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ACES Presidential Conference 2012

ACES Presidential Conference 2012. Utilising Public Sector Assets to Deliver Regeneration. PRIVATE & CONFIDENTIAL www.dtz.com. Introductions. DTZ Workshop Team. Andrew Smith Director, ead of Local Government Sector Group, DTZ Andrew.tc.smith@dtz.com Tel. 07808 479 229. Stephen Miles

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ACES Presidential Conference 2012

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  1. ACES Presidential Conference 2012 Utilising Public Sector Assets to Deliver Regeneration PRIVATE & CONFIDENTIAL www.dtz.com

  2. Introductions • DTZ Workshop Team Andrew Smith Director, ead of Local Government Sector Group, DTZ Andrew.tc.smith@dtz.com Tel. 07808 479 229 Stephen Miles Associate Director, DTZ stephen.miles@dtz.com Tel. 07980 666 095

  3. Context 1: Loss of private equity • Credit Crunch • Property Market Collapse • Government Budget Deficit

  4. Context 2: Retrenchment of public sector funds

  5. Context 3: Role & Expectations Shifting Policy Environment New Powers Spotlight on Local Authorities / LEPs Who else?

  6. Context 4: It’s about growth! “The transfer of NHS assets to a central company marks the end of localism” Wednesday 19th September 2012

  7. How can local authorities make better use of their £250 billion worth of property assets in order to unlock economic growth?

  8. Asset-backed vehicles such as LABV have been widely touted as an effective way to combine public sector assets with private sector expertise, yet relatively little use has been made of such vehicles. Why is this? And what are the barriers to their further utilisation? • What pressures have prevented local authorities from using asset disposals to create the greatest opportunity for regeneration and development? • How should public assets be used in designated areas such as Enterprise Zones so as to maximise their potential for growth? How could Enterprise Zones be improved to make best use of public assets? • What are the barriers to local authorities making greater use of existing powers - such as Compulsory Purchase Orders, Local Development Orders, master planning and Area Action Plans - to integrate public and private assets to achieve maximum impact? • What changes to the planning regime would help local authorities to maximise the value of public assets in planning for development? • To what extent can the private sector encourage and support the public sector to rationalise their use of public property, and release those assets that could make the maximum contribution to regeneration and growth?

  9. Approach: starting point Regeneration Objectives Assets Routes to Delivery

  10. What is regeneration? "It means providing bespoke and creative solutions to deliver sustainable new communities.....the acid test is a development that not only makes people feel good but makes them proud to be a part of it." John Ireland, Managing Director, Redrow Homes "Urban regeneration is a comprehensive and integrated vision and action which leads to the resolution of urban problems and which seeks to bring about a lasting improvement in the economic, physical, social and environmental condition of an area." Jon Ladd, Chief Executive, BURA "Development is easy, but regeneration requires partnership." Roger Madelin, Chief Executive, Argent Group "Urban regeneration is concerted social, economic and physical action to help people in neighbourhoods experiencing multiple deprivation reverse decline and create sustainable communities. It isn't property development by another name. Property development happens through market forces. Physical urban regeneration requires public sector financial support which is only given to benefit deprived communities.“ Chris Brown, Chief Executive, Igloo Regeneration Fund

  11. Asset types Surplus Non operational (investment) Operational New!

  12. Delivery Routes LAP LABV Collaboration TIF EZ Asset Leverage CIL LEP JV Co’s Development Agmts BID Prudential Borrowing NHB RGF Jessica Evergreen Local Housing JV Co. Seed Funding Revolve RPZ / LDO ….. Resource Review …...

  13. “too often the financial models are adopted as a solution without enough thought being given to whether they are appropriate to the circumstances” (Land Securities, written evidence to All Party Urban Development Group Inquiry).

  14. Asset-backed vehicles such as LABV have been widely touted as an effective way to combine public sector assets with private sector expertise, yet relatively little use has been made of such vehicles. Why is this? And what are the barriers to their further utilisation? • What pressures have prevented local authorities from using asset disposals to create the greatest opportunity for regeneration and development? • How should public assets be used in designated areas such as Enterprise Zones so as to maximise their potential for growth? How could Enterprise Zones be improved to make best use of public assets? • What are the barriers to local authorities making greater use of existing powers - such as Compulsory Purchase Orders, Local Development Orders, master planning and Area Action Plans - to integrate public and private assets to achieve maximum impact? • What changes to the planning regime would help local authorities to maximise the value of public assets in planning for development? • To what extent can the private sector encourage and support the public sector to rationalise their use of public property, and release those assets that could make the maximum contribution to regeneration and growth?

  15. What is a Local Asset Backed Vehicle? • Joint venture between public and private sector • Asset-backed: owns and uses land • Typically 50:50 equity/land deadlock partnership • Value of public sector land matched by private sector equity • Returns go to each party: public sector can choose to recycle these Land £equity Public sector Private Sector Partner JV Co Profit share Profit share delivery

  16. Types of LABV • Development - e.g. Onsite North East • Management - e.g. Blueprint • Operational - e.g. Solum Regeneraton, ISIS • Town centre Regeneration - Tunbridge Wells, Bournemouth

  17. Timeline of LABVs Source: RICS LABVs a Success Story or Unproven Concept

  18. What are the pros and cons?

  19. Ring-fencing of disposal proceeds • Straight land sale • Receipts via development agreement • Ring fencing of proceeds from assets within defined area • Clawback / overage

  20. Joint venture • Joint venture between public and private sector • Contractual relationship • Deals with shared responsibilities for delivery of development or services • Appropriate split of investment and risk Land Finance Local Authority Private Sector Partner JV Agreement Receipt Profit delivery

  21. Direct DevelopmentTown Centres • Cost Effective intervention – existing and new schemes • Rent more expensive that borrowing costs (& risk) • Clear plan and exit Birmingham City Council - acquired The Pallasades Shopping Centre for £103M April 2009 Lewisham Council - acquired Catford Centre for £11.5M Feb 2010 Basingstoke & Deane BC The Malls (acquired 65% geared interest) April 2010 Wokingham BC – acquired Wolsey Place Shopping Centre for £68M Feb 2010

  22. Direct DevelopmentMajor Projects • Direct Delivery • JV Partnerships • Housing Delivery Companies • Development Agreements • Cost effective intervention • More cost effective than gap funding • Existing and new schemes • Council as interim / end Investor • Returns justify investment • Clear plan and exit • Recognize wider socio economic benefits Council Partner Loan Guarantee Assets Equity Capital Payment Profit Share Loan Bank JV / LLP Loan payments Lease Rent Occupiers

  23. Use of assets to underpin investment e.g. Revolving Investment Funds Core public sector funding, EU, GPF, prudential borrowing, private sector investment Investments made from fund into Investment projects Investment projects Fund Installation directly supports release of land CIL revenue, proceeds from assets, business rate uplift, New Homes Bonus, other potential revenues Proportion of land value used to repay fund Development land Land value released by development over time

  24. Asset-backed vehicles such as LABV have been widely touted as an effective way to combine public sector assets with private sector expertise, yet relatively little use has been made of such vehicles. Why is this? And what are the barriers to their further utilisation? • What pressures have prevented local authorities from using asset disposals to create the greatest opportunity for regeneration and development? • How should public assets be used in designated areas such as Enterprise Zones so as to maximise their potential for growth? How could Enterprise Zones be improved to make best use of public assets? • What are the barriers to local authorities making greater use of existing powers - such as Compulsory Purchase Orders, Local Development Orders, master planning and Area Action Plans - to integrate public and private assets to achieve maximum impact? • What changes to the planning regime would help local authorities to maximise the value of public assets in planning for development? • To what extent can the private sector encourage and support the public sector to rationalise their use of public property, and release those assets that could make the maximum contribution to regeneration and growth?

  25. Constraints • Vires • S123 1973 LGA • OJEU / Standing Orders • State Aid • Difficulties with ring-fencing for regeneration purposes • Retention of revenue generation • Market / site constraints relating to assets • Capacity/skills • Political leadership

  26. Asset-backed vehicles such as LABV have been widely touted as an effective way to combine public sector assets with private sector expertise, yet relatively little use has been made of such vehicles. Why is this? And what are the barriers to their further utilisation? • What pressures have prevented local authorities from using asset disposals to create the greatest opportunity for regeneration and development? • How should public assets be used in designated areas such as Enterprise Zones so as to maximise their potential for growth? How could Enterprise Zones be improved to make best use of public assets? • What are the barriers to local authorities making greater use of existing powers - such as Compulsory Purchase Orders, Local Development Orders, master planning and Area Action Plans - to integrate public and private assets to achieve maximum impact? • What changes to the planning regime would help local authorities to maximise the value of public assets in planning for development? • To what extent can the private sector encourage and support the public sector to rationalise their use of public property, and release those assets that could make the maximum contribution to regeneration and growth?

  27. Use of Assets in EZs and other areas • Scope for development agreements or direct development that recognises value of rates additionality to the local authority • Ring-fencing proceeds from disposals of all surplus public sector assets • Consideration of deferred / geared payments for land to facilitate development • Recycling of proceeds into infrastructure funds

  28. Asset-backed vehicles such as LABV have been widely touted as an effective way to combine public sector assets with private sector expertise, yet relatively little use has been made of such vehicles. Why is this? And what are the barriers to their further utilisation? • What pressures have prevented local authorities from using asset disposals to create the greatest opportunity for regeneration and development? • How should public assets be used in designated areas such as Enterprise Zones so as to maximise their potential for growth? How could Enterprise Zones be improved to make best use of public assets? • What are the barriers to local authorities making greater use of existing powers - such as Compulsory Purchase Orders, Local Development Orders, master planning and Area Action Plans - to integrate public and private assets to achieve maximum impact? • What changes to the planning regime would help local authorities to maximise the value of public assets in planning for development? • To what extent can the private sector encourage and support the public sector to rationalise their use of public property, and release those assets that could make the maximum contribution to regeneration and growth?

  29. Barriers • Capacity and resources? • Revenue shortage? • Political leadership? • Cost and risk? • Market conditions?

  30. Asset-backed vehicles such as LABV have been widely touted as an effective way to combine public sector assets with private sector expertise, yet relatively little use has been made of such vehicles. Why is this? And what are the barriers to their further utilisation? • What pressures have prevented local authorities from using asset disposals to create the greatest opportunity for regeneration and development? • How should public assets be used in designated areas such as Enterprise Zones so as to maximise their potential for growth? How could Enterprise Zones be improved to make best use of public assets? • What are the barriers to local authorities making greater use of existing powers - such as Compulsory Purchase Orders, Local Development Orders, master planning and Area Action Plans - to integrate public and private assets to achieve maximum impact? • What changes to the planning regime would help local authorities to maximise the value of public assets in planning for development? • To what extent can the private sector encourage and support the public sector to rationalise their use of public property, and release those assets that could make the maximum contribution to regeneration and growth?

  31. Proposed planning reforms • Review the planning appeals procedure and to streamline the planning applications and related consents regimes to include a 12 month guarantee for the processing of all planning applications, including any appeals; • Consult on allowing for reconsideration of planning obligations in certain circumstances; • Consult on allowing change of use for certain buildings without the need for planning permission; • Change the threshold for major infrastructure projects so that more commercial developments can be decided at a national level through the national infrastructure planning system • legislate to allow planning applications to be decided by the Planning Inspectorate, if the local authority has a track record of consistently poor performance; and • Increase existing permitted development rights for extensions to homes and business premises, in non protected areas, for a three-year period.

  32. Asset-backed vehicles such as LABV have been widely touted as an effective way to combine public sector assets with private sector expertise, yet relatively little use has been made of such vehicles. Why is this? And what are the barriers to their further utilisation? • What pressures have prevented local authorities from using asset disposals to create the greatest opportunity for regeneration and development? • How should public assets be used in designated areas such as Enterprise Zones so as to maximise their potential for growth? How could Enterprise Zones be improved to make best use of public assets? • What are the barriers to local authorities making greater use of existing powers - such as Compulsory Purchase Orders, Local Development Orders, master planning and Area Action Plans - to integrate public and private assets to achieve maximum impact? • What changes to the planning regime would help local authorities to maximise the value of public assets in planning for development? • To what extent can the private sector encourage and support the public sector to rationalise their use of public property, and release those assets that could make the maximum contribution to regeneration and growth?

  33. Additional slides

  34. Growing Places Fund (GPF) • National fund for local infrastructure projects announced November 2011 • Initially £500m, increased by £270m at March 2012 budget • Funding allocated to LEPs on formula • Targeted on projects that unlock development and growth • Intended as revolving fund - significant degree of flexibility in application

  35. Tax Increment Financing / business rate retention • TIF – allows councils to borrow against future uplift in business rate income • Linked to wider proposals for business rate retention consultation paper 2011: • EZs – all rates retained/shared by LAs in LEP for 25 years + and disregarded for purposes of tariff/top up and levy calculations • Non EZs – Local Authorities to retain Business Rates above pre set thresholds (tariffs and top ups), but with claw back (“levy”) to capture disproportionate growth • TIF options included ring fencing TIF zones from tariffs and top up arrangements • March 2012 budget proposed £150million for TIF in core cities from 2013-14.

  36. ‘Earn back’ – holistic fiscal approach • City Deal proposals with eight Core Cities to decentralise powers in return for growth • Details of Greater Manchester’s Earn Back revolving infrastructure fund model confirmed in March 2012 budget • The deal will permit Greater Manchester to 'earn back' up to £30 million a year of tax for growth it creates • Under the scheme, Manchester will invest £1.2 billion in improving infrastructure such as transport • Details of similar deals for Leeds, Bristol, Birmingham, Newcastle, Nottingham and Sheffield to be confirmed in 2012

  37. New Homes Bonus • Bonus equivalent to national average Council tax (for the relevant Council tax band) for each new home for six years • Enhancement for affordable housing • Government has allocated £250m per year for 2012-2015 • Not ring-fenced - can be used flexibly

  38. Community Infrastructure Levy (CIL) • Market conditions & site values • Land owner’s return • Brownfield / Greenfield sites • Affordable housing and other 106 policies

  39. HCA agenda • Housing based infrastructure fund • Economic assets – proceeds • Major sites - over 10,000 units and 2000-4000 units • Getting Britain Building Investment Fund

  40. European Union – JESSICA EU Structural Funds Member State or region via designated managing authority Other public / private investors Urban Development Fund (UDF) Financing institutions and banks Infrastructure and development projects • JESSICA = Joint European Support for Sustainable Investment in City Areas • Establishment of Urban Development Fund (UDF) to invest in projects • Equity, loans and/or guarantees • Funds set up in North West, London, Midlands, Scotland and Wales • Current programme period is 2007-2013 – complexity in set up has left limited time for implementation

  41. Revolving Investment Fund Core public sector funding, EU, GPF, prudential borrowing, private sector investment Investments made from fund into infrastructure Infrastructure Fund Installation directly supports release of land CIL revenue, proceeds from assets, business rate uplift, New Homes Bonus, other potential revenues Proportion of land value used to repay fund Development land Land value released by development over time

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