Contact: Alan Giles, ext 7712 email: [email protected]

With the concurrence of the Chairman of the Hart Highway and Transport Advisory Panel under Section 100(B)(4)(b) of the Local Government Act 1972, this matter is included on the agenda to enable the Panel to consider recent changes to the funding arrangements for agency grass cutting.

. Summary

1.1 This report concerns the new agency and funding arrangements for Grass and Tree maintenance work carried out on the highway by district councils on behalf of Hampshire County Council, and in particular the effect upon Hart District Council.

2. Background

2.1 Up until the mid 1990s Hampshire County Council had funded district councils to carry out seven cuts per year of highway verges and for shrub and tree maintenance work. Due to cut backs in highway maintenance funding from about 1994, the allocations were cash limited. Although in later years the allocations have been increased in line with inflation, up until now there has not been a systematic approach to calculate allocations based upon the work done.

3. Blueprint Agency Review

3.1 From May 2002 highway maintenance services carried out by the district councils under long-standing agency arrangements were taken back by the County Council. However it was agreed that the arrangements for dealing with environmental and verge maintenance, which included highway grass cutting, shrub and tree maintenance, should continue to be done by the districts.

3.2 There were several reasons for this course of action. The districts already had:

(i) large grounds maintenance contracts dealing with similar works;

(ii) suitable staff for managing the works;

and would generally be able to make use of economies of scale by including highway environmental works as part of their own contracts (often increasing quantities by 30% to 50%).

In addition most districts wished to continue enhancing the service and to provide a higher standard of maintenance, for example by increasing the basis number of grass cuts and shrub maintenance visits.

4. Review of the Highway Environmental Maintenance

4.1 As part of the continuation of the Highway Environmental Maintenance agency arrangements, it was important to clarify both the standards of maintenance and the funding arrangements. Maintenance standards required by the County Council were unclear and the historical lump-sum funding needed to be completely reviewed and to be replaced with a transparent funding structure, easily understood by all parties and which fairly reflected the work done.

4.2 Over the summer of 2003 meetings were held with staff dealing with the grass and tree maintenance functions in each of the districts to obtain factual information relating to the quantities of work done and the costs. The quality of information supplied was variable and, in some cases, contradictory and it was not until November 2003 that the County Council considered that it had sufficient information to be able to propose a new funding formula for the works carried out.

5. Funding Formulae for Grass, Shrub and Tree Maintenance and Fees

5.1 Details of the formula for each of the above elements are contained in the attached appendix. The important point about this is that there are numerous ways in which funding can be allocated and the intention was to provide a formula that could be seen as simple to apply, fair to all parties and transparent. In the end, different formulae were devised for grass cutting, shrub maintenance, tree maintenance, grass management fees and tree maintenance management fees. The overall increase in costs to the County Council for works and fees increases to the district councils in Hampshire will be approximately £167,000. Now that formulae are in place it will be possible to monitor and review the effects of them and modify them in future years if necessary.

5.2 A second round of meetings with district staff was carried out in December 2003 to explain the formulae and to listen to any particular concerns arising from them. As a result of comments from Hart District Council staff, the formula for grass cutting management fees was revised to provide a fairer distribution of funding which would otherwise have unfairly penalised those districts with low grass cutting rates.

5.3 The results of the application of the formulae were that the majority of districts will receive a higher allocation with the exception of Hart and Fareham districts. It was appreciated that notification of the new allocations had come very late in the year and that this could cause problems where districts had already set their budgets for 2004/05 and were in line for a reduction. In order to minimise the impact of any reductions, it was further agreed that the changes would be buffered over 2004/05 and that any districts due to receive a reduction would only have to take one-third of that reduction during 2004/05 and similarly any districts due for an increase would only receive two-thirds of that increase in 2004/05, with the formulae applying in full in 2005/06.

5.4 Hart District Council staff were the only ones to disagree with the principles of the grass cutting formula, arguing that due to the particular contract prices in Hart, the Grounds Maintenance part of the contract is at a higher price than it ought to be and that the verge maintenance part of the contract is at a lower price, with the Grounds Maintenance works therefore subsidising the verge maintenance works.

5.5 It is regretted that this is considered to be a very doubtful case to prove, since it is inevitable that contract rates for different types of work are bound to vary. It becomes a very dubious exercise to try and predict what contract rates `ought' to be. Although the contract rates for grass cutting in Hart District are low, they are not the lowest in Hampshire and are certainly not unreasonably or uneconomically low. Under the circumstance it would not be reasonable to try and adopt a different funding formula for Hart District when the present proposal has been accepted by all of the other districts in Hampshire.

5.6 Hart District Council has decided to stop enhancing the numbers of grass cuts during 2004/05 and will be reducing the number of cuts to the six funded by the County Council.

6. Conclusion

6.1 The County Council has provided a number of formula for calculating works and fee allocations for environmental works. The formulae will be applied uniformly across the Hampshire districts and the allocations resulting from them will be monitored and reviewed as necessary.

Recommendation

That this report be noted.

8681/AG

APPENDIX

REVIEW OF AGENCY ARRANGEMENTS FOR GRASS, SHRUB HEDGE AND TREE MAINTENANCE CARRIED OUT BY DISTRICT COUNCILS ON BEHALF OF HAMPSHIRE COUNTY COUNCIL

1. General Principles of Agency Arrangements

1.1 The intention of the review of the agency arrangements is to clarify the responsibilities of the authorities, the standard of maintenance expected and the funding arrangements relating to the environmental maintenance of highway verges, shrub beds, hedges and trees.

1.2 To understand the reasoning behind this review, it is important to go back to basics and appreciate that county and districts have different respective reasons for grass-cutting. As highway authority, we do not fund maintenance of vegetation on the highway to amenity standards but only to the standards required to allow safe use of the highway. By safe use of the highway, we mean to prevent obstruction of access for pedestrians, to keep sight-lines clear of long grass or protruding hedges, to prevent dead branches falling onto the highway and to ensure traffic signs and street-lights are not obscured. Districts' reason for grass-cutting is for amenity which, being a different motivation to the County's, may necessarily demand a higher frequency or standard of maintenance. In most cases, therefore, the district and borough councils choose to increase at their expense the frequency of grass-cutting and standard of horticulture above that which we require as highway authority, so that all the vegetation in their area, whether or not it is on the highway, is maintained to an amenity standard to accord with civic expectations over and above highway requirements.

1.3 HCC recognises that districts may wish to enhance environmental maintenance standards and frequencies. The decision whether to enhance or not and what the degree of enhancement should be is a local democratic decision made by the district councils. HCC does not expect to subsidise any enhancement to its basic highway standards.

1.4 Districts need to recognise the right of HCC to specify the minimum highway standards for environmental maintenance and that HCC will only fund to that level. HCC does not expect district councils to subsidise the basic standard of environmental maintenance works on the highway.

1.5 With regard to maintenance contracts let by the district councils, HCC will expect that the principles of Best Value are being followed and that Districts can demonstrate that rates paid are competitive by an appropriate form of market testing (eg competitive tenders, regular benchmarking, etc).

1.6 HCC has developed a funding formula for the various elements of grass, shrub, hedge and tree works and for the management fees, which aims to ensure that both district councils and Hampshire County Council each pay their fair share of the works carried out.

2. Urban Grass Maintenance

2.1 HCC's present standards for urban grass maintenance follow those of the Best Value Code of Practice for Highway Maintenance. This is for a minimum of 5 cuts of urban grass per year. We propose to fund for 6 cuts as our HCC highways standard.

2.2 HCC accepts that there may be a step change in the equipment used and hence in the costs depending on the grass cutting frequencies. This seems to occur at the 5-6 cuts per year frequency, which is the minimum HCC standard. This would also imply that 5 or 6 cuts per year would be more expensive than a simple pro-rata calculation might show when compared with 10 or 15 cuts per year.

2.3 HCC therefore proposes that it funds the first 6 cuts and that these be treated as 2 times as costly as subsequent cuts, ie the cost of the first 6 cuts are treated as being the cost of 12 cuts. This funding formula accepts the principle that works are competitively tendered and will vary from district to district. The imposition of a single, county-wide rate would unfairly penalise some districts and overpay others.

2.4 Funding formula examples:

· District has 6 cuts, this is equivalent cost to 12 cuts, HCC pays for 12/12ths (100%).

· District has 10 cuts (6+4), this is equivalent cost to 12 + 4 = 16 cuts, HCC pays for 12/16ths (75%), instead of 6/10 (60%).

· District has 15 cuts (6+9), this is equivalent cost to 12 + 9 = 21 cuts, HCC pays for 12/21 (57%), instead of 6/15ths (40%).

2.5 The above funding formula requires that districts supply accurate information relating to:

· total areas of highway verges cut;

· total cost of works;

· total number of cuts per year. In the case of performance type contracts, this will be an annual average over the length of the contract; and

· where districts carry out enhanced cutting at different frequencies then the formula can be applied as an average over the whole area dealt with.

Alternative Funding Formulas Considered

2.6 The idea of using a single county-wide rate for 6 cuts was considered but not felt to be the best method. Unless a contractor could price for such work in the knowledge that he was submitting a genuine tender rate (and not just a hypothetical rate) then it would be impossible to have confidence that the rates were competitive. This would apply to both HCC and district contractors. There are perfectly logical reasons why contractual rates may vary between districts with similar scales of works (eg due to longer travelling distances between sites, etc) and there is no reason to suppose that contractors have unreasonably skewed their rates to subsidise other contract rates.

3. Rural/Rough Grass Maintenance

3.1 Rural grass defined as that cut twice per year using a tractor-mounted flail or similar equipment.

3.2 Initial proposals are that HCC will fund this work at cost.

3.3 However HCC already carries out a substantial amount of rural grass cutting through the highway Term Maintenance Contractor. Rates for this work are very competitive and the contractor is willing to take on more work. It is therefore proposed that HCC enters into discussions with the Districts who do this work to see if there are advantages (eg in cost saving or ease of management control) in transferring this work to HCC.

3.4 Any transfer of functions would be by mutual agreement and probably not start until 2005/06

4. Shrub Maintenance

4.1 HCC's highway maintenance standard for shrubs is for footways, carriageways and sightlines, etc to be clear of growth. The present HCC standard of one visit per three years for pruning work appears to be unrealistic and it is considered that at least one maintenance visit per year would be necessary for highway maintenance purposes.

4.2 It proved much more difficult to arrive at an equitable formula for shrub maintenance. Unlike grass maintenance where one visit equates to one cut, it is unclear exactly what work is being done at each visit to a shrub bed (eg minor pruning, major cut-back, weed spray, litter pick or a combination of any of those works). It is also unclear what level of enhancement is taking place. The rate per m2 per year varied too much to be meaningful, hence the rate per m2/yr/visit is used.

4.3 The proposed funding formula is:

· HCC to pay districts' annual cost of shrub maintenance up to a annual cap level equal to twice average rate per visit, per m2, per year

· The average rate per visit, per m2 is currently £0.307. The cap level would therefore be £0.307 x 2 = £0.61 per year per m2.

4.4 Shrub funding formula examples:

· District has total annual cost of £0.45 per year, per m2 for shrub maintenance. This is less than the cap level of £0.61 per year. HCC pays full cost.

· District has total annual cost of £1.45 per year, per m2 for shrub maintenance. HCC pays up to cap level of £0.61 per year, per m2.

4.5 The above sum should fund at least one visit, and in some cases two visits per year, even where the total annual cost to the districts is higher.

4.6 An additional sum will be provided to fund the removal of unsuitable shrub areas. This may require the total remove of shrubs and turning the beds to grass verge or maybe just the removal of shrubs planted too close to the perimeter of the beds. Districts will be invited to bid for sums each year based upon their assessment of the work necessary.

5. Urban Hedge Maintenance

5.1 To be funded at cost by HCC.

5.2 There are concerns that some hedge areas are not highway responsibility and this will require further investigation. This will need to be done jointly with the local Highways Team over 2004/05

6. Rural Hedge Maintenance

6.1 To be funded at cost by HCC.

6.2 There are concerns that some hedge areas are not highway responsibility and this will require further investigation. This will need to be done jointly with the local Highways Team over 2004/05

6.3 As in 3.3 above, HCC already carry out a substantial amount of hedge cutting through the highway Term Maintenance Contractor. Rates for this work are very competitive and the contractor is willing to take on more work. It is therefore proposed that HCC enters into discussions with the districts who do this work to see if there are advantages (eg in cost saving or ease of management control) in transferring this work to HCC.

6.4 Any transfer of functions would be by mutual agreement and probably not start until 2005/06

7. Tree Maintenance

7.1 It proved impossible to calculate a sensible funding formula for tree maintenance work, due to lack of data about total tree numbers in each of the districts. It is hoped that HCC and districts can work together to improve the tree inventory information over the next few years.

7.2 Generally, tree maintenance work is carried out by districts up to the value of the allocation given. Due to concerns over the minimum maintenance standards presently being achieved, the funding for this work has been increased to all districts.

7.3 Emergency works would not be expected to be funded from this budget.

7.4 There have been some concerns about the degree of expertise of district staff relating to tree maintenance work and HCC would be looking for the following:

· Adequately qualified and experienced arboricultural staff available to advise on all tree issues over and above basic responses, such as removal of basal suckers, cutting back of encroaching small growths, etc.

· Ability to provide tree inspection reports consistent with County standards for all inspections, and maintain adequate records, to address claims liabilities and enable effective management.

· Organisation of works to appropriate County and industry standards through specifications, contractor selection and supervision.

· Ensuring letting of cost-effective contracts to appropriate Standing Orders through tender process, cost-comparisons, etc.

8. Management Fees

8.1 For grass, shrubs and hedges, the initial proposal was for an allocation based on 6% of works costs. This was based on the fee level previously paid to Hart and East Hampshire Districts which were not funded on an FTE basis in the days of the highway maintenance agencies.

8.2 Discussions with the districts have brought to light some discrepancies with this method, ie that those districts with higher works costs would be paid higher fees than those with lower works costs. Alternative fee levels based on district staff time were considered but would be virtually unauditable, there would be no standard level of service and no method of comparing the efficiency of how issues are dealt with compared with other forms of public relations.

8.3 Under the circumstances, fee levels based on the scale of the works would appear to be reasonably fair and the most straightforward to allocate funding to. I therefore propose a funding formula that allocates a sum multiplied by the total area of grass shrubs and hedges managed. But for one very minor exception this will provide fee allocations greater than the original 6% and more equitable to the staff time spent on the service compared with a works percentage method of calculation.

8.4 Generally I feel that the staff time spent on dealing with tree maintenance is proportionate to the works done and hence a fee level based on a percentage of works cost is still fair and appropriate. Fee levels have been increased to 12%.

9. Other Issues

Siding Out

9.1 Some districts still carry out `Siding' or `Edging' works. Generally we would expect the local highways office to take responsibility for this work. If there are economic advantages in this work being done by the districts then we would expect to fund it separately from the environmental maintenance budget.

Total Allocations to be Applied

9.2 It is appreciated that the funding formulas proposed above will not be absolutely perfect and that in some cases the formula may, for example, provide an acceptable level of funding for grass maintenance but not quite so good for shrub maintenance or visa versa. The funding formulas are intended to be a simple, transparent mechanism for calculating funding but there will be no requirement for districts to stick rigidly to the budget headings of the various formulas. It will be the overall sum allocated to the district as calculated by the formulas that will be applied. Districts will then be free to distribute this total sum to the sub-headings (grass, shrubs, etc) in the proportions they wish.

Impact of the New Funding Formulas on District Grass Cutting

9.3 The whole purpose of reviewing the funding arrangements is to provide a fair method of funding. As stated in 1.3 and 1.4 above HCC does not expect districts to subsidise the basic grass and shrub maintenance work done on its behalf, nor does HCC expect to subsidise the enhanced works done by the districts. Where the new funding formulas result in HCC allocations being reduced in 2004/05 from the 2003/04 allocations, this just means that the HCC share of the total cost has been adjusted to pay for 6 cuts, calculated (probably for the first time) on a logical basis.

9.4 This also means that districts (again perhaps for the first time) will have a clear idea of the cost of their own contribution to enhance grass cutting works. It must be clearly understood that if any districts seek to suggest that reductions in HCC allocations will result in them having to reduce their enhanced cuts, then this will not be accepted. The funding formula ensures that HCC pays its fair share of the total cost. Any reductions in the number of enhanced cuts would be due to the district not being able (or willing) to pay its own fair share of those costs.

9.5 It is acknowledged that the funding formulas are far from perfect, however they are reasonable, fair, simple and transparent.

Buffering Proposal for 2004/05

9.6 Most districts have already set their budgets for 2004/05. The new funding formulas will result in most districts having increased funding from HCC. Those districts which will end up with a reduced allocation may find it difficult to accommodate those reductions so close to the start of a new financial year. We sympathise with this and will do all we can to reduce the difficulty. However this is not something that we can achieve alone, due to the implications on our own budgets.

9.7 The proposal is therefore that where districts are due for an increase in 2004/05, HCC will pay two-thirds of the proposed formula increase. Where districts are due for a decrease then HCC will bear two-thirds of the decrease and districts will only carry one-third of the decrease. HCC will therefore bear the majority of buffering the funding changes over 2004/05 and the formula funding will be fully applied from 2005/06.

Parish Charter

9.8 Hampshire County Council is presently reviewing the Parish Charter, which provides guidelines for its relationship with Town and Parish Councils in Hampshire. There have been indications from the Hampshire Association of Parish and Town Councils that some town or parish councils may be interested in taking on grass maintenance. If formal requests to take on this work are received then the matter will be discussed jointly between HCC, the town/parish council and the district council to agree the best way forward.

Adjustments to Quantities, Calculating Allocations and Auditing

9.9 Quantities will obviously vary over time. It is intended that each year, provisional quantities are agreed for the following year (for budgeting purposes) and final quantities for the existing year are confirmed. Districts are reminded that normal auditing procedures will apply to any allocations from Hampshire County Council.

HCC/District Council Joint Working Party

9.10 During the meetings between myself and district representatives during 2003, it became clear that an enormous amount of district work was being duplicated (eg with regard to contract document preparation) and that opportunities for sharing Best Practice with regard to dealing with environmental maintenance works were often being lost. Hampshire County Council obviously has a vested interest in ensuring that we all work more closely together in order to improve the exchange of information between us and to improve the efficiency and effectiveness of the services we are jointly providing.

9.11 We would therefore be willing to help coordinate a joint working parting to look at, for example, the preparation of standard contract documents and investigate opportunities for cross-boundary contracts, etc.

9.12 I would be grateful for you views on whether you would be interested in this approach.

Alan Giles

Chief Engineer

Environment Department

Hampshire County Council

19 January 2004