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South West Regional Assembly

Infrastructure Planning Advice Note

August 2008


South West Regional Assembly SWRA Regional Infrastructure Infrastructure Planning Advice Note Black


South West Regional Assembly SWRA Regional Infrastructure Infrastructure Planning Advice Note

August 2008

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South West Regional Assembly SWRA Regional InfrastructureInfrastructure Planning Advice Note



Contents

Page

Executive Summary 1

1 Introduction 9

1.1 Purpose of the advice note 9

1.2 The relationship between the spatial and infrastructure planning processes 10

1.3 Use of case studies 13

1.4 Regional Infrastructure Coordination Database 13

1.5 Structure of this report 15

2 Establishing a Framework for Infrastructure Planning 17

2.1 The Role of the Local Planning Authority 17

2.2 Determining the status and scope of the infrastructure delivery plan 19

2.3 Adopting a partnership approach 23

2.4 Defining a sub-regional geography for infrastructure planning 25

3 Identifying Infrastructure Need & Service Options 27

3.1 Steps for defining infrastructure need 27

3.2 Relating infrastructure need to the vision for an area 28

3.3 Contingency planning 31

3.4 Define infrastructure planning growth test scenarios 31

3.5 Option generation to test infrastructure solutions 33

3.6 Working with utility providers on evidence base development 36

3.7 Formalising the vision –structures and plans 41

4 Undertaking Infrastructure Costings 45

4.1 Costing methodologies 46

4.2 Sensitivity testing and cost review 54

4.3 Whole Life Costing 54

4.4 Future proofing the cost of infrastructure 55

4.5 Alignment with the Development Plan 56

5 Prioritisation & Monitoring of Infrastructure Needs 57

5.1 Development of criteria for infrastructure delivery plan prioritisation 58

5.2 Monitoring the delivery plan and risk management 60

6 Financing of Infrastructure 61

6.1 Background to the financing problem 61

6.2 Matching finance with type of infrastructure need 62

6.3 Developing a framework for considering funding options 63

7 Understanding the Scope for Developer Contributions Towards Infrastructure Funding 65

7.1 Residual Values and the funding of infrastructure 65




7.2 Utilising Residual Appraisals 66

7.3 Residual appraisal scenarios 69

7.4 Scenario residual appraisal results 74

7.5 Conclusions from the residual appraisal scenarios 82

8 Capturing Development Value: Developing Planning Obligations Policy & Emergent

Approaches to establishing a Community Infrastructure Levy 84

8.1 Current use of Planning Obligations 84

8.2 Case studies – Planning Obligation policy development 85

8.3 Emerging approaches to the Community Infrastructure Levy 87

9 Alternative Finance Options 92

9.1 Deficiencies in local financial mechanisms to fund infrastructure 93

9.2 Creating local financial freedoms 94

9.3 Securing greater financial freedoms over the longer term 99

9.4 Forward funding - the South West Regional Infrastructure Fund 100

9.5 Global investment funds 102

10 Capacity Development for Local Authorities 103

10.1 Major Development Peer Review Events 104

10.2 Resourcing skills needs 104

10.3 Dedicated Delivery Vehicles 106

11 Conclusions: The Infrastructure Challenge & Key Principles for an Integrated Planning

Approach 109

11.1 Sharing of experience across the region and areas for further research 110

Appendices

Appendix A

Key Themes & Trends in Infrastructure Provision

A1 Public Capital Expenditure in the South West – A Baseline

A2 Government Proposals for Integrated Regional Strategies

A2.1 Supporting economic development

A2.2 The Planning White Paper – Nationally Significant Infrastructure Projects

Appendix B

Sources of Information on Infrastructure Performance Requirements

Appendix C

Whole Life Costing & Exploring Infrastructure Service Models

C1 Whole Life Costing

C2 Exploring Service Model Assumptions & Options

Appendix D

Infrastructure Standards




Appendix E

Sources of Finance That Will Require Primary Legislation

Appendix F

Dedicated Delivery Vehicles: Summary Table

Appendix G

Definitions of Strategic Infrastructure

G1 South East RSS Implementation Plan & Milton Keynes Business Plan.




Page 1 Ove Arup & Partners LtdIssue 1 August 2008

Executive Summary

The advice note is directed towards helping Local Planning Authorities (LPAs) in the South West to

prepare Infrastructure Delivery Plans. It presents an outline process that can be followed, while

acknowledging that different councils and partner organisations will not be starting afresh. The

advice note has been prepared mindful of a range of existing and emerging requirements upon

LPAs:

• Revisions to Planning Policy Statement 12 that promote the integration of development

planning and infrastructure planning.

• Requirements for robust business cases to unlock sources of funding for infrastructure.

• A need to consider the sustainability of infrastructure options and service models.

• Proposals that a partnership approach to infrastructure planning is adopted to enable

cross-boundary and cross-sectoral working.

In order to fulfil requirements under PPS12, it is suggested that the evidence base for infrastructure

delivery plans should be recorded in ‘live’ databases and the information visualised through the links

to Geographical Information Systems (GIS) to enable improved analysis of information and frequent

review. At the time of this note’s publication, the Regional Planning Body (RPB) is in the process of

establishing a Regional Infrastructure Coordination Database, which provides an example of and

template for such an approach.

The sequencing of the stages in infrastructure delivery plan preparation,and the integration with the

local development framework (LDF) process, is illustrated in the diagram below:




The structure of the advice note broadly relates to the infrastructure planning stages shown in the

diagram. Key observations relating to each of these stages are outlined below.

Establishing a framework for infrastructure planning

Prior to embarking on a detailed infrastructure planning process, it is recommended that the LPA

takes a step back to establish an appropriate framework for the task. Key points are:

• The requirements of PPS12 and the ability to collect developer contributions mean that

the LPA will have a central role in the process. However the promotion of the task at

the corporate level of the council is appropriate taking account of the multiple service

delivery functions of the wider LA and its role as ‘community leader’.

• Infrastructure Delivery Plans are required as evidence base to support the core strategy

and planning obligations Supplementary Planning Documents. A robust evidence base

will depend on the periodic updating of costs and reappraisal of financing options as

infrastructure programmes and individual projects progress. A flexible, readily updated

form of document may therefore be considered the most appropriate solution.

• A partnership approach to infrastructure planning led at the corporate level is advocated

to ensure that planning is undertaken at the appropriate functional and geographic scale

and so that potential interlinkages between infrastructure sectors can be explored by

delivery agencies. Local authorities should explore opportunities the benefits of a

common approach to infrastructure planning with neighbouring councils. The process

should be led corporately. Collaboration between sub-regional partnerships will also be

required to ensure that matters relating to regionally significant infrastructure networks

are addressed.

• PPS12 requires that the infrastructure planning process should identify, as far as

possible, responsibilities for the delivery of infrastructure programmes and individual

projects. In response to this, the RPB will explore with LPA’s where they can assist by

working with the relevant regional delivery agencies and service providers to outline the

benefits of a collaborative business planning approach and draw up 'statements of

commitment' or formal agreements with infrastructure providers and agencies to enable

them to provide evidence to support the RSS and Core Strategy preparation.

Identifying infrastructure need and service options

Infrastructure Delivery Plans must be integrated with the overall vision for an area as expressed in

its Sustainable Community Strategy and Core Strategy. This vision will need to be unpicked to

identify the critical and placemaking infrastructure requirements required to achieve the vision over

the term of the plan. Key performance indicators for infrastructure can be determined by

undertaking a review of existing plans and strategies and through consideration of the needs and

aspirations of a community.

As part of the infrastructure planning process, it is recommended that alternative scenarios which

reflect the overall vision are used to determine critical thresholds for infrastructure delivery. The

scenarios should test alternative rates of household and job growth as well as variances in

demographic profile to analyse the effects on the timing of infrastructure provision and service

demand.

The scale and nature of the infrastructure solutions required will depend on the location of major

development within a local authority area, the assumed service model and the decision as to

whether conventional or low carbon solutions are adopted. The infrastructure planning process

therefore provides an appropriate forum for integrated decision making around the application of

climate change mitigation measures to land use planning, the testing of new infrastructure delivery

models and funding mechanisms, and the exploration of linkages and feedback loops between

infrastructure sectors.




Comprehensive and integrated infrastructure planning cannot be undertaken without knowledge of

water, wastewater, and energy requirements. Understanding the structure of the utility industries,

the nature of the forecasting activities of these companies and the information they prepare as a

matter of course provides a good basis for further engagement. The challenges set by the Code for

Sustainable Homes, as well as other strengthened environmental standards, will impact upon the

decisions and operations of LPAs and utility providers alike providing the motivation for more

collaborative approach to forward planning than has taken place in the past.

Undertaking infrastructure costings

A pragmatic approach will be needed to produce costings of infrastructure which uses benchmarking

information, until such time as feasibility funding can be secured to undertake design work. This

reinforces the need to treat the Infrastructure Delivery Plan as a “living document” that can be

updated readily as more detailed data becomes available without prejudicing the formalised plan

making process. At each stage of the development plan, confidence levels are likely to increase

making it possible to move from the use of aggregate expenditure data to costs based on outline

designs.

For each type of infrastructure, an assessment will need to be made as to which costing

methodology is most appropriate out of the following:

• Expenditure approach.

• Reference case approach.

• Standards based ‘top down’ approach.

• Baseline capacity assessment ‘bottom up’ approach.

• Modelling / design approach.

These approaches can be supplemented with sensitivity testing to investigate the affects of costing

parameters, including inflation and “optimism bias”. An unviable unit cost should trigger a review of

the process used to derive the initial costs including, if necessary, the exploration of alternative ways

or contingency plans for delivering the same infrastructure outcomes.

The Treasury promotes the use of the whole life costing approach, a technique that shows the flow

of costs associated with a particular type of infrastructure over its economic life span. Accounting

for ease of maintenance, the need for an upgrade in performance and decommissioning are material

considerations to the cost of an investment and can change the ultimate investment decision. For

example, a lot of sustainable construction design can involve a higher capital outlay at the start of a

project’s life, but potentially reduced expense in on going operation and maintenance.

Prioritisation and monitoring of infrastructure needs

The ability to raise planning obligations provides LPAs with an important, discretionary tool for

raising finance towards infrastructure provision across a range of sectors. The inherent flexibility of

developer contributions are likely to place LPAs in the position of having to promote a prioritisation

process as the scope of demands on planning obligations increases. Financial resources will rarely

meet all the identified needs for infrastructure and there will inevitably be a requirement to phase

and prioritise projects across an area. As a result, a qualitative framework and a decision-making

body will need to be defined to prioritise between geographical areas, categories of infrastructure

and individual projects.

Considerations that could form the basis for prioritisation criteria include:

• Strategic fit with regional, sub regional and local strategies;

• Significance to the realisation of a wider vision;

• Deliverability/ robustness;

• Value for money; and




• Contribution to critical interdependencies & sequencing of development activity

At this stage in the process projects are being prioritised within the Infrastructure Delivery Plan

rather than being formally appraised for funding approval so judgements may be subject to change

when more detail becomes available. The Infrastructure Delivery Plan will need to be managed and

monitored carefully on a regular basis to ensure that the plan is up to date, critical milestones are

reached and key infrastructure is in place at the appropriate time to enable sustainable

development. A monitoring programme could usefully incorporate a risk register, which can be used

to highlight those ‘critical’ infrastructure items that are key to the phasing and delivery of strategic

sites, but where consenting, programme, finance and construction risks have been identified.

Financing of infrastructure

As the definition of infrastructure needed to support new development has expanded beyond the

basics of transport, water, sanitation and energy into social and community facilities and green

infrastructure, so has the range of funding options with which it is beneficial for LPAs to be

conversant. Within this advice note, funding derived from developer contributions and alternative

sources are presented separately (Chapters 7 and 8 respectively), however it is important that they

are viewed as part of an integrated process of exploring funding options. The types of funding

streams that are available and the responsibility for LAs to secure finance will vary between different

infrastructure sectors. Nevertheless, the exploration of linkages between sectors and infrastructure

delivery options may reveal opportunities to pool resources and achieve investment efficiencies.

There are two options that can provide a starting point for considering funding strategies for an

infrastructure item. The first shows infrastructure need aligned with funding, ranging from cases

where need is met through more efficient on-site asset management through to larger scale asset

investment. The second demonstrates that it is necessary to consider both the need for up front

“delivery finance” and “repayment finance”, potentially against a backdrop of assessing the risk

associated with securing each type of finance.

Understanding the scope for developer contributions towards infrastructure funding

Optimising developer contributions is a crucial aspect of developing an infrastructure funding

strategy. The scope for securing planning obligations from development to fund infrastructure is

determined by the “residual value” left in a development after deducting costs from the gross value

of a completed development. There are a number of development appraisals and residual valuation

models in the market, which can be used to estimate what would constitute a viable developer

contribution towards strategic infrastructure. Key points to make with respect to residual valuations

are:

The strength of a residual valuation can only be as good as the inputs and assumptions used to

derive the figure. Due to the level of variable input assumptions, small changes in estimates can

affect the residual value. Seeking up to date professional advice at appropriate times is essential to

maximise contributions and to mitigate the effects upon the viability of schemes so that development

will be brought forward.

Gross Residual Land Values that result from planning permission being granted can vary

substantially between cities and towns, when compared to the relatively small variations in the

existing use value of greenfield land (i.e. agricultural land). Generally speaking, developments in

high value, high demand areas can sustain higher levels of contribution. Peripheral areas often

contain less attractive development opportunities which derive less value. This factor must be taken

account of during the design of a planning obligation policy, tariff or Community Infrastruture Levy

(CIL).

A developer is rarely able to control the overall costs of development and, as such, will have limited

ability to extract more value to pay for increased contributions to strategic infrastructure, particularly

during later stages of the process. Ultimately, therefore, land value will provide the main element for

negotiation and the land owner may be passed the majority of affects for strategic infrastructure

contributions via a lower land price.




Benchmarks for what constitutes an acceptable ‘receipt’ for the landowner will naturally vary from

place to place. The current move towards the establishment of local tariff/CIL approaches requires

new benchmarks of acceptable uplift in land value to be set, however these value levels are not yet

understood and will only materialise in the fullness of time. Infrastructure contributions should be a

known quantity so that developers may include these within appraisals to form the basis for

negotiations with landowners.

There is an onus upon LPAs to establish robust, costed lists of infrastructure and associated

planning obligations policy, in order that the costs of strategic infrastructure items are accounted for

in land markets.

Developing Planning Obligations policy and emergent approaches to establishing a

Community Infrastructure Levy

Proposals for the establishment of CIL aim to reduce the costs and increase certainty in the

negotiation of planning obligations. CIL will also allow for more equitable application of infrastructure

costs across small and large developments. By providing for the pooling of funds, the levy will also

assist by breaking the current planning obligation regime’s requirement for a direct link between a

contribution and a particular development; although it will need to be underpinned by a robust,

costed list of strategic infrastructure projects that are needed to support development. A key benefit

of CIL, therefore, is that it can more easily fund sub-regional or cross boundary infrastructure. Case

studies from within the South West reveal that some Local Authorities are already gearing up to

take advantage of the benefits associated with a tariff/CIL approach to securing developer

contributions.

Alternative finance options

The need for alternative and innovative finance strategies is primarily driven by the limitations of

funding infrastructure through central government funding and developer contributions alone. This

has led to a consideration of how other funding streams with some level of local discretion might be

used to address shortfalls and cashflow problems. Some measure of local discretion can be

exercised over the following sources of finance:

• Loans;

• Capital receipts;

• Grants;

• Equity; and

• User Charges

Further options that can be considered as part of an overall funding strategy include:

• Asset Backed Vehicles, such as the Local Infrastructure Finance Trusts (LIFT)

established for community health programmes and Local Education Partnerships

(LEPs); and

• Revenue based approaches, e.g. Southampton’s District Heating Network.

These two mechanisms can be used to secure private sector investment and are not mutually

exclusive. An asset backed vehicle can draw upon a guaranteed revenue stream, which can help to

further enhance confidence for the private sector to make an investment.

In addition to exploring whether the asset backed vehicles and revenue based models are

appropriate in a particular area, a long term route to reinvigorating infrastructure investment at the

local level will involve optimising the use of under utilised powers available in existing legislation.

These include:

• Up Scaled Local Area Agreements

• Road Pricing / Workplaces Car Parking Levy




• Relaxed Prudential Borrowing Rules

• Business Improvement Districts (BIDS)

• Local Area Business Growth Incentive (LABGI)

• Land Pooling

One of the biggest problems faced when a business plan for a major infrastructure item is being

prepared is that important elements of finance, such as financial contributions from developers, may

only become available after the initial need for infrastructure arises. It is in situations such as these

that the South West Regional Infrastructure Fund (RIF) will be invaluable. The South West RIF,

launched in March 2008, has an initial investment fund of £80 million. Achieving a return of 100% of

invested funds is the ultimate aim, with the fund growing further through the capturing (“topslicing”)

of development value uplift and additional contributions captured through pooling arrangements. It

is accepted that risk in some investments won’t be returned in full; therefore an 80% target has been

set as the minimum across the portfolio, with riskier investments being balanced against those

where 100% returns are certain.

Opportunities to establish smaller scale local or sub regional rolling funds may be an avenue worth

exploring in the future. The identification of an appropriate body to act as banker and the source of

start up finance will of course be key questions from the outset.

Capacity development for Local Authorities

Infrastructure planning is undoubtedly a crucial component of a successful and robust approach to

spatial planning, hence the increasing emphasis on this agenda within PPS12. As the role of

planning is redefined in order to ensure the delivery of major development, it is increasingly

recognised that local authority staff are required to adopt a new approach to planning that

encompasses a stronger element of project management. In terms of the opportunities available to

develop appropriate skill sets and bolster organisational capacity, options available to LAs include:

internal reorganisation and the creation of new posts to manage the infrastructure planning process;

and partnering arrangements with external partners, including the private sector, allowing for the

sharing of skills to meet common objectives.

With respect to support available for the development of internal organisational capacity, two key

initiatives at the regional level are the SW RIEP (Regional Improvement and Efficiency Partnership)

and the Major Development Peer Review Events. The SW RIEP has brought together the efficiency

work of the Regional Centre of Excellence with the Regional Improvement Partnership and will focus

on four interrelated strands of activity:

• Supporting excellent outcomes from LAAs;

• Building capacity for overall improvement in authorities;

• Building capacity for business transformation and driving value for money; and

• Building capacity in key thematic areas.

The Major Development Peer Review Events provide a forum whereby local authority staff from

across the region can meet to share experience, both best practice and lessons learnt.

Outsourcing and the sharing of skills between organisations presents a second set of opportunities

for local authorities. For instance, public-private partnerships for a specific project provides a

mechanism for gaining access to both finance and skilled staff. This report recommends that an

Infrastructure Planning Group (IPG) or partnership comprised of a range of organisations is

established to coordinate and progress the infrastructure planning process. The formation of a

partnership of this type will provide a forum for the integrated planning of infrastructure and will also

assist in sharing the resource load of undertaking the task. One of the main agenda items that the

IPG will need to consider during the preparation of an infrastructure plan is its own ongoing role as

the emphasis shifts from information gathering and planning towards implementation and delivery.




In effect, should the IPG partnership be further developed to form a Dedicated Delivery Vehicle

(DDV)? Important questions that partner organisations would need to consider are:

• Is a DDV required to coordinate the finance and delivery of infrastructure, or does

another single organisation or group of organisations have the competencies to

undertake this role?

• What powers would a DDV require to undertake its role most effectively?

• Where should the administrative boundary of the DDV be drawn?

• How would relationships between the DDV and existing and emerging LSPs, LABVs,

URCs, MAAs and LAs etc. be managed in terms of finance and accountability.

Conclusions: the infrastructure challenge and key principles for an integrated planning

approach

Providing for the levels of growth set out in the Regional Spatial Strategy presents a major challenge

to Local Authorities and the wide range of organisations responsible for infrastructure and service

provision across the South West. The preparation of an infrastructure planning evidence base to

support Core Strategies as required by PPS12 will undoubtedly have resource implications for all

organisations involved, however it is important that this agenda is not seen as a burden.

Infrastructure planning is a vital component of a comprehensive approach to spatial planning and it

is proposed that the establishment of appropriate working arrangements and processes will reduce

the time required to undertake the task while improving the outcomes and deliverability of

development plans. This advice note presents an outline approach to infrastructure planning that

must be adapted to the organisational circumstances in a locality. Key principles are as follows:

• Adopt a collaborative approach – the preparation of a robust infrastructure delivery

plan will depend on working across infrastructure sectors and administrative boundaries.

Many organisations will benefit from an integrated approach to infrastructure planning

and the resourcing of the task should be shared accordingly. Local authorities should

be prepared to lead this process at the corporate level.

• The Infrastructure Delivery Plan should be a ‘live’ document – the strategies and

plans of infrastructure and service providers will not always be neatly aligned in terms of

plan period or projected growth. It is therefore suggested that a database/GIS is

established that allows for information held to be readily updated and analysed to inform

the preparation of the Core Strategy and revisions to a Planning Obligations SPD. This

evidence base will also play a crucial role in informing the RSS Implementation Plan

and prioritisation of strategic infrastructure items at the regional level.

• Contingency Planning should be undertaken – as part of the infrastructure planning

process, local authorities and their partners should undertake contingency planning

based on: alternative growth projections; consideration of alternative models of service

provision; and alternative locations of growth. It is imperative that the sustainability of

alternative infrastructure solutions are explored given the huge influence of such

projects on the future demand and means of supply of energy and water etc. This

process can then feed into the Sustainability Appraisal of the Core Strategy.

In addition to meeting the requirements of PPS12 and improving the robustness of spatial planning

processes, a business planning approach to infrastructure will improve access to funding from both

the public and private sectors. This will help to address historic shortfalls in capital expenditure in

the South West when compared to that in many of the English regions.

Analysis of PESA (Public Expenditure Statistical Analysis) data shows that, in the past, the South

West has occupied 7th position out of all the English regions (9 regions) including London in terms of

per capital expenditure (refer to Appendix A1 for details). A key issue for the South West will

therefore become one of substantively raising the per annum rate of investment in infrastructure




through a process of identifying need, raising new forms of finance and ensuring the timely delivery

of projects. Innovations such as the South West Regional Infrastructure Fund (RIF) present the

region with an opportunity to move forward positively. The establishment of efficient, integrated and

robust infrastructure planning processes at the local/sub-regional levels will enable mechanisms

such as the RIF to be utilised to their full potential.

The Regional Planning Body are interested to explore with Local Authorities how they can best

assist with the establishment and resourcing of infrastructure planning and reporting processes.




1 Introduction

Summary

The advice note is directed towards helping Local Planning Authorities (LPAs) in the South

West to prepare Infrastructure Delivery Plans. It presents an outline process that can be

followed, while acknowledging that different councils and partner organisations will not be

starting afresh. The advice note has been prepared mindful of a range of existing and

emerging requirements upon LPAs:

• Revisions to Planning Policy Statement 12 that promote the integration of development

planning and infrastructure planning.

• Requirements for robust business cases to unlock sources of funding for infrastructure.

• A need to consider the sustainability of infrastructure options and service models.

• Proposals that a partnership approach to infrastructure planning is adopted to enable

cross-boundary and cross-sectoral working.

In order to fulfil requirements under PPS12, it is suggested that the evidence base for

infrastructure delivery plans should be recorded in ‘live’ databases and the information

visualised through the links to Geographical Information Systems (GIS) to enable improved

analysis of information and frequent review. At the time of this note’s publication, the

Regional Planning Body (RPB) is in the process of establishing a Regional Infrastructure

Coordination Database, which provides an example of and template for such an approach.

1.1 Purpose of the advice note

Delivering the sustainable communities envisaged by the Regional Spatial Strategy (RSS)

will rely upon sound infrastructure planning processes at the sub-regional and local level.

This advice note is, therefore, directed towards helping Local Planning Authorities (LPAs) in

the South West to prepare infrastructure delivery plans, which will in turn assist in delivering

the RSS and taking forward the RSS Implementation Plan. It is, however, important to

recognise a wider corporate dimension to the issue of infrastructure planning which involves

finance, legal, technical/ engineering and partnership development considerations. This

advice note presents an outline process that can be followed, while acknowledging that

different councils and partner organisations will not be starting afresh.

The advice note has been prepared mindful of a range of existing and emerging

requirements upon Local Planning Authorities in relation to infrastructure planning, as

summarised here:

• National Planning Policy to further integrate development and infrastructure

planning. Following the Kate Barker Review of Housing and the Comprehensive

Spending Review, the government has revised Planning Policy Statement 12 to

emphasise the importance of integrating the timely delivery of infrastructure into the

development plan process. PPS12 states that ‘the core strategy should be supported

by evidence of what physical, social and green infrastructure is needed to enable the

amount of development proposed for the area, taking account of its type and

distribution… The core strategy should draw on and in parallel influence any strategies

and investment plans of the local authority and other organisations’ (paragraph 4.8).

The recent paper on the Community Infrastructure Levy (CIL)(August 2008) advises that

the infrastructure planning underpinning the CIL needs to be embedded in the

development plan system.

• Unlocking funding sources. Access to funding sources such as the South West

Regional Infrastructure Fund (RIF)(see section 8.3) and CIL will depend on robust




business planning approaches to setting out the need for and cost of infrastructure. In

the case of the RIF, it will be necessary to demonstrate how the up front funding will be

recouped.

• Sustainability appraisal. PPS1 “Delivering Sustainable Development” places a duty

on LPAs to ensure that development plans pursue sustainable development in an

integrated manner. They are urged to bring forward sufficient development land taking

into account issues such as accessibility and sustainable transport needs, the provision

of essential infrastructure, including for sustainable waste management, and the need to

avoid flood risk and other natural hazards (paragraphs 13 & 27). As infrastructure

planning becomes more closely integrated with development planning, it will become

necessary for LPAs and their partners to develop methodologies to assess the

sustainability of different infrastructure options and service models.

• Governance approach to infrastructure delivery. Responsibility for infrastructure is

fragmented across a wide range of public agencies, private sector bodies and tiers of

government who perform regulatory as well as delivery responsibilities. Local Planning

Authorities are, therefore, one of many stakeholders in the process. Nevertheless, the

general “Well Being Power” introduced by the Local Government Act 2000 does give

credibility to LPA’s acting as a ring master to co-ordinate the actions of others. The

functional geographies of infrastructure such as transport will also necessitate working

across administrative boundaries with neighbouring authorities if they are to be

coordinated adequately. The functional geography of infrastructure will be informed by a

rigorous evidence base. The importance of engaging in partnership working is

emphasised by the RSS, while the piloting of Multi Area Agreements demonstrates the

Government’s commitment to facilitating joint working approaches.

Further context on current infrastructure spending in the South West region, on the

implications of planning reforms and the sub-national review is given in Chapter 11 and

Appendix A.

Local Planning Authorities (LPAs) in the South West already make extensive use of

planning obligations to fund the infrastructure demands arising from major development.

Progress has also been made in the development of Supplementary Planning Documents

that take forward the requirements of Circular 05/2005 to set out formulas and standards for

the calculation of contributions to infrastructure. It is intended that this advice note will

assist local planning authorities in further developing their approaches to infrastructure

planning and delivery.

1.2 The relationship between the spatial and infrastructure planning

processes

An integrated approach that seeks to align the main stages of the spatial and infrastructure

planning processes is illustrated in Figure 1 below. Infrastructure delivery planning has a

number of stages represented in the segments contained in the inner circle of the diagram.

The infrastructure delivery planning process moves from the identification of infrastructure

requirements; through undertaking costings and the consideration of funding routes; to

prioritisation; adoption; and monitoring/ review. The infrastructure delivery planning process

sits within the wider development planning cycle comprising of the issues and options;

submission; adoption and review stages. The two processes are shown to be linked by a

common vision for the area being focused upon.

In reality, the two sets of plan making processes can not be expected to neatly align with

one another, not least for the fact that key providers of infrastructure both inside and outside

the Council will have their own investment planning processes (e.g. water; flood prevention,

etc) that will be out of synchronisation with the plan development process outlined in the

Local Development Scheme (LDS). The infrastructure delivery planning process is,




therefore, likely to complete several review cycles within the time taken to adopt a local

development document reflecting a “catch up” process with third party providers. Whilst both

processes are shown separately in Figure 1, a continual exchange of information is needed

between both sets of processes to create the best opportunities for alignment at crucial

stages, such as the examination of a core strategy.

Figure 1 - Spatial and infrastructure planning cycle

As infrastructure planning is inherently a cross border activity, a further co-ordination

problem also applies in managing multiple development planning processes around a

shared vision. In some places this is at least partly overcome through the preparation of

joint Core Strategies.

Estimating CIL

One aim of this Advice Note is to assist Local Authorities to define the work that will be

necessary in setting a CIL levy if they chose to use this system once introduced through the

Planning Reform Bill and any secondary legislation. Figure 2 below illustrates the stages

that would be necessary.




Figure 2 - CIL flow chart

Key considerations in working through this flow chart are summarised below in Table 1 and

discussed more fully in later chapters.




Table 1- Key considerations in working through CIL flow chart

1.3 Use of case studies

Throughout this guidance note we have used examples drawn from four case study areas

within the South West who have agreed to share current practice on the planning of

infrastructure. The four case study areas have been selected to demonstrate a variety of

circumstances with the region:

• West of England – Encompassing three Strategically Significant Cities and Towns

(Bristol, Bath and Weston-super-Mare) and comprising of four local authorities, the sub-

region presents a particularly complex case in terms of the coordination of infrastructure

planning and delivery.

• Swindon – Situated in the east of the region on the M4 growth corridor, Swindon

Borough Council (SBC) is planning for the establishment of the single largest urban

extension in the region, of 12,000 dwellings in the Eastern Development Area.

• Taunton – A market town with an ambitious growth agenda including major brownfield

regeneration within the town centre and the delivery of two urban extensions.

• Plymouth – Located to the west of the region, the City Council is taking forward

redevelopment proposals set out in nine Area Action Plans, together with the planning

of Sherford New Community in partnership with South Hams District Council.

The case study areas are drawn upon to illustrate experience of the infrastructure planning

stages, focussing where relevant on different infrastructure sectors for each of the case

study areas. A commentary on the directions that each of the case study areas are or may

take with respect to the development of policy on planning obligations and tariffs is also

provided in Chapter 7.

Case studies from outside of the South West region are also included throughout the report

where they are thought to demonstrate valuable experience.

1.4 Regional Infrastructure Coordination Database

To support the Regional Planning Body (RPB) in fulfilling its requirements under PPS11, a

database has been created to record regionally significant strategic projects. This will

provide a platform for the RPB to:




• bring together data from a number of sources (e.g. Local Authority Infrastructure

Delivery Plans, Department for Transport (DfT) major scheme monitoring, Communities

(CLG) New Growth Point monitoring, Annual Monitoring Report data, Regional Funding

Allocation process etc.) to assist with funding applications and the monitoring of

progress of delivery at the SSCTs;

• store data on the strategic infrastructure required to deliver the RSS and update the

RSS Implementation Plan as required by PPS11;

• together with the Annual Monitoring Report (AMR), feed into the RSS AMR Policy and

Strategy Implications Report which will in turn influence future reviews of the RSS / Sub

Regional Strategies (SRS); and

• help better align the timing and delivery of transport and other major infrastructure

across sub-regions by providing a picture of what will be delivered when.

The database could also assist in the process of agreeing priorities for future rounds of the

Regional Funding Allocation (RFA) process.

The Regional Infrastructure Coordination Database provides an example of and template for

the type of ‘live’ infrastructure planning tool that Local Authorities may consider establishing.

Infrastructure Delivery: Spatial Plans in Practice (CLG, 2008) recommends that LAs produce

an 'infrastructure programme' which should be treated as a living document to be amended

as and when required to keep it up to date (paragraph 7.13). The storage of information in a

database rather than paper document would allow for the filtering and analysis of

infrastructure projects by sector, category and geographical sub-area, enabling improved

understanding of overall requirements The incorporation of the database within a

Geographical Information System (GIS) would allow for further visualisation of what is likely

to present a complex picture (see Figure 3 below). The aim would be create layers

representing different types of infrastructure and then develop a capability to take a cross

sectional view through multiple layers representing the combined needs of a specific

community. Ultimately it should be possible to look at infrastructure from a three

dimensional perspective picking up critical pathways and linkages essential to the early

identification of bottlenecks and barriers. Ideally, this could be linked to capital programming

activity and even involve interfaces out to external providers.

Figure 3 - Infrastructure planning and anaylsis using GIS




With respect to the collation of infrastructure planning information, the RPB are interested to

explore with LAs opportunities for the standardisation of data collection so that reporting and

review processes can be streamlined.

Case study: London Thames Gateway Social Infrastructure Framework

Initiated in 2004, the key aim of the Thames Gateway Social Infrastructure Framework was

to identify and plan for the social infrastructure required to support the London Thames

Gateway development agenda to assist in the creation of healthy sustainable communities

across the area. It was recognised from the outset that the Thames Gateway area contains

a wide diversity of communities, neighbourhoods and urban forms, ranging from the high

density multi –ethnic character of Inner East London, through to the lower density suburban

character of parts of Outer East London. Given this geographic, socio-economic and

administrative diversity, the Framework has not set out to impose a specific solution or “one-

size fits all” approach. Instead, the Social Infrastructure Framework seeks to establish an

evidence base and methodology that can be used by local stakeholders within a variety of

different circumstances to assist in the local decision making process.

An important component of the Social Infrastructure Framework approach, developed by

EDAW and Bevan Brittan, involves the establishment of a mapping toolkit that can be used

to analyse the infrastructure planning evidence base and guide decision making.

http://www.healthyurbandevelopment.nhs.uk/pages/int_social_infra/integrating_social_infras

tructure.html

1.5 Structure of this report

The sequence of chapters within this advice note broadly follows that of the main stages of

the infrastructure planning process shown in Figure 1.

• Chapter 2 seeks to establish the role of local planning authorities in the infrastructure

planning process and poses important questions about organisational arrangements

and the status of an infrastructure plan.

• Chapter 3 emphasises the need to establish a vision and performance standards that

will guide assessments of infrastructure need and prioritisation later in the process. It

suggests that conventional service models should be tested against other options that

may achieve improved efficiency and sustainability.

• Chapter 4 sets out a number of approaches to quantifying infrastructure need and the

production of costings.

• Chapter 5 suggests a framework for the prioritisation of infrastructure, which could be

used to inform decision making process in circumstance where insufficient finance has

been raised to deliver all the infrastructure sought.

• Chapter 6 provides an introduction to infrastructure financing and proposes some tools

that could be used to explore funding options.

• Chapters 7 and 8 focus on planning obligations. Chapter 7 utilises case studies to

explain how residual valuation techniques can be used to estimate the level of finance

that could be raised through s106. Chapter 8 provides brief details on how the case

study local authorities in the South West are developing Planning Obligations policy and

also sets out an outline methodology for establishing a Community Infrastructure Levy.

• Chapter 9 presents a range of alternative and innovative finance mechanisms, including

the South West Regional Investment Fund.




• Chapter 10 explores ways in which the infrastructure planning process can be

resourced and includes a section on the potential role of Dedicated Delivery Vehicles

(DDVs) in driving forward infrastructure provision.

• Chapter 11 reflects on the challenge presented by the infrastructure planning agenda,

sets out the key principles that should applied and suggests some areas of work that

could be coordinated at the regional level allowing for the pooling of resources of

experience.




2 Establishing a Framework for Infrastructure Planning

Summary

Prior to embarking on a detailed infrastructure planning process, it is recommended that the

LPA takes a step back to establish an appropriate framework for the task. Key points are:

• The requirements of PPS12 and the ability to collect developer contributions mean that

the LPA will have a central role in the process. However the promotion of the task at

the corporate level of the council is appropriate taking account of the multiple service

delivery functions of the wider LA and its role as ‘community leader’.

• Infrastructure Delivery Plans are required as evidence base to support the core strategy

and planning obligations Supplementary Planning Documents. A robust evidence base

will depend on the periodic updating of costs and reappraisal of financing options as

infrastructure programmes and individual projects progress. A flexible, readily updated

form of document may therefore be considered the most appropriate solution.

• A partnership approach to infrastructure planning led at the corporate level is advocated

to ensure that planning is undertaken at the appropriate functional and geographic scale

and so that potential interlinkages between infrastructure sectors can be explored by

delivery agencies. Local authorities should explore opportunities the benefits of a

common approach to infrastructure planning with neighbouring councils. The process

should be led corporately. Collaboration between sub-regional partnerships will also be

required to ensure that matters relating to regionally significant infrastructure networks

are addressed.

• PPS12 requires that the infrastructure planning process should identify, as far as

possible, responsibilities for the delivery of infrastructure programmes and individual

projects. In response to this, the RPB will explore with LPA’s where they can assist by

working with the relevant regional delivery agencies and service providers to outline the

benefits of a collaborative business planning approach and draw up 'statements of

commitment' or formal agreements with infrastructure providers and agencies to enable

them to provide evidence to support the RSS and Core Strategy preparation.

Prior to embarking on a detailed infrastructure planning process, it is recommended that the

LPA take a step back to consider: firstly, their role in the process; and secondly, whether the

most affective framework for the task has been or could be established. Key matters to be

considered at the outset of the process will be:

• The status, scope and timing of the delivery plan in relation to other strategies and plans

produced by the LA.

• The governance arrangements that are in place to enable partnership working with

infrastructure and service providers.

• Consideration of whether infrastructure planning is being undertaken at the most

appropriate geographical scale.

These matters are explored in further in this chapter.

2.1 The Role of the Local Planning Authority

A number of factors reinforce a view that LPAs should play a central role in the

infrastructure planning process.

Firstly, test of soundness (viii) requires that clear mechanisms for the implementation and

monitoring of development plans should be in place alongside other requirements

concerned with the need for a robust evidence base. The recently updated PPS12 (June,




2008) provides further clarification of what this means in relation to LPAs responsibilities for

infrastructure planning and delivery (paragraphs 4.8 and 4.9):

‘The Core Strategy should be supported by evidence of what physical, social and green

infrastructure is needed to enable the amount of development proposed for the area, taking

account of its type and distribution. This evidence should cover who will provide the

infrastructure and when it will be provided. The core strategy should draw on and in parallel

influence any strategies and investment plans of the local authority and other organisations.

Good infrastructure planning considers the infrastructure required to support development,

costs, sources of funding, timescales for delivery and gaps in funding. This allows for the

identified infrastructure to be prioritised in discussions with key local partners. This has

been a major theme highlighted and considered via HM Treasury’s CSR07 Policy Review

on Supporting Housing Growth. The infrastructure planning process should identify, as far

as possible:

• infrastructure needs and costs;

• phasing of development;

• funding sources; and

• responsibilities for delivery.’

This emphasis on delivery corresponds with the government’s wider vision of a spatial

planning approach, which goes beyond traditional land use planning, to bring together and

integrate policies for the development and use of land with other policies and programmes

which influence the nature of places and how they can function.

The second reason why LPAs have an inherent interest in the infrastructure planning

process is their crucial role in contributing to infrastructure funding through the collection of

developer contributions. Establishing a robust evidence base to justify developer

contributions and ensuring that the amount of finance that can be raised is optimised are

clearly of importance.

Both the spatial planning function and power to capture s106 contributions mean that LPAs

have a key role to play in an infrastructure delivery partnership, but it is also suggested that

the resourcing implications of producing a delivery plan should not fall solely with the LPA.

A wide range of both public and private sector organisations have vested interests in

ensuring that the planning, financing and delivery of infrastructure progresses as smoothly

as possible. The production of a delivery plan will in any case depend on the timely

provision of information by partner organisations and discussion of funding options. A

partnership approach to delivery plan preparation led at a corporate level is therefore

recommended.

It should also be noted that infrastructure planning in this context is very much an emerging

discipline. The recent CLG publication, Infrastructure Delivery – Spatial Plans in Practice:

Supporting the reform of local planning (June, 2008), advises as follows:

‘One of the main challenges in addressing this topic is that relatively few local planning

authorities have yet reached the stage of having an adopted core strategy or other

development plan document which outlines infrastructure requirements. Many local

authorities are only at an early stage of grappling with this aspect of the new spatial

planning arrangements, and as a result, the extent of current experience and practice that

can be drawn upon in the form of ‘good practice’ examples is relatively small.’

Without a definitive approach available ‘off the shelf’, it will be necessary for LPAs and their

partners to customise a process of infrastructure planning that takes account of local

circumstances, and the stage of review of the Local Development Framework and other

plans and strategies.




2.2 Determining the status and scope of the infrastructure delivery

plan

One of the first decisions facing LPAs will be to decide on the status of the Infrastructure

Delivery Plan. Although PPS12 requires that infrastructure planning is undertaken, it is not

explicit about the type of document that should be prepared. The emphasis is on the

provision of evidence base to support the Core Strategy, rather than the production of a

standalone Infrastructure Development Plan Document (DPD) or Supplementary Planning

Document (SPD).

The nature of infrastructure planning is such that a more flexible, readily updated form of

document could be considered more appropriate. Robust evidence base will depend on the

cyclical updating of costs and reappraisal of financing options as new funding streams are

developed. When deciding on the status and programming of Infrastructure Delivery Plan

preparation, the following should be considered:

• The status of the Core Strategy and timing of the examination.

• The status of the Developer Obligations SPD or equivalent. Is it necessary for the SPD

to include infrastructure planning evidence, or need it only refer to the Infrastructure

Delivery Plan?

• Do any major funding applications require the submission of infrastructure planning

evidence, such as New Growth Points?

• What are the timeframes for the production of relevant plans and strategies by partner

organisations?

• How frequently should the infrastructure delivery plan be reviewed? Should it be a ‘live’

document that is updated regularly?

In relation to these points about the timeframes of planning documents and the review

period of the infrastructure delivery plan, it will also be important for LPAs to consider which

items of infrastructure should be included having regard to their anticipated delivery date.

To explain, Local Transport Plans have a five year timeframe, but are set within a longer

timeframe. Local Development Documents generally have a fifteen year timeframe, and the

RSS a 20 year timeframe, (and assuming Sub-national Review proposals are implemented)

moving towards a single regional strategy looking to around 2031. It is anticipated that for

completeness, it will be necessary for the Infrastructure Delivery Plan to cover a long term

planning horizon, but potentially including a more detailed breakdown of short term priorities

and programme dates. This issue of timeframes ties in with the selection of demographic

and growth scenarios to assess infrastructure need, as discussed in section 3.2.2.

2.2.1 Infrastructure Delivery Planning can influence decisions in the rest of the

Development Plan

LPAs should beware of seeing Infrastructure Delivery Plans as an additional passive “bolt

on” stage to the planning process. The need for deliverability to be proven as part of the

testing of soundness may mean that the shape and distribution of new development must

take a significant account of infrastructure delivery considerations alongside other matters.

The massing and phasing of development will materially affect the deliverability of

infrastructure. For example, a larger urban extension (circa 6,000 dwellings) is more likely to

support its own range of social and community facilities, reducing the need to travel longer

distances. Smaller urban extensions could only support a much more limited range of social

and community infrastructure (without subsidy) and would therefore depend on the sharing

of facilities between developments or the use of headroom elsewhere in a local authority,

necessitating efficient transport links.




The interconnections between urban form and infrastructure emphasis the need for a

continual exchange of information between the infrastructure planning process and the

development plan process as illustrated in chapter 1.

2.2.2 The scope of the infrastructure delivery plan

There is now general acceptance that an infrastructure delivery plan is an integral part of the

spatial planning process. However, the inclusion of infrastructure opens the question as to

what is meant by the term in the first place. The word infrastructure was original derived

from a combination of “infra” meaning beneath and “structure” meaning buildings where the

term was usually applied to services and facilities that are underground such as piped water

and sewerage or that lie on the surface such as rail tracks and roads. As technology

evolved the term was also applied to lines strung above ground on poles and pylons. The

common characteristics were the use of networks that distributed goods and services over a

geography involving extensive capital investment of a durable and immobile nature. Most of

these networks require long, linear and contiguous rights of way which require some level of

subjugation of private property rights (to allow networks to be extended or maintained

without interruption or the extraction of excessive payments). Combined with extensive spill-

over benefits created by these networks in terms of community health, safety and economic

development, these characteristics have been a basis of government involvement and

regulation of infrastructure providers. However, the term “infrastructure” has been

broadened out to include a wide range of services associated with welfare provision through

fixed facilities.

PPS12 refers to social infrastructure, encompassing the health, education, social and

emergency services (paragraph 4.29). This broader definition is useful as it encapsulates

more of the infrastructure that is required to build successful communities, and which could

be part funded by developer contributions. There are close links to Communities and Local

Government agenda around “place making”. The development of the term “critical

infrastructure” represents an attempt to reaffirm a more traditional vision of infrastructure.

Table 2 lists the services that are considered to fall within the term of infrastructure for the

purpose of this advice note. Affordable housing has been included in this list for the reason

that, while it may not be considered an infrastructure item, contributions towards affordable

housing are major components of s106 agreements. The share of development value used

to support affordable housing will necessarily have a material effect on more conventional

forms of infrastructure. It is therefore important that Registered Social Landlords (RSLs) are

engaged throughout the infrastructure planning process so that they understand the

competing pressures for funding.




Table 2 - Infrastructure categories

2.2.3 Defining “strategic” infrastructure

The term ‘strategic infrastructure’ is used for a number of purposes (e.g. CIL Policy

Statement, RIF policy statement) and a view as to whether a particular item of infrastructure

is of strategic importance is likely to vary depending on the geographical scale of plan




making. This point is illustrated by the examples drawn from the South East RSS

Implementation Plan and Milton Keynes Partnership Business Plan which are provided at

Appendix G. Situations where a definition of strategic can be useful are:

• prioritising the funding and delivery of infrastructure items with reference to policy

objectives and development enabled;

• determining the scale of infrastructure that will be considered for a particular funding

stream; and

• determining whether it is reasonable to pool developer contributions from a wide area to

fund a particular infrastructure project.

The draft RSS sets out the region’s priorities for investment to support the spatial strategy.

While these broad objectives have been deleted in the Proposed Changes, they still provide

a useful indication of areas of focus for the South West:

• ‘More resilient and reliable inter-regional transport links and particularly links with

London and the South East, with the second strategic route as priority.

• Investment in urban transport systems and demand management with a step change in

public transport support, with investment to enable higher growth to be accommodated.

• Sufficient resources within locally determined funding sources to enable rural

accessibility and congestion in small towns across the region to be addressed.

• A South West Regional Infrastructure Fund to forward-fund development infrastructure.

• Mechanisms to enable contributions from development to be maximised and the

proceeds to be pooled across immediately affected local authorities to ensure all

development contributes to critical community and transport infrastructure, green

infrastructure and cultural facilities.

• A regional carbon offset fund, to finance actions to reduce climate change emissions

which would not otherwise go ahead, to which developers could contribute to offset

emissions they cannot avoid.

Key infrastructure requirements identified by the section 4(4) LPAs during their preparation

of evidence for the draft RSS are set out in section 2 of the draft RSS Implementation Plan

(Submission Version). These requirements will, of course, change over time in response to

new understanding of the developments’ needs and confirmation of development proposals

as LPAs prepare their LDDs and infrastructure delivery plans.

Section 3 of the South West’s Regional Infrastructure Fund proposal sets out a number of

tests in relation to how the word ‘strategic’ is applied:

• Projects with a large geographic scope;

• Projects that cannot be related to individual development proposals;

• Projects where costs exceed local funding mechanisms;

• Projects that support multiple developments;

• Projects that maximise private sector contributions.

To this definition can be added considerations about beneficiaries, including for example

infrastructure which caters for tourists essential to the South West economy as well as

existing residents and businesses. Projects that cross local authority boundaries, i.e. which

are of sub-regional scale, would also be defined as strategic.




2.2.4 Defining “critical” Infrastructure

The term “critical” infrastructure is sometimes applied to the classification of infrastructure

need and, typically, concerns infrastructure essential to delivering the basic requirements for

living. “Critical” infrastructure usually concerns potable water; energy; waste; waste water

and transport. The term is not used to devalue other forms of infrastructure but mainly to

express an understanding of basic requirements without which no development can

function.

2.3 Adopting a partnership approach

A second important decision will be the allocation or creation of an Infrastructure Planning

Group where the infrastructure planning process can best be advanced. It is possible that a

sub group within the Local Strategic Partnership (LSP) may already have suitable

membership to fulfil this role, although in most cases it is likely that a new body will need to

be formed. The adoption of a partnership approach fits with the “ring master” role prevalent

in government thinking around the responsibilities of local authorities within this agenda.

This advice note recommends that infrastructure planning should be promoted and pursued

by LAs at the corporate level, reflecting an overall responsibility as community leader and

multiple functions as LPA, Local Highway Authority and strategic housing body. PPS12

states that ‘local authorities should undertake timely, effective and conclusive discussion

with key stakeholders on what option(s) for a core strategy are deliverable… There is no

point in proceeding with options for the core strategy which cannot be delivered as a result

of failure to obtain the agreement of key delivery agencies’ (paragraphs 4.27 and 4.28).

Building on this, and as noted above, PPS12 requires that the infrastructure planning

process should identify, as far as possible, responsibilities for the delivery of infrastructure.

Infrastructure Delivery: Spatial Plans in Practice (CLG, 2008) recommends, therefore, that

LAs produce 'statements of commitment' which are formal agreements with infrastructure

providers and agencies etc to enable them to provide evidence to meet the test of

soundness requirements. In response to this, the RPB are interested to explore with LPAs

whether they can assist by working with relevant delivery agencies to draw up a regionally

agreed approach to 'statements of commitment'.

Delivery agencies whom LAs should consider approaching to form infrastructure planning

partnerships include:

• county councils and neighbouring LAs

• GOSW

• SWRDA

• SWRA (as RPB and Regional Housing Body)

• English Partnerships (New Homes and Communities Agency)

• Housing Corporation (New Homes and Communities Agency)

• The Environment Agency

• Natural England

• English Heritage

• the highways authority

• Highways Agency

• utility companies

• internal drainage board

• Port authorities and companies




• Network Rail

• public transport providers

• airport operators

• local authority education department (LEA)

• social services

• NHS primary care trust (PCT)

• acute hospital trusts

• strategic health authority

• the police

• the fire service

• Sport England

• Culture South West

• local authority parks department

• Urban Regeneration Companies (URC) and City Development Companies

(CDC)(where applicable)

Devising a strategy for engaging these stakeholders, that will facilitate the timely provision of

information, the discussion of delivery options and agreement of funding strategies, will be

an important early task. Recent research sponsored by the RTPI and CLG, Shaping and

delivering tomorrow’s places: effective practice in spatial planning (UCL and Deloitte, 2007)

contains important views about the role of spatial planning as ‘a delivery vehicle for the

social, economic and environmental infrastructure needed for our communities.’ The report

argues that for spatial planning to be affective, ‘it must focus on outcomes before

processes’, which suggests that delivery should be a driving force behind spatial planning.

The report therefore recommends that LPAs establish a Local Infrastructure Programme

(LIP)(equivalent to Infrastructure Delivery Plan), together with a Local Infrastructure Fund

(LIF), which would be managed by a Local Infrastructure Group (LIG). Swindon Borough

Council (BC) provide an example of where an equivalent to an LIG has been established.

Case study : Swindon BC – the establishment of an Infrastructure Delivery Board

Swindon Borough Council launched the ‘Swindon Infrastructure Delivery Board’ in October

2006. The Board was established in recognition that the Borough Council has an ambitious

agenda to improve the quality of life for existing communities and for the long-term

sustainable growth of Swindon.

The Infrastructure Delivery Board is responsible for overseeing and co-ordinating the

delivery of Swindon’s long-term future development. Board Members act as representatives

of their organisation, but take a wider view in order to deliver the Board’s objectives for

Swindon. Each Board member ensures the delivery of the individual projects for which their

organisation is responsible, or has a significant role in achieving. Board Members are key

stakeholders and include senior representatives from Swindon Borough Council (chair of the

Board), Department for Transport, Highways Agency, Environment Agency, Thames Water,

SWRDA, SWRA, GOSW, English Partnerships, Housing Corporation, Swindon PCT and

The New Swindon Company (the Swindon URC).

Since its establishment the Board has overseen Swindon become a designated growth

point; the implementation of the first year of growth point projects; the development of the

Swindon Programme of Development; award of growth point funding for the current

Comprehensive Spending Review period; as well as having a key input into important




workstreams that support the long-term growth of the Borough including the masterplanning

of a major urban extension, and the Swindon Transportation Study.

2.4 Defining a sub-regional geography for infrastructure planning

No single right answer exists for defining the most appropriate sub regional geography for

infrastructure planning. Sometimes, the solution to the boundary definition problem will be

found in pre existing partnership arrangements e.g. a City Region or Regeneration

partnership, but in other cases an evidence base review may require some adaptation.

2.4.1 Joint Study Areas and Housing Market Areas

When determining the nature of the forum/partnership that will take forward the

infrastructure planning process, it is suggested that consideration is given to the

geographical scale over which an infrastructure vision and needs assessment should be

developed. The Joint Study Areas (JSA), which informed the policies of the draft RSS,

provide an example of where sub-regional boundaries initially based on travel to work areas

(and with modifications) have been used to look at joint development issues in the South

West. Since the Joint Study Areas, other forms of spatial and functional geography have

been introduced to manage relationships, most notably the strategic Housing Market Areas

(HMA). Experience of JSA development showed that it did encourage cross boundary

working, and good practice from other English regions suggest that HMAs could be used as

a building block to create larger sub regional units if needed.

A sub-regional approach to infrastructure planning suggests that local authorities should

explore opportunities to align methodologies with their neighbours. For instance,

Cheltenham Borough Council, Gloucester City Council, Gloucestershire County Council and

Tewkesbury Council are considering options for the coordinated production of an

Infrastructure Delivery Plan to support a joint Core Strategy for the area.

The use of a single definition of a sub region (whether based on HMAs, aggregates of

HMAs or JSAs) might, in some circumstances, create governance and communications

problems. Infrastructure providers whose geographic area of operation exceeds the scale of

sub region may regard smaller sub regions as a complication or have limited resources to

engage multiple sub regions when its primary concerns are focused at a higher level.

Moreover, the demand modelling used by these infrastructure providers may not be spatially

discriminating enough to understand the requirements of smaller geographic areas. For

example, work undertaken for the Northern Way City Region infrastructure plans revealed

that a common load growth assumption was used to assess future energy demand rather

than one reflecting growth at a city region scale.

Choices with respect to the most affective infrastructure planning boundary are therefore

unlikely to be straightforward.

2.4.2 Understanding the functional geography of infrastructure providers

Much social and community infrastructure is specific to a local planning authority area,

reflecting local service priorities and catchments. However, many critical service

infrastructures like transport, energy and water supply are delivered through wide area

networks that extend well beyond the boundaries of any single local planning authority. In

these instances, infrastructure investment ‘plugs in’ new development to the benefits of the

wider networks that include national road travel, distant power stations and water treatment

plants. The nature of these networks has led to the government’s proposals to create a new

pathway through the planning system for Major Infrastructure Projects (MIPS).

The infrastructure delivery plan will have to contend with instances where key connection

points into these networks (e.g. transport interchanges, ports) are located outside the sub-

regional boundary, but will nevertheless be of importance in enabling growth and delivering




services. The delivery of a motorway junction, sewage treatment plant or grid reinforcement

outside the sub-regional infrastructure planning area may be essential in unlocking growth.

These situations will entail collaboration between sub-regions if infrastructure delivery plans

are to provide a sound foundation for the core strategies of individual LPAs.

The functionality of infrastructure networks will mean that geographic relationships will

change according to the type of service being provided. Consequently, planning for flood

defences within a river catchment area or coastal area would ideally require different

boundaries compared to the travel to work boundaries serviced by a transport network. It

will not be possible to define an infrastructure planning boundary that suits all infrastructure

types, however, inviting organisations with wider geographical remits to participate in the

infrastructure planning process will help to ensure that broader issues are identified and

addressed. For instance, the Environment Agency have responsibility for producing

Catchment Flood Management Plans and utility companies will wish to ensure that regional

distribution networks are able to meet future load requirements. Efforts should also be

made to ensure that key partners leading the infrastructure planning process are involved in

sector specific partnerships and initiatives, such as the Water Management Partnership

established for Somerset.

Case study: Taunton – the Parrett Catchment Project and Somerset Water

Management Partnership

The Parrett catchment is a large area (1690 Square kilometres), which includes not only the

River Parrett itself, but also its main tributaries - the Tone, Isle, Cary and Yeo. The area

contains the major urban areas of Taunton, Bridgwater and Yeovil and the internationally

significant Somerset Levels and Moors. The summer floods of 1997 and the prolonged

flooding of 1999/2000 proved that the Parrett catchment’s river and drainage system cannot

cope in extreme weather events, and the likelihood of increased stormy conditions,

combined with rising sea levels would make the problem of flooding much greater over the

next few decades.

As such, local agencies and people came together in 2000 to form the Parrett Catchment

Project, whose aim was to take action to address the issue of flooding now, rather than

storing up problems for the future. There is no single organisation which can tackle the

problem of flooding alone, so there is no single solution. After early consultations, twelve

areas of action were established, which, when combined, make a significant contribution to

reducing the adverse effects of flooding. They are:

• Changes to agricultural land management

• Creating temporary flood storage areas on farmland

• Controlling runoff from development

• Creating new wetland habitats

• Dredging and maintaining river channels

• Raising riverbanks

• Upgrading pumping stations

• Spreading floodwater across the moors

• Building a tidal sluice or barrier downstream of Bridgwater

• Upgrading channels to enhance gravity drainage

• Restricting new development on the floodplain

• Woodland development

The Parrett Catchment Project has recently been replaced by the Somerset Water

Management Partnership, which will be co-ordinated by Somerset County Council. The

new partnership provides a forum in which consultation can take place and issues debated

with a view to achieving consensus on what actions should be taken. The full membership

of the partnership is: Somerset County Council, Environment Agency, Taunton Deane




Borough Council, Sedgemoor District Council, South Somerset District Council, National

Farmers Union, Farming and Wildlife Advisory Group, Somerset Wildlife Trust, Royal

Society for the Protection of Birds, Somerset Consortium of Drainage Boards, South West

Association of Drainage Authorities, Somerset Waterways Development Trust, Wessex

Water and Natural England.

3 Identifying Infrastructure Need & Service Options

Summary

An infrastructure delivery plan has to be led by an overall vision for the development of an

area as expressed in its Sustainable Community Strategy and Core Strategy. This vision

will need to be unpacked into the performance required from individual services over the

term of the plan. Key performance indicators for infrastructure can be determined by

undertaking a review of existing plans and strategies and through consideration of the

technical and aspirational demands of a community.

As part of the infrastructure planning process, it is recommended that test scenarios

covering household growth, employment growth and demographics are agreed, which

reflect the vision, and can be used to define critical thresholds for infrastructure delivery in

terms of need and financing.

The scale and nature of infrastructure required will depend on the location of major

development within a local authority and the assumed service model. The infrastructure

planning process therefore provides an appropriate forum for integrated decision making

around land use planning, the testing of new infrastructure delivery models/ideas, and the

exploration of linkages and feedback loops between infrastructure sectors.

Comprehensive and integrated infrastructure planning cannot be undertaken without

knowledge of water and wastewater, and energy requirements. Understanding the structure

of the utility industries, the nature of the forecasting activities of these companies and the

information they prepare as a matter of course provides a good basis for further

engagement. Given that the challenges set by the Code for Sustainable Homes and other

strengthened environmental standards will impact upon the decisions and operations of

LPAs and utility providers alike, they are likely to provide the motivation for more integrated

working than has taken place in the past.

This chapter discusses the requirements of an evidence base to support the Infrastructure

Delivery Plan. Whilst the RSS sets broad quantitative requirements (numbers of houses,

numbers of jobs) it does not provide sufficient detail on its own account to plan infrastructure

need. An evidence base needs to be created that converts high level housing or

employment land targets into quantities relevant to infrastructure providers. For critical

infrastructure providers, metrics such as gigawatt hours, millions of litres of water/ waste

water, tonnes of waste or trips generated will be needed. For social and community

infrastructure, housing targets need to be expanded upon to understand the demographic

characteristics of likely occupying households. These broad aggregates must be assessed

in relation to the quality of service to be offered both now and into the future, risk assessed

against future problems such as security of supply and climate change. Sometimes, quality

standards are set by national regulators (e.g. water and power) but others may have more

scope for local flexibility. As noted in the previous section, the evidence base must also

look wider than individual local planning authorities.

3.1 Steps for defining infrastructure need

A number of process steps are recommended in examining the need for infrastructure:




Figure 4 - Flow chart of steps for defining infrastructure need

3.2 Relating infrastructure need to the vision for an area

Once a sub region for infrastructure planning has been defined, the partners working within

that sub region need to determine what their overall vision is for that area. A vision can

forcibly drive the performance expected from infrastructure in terms of what levels of service

or economic growth is expected. The vision links to the government’s agenda on making

places with attributes that sustain the attractiveness of communities over the longer term.

The vision may also influence the pace of development if partners want to ensure that key

infrastructure is in place before delivery of productive growth – housing and jobs.

The development of a vision cannot be neatly separated from the point in the business cycle

when partners develop their vision. In a buoyant economy boosting land values, greater

scope will exist to pursue bold visions. In a post “credit crunch” economy dominated by fears

of inflation and slump, the options might look more constrained. Partnerships will need to

consider carefully whether they are willing to trade off the prospect of meeting targets but at

a lower performance standard. A “making do” strategy may allow targets to be met in the

short term but are likely to present future downstream problems such as the need to retrofit.

Reconciling these pressures is likely to be a key issue for partners in the future that may

require development design that is flexible enough to absorb retrofit both physically and in

terms of the institutional set up (e.g. access to systems). Relatively short-term fears arising

from a downturn in the economy should not be allowed to stifle the need to plan for the

longer-term delivery of the vision and strategy.




An infrastructure delivery plan has to be led by an overall vision for the development of an

area as expressed in its Sustainable Community Strategy and Core Strategy. An early view

will need to be taken as to whether the Community Strategy is sufficiently well rounded to

inform the total vision of an area e.g. are economic issues adequately covered.

A rounded stakeholder vision for an area should inform the quality of life aspirations that

stakeholders want to achieve using infrastructure investment over the life time of the plan.

This vision will need to be unpacked into the performance required from individual services

over the term of the plan. Performance will need to be assessed in terms of the quantity of

provision required to meet absolute levels of growth but also any qualitative changes e.g.

improved environmental standards. The Vision, and associated standards, will form a

useful component of the prioritisation process described in chapter 5.

Case study: Vision for Plymouth

The Core Strategy for the city sets out the aspiration for Plymouth to become one of

Europe’s finest cities and that, to affirm its role as the leading city of the far south west,

Plymouth must be of significant critical mass. This ambition has also been enshrined in the

‘Vision for Plymouth’ which was prepared for Plymouth’s Local Strategic Partnership by

MBM Arquitectes and AZ Urban Studio under the lead of Barcelona based architect David

Mackay.

The vision for Plymouth was launched in November 2003 and outlines the following aims:

• To raise its population from 241,000 to 300,000 by 2026.

• To significantly reduce intra-regional disparities through targeted area action

programmes.

• To continue to invest in the City Growth Strategy sectors to create new jobs.

• To deliver 33,000 new dwellings by 2026, 4,200 affordable homes by 2016 and 17,000

new jobs through 220 hectares of new employment land.

• To deliver a radically different approach to transport in the city whilst continuing

investment in key road infrastructure projects linked to regeneration priorities.

The principal challenge is to ensure that the vision is realised and that a step change on the

economy is delivered after a period of poor economic growth, narrow economic base and

deprivation. Mechanisms are now in place to achieve this change in the form of the Local

Economic Strategy and the establishment of a City Development Company (CDC). Major

developments that will assist in meeting these aims include those in Devonport, Millbay,

Sherford and Plymstock Quarry.

To this end, Plymouth City Council has been working with its neighbouring authorities

(Caradon and South Hams) to provide integrated infrastructure, including:

• New park and ride interchanges in Caradon and the South Hams – providing links to

key employment and commercial destinations;

• Developing and extending the local rail links into the city; and

• Extending the city’s high quality public transport network to nearby towns.

The North Plymstock Area Action Plan (AAP), which covers the eastern corridor of

Plymouth, between Plymstock and Plymton and was produced by Plymouth City Council

makes reference to the Sherford AAP published by South Hams District Council, and the

importance of a coordinated, complementary planning and delivery of development.

Plymouth City Council and South Hams District Council have agreed to work together

informally to produce joined up solutions to cross boundary issues and this is exemplified in

the planning approach to Sherford and the North Plymstock AAP.




Together the AAP’s provide a framework to guide the form and content of development and

provision of infrastructure which it is hoped will lead to high quality development, timely

provision of infrastructure, high quality public transport and the coordinated progression of

cross boundary strategies.

Case study: Taunton Vision Commission

In 2002 the Taunton Vision Commission led a wide ranging consultation exercise, leading to

the formation of a vision for 2025 and beyond of a continually rejuvenating Taunton,

acknowledged nationally as a leading exemplar of a 21st century market town. One of the

key messages derived from the consultation was that a fresh approach should be taken to

the town centre and river frontage. It was recognised that the River Tone had been

neglected and under-valued, when it has great potential to be a key feature of the town with

the river corridor providing an open space resource and a corridor for footpaths and

cycleways.

Broad public support was also gained for the regeneration of major brownfield sites, such as

Tangier and Firepool, located on the banks of the river. It was clear that plans for the

redevelopment of these strategic sites would be underpinned by requirements for flood

alleviation measures. The Environment Agency has therefore been involved as a key

partner in developing the town centre strategy from the outset. The timeline table below

charts the flood risk assessment work that has been undertaken in parallel with the

masterplanning of the town centre.

3.2.1 Review and define service key quality performance standards

Key performance indicators for infrastructure will emerge from considering the technical and

aspirational demands of a community. Performance standards can be found by:

• Reviewing available statutory and non statutory plans and programmes to identify key

metrics and trajectories, such as the RSS, Local Transport Plans, Sustainable




Community Strategies; Sustainability Frameworks, Catchment Flood Management

Plans, etc.

• Identifying technical standards needed to meet adoption standards by a managing body

for infrastructure (e.g. Highways agency; Environment Agency, etc.).

• Identifying commercial performance standards if private sector participation is essential

(see Chapter 5 on Finance).

• Community consultation (new development will, by definition, lack any occupiers from

which to ascertain views on the performance objectives. In this case, steps should be

taken to identify suitable reference communities of a scale matching the proposed level

of growth and draw lessons from its implementation. Opportunities may exist for cross

boundary working if one local authority has already learnt lessons from developing a

new community).

Where standards can not be identified for infrastructure within existing plans and policies

then performance requirements can be sourced from a number of regulator and provider

organisations. These sources have been aligned against the categories identified by Egan

as constituent parts of a Sustainable Community (please refer to the table in Appendix B).

3.3 Contingency planning

Paragraph 4.10 of PPS12 advises that LAs undertake contingency planning to show how

objectives will be achieved under different scenarios. PPS12 refers specifically to

circumstances where the funding of critical infrastructure is unknown at early stages,

however, it is suggested here that a broader interpretation of and approach to contingency

planning would explore three interrelated subject areas:

• Alternative population, housing and employment growth projections;

• Alternative locations of growth, to tie in with the issues and options stage of Core

Strategy development; and

• Alternative models of service provision.

Factors to be take into consideration in the contingency planning process are explored

further in sections 3.4 and 3.5.

3.4 Define infrastructure planning growth test scenarios

The RSS provides targets for housing and employment growth over the next 20 years.

Infrastructure provision is, however, sensitive to any under or over shooting in meeting

those targets. In other words, the need for infrastructure delivery and the economies of

scale required to finance that infrastructure, may be dependent on particular growth

thresholds being reached. As part of the infrastructure planning process, it is therefore

recommended that test scenarios covering household growth, employment growth and

demographics are agreed which reflect the vision and provide for any potential acceleration

or deceleration in numbers. Growth scenarios that can be applied include the following:

• Target (RSS growth rate);

• High (e.g. assume success in becoming a growth point);

• Low (e.g. marginal improvement in build rate);

• Baseline (current build rates extrapolated)

• Maximum (maximum growth that can be accommodated)

The final ‘maximum’ scenario was identified during discussions at the Spring 2008 South

West Major Development technical Peer Review Events (see section 10.1 for further




details). The advice of LA presenters was that is worth considering the maximum number of

dwellings and employment floorspace that can be accommodated in a given Area of Search,

on the basis that current target growth figures are likely to be exceeded by future reviews.

The infrastructure required to deliver the maximum may exceed in scale or specification that

required currently, but it may be possible to facilitate upgrading at a later date through

careful planning and design now. Potential benefits of considering a maximum scenario

during the infrastructure planning include gaining further understanding of economies of

scale that can be achieved and value that could be captured. It also means that LPAs will

be prepared and aware of the infrastructure consequences should larger schemes be

proposed by other parties.

Case study: Plymouth – Testing of growth scenarios

Headline expansion targets for Plymouth include building 32,000 homes in the period to

2021 and creating 42,000 new jobs in the travel to work area. Plymouth City Council (PCC)

consider that it is vital that the necessary infrastructure is coordinated, programme and

planned to ensure that the anticipated growth in households and employment is mirrored

with appropriate infrastructure. Sufficient lead in time and coordination of infrastructure

design and funding is also fundamental to ensure a framework for the growth of the city is

delivered within budget against a pre-determined schedule.

One of the first tasks PCC have undertaken has been to determine a common set of

demographic change scenarios to enable infrastructure providers to have a consistent set of

data for short, medium and long term planning. The approach taken focuses on

demographic scenarios, but has also taken into consideration employment since the two are

interrelated. Job growth will attract migration and population growth will generate

employment in services. It was recognized therefore that population growth and

employment growth therefore need to be considered simultaneously.

The study undertaken by Arup and Knight Frank tested a large number of scenarios, which

were useful in providing context and indicating the range of uncertainty around such

projections, but were too many for practical use for assessing infrastructure requirements. It

was therefore concluded that it would be necessary to focus on a few scenarios that best

represent the current intentions for the city’s growth. It was also considered important to use

scenarios that strongly test infrastructure capacity, so that the risks and costs of under-

provision can be identified, and in case particular thresholds for infrastructure exist near the

top of growth expectations, with significant implications for planning and costs.

3.4.1 Converting growth scenarios into infrastructure need

Once growth scenarios have been agreed, it is necessary to convert numbers of households

and jobs into metrics suitable for establishing the scale and nature of the infrastructure

needed to support these figures.

Social and community provision would normally require household targets to be converted

to a form that would allow providers to understand the type of person expected to occupy

new development in terms of their demographic characteristics. The age profile will

determine the type of social services; education; health and general community services

needed. These factors will be dependent upon the characteristics of the new housing

proposed in a community (reflecting social mix and other factors).

Careful consideration will need to be given as to whether new housing will be occupied by

households conforming to average for the LPA. The type and scale of housing proposed is

likely to have a significant influence on the socio economic composition of the development.

For example, detached market housing with private garden space may be particularly

attractive to aspirant professional worker households with children whilst flatted

accommodation may encourage childless singles and dual income households. These




outcomes have a significant bearing on the need for different types of social and community

infrastructure e.g. more or less nursery and school accommodation. Consideration should

also be given to the displacement effect created by new development which successfully

attracts short distance moves (most moves in the housing market) from existing or newly

created households within the existing LPA boundary. For example, less mobile sections of

the population may account for an increased proportion of an existing neighbourhood,

resulting in changing demands for services hence infrastructure.

Critical service infrastructure will be required to meet the additional demand for energy;

water consumption; waste tonnage and trip generation, all of which must be measured in

the appropriate units. Methods will need to be developed with infrastructure and service

providers to model the impact of growth in terms appropriate to their business.

The methods employed will vary according to the stage in the planning process. At the

issues and options stage of the development plan process it is unlikely that any customised

forecasting will exist, however it should be possible to identify some metrics that can be

refined later:

Table 3 - Metrics to quantify critical infrastructure need

For further information on metrics relevant to community and social infrastructure please

refer to Appendix D.

3.5 Option generation to test infrastructure solutions

In addition to the consideration of growth scenarios, it is recommended that partners identify

wider trends that will inform and drive the development of alternative infrastructure and

service delivery options and solutions. This process will link in with the Whole Life Costing

process introduced in chapter 4 and an integrated approach to land use and infrastructure

planning as explored below. Factors that could be considered include:




• Changes to the cost of materials required to construct infrastructure, such as escalation

in the price of key commodities like steel and copper.

• Changes to the cost of running infrastructure, such as where carbon based fuels are

essential to the on going viability of a project and/or development.

• Likelihood of changes in government policy concerning the future ownership and

management of infrastructure.

• Likelihood of resilience to future changes in physical operating conditions, for example

higher temperatures can materially affect the operation of the electricity grid and

demand for potable water and the disposal of storm water;

• Likelihood of future technological change affecting the costs of a particular solution e.g.

power can be produced through multiple smaller sized generation units under a

decentralised scenario or through a grid based solution. It is also possible that

substitute energy carrier fuels will emerge that will either make personal mobility more

or less likely.

The uncertainties surrounding these issues means that there is no single most likely

outcome but more a range of differing scenarios whose likelihood needs to be investigated

as part of the testing process. Mitigating actions that could be tested are as follows:

• Give a high level of resilience and/or self containment in the future (where development

is future proofed against the affects of climate change and fluctuations in the availability

of key resources by lowering its reliance on external sources of energy, water, etc.);

• Networked solutions with a strong economic focus (where development draws on the

most cost effective source of supply through networks);

• Prioritisation of critical infrastructure services (e.g. water, energy transport) to meet

essential service needs;

• Employment of “soft” measures that reduce demand for services in the first place

(energy, water and transport);

• “Critical massing” of development to optimise the scope for meeting the minimum

thresholds required for viable infrastructure provision in larger urban extensions (say

over 5,000 dwellings); and

• Opportunities to utilise available headroom to absorb growth and minimise the need for

new investment.

Each of these scenarios will have an impact on the cost, phasing and risk associated with

development. The impact of these scenarios will need to be balanced against other material

considerations assessed in the planning process. For example, a large urban extension may

facilitate a lower cost of development but might materially affect the settlement to which it is

attached which may be important in heritage terms. Partners must decide on the relative

weighting that infrastructure considerations are given alongside other matters.

3.5.1 Integrating land use planning with infrastructure planning

The goal of integrating land use planning with infrastructure planning means that the

development of scenarios covering infrastructure must be worked through alongside those

relating to the scale, nature and timing of development to be delivered. The sub-sections

below introduce a range of factors that should be used to test infrastructure options and

devise solutions:

3.5.2 Sustainability performance criteria

As the Infrastructure Delivery Plan will support the Core Strategy, it is appropriate that the

infrastructure planning process is subject to sustainability appraisal.




A high level of sustainability performance has the potential to change the infrastructure

solution used to deliver services. High levels of resource efficiency reduce the need to

deliver water and remove waste water; electricity/ gas and landfill. Downstream implications

of resource efficiency are fewer power stations; pumping stations; land fill. Sustainability

resource criteria also affect the means used to deliver remaining need. Maximising energy

delivery through on site or community scale provision reduces the need for centralised

energy generation delivered from remote sites. Sustainable drainage places a greater

emphasis on landscaping rather than engineered drainage solutions.

3.5.3 Integrated infrastructure provision

Infrastructure solutions have traditionally been planned and delivered by sectoral specific

organisations providing water, electricity, gas or transportation. In contrast, sustainable

models of provision involve the delivery of integrated solutions, which recognise that

feedback loops can fostered between infrastructure sectors. For instance, that combustible

residual waste (non recyclable) can be used to generate energy and waste water can be

used as a source of biogas. These feedback relationships can be modelled and optimised

collectively, rather than treating infrastructure items as discrete service problems.

3.5.4 Location and scale of growth and economies of scale

It will be important for people responsible for developing housing targets to understand the

minimum thresholds associated with development as this might help identify additional

capacity to accommodate more growth if needed. The use of scenarios becomes critical

under circumstances where market confidence is already low or subject to uncertainty

making it less likely that a target level of growth can be met. Market uncertainty can easily

be transmitted to infrastructure providers who face a delivery risk if the anticipated level of

growth is not realised (although it would not normally be permissible to invest in advance of

a defined need for new capacity).

The deliverability of infrastructure is affected by the degree to which the scale of growth

meets the minimum economic size criteria used by a provider. Social and community

infrastructure typically requires a minimum population catchment to justify investment.

Phasing is, therefore, critical to ensuring that a development delivers the minimum

population needed to justify a new facility or upgrade economically. Unfortunately, different

types of infrastructure will have different minimum population requirements to justify their

needs. In these cases, the LPA must base its judgement on phasing by looking at the

expected socio economic profile of the development.

The situation with critical infrastructure is complicated by the way water, transport and

energy needs can often be met by spreading the load across a wider network, bringing in

resources from great distances. While this may resolve a problem in the short term, the

efficiencies of using remote networks can be lower, for example using the grid to deliver

power as opposed to higher efficiency district generation. Ultimately, these wider networks

may also be subject to the same problems, in this case, new electricity generation capacity

is needed to make up a projected national shortfall arising from the retirement of nuclear

and older coal fired power stations. These decisions remove control from the region and can

have a deleterious effect on the ability of the region to fulfil targets, for example, the likely

carbon intensification of the grid as a result of the construction of new coal fired power

stations to replace ageing nuclear plant.

Asset efficiency

Specific site allocations are material to the scale of infrastructure need (see section 4.1.4 on

Baseline Capacity Assessments). The need for fixed facility based infrastructure like

schools can be affected by the proximity to existing facilities where excess capacity has

been identified. Network infrastructure items such as transport can be affected by the flow

capacity of the infrastructure at the proposed point of ‘plugging in’ new development e.g.




spare carrying capacity may exist on the road network or grid at one location compared to

another location in the same Strategically Significant Cities and Town (SSCT).

The need for Local Authorities to show greater efficiencies in the use of their assets (The

National Improvement and Efficiency Strategy) may also provide a further driver towards

assessing where “headroom” exists in the physical infrastructure available in a locality.

Greater emphasis is now placed on co-locating services to achieve integrated delivery

between services formerly managed separately. The government is encouraging the

formation of Regional Improvement and Efficiency Partnerships (RIEPs) to facilitate this

innovation.

Accessibility

Accessibility is a key concern in planning infrastructure. Steps made to reduce the time and

cost required by people in new development to access an under utilised facility can remove

the need to provide additional capacity. A comparative cost benefit analysis should be used

to consider if improved accessibility can make existing infrastructure more effective.

Cost feedback into options

The issue of costing infrastructure is dealt with in Chapter 4. Information on the Whole Life

Costing model promoted by HM Treasury and further approaches to service model testing

are provided at section 4.4 and Appendix C.

3.5.5 Future proofing

Future proofing is a process whereby current standards are tested against the likely future

scenarios and decisions taken regarding the need to adopt more rigorous standards, such

as those relating to reduced energy or water use. Efficiencies can be gained by looking at

ways in which infrastructure needed to deliver one type of service can also support the

efficiency of another service.

Much of the legacy infrastructure built during the last two centuries did not have to meet

very testing performance standards because the resource base used to supply need was

relatively cheap and plentiful. As such it has been acceptable to use commodities like

energy fuels and potable water inefficiently without incurring any significant penalty.

The future is, however, likely to be dominated by shortages and expense as easily

exploitable resources and there is increasingly reliance on more expensive reserves and

alternatives. The use of more expensive alternatives will have an impact on the South West

economy’s ability to generate and retain wealth and place increasing strain on household

finances, especially those where basic commodities like energy, water and food account for

a relatively high proportion of total income.

Against this background, the relative efficiency by which infrastructure delivers services to

populations and businesses is likely to become a key issue that will impact on the ability of

areas to generate wealth and stability.

By its very nature, future proofing requires looking across a development to identify potential

linkages and set targets appropriate for them. This typically involves reviewing existing

targets and standards set within the planning process and outside it concerning waste,

localised energy, water, employment, environment and transport. It would be expected that

this type of work requires the development of an evidence base capable of informing

choices that cut across many of the professional disciplines that contribute to a final

development.

3.6 Working with utility providers on evidence base development

It is apparent that within the spatial planning field, the least-well understood infrastructure

sectors are the utilities; namely water and sewerage; and electricity and gas. These

industries are relatively complex in statutory make-up, spatial remit and their respective




regulatory frameworks. Understanding the structure of the industry, the nature of the

forecasting activities of these companies and the information they prepare as a matter of

course provides the basis for further engagement. Given that the challenges set by the

Code for Sustainable Homes and other strengthened environmental standards will impact

upon the decisions and operations of LPAs and utility providers alike, they are likely to

provide the motivation for more integrated working than has taken place in the past. For

example, the consultation of renewable energy issued by government in July 2008 on how

to meet the European Union’s 15% target for renewable generation across all forms of

energy consumption makes in more likely that a renewable heat obligation may be created.

It will be hard for the energy utilities to meet this target without a more intensive dialogue at

the local level.

This chapter of the advice note aims to provide a brief introduction to the structure of the

utility industries, and seeks to highlight matters of particular significance to improved

integration with spatial planning. Observations that are common to all the infrastructure

industries and may inform an approach to consulting companies are noted here:

• As a result of commercial sensitivity, some of the information held by utility companies

may not be available at all stages during the planning process. This could lead to a lack

of transparency and openness during dialogue.

• Utility infrastructure can involve long lead times and it is necessary for companies to

include costed infrastructure proposals within five year business plans. A process of

rolling engagement between the LPA and utility companies is likely to be of mutual

benefit.

• The geographical boundary of the utility providers does not correspond with that of

district, unitary or county administrative areas. As such, there may be benefit in LPAs

within a functional water supply area grouping together to discuss strategic

infrastructure issues with the appropriate company/s.

• Infrastructure networks face the challenge of renewal. For instance, sewer networks

have been built-up over several generations and many sewers are well over 100 years

old. A sewer’s age is a poor guide to its condition and performance and company

information on the state of a sewer may not always be complete. Gathering the data

necessary to make informed decisions on available capacity can therefore take time.

• In connection with the challenge of renewal, infrastructure networks are also facing

pressure to reconfigure. Much of the electricity grid infrastructure, built in the 1950s and

60s, is now nearing the end of its design life. Many argue that the opportunity to

facilitate decentralised technologies such as CHP should therefore be taken now while

ageing infrastructure is being replaced. The wastewater industry is presented with a

similar test in terms of how sustainable urban drainage systems should interact and be

maintained with more conventional systems.

Background information more specific to the two groupings of utilities is provided in the

following sub-sections:

3.6.1 Water and sewerage

The Water Act 1989 led to the privatisation of public water authorities and there are now 22

water and sewerage companies in England and Wales. Because the water industry is made

up of local and regional natural monopolies, and there is no national grid to transfer water

between networks, it has not been possible to stimulate improved performance and service

efficiency by providing customers with the option to switch supplier. The Government has

therefore maintained an economic regulator, whose role is to set price limits for customers

based on demanding efficiency assumptions. This encourages companies which perform

poorly to catch up with those that are more efficient.




Established in April 2006, Ofwat (the Water Services Regulation Authority) is the economic

regulator of the water and sewerage industry in England and Wales. Ofwat’s responsibilities

are to set limits on pricing and protect customer interests, encourage competition and

adequate investment within the industry, and administer and enforce the licensing regime

for water and sewerage companies set out in the Water Services Act 1991. Ofwat is not a

quality or environmental regulator for water; these responsibilities lie with the Environment

Agency, the Drinking Water Inspectorate and English Nature.

The key responsibilities of the water companies in relation to clean water supply are set out

in the Water Industry Act 1991:

• Section 37 – Every water supplier must develop and maintain an efficient and

economical system of water supply in its area.

• Section 55 – The water supplier must provide a supply of water.

In addition, the Environment Act 1995 specifies:

• Schedule 22, section 102 – It shall be the duty of every water undertaker to promote the

efficient use of water by its customers.

Water companies are required to submit two main forms of plan for scrutiny by government

agencies:

• 5 year business plans – every five years Ofwat evaluates business plans submitted by

each company to determine whether the proposed expenditure is necessary to deliver

required services, including security of supply, and therefore whether it will allow the

investment to be reflected in charges to the customer.

• 25 year water resource plans – Ofwat shares responsibility for ensuring companies

meet demand with its principle partner, the Environment Agency. The EA is responsible

for companies’ long term water resource planning, ensuring they have 25 year water

resource plans that will enable demand to be met.

Over the last few decades, the general principle underlying water management for

developments has been that it would be technically possible for water supply, sewerage and

sewage treatment to be made available anywhere. For instance, sewerage companies

have a duty to provide drainage, and have limited powers to stop additional flows into the

network even though these may overload it and cause flooding. It is widely acknowledged

that this model of infrastructure provision is outdated, as it does not account for the

potentially significant environmental, economic, timing and sustainability constraints that can

arise.

In terms of the linkages between spatial planning and infrastructure planning by the water

and sewerage undertakers, mechanisms for ensuring a degree of integrated planning have

improved in recent years. The Environment Agency has responsibility for long water

resource planning and also acts as a statutory consultee for both regional and local plans.

The EA is therefore in a position to ensure that, for instance, levels of groundwater

abstraction are maintained within environmental limits. Water Resource Plans with a 25

year timeframe correspond well with the strategic timeframe of the RSS and are important

as the provision of a new reservoir will typically take around twenty years from proposal to

completion.

As with water supply planning, planning for future wastewater discharges requires long-term

strategic appraisal. Where development is proposed in a river catchment close to its

capacity for accepting effluents, the treatment and discharge of additional wastewater will be

a concern. If development proceeds ahead of the sewerage system capacity and the ability

of receiving sewage treatment works to process increased flows, inadequate foul drainage

may result in pollution of the water environment. To overcome this, the sewerage undertaker

could transfer flows to another catchment for discharge, or treat the effluent to a quality that




is close to natural river quality and so limit impact on the water environment. Both solutions

would require a sustainability assessment. The gap in the current planning framework is

that there is currently no equivalent to the long term water resource plans, whereby

companies would be required to produce 25-year sewerage plans that consider strategic

options. This absence of long term planning within the wastewater industry is an issue that

Ofwat are currently seeking to address in consultation with the Environment Agency.

In terms of financing water and sewerage infrastructure, under current planning legislation

there is no requirement for developers to contribute to the cost of upgrading sewage

treatment works or of new water resource schemes and it can be problematic to secure

upgraded infrastructure in advance of development. There are several ways of allowing

developers to finance other network infrastructure (such as network extensions), but new

infrastructure, such as works upgrades, will be financed from general customer tariffs,

unless the developer and the statutory undertaker reach a bilateral agreement that

accelerates the process.

3.6.2 Electricity and gas

British Gas was privatised in 1986 and the electricity industry was privatised three years

later in 1989. The structure of the energy industry has more organisational layers than that

of the water and sewerage industry and therefore the economic regulator, Ofgem, is

required to promote efficiency and competition in a number of ways. The roles of the

numerous stakeholders are summarised below:

• Generators (electricity) and wholesale gas suppliers – Generators own and operate

power stations. The majority of Britain’s gas comes from offshore gas fields in the North

and Irish Seas. Since market reforms in 1996, wholesale gas has been traded like any

other commodity. Generators and wholesale gas suppliers sell to energy supply

companies (see below).

• Transmission Network Owner – Both the electricity and gas transmission networks in

England and Wales are owned and operated by National Grid.

• Distribution Network Operators (DNOs) – Distribution networks carry electricity and

gas from the transmission network to homes and businesses. The south west region is

served by three electricity DNOs: Western Power Distribution, Central Networks and

SSE-Southern (a map of DNO boundaries can be viewed at:

http://www.nationalgrid.com/uk/Electricity/AboutElectricity/DistributionCompanies/

Energy transportation businesses are natural monopolies so in order to encourage

efficiency and protect customers’ interests, Ofgem regulates the companies through

five-year price control periods. Electricity network companies raise revenue by levying

three broad types of charges on both generators and energy suppliers: use of system

charges to pay for network reinforcement and maintenance; connection charges to

cover the cost of new connections; and balancing charges, to meet the costs of

matching supply with demand.

• Energy Suppliers – Household and business consumers buy electricity and gas from

the energy supply companies. At present this competitive market is dominated by the

‘big six’ supply companies: E.on (Powergen), Centrica (British Gas), EDF Energy,

Scottish and Southern Energy, RWE (npower) and ScottishPower.

Beyond proposals for major infrastructure items such as power stations and gas storage

facilities, elements of the energy industry that are likely to be of greatest interest at the local

level are:

• the cumulative impact of grid connections on the transmission and distribution networks;

and




• the implications of decentralised generation on the form of the electricity distribution

network.

In relation to the first of these, an accumulation of connection requests can ‘trigger’ deeper

Grid reinforcements, to increase capacity at bottlenecks. By waiting for requests from

developers and suppliers, network operators are able to build an evidence base to show

planning authorities that new lines are needed. This approach also allows operators to

avoid investing in lines which may prove uneconomic at a later date. The disadvantage is

that long delays to delivery can result when the trigger point for the additional capacity is

reached.

The second issue relates to the form of the electricity distribution network and its ability to

integrate the decentralised generation technologies promoted by planning policy, such as

CHP and small wind farms. The distribution network can be described as resembling a tree,

with power flowing from the root and trunk and out along branches. There is little

interconnection between the branches and therefore maintaining reliability can present

technical challenges. Once decentralised generation is introduced, networks would need to

cope with voltage fluctuations and reverse power flow. Though the higher-voltage lines are

monitored and managed centrally, the lower-voltage parts are not. Most faults still require

on-site intervention to restore supply. If decentralised generation is to become widespread,

improved monitoring and control techniques are likely to be required, with more automation

and more interconnectivity between branches.

Engagement with utility providers will help LPAs to understand whether the matters raised

here are significant issues for and individual sub-region, and therefore whether spatial

planning policies and delivery timeframes need to be adjusted. The Taunton case study

provides illustrates the type of useful information that can be gathered through early

consultation.

Case study: Taunton - Urban Extension Study

Taunton Deane Borough Council commissioned Terence O’Rourke to complete an Urban

Extension Study (published November 2004). Utility infrastructure providers were contacted

as part of this study, and for strategic site at Monkton Heathfield, the following information

was gathered:

Electricity – It was confirmed that any expansion of the town within this area of search will

require some off-site reinforcement work. The area already accommodates 11kV overhead

power lines and these will need to be incorporated within future road layouts as part of any

expansion of the town. The area of search is also crossed by 33kV overhead lines and

these may need to diverted of laid underground.

Gas – The area of search lies at the start of the medium pressure gas network and close to

the intermediate pressure network. An urban extension here would potentially require no

reinforcements and minimal approach mains.

Water supply – Any large scale expansion of the town will have significant impacts on

water supply sources and on the distribution system in general, and considerable

reinforcement work will be required alongside any expansion. Detailed appraisals will be

required to model the water supply system once the scale and location of any extension has

been confirmed.

Sewerage – The whole of the Taunton area discharges foul sewerage to a single sewage

treatment works at Ham located approximately six kilometres east of Taunton town centre.

It was confirmed by the sewage company that the further extension of the town in a north-

eastwards direction will require a public sewerage connection to the Ham trunk sewer which

is located approximately 1 kilometre to the south. Making this connection will involve

crossing the Taunton to Bridgwater canal, the Penzance to Paddington railway and the

River Tone, which will be expensive and potentially difficult. As this connection is likely to




be a pumped connection, to avoid problems of septicity when foul flows are relatively small

during the early years of the town’s expansion, a short-term solution may also be required

alongside the long-term solution, perhaps entailing the use of lower capacity pumps and the

provision of twin or multiple small diameter rising mains in lieu of one of large diameter.

However, as many of the other local sewerage systems in this area of Taunton are already

at capacity, there are likely to be wide benefits resulting from this long-term connection if

delivered in advance of any expansion of the town.

Telecommunications – No problems were envisaged in terms of supplying

telecommunications to the area.

Case study: Yorkshire and Humber Assembly - Lessons from the Regional

Integrated Infrastructure Scoping Study

The preparation of a scoping study by Arup, to help develop a common evidence base and

approach to infrastructure in the Yorkshire and Humber region, involved engagement with

the full range of infrastructure providers.

Before an engagement strategy can be prepared a full understanding of the infrastructure

providers to be engaged is essential. It is necessary to ensure that all relevant

organisations for the spatial area to be covered are contacted. This may involve a number

of organisations, for example in the Yorkshire & Humber region there were 5 relevant water

and sewage treatment companies, 4 electricity distribution networks and 2 Gas Distribution

Network Operators.

In terms of the engagement process itself it emerged that there was considerable advantage

to be gained by engaging providers on an individual basis through structured face to face

meetings. This was found to enable a greater degree of shared understanding about the

planning objectives and therefore deliver more useful outcomes than could be gained

through telephone conversations or email correspondence. Workshops (of around 50-60

representatives in the case of Y&H) were beneficial for wider debates, particularly where the

regional assembly or local authority utilised its status and contacts to gather together the

relevant organisations. Water companies were generally well represented at workshops,

followed by electricity companies. Gas companies were less likely to attend workshops.

The benefit of a good strategy is that the process of dialogue with regional stakeholders and

service providers itself has the potential to build capacity in the region and assist in the

move towards a more integrated approach to planning for future growth, as was found in the

case of Yorkshire & Humber.

3.7 Formalising the vision –structures and plans

The government has introduced the Multi-Area Agreement (MAAs) as an opportunity to

work across shared priorities, while the Review of Sub-National Economic Development and

Regeneration has also strengthened the role of localities in securing economic growth. This

agenda requires looking beyond administrative boundaries to consider options for delivering

services across sub regions. The same issues apply specifically to choices for delivering

need and opportunities for achieving greater efficiencies in delivery.

MAAs are designed to enable local government to transcend traditional administrative and

structural boundaries. MAAs could deliver solutions to issues which may be more

effectively dealt with on a cross boundary basis (e.g. skills deficits, housing market

imbalances, transport links and other infrastructure projects). They are intended to be

aligned with, and to add value to, existing LAAs, whilst increasing freedom and flexibility for

local decision-making. The Local Government White Paper sets out the main intentions

behind MAAs: “We expect that development of MAAs will be voluntary. It will be for groups

of authorities and their partners to develop and deliver the MAA, and ensure democratic




accountability in the governance arrangements. They will be able to agree shared outcome-

based targets drawn from the national indicator set and local priorities, which will then be

reflected in each area’s LAA. Authorities and their partners will also be able to agree to pool

funding to be used across the sub-region. These funding streams will need to be managed

by a single accountable body nominated by the partners.”

MAAs may be delivered one of three ways:

• An entirely localized agreement between different local authorities and regional

partners, amongst which common strategies and funds are shared, and existing

flexibilities are more fully utilized.

• An informal local or central agreement, in which central government assists in

unblocking any barriers to more effective working as a partnership.

• A formal local or central agreement, in which central government grants more

extensive and detailed flexibility in exchange for clear commitment to specific outcomes.

In November 2007, Hazel Blears announced thirteen sub-regions interested in developing

MAAs as part of a process to enable them to increase competitiveness and quality of life.

The aim is for each to produce an MAA locally and with government by June 2008. Two

examples from the thirteen sub-regions are the Tees Valley Partnership and the West of

England Partnership.

Case study – Tees Valley MAA

The Tees Valley City Region consists of the five borough councils of Darlington, Hartlepool,

Middlesbrough, Redcar and Cleveland; a group of authorities who have a strong history of

partnership working through the Tees Valley Joint Strategy Unit, the Tees Valley

Partnership, Tees Valley Urban Regeneration Company and Tees Valley Living. In May

2006, the Secretary of State for Communities and Local Government asked the partnering

authorities to prepare a City Region Business Case (dated September 2006), which was

accompanied by a 10 year investment plan based broadly on the current availability of

resources. In due course the Tees Valley Partners were also invited to participate as one

the thirteen pilot sub-regions who would produce a MAA.

The Tees Valley Partners felt that they already had the basis of an MAA within the City

Region Business Case, and hence the proposed MAA includes four elements:

• Priorities – based upon the projects within the City Region Investment Plan;

• Resources – the projects have already been prioritised to complement expected

funding envelopes and delivery capacity;

• Governance – a new City Region Metropolitan Economic Partnership including strong

representation from the private sector (see Tees Valley Unlimited below); and

• Performance monitoring – indicators that draw on, rather than add to the emerging

national indicator set for Local Area Agreements.

The Tees Valley Partners feel that the MAA should draw as much as possible on the work

already in place in the City Region, but provide added value. The partners advise that, in

essence, 80% of what they wish to achieve can be done without an MAA; the MAA itself

facilitates the delivery of the final 20% through the following key areas:

• Comfort – for the Tees Valley in being able to say that their proposals have the outline

support of Government, and for Government to show that the City Region has taken

hard choices in prioritising our interventions to account for funding availability and

delivery capacity;

• Certainty – greater long term funding certainty which will facilitate greater private sector

leverage and provide agreed ‘limits’ for Government to work to;




• Flexibility – an ability to vire resources between projects and funding streams so that

overall programme (and cost) management is improved, and to share efficiency savings

between all partners;

• Buy in – a document that has a protocol, and is signed, committing parties to delivering

real benefits for communities, which draws Partners together towards a common goal.

It is proposed that, initially, the MAA would cover the three main funding streams in order to

keep it simple:

• the single programme from One NorthEast;

• transport funds through the regional funding allocation or direct from the Department for

Transport; and

• housing market restructuring funds through the Regional Housing Board/Department for

Communities and Local Government (DCLG).

It is intended that one authority will act as the accountable body for the resources in the

MAA supplemented with an agreement with the other four Tees Valley authorities specifying

the responsibilities of the accountable body and the other four local authorities in delivering

the MAA in their area. This agreement already exists in the city region for single

programme resources from One NorthEast.

With respect to governance, the MAA will be overseen by the Tees Valley Unlimited

partnership, the organisational structure of which is set out in the diagram below:

Source: http://www.teesvalleyunlimited.gov.uk/

Case study - the West of England MAA

The MAA will be based around the following key themes for the area: economic growth;

employment and skills; housing; transport; waste and climate change. These themes are

considered to be those where benefit could be gained from one or more of the following:

• Focusing the sub-region, its strategic partners, regional/national agencies and

government departments on delivery of the West of England’s key priorities;

• Securing commitment in advance of programmed investment in infrastructure, to match

growth in jobs and homes;

• Improving ways of doing business with strategic partners, regional/national agencies

and government departments, by reducing bureaucracy and complexity;




• Concluding specific agreements which link together the work of public sector

organizations and government, reduce certainties and speed up delivery, especially

around public development;

• Ensuring greater flexibility, powers and resources are devolved to the sub-region, in

return for delivery of agreed and measurable outcomes.




4 Undertaking Infrastructure Costings

Summary

A pragmatic approach will be needed to produce costings of infrastructure which uses

benchmarking information, until such time as feasibility funding can be secured to undertake

design work. This reinforces the need to treat the Infrastructure Delivery Plan as a “living

document” that can be updated readily as more detailed data becomes available without

prejudicing the formalised plan making process. At each stage of the development plan,

confidence levels are likely to increase making it possible to move from the use of

aggregate expenditure data to costs based on outline designs.

For each type of infrastructure, an assessment will need to be made as to which costing


• Expenditure approach.

• Reference case approach.

• Standards based ‘top down’ approach.

• Baseline capacity assessment ‘bottom up’ approach.

• Modelling / design approach.

These approaches can be supplemented with sensitivity testing to investigate the affects of

costing parameters, including inflation and “optimism bias”. An unviable unit cost should

trigger a review of the process used to derive the initial costs including, if necessary, the

exploration of alternative ways or contingency plans for delivering the same infrastructure

outcomes.

The Treasury promotes the use of the whole life costing approach, a technique that shows

the flow of costs associated with a particular type of infrastructure over its economic life

span. Accounting for ease of maintenance, the need for an upgrade in performance and

decommissioning are material considerations to the cost of an investment and can change

the ultimate investment decision. For example, a lot of sustainable construction design can

involve a higher capital outlay at the start of a project’s life, but potentially reduced expense

in on going operation and maintenance.

The realities of development planning and infrastructure planning are that they are more

likely to be out of step with one another than neatly aligned. Typically, the planning system

demands much greater detail than infrastructure providers are capable of delivering early on

in the process, because insufficient certainty exists for others to commit resources to in

depth design work.

A pragmatic approach will, therefore, be needed to produce costings of infrastructure which

uses available sources of information until such time as feasibility funding can be secured to

frontload design work. This reinforces the need to treat the Infrastructure Delivery Plan as a

“living document” that can be updated readily without prejudicing a more formalised plan

making process.

As the development plan process moves towards the specification of specific sites and

policies, infrastructure providers will have greater certainty within which to commit their own

monies to design works.

The process of producing an Infrastructure Delivery Plan is, therefore, iterative meaning it

will become possible to refresh the IDP with new costing information either from providers or

through funding available from other sources to firm up proposals.




4.1 Costing methodologies

For each type of infrastructure, an assessment will need to be made as to which


• Expenditure Approach

• Reference Case Approach

• Standards based ‘top down’ approach

• Baseline capacity assessment ‘bottom up’ approach

• Modelling/ Design Approach

4.1.1 Expenditure approach

This method is the fall back position that should be used when no other alternatives exist,

usually early in the planning process. This method makes up for the lack of information by

making a simplifying assumption that total budgeted sum spent on providing a particular

type of infrastructure is a reliable guide (adjusted for inflation) of what might be needed to

meet future need. Most government programmes allow for 2.5% inflation, which is separate

from construction cost inflation and land price inflation (e.g. inflation for major transport

schemes is currently running at around 10%).

Methods based on looking at the totality of expenditure on a particular type of infrastructure

should look to applying a cost inflator and producing a per capita expenditure figure which

can then reflect anticipated growth. This method is a stop gap method and only capable of

producing “ball park” figures. It should be the objective to substitute costs calculated this

way with output from any of the other methods if and when they become available.

Table 4 - Undertaking expenditure costing

This approach does assume that per capita costs for providing infrastructure stay constant

in real terms irrespective of the size of settlement. However, it is likely that once a

settlement expands beyond a certain point, the per capita costs of infrastructure change

because the projects tend to get larger and more complex to deliver.

4.1.2 Reference case approach

This method makes up for the lack of information by making a simplifying assumption that

comparable projects or how much has been spent on providing a particular type of

infrastructure in the past is an adequate guide to meeting future need. The absence of

design proposals for the costs for a new waste processing would be met by looking for a

comparable facility provided either locally or elsewhere (including outside the region if

necessary). Examples may be available through professional journals, specialist studies,

government databases on PFI projects. Reference case data can be a useful way of testing

other assumptions such as whether a project proposed now has made too optimistic




assessments of the costs and benefits associated with its development (see box on

optimism bias).

Dealing with “Optimism Bias”

Accumulated evidence from large reference case projects can help reveal potential

“optimism bias” where actual costs registered on these projects significantly exceed the

forecast costs. For instance, inaccuracy on costs has averaged 44.7% on rail (where

schemes have been reasonable well defined); 33.8% for bridges and tunnels and 20.4% for

roads. When inaccuracies on costings are combined with the errors in forecasting demand

for rail and road services, the cost/ benefit appraisals are factoring significant problems.

Academic study suggests that the source of inaccuracy seem less related to the quality of

data and more related to the psychological and political behaviour of the people involved

with project development. Forecasters and managers were seen to be deliberately

overstating the benefits and understating the costs in order to secure approval for their

project.

The problem has been given the term “optimism bias” which is a form of self deception as

opposed to deliberate lying. Research has suggested that optimism bias tends to be

systematic rather than random and therefore open to correction. Reference class

forecasting is a means of trying to correct for optimism bias by identifying a relevant

reference class of past, similar projects. The class must be broad enough to be statistically

significant but narrow enough to offer meaningful comparisons. The second step is to draw

lessons from the class in terms of statistically significant patterns. The third step would

compare a specific project’s assessment against the reference class to identify possible

sources of bias.

The results of the “optimism bias” survey referred to above related to schemes that were

fairly well defined. Clearly, the potential for underestimations of the funds required for a

scheme that is only at the conceptual or options appraisal stage will be even greater.

4.1.3 Standards approach

This approach is based on producing a bottom up assessment of need using a standard

cost yardstick like a build cost per square metre. Need expressed as quantities of floorspace

needed for community centres, doctor’s surgeries, day care centres, social day care centres

can be readily converted to a cost using the type of guides available through Quantity

Surveyors or through official benchmark costs used by government departments like

Department for Education and Skills. Examples of the standards approach are to be found

in the Supplementary Planning Documents and Development Control Guidance Notes on

Planning Obligations published by Local Planning Authorities aligned to advice issued under

ODPM Circular 5/05.

The standards approach can deal with economies of scale in providing social infrastructure

if it’s known that a minimum size of facility is needed to service a particular need.

Local Authorities still commission or deliver directly much of the social infrastructure within

their remit so the data needed to develop indicators is usually drawn from service planning

data held by departments.

Accessing data to establish standards for private services is, however, less easy to deal

with. Issues of commercial confidentiality arise when trying to access performance data

outside anything publicly available through regulatory bodies.

Standards are usually moderated to reflect the size of the development (where standards

are reduced for smaller sized developments reflecting relative impact); and “headroom”

(where requirements are reduced to reflect the availability of headroom in existing

infrastructure).




Standards are also moderated by type of development (e.g. smaller dwellings with fewer

occupants have a different service impact than larger dwellings). Type is usually

differentiated by bedroom size which is equated to average number of occupants:

Table 5 - Average number of occupants per dwelling (Swindon)

Many further examples of the standards approach exist in the South West. Swindon BC’s

Developer Contributions Guidance Note (Sep 2006) sets out the Council’s approach across

a variety of community infrastructure.

4.1.4 Baseline capacity assessments

The results of a standards assessment can be refined using baseline capacity studies,

which are better able to take account of specific local circumstances and forms of service

delivery. It is therefore good practice to encourage service providers to report on what

headroom exists in existing facilities; road networks and processing plants etc. Local

government is increasingly obliged to demonstrate efficiency savings so understanding

where scope exists for using what already exists; building on what is already in existence or

looking at complimentary co-location can help identify resource efficiencies that lessen

impact on the eco system and are cheaper and less disruptive to communities.

The diagram below illustrates the queries/stages of baseline capacity assessment that could

be followed:

1. Can need be met through existing headroom?

2. Can need be met by enhancing existing facilities or through co-location?

3. Can need be met on site?

4. Can need be met within the host community?

5. Need to be met remotely?




Figure 4 – Infrastructure provision and finance

Case study: Swindon – baseline capacity assessment of schools

Swindon Borough Council’s Developer Contributions Guidance Note (Sep 2006) utilises a

combination of the baseline capacity and standards approaches to calculate developer

contributions for education provision.

Swindon Borough Council used The Schools Organisational Plan (2006 to 2011) to identify

the number of educational facilities within the Borough operating at or beyond capacity, or

that are likely to operate at or beyond capacity during the life of the Plan – the Plan being

updated annually. This entails that decisions regarding

sufficient capacity are made with reference to the Net

Capacity Figures, as reported to the DfES in the Annual

Surplus Places Return, in line with the Pupil Level Annual

Census Data (PLASC). Empty spaces do not necessarily

mean there is excess capacity at a given school, as it is

generally accepted that schools should not operate at

100% capacity. The amount of surplus places calculated

also takes into account the impact of previous Planning

Applications processed within the previous two years.

The Council seeks a contribution from all developments

within catchment areas where schools are operating within

5% of capacity, or are projected to reach upwards of this

capacity during the period up to 2011, or have fewer than

6 actual places. Catchment maps such as that adjacent

are used to signify areas in which proposed residential development would result in a need

to contribute to primary and/or secondary education.




If residential development results in a school’s capacity being exceeded, a financial

contribution for the extension or upgrading of off-site facilities would be sought. If the size of

the development justifies the provision of new educational facilities, on-site provision may be

required. Single bed dwellings, bed-sits and temporary housing are not currently expected

to contribute, as the number of educational places resulting is marginal.

Contributions to Primary and Secondary School education are calculated using the following

formulae, which are subject to annual review in line with government guidance:

DfE’s Cost Multiplier x 0.98 Regional Factor + ICT £1800 = £ per place

£ per place x places per dwelling = £ per dwelling

The cost multiplier is the assessment made by the government of the cost of a school place.

The Regional Factor is an adjustment made for the local costs of provision.

Where the impact of a new development results in the need for a new school,

accommodation requirements are calculated by reference to the maximum DfES guidelines

as outlined in Building Bulletin 98 (Secondary schools) and Building Bulletin 99 (Primary

schools). Specifications also need to meet the government’s Extended Schools agenda and

best practice for the type of school, in addition to government advice on design and

environmental issues.

4.1.5 Modelling approach – larger infrastructure

Larger infrastructure projects that enhance an open network like highways,

telecommunications, energy grids or waterways present a challenge to the development of

appropriate standard, and baseline capacity assessments.

Network improvements change the behaviour of existing users as well as providing capacity

for new users, unless steps are taken to deliberately exclude them, such as through

targeted pricing. Without modelling the behaviour of the whole network to determine the

effect of new motorway junctions or electricity grid reinforcement, it becomes hazardous to

load the cost of network infrastructure upgrades on the last development that resulted in the

maximum capacity threshold of the existing infrastructure being exceeded. The impact of

network behaviour also has an important influence on the cost of the infrastructure itself as

the actual design performance of the infrastructure must account for all potential users. As

noted in section 3.2.2, it may therefore be useful to explore the implications of a number of

growth scenarios on network capacity, in order to understand when critical thresholds are

crossed and what the economy of scale implications are for the funding of a particular item

of infrastructure.

Case study: West of England – Greater Bristol Strategic Transport Study

The West of England differs from the majority of sub-regions within the South West for the

reason that it encompasses three designated Strategically Significant Cities and Towns

(SSCTs) rather than a single principal town or city. In this context, transport modelling has a

particularly important role to play in planning the balance of growth between the three

closely linked SSCTs of Bath, Bristol and Weston-super-Mare, in addition to considering the

distribution of growth within and adjacent to each of these centres.

The four authorities of Bath & Northeast Somerset Council (B&NES), Bristol City Council

(BCC), South Gloucestershire Council (SGC) and North Somerset Council (NSC) have

traditionally cooperated on transport planning matters; formally through the Joint Strategic

Planning and Transport Unit (JSPTU) and more recently through the West of England

Partnership (WoEP). The Greater Bristol Strategic Transport Study (GBSTS), undertaken

by Atkins, was commissioned with a brief to develop a series of integrated multi-modal




transport strategies over time, including detailed strategies for 2011 and 2016 and broader,

high level, strategies for 2021 and 2031.

Modelling work was initially undertaken for five spatial growth scenarios. None of these was

designed to be a distribution of developments that was expected to be implemented, rather,

they represented a range of different assumptions whose impact on the transport system

could then be estimated and assessed. From the transport analysis, it was possible to

assess the affects that each scenario would have on the performance of the transport

system and the types of measures that would be required in order to resolve some of the

resulting transport problems. This analysis formed an input into the selection by the West of

England by Partnership of a baseline preferred spatial distribution, which formed the basis

for the preparation of a preferred transport strategy that is now being taken forward through

the Joint Local Transport Plan.

The problem with the modelling approach is that it is expensive and sensitive to the lack of

detail that pervades the planning system early on the development planning process. The

transition from a broad location identified in the RSS to a specific site in a site allocations

development plan document can produce materially different outcomes on how

infrastructure is used.

Faced with this problem, attempts have usually been based on finding rationales for

apportioning a design cost to new housing as opposed to other users. The method is based

on determining what proportion of a large project should be allocated to new development

and what is reasonably attributable to an existing community.

A cost per new household is calculated by:

• apportionment between domestic and non domestic (where appropriate);

• forecasting the number of new households over the plan period;

• determining what proportion new households constitute of the total for the local

authority;

• calculate the share of the infrastructure cost attributable to new housing;

• dividing the cost by the number of new houses to establish a charge per house.

This method relies on someone calculating the cost of the infrastructure in the first place

and agreeing to it’s status as a shared benefit, such as a common definition of an existing

community if the benefit crosses administrative boundaries.

4.1.6 When to apply these methods

To gain an overview of infrastructure requirements for all categories, it will be necessary for

authorities to use a combination of approaches to assessment. This will involve gathering

existing information that is available and requesting/commissioning new studies that utilise

the broad approaches to assessment described above. As more accurate and detailed

information becomes available, initial costing exercises undertaken using an expenditure or

standards approach can be supplemented or replaced by that gained through a baseline

capacity assessment and quantity surveying.

Table 6 - Converting assessments of infrastructure needs to costs




An illustration of how the different approaches can be applied within a single sub region is

illustrated below:

Case study: West of England – pooling of information on infrastructure need and

costs

The West of England Partnership (WoEP) recently commissioned SQW to produce a

Delivery Plan for the sub region. The study provides an example of where information

derived through the standards, baseline capacity and modelling approaches has been

pooled to build up a comprehensive picture of sub regional infrastructure requirements and

identify where further work may be required. Table 7 identifies the sources of information

used for each category of infrastructure and the likely costing methodology.

In terms of next steps, the report advises that partners may need to undertake a

prioritisation process to determine where funding should be allocated when shortfalls arise,

in addition to a rolling review of identified infrastructure requirements.




Table 7 - West of England assessments of infrastructure need and costing




Table 7 - continued

4.2 Sensitivity testing and cost review

Sensitivity testing can be undertaken to investigate the affects of the following costing

parameters:

• Scoping of costs – what is included/ what is excluded.

• Assumptions concerning cost – as the development planning process moves ahead,

new sources of data will become available that can be used to refresh costing data.

Every attempt should be made to get design specific costing data and supercede

budget based costing data.

• Assumptions concerning the continuity of infrastructure budgets – typically

governments tend to cut capital budgets when faced with economic difficulties – these

effects need to be examined.

An unviable unit cost should trigger a review of the process used to derive the initial costs

including, if necessary, some of the core assumptions involved including the initial vision.

Alternative ways of delivering the same infrastructure outcomes may need to be explored

and evaluated.

4.3 Whole Life Costing

Costing of projects should reflect the whole life implications of infrastructure rather than its

immediate construction costs. Figure 6 shows the flow of costs associated with a particular




type of infrastructure over its economic life span. An initial spike in costs can be seen during

the construction of a project however there is a cumulative effect of spending funds to

maintain and upgrade the performance of infrastructure over its lifespan. The illustration

shows two key areas of additional expense related to upgrading performance and

decommissioning which collectively amount to a significant sum.

Accounting for the ease of maintenance; the need for upgrade in performance and

decommissioning are material considerations to the cost of an investment and can change

the ultimate investment decision. For example, a lot of sustainable construction design

carries a higher capital outlay at the start of a project’s life but potentially reduced expense

in on going operation and maintenance. Traditional solutions to infrastructure can carry a

reduced up front cost, but may turn out to be more costly to maintain and service. Irregular

and corrective maintenance requires certainty of public sector funding over a longer

timeframe so that funding ‘peaks’ can be accommodated.

Whole Life Costing has only been promoted by the Treasury relatively recently. Following

the “credit crunch” with the inevitable pressure to do the basic minimum, whole life costing

assumes critical importance. Reducing the capital cost of a development through a basic

compliance approach to design may bring a project within a reduced budget now but cost

much more over its lifetime because the running and maintenance costs are much greater.

Partnerships will need to understand the trade offs they will be making in allowing a reduced

development and possibly look to ways that the design; institutional and procurement

systems can facilitate retrofitting higher quality solutions when economic circumstances

allow.

Further detail on Whole Life Costing has been provided at Appendix C.

Figure 5 - Profile of costs associated with a project over time

4.4 Future proofing the cost of infrastructure

Until fairly recently, the price of resources needed to run and maintain infrastructure has

tended to be a marginal consideration relative to other cost items like staffing. Increasing

resource scarcity combined with price inflation is likely to change this perception. At a time

when economic growth prospects are likely to constrain budgets, energy or water hungry




infrastructure is likely to create a significant cumulative cost for the future. Infrastructure with

a life span in excess of 25 years is likely to experience the effects of unavoidable climate

change which may prompt a need for more costly corrective maintenance to meet new

performance needs or simply deal with the damage caused by more extreme climate

events. In addition, any move to price carbon dioxide emissions as a further deterrent to

climate change may mean operating costs increase alongside inclusion in Emissions

Trading Systems or the imposition of carbon taxes. Decommissioning may also incur

significant costs as the regulation of waste require certain actions to be taken in relation to

recycling and reuse.

4.5 Alignment with the Development Plan

The development plan is most likely to affect this stage by changing the basis of the costing

methodology. At each stage of the development plan, confidence levels are likely to

increase making it possible to move from the use of aggregate expenditure data to costs

based on outline designs.

Table 8 - Alignment of infrastructure costing with development plan production




5 Prioritisation & Monitoring of Infrastructure Needs

Summary

The ability to raise planning obligations provides LPAs with an important, discretionary tool

for raising finance towards infrastructure provision across a range of sectors. The inherent

flexibility of developer contributions are likely to place LPAs in the position of having to

promote a prioritisation process as the scope of demands on planning obligations increases.

Financial resources will rarely meet all the identified needs for infrastructure and there will

inevitably be a requirement to phase and prioritise projects across an area. As a result, a

qualitative framework and a decision-making body will need to be defined to prioritise

between geographical areas, categories of infrastructure and individual projects.

Considerations that could form the basis for prioritisation criteria include:

• Strategic fit with regional, sub regional and local strategies;

• Significance to the realisation of a wider vision;

• Deliverability/ robustness;

• Value for money; and

• Contribution to critical interdependencies & sequencing of development activity

At this stage in the process projects are being prioritised within the Infrastructure Delivery

Plan rather than being formally appraised for funding approval so judgements may be

subject to change when more detail becomes available. The Infrastructure Delivery Plan

will need to be managed and monitored carefully on a regular basis to ensure that the plan

is up to date, critical milestones are reached and key infrastructure is in place at the

appropriate time to enable sustainable development. A monitoring programme could

usefully incorporate a risk register, which can be used to highlight those ‘critical’

infrastructure items that are key to the phasing and delivery of strategic sites, but where

consenting, programme, finance and construction risks have been identified.

Financial resources will rarely meet all the identified needs for infrastructure and there will

inevitably by a requirement for the prioritisation of projects. This process is likely to involve

difficult decisions and a political dimension. The establishment of an up front framework for

prioritisation can however assist by providing a structure for political decision making and a

means for justifying the choices that are made.

As collectors of developer contributions and custodians of relevant policy, it is likely that

LPAs will need to promote a corporate prioritisation process as the demand on planning

obligations increases in scope. A framework for prioritisation will need to operate taking

account of three main elements:

• Prioritisation between areas - The Infrastructure Delivery Plan and prioritisation

framework will need to reflect the intended spatial pattern of growth and be presented

so that the infrastructure requirements for each area within a sub region, such as

particular districts of a city or growth corridor, are clearly defined. In this context,

infrastructure related to strategic growth corridors that are programmed to come forward

in the first five or ten years of the plan period are likely to form the initial focus for

investment.

• Prioritisation between types of infrastructure (where funding is not ring fenced to

certain types of investment) - Clearly, a balance needs to be struck between different

types of infrastructure needed to make viable places aligned to government thinking on

sustainable development. There may well be tensions between whether available




resources are used to fund visible social/ community ‘place making’ infrastructure in

preference to less visible, yet essential infrastructure like flood defences or transport.

• Prioritisation between projects – Within a particular category of infrastructure

provision, there are likely to be competing projects that will also need to be assessed

against set criteria.

In terms of establishing an approach to prioritisation, it may be desirable to consider

infrastructure in terms of its contribution to a holistic measure of outcomes, such as

ecological footprinting or quality of life indicators, rather than seeking to balance

performance measures peculiar to a particular type of infrastructure. Such systems will

however incorporate there own inherent weighting systems, which may not reflect the

starting position, specific infrastructure needs and main concerns of a given community.

5.1 Development of criteria for infrastructure delivery plan

prioritisation

A prioritisation framework should take cues from the visioning and infrastructure standards

development described in chapter 2 of this report. Further considerations that should form

the basis of prioritisation criteria include:

• Strategic fit with regional, sub regional and local strategies - Does the project ‘fit’

with the Regional Spatial Strategy and sub regional and local strategies. For instance,

those in line with policy would be ranked medium or high, whilst those not in line would

be ranked low or zero. The importance of criterion in the overall weighting will be

dependent on the status of the Sustainable Community Strategy, LDF etc. and the

timescale for the proposed project. Where possible, infrastructure providers should

demonstrate which policies their projects support and, where there is conflicting policy,

how this has been considered.

• Significance to the realisation of a wider vision - How significant is the project in

terms of achieving the vision set for an area. Proposals that clearly advance the

delivery of spatial priorities will be scored highly. Proposals that don’t fit will be scored

medium or low, whilst those that risk the spatial priorities will be scored zero.

• Deliverability/ robustness - Is the project deliverable in the required timeframe given

its stage of development and the nature and scale of risks associated with it? Project

robustness and risks should be clearly outlined by infrastructure and service providers,

including the dependability of the finance package, certainty over land acquisition and

feasibility of achieving consent and licences. Projects providing a robust viability and

risk assessment would be scored highly, proposals with partial information would be

scored medium and those with no information would be score low.

• Value for Money - Does the project provide value for money in terms of its cost relative

to the benefits realised in achieving housing and employment targets. In order to

ensure a judgement can be formed information will be required on:

• the overall cost of the scheme and how this may be broken down over time;

• why public sector funding is required;

• the funding gap and costs broken down by source and timing;

• key outputs that the project would help deliver e.g. jobs by type or housing units

(including number of affordable homes);

• ‘additionality’ delivered as a result of public funding

Projects providing reasonable cost and output information will be scored high, those

providing partial information or where elements of the information are uncertain would

be score medium whilst projects with minimal information would be scored low.




• Contribution to critical interdependencies & sequencing of development activity -

The prioritisation process should take account of a projects importance to delivering the

Vision. For example, a project may be relatively small in cost terms, but crucial in

facilitating a development opportunity or another interlinked infrastructure project. There

are likely to be many instances where an infrastructure item must be delivered before a

planning permission for development can be implemented.

Alternatively a project could change perceptions of an area, as a place to live, work and

invest. For example, the provision of a new educational facility could have a positive

effect on land value uplift in parts of the city thus enhancing the potential to raise

funding via the tariff or CIL.

Where a project can demonstrate that it is an essential part of the development process

or its programming is critical to the maintenance of the housing or employment build out

trajectories it should score highly, whereas projects that can’t demonstrate a causal link

should be scored medium or low.

At this stage projects are being prioritised within the Delivery Plan rather than being formally

appraised for funding approval so judgements may be subject to change when more detail

becomes available.

Case Study: Prioritisation – Milton Keynes Partnership

The experience of Milton Keynes Partnership offers an insight into the need for prioritisation

in the bringing forward of infrastructure projects. The total funding requirement for 15,000

homes was calculated to be £1.67 Billion of which the tariff was projected to contribute £310

million or 19% of the total (with nearly 90% of the tariff coming from housing). The balance

of funding consists of a range of funding sources including Local Transport Plan monies;

Local Authority main programme; Highways Agency and Health funds. The Partnership has

had to consider prioritisation in relation: firstly, the flow of available funds; and secondly, the

sector spread of funds contained in the business plan, which has been formulated to lock in

commitments from the various partners involved with the process which include the utilities,

the primary care trust, highways agency, land owners, community sector and the Regional

Development Agency alongside the Council.

Case study: Cranbrook New Community – prioritisation of s106 requirements

In the case of Cranbrook New Community, there are a wide range of competing demands

upon developer contributions to be secured through a s106 agreement, and early valuation

advice suggested that the burden placed on the s106 package would challenge the viability

of the project. In order to ensure that the final s106 agreement best represents the needs

and priorities of the new and existing community, East Devon District Council has

undertaken the following steps:

Firstly, the council progressed the preparation of their Supplementary Planning Guidance for

the New Community in parallel with the processing of the planning applications, providing

members with the opportunity to consider priorities in a separate forum to direct negotiations

with developers. The SPG process provided for the examination and prioritisation of key

infrastructure such as public transport, the railway station, roads, utilities and renewable

energy technology.

Secondly, the council have sought to involve key infrastructure and service providers

throughout the process. This includes the formation of a Service Providers Group, with the

following organisations represented:

• East Devon DC;




• Devon CC;

• East Devon PCT;

• Christians Together in Devon;

• Westcountry Ambulance Service;

• Devon Fire and Rescue;

• Community Council of Devon;

• Devon and Cornwall Police Authority; and

• Devon and Cornwall Housing Association.

Workshops were convened both prior to submission and during the processing of the

planning applications to allow service providers to examine opportunities for shared service

provision. Consultants were employed to examine the range of services identified by the

Service Providers Group and identify the built form, ownership and management options for

the range of services and facilities needed. The study looked at options for sharing

accommodation and scenario planning for delivery, such as RSL led public service

provision.

This process established a clear list of community needs, but commitments from service

providers to the ongoing funding and management of facilities were also needed.

Finally, when it came to prioritising demands on s106 funding, East Devon DC and Devon

CC jointly invited bids from service providers and scrutinised those bids over two days of

interviews. The process allowed both Councils to form a view of the relative merits of all the

bids and compile a priority list.

The priority list established through this process was turned into an early heads of terms

document that could be negotiated with developers and service providers and used to

examine options for delivery. Discussions included the extent to which private sector

funding would be made available for the provision of GP and dentist surgeries.

Opportunities for community service organisations to share a multi purpose building,

especially for the early years, were also explored.

5.2 Monitoring the delivery plan and risk management

The Delivery Plan will need to be managed and monitored carefully on a regular basis to

ensure that the plan is up to date, critical milestones are reached and key infrastructure is in

place at the appropriate time to enable sustainable development. This task is a corporate

role rather than belonging to any single department/ directorate and it is therefore essential

that the corporate services arm of the council takes ownership of the monitoring process

with the planning function remaining a key contributor.

As identified in chapter 1 of this report, to support the RPB in fulfilling its requirements under

PPS11, a database has been created to record regionally significant strategic infrastructure

projects. The database could provide the means for LAs to report progress on a rolling

basis. In addition to assisting the RPB in completing the RSS AMR Policy and Strategy

Implications Report, it will also provide the RPB with the information required to pursue

funding on behalf of Local Authorities.

A monitoring programme could usefully incorporate a risk register, which can be used to

highlight infrastructure items that are key to the delivery of strategic sites, but where

important programming, finance and construction risks have been identified. Procedures

will also need to be put in place to ensure that risks are monitored at regular (quarterly)

intervals in order for mitigation measures or alternative solutions to be put in place as early

as possible.




Risk should be presented in a way that allows senior managers to quickly appraise

themselves of progress and consideration should be given to techniques such as “traffic

lighting” that can be used to highlight potential problem areas.

6 Financing of Infrastructure

Summary

As the definition of infrastructure needed to support new development has expanded

beyond the basics of transport, water, sanitation and energy into social and community

facilities and green infrastructure, so has the range of funding options with which it is

beneficial for LPAs to be conversant. Within this advice note, funding derived from

developer contributions and alternative sources are presented separately (Chapters 7 and 8

respectively), however it is important that they are viewed as part of an integrated process

of exploring funding options. The types of funding streams that are available and the

responsibility for LAs to secure finance will vary between different infrastructure sectors.

Nevertheless, the exploration of linkages between sectors and infrastructure delivery

options may reveal opportunities to pool resources and achieve investment efficiencies.

There are two options that can provide a starting point for considering funding strategies for

an infrastructure item. The first shows infrastructure need aligned with funding, ranging

from cases where need is met through more efficient on-site asset management through to

larger scale asset investment. The second demonstrates that it is necessary to consider

both the need for up front “delivery finance” and “repayment finance”, potentially against a

backdrop of assessing the risk associated with securing each type of finance.

6.1 Background to the financing problem

Demand for new infrastructure has expanded beyond government’s ability to fund from

taxation alone and must be met by other sources of funding. This introductory section and

the next two chapters of this advice note deals with this issue.

As the “shopping list” of infrastructure needed to support new development has expanded

beyond the basics of transport, water, sanitation and energy into social and community

support and green infrastructure, so the need for funding has expanded both in terms of the

overall cost of servicing a community and the type of funding needed to sustain activity.

Basic services like water and electricity have been part of the everyday cost of living borne

by households and businesses, while other forms of infrastructure create new demands for

on going revenue support. These are by their nature “public goods” requiring support from

taxation. The Whole Life Costing approach reveals that these costs can be considerable

over the life of an investment.

The government’s response to the expanding shopping list and ageing infrastructure has

been to undertake a combination of accounting policy changes and look at ways of making

public finance stretch further. Expanding the role of private finance has been a critical part of

government policy, firstly, through extracting more funds from the development process

itself but also through contractual relationships established by central government for

participation at a local level in projects. As infrastructure projects are usually big and

immobile, the complexities of the contracts are usually extensive and need to guarantee a

rate of return for the private investor.

This part of the guidance note now deals with how these two areas of private finance can

fund infrastructure development. The issues dealt with are:

• Understanding the scope for contributions from development;

• Assessing current practice in the use of Planning Obligations and the emergent

Community Infrastructure Levy; and,




• Understanding the scope for contribution from other financial mechanisms principally

through public private contributions.

Given the pressures on finance, government has been increasingly interested in ensuring

that land owners and developers pay a fair share towards the costs of the infrastructure that

their projects create a demand for in the first place. The Kate Barker Review on Housing,

including the aborted Planning Gain Supplement (PGS) proposal, represents a recurrent

theme in public policy as to how the uplift in land price conferred by a planning consent can

be used to meet the ballooning costs of infrastructure, especially at peak points in the

property and construction cycle.

At the peak of the cycle, gains in development value have been significant especially in high

demand areas of the country but, arguably, the demand for infrastructure has also risen

significantly at the same time. Pressures created by unavoidable climate change; new

models of energy delivery; concerns over water shortages and the desirability of a

knowledge/ cultural economy have created additional demands. The latter of these can be

seen as particularly important in areas that are seeking to regenerate their economies and

diversify away from failing industries. As such there is often a significant mismatch between

the scale of infrastructure and what the development process is capable of realistically

delivering, hence the importance of the prioritisation process outlined in chapter 5.

The funding gap will be exacerbated by certain situations. For instance, while some

projects benefit a wide geography, well beyond that required to service new development

alone, there are few local funding mechanisms available that will allow councils to tap into

these additional beneficiaries. The UK system of local government finance is highly

centralised and limits scope for generating funds to support infrastructure from existing

residents and businesses. Equally, few opportunities exist to extract funding from the tourist

visitor to the South West whose primary contribution will be through general national

taxation e.g. value added tax. Those options that are available are discussed in Chapter 8.

Without the financial freedoms and flexibilities found in other countries with developed

economies, the focus of the debate has centred on extracting more value from the

development process to fund infrastructure. However, this mechanism is uniquely unsuited

to funding the upfront creation of new infrastructure that is often essential to creating viable

communities. The largest flow of receipts is likely to occur after the peak expenditure

requirement creating a cash flow deficit, funded by either borrowing or using positive

cashflow from another source. In a falling market, a further risk is introduced in the form of a

potential threat to the forecast value being realised from development. Various solutions to

the timing problem have been developed, including the establishment of a fund designed to

meet an infrastructure need in advance of funds flowing from the development itself. In the

South West, this model has been made available to LAs through the establishment of a

Regional Infrastructure Fund (RIF), which will be replenished from receipts downstream of

the initial investment (see section 8.3 for more details on the RIF).

Within this report, funding derived from developer contributions; the use of planning

agreements/ CIL to capture that benefit and alternative sources are presented separately

(Chapters 7, 8 and 9 respectively), however it is important that they are viewed as part of

an integrated process of exploring funding options.

6.2 Matching finance with type of infrastructure need

The types of funding streams that are available and the responsibility for LAs to secure

finance will vary between different infrastructure sectors. Nevertheless, the exploration of

linkages between sectors and infrastructure delivery options may reveal opportunities to

pool resources and achieve financial gains. Figure 7 shows infrastructure need aligned with

funding, ranging from cases where need is met through more efficient asset management

through to larger scale asset investment.




Figure 6 - Infrastructure provision and finance

Where an infrastructure need can be met through using headroom in existing assets more

efficiently, the use of existing assets could be met through Capital Maintenance Funding.

As the requirement moves beyond the utilisation of an existing asset (options 1 and 2 in

Figure 7) towards asset investment, the financial options changes. “On site” infrastructure

(option 3) and that related to new development is likely to be associated with the use of

planning obligations where there is a clear relationship between the additional need being

created and the development itself. This in itself presents options as to whether a developer

should be required to construct a building/facility, or provide a financial contribution towards

provision by the infrastructure or service provider.

As the scale of infrastructure need increases (options 4 and 5), the funding toolset changes

to include additional more complex financial mechanisms. Infrastructure related to the

general functionality of a community rather than a specific site may be better dealt with

through a tariff/Community Infrastructure Levy. Larger scale propositions may also be

considered appropriate for complex public private partnerships, where scope of investment

is more likely to justify the overheads involved in establishing them. More scalable vehicles

focused on specific sectors include Local Infrastructure Finance Trusts (LIFTs) and Local

Education Partnerships (LEPs), which are described in section 8.2.1 of the advice note.

6.3 Developing a framework for considering funding options

A business planning approach to the financing of infrastructure assumes a systematic

approach to the consideration of funding options. Table 9 below provides a framework that

an infrastructure planning group may find useful. Firstly, the diagram distinguishes between

those funding sources that are able to provide the “delivery finance” that will enable

construction of an infrastructure item to commence, and the “repayment finance” that will be

required to service loans available through the RIF. Secondly, the diagram lists potential




funding sources, with the lowest risk options on the left and higher risk alternatives to the

right. The funding options included here are represent only a few of the options which might

be included, which will vary depending on the infrastructure sector being considered.

In the example below, government grant is the preferred option, as it is low risk and will not

require arrangements for repayment finance. If grant is not available, then the up front

financing of a project through the RIF is preferred to private finance, as the performance

requirements on loan payments will not be as demanding. When it comes to considering

repayment finance, contributions generated through an asset backed vehicle are shown to

be preferable to conventional developer obligations, as the LA will have greater control over

development outcomes. The revenue that would be generated through congestion charging

is shown as the highest risk option in this case, as there may be legislative and political

hurdles to overcome before a charge could be implemented.

Table 9 - Funding options framework




7 Understanding the Scope for Developer

Contributions Towards Infrastructure Funding

Summary

Optimising developer contributions is a crucial aspect of developing an infrastructure

funding strategy. The scope for securing planning obligations from development to fund

infrastructure is determined by the “residual value” left in a development after deducting

costs from the gross value of a completed development. There are a number of

development appraisals and residual valuation models in the market, which can be used to

estimate what would constitute a viable developer contribution towards strategic

infrastructure. Key points to make with respect to residual valuations are:

• The strength of a residual valuation can only be as good as the inputs and assumptions

used to derive the figure. Due to the level of variable input assumptions, small changes

in estimates can affect the residual value. Seeking up to date professional advice at

appropriate times is essential to maximise contributions and to mitigate the effects upon

the viability of schemes so that development will be brought forward.

• Gross Residual Land Values that result from planning permission being granted can

vary substantially between cities and towns, when compared to the relatively small

variations in the existing use value of greenfield land (i.e. agricultural land). Generally

speaking, developments in high value, high demand areas can sustain higher levels of

contribution. Peripheral areas often contain less attractive development opportunities

which derive less value. This factor must be taken account of during the design of a

planning obligation policy, tariff or Community Infrastruture Levy (CIL).

• A developer is rarely able to control the overall costs of development and, as such, will

have limited ability to extract more value to pay for increased contributions to strategic

infrastructure, particularly during later stages of the process. Ultimately, therefore, land

value will provide the main element for negotiation and the land owner may be passed

the majority of affects for strategic infrastructure contributions via a lower land price.

• Benchmarks for what constitutes an acceptable ‘receipt’ for the landowner will naturally

vary from place to place. The current move towards the establishment of local tariff/CIL

approaches requires new benchmarks of acceptable uplift in land value to be set,

however these value levels are not yet understood and will only materialise in the

fullness of time. Infrastructure contributions should be a known quantity so that

developers may include these within appraisals to form the basis for negotiations with

landowners.

There is an onus upon LPAs to establish robust, costed lists of infrastructure and associated

planning obligations policy, in order that the costs of strategic infrastructure items are

accounted for in land markets.

7.1 Residual Values and the funding of infrastructure

The scope for securing funds from the development process to fund infrastructure is

determined by the residual value left in a development after deducting costs from the gross

development value (GDV). Residual valuation techniques are usually employed to

determine how much a site is worth to a developer. However, the residual valuation

approach can be adapted to include land values as another cost to be met out of the gross

development value achievable on a site. The residual value becomes the amount of funds

available to meet all forms of infrastructure including on site requirements like affordable

housing as well as off site provision.




The amount of funding is therefore highly sensitive to changes in the assumptions over the

gross development value; developer profit; professional fees; construction costs and

discounting rates used in the calculation. Areas of weak demand would be expected to

yield a smaller residual value available for infrastructure. The residual value would also

need to be split between competing uses of the funding – on site versus off site

infrastructure.

The scale of residual value essentially acts as a cap on expected development contributions

towards infrastructure. Increasing residual values can only happen by testing initial

assumptions on development costs but this may not be realistic. Developer profit must be

maintained at a reasonable level if sufficient incentive is to be left to developers.

Clearly the viability of a scheme is a subjective term which can be argued from contrasting

points of view. As such, Knight Frank have adopted a rational approach to undertaking

indicative residual appraisals within this Advice Note, providing a spectrum of values, with a

base figure set at the existing use value and an upper value set at the assessed Gross

Residual Value. Through this range it is possible to observe the potential contributions

towards strategic infrastructure.

It is considered that a suitable definition of viability for the purpose of this study is the

attainment of a site value sufficiently in excess of the current use value in order for a

landowner, acting reasonably, to release the land for development. The reasoning behind

this approach is that the adopted valuation inputs are considered relatively fixed and in the

main outside of the control of the expected market norms. Therefore it is logical to conclude

that further contributions, over and above those already known and accepted within the

market place, will derive from a lower land purchase price.

This section does not propose to debate what constitutes a “sufficient excess” from the

perspective of a landowner, as this may differ vastly in reality, and will vary between

different geographic areas. What this chapter does show is that in some cases there may

be vast increases in land value. This increase has the potential to contribute towards

strategic infrastructure.

7.2 Utilising Residual Appraisals

7.2.1 The Residual Valuation Model

A residual land valuation model can be broken down into three main parts;

Gross Development Value (GDV) – the aggregate value of capital receipts, i.e. sale of

units, assuming the development is completed and 100% sold at today’s date at current day

values.

Costs – These are total costs incurred by the developer through out the construction,

inclusive of both on and off site works, contingency, professional fees, acquisition costs,

sales, marketing, legal and finance costs to complete the scheme.

Profit – This is a calculation of reasonable return for the risk the developer incurs

throughout the process of development and the opportunity cost of the capital invested.

These components create the inputs to a simple equation;

GDV – (Costs + Profit) = Residual Land Value

7.2.2 Variables

There are a number of fundamental variables which influence the output of a residual

valuation. Fully understanding the effects of these is important and requires careful skill in

determining these range of inputs.




Capital Values

There are a number of methods for calculating the capital value, or GDV, of a development

opportunity. The most commonly used are the comparative method and the investment

method.

The comparative method is most widely used for assessing the value of residential property

and is suitable due to the high volume of market transactions. This method adopts a review

process, assessing recent or current sales figures of both new build and second hand

property within the local market. This evidence is then compared against the subject

scheme to form an opinion of value, taking into account inter alia, size, location, aspect and

specification.

In the absence of relevant comparable evidence alternative methods for valuation must be

employed to derive reliable information. A typical alternative which is widely employed in

assessing the value of commercial property is the investment method. This derives value

from the rental income of the subject scheme, on the basis that most commercial properties

are often leased/let. The resultant rental stream can be capitalised, which calculates the

value of the property in the following way:

Net Rental Income per annum x Capitalisation Rate = Capital Value

Net rental income per annum can be assessed through a review of comparable commercial

properties within the vicinity of the subject, usually expressed on a pro rata area basis.

The capitalisation rate is a calculation of risk/return which is derived from the time frame

assigned to the rental stream and a risk factor, or yield, which is an expected investment

return (%) for the capital to be invested. The yield is based on comparable properties in the

vicinity of the subject. The higher the yield, the greater the expected risk, and therefore the

lower the capital value.

The most difficult and subjective variable within the residual valuation is capital value, or

GDV, of the scheme. This is due to the multitude of influencing factors.

Costs

Ascertaining project costs can be a complex and lengthy process. Albeit, indicative costing

information can be gathered from a range of sources to formulate a general view. Sources

such as the Building Cost Information Services (BCIS) or Spon’s Architects' and Builders'

Price Book 2008 gather a wide range of data throughout the country with a view to providing

up-to-date general build cost information.

It must be stressed that in 2007/2008 build cost inflation is rising between 6-7% per annum,

therefore information must be treated accordingly. It should never be assumed that a rise in

build costs could be absorbed by a rise in capital value for the scheme.

Development costs are directly related to the type and complexity of the development

scheme. For example, low level traditional housing tends to derive lower costs per sq ft

than that of high rise buildings due to the added complexities of construction and more

expensive building materials. This is also true of the required levels of sustainability and is

notable throughout the increasing levels of the BREEAM Code for Sustainable Homes.

Cost can often be managed through effective phasing of the subject scheme. Cashflow

modelling, a staged or phased construction period can act to reduce the burden of debt,

large capital expenditure and risk by ensuring that there is not only an outflow of cash but

also a inflow as the scheme sells. Commencing development when it is specifically required

demands careful planning to achieve best value and can often lead to large savings across

a scheme.

A range of costs are also derived from developer contributions, including Section 106

agreements, highways agreements and affordable housing. The effect of these costs has a




range of impacts depending on the requirement and also the expected implementation of

the contribution. Flexibility and negotiation in this area is often required to ensure

development contributions which are acceptable to all parties.

Another important area to be regarded is the difference in cost related to development on

Greenfield or Brownfield land. In some cases a Brownfield site can have nil or negative

value due to the past uses which incur high remediation costs to facilitate development.

Contrastingly, Greenfield sites may have limited or no contamination issues, however their

placement, often at the edge of settlements, requires enabling contributions towards

infrastructure to access the site. These “abnormal costs” all affect land value.

Another area of cost amounts from the requirement for finance from funding institutions and

third parties. This cost can derive from a variety of complex arrangements including

traditional senior debt funding, mezzanine funding, private equity clubs, development

management and joint venture funding among others. Each in turn accrue related costs

payable throughout the process and are often tied to the current Bank of England base rate.

Profit

Scheme profit is seen as a cost which must be included within a residual valuation. It is

widely recognised that development would not occur without acceptable profit for the

developer. Acceptable profit is to be assessed on an individual scheme basis and is a

reflection of risk. Risks include;

• The estimated time to complete the project

• State of property market

• Certainty of assumptions and information

• Potential pre sales or lets

• The level of competition in the region

A developers profile is also an important attribute in determining required profit, for example,

for a small development a local builder/developer may require a profit of 10% - 15%

whereas a regional builder, with greater overheads, may require higher returns. In

considering additional contributions to infrastructure in this advice note, the aim is to set

profit at a fixed but acceptable level to indicate what additional element of cost could

theoretically be borne by a development. The previous equation then becomes:

GDV – (Costs + Profits) = Residual Land Value + CIL

This equates to the Government’s assumption that any CIL would be deducted from the

land value.

7.2.3 Sensitivity Analysis

Sensitivity analysis is an important part of any development appraisal and ultimately seeks

to determine how sensitive the viability of a project is to changes in one or more of the

variables. This in turn helps to determine which are the most important and sensitive

variables which may threaten viability. It is possible to minimises exposure to this through a

number of means including; securing fixed build contracts and fixed interest rates, however

premiums are often paid for this level of security.

7.2.4 Strengths and Limitations of Residual Valuation

Residual valuation is a widely recognised valuation technique, used by a range of property

professionals. It’s over arching strength lies in the ability to model a variety of scenarios to

suit different circumstances, with the ability to have complexities built into the process as the

development evolves. Under the control of a suitable professional, with relevant knowledge

and expertise, a residual valuation can be produced with a high degree of accuracy.




The strength of the residual valuation can only be as good as the inputs and assumptions

used to derive the figure. Due to the level of variable input assumptions, small changes in

estimates can affect the residual value. Therefore the process is ultimately dependant on

the professional expertise and judgement of the valuer.

7.3 Residual appraisal scenarios

There are a number of used and adopted appraisal packages in the market which all have

their pros and cons. Examples include:

• the Three Dragons model, which has been adopted by LPAs in South East Dorset to

ensure a consistent and equitable cross-boundary approach to securing developer

contributions;

• the Economic Appraisal Tool developed by GVA Grimley and Bespoke Property Group

on behalf of the Housing Corporation; and

• the Greater London Authority Affordable Housing Development Control Toolkit

These models are focussed on testing development viability with a view to isolating finance

that could be used to contribute towards affordable housing provision. Nevertheless, the

same basic principles will apply to an assessment that sets out to understand what

contributions could be made to the following three elements of a s106:

• affordable housing;

• on-site infrastructure; and

• strategic infrastructure.

Knight Frank have developed a bespoke residual appraisal model that is used to evaluate

and scenario test the viability of large, phased, mixed use development proposals. Like

other models this is based on a predefined take up rate on a current cost, current value

assumption.

To exemplify the workings of a residual valuation and it’s application to achieving community

gains, an approach of scenario testing has been adopted. In this way the intricacies of the

residual approach can be realised across different locations. We have created 4 scenarios

(A,B,C and D) which have been chosen to reflect a range of characteristics which lend

themselves to comparison, for example high value/low value and greenfield/brownfield.

As previously discussed a residual land valuation comprises three main parts; GDV, Cost

and Profit. For the purpose of these valuation examples a residual valuation has been

produced for each scenario with a view to analysing this against the existing use value. In

this way the value above existing use can be observed and the purchase price in terms of

viability can be assessed. This process takes the following form:




The final stage of the appraisal will provide a sensitivity analysis to demonstrate how

changes in land value, across the spectrum of potential purchase price scenario’s, affect the

amount of funding received for strategic infrastructure.

For the purpose of our assessment of Gross Residual Land Value, we have assumed that

the site is not in the ownership of a developer yet, but that negotiations are underway with a

current landowner. This assumed deal is “conditional” upon receipt of planning, therefore

the offer price is to be completed once the developer has obtained planning permission.

Therefore within this process S106 agreements can be drawn up and a the strategic

infrastructure requirements subsequently negotiated.

An explanation of this takes is shown in Figure 7.




Figure 7 - Viability analysis explanation

In this example it is considered that a developer could purchase the land for up to a

maximum of £3 million per hectare, this is therefore the combination amount of both price of

the land and contributions towards strategic infrastructure.

In terms of development scheme viability it is considered that the land may be sold for

development between the range of £12,000 and £3,000,000 per hectare.

We have considered it rational that if the site value is in reasonable excess of the current

use value there would be incentive to release the land for development. This however is

highly subjective and benchmarks which may be deemed “acceptable” by a landowner will

naturally vary from place to place.

A clear issue in relation to the expectations of a landowner is with regard to the historic

values that may have been achieved in the absence of additional developer contributions

towards strategic infrastructure. The balance of viability and landowner expectations is one

which will be required, over time, to shift in order to achieve these increased infrastructure

contributions. As such it is therefore of great importance that LPAs develop and adopt a

robust approach to infrastructure contributions and be prepared to demonstrate the true

costs of infrastructure at Inquiry if necessary.

Due to the untested nature of strategic infrastructure contributions as currently proposed,

and their effect upon residual land values, there is currently no empirical data that can be

utilised as a benchmark. Our valuations provide a value as if the development was

constructed now and sold at “today’s” values, ignoring the effects of the future uplift in




contributions that will permeate land markets over time. A range between existing land use

and assessed Gross Residual Land Value is subsequently provided to demonstrate a

possible range of contributions.

7.3.1 Sources of Information and Key Assumptions

Property Values

In the instance of residential property the comparable method of valuation is a widely

recognised technique. Quality of information is of paramount importance and requires an

objective and skilled approach to ensure a full appraisal of all the variables.

There are a range of information sources including the Land Registry, which collates sales

prices; property websites, including Rightmove and Prime Location and general area

profiling from websites such as Up My Street.

For the purpose of our examples we have pursued Land Registry data, to provide a

spectrum of property prices across the region and sub regions. From this point we have

created a profile for each assumed area, with our final adopted values derived from the

example prices provided below.

Table 10 - Property prices across the region (March, 2008)

Property value is also directly related to the type and size of the property. We have

therefore made assumptions, based on our experience, as to a realistic development

schedule of unit sizes and types.

Density is a primary influence in the value of a scheme. Clearly density is influenced by a

range of factors directly relating to the sites constraints. We have adopted current accepted

density rates as described by local authority planning policy, with a view to derive a

maximum use value. This is on the basis that the higher this value the greater the ability for

the development to contribute to strategic infrastructure as costs related to development

remain relatively static and do not generally rise pro-rata.

Costs

Initial cost estimating is prepared once the basic outline of the development scheme has

been established and determined in broad outline. This is normally prepared by a Quantity

Surveyor with the main objective being to anticipate the overall build costs based on the

best information available.

Build cost information can be gained from a range of sources. These mainly rely on the

costing information gained from similar schemes, and provided on a per unit area basis, i.e.

£/sq m/ft. This information is collated by such organisations as Building Cost Information

Service (BCIS) or Spon’s Architects and Builders Price Book, and can be applied with

varying degrees of accuracy depending on complexities. Regional indices can be applied to

the average costs to reflect the availability of labour and materials. The difficulty clearly lies

with the lack of precise information, therefore sensitivity testing is often required to analyse




fluctuations in build costs to show the best or worst case results. Build cost information has

been provided by BCIS, dated March 1st 2008 and index linked for the South West Region.

Another important area that requires careful consideration are assumptions relating to

professional fees. Development projects can require a wide range of professional advice

both before and during construction. Experts can include Architects, Ecologists,

Environmental Specialists, Geotechnicians, structural engineers, planners among many

others. The requirement for this expertise is in direct relation to the constraints and

complexities of the site and can have a large impact on the overall cost of a development.

In formulating our view of the cost of professional fees we have utilised our knowledge of

the process of development and applied this to the individual scenario examples.

Initial costing for community benefits, such as Section 106 agreements and affordable

housing requires a high level of understanding a skill. These attributes are often bespoke, it

is therefore prudent to value a scheme according to worst case assumptions. The range of

usable information in forming these assumptions is varied between authorities, with some

offering online matrices and programmes to calculate the expected contribution amounts. In

formulating our opinion of these costs we have endeavoured to liaise with the planning

authority for each scenario to gain a realistic view of likely contributions. In the absence of

information we have, through necessity, made assumptions based on our experience.

Costs relating to infrastructure and services are area and site specific. In our examples we

have assumed there to be acceptable access and services to the site and have made

allowances for internal infrastructure and services to be provided. We have adopted an

average across all the scenarios, which we consider appropriate, however this should be

treated as indicative only. In reality individual site costs may vary.

Land Values

Land values as discussed above are influenced by a range of variables. Ultimately the

varying effects of these will impinge on value of the site and consequently the proportion of

the overall Gross Residual Land Value which can be provided for strategic infrastructure.

As a summary, these influences may also include;

• Required dwelling density and mix

• Planning restrictions

• Contamination

• Locational factors

• Current Infrastructure

• Topography

• Ground Conditions

• Archaeology

• Supply and demand

• Competition

• Accessibility

• Availability of labour and materials

• Financial environment

• Historic use

In order to assess the viability of each individual case we have undertaken a review of

existing use value. In most examples average land values for agricultural land in each

region have been assessed using the comparable method to provide a base value. This

has been largely informed by the RICS Rural Market Survey (H2 2007) and our in house

databases. In the instance of our Brownfield land example we have assumed the land to

have a nil value due to potentially contaminative past uses.




7.3.2 Appraisal Scenarios

In order to provide clarity to the appraisal process it is important to derive meaningful

comparisons between each of the scenarios. As such, scenarios A, B and D have been

treated in the same manner to achieve a clear differential in the ability to raise contributions

due to locational factors. In addition scenario C has been used as a Brownfield case study

to exemplify the additional variables imposed by this type of land.

As with all models of this nature, the Knight Frank viability model is only as good as the

model inputs and there will inevitably be a trade off between parsimony and simplicity. It is

an abstraction from reality and it must be recognised that all models therefore have

limitations. For example, in reality development costs might rise faster than values over

time, or vice versa; the longer term cyclical nature of unregulated property markets similarly

cannot be predicted and therefore a current cost, current value approach must be adopted.

7.4 Scenario residual appraisal results

7.4.1 Scenario A

It assumed that for scenario A the proposed development is to be part of an urban extension

to a city in the northeast of the region. As such this is a 23 hectare Greenfield site with a

previous agricultural use. It is assumed that there is a relatively flat topography, with limited

site constraints such as flooding, ground stability and contamination. Access to the site is

reasonable, with adequate roadway infrastructure available for construction vehicle access.

The development proposal comprises a mixed use scheme, with 1,000 residential units at a

density of 56 dwellings per net developable hectare. The commercial/retail element is

assumed to include facilities such as local shops and a number of small offices.

It has been assumed that the development has a mixture of houses with a small element of

apartments. As a focus, three bedroom properties make up the highest proportion of

properties. This scenario has the lowest value profile of the four examples which is due in

general to a high supply of new build properties which has not been met by subsequent

demand.

Separate assumptions have been made with regard to S106 agreements and Highways

agreements with a total contribution of £7,303,500. In addition affordable housing has been

has been assumed to be at 30% of the total units.

Separate assumptions as to commercial value have been made through a review of

comparable properties and using the investment method of valuation.




Cashflow Summary

As described earlier in this document the assessed Gross Residual Land Value (GRLV), as

provided above, is the maximum value of the site given our scenario and variables. This

therefore provides a price ceiling or “pot” of money which can be paid to the land owner and

the Local Authority for strategic infrastructure contributions.

Viability Testing

To express a possible negotiation scenario we have assessed the existing use value (as

£12,000 per hectare, as agricultural land) in the second table (below), to show a spectrum of

price to be paid for the land up to the assessed GRLV. This spectrum therefore ranges

between £12,000 and £1.8 million per ha. If we assume that the GRLV is the maximum

possible land value for the site, as this value is decreased through the spectrum towards

existing use value (to the left), there is a surplus which may provide contributions towards

strategic infrastructure. Please refer to Figure 8 for further explanation.




As discussed earlier, viability is the attainment of a site value sufficiently in excess of the

current use value in order for a landowner, acting reasonably, to release the land for

development.

For example, if a land purchase price is negotiated to £1,500,000 per hectare there is a

surplus of £300,000 per hectare(£1.8 million less £1.5 million), equating to a net strategic

infrastructure contribution of approximately £7,000,000.

Whether a lower purchase price can be negotiated in order to provide for strategic

infrastructure contributions is a matter to be treated on a case by case basis.

7.4.2 Scenario B

It assumed that for scenario B the proposed development is to be part of an urban extension

on the periphery of a city in the west of the region. As such this 23 hectare Greenfield site

has a previous agricultural use. It is assumed that there is a relatively flat topography, with

limited site constraints such as flooding, ground stability and contamination. Access to the

site is reasonable, with adequate roadway infrastructure available for construction vehicle

access.


density of 56 dwellings per hectare. The commercial/retail element is assumed to include

facilities such as local shops and a number of small offices.



properties. This scenario has the 2nd lowest value profile of the four case examples. This,

in general is due to lower than average wages which restricts the buying power of the local

population.


agreements with a total contribution of £8,936,183. In addition affordable housing has been

has been assumed to be at 30% of the total units.






Cashflow summary

The Gross Residual Land Value (GRLV), as provided above, is the maximum value of the

site given our scenario and variables. This therefore provides a price ceiling to be paid to

the land owner. This also provides a “pot” of money which could be divided between land

owner and Local Authority for strategic infrastructure contributions.

Viability Testing

To express a possible negotiation scenario we have assessed the existing use value

(approximately £10,000 per acre as agricultural land) in this second table, to show a

spectrum of land value up to the assessed GRLV. This spectrum therefore ranges between

£11,000 and £2.1 million per ha. If we assume that the GRLV is the maximum possible land

value for the site, as this value is decreased through the spectrum towards existing use

value (to the left), there is a surplus which may provide contributions towards strategic

infrastructure.




For example if a land purchase price is negotiated to £1,730,000 per hectare there is a

surplus of £370,000 per hectare (£2.1 million - £1.73 million), equating to a total contribution

of £8,510,000.

7.4.3 Scenario C

For scenario C we have assumed a 6 hectare Brownfield site, located centrally in a market

town. This is a strategic site, however it’s past uses have rendered the site particularly

contaminated, requiring a significant level of remediation for development.

For this scenario we have adopted a 500 unit scheme, which is predominately apartments at

a high density of 100 dwellings per hectare. It is assumed that there is to be a small ground

floor retail element such as local shops including a convenience store.

This scenario has been selected to demonstrate the effect density has within an inner city

environment. The value profile of the scenario area is reasonable as the site is located in a

central position and benefits from the amenities of this position. The site is also well located

for commuter links, particularly public transport.

We have assumed that the land is to be remediated and there is a requirement from the

Local Authority of 25% affordable housing and a £3,000,000 Section 106 and highways

agreement. In addition a allowance of £5,000,000 has been made for the remediation of the

site.




Cashflow summary

Whilst this is a Brownfield site, the resultant land value is positive as a result of the good

location and high density of development proposed. It should be noted that reductions in

density for site such as this can dramatically affect the overall site value and the viability of

the scheme.

Please see below for our assessment of potential contributions.

Viability testing

To express a possible negotiation scenario we have assessed the existing use value (which

is assumed to be of nil value due to past uses) in this second table, to show a spectrum of

price to be paid for the land up to the assessed GRLV. This spectrum therefore ranges

between £0 and £3.3 million per ha. If we assume that the GRLV is the maximum possible

land value for the site, as this value is decreased through the spectrum towards existing use

value (to the left), there is a surplus which may provide contributions towards strategic

infrastructure.




For example, if a land purchase price is negotiated to £2,800,000 per hectare there is a

surplus of £500,000 per hectare (£3.3 million less £2.8 million), equating to a gross

contribution of £3,000,000.

7.4.4 Scenario D

It assumed that for scenario D the proposed development is to be part of an urban

extension on the periphery of a major city in the north of the region. As such this 25 hectare

Greenfield site has a previous agricultural use. It is assumed that there is a relatively flat

topography, with limited site constraints such as flooding, ground stability and

contamination. Access to the site is reasonable, with adequate roadway infrastructure

available for construction vehicle access.


density of 50 dwellings per hectare. The commercial/retail element is assumed to include

facilities such as local shops and a number of small offices.



properties. This scenario has the highest value profile of the four examples. This in general

is due to the good position of the site with good connectivity to major infrastructure routes

and a close proximity to a wide range of employment opportunities.


agreements with a total contribution of £10,000,000. In addition affordable housing has

been has been assumed to be at 30% of the total units.






Cashflow Summary

Viability testing

To express a possible negotiation scenario we have assessed the existing use value

(approximately £12,000 per acre as agricultural land) in this second table, to show a

spectrum of price to be paid for the land up to the assessed GRLV. This spectrum therefore

ranges between £12,000 and £2.58 million per ha. If we assume that the GRLV is the

maximum possible land value for the site, as this value is decreased through the spectrum

towards existing use value (to the left), there is a surplus which may provide contributions

towards strategic infrastructure.




For example, if a reduction in land purchase price is negotiated to £2,160,000 per hectare

there is a surplus of £420,000 per hectare (£2.58 million less £2.16 million), equating to a

total contribution of £10,500,000.

7.5 Conclusions from the residual appraisal scenarios

The residual method of valuation is one with a range of uses and can only be as good as

the quality and robustness of input data. The examples provided have a high dependence

on secondary data, which has been adopted for transparency. In using this approach we

have used various sources to obtain average data within each location. However, in reality

every potential site is a micro environment and will have site specific issues unique to the

location.

Whatever appraisal technique/package adopted, every appraisal is unique and will have to

be bespoke built by experts to take into account the site specific variables. The sensitivity

analysis provided in the cashflow summary tables for each scenario demonstrates that even

seemingly minor changes in core variable inputs can have a significant impact on the

assessment. Obtaining the most accurate data possible and employing appropriate

specialist knowledge to interpret inputs is vital.

As demonstrated in Table 11 below, Gross Residual Land Values can vary substantially

between cities and towns, when compared to the relatively small variations in the existing

use value of development land. Generally speaking, developments in high value, high

demand areas can sustain higher levels of contribution. Peripheral areas often contain less

attractive development opportunities which derive less value. As such it is considered that

strategic infrastructure contributions are more likely to be obtained from the former type of

developments, which may have to cross-subsidise designated areas of need.

Consequently, relying on total funding from these sources has its limitations and tariff/CIL

approaches may need to be spatially differentiated within an SSCT to ensure viability.




Table 11 - Conclusions from the residual appraisal scenarios

A developer is rarely able to control the overall costs of development and as such will have

limited ability to extract more value to pay directly for increased contributions. Ultimately,

therefore, land value will provide the main element for negotiation and the land owner may

be passed the majority of effects for strategic infrastructure contributions via a lower land

price. Benchmarks for what constitutes an acceptable ‘receipt’ for the landowner will

naturally vary from place to place.

The current policy direction towards the establishment of tariff/CIL approaches requires new

benchmarks of acceptable uplift in land value to be set, however these value levels are not

yet understood and will only materialise in the fullness of time. What is clear from these

scenario examples is that in general expectations must start to change, and cannot be

assessed against historic gains if the values of a parcel of land is to reflect more accurately

the wider cost of servicing it.

Our approach has assessed the value of four sites on current costs related to development.

Subsequently a range between existing use value and Gross Residual Land Value can be

observed. This simplistic approach has been used to demonstrate that in some cases uplift

in land value can be great, leading to the potential within this for further contributions.

Under this scenario, contributions towards strategic infrastructure would be negotiated at the

same time as Section 106 agreements. In reality, however, negotiations for substantial

amounts at a late stage in the development process are likely to be fraught with

complexities, which may increase development timeframes, uncertainty and may deter

development. This demonstrates the importance of formulating robust tariffs and associated

policy, so that the required adjustments in land markets can commence.

Overall, it is concluded that infrastructure contributions should be a known quantity so that

developers may include these within appraisals to form the basis for negotiations with

landowners. In order to ensure land is brought forward for development it is suggested that

differing rates could be imposed for differing land types, for example Greenfield or

Brownfield, and categories within each according to values in each area. For those sites

which may be of nil value, such as highly contaminated Brownfield land, these may be

earmarked for relief to encourage development. In this way contributions may be clear,

unavoidable (but fair) and costly negotiations may be avoided at later stages in the process.

Importantly the LPAs must develop a robust, defensible approach which may come under

scrutiny at Inquiry.

Many of the urban extensions are to be developed over many years, and are likely to

experience fluctuations in value throughout this period. Consequently the potential for

contributions will also fluctuate. Seeking up to date professional advice at appropriate times

is advisable to maximise contributions and to mitigate the effects upon the viability of

schemes. There may be an opportunity to share information on land values amongst

stakeholders in order to develop shared understanding, save on costs and reduce the

potential for disagreement.




8 Capturing Development Value: Developing Planning

Obligations Policy & Emergent Approaches to

establishing a Community Infrastructure Levy

Summary

This Chapter considers good practice in capturing development value through established

mechanisms like Section 106 Agreements as well as recent policy innovations such as the

Communtiy Infrastructure Levy. Proposals for the establishment of CIL aim to reduce the

costs and increase certainty in the negotiation of planning obligations. CIL will also allow for

more equitable application of infrastructure costs across small and large developments. By

providing for the pooling of funds, the levy will also assist by breaking the current planning

obligation regime’s requirement for a direct link between a contribution and a particular

development; although it will need to be underpinned by a robust, costed list of strategic

infrastructure projects that are needed to support development. A key benefit of CIL,

therefore, is that it can more easily fund sub-regional or cross boundary infrastructure.

The first part of this Chapter discusses case studies from within the South West, which

reveal that some Local Authorities are already gearing up to take advantage of the benefits

associated with a tariff/CIL approach to securing developer contributions. The second part

discusses likely approaches that may emerge where authorities opt to apply the Community

Infrastructure Levy.

8.1 Current use of Planning Obligations

Section 106 of the Town & Country Planning Act 1990 provides the legal basis for securing

planning obligations from development. A planning obligation is a legally binding private

contract between a developer and a local planning authority that operates alongside a

statutory planning permission. Such agreements require developers to carry out specified

obligations when implementing planning permissions and are the result of negotiations on

these matters between the two parties. Obligations may include financial contributions from

a developer to fund infrastructure that will assist in mitigating a development’s wider effects

on public services. Obligations can be carried out either by providing what is needed to a

standard specified in the agreement or by paying a sum to the planning authority which will

then itself provide the facility.

Current Government policy and advice on planning agreements is set out in Circular 05/05

(ODPM, 2005). S106 should be used in a manner that protects the interests of the

community and planning authorities are advised that obligations might arise from the need

to safeguard the local environment or to meet the costs imposed as a result of development,

stressing that what this means in practice will depend on the circumstances of each case.

‘Properly used planning obligations may enhance the quality of development and enable

proposals to go ahead which might otherwise be refused’ (ODPM, 2005).

In the South West, the current system of planning obligations is already used extensively to

deliver developer contributions towards local infrastructure associated with major

development. In 2006, research by Sheffield University showed that the South West made

the second greatest use of planning obligations on major developments out of all the

English regions including London. The Sheffield University study also found that the highest

total obligation contributions were found to be for “Transport and Travel” followed by

“Education” and “Open Space”.

Over time, the Section 106 route has been stretched to include a wider range of community

needs, whilst the cost of setting an agreement in place has meant that smaller




developments have generally escaped making contributions despite their cumulative effect

on infrastructure.

Section 106 agreements are complemented by section Section 278 of the Highways Act and

Section 111 of the Local Government Miscellaneous Provisions Act, which can be used by

the Local Highway Authority to secure planning obligations for highways.

8.2 Case studies – Planning Obligation policy development

Optimising developer contributions will be a crucial aspect of developing an infrastructure

funding strategy. This section of the advice note provides a summary of planning obligation

policy development in the four case study authorities of Swindon, Taunton, Plymouth and

the West of England.

Case study: Swindon Borough Council

Swindon Borough Council (SBC) published a Planning Obligations Guidance Note setting

out a tariff in September 2006 and therefore have good experience of implementing such an

approach. The tariff only applies to residential development in the borough, with

contributions for commercial development being negotiated in the conventional manner.

Thresholds vary depending on the category of social infrastructure, for instance open space

contributions are triggered at 25 dwellings and Public Art at 10 dwellings or sites over 0.4

hectares. All other contributions, with the exception of affordable housing, are not subject to

thresholds and apply to all new dwellings. In order to assist developers in establishing the

overall level of contribution that will be sought, SBC have provided an online calculator on

their website. Total contributions are calculated from the following details:

• total number of units to be provided (including affordable housing);

• site area;

• a breakdown of the number of 1 bed, 2 bed, 3 bed and 4+ bed units;

• ability to provide open space on the development site;

• education zone (zones relate to a baseline capacity assessment for primary, secondary

and early years provision – see section 4.1.4); and

• status of nearby doctors’ surgery (status relates to baseline capacity assessment).

It is notable that SBC have decided to differentiate the level of contribution sought by the

size of dwellings, rather than apply a standard roof tax.

The 2006 Developer Contributions Guidance Note implies that developer contributions

towards transport infrastructure would be negotiated on a site by site basis, with reference

to the Local Transport Plan 2006-2011 and site specific requirements. SBC are actively

considering the ability to extend the tariff approach to cover higway infrastructure and have

already published a draft Developer Contributions for Transport and Infrastructure and

Services Guidance Note (January 2008) which is currently under review. This proposed

tariff, if adopted, will apply to residential development and has been calculated on the basis

of growth projections and a costed list of infrastructure requirements (incorporating optimism

bias).

Case study: Taunton Deane Borough Council

Taunton Deane Borough Council (TDBC) have recently published a consultation draft

Planning Obligations SPD (June 2008), which proposes two methods for the calculation and

negotiation of developer contributions.

Firstly, where sites are located in the town centre area covered by the authority’s AAP

(submission version, October 2007), planning obligations will be made up of three

components:




• Developers will be expected to implement community infrastructure items that are

packaged up with individual sites within the AAP; for instance, the retail redevelopment

to the east of High Street will be expected to include a new public square, residential

units, public car parking, public conveniences, improvements for pedestrians and public

realm enhancements within and around the perimeter of the area.

• Developers will be expected to contribute to a pool of funds enabling the delivery of

infrastructure items that are essential to bringing forward some or all of the town centre

sites. The River Tone through central Taunton is prone to flooding, hence the

infrastructure items listed include flood plain re-profiling at Longrun Farm and the

construction of a flood detention reservoir at Wild Oak Lane. TDBC commissioned

consultants to cost these infrastructure items, so that a business case for forward

funding could be produced and developer contributions fully justified. It is useful to note

that the council have also undertaken a prioritisation exercise that will inform the

negotiation of contributions where development viability is a constraint.

• Where town centre sites include residential development, the generic contributions

sought on all sites in the borough will also be sought.

Secondly, for all areas of the borough falling outside the five town centre regeneration sites,

TDBC are proposing to apply generic developer contribution requirements. The evidence

base for the per dwelling tariff includes standards such as the DfES Basic Need Cost

Multipliers, as the detailed studies and costing exercises undertaken for the town centre are

not available for the whole borough. It is the authority’s intention that financial contributions

will be sought from all residential developments, irrespective of dwelling size and tenure

(with some exceptions as specified in the SPD). Affordable housing remains a negotiable

component of a developer contribution.

Case study: Plymouth City Council

Plymouth City Council (PCC) have consulted on a draft Planning Obligations SPD

(November 2007), which sets out an approach to developer contributions comprising of two

components:

• A development tariff – PCC will seek a fixed financial contribution for all residential

developments from 1 dwelling or more and all commercial developments from 500m².

The tariff will cover contributions for: education, health, libraries, open space and

children’s play space, recreation and sport, recycling and waste management, strategic

natural environment marine sites, and transport.

• A negotiated element – this will include affordable housing and site specific

requirements not addressed by the tariff.

A situation that will not be unique to PCC is the need to pool developer contributions with

those secured by adjoining authorities. The Billacombe Road High Quality Public Transport

(HQPT) route will run from the city centre to the proposed Sherford New Community located

to the east. Phase 1 of the HQPT involves the provision of a transport interchange at

Plymstock Quarry and the establishment of a bus service, in association with a major

development mixed-use development at that site. Plymstock Quarry is located within the

administrative boundary of Plymouth City Council. Phase 2 will involve the extension of

HQPT to serve Sherford, which is located in South Hams District Council, and an increase

in the frequency of the bus service. Apportionment of costs and pooling of funding between

the two authorities will be crucial to ensuring delivery.

Case study: West of England

The four unitary authorities in the sub region have considerable experience of working

together in relation to the infrastructure sectors of transport and waste through the

preparation of a Joint Local Transport Plan and Joint Waste Strategy. It is therefore natural




that these sectors form the basis for the trialling of a Multi Area Agreement for the sub

region, which could provide a mechanism for the pooling of finance for cross-boundary

infrastructure networks.

Progress with respect to the preparation of planning obligation SPDs is not currently aligned

within the sub region; a factor which could influence the approach that can be taken to

optimising developer contributions towards strategic infrastructure in the short term. The

West of England Sub-Regional Delivery Plan provides an important resource as a joint

evidence base, supporting both the review of core strategies (as required by PPS12) and

the potential establishment of a strategic tariff or local tariffs. Maintained and updated as a

live document, the Delivery Plan might be developed as a reference to support local

planning obligation SPDs that take account of the financing requirements of both strategic

infrastructure networks and local priorities.

8.3 Emerging approaches to the Community Infrastructure Levy

The proposal to establish a Community Infrastructure Levy (CIL) aims to reduce the costs of

negotiating a planning obligation by developing a levy that can reduce the threshold of

development size from which a contribution to infrastructure can be demanded. The CIL

would also break the current planning obligation regime’s required link between a

contribution and a particular infrastructure project/s, although the CIL will need to be

underpinned by a robust, costed list of infrastructure projects that are needed to support

development. A key benefit of the CIL, therefore, is that it can more easily fund sub-regional

infrastructure.

Communities and Local Government published an information note on proposals for the CIL

in January 2008 and a further update on proposals in August 2008. The Planning Bill now

before Parliament provides the legislative framework for the CIL. Clauses in the Bill allow

for the creation of Regulations, which will be subject to formal public consultation and will

set out the detail of the new regime and how the CIL will work in practice. This approach is

intended to provide flexibility for the future, in recognition that planning obligations practice

has evolved significantly over time and it is anticipated that CIL will also evolve as local

authorities and developers become more familiar with the new approach. Key aspects of

the proposed CIL are summarised here:

• CIL will be a standard charge decided by designated charging authorities and levied

by them on new development. For example, the CIL could be levied as a certain

amount per dwelling or per square metre of development, following the example of

existing ‘tariff’ schemes introduced by some local authorities.

• Research shows that local authorities tend only to negotiate planning obligations

alongside consents for larger developments, partly because affordable housing

requirements with stipulated thresholds often trigger a planning obligation, but also

because the time and costs involved do not always make it worthwhile negotiating

on small developments. An objective of the CIL is therefore to ensure that the

burden of contributing to development should be spread more fairly.

• CIL will need to be underpinned by a costed list of infrastructure projects that are

needed to support development. However, it is appreciated that development plans

look many years ahead and need to be flexible enough to cope with major

uncertainties. The anticipated infrastructure needed to support development should

be broken down into two types: firstly, specifically identified items of infrastructure

needed to support major strands of the development strategy, such as a major

transport link; and secondly, infrastructure that is not specifically identified, but is

known to be needed, such as the number of primary schools needed to support

anticipated population growth.




• There may be a case for allowing charges to vary within charging authorities to

reflect specific local conditions, and this is something Government wishes to explore

further in consultation with stakeholders. This includes a facility to set differential

rates geographically and a provision for very exceptional cases which cannot afford

to pay the rate set out in the charging schedule.

• The Government do not initially intend to include affordable housing within the

scope of what may be funded from CIL, although affordable housing will be included

within the definition of infrastructure in the Bill so that affordable housing could be

included as part of the CIL if evidence later shows that this is necessary.

• The existing system of planning obligations does not meet all of the infrastructure

costs of development. While it is intended that the CIL will make a significant

contribution to infrastructure provision, Government acknowledge that it is likely to

remain the case that CIL on its own will not be able to meet the entire cost of a

major infrastructure project. Core public funding will continue to bear the main

burden.

• CLG recognise that many authorities either have already developed standard

charges or are considering them. The Government encourages them to continue

this work, reflecting current law and policy. They should however bear in mind the

new policy direction now being set out, so that they are ready to take advantage of

the new power to charge CIL.

The CIL would be based on a costed assessment of infrastructure requirements arising out

of all development within the area; taking account of land values and potential uplifts.

Standard charges would be set, which may vary from area to area and according to the

nature of development proposed. A suggested process is shown in the Figure 2 below. A

risk for LPAs within the South West would be to over estimate the levy yield for sub regions,

especially in areas where land values may be too weak to sustain a significant scale of levy.

Implementation also needs to account for continued policies for Section 106.




Figure 2 – CIL flow chart (as shown in Chapter 1)

8.3.1 Vision

The Infrastructure Delivery Plan (IDP) needs to be guided by an overall vision for the

community it is meant to be serving. This topic is covered in Chapter 3 of the Advice Note.

8.3.2 Infrastructure need

The vision needs to be translated into an assessment of the infrastructure needed to deliver

the vision. This topic is covered in Chapter 4 of the Advice Note.

8.3.3 Gross Infrastructure Costs

Infrastructure need should be converted to costs using methodologies that match the

available information. It should be expected to run this iteratively.

8.3.4 Determining Net Infrastructure Costs

Other sources of funding needs to anticipate likely receipts over the plan period from

sources such as:

• National Lottery;

• European Funding;

• Capital Receipts

• Credit Approvals.




Various sources of Government funds are also available for growing urban areas, such as

New Growth Point funding.

Anticipated receipts should be deducted from the cost of infrastructure. More detail is

available in Chapter 5 of this Advice Note.

8.3.5 Apportionment of benefit - who benefits from infrastructure and who

pays?

The major new development anticipated in the RSS are not the only beneficiaries of the

services brought to an area by new infrastructure. The beneficiaries can include:

• Existing residents and businesses;

• Out of area users (in transit or visiting an area)

• Small scale new development;

Most forms of infrastructure will deliver a spread of benefit; the issue for the costing strategy

is how to represent this in the costing of an infrastructure delivery plan. Loading the costs of

infrastructure that deliver wide area benefits beyond the immediate requirements of new

development risks making projects unviable leading to delay.

Within the context of a Multi Area Agreement and Joint Core Strategy it may be possible

to agree to cost sharing key infrastructure that creates a wider benefit. Infrastructure in

larger settlements will normally provide services to a wide catchment area and it depends

upon the degree to which a consensus can be reached with a sub region as to where these

benefits exist.

A similar problem exists in determining the apportionment of benefit between existing

communities and new build. Loading of new infrastructure costs on new build does have the

benefit of generating windfall benefits for the wider community and covering a deficit that

would not otherwise be available if a distinction was made. The benefit has to be weighed

against the strength of the market to deliver contributions at that level (see finance chapter).

A similar problem applies to users that come from further afield such as tourists to the South

West whose activities benefit the region’s economy but do so at the cost of creating

considerable congestion. New transport infrastructure has to be designed to cater for all

users including these peaks in use driven by the visitor economy. One of the problems is

that the economic benefit to the region largely by passes the types of local funding

mechanisms available to fund infrastructure.

If a sub region determines that the distribution of benefit between individual authorities

balances out across all projects or that there is a wider benefit to absorbing one area’s use

of another’s infrastructure then a decision can be made to by pass apportionment. In areas

where there may be a structural imbalance between areas because one authority acts as a

service centre for a host for smaller authorities consideration should be given to these wider

effects on the management of provision costs.

8.3.6 Establishing a unit cost

New build covers domestic and non domestic build although the RSS target is focused on

housing. The objective of this chapter is to calculate a unit cost using data from the earlier

stages:

• Divide total cost attributable to new build housing by forecast new build housing

resulting in a cost per house;

• Divide total cost attributable to new build non domestic by total new non domestic

floorspace resulting in a cost per square metre of floor space;

• Moderate the average cost per house by assumed occupancy to reflect the differential

impact of lower occupancy housing.




8.3.7 Reality checking – can the market bear the proposed levy?

Once the levy has been estimated, the figure should be compared against the residual value

likely to be yielded from the development. The residual value will determine the level of

funding that can be secured from development without making the project unviable. Asking

for more funding than is available is likely to compromise the delivery of housing growth. In

checking the proposed levy against the residual value (see Chapter 7), the following factors

need to be considered:

Table 12 – Reality checking

A methodology is contained in Appendix C to this advice note that contains case studies of

how the residual value calculation can be carried out.

8.3.8 Sensitivity testing

The calculation of net costs and a unit charge can be affected by:

• Assumptions concerning the availability of other funds – the availability of grant

funding from Europe or the Lottery could lessen the costs of infrastructure. These

sources are often subject to periodic review; re prioritisation and late/ delayed payment.

These effects need to be examined;

• Assumptions concerning the scale and phasing of growth – both factors can affect the

economics of delivery and different scenarios need to be tested (see Chapter 3);

• Residual Valuations – a calculated levy figure needs to be tested against the likely

yield expected from different development types in the LPA (in terms of location and

types of development). Setting the levy at the upper end of probabilities in terms of yield

risks removing the incentive for developers to proceed with projects.




9 Alternative Finance Options

Summary

The need for alternative and innovative finance strategies is primarily driven by the

limitations of funding infrastructure through central government funding and developer

contributions alone. This has led to a consideration of how other funding streams with some

level of local discretion might be used to address shortfalls and cashflow problems. Some

measure of local discretion can be exercised over the following sources of finance:

• Loans;

• Capital receipts;

• Grants;

• Equity; and

• User Charges

Further options that can be considered as part of an overall funding strategy include:

• Asset Backed Vehicles, such as the Local Infrastructure Finance Trusts (LIFT)

established for community health programmes and Local Education Partnerships

(LEPs); and

• Revenue based approaches, e.g. Southampton’s District Heating Network.

These two mechanisms can be used to secure private sector investment and are not

mutually exclusive. An asset backed vehicle can draw upon a guaranteed revenue stream,

which can help to further enhance confidence for the private sector to make an investment.

In addition to exploring whether the asset backed vehicles and revenue based models are

appropriate in a particular area, a long term route to reinvigorating infrastructure investment

at the local level will involve optimising the use of under utilised powers available in existing

legislation. These include:

• Up Scaled Local Area Agreements

• Road Pricing / Workplaces Car Parking Levy

• Relaxed Prudential Borrowing Rules

• Business Improvement Districts (BIDS)

• Local Area Business Growth Incentive (LABGI)

• Land Pooling

One of the biggest problems faced when a business plan for a major infrastructure item is

being prepared is that important elements of finance, such as financial contributions from

developers, may only become available after the initial need for infrastructure arises. It is in

situations such as these that the South West Regional Infrastructure Fund (RIF) will be

invaluable. The South West RIF, launched in March 2008, has an initial investment fund of

£80 million. Achieving a return of 100% of invested funds is the ultimate aim, with the fund

growing further through the capturing (“topslicing”) of development value uplift and

additional contributions captured through pooling arrangements. It is accepted that risk in

some investments won’t be returned in full; therefore an 80% target has been set as the

minimum across the portfolio, with riskier investments being balanced against those where

100% returns are certain.

Opportunities to establish smaller scale local or sub regional rolling funds may be an avenue

worth exploring in the future. The identification of an appropriate body to act as banker and

the source of start up finance will of course be key questions from the outset.




The need for alternative and innovative finance strategies is primarily driven by the

limitations of funding infrastructure through national funding and developer contributions

alone. In Chapter 5, it was noted that the tariff is only contributing around 20% of the total

requirement with the remainder coming other sources.

In the short run, financial innovation has centred on the exploration of means for plugging

deficiencies in the existing financing framework. Over the longer term, alternative ways of

organising local finance may offer and become established as more effective means of

delivering infrastructure requirements.

9.1 Deficiencies in local financial mechanisms to fund infrastructure

Infrastructure investment has an uneven geography that tends not to be reflected in the way

public funding is distributed. The UK local financial system tends to even out the distribution

of public funds to ensure equivalent standards of service across the country. Whilst the

system helps support a uniformity of standard to the delivery of services, the ability to fund

the localised implications of housing and employment growth is diminished.

Planning obligations offer a means of extracting contribution that can used directly to fund

new infrastructure requirements. Its merit is that it is locally controlled although proscribed

by national planning policy. Yet, the pressure to fund infrastructure need beyond that

attributable to new development reveals short falls and cashflow problems.

This has led to a consideration of how other funding streams with some level of local

discretion might be used to address shortfalls and cashflow problems.

Some measure of local discretion can be exercised over the following:

• Loans;

• Capital Receipts;

• Grants;

• Equity; and

• User Charges

These are described in brief below.

9.1.1 Loans

Loans can be raised from the commercial sector on conventional lending terms. Local

Authorities have been given powers to borrow money under the “prudential borrowing

power”. Alternatively, public bodies such as the European Investment Bank (EIB) or the

National Lottery can be approached to raise loan finance for sector specific projects like

cultural infrastructure.

9.1.2 Capital receipts

Sale of land and buildings in public ownership generate capital receipts which can

potentially fund new forms of infrastructure need.

9.1.3 Grants

A number of grant regimes exist within EU State Aids regulations that could be drawn upon

to fund the capital expenditure requirements of infrastructure. Structural funding is still

available in certain parts of the country and the South West region.

Grant Funding in the South West - transition to convergence

Grants are still important in the South West. The Objective One Programme for Cornwall

and the Isles of Scilly has been relaunched as the Convergence Programme for the period

2007-2013. The purpose of the Convergence Programmes will be to speed up the economic

development of Cornwall and the Isles of Scilly, particularly through investing in:




• skills and helping people into work;

• the development of a more knowledge based economy;

• business productivity and innovation; and

• in infrastructure for a more modern economy.

The Convergence Programme for Cornwall and the Isles of Scilly has been approved by the

European Commission, allowing it to begin early in 2008.

9.1.4 Equity

Equity investment can be secured indirectly by forming partnerships with the private sector.

This involves cash investment from the private sector in infrastructure projects capable of

meeting a return on capital invested. It is important that the basis for the capital return is

established upfront to ensure compatibility with wider community objectives for an area.

9.1.5 User charges

User charges can offer a revenue stream that can make a project an attractive prospect for

the private investor. User charges could be paid directly by the end user (e.g. a toll road) or

by government who is then free to determine how much of the charge is passed onto the

end user. It is not always feasible or possible to levy user charges, however new technology

is opening up opportunities that previously did not exist on open access infrastructure

networks such as roads.

Opportunities exist to use these funding streams either in isolation or as funding packages

in order to overcome shortfalls or cashflow problems.

9.2 Creating local financial freedoms

Local authorities have access to a significant asset base (land and buildings) and specific

funding streams that can be used to create new infrastructure. Assets can be used to

generate new forms of revenue, whilst revenue streams can in turn be used to support the

creation of new infrastructure assets through creating the conditions for the private sector to

invest. Figure 8 identifies three components that will form the basis for considering the

potential for private sector participation.




Figure 8 - Innovative Finance - Unlocking private sector particpation

To provide examples of the practical application of these principles, asset backed vehicles

and revenue backed vehicles are explored below:

9.2.1 Asset backed vehicles

Local authorities own land and buildings to support the delivery of services. These assets

offer an attractive form of security to the private sector and a means of creating added

value. Under performing surplus assets can be put into a special purpose vehicle (company

limited by guarantee) where the private sector invests capital in return for a share in an uplift

in value. The uplift is normally realised after a 25 to 30 year period along with a share to the

public body (which could be retained as a capital receipt or recycled into infrastructure).

Examples of these special purpose vehicles can include mainstream Private Finance

Initiative funded projects such as hospitals or universities. Local Infrastructure Finance

Trusts (LIFT) for community health and Local Education Partnerships (LEPs) for new

schools are alternative sector focused vehicles. Consideration has also been given to the

use of these vehicles in social housing. The common denominator of these approaches is

that at the end of the investment period, the private sector receives benefit from the uplift in

value.




Figure 10 – Structure of local asset backed vehicles

Local Improvement Finance Trusts (LIFTs)

First formed in 2003, each LIFT is a limited company jointly owned by a public sector

organisation such as a local authority and a private sector participant, usually a consortium.

The LIFT takes ownership of land and buildings wholly owned by the NHS. It may redevelop

the existing site or construct new buildings. The LIFT takes responsibility for maintaining the

premises and leases it back to primary care trusts, social services, dentists and

pharmacists. Under these arrangements, the private sector would normally have a 60%

share and the NHS has a 40% stake (this enables the government to keep these projects off

the public sector balance sheet). The deals are established for a 25 year period at which

point both parties would benefit from the increased land values arising from a scheme in

proportion to their stake

Government rules stipulating that land ownership can not be transferred in PFI do not apply

with these vehicles, and LIFTCos have been engaged in rationalising land holdings to make

bigger units at better locations out of small fragmented sites. This approach has been used

to achieve co-location of facilities. The public sector hands over its land holding in

exchange for an equity holding in the LIFTCo. In these arrangements, the market price for

land is valued independently and the PCT will benefit financially if the land is worth more

than its original equity stake. A further benefit is that the LIFTCo can borrow against the

value of the land rather than raise more expensive project finance. Because the size of

individual primary care projects tend to be relatively small (e.g. GP surgeries),

redevelopment opportunities are sometimes bundled together into larger contracts capable

of attracting private sector partners.

Since it became operational, the LIFTCo mechanism has been used to fund 210 separate

health care buildings.

See:

http://www.dh.gov.uk/en/Procurementandproposals/Publicprivatepartnership/NHSLIFT/index

.htm




Case study: Plymouth – asset management

In August 2006, Plymouth City Council’s Asset Management Team commissioned Arup and

Knight Frank to advice the council, as a principal landowner within the city, on how best to

manage its land and property portfolio in order to facilitate the objectives for the city as

outlined in the emerging Local Development Framework. The primary tool for the asset

review exercise was the Council’s own GIS mapping based system, known as GCP. The

Asset Management team undertook a process of entering data pertaining to all operational

and non operational land and property assets in which the City either has a freehold or

leasehold interest. Detailed information recorded included:

• NLPG Unique Property Reference Number – national referencing system

• Portfolio holder – the portfolio against which the interest is registered e.g. Social

Services

• Tenure and lease expiry date

• Site area

• Land use

• Status as operational or non operational

For the purposes of the asset sifting and review purpose, the city was broken down into

smaller geographical areas using the nine Area Action Plan (AAP) boundaries and a tenth

“Rest of Plymouth” category, which was followed by a process of overlaying asset maps

with the Core Strategy and AAP. This initial sifting exercise identified in excess of 80 key

assets falling into one of the following categories:

• Land or buildings that relate to the delivery of specific site based proposals as set out in

the AAP’s

• Land or buildings that relate to the delivery of non specific policies as set out in the

AAP’s

• Land or buildings that will need to be utilised to deliver transport infrastructure

improvements

• Land or buildings that will become surplus to requirements and have the potential for

redevelopment as commercial opportunities

• Land or buildings that should be safeguarded from disposal to facilitate Local Transport

Plan objectives and proposals.

Plymouth City Council are now in the initial stages of considering how use of the GCP GIS

system could be extended to provide an analytical tool as part of a live infrastructure

planning tool/database (as referred to in section 1.4).

Case study: The Croydon LABV

The London Borough of Croydon is the first local authority to enter into a LABV partnership.

The council recognised that its planning powers and ability to negotiate S106 contributions

were the key factors affecting its ability to achieve its regeneration objectives, however

neither of these factors determined when or where regeneration took place in a co-ordinated

manner at a pace they could have more control over. In recognising this, and being inspired

by the creation of urban regeneration vehicles like Blueprint, a local authority driven LABV

seemed the right opportunity for the public sector at the local level to have more control over

the delivery of the their vision and regeneration activities.




Croydon holds a substantial portfolio of development sites and owner-occupied estate in the

town centre and throughout the wider borough. The portfolio includes a number of large

strategic development opportunities in the town centre. Additional property and assets will

be added or acquired later. A joint venture partnership will be established between the

council and a private sector partner to whom the council will initially commit a number of

town centre development opportunities. In addition, the council will consider committing to a

pre-let on new office accommodation to be developed by the LABV in order to provide a

strong covenant and income stream to assist in the redevelopment of other mixed-use sites

taken forward by the LABV.

The council is placing between £30m and £60m of property assets into the partnership, to

be matched by funds from a private sector developer. The private investor will take over the

development of the joint venture, which will also take on bank debt to help regenerate

Croydon town centre and, in theory, make profits for both the council and the private

company. The ultimate value of the vehicle has been estimated at £450m.

9.2.2 Revenue based approaches

Revenue based approaches involve using one or more of the following:

Public sector backed revenue streams

Local authorities pay for the on going costs of service provision including the renting of

buildings and land. A private investor could be confident in securing either a guaranteed

end user or a funder of third party use if developed in partnership with a local authority. For

example, Southampton City Council purchases its energy requirements from Utilicom who

provide a district heating network in the City (see the box on Energy Services Companies

below).

Other revenue streams

A more controversial area would be where infrastructure is provided by the private sector on

the basis of a revenue stream from the end user, without it being mediated by a local

authority. In these circumstances infrastructure may be designed to deliver specific

requirements to high value users willing to pay for access. For instance, this type of solution

might typically apply in telecommunications, where a premium is placed on enhanced

functionality. This type of infrastructure may however exploit a local monopoly and may

involve deliberately excluding certain classes of user even though it may be the most

accessible to them?

Energy Services Companies

Energy Services Companies (ESCOs) are examples of bodies that are sustained by

revenue earned from the sale of energy services which can include heat, light and power.

Many local authorities are interested in using ESCOs as a way of delivering low carbon

economy infrastructure with private sector support. An example would be Utilicom’s

partnership with Southampton City Council where Utilicom provides investment capital and

in return, Southampton purchases energy from Utilicom at a guaranteed rate. Southampton

is also able to assist Utilicom in terms of maintaining/ extending its heat main.

Multiple Service Companies are a concept for the combined delivery of a number of utilities,

which may result in construction and operational efficiencies.

These mechanisms are not mutually exclusive. An asset backed vehicle can draw upon a

guaranteed revenue stream which can help enhance confidence for the private sector to

make an investment.




9.3 Securing greater financial freedoms over the longer term

A long term route to reinvigorating infrastructure investment at the local level will involve

firstly, optimising the use of under utilised powers available in existing legislation and the

consideration of relevant experience in other countries where greater financial freedoms

currently exist.

9.3.1 Summary of measures that can be taken to raise finance without

recourse to primary legislation

Opportunities available to LAs without the use of further primary legislation are summarised

below.

Table 13 – Summary of measures that can be taken to raise finance without recourse to primary legislation

Source: Loosening the Leash – All Party Urban Development Group (2007).

Further measures for raising finance that would require primary legislation are listed at

Appendix E.




9.4 Forward funding - the South West Regional Infrastructure Fund

One of the biggest problems with planning obligations is that the finance often becomes

available after the initial need for infrastructure arises. In Section 106 agreements a

developer will normally agree milestones for the payment of financial contributions towards

infrastructure. In order to ensure that their own cashflow remains healthy, developers will

try to minimise the amount of funding released to meet obligations in advance of their own

development starting and receipt of finance from property sales. The introduction of the

Community Infrastructure Levy should provide some relief by creating a pool of funding that

can be drawn upon to cover early out goings. The problem. however, is magnified with the

larger, more complex forms of infrastructure, such as major transport projects, where the

lead times to going cash positive are much greater. It is in situations such as these that the

South West Regional Infrastructure Fund (RIF) will be invaluable.

The South West RIF launched in March 2008, is the first regional rolling fund to be

established in the UK. Its principal aim is to facilitate the timely provision of regionally or

sub-regionally significant infrastructure that is critical to the delivery of planned growth. RIF

is a mechanism through which a region can pump prime or forward fund major infrastructure

schemes, in situations where the anticipated public or private funding for the scheme will not

be available in full at the time when the infrastructure is needed to support planned growth

or development. The cost of the capital investment would then be recovered from pre-

determined public and/or private funding streams as they become available. The RIF also

provides an effective mechanism for progressing projects from outline proposals to

regionally prioritised schemes that are supported by robust financial and economic business

cases.

SWRDA is the accountable body for SWRIF funds. It will hold uncommitted RIF funds and

receive back repayments, from sources such as planning obligations and infrastructure

related revenue streams, which can then be recycled into further investments. DfT funds will

not be held in the fund, but drawn-down as when required. SWRDA undertake the day to

day operation of the fund, and will manage the process of project and financial appraisal

and ensure that appropriate monitoring and evaluation processes are implemented. An

Investment Panel have been set up to direct the investment of the SWRIF and manage the

SWRIF Business Plan.

A final decision to invest in a project will require compliance with a series of criteria:

• The infrastructure project put forward meets with the definition of ‘infrastructure’ as

defined in the SWRIF prospectus and for which a developer can legitimately be

required to make a contribution.

• The infrastructure is required to support the delivery of development that is

supported by and consistent with the priorities established in the RSS/RES/RHS.

• Priority will be given to infrastructure that adds value to the delivery of sustainable

growth within Key Growth Areas identified in The Way Ahead or a New Growth

Point.

• Infrastructure must be related to the development of a large growth site, a number

of linked developments or unlocking capacity. Associated development(s) must be

of greater size than 1000 houses, 20 Hectares of retail/office/employment or a

combination of the two in mixed use.

• The infrastructure and related development must be rooted in a robust Core

Strategy, Area Action Plan or adopted Local Plan.

• There must be a realistic timetable for the infrastructure provision and of the

associated development and detail as to when SWRIF investment will be required.




• There must be details as to the likely value of SWRIF investment required and a full

justification, under the current planning obligations legislation, for seeking developer

contributions for the infrastructure

• The related developments are demonstrated to be wholly viable (and able to make

the contributions required) and the full funding package for the infrastructure can be

demonstrated.

• A robust timetable for the repayment of the secured and expected developer

contributions equivalent to the SWRIF investment being sought. Evidenced by a

unilateral undertaking from developer(s), or draft, agreed, S106 clauses or a

Planning obligations SPD, or other robust planning document.

• The Infrastructure must have planning permission and achieved all necessary

consents and/or programme entry, for example Department for Transport

programme entry.

The South West RIF has an initial investment fund of £80 million. Achieving a return of

100% of invested funds is the ultimate aim, with the fund growing further through the

capturing (“topslicing”) of development value uplift and additional contributions captured

through pooling arrangements. It is accepted that some risk in some investments won’t be

returned in full; therefore an 80% target has been set as the minimum across the portfolio,

with riskier investments being balanced against those where 100% returns are certain.

Case study : Taunton – forward funding flood alleviation

The town centre flood risk assessment work undertaken for the Project Taunton partnership

by Black and Veatch informed proposals for flood alleviation schemes, including:

• Floodplain reprofiling at Longrun Farm. The area of floodplain to the west of the

town centre at Longrun Farm forms one of Taunton’s strategic green wedges. The

reprofiling of this area of the floodplain will enable the creation of wetland habitat and

provide sufficient replacement flood storage capacity to alleviate the majority of the town

centre area. Forward funding of the works is to be provided through the South West

Regional Infrastructure Fund, with the loan to be repaid through s106 contributions from

the town centre redevelopment sites. Planning permission for the scheme has been

granted and works are programmed to commence in August 2008.

• Wild Oak Lane flood detention reservoir. The Wild Oak Lane flood detention

reservoir proposal is located on the Sherford Stream to the south of the town. The

Sherford is one of a number of fast running streams draining the Blackdown and

Quantock Hills that join the River Tone at Taunton, excerbating flow rates during periods

of heavy rainfall. In terms of design, the compensation area is to be formed by an

embankment across the stream that restricts flow, resulting in the temporary storage of

water during high rainfall events and the prevention of rapid discharge to the River

Tone. Should it arise that it is not possible to progress this scheme for any reason, an

alternative sites have been identified on Sherford and Galmington Streams. A similar

scheme has recently been implemented on the Halse Water near Norton Fitzwarren,

just to the NW of Taunton

It is important to note that the implementation of these ‘soft’ flood alleviation measures will

limit requirements for more intrusive flood defences in the town centre, which would

compromise the Council’s vision for the active use of the river corridor as an attractive open

space.

Rolling funds such as the South West RIF are the latest innovation in attempts that are

being made to enable upfront investments in essential infrastructure. Opportunities to




establish smaller scale local or sub regional rolling funds may be an avenue worth exploring

in the future. The identification of an appropriate body to act as banker and the source of

start up finance will of course be key questions from the outset. An assessment of the

overheads associated with such as operation at the local scale would also need to be

undertaken.

9.5 Global investment funds

As an alternative to public sector funds providing start up finance, the securing of private

sector investment will mean accommodating the objectives of a private partner in terms of a

rate of return or asset preference. There has been a proliferation of private infrastructure

funds established in recent years seeking a safer class of investment asset than classic

alternatives such as the stock and bond market or commercial property. As a general rule,

the opportunities for participation of larger scale private finance are likely to decline as the

scale of the investment vehicle shrinks. Small sector focused vehicles or those defined

around a small geographic area are likely to carry a higher set up and operating overhead.

The move to open infrastructure to private capital by governments around the world (led by

the UK) has encouraged the creation of multi billion dollar infrastructure funds seeking

investment capital from pension funds; insurance companies; sovereign wealth funds and

private equity. At a time when returns from traditional investment markets like stocks, bonds,

commercial property are looking increasingly uncertain, infrastructure can be seen as

offering an asset with relatively good security with a predictable income flow. The rise of

sovereign wealth funds with their vast surpluses of petrodollars accumulated from oil

revenues indicates that these funds may well benefit from exceptionally good future liquidity.

The emergence of these funds means that securing new infrastructure ceases to be a

matter purely for the local management of planning gain to a much wider strategy

embracing regional approaches to the attraction of inward investment on a national and

international scale. The attraction of large scale capital inflows into the South West does

however require the imagination to package opportunities together on a scale “visible” to

these investors. As opportunities for footloose major investors become more constrained,

regions may be able to attract funding to underpin their longer term growth aspirations.




10 Capacity Development for Local Authorities

Summary

Infrastructure planning is undoubtedly a crucial component of a successful and robust

approach to spatial planning, hence the increasing emphasis on this agenda within PPS12.

As the role of planning is redefined in order to ensure the delivery of major development, it

is increasingly recognised that local authority staff are required to adopt a new approach to

planning that encompasses a stronger element of project management. In terms of the

opportunities available to develop appropriate skill sets and bolster organisational capacity,

options available to LAs include: internal reorganisation and the creation of new posts to

manage the infrastructure planning process; and partnering arrangements with external

partners, including the private sector, allowing for the sharing of skills to meet common

objectives.

With respect to support available for the development of internal organisational capacity,

two key initiatives at the regional level are the SW RIEP (Regional Improvement and

Efficiency Partnership) and the Major Development Peer Review Events. The SW RIEP has

brought together the efficiency work of the Regional Centre of Excellence with the Regional

Improvement Partnership and will focus on four interrelated strands of activity:

• Supporting excellent outcomes from LAAs;

• Building capacity for overall improvement in authorities;

• Building capacity for business transformation and driving value for money; and

• Building capacity in key thematic areas.

The Major Development Peer Review Events provide a forum whereby local authority staff

from across the region can meet to share experience, both best practice and lessons learnt.

Outsourcing and the sharing of skills between organisations presents a second set of

opportunities for local authorities. For instance, public-private partnerships for a specific

project provides a mechanism for gaining access to both finance and skilled staff. This

report recommends that an Infrastructure Planning Group (IPG) or partnership comprised of

a range of organisations is established to coordinate and progress the infrastructure

planning process. The formation of a partnership of this type will provide a forum for the

integrated planning of infrastructure and will also assist in sharing the resource load of

undertaking the task. One of the main agenda items that the IPG will need to consider

during the preparation of an infrastructure plan is its own ongoing role as the emphasis

shifts from information gathering and planning towards implementation and delivery. In

effect, should the IPG partnership be further developed to form a Dedicated Delivery Vehicle

(DDV)? Important questions that partner organisations would need to consider are:








This chapter considers possible options for local authorities faced with the additional burden

of handling the infrastructure planning process. The development of a more comprehensive




approach to the business planning of infrastructure delivery opens up a variety of skills

issues for local authorities including:

• Project management skills;

• Procurement (complex and large scale)

• Costing;

• Funding (analysis of funding sources);

• Resource efficiency assessment;

• Public consultation management;

• Project modelling;

• Partnership working.

With respect to support offered at the regional level, two key initiatives are the SW RIEP

(Regional Improvement and Efficiency Partnership) (as described in section 10.2 below) and

the Major Development Peer Review Events.

10.1 Major Development Peer Review Events

The Delivery of Major Development Peer Review Events are designed to provide local

authorities (LAs) from across the South West with the opportunity to share experience, both

best practice and lessons learnt, and develop networks for the exchange of expertise.

Successful peer review events have previously been held for transport planners and it was

felt that the concept would prove equally beneficial for the disciplines of spatial planning and

regeneration. Acting as pilots for the major development peer review process, the first two

events were held in May 2008:

• Thursday 15 May – Urban Regeneration

• Thursday 22 May – Urban Extensions

Each event was attended by around thirty senior staff from the planning and corporate

departments of local authorities and county councils within the South West region, together

with representatives of government agencies and a private sector consultancy. A similar

format was adopted for both events, with selected participants presenting case studies

which acted as springboards for discussion.

An overriding conclusion at both of the May events was that the planning and delivery of

major brownfield regeneration sites and urban extensions is not conventional development

control planning, and that planners will need to learn the project management skills that will

enable them to establish partnerships and guide proposals through the policy and consents

stages. Infrastructure planning is undoubtedly a crucial element of a robust approach to

spatial planning and therefore it is the intention of the SWRA to schedule an Infrastructure

Planning Peer Review Event for the Autumn of 2008.

10.2 Resourcing skills needs

Local authorities have a choice of whether to “buy in” (see box on the SW RIEP) or

“outsource” these skills (see Section on Dedicated Delivery Vehicles). Within these basic

categories there will be sub options for securing the right skills. Options include:

“Buy in”

Redeploy within the authority (requires identification of skills and surplus/ deficit areas);

• In house retraining/ mentoring suitable individuals to undertake new tasks;

• Organisational regrouping to reflect new tasks;




• Create new post (dedicated job role).

SW RIEP (Regional Improvement and Efficiency Partnership)

The LIFT SW Partnership was set by authorities up in June 2006 as a hub to drive

innovation and progress against regional priorities and to share information and knowledge

in conjunction with other public sector bodies and support agencies to give the South West

a ‘LIFT’.

The Partnership has brought together the efficiency work of the Regional Centre of

Excellence with the Regional Improvement Partnership. This model has now been adopted

nationally through the formation of the nine Regional Improvement and Efficiency

Partnerships (RIEP) that were scheduled to become operational from May 2008, subject to

release of funding.

The SW RIEP programme, which has a budget of £22m will incorporate four interrelated

strands of activity:

1. Supporting Excellent Outcomes from LAAs: support for the LAA process, LAA outcomes

and preparation for CAA.

2. Building Capacity for Overall Improvement in Authorities: Authorities in difficulty, building

corporate and leadership capacity, use of resources, workforce planning and development.

3. Building Capacity for Business Transformation and Driving Value for Money: including

business process improvement, smarter procurement, asset management, use of

technology, property construction.

4. Building Capacity in Key Thematic Areas as follows:

• Adult Health and Wellbeing: services in difficulty, workforce planning, developing

leadership, support for councillors, personalisation of services, commissioning and

procurement, process improvement, asset management

• Children and Young People: capacity building, commissioning, benchmarking data,

mother and baby assessments, joint provision in mental health.

• Environmental Sustainability: waste management, climate change

• Local Economy: housing and transport, developing economic capacity, urban

development and renewal

• Tackling Exclusion and Promoting Equality: equality and diversity Stronger

Communities: sustainable communities and community empowerment

• Fire and Rescue services

“Outsource”

• Public Private Partnership (Generic service);

• Public Private Partnership (Project specific);

• Access advisory services e.g. CABE on specific aspects of development

• Procure specialist consultancy advice.

All the options require the commitment of resources, however some are less dependent

upon finding new sources of funding. The options also vary in terms of their duration, for

example, public private partnerships formed around the delivery of a specific project may

well have duration of 20 years plus as opposed to the procurement of short term advice

through the consultancy route.




The outsourcing route is explored in greater depth with respect to the formation of dedicated

delivery vehicles which are capable of making best use of staff resources and accessing

external expertise.

10.3 Dedicated Delivery Vehicles

This report recommends that an Infrastructure Planning Group (IPG)/partnership comprised

of a range of organisations is established to coordinate and progress the infrastructure

planning process (see Chapter 2). One of the main agenda items that the IPG will need to

consider is its own ongoing role as emphasis shifts from information gathering and planning

towards implementation and delivery. For instance, should the IPG evolve to become an

Infrastructure Planning and Delivery Group (IPDG), established as a separate legal identity

with a coordination and banker role? In essence, the IPG would become an IPDG

Dedicated Delivery Vehicle (DDV)/ Local Delivery Vehicle (LDV). Important questions that

partner organisations would need to consider are:








The matters raised by these questions are explored in the sub-sections below.

10.3.1 Is a DDV required to coordinate the finance and delivery of

infrastructure?

When considering this question, it is useful to briefly review the reasons why DDVs have

been established in the past. For larger projects, like those funded under the Private

Finance Initiative, there are specific provisions concerning the establishment of a DDV, but

more generally they act as a legal safeguard for managing a complex set of relationships.

Some forms of DDV, such as Urban Development Corporations, have been brought into

being through statute but are still subject to public sector financial regulations. Others are

limited liability companies that provide financing and management flexibilities not normally

available to local authorities. DDV models that have emerged in the last decade include:

• Urban Regeneration Companies (URCs);

• City Development Companies (CDCs) / Economic Development Companies (EDCs);

• Urban Development Corporations (UDCs);

• Urban Development Area (UDA) & Milton Keynes Partnership Committee (MKPC);

• Partnerships/Companies limited by guarantee

Lord Rogers’ Urban Task Force recommended the creation of URCs in 1999 to champion

and stimulate new investment into areas of economic decline and to co-ordinate plans for

their regeneration and redevelopment. As their titles would suggest, URCs tend to have a

town centre focus which could limit their ability, as currently constituted, to coordinate the

delivery of infrastructure across a wider sub region. They will, however, continue to play an

important role in coordinating the delivery of specific schemes and development packages

that could incorporate or facilitate the provision of specific infrastructure items. Some of the

URCs are now evolving to become CDCs/EDCs. CDCs/EDCs have a principle focus on

economic development, hence there may be less emphasis on the physical regeneration

projects that have characterised the work of URCs.




The publication of the Sustainable Communities Plan in 2003 and identification of strategic

growth corridors in the south east and midlands prompted the formation of a range of

statuory and non-stautory DDVs. Statutory DDVs are the UDCs and UDA - the operation of

the latter is integrated closely with that of the Milton Keynes Partnership Committee. UDCs

are able to use compulsory purchase powers to buy land at ‘no scheme’ value and recycle

the uplift value from new development.

Non-statutory DDVs include partnerships/companies limited by guarantee, which are

established as a means of borrowing against future s106 contributions and writing down

capital receipts. The shift in public policy towards allowing assets to be transferred at less

than the highest price to achieve a wider objective has worked in the favour of non-statutory

DDVs, as have changes in government accounting rules that allow DDVs to:

• to retain an interest in publicly funded assets;

• use grant funded assets to generate revenue or secure borrowing; and

• in certain circumstances, support third parties through clean break endowments.

Once the government no longer has charge over the asset, or the clawback period has

expired, the DDV is free to use the asset as it wishes.

Each form of DDV has a different legal status and range of powers, hence it is necessary to

select an appropriate DDV having regard to the organisational circumstances of a defined

infrastructure planning area. It is also important to note that, while the growth agenda for

the South West shares many characteristics with the scale of new housing required in the

South East, the government has not provided any indication that statutory vehicles will be

created for high growth areas in the South West, which will limit the options available.

10.3.2 What powers would a DDV require to undertake its role most effectively?

The government has generally applied 6 benchmark tests to define the comparative powers

of DDV models:

• It is a single purpose body.

• It has power to assemble land (through purchase and Compulsary Purchase Order

(CPO)).

• It has power to capture development values (through s106 and in the future, CIL).

• It has control of plan making and development control (normally major applications

only).

• It has the ability to raise large scale long term funding.

• Mechanisms for transparency and accountability are in place.

Appendix F provides a summary of DDV models, examples of where they have been

established and their relative competencies. Historically, UDCs have had the most direct

access to the range of powers listed above, although there are important differences

between those formed in the 1980s and the second group created in 2004/05. The planning

powers are now not as extensive and a more collaborative approach, involving local

stakeholder and partners, has been taken to governance, as opposed to the original

approach where a board was directly appointed by the Secretary of State.

Non-statutory DDVs such as partnerships limited by guarantee (a company that is

incorporated for non-profit making functions), may be considered an appropriate option in

the South West. By involving the local authority in the partnership, the board could have

access to statutory powers such as CPO and the ability to capture development values,

however, it would be important to establish the legalities of utilising these powers and define

the roles of the corporate versus regulatory/planning arms of a council.




10.3.3 Where should the administrative boundary of the DDV be drawn?

Many of the DDV models referred to above have had relatively tightly drawn administrative

boundaries, either as a result of an urban regeneration focus (URCs) or a need to

concentrate planning powers within a limited area (UDCs). Assuming there is no need for

an infrastructure DDV to have formal planning powers, and defined roles consist of

establishing an infrastructure planning evidence base and coordinating delivery, then it may

be plausible for a DDV to have wider geographic remit for the reasons explored in Chapter

2.

10.3.4 How would relationships between the DDV and existing organisations be

managed?

Introducing a new organisation to an already complex arena is clearly not a step to be taken

lightly and partner organisations will want to explore:

• Whether the benefits of an infrastructure DDV would outweigh the associated

overheads; efficiencies could be gained where sub-regional bodies are resourced by a

number of LAs and agencies.

• Would the formation of a DDV result in duplication.

• Which organisations would be represented on the board. Would directors be drawn

from the public and private sectors, and would both officers and council members be

appointed.

It is not possible to detail all options in this advice note, and the ‘right’ organisational solution

to infrastructure coordination and delivery will vary depending on the existing and emerging

planning and governance arrangements in a given sub-region. For instance, the emergence

of a MAA in the West of England covering the transport and waste elements of infrastructure

would have an important bearing on decisions relating to whether a DDV would be

appropriate. In terms of learning from case studies, it is suggested that a review of the non-

statutory DDV models emerging in the South East and Midlands would be of benefit to

authorities in the South West.




11 Conclusions: The Infrastructure Challenge & Key

Principles for an Integrated Planning Approach

Providing for the levels of growth set out in the Regional Spatial Strategy presents a major

challenge to Local Authorities and the wide range of organisations responsible for

infrastructure and service provision in the region. The preparation of an infrastructure

planning evidence base to support Core Strategies as required by PPS12 will undoubtedly

have resource implications for all organisations involved, however it is important that this

agenda is not seen as an adjunct to existing corporate priorities but becomes central to a

more collaborative approach to business & service planning processes. . Comprehensive

infrastructure planning is a vital component of spatial planning and the establishment of

collaborative working arrangements and data sharing will ultimately reduce the time required

to undertake the task while improving the outcomes and deliverability of development plans.

The advice set out in this note presents an outline approach to infrastructure planning that

must be adapted to the organisational circumstances in a locality. Overarching principles to

follow can be summarised as follows:

• Adopt a collaborative approach - the preparation of a robust infrastructure delivery

plan will depend on working across infrastructure sectors and administrative boundaries.

Many organisations will benefit from an integrated approach to infrastructure planning

and the resourcing of the task should be shared accordingly. Local authorities should

be prepared to lead this process at the corporate level.

• The Infrastructure Delivery Plan should be a ‘live’ document - the strategies and

plans of infrastructure and service providers will not always be neatly aligned in terms of

geography, plan period or projected growth. It is therefore suggested that a

database/GIS is established that allows for information held to be readily updated and

analysed to inform the preparation of the Core Strategy and revisions to a Planning

Obligations SPD. This evidence base will also play a crucial role in informing the RSS

Implementation Plan and prioritisation of strategic infrastructure items at the regional

level.

• Contingency Planning should be undertaken - as part of the infrastructure planning

process, local authorities and their partners should undertake contingency planning

based on: alternative growth projections and build out rates; consideration of alternative

models of service provision; and alternative locations of growth. It is imperative that the

sustainability of alternative infrastructure solutions are explored given the huge influence

of such projects on the future demand and means of supply of energy and water etc.

This process can then feed into the Sustainability Appraisal of the Core Strategy.

In addition to meeting the requirements of PPS12 and improving the robustness of spatial

planning processes, a business planning approach to infrastructure will improve access to

funding from both the public and private sectors. This will help to address historic shortfalls

in capital expenditure in the South West when compared to that in many of the English

regions.

Analysis of PESA (Public Expenditure Statistical Analysis) data shows that, in the past, the

South West has occupied 7th position out of all the English regions (9 regions) including

London in terms of per capital expenditure (refer to Appendix A1 for details). A key issue for

the South West will therefore become one of substantively raising the per annum rate of

investment in infrastructure through a process of identifying need, raising new forms of

finance and ensuring the timely delivery of projects. Innovations such as the South West

Regional Infrastructure Fund (RIF) present the region with an opportunity to move forward

positively. The establishment of efficient, integrated and robust infrastructure planning

processes at the local/sub-regional levels will enable mechanisms such as the RIF to be

utilised to their full potential.




The Regional Planning Body are interested to explore with Local Authorities how they can

best assist with the establishment and resourcing of infrastructure planning and reporting

processes.

11.1 Sharing of experience across the region and areas for further

research

The Major Development Peer Review Events referred to in section 10.1 revealed that there

is an appetite amongst Local Authorities in the region to pool experience and resources

where appropriate. A number of tasks and initiatives that could potentially be taken forward

at the regional level are:

• The development of a database/GIS infrastructure planning tool that can form the basis

of ‘live’ infrastructure delivery plans. The Regional Planning Body (RPB) is in the

process of establishing a Regional Infrastructure Coordination Database, which

provides an example of and template for such an approach.

• With respect to the collation of infrastructure planning information, the RPB are

interested to explore with local authorities opportunities for the standardisation of data

collection so that reporting and review processes can be streamlined.

• The production of pro forma ‘statements of agreement’ on responsibilities for delivery

between local authorities and infrastructure / service providers.

• The production of sector profile sheets, possibly as a web resource, that provide an

overview of the structure, planning processes and funding streams of each

infrastructure sector.

• Undertake further research on models for Dedicated Delivery Vehicles that would best

suit circumstances in the South West.

• Explore with the utility providers the types of procedures that could be put in place to

improve the interface between land use planning and their own business planning

procedures.

• Explore the potential for using partnering arrangements, secondments or panel

framework agreements to provide specialist infrastructure expertise to local authorities

• Assess whether there is potential for the pooling of resources by local authorities to fund

a land valuation expert, who could assist with the preparation of planning obligations

policy.




Bibliography & Useful References

All Party Urban Development Group (2007) Loosening the Leash: how local government

can deliver infrastructure with private sector money.

All Party Urban Development Group (2008) Delivering Urban Homes: the role of the public

and private sector

BCIS (Building Cost Information Service) - http://www.bcis.co.uk/

CIRIA (2006) Sustainable water management in land use planning. CIRIA C630

CLG (January 2008) The Community Infrastructure Levy

CLG (August 2008) The Community Infrastructure Levy

CLG (2008) Infrastructure Delivery, Spatial Plans in Practice: supporting the reform of local

planning

HM Treasury (2007) Transforming Government Procurement

Housing Corporation Economic Appraisal Toolkit

(http://www.housingcorp.gov.uk/server/show/nav.00100f00200b)

NAO (2004) Out of sight – not out of mind: Ofwat and the public sewer network in England

and Wales

NAO (2007) Ofwat – Meeting the demand for water

Ofgem (2003) Securing Britain’s gas supply

Office of Government Commerce (2007) Whole life costing and cost management:

achieving excellence in construction procurement guide.

Ofwat (2006) A sustainable water industry – to PR09 and beyond – consultation paper

Parliamentary Office of Science and Technology (2007) Postnote: Electricity in the UK

Spon Press (2008) Spon's Architects & Builders Price Book 2008

Sustainable Development Commission (2007) Lost in transmission: the role of Ofgem in a

changing climate

Taunton Deane Borough Council (2004) Taunton Urban Extension Study, Terence

O’Rourke

TRICS database - http://www.trics.org/

West of England Partnership (2006) The Cost and Funding of Infrastructure in the West of

England – Stage 1, Roger Tym & Partners

West of England Partnership (2008) Sub-Regional Delivery Plan, SQW Consulting


Appendix A

Key Themes & Trends in Infrastructure Provision


A1 Public Capital Expenditure in the South West – A

Baseline

In 2006/7, the public sector spent £2.585 Billion on capital projects in the South West

equivalent to £503 for every person in the South West (PESA, 2006/7). The South West,

however, occupies the 7th position out of all the English regions (9 regions) including

London in terms of per capita capital expenditure. The region accounts for 8.3% of all

English capital expenditure despite holding 10.1% of the population. If the region had

secured the average per capita sum for England as a whole, a further £0.55 Billion would

have been available to spend on capital investment.

Public expenditure on capital covers a wide variety of different services from education to

defence. The distribution of capital finance in 2006/7 is shown in Figure 10 below.

Figure 9 - Distribution of capital expenditure in the South West

Environmental Protection is the only category where the South West exceeds the English

average for per capita expenditure.

In addition to public sector capital expenditure, many services are now provided through

the private sector. Estimates of capital expenditure are harder to obtain but an additional

£1.265 Billion could be attributed to the utility sectors comprising energy, water, waste

water and telecommunications (ABI Regional Statistics, 2007 – Adjusted).

Collectively, around £3.85 Billion per annum capital expenditure concerned with

infrastructure can be identified. These figures will reflect investment programmes running

over multiple years. It does, however, illustrate the scale of funding concerned with

delivering key quality of life services and suggest the existence of a funding shortfall (the

existence of a shortfall is more complicated than merely failure to match national average

investment, which provides one broad indicator).

Implications for the Regional Spatial Strategy on Infrastructure

The RSS is based on meeting the needs of projected economic and population growth

within the region. An additional 750,000 population by 2026 would raise the expected

level of public and private capital expenditure in the South West if current per capita

levels of investment were to be maintained.

Based on 2006/7 levels of public sector capital expenditure, a further £377 million per

annum would be needed across all classes of investment to maintain current levels. A

further £185 million per annum would be needed to sustain utility investments. Over a

twenty year period, £11.24 billion would need to be invested in capital projects to sustain

population growth equivalent to around £20,000 per dwelling (based on 569,450 dwellings

over a twenty year period). A spend level equivalent to the English average would equate

to £22,500 per dwelling. These figures do not account for changes in quality or the impact

of technology that require major overhauls in infrastructure.

A key issue for the South West will become one of substantively raising the per annum

rate of investment in infrastructure through a process of identifying need, raising new

forms of finance and ensuring the timely delivery of finance.

A2 Government Proposals for Integrated Regional

Strategies

In 2010, the government is proposing a new approach to the development of regional

strategies that will bring together the current economic and spatial planning strategies of

the South West. Whilst the enabling legislation is unlikely to be ready before 2010, this

approach signals a need to take much more of a business planning approach in the

development of regions.

This reform is part of a much wider set of reforms brought forward by a government keen

to ensure that its wider macro economic goals are supported by an infrastructure base

capable of supporting a high productivity economy. The Comprehensive Spending

Review 2007 specifically identified the need for infrastructure to support housing growth.

A key concern has been the market failures around bringing forward sufficient funding to

make infrastructure happen at the right time. Part of these reforms has concerned how

the development planning process can contribute a balanced share of the funding needed

for new development to happen.

The formation of Regional Integrated Strategies will require a significant change in the

way integration has occurred to date. These reforms are cascading down through the

Local Development Frameworks through the revision of Planning Policy Statement 12

which places infrastructure as an early consideration in planning process.

Under the current system, infrastructure has tended to be treated as a lag indicator that

“catches up” with growth. This reactive strategy has been a principle reason why

bottlenecks emerge that hold back growth.

A2.1 Supporting economic development

Increasing the annual rate of investment in infrastructure needs to be supported by a

frontloading of involvement in the assessment of infrastructure. Plymouth has started to

reverse this approach by front loading the involvement and assessment of infrastructure.

The starting point has been to develop economic development led modelling approaches

that seek to establish the level of growth anticipated over a 20 year period. These growth

forecasts have been translated into the traditional indicators such households and jobs

but also sustainability indicators which are becoming increasingly important in defining

infrastructure need particularly scale. Infrastructure need assessment is being brought

into this integrated modelling approach. In other regions such as the West Midlands, the

utilities are starting to see the advantage in early engagement with the planning process

by putting resources into a person whose sole responsibility is tying in utility network

planning into the development planning process.

A2.2 The Planning White Paper – Nationally Significant Infrastructure

Projects

The Planning White Paper provides a means by which nationally significant infrastructure

projects (e.g. major airports, ports, power generation, waste processing) will be identified

more clearly through a system of National Policy Statements, including consultation and

Parliamentary scrutiny. A new Infrastructure Planning Commission is to be established to

examine and determine applications for major infrastructure within the context of the

relevant National Policy Statements, which will have established the principle for that

scheme.

Appendix B

Sources of Information on Infrastructure Performance Requirements

South West regional Assembly SWRA Regional Infrastructure Infrastructure Planning Advice Note


Page B1 Ove Arup & Partners Ltd Issue 1 August 2008

This tabulation provides potentially useful references concerning infrastructure provision and

assessment of need. It is not intended to be exhaustive but will provide a useful starting

point.



Page B2 Ove Arup & Partners Ltd Issue 1 August 2008

Appendix C

Whole Life Costing & Exploring Infrastructure Service Models




Page C1 Ove Arup & Partners Ltd Issue 1 August 2008

C1 Whole Life Costing

The UK government has taken a decision to make all construction procurement choices on

the basis of whole life costs. Transforming Government Procurement (HM Treasury, 2007)

refers to the Government’s determination to be at the forefront of sustainable procurement,

making the government estate carbon neutral by 2012. The Office of Government Commerce is

expected to deliver this commitment, with the additional focus of driving better value for money

from procurement through whole-life costing. The general ruling by the Treasury has been

brought to the fore in relation to Private Finance Initiative (PFI) and Public Private

Partnerships (PPP) contracting in particular. The focus of PFI and PPP on long-term risk

management and long-term operation and maintenance makes comprehensive whole life

costing a necessity. However, government procurement outside of PFI and PPP will now

have an emphasis on whole life costs at all levels, including local authority and housing

association procurement.

Whole-life costing is aimed at answering the question: 'What is the cost of achieving this

objective in this way?'. It is considered in relation to quality in meeting a business or service

need, in order to determine value for money. Different solutions to meeting the service need

could result in significantly different cost profiles and contract duration, therefore an

appraisal of options needs to be flexible enough to compare very different approaches.

The whole-life costs of a facility (sometimes referred to as through-life costs) are the costs

of acquiring it (including consultancy, design and construction costs, and equipment), the

costs of operating it and the costs of maintaining it over its whole life through to its disposal

– that is, the total ownership costs. These costs include internal resources and departmental

overheads. They also include risk allowances and optimism bias as required; flexibility

(predicted alterations for known change in business requirements, for example),

refurbishment costs and the costs relating to sustainability and health and safety aspects.

Long-term costs over the life of the asset are considered to be more reliable indicators of

value for money than the initial construction costs for the following reasons:

• Money spent on a good design can be saved many times over in the construction and

maintenance costs. An integrated approach to design, construction, operation and

maintenance with input from constructors and their suppliers can improve health and

safety, sustainability, design quality; increase buildability; drive out waste; reduce

maintenance requirements and subsequently reduce whole-life costs. It is important to

take a whole-life approach to the asset, whether or not the same team is responsible for

design, construction, operation and maintenance.

• Investment in a well-built project can, in turn, achieve significant savings in running

costs.

This means that a service provider should be prepared to consider higher costs at the

planning, design and construction stages in the interests of achieving significant savings

over the life of the facility. As such it is considered essential that long-term maintenance

requirements are reviewed very early in the design stage; most of the cost of running,

maintaining and repairing a facility is fixed through design decisions made during the early

part of the design process.

The Royal Academy of Engineering reports that the typical costs of owning an office building

for 30 years are in the ratio of 1 (for construction costs): 5 (for maintenance costs): 200 (for

costs of the operation being carried out in the building, including staff costs). Consultancy

fees account for 10-15% of the construction cost that is, 0.1-0.15) when compared with 200

operational cost. The focus on whole-life cost should start from the business case by

increasing the value in the operational aspect while keeping the maintenance as low as

possible. In this way the initial construction cost can be recovered, since this initial cost is

the smallest amount and optimising the other two figures will have saved more than the




construction costs. The 200 figure is expenditure by the client organization on operating the

facility and will also reflect the benefit of that facility to the department or the public at large.

While a hospital may cost 200 times its construction cost over 20 years to provide a service

to patients, a well designed hospital may cost considerably less and a poorly designed one

considerably more.

Whole-life costing is covered by a British and International Standard – BS ISO 15686:

Service life planning of buildings and constructed assets.

C2 Exploring Service Model Assumptions & Options

The Infrastructure Delivery Plan is a supporting document to the Core Strategy and will be

tested at examination. Whilst the Regional Spatial Strategy will have been tested in terms

of the sustainability of its policies, the Core Strategy is likely to define a basis for specific

types of infrastructure solution which will themselves have sustainability outcomes.

A service need can be met through more than one type of infrastructure solution although

there may be a strong institutional preference for one particular way forward. Infrastructure

solutions need to be tested. A need for infrastructure can often be met in a number of ways.

The opening up of previously closed markets in provision can introduce new business

models as well as changes in technology and organisation. Infrastructure needs to be

reviewed in terms of how effect a solution is in terms of:




Solutions need to be tested against these issues and the results integrated into the

Sustainability appraisal of the development plan. The diagram below provides an example

of a structured approach to analysing these issues using a framework.

The diagram shows how an infrastructure project can be appraised across a number of

variable headings (radii) . The tool could be used with stakeholders to understand the

impact of a package of infrastructure or applied to an individual project. The tool can be

used to assess the most appropriate solution and the type of infrastructure needed to meet

community need.

The testing of infrastructure solutions will become increasingly important as environmental

sustainability performance standards become ever tighter e.g. carbon performance, water

management, biodiversity conservation. Meeting these requirements will need to be set

against the other dimensions of a sustainable development model.


Appendix D

Infrastructure Standards




Page D1 Ove Arup & Partners Ltd Issue 1 August 2008

This table follows on from Table 3 in section 3.4.1 ‘Converting growth scenarios into

infrastructure need’ and provides examples of standards that can be applied for different

infrastructure sectors.


Appendix E

Sources of Finance That Will Require Primary Legislation




Page E1 Ove Arup & Partners Ltd Issue 1 August 2008

Primary legislation would be required for the introduction of any of the following mechanisms

for raising finance.

Source: Loosening the Leash – All Party Urban Development Group (2007).


Appendix F

Dedicated Delivery Vehicles: Summary Table


South West regional Assembly SWRA Regional InfrastructureInfrastructure Planning Advice Note


Page F1 Ove Arup & Partners Ltd Issue 1 August 2008

Powers and constitution Title Designation Funding

Power to

assemble land

Power to

capture

development

values

Control of

plan-making

and

development

control

Constitution,

transparency

and

accountability

Comment and examples

Statutory DDVs

Urban

Development

Corporation

(UDC)

UDCs are non-

departmental public

bodies established

under the Local

Government, Planning

and Land Act 1980.

They have a term set

for seven to ten

years, with a review

after five years and

are funded by Central

Government (CLG).

UDCs may

acquire, hold,

manage,

reclaim and

dispose of land

and other

property.

UDCs have

CPO powers

UDCs are able

able to capture

and recycle

development

value to achieve

aims.

UDCs

established in

2004-05 have

power to

determine

major

applications.

Forward

planning

powers remain

with the LPAs.

The first wave of

UDCs were run by

boards appointed

by the Secretary

of State. A more

collaborative

approach is now

taken through

partnerships with

local, regional and

national

stakeholders.

UDCs are intended to: bring land and buildings into

effective use; encourage the development of existing

and new industry; create an attractive environment; and

ensure that housing and social facilities are available to

encourage people to live in the area. Twelve UDCs

were set up in 1980 under the Planning and Land Act,

and all were wound up by the mid 1990s. Since the

Sustainable Communities Plan was published in 2003,

a further three new UDCs have been established.

UDCs are not intended to be long-term bodies and

have relatively short lifespans.

Examples: Thurrock Thames Gateway UDC; The

London Thames Gateway UDC; and West

Northamptonshire UDC.

Milton Keynes

Partnership

Committee

(MKPC) and

Urban

Development

Area (UDA)

An UDA has been

established for Milton

Keynes based on the

powers granted to

Secretary of State by

the Leasehold Reform,

Housing and Urban

Development Act

1993.

The MKPC is a sub-

committee of English

Partnerships.

English

Partnerships

have acquired

land in the

UDA to

facilitate

development.

MKPC

administers the

Milton Keynes

tariff.

MKPC has

power to

determine

major

applications

within the UDA.

The UDA is

managed by

MKPC, a sub-

committee of

English

Partnerships,

which comprises

wide public,

private and

community sector

representation.

MKPC brings together Milton Keynes Council, English

Partnerships, Local Strategic Partnership

representatives from the health, community and

business sectors and independent representation. The

role of MKPC is to co-ordinate and implement the

delivery of growth and ensure that homes,

infrastructure, jobs and community facilities are

provided as part of a joined up approach.

Milton Keynes Partnership's statutory remit is set out in

the Milton Keynes (Urban Area and Planning Functions)

Order 2004 (S.I. 2004 No. 932).





Power to

assemble land

Power to

capture

development

values

Control of

plan-making

and

development

control

Constitution,

transparency

and

accountability


Urban

Regeneration

Company (URC)

URCs are independent

companies established

by the relevant LA and

Regional Development

Agency.

Joint funded by the

Regional

Development Agency

and English

Partnerships

URCs are able

to make key

acquisitions for

development

schemes and

are sometimes

assisted by

English

Partnerships

through joint

ventures.

URCs are able

to capture

development

value through

constituent

members.

None URCs bring

together public

and private sector

partners.

URCs were created to champion and stimulate new

investment into areas of economic decline and to co-

ordinate plans for their regeneration and

redevelopment. A URC’s principle aim is to engage the

private sector in a sustainable regeneration strategy,

working within the context of a wider strategic

regeneration framework or masterplan for a defined

area. Over time, URCs have become almost

exclusively associated with physical regeneration.

Three URCs have now changed their status to City

Development Companies (CDCs) or Economic

Development Companies (EDCs) – see below.

Examples from the South West: Swindon URC;

Camborne/Pool/Redruth URC; and Gloucester URC.





Power to

assemble land

Power to

capture

development

values

Control of

plan-making

and

development

control

Constitution,

transparency

and

accountability


Non-statutory DDVs

City Development

Company (CDC)

or Economic

Development

Company (EDC)

CDC/EDCs are

designed by LAs

working with the

Regional Development

Agency and are

established as

independent

companies limited by

guarantee. They are

expected to operate at

arms length from the

LA and RDA

Running costs are to

be met by member

organisations, with

no direct funding

streams from

government.

CDC/EDCs are

able to acquire

land.

Not anticipated

that a CDC/EDC

would perform

this role.

None Board made up of

representatives of

the public and

private sector.

50% of the board

and the chair

should come from

the private sector.

The Government has taken a non-prescriptive

approach to CDCs, but does support the concept. A

CDC is essentially a city economic development

company, and its primary aim is to improve city

economic performance. CDCs are closely related to

the URCs, but will tend to have a city wide or city-region

wide territory rather than the narrower spatial focus of

URCs.

Examples: Creative Sheffield CDC; Liverpool Vision

EDC; and Hull Forward CDC.

Partnership/

company limited

by guarantee

A company limited by

guarantee is normally

incorporated for non-

profit making functions.

The company has no

share capital. A

company limited by

guarantee has

members rather than

shareholders. The

partnership/ company

is established by its

members.

In the example of

Aylesbury Vale

Advantage, the initial

set up costs for the

DDV were provided

by the ODPM using

Growth Area Funds.

Partnership or

members could

act to acquire

land. This

could include

joint ventures

and the use of

CPO powers

where

necessary.

Partnerships are

able to capture

development

value through

constituent

members.

No planning

powers, but

inclusion of LA

members will

secure clear

lines of

communication

between

company and

LPAs.

Board can

comprise of

member

organisations who

own the own the

company and

other public,

private and

community

representatives

who are invited to

participate.

Aylesbury Vale Advantage has five member

organisations: Aylesbury Vale DC, Buckinghamshire

CC, English Partnerships, SEEDA, and the Aylesbury

Vale PCT that own the company. The Strategic

Delivery Plan 2004-2006 states that the key role of

Aylesbury Vale Advantage is enable the delivery of all

the growth development components (housing,

employment, infrastructure, health and community

facilities) and that these are provided at the right time

and to the right quality standards. It is not intended for

the company to duplicate or complicate existing

structures and activities, but to identify any constraints

to, or gaps to achieving the levels of growth envisaged

and a method of overcoming these gaps. In this sense,





Power to

assemble land

Power to

capture

development

values

Control of

plan-making

and

development

control

Constitution,

transparency

and

accountability


the company may act as a facilitator or intervene

directly.

Appendix G

Definitions of Strategic Infrastructure




Page G1 Ove Arup & Partners Ltd Issue 1 August 2008

G1 South East RSS Implementation Plan & Milton

Keynes Business Plan.

The term ‘strategic infrastructure’ is used for a number of purposes (e.g. CIL Policy

Statement, RIF policy statement) and a view as to whether a particular item of infrastructure

is of strategic importance may vary depending on the geographical scale of plan making.

This point is illustrated by the examples drawn from the South East RSS Implementation

Plan and Milton Keynes Partnership Business Plan. For instance “Health” is defined as

strategic infrastructure in the Milton Keynes Partnership Business Plan, while in the South

East Implementation Plan health centres and GPs are defined as local while acute, general

and mental hospitals fall in the national/inter-regional category.

South East Regional Spatial Strategy Implementation Plan for Examination in Public

(SEERA, October 2006)



Page G2 Ove Arup & Partners Ltd Issue 1 August 2008

Milton Keynes Partnership Business Plan 2006/7 – 2010/11, page 39