MAIDSTONE BOROUGH COUNCIL
CABINET MEMBER FOR PLANNING, transport and development
REPORT OF THE HEAD OF PLANNING AND DEVELOPMENT
Report prepared by Darren Bridgett
Date issued: 31 October 2013
1. COMMUNITY INFRASTRUCTURE LEVY
1.1 Key issue for decision
1.1.1 There are two issues for consideration/decision.
1.1.2 Issue 1. To note the progress made in determining the basis for the council to charge a Community Infrastructure Levy (CIL), including the justification for charging by development type and by development location.
1.1.3 Issue 2. To consider the guidelines upon which the council determines the infrastructure to be included on the list of relevant infrastructure.
1.2 Recommendations of the Head of Planning and Development
1.2.1 There are two recommendations.
1.2.2 Recommendation 1
That, subject to the SCRAIP following the meeting of the Planning, Transport and Development Overview and Scrutiny Committee (PTD OSC) on 15 October 2013 (attached as appendix 2), the Cabinet Member for Planning, Transport and Development notes the progress made in determining the basis for the council to charge a CIL, including the justification for charging by development type and by development location.
1.2.3 Recommendation 2
That, subject to the specific amendments suggested to this recommendation in the SCRAIP from the meeting of the PTD OSC on 15 October 2013 (attached as appendix 2), the Cabinet Member for Planning, Transport and Development approves the methodology for guidelines for determining which infrastructure is included on the list of relevant infrastructure.
1.3 Reasons for recommendation
1.3.1 At the meeting of the PTD OSC on 15 October 2013, members considered the progress made to date in determining the CIL rates that might be charged on development in the borough. Appendix 1 to this report outlines briefly what the CIL is, how it can be charged and what the relationship with section 106 (s106) obligations is. As detailed in the SCRAIP (attached as appendix 2), members have requested further training in relation to this and have requested to understand further the implications of regulation 59A of the CIL (Amendment) Regulations 2013 – the duty to pass CIL to local councils.
1.3.2 Recommendation 1
On 16 May 2012 Cabinet confirmed its commitment to develop and charge a CIL. The council has since commissioned consultants Peter Brett Associates (PBA), to undertake viability testing of the local plan and to identify how the CIL could be applied in the borough. This testing forms the basis for the preliminary draft charging schedule (PDCS), which is currently being developed. The progress developing the PDCS is outlined in this report.
1.3.3 Recommendation 2
Regulation 123 of The Community Infrastructure Levy Regulations 2010 requires that a ‘list of relevant infrastructure’, commonly referred to as the ‘regulation 123 list’, is drawn up to identify which infrastructure CIL will be used to fund. If the list is not drawn up, it is assumed that CIL pays for all infrastructure, which would mean that section 106 obligations no longer had a role to play. It is proposed that a standardised, although not concrete, approach is used to identify which infrastructure is ‘relevant’, to promote consistency, transparency and a basis for future additions to the list.
1.3.4 Background and introduction
1.3.5 Recommendation 1: noting CIL progress to date
In May 2012 Cabinet confirmed its commitment to develop and charge a CIL. To support the approach adopted by this decision, the council commissioned PBA to undertake viability testing of the local plan. The work would assess the cumulative plan viability and specific site viability (including generic sites representing possible future developments), which would in turn provide the basis for specific CIL charges. The commissioning process was undertaken in co-operation with Swale Borough Council.
1.3.6 The basis for testing was, at the time, the emerging Core Strategy – now the Maidstone Borough Local Plan. The Core Strategy was consulted on in 2011 and included spatial and core policies, which outlined the types of development expected to come forward during the plan period. The 2011 document helped to determine which non-residential developments were likely to come forward. PBA used this information, and their experience, to develop a number of generic non-residential development scenarios.
1.3.7 At the time of commissioning (summer 2012), the council was preparing a strategic site allocations consultation document with the ultimate intention that following a successful consultation, the sites in this document would be amalgamated with the Core Strategy consulted on nine months earlier. The strategic site allocations provided the basis for more specific site viability testing. The Strategic Housing Land Availability Assessment (SHLAA) 2009 provided an understanding of the availability of sites elsewhere in the borough – this understanding formed the basis for a number of generic site viability assessments, particularly in rural areas where no allocations had been proposed.
1.3.8 Understanding the balance of costs
Where development types and development locations have been assessed for their potential viability, a number of factors have been considered. These are the costs that local policy might place on a development. The proposed costs that the council is seeking to implement through its plan are:
· Affordable housing
· CIL contributions
· S106 contributions
and
· Sustainable construction standards
For the purposes of testing, sustainable construction standards were set as per proposed policy CS6 (approved for further consultation at 13 March 2013 Cabinet). The reason for this was to strike a reasonable balance between sustainability considerations and other costs – the purpose of viability testing is not to test every eventuality, but a reasonable selection of scenarios. This means that there is a balance to be struck between the remaining three elements. If, for example, the affordable housing cost increases, then there will be less funding available for CIL and s106 contributions and vice versa.
1.3.9 Marginal viability
For a development to be considered viable on a given site, there needs to be a reasonable prospect that the landowner can make money above the existing use value of the site, otherwise he/she is unlikely to sell it to a developer. The value above the existing value, to make the prospect of sale more attractive, is referred to as the uplift. For the purposes of the viability testing, this uplift is 40% on top of the existing use value. If, after the potential development value is calculated, and the development costs are subtracted, there is enough value left to meet the existing use value, but not enough to meet the uplift on top of that value, the site is considered marginal in viability terms.
1.3.10 Local Plan viability testing – evidence document
The Local Plan viability testing was published on the council website in August 2013, following a members presentation in July 2013. The viability testing differentiates by development type and by development location. It is important to note that development types for the purposes of CIL/viability testing do not necessarily reflect development types identified in the Use Class Order (as amended in 2013).
1.3.11 Residential CIL
Following how testing scenarios were derived for residential development, a broad categorisation became apparent. Policy recommendations, following this categorisation, were split as follows:
· Maidstone urban area (previously developed land)
· Maidstone urban and urban periphery (greenfield), and garden land
· Rural and rural settlements
1.3.12 Draft CIL rates proposed by PBA for residential development, by location, were:
· Maidstone urban area - £35 per m2
· Maidstone urban and urban periphery, and garden land - £84 per m2
· Rural and rural settlements - £105 per m2
Note: the draft CIL rates that PBA proposed were based on having adopted equivalent affordable housing rates of:
· 20%
· 25%
· 40%
At Cabinet on 13 March 2013, policy CS10 (affordable housing) was approved for further consultation, with varied affordable housing targets of:
· 15%
· 30%
· 40%
The PBA proposed CIL rates also assume a split between CIL and s106 obligations of 70%/30%.
1.3.13 The council has sought to pursue different affordable housing targets for each location (from those suggested by PBA), and may seek to pursue a varied split between CIL and s106 funding, dependent on the information that comes forward through the infrastructure delivery plan (IDP). It is therefore still a part of the process for the council to decide how these variances, that is to say what is the most appropriate funding method for identified infrastructure needs, might affect the CIL rates that it proposes for consultation.
1.3.14 Non-residential CIL
Retail, although ostensibly one category, shows varying levels of viability. Where front running authorities have sought to charge different CIL rates, based on the type of retail assessed, they have found varying levels of success. The latest government consultation on CIL (ending May 2013) proposed that retail uses may be considered different to one another based on their size and impact on the local community. However, this has not yet been adopted by government.
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Retail viability assessments (potential £ per m2) |
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Local/convenience |
£189 per m2 |
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Supermarket |
£260 per m2 |
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Retail warehousing |
£276 per m2 |
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Superstore |
£434 per m2 |
1.3.15 All other non-residential development types tested showed only marginal viability, or in most cases, negative viability. Further information is available in the published evidence document Local Plan Viability Testing.
1.3.16 Translating evidence into policy
The next stage of CIL development at Maidstone is the preparation of, and consultation on, the preliminary draft charging schedule (PDCS). For the council to adopt CIL, it needs to prepare on this basis:
· Preliminary draft charging schedule – consultation
· Draft charging schedule (DCS) – consultation
· Submission to the Secretary of State
· Examination
· Adoption
1.3.17 The CIL preparation timetable is intended to follow the local plan preparation timetable. The timetables are aligned to allow the council to iterate between the requirements of the IDP and the rates at which CIL is set.
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Local plan |
CIL |
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Regulation 18 |
PDCS |
|
Regulation 19 |
DCS |
|
Submission to Secretary of State |
Submission to Secretary of State |
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Examination |
Examination |
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Adoption |
Adoption |
1.3.18 Officers are currently testing the implications of the proposed different CIL levels and how the delivery of infrastructure can be programmed with the potential income flow that these levels might produce.
1.3.19 Recommendation 2: agreeing the guidelines for determining the list of relevant infrastructure
The list of relevant infrastructure provides a clear basis for the council and potential developers to know how infrastructure will be funded. The implication of knowing how infrastructure will be funded is that thought will also need to be given to how the infrastructure will be delivered. The council will in some cases, become its own delivery agent, that is, it may need to commission projects for the delivery of infrastructure, rather than relying on the developer to deliver. In other cases, such as highways, the delivery agent will remain Kent County Council and it will be for Maidstone Borough Council and Kent County Council to agree governance protocols for funding.
1.3.20 It is important to understand that as the plan period progresses, the need for infrastructure may change. When these changes occur, there should be guidelines for how any new infrastructure is funded – assuming a continuance of the CIL and s106 options. The advantages and disadvantages of CIL funding have been briefly considered earlier in this report, but the decision to include an infrastructure type or infrastructure project on the list of relevant infrastructure should also be guided by other factors, which are recommended below.
1.3.21 If it is strategic infrastructure
Where strategic infrastructure needs to be delivered, particularly on a borough wide basis, the pooling of contributions through CIL is likely to be the most feasible approach to do this. The need to prove a link to development, as per s106 obligations, will not be a restricting factor.
1.3.22 If the cost of the infrastructure is significant
Pooling restrictions may mean that five s106 obligations cannot sufficiently finance an identified infrastructure project. This is likely to be the case with strategic infrastructure.
1.3.23 If the number of development sites that should contribute to specific infrastructure exceeds the s106 pooling limit
There may be more than five development sites that should contribute to an infrastructure project. It is also not necessarily the case either that one site, as allocated, would be submitted to the council in one planning application, potentially increasing the number of s106 obligations further still.
1.3.24 If infrastructure contributions are determined by set standards
Where infrastructure is determined by standards, for example open spaces, that need to be adopted in policy (if the delivery method were usually s106 obligations), it may be more advantageous to collect CIL contributions and have the council deliver the infrastructure itself. This would bypass the need to strictly consult on and examine standards through the planning system (as per procedures set by planning regulations). This could offer flexibility in the long term for amending standards if considered necessary.
1.3.25 If the delivery of infrastructure is necessary before development proceeds
In some cases the delivery of infrastructure to enable a development or developments to proceed, might be necessary at an early stage, even prior to development proceeding. If the council has sufficient knowledge of this requirement, through detailed infrastructure planning in the IDP, it may be able to assist in the delivery of the infrastructure project, overcoming any funding/viability issues if they are likely to arise.
1.3.26 If applications are being submitted that require infrastructure based mitigation before the adoption of CIL
The list of relevant infrastructure will come into force when the CIL is adopted. For applications that are submitted prior to the adoption of CIL, the council will still need to seek infrastructure improvements using s106 obligations. Where it is the case that an infrastructure project needs to be, or can only be, delivered over a longer time period, potentially with high costs involved, the council has the option to split the infrastructure project into component parts. The council could, for example, continue to take s106 monies towards one phase of the project and then at an appropriate time, when that first phase has been delivered or commissioned, assuming that CIL has now come into force, place the second phase of the project onto the list. This would ensure that developers are not being required to pay twice for the same piece of infrastructure. As part of the ongoing administration of CIL, accounting procedures would need to be put into place to ensure transparency in situations such as this.
1.3.27 These factors are suggested as guidelines as to how the list of relevant infrastructure is determined. While in most cases, the council could reasonably apply these considerations to an infrastructure type or infrastructure project and determine if it is a suitable inclusion, there may be unforeseen circumstances that mean it is still more preferable to seek delivery through s106 obligations. The council should recognise this and in such circumstances seek clarification of the reasoning. The council should, in any case, retain the ability to apply flexibility in its administration of the CIL.
1.3.28 Future tasks – prioritising the list of relevant infrastructure
A significant implication of the CIL and the list of relevant infrastructure is that the council itself will collect the funds and make the decisions on distributing these funds. At Cabinet on 13 March 2013, the decision was made to prioritise infrastructure contributions, based on information in the IDP, as it stood at that time.
1.3.29 The final development (housing and employment) targets for the borough are still to be determined and agreed. The infrastructure requirements arising from any other proposed land allocations (beyond those agreed at Cabinet on 13 March 2013) will need to be factored in to the preparation of the list of relevant infrastructure and ultimately the council may need to review/reaffirm its decision relating to the prioritisation of infrastructure.
1.3.30 Capital programme
With the identification and agreement of development targets to be included in the Maidstone Borough Local Plan, the council will be able to estimate with a degree of accuracy the potential income that could be generated by the CIL. S106 income is more difficult to predict, because by its nature, an element of it will be based on developer negotiations. This would take account of potential variances in the CIL rate, affordable housing contributions and the amount of CIL passed to relevant parish councils and neighbourhood forums.
1.3.31 The receipts information will need to be phased (to understand timing) and read with the IDP requirements. This will allow the council to have a clearer understanding of when funds are likely to come in, where they are likely to come from and which decisions it is likely to need to make regarding the allocation of different sources of funding.
1.4 Alternative action and why not recommended
1.4.1 Cabinet has already confirmed its commitment to introduce a CIL for Maidstone. Much of this report addresses the process following that decision. The alternative action in this case relates to the issue of how the list of relevant infrastructure is populated.
1.4.2 Feasibly, the council could choose not to set guidelines for populating the list of relevant infrastructure. The council could choose a limited amount of infrastructure types or infrastructure projects to include on the list. The benefit of such an approach is simplicity, however, whereas CIL may be more simple, the infrastructure requirements will still exist and would therefore need to be delivered through s106 obligations.
1.4.3 Continuing to use s106 obligations as the primary infrastructure delivery method could still be achievable, however, the national introduction of CIL has brought with it codified restrictions on s106 usage. These have been addressed in the main body of the report, but the essence is that s106 obligations:
· From 6 April 2014, can be pooled for a maximum of five agreements towards any one infrastructure type or infrastructure project, counting back to 6 April 2010
· Must be shown to reasonably relate to the development in question
1.4.4 The ability of the council to consistently collect CIL on all relevant developments means that it is not subject to there being a reasonable infrastructure requirement associated with a development. The existence of a link is significantly less likely with minor development proposals (because they are unlikely to cause a noticeable impact on local amenities) and even if it were so with each small development proposal, the administration cost of implementing so many legal obligations could outweigh the income generated by them.
1.5 Impact on corporate objectives
1.5.1 The adoption of CIL impacts on two of the corporate objectives.
1.5.2 For Maidstone to have a growing economy – the introduction of CIL, to support the local plan and IDP, will allow the council to predict with more certainty where infrastructure is required and when that infrastructure can be delivered. The increased confidence that this would foster would mean that the borough is a more attractive place to locate for residents and businesses.
1.5.3 For Maidstone to be a decent place to live – the local plan and IDP, which the introduction of CIL supports, are in essence tools to allow Maidstone Borough to continue to be a decent place to live.
1.6 Risk management
1.6.1 The risk in determining the list of relevant infrastructure is not getting the correct balance between CIL and s106. The council might propose too few infrastructure types or infrastructure projects, which could place an unachievable delivery requirement on the use of s106 obligations, given their inherent restrictions. Alternately, the council might place too many infrastructure types or infrastructure projects on the list, which means that there might not be enough funding to support the list ever reasonably being delivered. Having too many types or projects listed may also mean that the council sets itself too demanding a task in terms of administration of CIL and the commissioning and delivery of infrastructure, before it has had the chance to gain the necessary experience of working with this system.
1.6.2 In both cases, the council would need to monitor the ongoing performance of infrastructure delivery, across CIL and s106 obligations. If infrastructure delivery is not proceeding as forecast, it may be that the list of relevant infrastructure needs to be changed. The council would need to make an informed decision and then consult on this. The type of consultation has not yet been specified in detail by government, however, it is anticipated that 30 days of consultation and a report to Cabinet would be the appropriate approach. In order to identify if such a situation were occurring, the council would need to monitor on a set basis, perhaps as part of its planning annual monitoring report, or as part of its financial monitoring, its own performance in this regard. It would then be for the officers to make recommendations to address any underperformance.
1.7 Other implications
1.7.1
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1. Financial
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X
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2. Staffing
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X
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3. Legal
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X
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4. Equality impact needs assessment
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5. Environmental/sustainable development
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X |
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6. Community safety
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7. Human Rights Act
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8. Procurement
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X |
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9. Asset management
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X |
1.7.2 Financial – the introduction and collection of the CIL, as well as infrastructure payments, will require new financial procedures to be implemented within the council.
1.7.3 Staffing – the ongoing administration of the CIL is likely to require dedicated staff support.
1.7.4 Legal – the council will need to implement internal and external governance arrangements in relation to the implementation of the CIL. The ongoing use of s106 obligations will also require legal input.
1.7.5 Environmental/sustainable development – the CIL will support the delivery of the Maidstone Borough Local Plan, aims and objectives. The plan is written to deliver environmental/sustainable development as a key aspect.
1.7.6 Procurement – the procurement arm of the council will need to guide the commissioning and delivery of relevant infrastructure.
1.7.7 Asset management – there are likely to be implications for the council’s own asset management as part of the delivery of infrastructure. The council may wish to implement procedures where assets are managed externally, however, this would need to be determined depending on which infrastructure types and infrastructure projects are delivered.
1.8 Relevant documents
1.9 None.
1.9.1 Appendices
1.9.2 Appendix 1 – Community Infrastructure Levy – background information.
1.9.3 Appendix 2 – 15 October 2013, Scrutiny Committee Recommendation Action and Implementation Plan (SCRAIP).
1.9.4 Background documents
1.9.5 Record of decision of the Cabinet – Community Infrastructure Levy, 16 May 2012.
1.9.6 Local Plan Viability Testing, Maidstone Borough Council, 2013.
1.9.7 The Community Infrastructure Levy Regulations, 2010.
1.9.8 The Community Infrastructure Levy (Amendment) Regulations, 2013.
1.9.9 Report of the Director of Change, Planning and the Environment – Maidstone Borough Local Plan, to Cabinet, 13 March 2013.
1.9.10 Record of decision of the Cabinet – Maidstone Borough Local Plan, 13 March 2013.
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