Meeting documents
Cabinet
Wednesday, 14th May, 2008
Introduction
This Asset Management Plan (AMP) is intended initially to cover the Financial Year 2008/2009 but also extends to the financial plan period and impacts on the capital programme. It is a live document incorporating real short term targets, medium term goals and longer term aspirations. Alongside the AMP the Property Policy provides the protocol for roles and responsibilities in all aspects of asset and property management.
Context
The AMP brings the property dimension into the Service Planning process and reflects current governance factors including particularly Comprehensive Performance Assessment (CPA), to be replaced by CAA in 2009. The Property Board is the client body providing the strategic steer in all aspects of operation of the AMP.
The sister document, the Property Policy, sets some of the background by clearly
- Clarifying the roles and responsibilities between occupiers, Property Services and other specialists within the council.
- Providing for all property owned by the Council to be allocated to one of the Divisional Directors.
- Setting out robust financial arrangements including identification of all costs on a property by property basis.
- Making absolutely clear the budgetry arrangements in the case of surplus property.
Both documents have been brought forward in the context of
- Financial pressures on both the capital programme and the revenue budget.
- The wealth of guidance and instruction emerging from central government and the professional bodies.
- The transition from CPA to CAA.
Volumes
The council's property portfolio is currently held within two separate primary estates
- Corporate Estate (operational portfolio) - The operational portfolio comprises those properties identified for the provision of front line service delivery. These mainly include Schools and other Educational Establishments, Social Services Buildings, Council Occupied Offices, Car Parks, Sports Centres, Leisure Facilities and Open Spaces, Heritage Buildings, Depots and Libraries.
- Commercial Estate (revenue portfolio) - non operational investment properties primarily used to generate revenue and/ or capital to support the Council's aims, objectives and improvement priorities.
The entire estate comprises some 1,200 holdings with an aggregate book value of around £550m as at September 2007.
Issues and drivers
Financial pressures
The Council's Property Assets contribute to overall financial performance in the fiollowing ways
- The programme of capital receipts provides one of the key funding sources for the capital programme.
- Non operational assets provide a significant element of net income to support the revenue budget.
- By providing the opportunity to improve utilisation and efficiency in all areas of property occupation.
Public Realm
The aspirations to create capital arise partly as a result of a desire to improve the public realm. Such improvements may be funded in part by contributions under planning legislation as a condition of the grant of planning permission (s106 agreements), or from other public/private funding initiatives. The Council's s106 policy is evolving and statutory consultation is underway. This policy will increase the level of contributions from the private sector but will not provide the total solution.
Governance
The Property Board now provides the strategic client steer in relation to property and asset management and property projects. The capital programme is administered by the Capital Strategy Group and Projects Programme Board.
The process of Asset Management
Understanding the issues
The existence of an Asset Management Plan and embedding the best use of resources into the Council's thinking is a mandatory requirement of CPA and the Comprehensive Area Assessment (CAA) philosophy will reinforce this from 2009.
Income from the revenue portfolio is a key element of the revenue budget and sales, developments and other restructuring of those income flows could produce capital but at the expense of revenue flows.
Identified capital receipts in the short term take advantage of surplus properties and will not result in loss of income; however this is not sustainable into the longer term. Revenue and capital effects of any strategy need to be considered in parallel.
Understanding the Portfolios
In order to be in a position to drive forward asset management it is necessary to understand both the portfolios and the service delivery issues that surround the Council. This is sometimes called intelligence and is divided into 2 categories
Service intelligence
Information concerning the occupiers, their needs now and into the foreseeable future
- Statutory Changes
- Service growth and/or decline
- New Service Delivery Models
- Changing Service Standards
- Changes in Service Frequency
- Changes in Service Location
Portfolio intelligence
Information concerning the properties themselves
- Tenure & Use
- Condition & `Fitness for Purpose'
- Value, Cost & Income
- Capacity & Utilisation
- Efficiency & Sustainability
- Statutory Compliance
Segmentation, Review and Challenge
Properties initially allocated to one of the primary portfolios, operational or revenue.
Having established the primary portfolios, ongoing challenge takes the form of a rolling 5 year programme based upon the overall objective of the best total financial return. Such programme of review will benefit from a structured process which challenges the need to retain properties on an individual basis, by geographical area, by sector or any other appropriate segmentation. Criteria will depend upon the primary portfolio but the following factors will be relevant
Operational Efficient operation and utilisation
Best use
Condition v suitability matrix
Service planning.
Revenue Internal Rate of Return (IRR)
Total financial return - ie capital and revenue performance.
NB - Current guidance also makes reference to socio economic (non financial) factors and these are increasingly forming a secondary part of the overall assessment of non operational property performance.
Where a property satisfies the criteria above then it will be retained in the appropriate primary portfolio and brought forward for review during the subsequent 5 year cycle. Where these criteria are not satisfied however, then the property will be considered for allocation to one of the secondary portfolios for appropriate action. These potential outcomes are set out below
- Development portfolio - properties identified for redevelopment, ie where potential value exceeds existing use value.
- Disposals portfolio - surplus land and buildings. In most cases the property will be available for immediate sale however in certain circumstances it would be appropriate to retain it in the short term to enable greater value to be realised from (eg) the grant of planning permission. Also in certain circumstances the results of the challenge process will identify areas of land which have no realisable value and such assets may need to be retained for slightly longer periods. In these cases the management strategy will revolve around ensuring costs are kept to a minimum.
- Certain assets by their very nature are not subject to challenge, development or disposal
- Community assets - strict CIPFA definition. Includes Parks and Gardens, Play Areas etc. describes assets that have no alternative use and thus no value or potential.
- Infrastructure assets - strict CIPFA definition. Includes roads, bridges etc. Again there would be no alternative use hence the asset would not be available for reallocation or disposal.
Actions and Performance measures
The AMP is about embedding the principles outlined above into the organisation however there are certain specific targets, goals and aspirations that have been identified as priorities.
Many of these will require cooperation and engagement from occupiers, service managers and finance managers. The immediate targets are set out below
- CPA KLOE for 2008 - in particular the need to be able to demonstrate that
1. The council's asset management plan provides clear forward looking strategic goals for its property assets that show how the council's land and buildings will be used and developed to help deliver corporate priorities and service delivery needs, now and in the future. The plan shows how property assets will be maintained, modernised and rationalised to ensure that they are fit for purpose.
2. The council maintains a record of all of its land and buildings that contains accurate data on its efficiency, effectiveness, asset value and running costs which can be used to support decision making on investment and disinvestment in property.
- Rollout of Property Policy and AMP to services including
o Roles and responsibilities - understanding the corporate and strategic role of property and its relationship with users.
o Allocations and segmentation - fundamental to this whole process is an allocation of every asset to a service occupier and a transparent understanding of the portfolio in which the property is held and from this the management strategy that will be adopted.
o Surplus land procedure - following on from this it is essential that the process of declaring property surplus and the arrangements for dealing with property during the disposal period is understood.
o Costs of Occupation - property costs are fragmented and inconsistent at best. The first step here is to make sure property transactions are recorded in a way that enables the Council to understand how much properties cost on a unit basis.
- Asset Review programme - the programme for reviewing and challenging assets over a 5 year period needs to be set in conjunction with occupiers and their service planning processes.
- Capital Receipts - new arrangements pursuant to the Property Holdings Review need to be integrated with the Property Board and Capital Strategy Group reporting regimes.
- Revenue Receipts - also need integrating in order to be clear about the revenue position and any variation that provides borrowing or other opportunities
The above represent the immediate targets; longer term goals and aspirations are set out in the Plan itself.