The new Liberal Democrat leadership of Gloucester City Council has said it needs to strengthen its commercial property portfolio to steer its finances out of the crisis.
The property collection was forecast to generate £3.49 million in 2023/24 but actually only generated £2.35 million.
Council leader Councillor Jeremy Hilton said the £1.14 million difference was “a matter of concern”.
The new Cabinet met for the first time on Wednesday (17 July) to table the Financial Performance Report for the 2023/24 financial year.
It shows that under the previous Conservative government the council's main income account, the general fund, fell by £288,000 compared with a budgeted fall of £104,000.
This means funding has fallen from £849,000 to £561,000 during the last financial year.
Designated reserves also fell by £320,000 from £4.26 million to £3.94 million.
“This is the financial situation when it was handed over to our administration,” Councilman Hilton said.
“We didn't start the year as badly as we initially thought.
“There is one area that remains of concern, and that is commercial real estate.
“One of the areas on the balance sheet that could strengthen the financial health of this council is to generate more commercial income,” he added.
“It's not easy to do that with a municipal tax because you have to make sure that the municipal tax is affordable for the residents of the city and you can't raise it too high without a referendum, which is not allowed.”
“The only way to increase revenue for the authority is to look at commercial revenue.”
The difference in commercial property revenues is due to “adjustments for annual service charges and additional vacant unit fees charged,” according to the report.
Much of its portfolio is retail and, like much of the country, Gloucester is suffering from a “significant downward trend in town centre retail”, it said.
We hope this situation will improve as the redevelopment of Kings Walk Shopping Centre is completed and the Forum and University of Gloucestershire development nears completion in 2024/25.
The capital programme saw an expenditure of £52.9 million against a budget of £62.3 million. Of this, a significant amount of £52 million was earmarked for the Forum, with £41.4 million spent throughout the year.
Officials have praised the new administration for reducing the deficit for 2023/24 to £288,000 from the £1.5 million predicted under the previous Conservative government.
“Our staff has done a really good job getting the budget back on track,” Hilton said.
“It's not as bad as we initially thought it would be, and we're off to a good start this year.”
But deputy leader and cabinet member for resources, Councillor Declan Wilson, told the new cabinet they must not let their guard down.
He described the financial situation as a “mix of good and bad.”
“The good news is that things have improved since last quarter,” he said.
“The third and fourth quarter reports were concerning to say the least, but that was due to major pressures.
“The general fund declines were better than what we had projected in the third quarter and better than what we actually voted for in our five-year funding plan earlier this year.”
“We were expecting it to be £500,000 but it's actually going to be £561,000, so that's a good result.”
“But I have to say we're not out of the woods yet. We'll need to monitor these financial situations closely throughout the year.”
“The main pressures remain.”
they are:
The cost of temporary accommodation for the homeless. The cost of this statutory provision increased significantly throughout the year, leading to an overspend of £500,000 across this service area. The actions taken by staff throughout the year to address the situation, and the receipt of an additional £117,000 rough sleeping grant from the government, resulted in an improvement of £116,000 from the forecasted situation in the third quarter. Rising energy costs and the cost of living crisis made the leisure centre increasingly expensive to run, resulting in an overspend of £640,000 against the budget by the end of the year. With the appointment of an interim operator working from a fixed budget, this is broadly similar to the situation reported in the third quarter. Similarly, rising energy costs affected the performance situation in the council's bereavement services area, leading to a net deficit of £477,000 for the year, due to rising gas costs at the crematorium. This has been addressed in 2024-25 with price increases approved by the Budget Council. Planning income has fallen due to increased development costs and the absence of an increase in smaller planning applications due to working from home during the Covid-19 pandemic. Actual income achieved throughout the year was just 71% of budgeted, causing a budget pressure of £161,000 at the end of the year. Property repair and maintenance work led to the closure of Longsmith Car Park, reducing income in the second half of the year by around £130,000, as well as additional property survey and repair costs of £80,000. Increased interest costs relating to ongoing and future projects have put pressure on the council's budget by £300,000.
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