Budget Transfers between Infrastructure and Liquid Waste Strategy Capital Heads of Expenditure

DEPARTMENT FOR INFRASTRUCTURE

TRANSFER OF BUDGETS BETWEEN THE INFRASTRUCTURE AND LIQUID

WASTE STRATEGY CAPITAL HEADS OF EXPENDITURE

1. Purpose of Report

To enable the Minister to approve the internal budget transfer totalling £4,500,000 in 2017 from the Infrastructure capital head of expenditure (Q00RL10011), to the Liquid Waste Strategy head of expenditure (Q00BT14022).

2. Background

On June 3 2014, the States approved the 20 year Waste Water Strategy (P.39/2014) for the Island and the funding proposals set out therein.

A key element of the Waste Water Strategy was the construction of a new Sewage Treatment Works (STW) at Bellozanne at an estimated cost of £75m to replace the existing plant which was built in the 1950’s.

Subsequent to the States decision (P.39/2014) in June 2014, a strategic re-assessment of funding available for Capital projects in the Island was carried out and it determined that no further funding would be made available for the new STW project from the Capital programme beyond that already allocated in 2013, 2014 and 2015.

This decision has now been incorporated into the Medium Term Financial Plan (MTFP) 2016–2019 (P.72/2015) which states that any further funding required for the STW project will be sourced from the Department for Infrastructure Rolling Infrastructure Vote.

In 2013 and 2014, a total of £10.1m was allocated to the STW project. This consisted of £4m from the Infrastructure Rolling Vote, £3.1m from the main Capital programme and £3m from the Consolidated Fund.

A further investment of £25.494m was agreed in the Budget 2015 from the Currency Fund and £1m was also transferred from the Rolling Infrastructure Vote in 2015 in accordance with the MTFP. These funds are all held under capital Vote Q00BT14022 (Liquid Waste Strategy).

In addition, in 2013 and 2014 a further £1m was received in a separate Vote, Q00MF13030, which is intended for Refurbishment of the existing Clinical Waste Incinerator at Bellozanne (this money did not form part of the £75m allocation but can be utilised, as moving the Clinical Waste Incinerator now forms part of the works for the STW).

This provided a total of £37.594m across two heads of expenditure that had been allocated to the STW project up to December 2015.

Subsequent funding and procurement of the STW project was based on proposals set out and approved in MD-T-2015-0072 which was based on a revised Capital cost of the scheme of £53.594m.   

Proposals in the Ministerial Decision envisaged the £16m shortfall in funding being achieved by transfers from the Infrastructure capital head of expenditure to the Liquid Waste Strategy capital head of expenditure in 2016-18 of £4,500,000, £4,500,000 and £7,000,000 respectively.

Subsequently, £4.5m was transferred in 2016 and therefore the current budget for the STW project stands at £42.094m.

In accordance with the Ministerial Decision and the MTFP 2016-2019, a further £4.5m is required to be transferred in 2017.

In adopting a revised Capital cost of £53.594m in 2015, as outlined in MD-T-2015-0072, a number of risks were highlighted which would impact on the cost of the scheme if they arose. These included the fact that no allowance had been made for inflation over the course of the project and rejection of an export licence for clinical waste would increase costs further.

A number of these risks have subsequently arisen, including those above, and in addition, adoption of the final layout and preliminary design, including additional facilities to assist with mitigating nitrate discharges to St Aubin’s Bay, has also impacted on the likely outturn cost. Current estimates now indicate a likely outturn cost of £68.944m, including contingencies.

Unless another source of funding is identified in the meantime for the additional £15.35m now required over and above the £53.594m, this funding will need to be allocated from the Rolling Infrastructure Vote in 2019 and 2020 as there are insufficient funds in the proposed total 2017 and 2018 Rolling Infrastructure Vote allocations to accommodate this sum.

3. Recommendation

That the Minister approves the transfer of £4,500,000 budget from the Infrastructure capital head of expenditure (Q00RL10011) to the Liquid Waste Strategy capital head of expenditure (Q00BT14022).

4. Reason for Decision

Article 18 of the Public Finances (Jersey) Law 2005 (the Law) and Finance Direction No.3.6 ‘Variations to Heads of Expenditure’ (the FD) set out the procedures for transfers between heads of expenditure.  Paragraph 5.1 of the FD and Article 18(2) (c) of the Law require departments wanting to transfer funds between heads of expenditure to obtain the approval of the Minister responsible for their administration.  Article 18(1) (c) of the Law requires the approval of the Minister for Treasury and Resources for any budget transfers between heads of expenditure.  Paragraph 5.2 of the FD delegates non-contentious transfers between heads of expenditure up to £1,000,000 to the Treasurer of the States.  Paragraph 5.3 of the FD states that, in all other instances, the approval of the Minister for Treasury and Resources must be obtained.

The construction of a new Sewage Treatment Works (STW) at Bellozanne is required to replace the existing plant which was built in the 1950’s.  Anticipated costs were reduced in 2015 from £75m to an initial £53.594m by the deletion or reduction of certain elements of the Accommodation and Enabling Works and STW Development Phase, and their associated contingencies. In order to make up the £11.5m difference between the current level of funding of £42.094m and the revised initial estimated cost of £53.594m, the MTFP is proposing that the Department for Infrastructure Rolling Infrastructure Vote be used.

5. Resource Implications

The Infrastructure capital head of expenditure (Q00RL10011) 2017 allocation will decrease by £4,500,000 and the Liquid Waste Strategy capital head of expenditure (Q00BT14022) will increase by £4,500,000.

6. Action Required

The Finance Director to request the approval of the Minister for Treasury and Resources for these budget transfers