Ref: PHD 087/05
Subject:
Portfolio Holder:
Street Lighting : Bid for PFI Funding
Expression of Interest to Department for
Transport
Andrew Trehern – Executive Director Urban
Living
Dave Masters – Interim Manager Civil
Engineering Tel :020 8424 1580
Leader
Key Decision:
No
Urgent/Non Urgent:
Urgent
Power to be exercised:
Portfolio Holder Responsibilities [Allocation of
Responsibilities] – Paragraph 3 of Delegated
Powers to Portfolio Holders, Appendix to the
Executive Procedure Rules, Part 4D of the
Constitution.
Part 1
Responsible Officer:
Contact Officer:
Status:
Section 1: Summary
URGENCY : Local Authorities have been invited to bid to the Department for
Transport for PFI credits for PFI funding in recognition of the nationwide backlog of
street lighting maintenance but Expressions of Interest have to be with DfT by 24
February. Specialist consultants have completed a feasibility study and are currently
developing the Expression of Interest. This timescale has not allowed the
opportunity for a report to Cabinet.
C:\moderngov\data\published\Intranet\IssueDocs\1\7\7\6\I00026771\08705StreetLightingBidforPFIFunding0.doc
The majority of the street lighting in the borough does not meet modern
requirements. Although the Capital programme includes a 3 year commitment for
replacement lighting, it would need 8 years with the same level of investment to
bring all the lights up to standard.
If the EOI is successful, any final decision to proceed with a PFI contract would be
made following a full report to Cabinet. Completion of the EOI does not commit
Harrow at this time.
Decision Required
1. To authorise the submission of the Expression of Interest [EOI] to DfT.
2. To authorise the inclusion of a statement within the EOI which confirms cross
party political support for this PFI Bid
Reason for report
1.
2.
Preparation of the EOI will cost an estimated £25k. The deadline for EOI
submissions is 24 February. In view of the tight deadline and following
liaison with Councillor O’Dell, Portfolio Holder for Environment and
Transport, work is on-going to prepare an EOI, in anticipation of wider
member support.
The EOI needs to demonstrate both full financial and political support.
Agreement by party Leaders to this report will fulfil the requirement to
have cross party political support for the EOI.
Benefits
Asset renewal and service benefits would flow from a PFI contract but most would
be later benefits following the procurement.
Service improvements
The proposed project seeks to provide replacement of street lighting and illuminated
signage that is currently managed by the council to improve street lighting levels
over five years. The scope includes the management, operation and maintenance
of this stock (including the provision of energy) over a 25-year project life.
Additional Lighting Columns
It is anticipated that 73% (11,351) of the existing 15,467 columns will need to be
replaced to reach the required standards of street lighting (BS 54891:2003/EN13201), together with the installation of 4,087 additional columns (36%
increase on existing stock) within the first five years. In addition, 3,070 of the
illuminated signs (bollards, signs and related street furniture) would be replaced.
C:\moderngov\data\published\Intranet\IssueDocs\1\7\7\6\I00026771\08705StreetLightingBidforPFIFunding0.doc
Overall a range of wider benefits would be derived including :
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Access to PFI credits
Contributes to the achievement of the Council’s vision and strategic priorities
Service improvement
Responding to customers
Impact on Council performance measures and CPA
Compliance with statutory duty
Better use of resources
Increased safety for residents and businesses
Improvements to the economic, social and environmental aspects of the
borough
Enhanced community safety, reduction in street crime/fear of crime
Enhanced road safety, reduction in numbers of accidents during hours of
darkness
Strategic and economic regeneration, 24 hour economy
A high class service
Improved standards of maintenance, reduction in number of lighting faults
Reduced levels of complaint,
Reduced light pollution, high optical performance of modern lighting
luminaires
Improved infrastructure, reduction in Health & Safety implications of
deteriorating lighting stock
Improved standards of illumination, designed lighting levels, quality and
uniformity
Timescale of implementation, defined Fast Track replacement programme
within the first 5 years
Notwithstanding the overall benefits of improved street lighting individual changes,
particularly in residential streets, often generate complaints from residents e.g. when
a street lamp is moved from or to outside their premises.
C:\moderngov\data\published\Intranet\IssueDocs\1\7\7\6\I00026771\08705StreetLightingBidforPFIFunding0.doc
Cost of Proposals
See Financial Implications section.
Risks
1. There are no apparent risks in submitting the bid.
2. If the DfT accept the EOI and Harrow proceed to PFI procurement there will
be a slight risk that the service provider’s bid might exceed the level of any
PFI credits awarded.
3. This would be a 25-year contract requiring the commitment of existing
revenue budgets for street lighting over that period thereby reducing some
flexibility for future budget strategy.
Implications if recommendations rejected
An opportunity to bid for government funding of our street lighting renewal would be
lost.
Section 2: Report
2.1
Brief History
a) In recognition of the nationwide backlog of street lighting maintenance, the
Government has announced a further £600m PFI funding. This is the second
round.
b) In the first round in 2003 Harrow expressed interest but narrowly missed out to
two other London boroughs.
c) Much of Harrow’s street lighting stock is in need of investment. The Medium
Term Budget Strategy Includes £2million pa capital investment.
d) A PFI would fast track improvement into a core early investment period, funded
by private finance paid back over 25 years, supported using Government PFI
credits.
e) The proposed bid is of the order of £22million. This is considered close to the
minimum qualifying threshold. We have sought to partner with nearby authorities to
present a consortium bid, but despite some early interest from Hillingdon, none are
willing to do so (some already have a PFI in place, some are not in a position to
provide necessary information to support a bid).
f) Pricewaterhouse Coopers have completed a feasibility study and concluded that
“the council could have a competitive case should it wish to develop an Expression
of Interest for securing PFI credits for Public Lighting.”
C:\moderngov\data\published\Intranet\IssueDocs\1\7\7\6\I00026771\08705StreetLightingBidforPFIFunding0.doc
g) The contract is likely to require complete asset renewal in the first 3-5 years and
full maintenance, including responsive maintenance, for the remainder of the 25
years.
2.2
Options considered
We have sought to partner with nearby authorities to present a consortium bid,
but despite some early interest from Hillingdon, none are willing to do so (some
already have a PFI in place, some are not in a position to provide necessary
information to support a bid).
2.3
Consultation
The street lighting maintenance and improvement service is already carried out
by a term contractor and the roles of the existing Harrow Lighting Engineer and
Lighting technician will change little under the PFI as they will retain an
oversight and monitoring role for the PFI contractor as they do now for the term
contractor; they are both well aware of the proposal as they have been heavily
involved in preparing this EOI.
It is proposed to notify the UNISON Branch Secretary that the council is
submitting an Expression of Interest without commitment.
2.4
Financial Implications
The PFI contract would pay for £22m of capital investment in the street lighting
service. The Council would receive an annual grant for the 25 years of the
scheme in respect of the financing costs. The affordability gap i.e. net increase
in the Council’s revenue expenditure arising from the scheme is approximately
£700k p.a. This increase would be from 2008-2009 and would last for the 25
year length of the contract and the council would need to commit to a long-term
revenue budget increase for this additional cost.
The increase of £700kp.a. is partly attributable to the costs of renewing the
lighting stock, partly to the additional numbers of columns being installed and
partly the higher energy consumption of modern lighting.
There is currently a provision for street lighting within the capital programme of
£2m p.a. This provision would no longer be required from 2008-2009 when the
the PFI contract starts. Were the Council to undertake this scheme using
Prudential Borrowing instead of PFI, the additional revenue costs would be in
excess of £1.4m p.a. The Council will also benefit from the transfer of risk in the
operation of the contract to the PFI provider.
The results of the EOI will be released in May 2006. If successful, and subject to
Cabinet approval, the next steps would be the preparation and submission of an
Outline Business Case by October 2006 (estimated cost £50k), following which a
contract can be prepared and tenders sought for suitable partners . The
estimated costs of £200-£400k in respect of legal, financial and technical
advisors would need to be contained within the Urban Living revenue budget in
C:\moderngov\data\published\Intranet\IssueDocs\1\7\7\6\I00026771\08705StreetLightingBidforPFIFunding0.doc
2006-2007 and 2007-2008.. It is anticipated the contract will commence spring
2008.
Signature …………………………………
Date ……………………………
Name (print) …………………………………………………………………….
2.5
Legal Implications
There are no legal implications arising from submitting the EOI.
If the EOI is successful and the council proceeds to procure the project
implementation by way of a design, Build, Finance Operate [DBFO] PFI model
of delivery, Legal Services will co-ordinate the procurement of expert external
legal support to ensure that the contractual and associated legal implications
are comprehensively addressed.
The PFI model allows the council to transfer risk elements to the private sector
company, through variable payment arrangements.
Signature …………………………………
Date ……………………………
Name (print) …………………………………………………………………….
2.6
Equalities Impact
Renewal of all Street Lighting stock in the early years of any PFI contract would
reduce the incidence of faults and would increase lighting levels generally,
leading to perceptions of improved security for lone pedestrians, especially
women and elderly persons.
2.7
Section 17 Crime and Disorder Act 1998 Considerations
The majority of offences recorded by Harrow Police are committed during times of
darkness. The MORI public satisfaction survey and open budget process identified
street lighting as a main concern for residents. The crime and disorder implications
are addressed throughout the report as the improvements in lighting stock will,
according to evidence based research, have an impact on crime, disorder and the
fear of crime.
C:\moderngov\data\published\Intranet\IssueDocs\1\7\7\6\I00026771\08705StreetLightingBidforPFIFunding0.doc
Section 3: Supporting Information/ Background Documents
Appendices: None
Supporting Information: None
Background Documents: 1) Letter from DFT inviting EOI’s.
2) Feasibility study by PriceWaterhouse Coopers,
Harrow’s specialist consultant.
List information that is on deposit in Group Offices and can be viewed on the web:
None
List other background papers that are available on request:
None
Signature:
…………………………………………………………………………
Position
Insert Relevant Head of Service
Name (print)
…………………………………………………………………….
Date:
FOR PORTFOLIO HOLDER/LEADER
* I do agree to the decision proposed
* I do not agree to the decision proposed
* Please delete as appropriate
Notification of personal interests (if any):-
(Note: if you have a prejudicial interest you should not take this decision)
Additional comments made by and/or options considered by the Portfolio Holder
C:\moderngov\data\published\Intranet\IssueDocs\1\7\7\6\I00026771\08705StreetLightingBidforPFIFunding0.doc
Signature:
…………………………………………………………………………
Portfolio Holder
Date:
PFI Executive Action/jbm - 150206
C:\moderngov\data\published\Intranet\IssueDocs\1\7\7\6\I00026771\08705StreetLightingBidforPFIFunding0.doc