Report Title Community Infrastructure Levy Which Committees is this report intended for? (Please state dates) Cabinet Date: Overview and Scrutiny Date: 20th Sept 2011 Full Council Date: Is the report Exempt? Yes No Does the report concern a Key Decision? Yes No If a Key Decision is it on the Forward Plan? Yes No Why is it exempt? Ward(s) affected ALL Responsible Cabinet Member name Contact Officer Mark Ashwell Email address firstname.lastname@example.org Telephone number 516325 Are there Non-electronic appendices? Yes List of Background Papers, if any File Location Implications/Risks Have you identified and explained within the report the implications of the options available to Members? (Implications should include financial, legal and links to the Council’s existing policies and strategies) Have you highlighted the risks to the Council? Financial Implications and Risks to the Council should have their own separate headings. It is not acceptable to simply state that financial implications or risks have been alluded to in the main body of the report. Have you considered Sustainability issues in relation to this report? Sustainability should have its own separate heading. It is not acceptable to simply state that Sustainability has been alluded to in the main body of the report Yes None Yes None Yes None No Have you considered Equality and Diversity issues in relation to this report? Equality and Diversity should have its own separate heading. It is not acceptable to simply state that Equality and Diversity has been alluded to in the main body of the report Have you considered S17 Crime and Disorder issues in relation to this report? Crime and Disorder should have its own separate heading. It is not acceptable to simply state that Crime and Disorder has been alluded to in the main body of the report Yes None Yes None This report has been subject to the following processes: Consultations with: Cabinet Member Yes If not please state reason below Local Member Yes If not please state reason below S151 Officer Yes If not please state reason below Monitoring Officer Yes If not please state reason below S17 Officer Yes If not please state reason below Democratic Services Team Leader Yes If not please state reason below Communications Manager Yes If not please state reason below Other Head(s) of Service: Others: Please confirm this report has been signed off by: Management Team Yes Not apt Relevant Strategic Director Yes The Chief Executive Yes Not apt Not apt Agenda Item No_________________12______ COMMUNITY INFRASTRUCTURE LEVY (CIL) Summary: This report outlines the process of securing contributions towards infrastructure needs in the district through the development management process. It explains the Community Infrastructure Levy (CIL), the process required for its introduction and how CIL might benefit local communities. Conclusions: CIL has the potential to raise significant additional resources to help fund the infrastructure which is necessary to deliver the growth proposed in the Council’s adopted development plans. CIL would be a fairer, more transparent, and potentially a more administratively efficient mechanism for securing developer contributions towards infrastructure than through the existing planning obligations mechanisms. At present the Council does not have sufficient evidence in relation to infrastructure and the costs of provision or the potential impacts of CIL on development viability in the district which would be required to support CIL introduction and this work will need to be undertaken before a CIL could be introduced within the District. Recommendations: That Scrutiny Committee recommends to Cabinet that the Council introduces CIL and that the Planning Policy and Built Heritage Working Party progresses the detailed work in relation to infrastructure planning, viability testing, and preparation of a Draft Charging Schedule. Cabinet Member(s) Ward(s) affected : All Contact Officer, telephone number and email: Mark Ashwell, 01263 516325, email@example.com 1. Introduction 1.1 It is an established part of the planning system that those who secure planning permission for the development of land should contribute towards meeting the need for new or improved infrastructure which is required in connection with their development. Local Authorities are able to secure such contributions either through the direct provision of infrastructure by the developer or the payment of monies to deliver that infrastructure. Typically these contributions are made in relation to larger scale developments and might include both physical and social infrastructure such as affordable housing, local road improvements, provision for public open space and its on-going maintenance, funding for additional school places, library facilities and other public services. 1.2 These contributions have mainly been secured through a process of legal agreements under Section 106 of the Town and Country Planning Act 1990 where the Planning Authority agrees to the grant of planning permission subject to the prior completion of a legally binding agreement to provide the required infrastructure. Highway improvements can be secured through Section 106 Agreements but are more often covered by separate agreements with the County Council under Section 278 of the Highways Act. 2. Current Policy and Approach 2.1 Adopted Core Strategy Policy (CT2) and site specific policies in the Allocations Development Plan recognise that in many instances development will only be able to proceed if local infrastructure, services and community facilities are improved. Policy CT2 indicates that such improvements may be required in relation to development proposals for 10 or more dwellings and that the mechanism for making contributions (either as direct provision or through a financial contribution) will be published in a Planning Obligations Supplementary Planning Document (SPD). This SPD has not yet been produced and contributions are currently negotiated in accordance with agreed protocols and interim policy guidance. 2.2 In preparing the Core Strategy and the Site Allocations Development Plans it was recognised that in some parts of the District there are known infrastructure deficits which are expected to be addressed through the investment programmes of providers. For example, in some locations upgrades to Sewage Treatment Works will be necessary before growth can proceed and these would be funded through the investment programmes of Anglian Water. In these cases approved policies indicate that development may need to be delayed until these investments have been made. In relation to affordable housing, educational provision, localised highway improvements and the provision of public open space, it was proposed that contributions would be secured through the completion of Section 106 Legal Agreements negotiated on a case by case basis through the determination of planning applications. In practice, the small scale of most developments in the District over the past few years has rarely triggered the need for significant contributions. 3. What is CIL 3.1 The Government has decided that the process of securing developer contributions through legal agreements has been slow, creates uncertainty, and does not secure contributions from smaller scale developments - notwithstanding that these collectively place addition burdens on infrastructure and services. Nationally it is thought that just 14% of new development makes any significant contribution to local infrastructure provision associated with new development. The Government’s preferred approach is therefore to apply a “tariff” on most new development at the point when planning permission is granted. The Government’s view is that this tariff (the Community Infrastructure Levy) would be fairer, faster and a more certain and transparent system. The intention is that levy rates would be set in consultation with local communities and the development industry, providing developers with much more certainty ‘up front’ about how much money they would be expected to contribute. The levy would apply to most new development above 100sqm in size and to all new dwellings, except affordable housing units, and would therefore spread the ‘burden’ of contributions across a much broader spectrum of development than has previously been the case. Importantly, CIL is intended to be directly related to the delivery of the growth proposed in Development Plans and would operate as a contribution towards, rather than a replacement of other infrastructure funding. The levy is intended to ‘unlock’ the growth that is proposed in Development Plans by raising funds that can be spent on the infrastructure which is necessary to allow this growth to occur. Once set, CIL would be a non-negotiable tariff which would become payable upon commencement of development, or other agreed time, and would be recorded as a charge against the land. 3.2 Government advice states that CIL contributions should not be set at a level that risks the delivery of the Development Plan objectives by making development unviable. The guidance also states it would be possible to charge differential rates within an area to cover viability issues for different types of development (eg residential, commercial, retail) and across different geographical areas or sub zones. CIL charging schedules would be subject to consultation and examination in a similar way to a Development Plan. The Charging Schedule would set out an amount which the Council would charge for each new square metre of development built within different categories of development and provide evidence showing why a charge was necessary and reasonable. 3.3 Affordable and social housing projects, as well as charitable developments, would be exempt from the levy and there is provision for further local exemptions, although these would need to be rigorously justified. Currently it is proposed that developer funded affordable housing would continue to be delivered through planning obligations under S106 agreements and not CIL, as could other site specific works such as localised road improvements. 3.4 Regulations have been passed which allow, but do not require, a local authority to charge a CIL levy. Those local authorities who prepare Development Plans would be a Charging Authority. In Norfolk the responsibility therefore falls to the District Councils to prepare a CIL, should they choose to do so. In most circumstances the Charging Authority will also be the Collecting Authority. 3.5 As part of the recent announcements in the Localism Bill, the Coalition Government has indicated that neighbourhoods should receive a meaningful proportion of the funds raised from the CIL. These could pass directly to the local neighbourhood so community groups could spend the money locally. The precise mechanism as to how this would work is not clear at this stage although some authorities are considering the possibility of earmarking an agreed proportion of the levy for projects / infrastructure proposed at a neighbourhood level. 4. What is the process for introducing CIL? 4.1 The Charging Authority firstly has the option of whether to introduce CIL, or simply continue with using the existing planning obligations processes for seeking developer funding. Where the local authority opts to go down the CIL route, there is a formal process for its introduction, which involves developing and adopting a “Charging Schedule”. The Charging Schedule sets out the infrastructure requirements and the proposed levy on a per square metre basis for different types of development. The Charging Schedule is subject to public scrutiny and examination. Key stages in the preparation process are: • Identifying the total Infrastructure requirement arising from proposed growth in the area. Any tariff needs to be supported by an understanding of the Infrastructure that is required to support the development proposed in the adopted Development Plan. Once the full extent of infrastructure needs are identified these need to be fully costed. Existing funding sources are deducted from the overall cost to establish a “funding gap”. The Government does not require the development industry to fund all new infrastructure but expects a contribution to be made in so far as it is necessary to allow development to take place, or to take place earlier than might otherwise have been the case. The current North Norfolk Core Strategy adopted in September 2008 is supported by a high level understanding of infrastructure needs, but did not include a formal Infrastructure Plan or an understanding of the full costs of provision/availability of existing funding. A detailed Infrastructure Study would therefore need to be commissioned to bring this work up to date. • Decide what is in CIL and what is not. A decision would need to be taken in relation to which types of infrastructure might be funded via the levy. An authority might decide that some types of provision, for example small scale site specific works, are best secured through the existing Section 106 process. There is no prescription in relation to what should, and should not, be included. • Preparation of evidence on economic viability. Any tariff that is set must be subject to viability testing to ensure that it is not set at a level which would undermine delivery of the Development Plan. A key piece of evidence at the Examination would be a comprehensive assessment of likely impacts on development viability including how CIL might impact on different scales and types of development in different locations. • Formal consultation on the Charging Schedule. A draft Charging Schedule must be published for a minimum of a four week consultation period, inviting comment on the proposals by the development industry and local communities. • Examination in Public – chaired by an Independent Inspector. Inspectors are appointed by the Planning Authority and need not be a Government Inspector. The Examination process is similar to that employed in consideration of LDF Development Plan Documents with the Inspector publishing his/her findings and making recommendations. The Examination would focus on the evidence that is produced to support the proposed tariffs. (Core Strategy, Allocations DPD, Infrastructure Plan, Viability Assessment, Consultation responses and how the LPA has taken these into account). Whilst Development Plans are tested for ‘soundness’, Charging Schedules are examined for ‘reasonableness’. • Approval. The CIL must be the subject of a formal Council resolution to adopt. • Implement and establish administrative processes for collection, distribution, spending and monitoring. Administrative processes would need to be established to allow the Council to collect and distribute CIL. The Council is also required to publish details of what is collected and how it is spent in its Annual Monitoring Report. CIL need not be spent for the purposes for which it was collected, Spending Authorities are able to set their own priorities for expenditure. The regulations anticipate close working with communities to establish priorities. 5. What could CIL cover? 5.1 The definition of infrastructure included within the regulations is very broad. The key principle is that the Infrastructure should be necessary to facilitate growth and CIL should be a contribution towards provision rather than a substitute for other funding. 5.2 Pending the preparation of an Infrastructure Plan, it is not possible to be definitive in relation to what might be included within a CIL for North Norfolk. However the Core Strategy provides a broad understanding of likely infrastructure requirements which will be necessary to underpin delivery of the Plan. Table 1 (Appendix xxx) is illustrative of the potential areas which could be considered for CIL contributions. These should be treated as illustrative at this stage. 6. How much could CIL raise and how does this compare to the Section 106 process? 6.1 The level at which CIL could be set in North Norfolk will not be known until such time as a detailed Infrastructure Plan has been produced and CIL levels have been viability tested. Government estimates that nationally CIL could raise up to £1 billion in additional funding. As an example, those authorities that have progressed as far as preparing draft Charging Schedules are suggesting a levy in the range of £50 - £100 per square metre on residential developments. This equates to £3,500 - £7,000 for each new dwelling based on a typical floor area of 70 sqm per dwelling. The Government’s own Impact Assessment accompanying the Regulations appears to anticipate similar levels of charge. 6.2 Up to 5,000 new dwellings may be built in the District over the next 15 years or so, of which approximately 1,500 could be affordable and therefore exempt from any levy. Set at the above levels this residential development could contribute between £12 and £25 million towards infrastructure provision over the 15 year period. Contributions from other types of development are likely to be substantially less. 6.3 In the last three years just 23 developments in the District have been subject to Section 106 Agreements. This low number is indicative of the small scale of the majority of developments which have been approved. There were only 5 examples where financial payments were made directly to the District Council amounting to £40,000 towards maintenance of public open space. In the same period around £100,000 was collected by the County Council towards schools, libraries and the fire service. These figures exclude financial contributions and physical works undertaken to the public highway which are often funded under separate agreements with the County Council. Had CIL been in place over the same period residential development (based on actual housing completions excluding affordable housing) could have delivered approximately £5.5 million in contributions if set at the lower £50 per sqm figure referred to above. 7. Issues 7.1 Historically only a small proportion of new development in the District has made any contribution towards wider infrastructure needs. The practice has been to seek contributions only from relatively large scale residential proposals with little or no contribution from commercial or smaller scale residential schemes. Seeking contributions from a broader spectrum of development is considered to be both fairer and has the potential, depending on the level of charge, to make a greater contribution towards infrastructure needs. 7.2 Notwithstanding the land allocations made in the Site Allocations Development Plan, much of the future development in the District will continue to comprise small scale developments not previously liable to contribute. In these cases a CIL levy would represent an additional cost and this may raise concerns about the continued viability of smaller scale developments. The regulations envisage that viability testing would be undertaken on a range of developments (size, type, location) across the District and that levy rates would be set at a level which would not seriously undermine delivery of the development plan. However, there is no requirement to show that all development would continue to be viable following the introduction of a Levy and consequently it may prove more difficult, following the introduction of CIL to deliver smaller developments particularly on brownfield sites. In North Norfolk it will be particularly important to ensure that any CIL does not undermine the viability of smaller brownfield redevelopment opportunities as these will comprise an important component of the regeneration of some of the Districts towns. 7.3 Affordable housing contributions from the private development industry are currently provided on the basis that either the developer and/or the land owner will subsidise the cost of affordable housing. There is a concern that CIL will add additional costs which may make it more difficult to secure affordable housing, particularly as CIL is a non-negotiable payment which will take priority over other contributions when considering scheme viability. Similarly, it may become more difficult to secure other site specific infrastructure not covered by CIL contributions where development viability is marginal. These issues would need to be reflected in the level of any tariff and taken fully into account in viability testing. 7.4 Using new powers introduced in the Localism Bill, the Government will require charging authorities to allocate a meaningful proportion of levy revenues raised in each neighbourhood back to that neighbourhood. This will ensure that where a neighbourhood accommodates new development, it receives sufficient money to help it manage those impacts. 7.5 Local authorities will need to work closely with neighbourhoods to decide what infrastructure they require, and balance neighbourhood funding with wider infrastructure funding that supports growth. 8. Financial implications 8.1 There is limited staff resource within the Council to undertake CIL preparation. Consultancy support is likely to be required in relation to reviewing infrastructure needs and undertaking viability analysis. There is some financial provision for this within the existing Planning Policy budget (combined costs estimated at approximately £50,000) and therefore, if the Council is minded to proceed with the introduction of a CIL and preparation of a Charging Schedule, it is requested that authority is provided to procure such technical reports. Government guidance states that Charging Authorities are able to recover the costs of CIL preparation and ongoing administration through the CIL charge subject to these not exceeding 5% of monies collected, although clearly there are some upfront costs which the authority would need to bear before income from any CIL was to be received. 9. Sustainability 9.1 Developer contributions towards the provision of infrastructure, whether collected via Section 106 Agreements or CIL, are an integral part of ensuring the sustainability of future development. 10. Equality and Diversity 10.1 CIL would not have an adverse impact on any social group. By making communities more sustainable, CIL would facilitate economic growth and the provision of improved neighbourhood infrastructure and so create opportunity for all. The infrastructure and services that CIL could provide would enhance accessibility and quality of life for all sectors of society, and could help to deliver new infrastructure that serves different needs within the community, for example, by increasing mobility and accessibility. Consequently it is not expected that the introduction of CIL would raise any particular equality or diversity issues. 11. Section 17 Crime and Disorder considerations 11.1 This report raises no Section 17 issues.