Forecasting Infrastructure Funding24 October 2013

AgendaAgenda • Forecasting Infrastructure Funding, 24 October

2013

8.00 Arrivals and refreshments8.30 Chair’s welcome: Lisa Taylor

8.40 Infrastructure planning and demand management: Pat Hayes8.55 Tax Increment Financing and enterprise zones: Tom Burton-Page9.10 Community Infrastructure Levy – what we’ve learnt so far: Judith Damerell9.25 Q&A and discussion

10.00 Coffee and networking

10.30 Close

Lisa TaylorInterim Director, Future of London

Forecasting Infrastructure FundingWelcome

Pat HayesExecutive Director of Regeneration and Housing, London Borough of Ealing

Forecasting Infrastructure FundingInfrastructure planning & demand management

Tom Burton-PagePrincipal, Commercial Finance, Transport for London

Forecasting Infrastructure FundingFunding investment in London’s transport

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24 October 2013Tom Burton-Page

Principal, Commercial Finance

Funding investment in London’s transport

Funding vs Financing

who ultimately pays for new infrastructure?– The first problem to solve– Controversial if people are asked to pay more!

raising debt to pay for construction, in expectation of capturing future funding streams to service that debt over time.

– A ‘secondary problem’ to funding – but key issues around risk allocation

– TfL increasingly moving away from private finance, which can increase the funding challenge

Funding:

Financing:

Context

Population forecast to rise to over 10m• Where will they (a) live? (b) work?• What are the transport implications?

Government grant likely to focus on updating existing infrastructure. New infrastructure requires bespoke “packages”

London Finance Commission makes the case for greater devolution of tax revenues

What funding sources are open to TfL / the Mayor?

Users:• Fares• Tolls

Taxpayers:• Business Rate Supplement• TIF / Enterprise Zone• Other

Development levies• Mayoral CIL• Borough CIL / s106• Direct partnerships with developers

Commercial exploitation of land / assets

Overview of NLE funding structure

(PWLB)

Contractors(civils, systems, rolling stock etc)

1. Developer contributions2. Enterprise Zone income

Borrows up to £1bn…

UK Guarantee

…pass through to TfL

Developers

Battersea Enterprise Zone

• Mayor lobbied government for a business rates TIF to close the NLE gap. Two key arguments:

- BPS development requires NLE (Grampian condition)

- BPS investment was additional (not displaced)

• In Autumn Statement 2011, Chancellor offered an Enterprise Zone (EZ):

- Incremental business rates retained for 25 years (businesses pay no more)

- Tax, planning and infrastructure (eg broadband) benefits to occupants in other EZs do not apply

Map of Enterprise Zone (provisional)

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NLE - reflections

VNEB is unique- Ex industrial site with iconic building at its heart,

1 mile from Westminster- high land values enable developer contributions

to make a significant contribution- HMT support critical for EZ- One key developer - provides an opportunity for

a commercial deal.

But many of the issues are common- who bears risk- complex stakeholder environment

Judith DamerellPartner and Head of Planning, Lewis Silkin

Forecasting Infrastructure FundingCommunity Infrastructure Levy

Forecasting Infrastructure FundingFuture of London

The Community Infrastructure Levy

Judith Damerell

24 October 2013

Overview

Community Infrastructure Levy

• Basics

• Its role as a funding stream for infrastructure

CIL – political & intended purpose

• The purpose of the Community Infrastructure Levy (“CIL”) is to support infrastructure delivery

• It is intended that the CIL will establish “a better way to increase investment in vital infrastructure”

Previous and (in places) ongoing mechanism – S106 Town and Country Planning Act 1990 Agreements

Latest of many attempts to deal with the difficulties the development industry encounters (seemingly) with the negotiation by and approach of local planning authorities (LPAs) to planning agreements

Baroness Andrews stated during the Planning Bill’s passage through the Lords that “the CIL is a generalised charge ... Unlike planning obligations under Section 106, CIL loosens the relationship between an individual development and the size of its contribution to fund infrastructure, because it is an averaged cost distributed evenly across a number of developments. The amount of CIL to be paid in a specific case would not be calculated on the basis of the specific need for infrastructure.

CIL - The basics

• The Planning Act 2008 (ss 205–225) introduced CIL

• The CIL Regulations 2010 (2010/948) took effect in April 2010

• Subsequent CIL (Amendment) Regulations in 2011 (2011/987), 2012 (2012/2975) and 2013 (2013/982)

• CIL Reforms Consultation April 2013 – outcome awaited

• The Mayor of London’s CIL applies to developments granted planning permission from April 2012.

CIL – the basics (continued)

• Every charging authority (in essence, the LPA) must prepare a charging schedule. CIL is only payable if planning permission for a scheme is given after the relevant LPA has implemented the CIL regime by adopting its charging schedule. If the planning permission is not implemented, no CIL will be payable. Redbridge Council’s estimation is that one fifth of the permissions it gives are not implemented.

CIL - the basics (continued)• Liability arises on construction of new building or extension

of an existing one. Is a “tax” on net increase in floor space of new developments – but floor space in existing buildings may be caught if they have not been used for some time

• Imposition of CIL is not limited to circumstances where a S106 obligation would otherwise be required

• Non – negotiable

• If an outline permission permits development to be implemented in phases, every phase will be treated as a separate chargeable development

Charging Schedules

• Jury is out on benefits, in terms of the regime being fairer, clearer and more predictable

• Many authorities have adopted charging schedules, but a wide variety of approaches is emerging – flat rates versus a range, for example. Some authorities have different rates depending on the use (e.g. residential or commercial) whereas others have a fixed rate.

Charging schedules and the “appropriate balance”• CIL allows development gain to be captured and applied

locally

• However, the appropriate balance creates a difficulty – CIL set too high may create viability and/or landbanking issues. A CIL set too low will not assist in bringing schemes forward as they will be constrained by the lack of funding for essential local infrastructure

Flexibility of CIL operation for infrastructure funding• raised within one area but paid to bodies outside of it

• restrictions on projects identified in charging schedules?

• pooled contributions

• administratively self-financing

CIL - Areas of concern

• Overlap with S106 Agreements – legal issues re Regulation 122 and the Town and Country Planning Act 1990 section 70

• Interested parties – eg: Arts Council April 2012 - The Community Infrastructure Levy: advice note for culture, arts and planning professionals

“This note explains how the needs for cultural and arts infrastructure in association with new development can be established and fed into the Community Infrastructure Levy process.”

CIL - Areas of concern (cont.)

• Describing infrastructure as direct site infrastructure to enhance development scheme – promote it through S106 Agreement to avoid Regulation 122 difficulties – potential to cause delay?

CIL - Mayor of London

• Mayor of London CIL in effect for London planning permissions issued on or after 1 April 2012

• It is intended to raise £300 million towards the delivery of Crossrail

• Charges are based on the size and type of the new development and individual London Councils fall within particular charging zone bands

• Viability – Inspector concluded that marginal schemes may be at risk but London’s CIL only a “very small part” of overall cost of development

Thank you

Breakfast BitesForecasting Infrastructure Funding24th October 2013