Hampshire County Council

River Hamble Advisory Committee

1 December 2003

Revised Budget 2003/04 & Forward Budget 2004/05 - River Hamble

Report of the County Treasurer

Contact: Adrian Thorne, ext 6409 e-mail: [email protected]

( With the concurrence of the Chairman under Section 100(B)(4)(b) of the Local Government Act 1972, this matter is included on the agenda to enable the Committee to approve the Revised Budget for 2003/4 and the Forward Budget for 2004/5, as well as the proposed charges for 2005 which relate to the 2004/5 budget, without delay. )

1 Summary

1.1 This report presents the results of the review of the River Hamble Budget which has been carried out by consultation between the Acting Harbour Master and the Devolved Finance Unit. It presents the revised budget for 2003/4 and the forward budget for 2004/5, as well as the proposed charges for 2005 which relate to the 2004/5 budget.

1.2 The underlying principle for both years is to produce budgets which enable the Harbour Authority to operate within its revenue earning capacity. Both budgets have been debated by the Executive Members Group to meet the above principle. The results will be presented to the River Hamble Harbour Management Committee and will then be presented to the Executive Member for Environment for approval at the January decision day.

1.3 As previously discussed, a zero based budgeting approach has been adopted for setting the revised and forward budget . The use of a zero based budgeting approach by definition means that comparison of the revised and forward budgets with the original budget for 2003/04 is less meaningful. Budget headings have been revised and a glossary of terms has been included in Appendix E for clarification.

1.4 All costs attributable to the Harbour Authority carrying out its statutory and ongoing duties on the River have been identified and built into the budget. This includes all legislative and health and safety responsibilities.

1.5 The Capital budget has been removed as the expenditure previously identified has now been designated as either revenue expenditure or as individual projects. The River Hamble accounts operate such that expenditure is financed from the revenue account, collected via Harbour Dues, so there is no advantage in separating this expenditure from the main Harbour Authority account.

1.6 Project related expenditure has been identified by the Acting Harbour Master. These projects were debated and prioritised by the Executive Members Group in line with the available funding. The full list of projects is shown in Appendix B, together with the results of the review by the Executive Members Group. It is intended that all future projects will follow the above process and be presented to the Executive Members Group. A cost benefit analysis will need to be part of the future approval process. To help this process it is suggested that all further reports to the Executive Members Group has a section in the report covering cost and benefits to justify investment.

2 Harbour Undertaking & Management of the Moorings 2003/04

2.1 The revised budget for 2003/04 for the Harbour Undertaking and Management of the Moorings, summarised in Appendix A, shows gross expenditure of £436,500, in line with the revised income budget. This includes budgetary pressures approved by the Executive Members Group totalling £17,500 .

2.2 The Inflation budget of £12,000 has now been allocated across headings in line with the zero based budget approach.

2.3 The revised Employees budget of £247,100 reflects the full year cost of the Harbour Master and acting up allowance for the Deputy Harbour Master, as well as the full year cost of regrading key staff and the cost of temporary staff to assist in the harbour office during the summer period.

2.4 The Premises budget for 2003/04 has been increased to £27,400. This includes an increase of £2,900 for rent and rates incurred by the harbour office, giving an annual budget of £11,000. A review of rent and rates was undertaken by PBRS and a meeting with Crown Estates took place in September to discuss the recovery of rates paid on their behalf by the Harbour Authority. This is discussed further in paragraph 3.4.

2.5 A sum of £9,000 has been transferred into the Premises budget from the Visitor Centre Partnership to reflect use of the workshop, storage facilities and Visitor's Centre by the Harbour Authority. A sum of £2,000 has been included in Premises for 2003/04 to cover the required one-off cost of health and safety modifications to the harbour office. The remainder of the Premises increase relates to the one-off cost of a new security door and new office furniture.

2.6 The revised Transport budget, which mainly relates to transport on the river, has been increased to £32,300. This reflects the purchase of a new Dory (£7,000) and refit and repairs to boats (£8,300) that have been undertaken this year. Expenditure to date includes lifting the boats out of the water into boatyards, maintenance and servicing of the engines, repairs to electronics, repairs to the steering system, repairs and parts to the hydraulics, fuel and oil, repairs and replacements to the instruments. The general repair and maintenance budget has been increased by £900 and the fuel budget has been increased by £1,400. The staff travel/car allowances budget has also been increased by £100.

2.7 There is no change from the original budget for Navigational Aids as the Acting Harbour Master is confident that the original budget level of £3,000 is adequate. The budget for Environmental Maintenance has been reduced by £500 to £2,500 as agreed by the Acting Harbour Master, in line with expenditure to date.

2.8 A budget has been included within Supplies and Services for Public Jetties and Navigational Safety of £9,000 for both the revised and forward budget. This is to cover the expense of removing hazardous objects/materials from the River. This is clearly a demand responsive budget so the budget level has been set by the Acting Harbour Master based on actual spend to date.

2.9 Consents for the CCTV project have been obtained at a cost of £5,045 and tenders are in the process of being sought. It is intended to defer the installation to 2004/05, thus reducing the level of expenditure in the current financial year by £30,000.

2.10 Central department recharges have been reduced by £3,100 based on actual costs for 2002/03. The breakdown of central department recharges is as follows:

These costs are then apportioned between the Harbour Authority and the Visitor Centre Partnership, resulting in an expected charge to the Harbour Authority for 2003/04 of £24,800.

2.11 IT charges for the operation, which are included within Office Expenses, have been reduced from £11,000 to £9,000 to reflect actual charges for 2002/03. Of this, £8,000 has been charged to the Harbour Authority with the remaining £1,000 being allocated to the Visitor Centre as advised by the Acting Harbour Master on the basis of the volume of computer transactions. The breakdown of the Office Expenses budget is as follows:

2.12 The Consultants budget of £3,000 within Other Services has now been removed as these fees have been included within the relevant project budgets. The breakdown of the Other Services budget is shown below.

2.13 The Oil Pollution Response budget has been increased to £17,600 to reflect the level of work undertaken this year. The annual contract value with Oil Spill Response Ltd is £2,500 and it costs a further £1,500 for them to attend the annual deployment. This has been negotiated down by the Harbour Master as the deployment is also used as a training exercise for Oil Spill Response Ltd. However, exceptional circumstances including the investigation into the BP oil boom this year has increased the cost for this year as a one-off to £17,600.

2.14 A budget of £2,000 has been included to cover the costs of implementing the mandatory Port Waste Management Plan. This is a two year plan for the Port as a whole, which draws on and consolidates the individual plans produced by the Harbour office, yards and larger marinas.

2.15 A budget of £1,000 has been included in both financial years to cover the cost of staff to attend forum meetings relating to the Estuary Management Plan.

2.16 The Hydrographic Programme budget has been reduced to £5,000 in both financial years, to reflect the annual contract value of this work. Previously the consultants have carried out work over and above the annual contract which has resulted in additional costs. In future this will be managed such that any non-contract work will be treated as a separate project subject to funding approval.

2.17 The dredging plan has now been approved and the project will start imminently. It is expected that phase 1 of the project will be complete by the end of January 2004 and the Harbour Authority share of this cost is £3,500. The total cost to the Harbour Authority for the whole project is £12,200 so the remaining budget of £8,700 has been included in 2004/05 to cover phase 2 in line with the expected timescales. New legislation is awaited which may impact on whether phase 2 actually occurs.

2.18 Budgetary pressures of £33,000 were identified for 2003/04, but following debate at the Executive Members Group, these pressures have been reduced to £17,500 as detailed in Appendix B. £8,000 reflects the Acting Harbour Master's estimate of costs for a winter refurbishment of boats. This would include general care and maintenance, inspection and repairs to fibreglass as well as minor repairs to steelwork. It is the Acting Harbour Master's opinion that a regular care and maintenance plan should be put into place for the boats and this would be the first stage in undertaking that commitment.

2.19 Budgetary pressures originally included £5,000 to cover printing costs for the River Talk magazine published and distributed to river users twice a year. It has been agreed that a leaflet produced by the Harbour Master's office and sent to all mooring holders with their invoices is sufficient to keep mooring holders informed, therefore the River Talk magazine will be withdrawn.

2.20 A one-off allowance of £9,500 has been included for the enhancement or replacement of IT systems although as yet no detailed costing has been prepared by the IT department. The budget put to the Executive Members Group included £20,000 for this item, however following discussion it was agreed that £9,500 would be a more realistic level of expenditure.

2.21 It is forecast that the budget for Harbour Dues (£308,000) and Supervision Charges (£89,800) are fully collectable. The Acting Harbour Master has negotiated a small increase to the Crown Estates annual management fee payable to the Harbour Authority for the administration of the moorings waiting list, so the annual budget has been revised to £22,500. The Crown Estates income budget also includes £12,000 contribution to the Environment Assistant Harbour Master post, bringing the total Crown Estates funding to £34,500.

2.22 There is a need for expenditure of £33,000 to be met directly from reserves, as illustrated in Appendix D, for the following items. A payment will be made to Hamble-le-rice Parish Council in respect of mooring rental incorrectly charged in previous years on parish owned land. Discussions have taken place with the Parish Council and they have agreed to a payment of £6,000. This will be met from Reserves as it relates to income received in previous years. The work currently being undertaken on replacement and refurbishment of maintenance piles, which is estimated to cost £27,000, will be met from Reserves and has therefore not been included within the budget setting process.

3 Harbour Undertaking & Management of the Moorings 2004/05

3.1 The forward budget for 2004/05 highlights gross expenditure of £463,600, in line with budgeted income. This includes Budgetary Pressures approved for the year of £37,100.

3.2 Many of the issues surrounding the 2004/05 budget have been discussed in Section 2 as part of the revised budget, but some further detail is required as set out below.

3.3 The forward Employees budget of £235,200 is based on the agreed establishment.

3.4 Rates expenditure of £11,000 has been included within the Premises budget and a corresponding income budget has been included. Following discussion with Crown Estates, it is advised that for 2004/05 Rates expenditure should be collected as a separate charge at the same time as Supervision Charges are levied. From 2006 the collection of Rates will become the responsibility of the Crown Estates.

3.5 The premises budget has been set at £24,900 in 2004/05, £2,500 lower than 2003/04. This reflects the required one-off costs in 2003/04 for health and safety modifications to the harbour office, a new security door and office furniture.

3.6 The Transport budget of £17,000 excludes the one-off cost in 2003/04 of the purchase of the Dory and repairs and refit to patrol boats.

3.7 Central support charges have increased by £2,600 to reflect the increased level of financial support. Office expenses includes £400 in 2004/05 for travel and subsistence costs.

3.8 The budget for Oil Pollution Response has been reduced to £3,900 to reflect the annual contract cost of £2,500 and staff training costs of £1,400. There is no requirement to deploy the boom in 2004/05.

3.9 An inflation provision of £12,700 has been calculated at 3.5% of salary costs and 2.5% for all other costs.

3.10 Budgetary pressures of £57,100 were identified and £37,100 of these have been agreed as shown in Appendix B. These include a budget for implementation of a Harbour Revision Order. The financial exposure will depend on the extent of change to corporate governance, and a provisional budget of £30,000 was identified, but was reduced to £15,000 by the Executive Members Group. Again, £5,000 was included for the printing of the River Talk magazine for river users, but it has been agreed that this will no longer be produced.

3.11 The Acting Harbour Master has requested that £22,100 be included as an annual contribution to a boat and engine replacement reserve. This would enable the Harbour Authority to put sums aside for the replacement of assets rather than having to find considerable sums in individual years. The total is included in Appendix B as the Boat Replacement Fund and is broken down as follows:

The Dory engine is 2 years old and has a useful life of 5 years and therefore will need replacing in 2006 at an approximate cost of £5,500. Although there will not be the full amount in the reserve for the first engine replacement, this will go some way towards the cost and will initiate the procedure for annual contributions towards replacement. The recently purchased Dory has a remaining useful life of 7 years and will cost approximately £7,000 to replace. Therefore an annual contribution to reserves of £1,000 would cover this cost.

The two patrol boats each have 2 engines which require replacement every 3 years. The cost of 4 engines would be approximately £24,000 so an annual contribution to reserves of £8,000 would ensure that funds are available when replacement is due. The two patrol boats are currently 5 years old and have a useful life of approximately 10 years. To replace the two boats would cost approximately £60,000 in total, so an annual contribution to reserves for the next 5 years of £12,000 would ensure there are sufficient funds to replace the boats. Thereafter, the contribution would reduce to £6,000 per annum.

3.12 The income budget for 2004/05 stands at £463,600. As previously reported, Harbour Dues will rise by RPI +1% (3.9%) for 2004/05 as will Supervision Charges. Crown Estate funding for the Environment Assistant Harbour Master is being re-negotiated by the Acting Harbour Master and £12,000 has been included within the budget. An inflation only increase of 2.9% in the management fee income has been assumed, although this has not yet been agreed with Crown Estates.

3.13 An new Rates Charge mentioned in paragraph 3.4 has been included. The annual budget for Rates paid on behalf of Crown Estates is £11,000 which gives a charge of £1.04 per metre. From 2006 the rates will be recovered by Crown Estates directly.

4 Visitor Centre Partnership 2003/04

4.1 Appendix C shows the revised budget for the Visitor Centre Partnership. The budgeted net deficit is £16,200 for 2003/04.

4.2 Staff costs have been revised to reflect the full year cost of staff as discussed previously in paragraph 2.3.

4.3 Premises costs have been revised down to £8,300. This reflects the annual rent and rates charges as well as cleaning and utilities costs. These costs have been revised on the basis of actual costs for 2002/03. Water and sewerage charges alone have been reduced by £4,500 based on actual costs for last financial year, and charges for this year to date.

4.4 The lease cost of the visitor centre has been reduced by £9,000 to reflect the lease value of the areas used by the Harbour Authority for storage and other activities, as mentioned in paragraph 2.5.

4.5 The Warsash Improvement Plan has been included as a budget line item, and £399 has been incurred to date.

4.6 Sub-let and Visitor income has been included at original budget levels for 2003/04.

5 Visitor Centre Partnership 2004/05

5.1 An option appraisal is currently being undertaken in conjunction with the Crown Estates to recommend the most commercial way forward for the partnership. The budget shown assumes no change to the present arrangements, thus taking a prudent approach.

5.2 Appendix C shows the forward budget for the Visitor Centre Partnership. The budgeted net deficit is £14,700 for 2004/05.

5.3 The Premises budget includes a small increase of £300 for fixtures, fittings and repairs.

5.4 Inflation of £2,400 has been calculated at 3.5% of salaries and 2.5% of other costs.

5.5 Sub-let and visitor income has been increased by RPI +1% to £7,800 and £64,500 respectively for 2004/05.

6 Reserves 2003/04

6.1 The Reserves as they stand show the expenditure to be met from Reserves in 2003/04 and the deficits for both years on the Partnership Account which should reduce particularly for 2004/05 when the future of the Partnership will have been decided.

6.2 The effect of the above and the changes to the 2003/04 budget impact the reserves as highlighted in Appendix D.

6.3 The projected balance at 31^st March 2004 for the Harbour Authority is £160,120, while the projected deficit on the Visitor Centre Partnership is (£123,633).

6.4 Interest charged or received on reserve balances has been estimated at 3.5%.

6.5 The second capital receipt has been received from Crown Estates for the sale of piles, giving a total projected balance on reserves of £239,987 as at 31 March 2004.

7 Reserves 2004/05

7.1 The effect of the projected deficit on the Visitor Centre Partnership in 2004/05, and the third capital receipt from Crown Estates, gives an estimated balance on reserves of £333,677 at 31^st March 2005.

8 Charges

8.1 Based on the budget for 2004/05, the proposed charges for 2005 are as follows:

8.1 The Harbour Dues for a 10 metre boat inclusive of VAT will therefore be £121.61 (117.03 in 2004).

8.2 This represents an increase of 3.9%, (RPI +1%).

8 Recommendation

8.1 That the revised and forward budget for the statutory operations of the Harbour, and the proposed charges, be noted.

8.2 That the call on reserves be noted.

8.3 That the charges for 2005 be noted.

Appendix A

Harbour Undertaking & Management of the Moorings

Appendix B

Budgetary Pressures 2003/04 & 2004/05

Appendix C

Visitor Centre Partnership

Appendix D

River Hamble Reserves - Forecast 2003/04

River Hamble Reserves - Forecast 2004/05

Appendix E

Glossary of Terms