Agenda item - Waste PFI – Updated Outline Business Case

This report provides updated financial information on the waste PFI project, identifies a revised affordability position for the Council and seeks confirmation that Members are committed to finding the additional resources required to make the project affordable.

RESOLVED: (i) That it be confirmed that the Council is committed to finding the additional resources required to make the project affordable over its life, as set out in paragraphs 14 to 28 of the report, subject to any further obligations and financial parameters that may be directed by DEFRA or any other government department.

REASON: To progress the PFI application for funding to DEFRA.

(ii) That the revised timescales identified in paragraph 10 of the report be noted.

REASON: For information.

(iii) That the substantial savings that have been achieved due to the dramatic increase in recycling rates in the last four years, and the successful waste minimisation campaigns run by City of York Council, be noted, and that the Council’s commitment to reducing the need for residual disposal through the waste hierarchy be re-affirmed.

REASON: To recognise the achievements already made in this area, as well as the need for continued action.

(iv) That the Executive’s support for Mechanical Biological Treatment as the preferred residual waste treatment process for York’s waste be re-affirmed.

REASON: In view of the need to take proactive steps to treat residual waste.

(vi) That the Local Government Association campaign to have Landfill Tax rises returned to local government in full be supported.

REASON: To reduce the burden on local authorities and boost the minimal support grant received for recycling services.

(vii) That the Retail Packaging Bill before Parliament, presented on 6 March 2007, be supported.

REASON: In order to support efforts to address the problem of excess packaging, which cannot easily be re-used or recycled.

Members considered a report which provided updated financial information on the Waste Private Finance Initiative (PFI) project, identified a revised affordability position for the Council and sought confirmation of Members’ commitment to finding the additional resources required to make the project affordable.

On 12 September 2006, the Executive had approved the submission of an Outline Business Case (OBC) to DEFRA for joint procurement of future waste treatment services with North Yorkshire County Council. Since then, the OBC had been updated in accordance with revised DEFRA requirements for PFI projects and both councils’ recent budget setting processes. In addition, DEFRA had requested that Members be made fully aware of the affordability of the project, including appropriate sensitivity analysis.

Estimates of future growth in waste had been revised downwards since submission of the OBC, to reflect more accurately recent experience and trends. This had resulted in reduced operating costs, although prices of the capital infrastructure and associated life cycle costs had increased. The revisions had significantly decreased the ‘affordability gap’ and the latest estimated affordability gap for York over the life of the project was £123,559k. This still represented a significant challenge to the Council, in the context of spending pressures and Council Tax capping. Due to changes to the procurement strategy, key dates within the project had changed. These changes were detailed in paragraph 10 of the report. To test the robustness of the costs, sensitivity analyses had been carried out on a number of assumptions. These had identified that the overall net cost for York could range between £106,952k (best case) and £135,928k (worst case).

Officers reported at the meeting that, due to the £8 per tonne increase in Landfill Tax reported in the recent Budget (compared to the expected £3), projected landfill costs for the Council would increase by £375k in 2008/09, thus strengthening the case for the PFI project.