PAPER B

Purpose : For Decision

REPORT TO THE EXECUTIVE

Date : 12 MARCH 2003

Proforma : RESPITE CARE HOME FOR CHILDREN WITH A DISABILITY

JOINT REPORT OF THE PORTFOLIO HOLDERS FOR RESOURCES AND SOCIAL SERVICES AND HOUSING

IMPLEMENTATION DATE : 24 MARCH 2003

SUMMARY/PURPOSE

1. To update Members on the current position with regard to this project and to seek agreement to proceed on the basis outlined in this report.

BACKGROUND

2. Both the Council and the Isle of Wight Health Care NHS Trust (the Trust) have been working in partnership over several years to bring forward a new Respite Care Home in the absence of available funding. This project has been given a high priority and the Executive is now being asked to approve a complex scheme to secure both public and private funding to build and manage the new home for the Island.

3. The project plans to provide a new 12 bedroom home on Council land adjacent to the Medina High School, Newport, with 8 respite beds and 4 intensive respite support beds. The service will be provided and operated by the Isle of Wight Health Care NHS Trust through an appropriate care contract with the Local Authority for the next ten years. Detailed planning permission and building regulation consents have already been approved.

4. A building tender has been received priced at £1.212 million which can be recommended to the Council. The total scheme cost is estimated to be £1.4 million.

5. The outstanding issues to be resolved relate to the funding and timing of the scheme.

6. Whilst unfortunately none of the usual capital finance routes have been identified as available, the Council and the Trust have been able to accumulate some £700,000 of capital. This includes a £250,000 grant from the Joint Investment Plan for Learning Disability through the Department of Health, sale proceeds from the existing home plus an allocation from the Council’s own capital programme and contributions from Social Services and Housing and Education Directorates. This leaves approximately £700,000 to be raised from a private investor.

7. The route to raising funds from a private investor is available to the Council because this project is for the development of accommodation which is classified as a hostel. This gives the Council the opportunity to use the provisions of the Local Authorities (Capital Finance) Regulations 1997 (“the 1997 Regulations”) to raise funds, in addition to the approved allocation, on the basis that the completed building is not let to the Council. The arrangement proposed has been advised by legal consultants in this field of work and are set out in addendums 1 and 2 attached.

8. The building works tender being recommended to the Council and the Trust is from Stoneham Construction Limited at a cost of £1,211,902.63 excluding VAT. This price is open for acceptance until 14 February 2003, but the Contractor has agreed to extend this date until 26 March 2003 for a start in March and completion April 2004.

9. All the documents, drawing certificates and associated papers have been compiled onto one compact disc and that information, together with covering instructions went to the Council’s appointed agent Driver Jonas on 24 January 2003.

10. The Council’s agent has been asked to seek expressions of interest from potential funders and to make recommendations following the marketing exercise. At the time of preparing this report, the outcome of that exercise is not known. Officers do however propose to advise on further information in time for/or at the Executive meeting whichever opportunity becomes available earliest.

CONSULTATION

11. Throughout the development of this scheme the following bodies and organisations have been kept informed and consulted :

· Isle of Wight Healthcare NHS Trust

· Medina High School

· Primary Care Trust

· Friends and Parents

12. No adverse observations have been received. This scheme has received the continued support of all parties for a number of years. There is a critical need to enhance the respite care provision for children with disability on the Island. This scheme would allow the Council to more effectively address this unmet need.

COUNCIL STRATEGY

13. This scheme is consistent with the Council’s key objective of “Improving health, housing and the quality of life for all” together with the Children’s Services Plan and the Local Delivery Plan for Health.

LEGAL IMPLICATIONS

14. This is a complex case, with legal advice and drafting work being delivered through a mix of internal and external provision. Legal powers to provide respite care and enter into this arrangement are not only contained in the 1997 Regulations but also in the Care Standards Act 2000, the Children’s Homes Regulations 2001 and the Local Government Act 2000 Part I. There are no foreseeable adverse human rights, crime and disorder or race relations implications.

15. This scheme has been the subject of considerable legal scrutiny in order to find a suitable means of achieving compliance with The Local Authorities (Capital Finance) Regulations 1997. Counsel’s opinion has been sought and the detailed work associated with the Contract preparation has been undertaken by specialists in the field. It is considered that the scheme as proposed is now compliant with regulations and is acceptable to the Council’s Monitoring Officer.

FINANCIAL IMPLICATIONS

16. Currently projected total capital costs are £1.4 million and the associated capital financing is as follows:

	£
Capital Receipts	125,000
Social Services	200,000
Government Grant	250,000
IW Council Capital Programme	135,000
Private Sector	700,00
	1,410,000

17. Currently projected revenue costings provide for the running cost of the home to be substantially funded from the available budgets from the Council and Health Authority that are associated with the running of the current home. Should the facilities to be provided not be available on the Island, the Council would potentially be faced with substantial future costs associated with identified children who will require this service and may otherwise face mainland placements.

PERFORMANCE MANAGEMENT

18. The Council will raise its performance in this field of care provision through the following measurable outcomes :

· Securing eight respite care places to supplement current deficiency.

· Potential room for expansion in the future (modular approach).

· Improved quality of respite care enabling children to remain with their families.

· Achieving new capacity for intensive respite support currently not available.

· Potential savings on mainland placements.

RESULTS OF FUNDING TENDER

Disappointingly only one private sector tender was received to fund the capital shortfall through the leasing scheme devised. That tender proposes payments as follows :

Years 1 to 5	£95,000 per annum
Years 6 to 10	£100,000 per annum
Years 11 to 15	£110,000 per annum
Years 16 to 21	£120,000 per annum

This represents a total cost in excess of £2.2 million which far exceeds the cost to the Council of financing from its own capital resources should any be available. The private sector tender contains a financing choice consistent with a 13.75% rate of interest compared with a current Public Works Loan Board rate of 4.5% over a 20 year period. The currently proposed revenue budget for the scheme would also be insufficient to service the costs associated with the private sector proposal. Given this result the Council is faced with meeting the total scheme requirements from its own Council programme now or deferring the scheme to some future point.

OPTIONS

1. That the Council fund the scheme from its own capital programme.

2. That the Council defer the scheme until some future point.

CRITICAL SUCCESS FACTORS

· The Joint Investment grant allocation of £250,000 from the Department of Health is made subject to the scheme being confirmed and commenced in the 2002/2003 financial year. Delay in progressing the scheme would jeopardise this grant.

· Securing the outstanding funding at this time is critical to progressing this scheme.

· The demand for this care provision is growing and the current facility is at capacity and inadequate.

EVALUATION

There is currently a £1 million over commitment on this year’s capital programme which the Executive have agreed to manage through slippage in the programme. This over commitment will be recovered by identified capital receipts accruing in the New Year. A similar strategy could be agreed to manage the necessary support in the 2003/04 programme in order to accommodate the Council funding of this scheme within that year. Should sufficient slippage not materialise it will be necessary to defer or postpone equivalent expenditure from the currently approved capital programme. Given the Council does agree to use its own capital then there would also be a potential revenue saving to set off against that capital.

RECOMMENDATIONS

Option 1.

BACKGROUND PAPERS

19. Executive report – 18 January 2001 and 10 September 2002.

20. Social Services and Housing Select – 21 December 2000.

21. The Local Authorities (Capital Finance) Regulations 1997.

Contact Point : Tony Flower, ( 823263, e-mail: tony.flower@iow.gov.uk

Jimmy Doyle, ( 520600, e-mail:[email protected]

J DOYLE Acting Strategic Director Social Services and Housing

R R BARRY Portfolio Holder for Resources

ROGER MAZILLIUS Portfolio Holder for Social Services and Housing

Addendum 1

JCT Contract

Parent Contract

Same day enter into

	· Between IOWC (1) Funder (2) NHS Trust (3). · Secures £700,000 investment from Funder plus % (presently unknown until Funder identified). · Permits early repayment at IOW discretion.	· Between IOWC (1) (using Funder as Agent for movement of monies) Contract (2). · Contractor constructs new building. · Building works (full tender details) supervision. · Programme and completion. · Variations and Arbitration. · IOWC recovers VAT.

Headlease
		· Between IWC (1) Funder. (2). To be granted on completion of new build. · 21 years + 1 day, £1 pa rent. · Break provisions (right of renewal excluded). · IOWC (freeholder’s) liabilities (repair/insurance).
Under Lease
			· Between Funder (1) NHS Trust (2) (care service provider). To be granted on completion of new build. · 10 years, £1 pa rent. · Conditional right of renewal only · Break provisions (right of renewal excluded).
Care Service Agreement
			· Between IWC (1) NHS Trust (2) to be entered into on completion of new build. · 10 years with review (conditional option for further 10 years.

Addendum 2

Arrangements For The Replacement Of Beaulieu House, Newport, Isle of Wight

Isle of Wight Council (“the Council”) have tendered works for the construction of a new respite care home for children to replace Beaulieu House off Fairlee Road, Newport, in accordance with Planning permission granted on 6 June 2001.

The Council have received a favourable tender in the sum of £1,208,902.63 and are looking for a suitable partner to assist with the financing of the project. The Council have £500,000 available to them from their own resources and from the Isle of Wight NHS Healthcare Trust. The Council and the Trust intend to enter into a contract for the provision of care services by the Trust at the new home once it is built.

They wish to defer the balance of the contract price with the assistance of a partner who will pay the balance of the sums due to the building contractor, under the building contract on their behalf up to a maximum of £708,902.63. This sum will be placed in a deposit account to be charged to the Council at the outset of the development.

After the practical completion of the development, the Council will reimburse the deferred payments over a maximum period of 21 years, together with sums equivalent to interest on the balance of these deferred payments outstanding from time-to-time. The Council may at its discretion accelerate the reimbursement.

As part of these arrangements, the Council will grant a lease of the new home to its partner for a term of 21 years, plus one day at a nominal rent without a premium and with the Council having responsibility for repairs and insurance. The tenant will not be able to carry out alterations and must report on the condition of the premises to the Council every quarter. The tenant will be responsible for cleaning the premises and for taking out public liability insurance.

The tenant must also underlet the premises at a nominal rent without a premium to the Isle of Wight NHS Healthcare Trust, to enable them to deliver the care services to the children who will reside at the home from time-to-time. The tenant will have a similar commitment to underlet to any new care provider during the term of the lease. The form of the underlease will pass down to the care provider the responsibilities of the tenant under the lease. The underlease is terminable if the contract for care services comes to an end.

This leasing structure is a key feature of the arrangements and is designed to comply with the Local Authorities Capital Finance Regulations 1997 as amended.

Wragge and Company Solicitors