintenance or repair work is done in the most convenient, cost effective manner to keep the maintenance cost of our assets down over the medium term.
6. Projected results
For the current year the authority is projecting, based on the 9 month figures, a deficit of approximately £126,500. This compares to a budgeted deficit of £62,750.
The main reason for the additional deficit is that the board developed two further projects after the budget had been agreed. These were funded from rate borne reserves.
These were the removal of the asbestos at Elm Tree House and the refurbishment of Hawthorn Villa, the authority’s main office. The work at Elm Tree House has enabled us to find new tenants for the property who will move in shortly. The refurbishment of Hawthorn Villa has provided disabled access to the office, primarily to the finance counter and the boardroom, to which a lift has been installed. This will help us comply with the requirements of the Disability Discrimination Act 2006. The provision of this access to the building means the temporary boardroom at Willow House can be made available to be let out.
The budgeted cost of the two projects is over £143,000 and therefore, once they have been incorporated into the comparative figures, the authority’s deficit is below the budgeted level by approximately £80,000.
The Board and authority remain committed to taking a realistic and prudent approach to their finances in these difficult and challenging times, whilst ensuring that we continue to provide Value for Money Services to the residents of the District.
It is with this in mind and our commitment to continue to provide cost effective and quality services that we have agreed a rate for the District of Onchan of 307p for the financial year from 1 April 2015 to 31 March 2016.
The rate comprises of 249p for our Core Operations and 58p for Central Government imposed Charges.
This is an increase of 17p (5.86%) on the current year’s rates, which is an increase of £26.45 per annum for the average household or 51p per week.
As I previously mentioned, the budgeted net rate borne expenditure of authority for its Core Services has reduced very slightly. Therefore this has in itself not increased the level of rates we need to charge.
The required increase has come due to two reasons. Firstly the effect of the increased charges coming from Central Government in the form of the increased Waste Disposal Charges or the cost of the additional transferred services have led directly to an increase in our expenditure by the equivalent of a 14p rate increase.
Secondly, the authority has over the last few years budgeted to run its ongoing services by taking an element of the required expenditure from its brought forward reserves. For 2014-15 the budgeted level of ongoing expenditure to be funded from reserves was equivalent to a 9p increase in rates. This is not a situation which can continue in the medium term as we must ensure that the authority continues on a sound financial basis. If not we will eventually lose the required buffer of reserves needed to assist the authority prior to the majority of the rate income being received or deal with emergencies.
We have therefore agreed to reduce the budget deficit on the authority’s ongoing net expenditure over a number of years. This has contributed to the remaining 3p increase on the rate this year.
The rate of 307p produces a budget with a deficit of £28,432 which will be taken from projected Rate borne reserves brought forward as at 31 March 2015 of £685,658.
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