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REPORT ON THE PUBLIC MEETING 01 MAY 2014 Capital Expenditure

By J. Brock (FINN)

A public meeting was held in the function room of the Falkland Islands Chamber of Commerce at 1700hrs on Thursday, 01 May 2014. The Hon Mr Michael Poole introduced the subject matter of the meeting which was the Capital Plan and the money to pay for it. The Honourable Mike Summers did the presentation and answered questions as he went along.

Mike Summers first explained about the money available for expenditure on the Capital Plan. He then identified areas of expenditure by category and some totals compared with the money available as well as the choices we have to make.

Pointing out that the figures were all illustrative, Mr Summers said that in very few places had detailed costings been done. However the presentation gave those present the idea about the size of the projects and how much the projects will cost.

Saying that it was important to discuss relative priorities in the community he asked about projects to bring forward  what was the community view. Some maintenance projects were left out of the programme but they did not affect the overall programme. At the moment there is a 20 year infrastructure plan that is being developed. It is not ready for the budget this year but Mr Summers hopes it can be in place for next year.

Quite a lot depends on whether the Sea Lion Project is developed. Premier Oil will announce this in due course, probably the first quarter of 2015. What we do with the Capital plan depends of what Premier oil decides.

MS: The closing reserve at the end of the financial year 2012/13 is £163Million. In theory this is available for expenditure and it doesnt include pensions. It is money available for financing. The last budget saw 7.4Million deficit over the next 5 years and hasnt changed  it was left in the calculations. Positive input adjusts the figure to just under £160Million. In the last week or so the Treasury has done more work with the revenue generating departments of the Government and we foresee another £17.5 Million of revenue over the next 5 years that hadnt been anticipated last year. This added back with no additional operating expenditure is £176.6 Million. The Assembly has decided as a matter of policy that we will keep 2.5 times our yearly operating expenditure in reserve. It is a conservative figure with some people only wanting 2 years and some wanting 3 years but it is prudent in case things dont go the way we expect. The difference is £54.8 Million to spend on Capital projects. If we spend the money we dont get investment income which, over 5 years will leave us with a figure of £41 Million. In addition there is also a sum of £20 Million representing £4 Million, which is the Capital transfer for the operating fund that we make every year. In total we are estimating that we have £60 Million worth of money that we can spend on Capital in the next 5 years. And that is £12 Million per annum.

Andrea Clausen asked where the £17 Million came from and Mike summers said it was investment and corporation tax and income from customs and import duties. Gerald Cheek asked why the money couldnt be spent in one year and Mike Summers said that FIG wasnt geared up to spend that kind of money. He went on to say a lot of the projects required more detained design and development work before they are ready. He went on to say that it makes sense to do as much of the work as we can with the resources that exist here in the Falklands. The more people brought in, the more people are contracted from outside and more money will go outside.

Following is a list of the items that are considered important projects but they are in no particular order. They are called P-1 priorities. They are divided up into categories. At the end of each category people asked questions.

1. FIPASS  considered to be a temporary fix until a deep water port is built 2. The prison. There are issues with extending it or completely removing it as well as the Police Station out of the centre of town 3. An elder care home  work on this is at its early stages but there is an issue over the number of beds. Are 10 beds enough or should a larger unit be built. Peoples ideas are needed. Mike Summers said that if a larger facility were built then money would have to be taken from other projects. 4. Education  more classrooms are needed. It was thought that a new Infant/junior School could be built nearer the Community School but it could have issues with the geography of the site. 5. A fire station would be built in an area behind Stanley Services and the area in the centre of town freed up for other purposes.

Karen Lee asked why we dont replace the Power Station and Mr Summers said that temporarily it needed to be extended and more generators bought. Additional capacity was more important at this stage than replacement.

The next section of P-1 expenditure includes housing infrastructure, Government houses for contractors and for social housing, Stanley Utilities and maintenance. To provide plots it is estimated to cost £1Million per year, £6Million to build new houses, an estimated £12 Million per annum over the next 5 years including expenditure on utilities and maintenance. In answer to a question about income Mr Summers said the figure for that was not shown on the slide.

Barry Elsby said it was not expected to cover the cost of providing plots as they are handed out to first time buyers and it was not intended to cover the costs. Andrea Clausen asked if the figure covered social and other Government housing as well as first time buyers and Mr Summers said it did.

Mrs Clausen asked about private sector involvement and Mr Summers said a few years ago the private sector asked Government to stop constructing plots as the Private sector was being crowded out by private sector companies building houses so the practice was stopped. John Birmingham interjected that it was the houses they stopped building and not providing infrastructure for plots. Mr Summers said houses and plots construction by FIG stopped and after the East Stanley development ceased there was a pause but nothing new came on to the market from the private sector. Government then got the message and began to provide plots and construct houses again. He surmised that the private sector may not be able to build houses for affordable houses if they had to provide the infrastructure. He continued that it was important to keep costs down to a level that people can afford. A proposal to build another 30 houses would go before Executive Council in due course. This could cost an estimated £3Million.

John Birmingham said that some of the older properties are more expensive to maintain and have long-term tenants in them. Would these be sold to Tenants? Mr summers said it was part of the strategy of the Strategic Housing Group as the Housing Committee was only responsible for allocating existing stock. The new group will look at this. Mr Summers said the need for Government building new houses has been recognised. He continued that there always seemed to be 40 people on the housing list. They are not un-housed but living somewhere else but would like to move. Currently there are five or six urgent requests for houses so it is not as desperate as it may seem. There are a few older properties that could be sold to provide some income to FIG.

The next slide showed P-1 priorities of roads, Camp roads, MPA Road surfacing, Stanley Roads and replacement of sections of Ross Road. This should cost £45 Million of the £61 Million available. John Birmingham said that just short of £500,000.00 was spent on the maintenance of the MPA Road at present. Andrea Clausen wanted to know if there were options to make the road safer if it could not be re-surfaced. Mike summers said there were always options but not surfacing or surfacing is were always options. However, it is deteriorating rapidly and putting barriers on either side of a dilapidated road would not be a good option. John Birmingham said that £200,000.00 for the rest of Stanley roads wasnt enough. Mike Summers said it was the available money in the budget for the last several years and it was the amount that would be allocated. Ian Hansen said that £1.4Million for Camp roads that consist of many more kilometres also wasnt enough.

John Birmingham added that the number of vehicles that go on a metre of road in Stanley was far more than what travelled on Camp roads. Though Camp tracks are deteriorating, the £1.4 Million was the total available to deal with maintenance and he admitted it was a losing battle. Mike Summers said it was a priority to keep all the roads in usable condition and when it was in an unusable condition, it had to be fixed.

It is important to note that none of these projects are intended to make a profit and could incur recurrent expenditure.

The next three items were the air terminal (at Mount Pleasant Complex), industrial site development and waste management. Mike Summers said these figures were conceptual and there was no idea how the amounts of money would be allocated even if they were agreed. There is an aspiration to improve the terminal at Mount Pleasant. That depends on approval and funding for the project going ahead and Government having ownership of it, otherwise it might not get done. Mr Summers pointed out industrial site development without further comment. He went on to waste management and said that 10 times or more could be spent and it wouldnt scratch the surface of the costs of the project.

Government Offices and Hospital Maintenance were mentioned. Mr Summers said that Government offices didnt form any part of the priority system but it was a matter of choice. But going back to the Fire Station, if you were going to build new offices, that is the likely site. He repeated that the Fire Station would be moved to an area behind Stanley Services. The advantage of that site for the Fire Department is that equipment can get straight on to the Bypass. Like all of the subjects it would be discussed in planning to be sure whether it was the right thing to do or not.

Steve Dent asked that Mr Summers speak about industrial site development. Mr Summers said it was a small figure meant to facilitate the allocation of spaces for industrial development. He went on to say that we had been fortunate with the Lookout Industrial Estate that was bought by FIG from the Military for £26,000.00 and Gordon Lines had been developed over the years for industrial development but it wouldnt last forever. There could be other areas to come. Mr Dent felt it was a small amount given what was coming. Mr Summers agreed and said it would only deal with the provision of utilities. He went on to say that it was likely that the private sector would contribute to the development of new sites.

The final P-1 priorities on the slides were community projects and the vulnerable persons strategy. Mr Summers said the Vulnerable Persons Strategy would throw up a number of other investments. The sums mentioned were nominal but not set in stone. Something had to be put into the budget at this stage

John Birmingham mentioned that a net Infant/Junior School would be needed as porta-cabins and other spaces were being allocated for classrooms. Once abandoned, what would happen to the building? Barry Elsby said it was something that had been discussed on an off and on and off basis. He agreed with Mr Birmingham about re-allocating the building.

Mr Summers surmised that if the Fire Service was re-located the space would be used for Government Offices and the Secretariat could be re-allocated to the health and Medical Services Department. Barry Elsby agreed that if you knock down the Secretariat there would be nothing in the budget to re-build it.

A member of the public suggested that the Secretariat could be used as the old peoples home and Mike Summers said it wasnt suitable for a home for the elderly. He agreed the Secretariat could be used by the Medical Department but not for old people.

Decisions about the police station and prison being used for classrooms and building a new police station and prison are decisions that yet have to be made. Phyl Rendell said it was a very valid point that John and Karen made. She mentioned the working group set up when the Community School was built. She felt that we have to be careful and look at everything and not make knee-jerk decisions and build something we regret a few years later. Next week Phyl said there would be a meeting with Manfred Keenleyside about some of the items discussed at the meeting.

Mr Summers said there were opportunities to build small and add on later. The alternative was to build big in the first place.

A member of the public asked if we could learn from extending the Infant Junior School and not do the same with the Prison by extending and adding on. Mr Summers said that the last time the Infant Junior School was extended it was guaranteed that another wouldnt be needed for 30 years. Jan Cheek said the guarantee was 20 years at least. Hind sight being 20/20 the guarantee shouldnt have been made.

Steve Dent mentioned that the proposed police station of 10 years ago would be a massive headquarters for a regional police force. Jan Cheek mentioned it had morphed into something with 12-foot walls. Mr Dent said it was all about project management and the public needs to know what is needed.

Steve Dent said that FIG have excellent managers trained for such projects and they need to focus on these projects and come up with something we can afford.

Barry Elsby said we have a very poor prison at the moment and little space. Those people, like it or not, are going to come out and be in the community. And it behoves us to make sure that when they are released they are not going to cause harm again and we need to have space to do that, said Barry Elsby. Then he asked if the prison population was going to grow and if this is the peak of what we are going to see. He answered himself by saying that we just dont know. Jan Cheek picked up on one point that before this spate of offences that sort of behaviour was not acceptable.

John Birmingham mentioned that there is a bit of foresight in his advocating more than 10 beds for an old persons home. He said that the population was ageing and unless bunk beds were allowed we were going to have a problem. Ian Hansen totally agreed with what he was saying but if a larger eldercare facility was built another needed facility would be under-funded. In his view it was important to make a building that could be extended.

Can I turn the Director of Public Works argument against single units on its head then and use it in this way, asked John Birmingham? His argument is that you need a bathroom, you need a kitchen, you need a living area. To actually stick on a second bedroom is not that much more money. Therefore it is more economical to build a two bedroom unit. Thats why they have been doing that, he continued. With a care facility I would suggest that with what we know now we dont have to be an expert. The figures are all there. We are going to need an expanding building, concluded Mr Birmingham.

Ian Hansen said that the recurring cost of staff that would cause a problem. Mike Summers said there was danger in focusing on a detail and there is clearly an issue with how big the facility would be as well as the new education facility and the prison. However, all had to be assigned an acceptable figure at some point. Lyn Buckland mentioned when she was working in the UK she knew of standard designs for residential care homes. It was a nucleus design that could be expanded. Mike Summers said that MLAs and the Health and Medical Service Department in the Falklands had those designs and were going with it

Mike Summers went on to discuss the Port Project and said the figures on the slide were highly speculative as nobody knew what kind of port would be built until sometime next year. It was a notional figure that needed to be included.

The next section included Plant for PWD, Vehicles and Equipment. Mr Summers said the figure was low but to slot a figure in was necessary. For the Mount pleasant Road there would be more spent than the figure listed. And, it would be somewhere between £3- and £60Million  roughly £1 Million a mile. A member of the public thought we should build a bit at a time and Barry Elsby mentioned a figure of £5 or £6 Million a year. Mike Summers said the advice MLAs received was that it is a highly inefficient way of doing it because a team needed to be mobilised every year and then be withdrawn to do 2 months work.

Roger Edwards said there was a quote to blacktop the MPA Road but it was hugely expensive as the engineering work needed for the substructure of the road to bring it up to a level where it is worth putting black top on it was preventative. It wasnt just the physical blacktopping of the road that added costs to the project. Unfortunately, bitumen has risen to almost the cost of concrete. Mike Summers said £100,000.00 had been allocated to re-engineer sections of the road that needed it but someone had to do a lot of work to survey the road and report on the findings.

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