BACKGROUND

With ongoing reductions in public expenditure for infrastructure funding, this Huckfield briefing gives a summary of funding available in Scotland for further development of infrastructure projects. It does not seek to be exhaustive but to shed light on some sources with which all readers may not be familiar.

The following headings take you straight to sections concerned:

SCOTTISH INNOVATION

This Section offers a brief description which shows that there is more funding innovation in Scotland than is sometimes recognised or appreciated.

Glasgow Eastern Area Regeneration (GEAR)

This important partnership brought public and private sectors together with benefits for deprived communities in Glasgow.

Highland Housing Association Land Bank Fund

This important Highland Council/Highland Housing Association Land Bank Fund initiative deserves more detailed study.

Fife and East Kilbride

In Fife and East Kilbride there have been important research projects which are sometimes overlooked. Further Huckfield briefings will provide more details on these.

LOCAL COUNCIL BORROWING AND LOANS

The following represent general powers for local council borrowing which do not need special purpose vehicles:

Prudential Borrowing

A brief summary of the Prudential Borrowing Code and its implications for local councils.

Municipal Bonds

Faced by higher interest rates from the Public Works Loan Board, following the example of the Greater London Council and some Housing Associations, more local authorities are exploring issuing their own bonds.

SPECIAL PURPOSE VEHICLES

Rather than general powers, these mechanisms need specific assembly and formation:

Non Profit Distributing Organisations

NPDOs are sometimes called “PFI-lite”. Through the Scottish Futures Trust NPDOs represent the Scottish Government’s chosen vehicle for funding significant public infrastructure developments. Scottish Futures’ “hub” policy is still being developed across Scotland.

National Housing Trust

Through the Scottish Futures Trust, these involve partnerships between local councils and developers to build more affordable homes.

EUROPEAN FUNDING

Under some Priorities of the 2007 to 2013 Structural Funds Programmes, local councils and others may continue to make funding applications.

JESSICA

Funding under JESSICA (Joint European Support for Sustainable Investment in City Areas) represents an important programme funded by the European Commission, European Investment Bank and Scottish Government.

LEVIES AND TAXATION

This Section deals with Planning Agreements, Community Infrastructure Levy and Tax Increment Funding.

Planning Agreements

Planning Gain through Planning Agreements has been more widely used in England than Scotland.

Community Infrastructure Levy

In England, CIL is beginning to replace Planning Agreements under Section 106 of the Town and Country Planning Act 1990.

Tax Increment Funding

With the Scottish Futures Trust, the Scottish Government and local councils are setting the pace for the rest of the UK in this important new financing mechanism.

LOCAL COUNCILS AND COMMUNITY BENEFIT FROM RENEWABLE ENERGY

With more Councils defining and developing Community Benefit policies from renewable energy, especially wind farms, this is an expanding area of potential infrastructure funding.

Dumfries and Galloway

Following a detailed review in 2011, Dumfries and Galloway are developing a detailed Community Benefit policy.

South Lanarkshire

Especially with its well known Whitelee Wind Farm, South Lanarkshire has been a Scottish and UK pace-setter in defining community benefit from wind farms.

Scottish Borders

Scottish Borders is developing its Community Benefit policy. Its area includes the 10-turbine Brunta Hill Windfarm.

Highland Council

Highland Council announced its detailed Community Benefit policy, including funding for infrastructure, on Friday 24 February 2012. Highland is also the first council in Scotland to begin a detailed community benefit policy for offshore wind.

OTHER COMMUNITY BENEFIT FROM RENEWABLE ENERGY

Scottish and Southern Energy (Scottish Hydro) and the Forestry Commission are beginning to develop their Community Benefit policies across Scotland. While these are at a preparatory stage, their size they may have important implications for infrastructure.

Scottish and Southern Energy (Scottish Hydro)

Scottish Hydro policy across Scotland is beginning to emerge.

Forestry Commission

The Forestry Commission has pursued a tendering process for wind farm developments on its land. The £5000 per installed Megawatt tariff which has emerged has now set the benchmark for Scotland.

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SCOTTISH INNOVATION

The following show examples of innovation in Scotland which deserve more study and will be covered in more detail in further Huckfield briefings.

Glasgow Eastern Area Regeneration (GEAR)

GEAR activity from 1976 to 1987 is summarised in “Remaking Planning: The Politics of Urban Chance” in 1996 by Tim Brindley, Yvonne Rydin and Gerry Stoker:

“Private builders have been attracted to GEAR sites that have been reclaimed and attractively landscaped by the public sector. Initially, land was sold cheaply by the former public sector owners and in some cases, subsidised with public sector grants and underwritten by public sector guarantees to buy any properties not sold”.

Highland Housing Association Land Bank Fund

“Paying the Piper:Funding and Financing Infrastructure Issues for Housing in Scotland” March 2011 by Newhaven Research for the Chartered Institute of Housing, describes the Highland Council/Highland Housing Association Landbank initiative on page 45:

“In March 2005, Highland Council transferred the land to Highland Housing Association (HHA) for the open market value. Purchase of the land by HHA was funded by means of an interest free loan provided from the Land Bank Fund . HHA issued a development brief in July 2005, and commissioned a feasibility study and indicative masterplan for the site, which confirmed potential for 32 affordable and 88 private units, or 120 in all; revised outline planning consent was applied for and granted.”

Fife and East Kilbride

There are also cases innovative ways forward in Fife’s research into a possible “roof tax” and research for East Kilbride on the “Infrastructure Deficit” for the Northern Distributor Road.

Further Huckfield briefings will provide more details on these.

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LOCAL COUNCIL BORROWING AND LOANS

Prudential Borrowing is well established as a local council funding source for infrastructure. With increased Public Works Loan Board rates, more councils are now investigating the possible issuance of their own bonds.

Prudential Borrowing

Prudential Borrowing is the administrative framework applying to local councils that allows them to borrow in accordance with the Prudential Borrowing Code.  The objective of the Code is to help ensure for individual authorities that:

  • Capital expenditure plans are affordable
  • All external borrowing and other long term liabilities are within prudent and sustainable levels
  • Treasury management decisions are taken in accordance with professional good practice

Prudential Borrowing has often been a loan from the Public Works Loan Board at rates of interest marginally above those at which the Government itself can borrow from the gilts market. Other forms of borrowing, including commercial bank loans and bond issues, are also permitted.

Prudential Borrowing is sometimes described to as an alternative means of procurement to PFI/PPP. But Prudential Borrowing represents a means of finance rather than a procurement route. But Prudential Borrowing can be used in conjunction with conventional, PPP or PFI procurement mechanisms.

In “An Exploratory Study of the Utilisation of the UK’s Prudential Borrowing Framework” by Stephen Bailey and others in Public Policy and Administration November 2010, on page 352:

“The Prudential Indicators are intended to clarify the consequences of proposed investment policies, enhancing transparency and accountability. Using the Indicators, each local authority sets a limit on the amount of borrowing it can undertake. Estimates for ‘capital expenditure un-financed’ (defined as that capital expenditure which is not financed by capital receipts, grants or revenue contributions) results in local authorities setting their own limits on the total amount of debt they can take on. This is intended to ensure that all external borrowing is within prudent and sustainable limits, that capital expenditure plans are affordable and that treasury management decisions correspond with certain accounting standards. This marks a significant shift from direct prescriptive statute-based control towards increased local self-regulation, financial autonomy and reliance on professional codes of practice for the monitoring of this autonomy”

Municipal Bonds

Municipal bonds may be issued by central and local government to finance capital projects like schools, roads or other public infrastructure or even to fund ongoing required expenditure.  Investors who buy municipal bonds are in effect lending money to the bond issuer in exchange for a promise of regular interest payments and the return of the original investment or principal. These bond investors are usually attracted by the steady stream of income payments. They may be more risk-averse and more focused on preserving rather than accumulating wealth.

Following London’s £600mn bond issue to fund Crossrail in July 2011, according to the Sunday Telegraph of Sunday 4 December 2011 some English local councils, including Wandsworth, Birmingham and Guildford now have secured external credit ratings as a preparation to become potential bond issues as their sources of finance are cut or become more expensive.

Though around 50% of UK capital expenditure is channelled through local government. But local councils face increasing difficulties with  spending cuts and increases in the cost of borrowing from the central Public Works Loan Board. Grants for local government capital spending will be reduced from £11.1bn in 2010-11 to £6bn in 2014-15 in real terms.

The New Local Government Network believes that increased Public Works Loan Board interest rates will force more city councils to the bond markets. In “Capital Futures:Local Capital Finance Options in an age of recovery”, the New Local Government Network said:

“Nearly two-thirds of the councils surveyed for new research say the PWLB rate rise will change the way they borrow, suggesting that bond issuances will come back onto the local agenda for the first time in 17 years.”

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SPECIAL PURPOSE VEHICLES

This Section describes special mechanisms which may be set up through Scottish Futures Trust to assist local council borrowing.

Non Profit Distributing Organisations

These are sometimes called “PFI lite”. The Scottish Government has abandoned PPP/PFI in favour of the Scottish Futures Trust(SFT). SFT has embarked on a range of procurement options, such as Non-Profit Distributing Organisations (NDPOs). The essential difference between NPDOs and mainstream PPP/PFI is that returns to private investors are capped.

The Eighth Report on December 16 2008 of the Scottish Parliament Finance Committee Inquiry into Methods of Funding Capital Investment Projects in paragraph 129 concludes:

“The Committee believes that a broad range of options for funding and procurement of capital projects should be in place. The Committee notes the Scottish Government’s decision to make NPDO models the default form of private finance, and the statement in the Value for Money Guidance that, where NPDO is not suitable, other private finance models will be assessed. The Committee recommends that public bodies should select the method of financing which delivers best value to the taxpayer. The Committee, therefore, agrees by division that all methods of finance should be considered equally on their merits. A minority of the Committee endorses the Scottish Government’s position that the NPDO model should be the default option.”

The Scottish Government’s Response from Cabinet Secretary John Swinney on February 16 2009:

“The Scottish Government very much agrees that value for money should determine the procurement model used. That is why it is not in favour of the use of the standard PFI model of procurement because it considers that the uncapped equity returns inherent in the financing structure do not represent best value for money for the taxpayer and give rise to excessive profits. Where it is shown that the use of private finance will secure better value for money, the Government believes that the NP~ model, which eliminates uncapped returns and directs surpluses for community benefit, offers a better deal for taxpayers”.

In “Non-Profit Distribution: The Scottish Approach to Private Finance in Public Services” in the Cambridge University Press “Social Policy and Society” 2009, Mark Hellowell and Alyson Pollock on page 406:

“The key difference between PFI and NPD is that, whereas in the former, the SPV capital includes a small element of private equity, in the latter its members invest only loans. In consequence, while SPV shareholders receive returns on their capital in NPD, the level of these returns is to a large extent ‘capped’ at the point at which contracts are signed, and any surpluses remaining at the end of the contract are passed to a designated charity. This is distinct from the PFI model, in which surpluses are passed to SPV members as dividends”.

The Scottish Futures Trust is forming a series of NPDO “Hubs” across Scotland involving private and public sector partners. On Monday 23 January 2012, Barry White, SFT Chief Executive announced:

“This is a momentous achievement for SFT and the hub team. In the past 18 months we have announced the appointment of the preferred partners for the South East, North, East Central and West hubs with the last preferred partner for South West hub to be announced in August 2012. When all hubs are operational they will deliver in excess of £1.4bn of infrastructure projects across Scotland by 2020″

National Housing Trust

This is an initiative by the Scottish Government in 2011 to enable developers and local authorities jointly to fund homes by forming Limited Liability Partnerships, with loans underwritten by the Scottish Government. Typically a local council may meet 65% of construction costs for the homes, in a partnership with private developer.

The Scottish Government described in October 2011 how the National Housing Trust works.

“New build homes are procured from developers, and when a bid from a developer is accepted onto the initiative the developer will complete the homes on their site to agreed standards and timescales. Limited Liability Partnerships (LLPs) are being set up to oversee progress on each developer’s site within a Council area – these are companies which won’t have any staff, but have a board of management involving the relevant developer and Council and a representative of the SFT. Once the homes are completed, the LLP will buy them by paying between 65% and 70% of an agreed purchase price to the developer upfront.

“This contribution is funded by participating Councils who will provide loans to the LLPs in their area – Councils are likely to fund this by borrowing from the Public Works Loan Board. The remaining 30% to 35% is contributed by the developer as a mixture of loan funding and equity investment”

“The homes are expected to be available to tenants for affordable intermediate rent for five to 10 years and the developer will oversee an agent(s) who will manage the homes and carry out maintenance and repairs to agreed customer service standards. The managing agents will allocate homes to tenants based on criteria agreed with the Council.

“Each LLP’s income from tenants’ rents will be used to pay interest to the Council so it can finance its own borrowing for the initiative and will also pay interest on the loan from the developer and pay for agents responsible for managing and maintaining the homes. The Scottish Government will provide a guarantee to participating Councils that it will step in if there is a problem and the LLP is unable to pay what it owes to the Council”

This is an example of Procurement Tendering on the Tenders Electronic Daily site.

The Second Phase of the NHT initiative shows details of 15 Councils procuring homes through the current phase of the NHT initiative and the approximate number of homes being sought in each area.

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EUROPEAN FUNDING

Under current 2007 to 2013 EU Structural Funds Programmes, the Scottish Government, Local Councils and others may continue to apply for European Regional Development Fund, provided they can find the required match funding contribution. EU funding will be covered in detail in a later Huckfield posting.

Councils and others can also apply under a wide range of Transnational Programmes including Eighth Framework. Applications may be made under most of these, irrespective of council designation.

JESSICA

The most recent development in Scotland is under the JESSICA (Joint European Support for Sustainable Investment in City Areas).

Scottish Ministers signed a Funding Agreement with the European Investment Bank (EIB) in June 2010 to establish a £50m JESSICA Holding Fund in Scotland. The fund was capitalised with £24m from ERDF Priority 3, matched by £26m from the Scottish Government.

The £50 million investment fund will support a range of regeneration projects offering loans and equity investment to revenue generating projects in 13 local authority areas in Scotland. These areas being an eligibility criteria of ERDF Priority 3.

The announcement at the Scottish Government JESSICA launch event said:

“The £50 million SPRUCE (Scottish Partnership for Regeneration in Urban Centres) Fund is open for business. The Fund is a new source of capital aimed at financing regeneration projects in Scotland, with funding that has been repaid from successful projects being used to fund further regeneration projects. Administered by Amber Fund Management Limited SPRUCE, Scotland’s JESSICA Fund (Joint European Support for Sustainable Investment in City Areas) will provide funding support to revenue-generating projects within 13 eligible areas. The intention is that the fund will be recycled up to three times within 10 years, providing significant resource to support successful regeneration in these key areas”.

This is explained in more detail on the site of AMBER, the fund’s managing agent:

“The SPRUCE Fund supports a wide range of urban regeneration activity within well defined, integrated, sustainable urban development plans.

“Eligible and investible projects include the development of office and commercial space, key transport projects and investment in energy efficient projects. This latter activity includes support for innovative approaches to energy efficiency retrofit measures.

“The SPRUCE Fund can lend to public, private or joint venture entities delivering regeneration or energy efficiency benefits within the designated local authority areas. The SPRUCE Fund lending rates are highly competitive”.

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LEVIES AND TAXATION

This Section describes Planning Agreements, Community Infrastructure Levy and Tax Increment Funding. The latter are emerging instruments which deserve special focus in view of their potential.

Planning Agreements

Previously, a main source of funding for infrastructure in Scotland and especially in England has been from Planning Gain and Planning Agreements.

In 2004/05 most Scottish planning agreements were under Section 75 of the Town and Country Planning (Scotland) Act 1997. By 2006/07 the majority were under Section 69 of the Local Government (Scotland) Act 1973. In England the main legal basis for planning obligations is set out at section 106 of the Town & Country Planning Act 1990.

The Scottish Government’s “Assessment of the Value of Planning Agreements in Scotland” by McMaster and others in 2008 on page 37, Table 4.11 showed that during the three years from 2004/05 to 2006/07, the total value of all planning obligation contributions throughout Scotland was £159mn.

The same Report on Planning Agreements shows that during the period 2004/05 to 2006/07 only 16% of all planning permissions in Scotland were linked with a Planning Agreement. Edinburgh, Scottish Borders, Aberdeenshire, Glasgow and Midlothian accounted for 61% of all contributions. Page 1 on Use of Agreements shows:

“The increase in the use of agreements for major housing developments, however, was especially significant. In 2003/04, 9% of all such permissions were linked with an agreement and the proportion rose to 16% in 2006/07.

For England, the equivalent Department of Communities and Local Government Report in 2006 showed that this three year Scottish total compared with an English total ten times as large in 2003/04 – for a single year.

In Valuing Planning Obligations in England Update Study for 2005-06, published by DCLG Final in August 2008,  Table 4.2 “Regional Estimate of the total value of planning obligations agreed in 2005-06 (excluding land contributions and county councils)” on page 50 shows that total Affordable Housing contributions were £1.9bn and other obligations £935.7mn, giving a total of £2.8bn

On page 52 this is further summarised:

“The total value of obligations that will be delivered from agreements signed in 2005-06 is estimated at around £2.8bn (an estimated loss or non-delivery of approximately £1bn or 30%)”.

Allowing for population differences – with England’s population ten times that of Scotland – this shows that the English total in developer contributions for one year was three times the level of contributions in Scotland.

The Town and Country Planning Association in “Planning Community Needs – a Guide to Effective Section 106 agreements and Statements of Community Involvement” in July 2008 gives a London Borough of Camden example where the total Section 106 Planning Gain was valued at £90mn from a scheme with a total value of £3bn. Inside the M25 orbit, London Boroughs and Central Government investment in London have seen levels of planning gain which are not achievable in Scotland, the North or Midlands.

After lobbying from developers about planning obligations’ being too onerous, Scottish Government Circular 1/2010 was designed to ease pressure on residential and commercial developers, through “Relationship to Proposed Development” and “Reasonableness” Tests.

Further developments now make it easier for some negotiations between planning authorities and developers to enable relief from some Planning Agreements in order to allow developments to proceed. While all of this eases pressure on some developers, it does not make it easier to fund infrastructure.

Further Huckfield briefings will include more up to date information on Planning Agreements in Scotland and England.

Community Infrastructure Levy

The main advantage for infrastructure funding is that procedures in a Community Infrastructure Levy in England determine the levy in advance, without subsequent uncertainties on payments and implementation. In many London Boroughs there will soon be two Community Infrastructure Levies – one levied by the Mayor to fund Crossrail and the other by Boroughs to fund their infrastructure needs.

One of the forerunners of the Community Infrastructure Levy was the Milton Keynes “Roof Tax”, as reported in the Guardian of Wednesday 27 July 2005:

“Society Guardian has learned that a Milton Keynes partnership committee, a new body with powers to fast-track planning, which includes EP and councillors, will tell key Whitehall departments that the infrastructure price tag for the proposed eastern and western extensions of the new town will reach between £1.2bn and £1.5bn by 2011.

As an interim measure to fund facilities, the Milton Keynes partnership committee has gained agreement from 20 large landowners, as well as builders, for the country’s first infrastructure tariff, labelled a “roof tax”. They will pay a levy of £18,000 for each house completed. This could raise around £270m”.

There is potential in exploring models of development charges based upon work already undertaken by Scottish Government.  This should build on recent research and examples of good practice including the Future Infrastructure Requirements for Services model adopted in Aberdeenshire.  Other models might be based upon the concept of allowing developers to ‘pay as you sell’ rather than ‘pay in advance’. This relies on infrastructure planning to identify where benefits can be accrued.

Under the Community Infrastructure Levy procedure in England Local Planning Authorities publish a list of infrastructure projects to be funded and the levy rate to contribute to identified funding gaps. An Independent Examiner from the Planning Inspectorate then judges whether the infrastructure list and proposed levy are reasonable.

Community Infrastructure Levy powers were introduced for England in April 2011. DCLG has consulted on amendments following the Localism Act 2011, to require local authorities to pass some receipts to neighbourhoods where development is taking place and to clarify how receipts fund ongoing costs of providing infrastructure. All this gives more local choice over how to implement the CIL charge.

As the DCLG March 2011 Presentation shows, Community Infrastructure Levy may be spent on infrastructure which legally includes (the list in the Act is not exhaustive):

  • flood defence
  • open space
  • recreation and sport
  • roads and transport facilities
  • education and health facilities
  • affordable housing

Authorities are advised to keep their infrastructure evidence simple and should demonstrate that there is an Infrastructure Funding Gap against existing funding streams. Authorities seeking to raise funds through CIL have to strike a careful balance between:

  • Meeting all or part of the infrastructure funding gap
  • The potential impact of CIL upon the economic viability of development across its area

The Newark and Sherwood CIL came into force in December 2011. Redbridge and Shropshire followed on New Year’s Day 2012. Portsmouth and London are at Examination Stage. Broadland, Croydon, Huntingdonshire, Norwich, Poole, South Norfolk and Wandsworth are undergoing Examination.

Since the first 12 CIL Charging Schedules show significant differences, it is difficult to predict average yields from CIL. But they will be significant.

Bristol predicts £14mn over five years. In its detailed Levy Rationale Background Paper – March 2011 Shropshire identified an overall Infrastructure Funding Gap of £385,459,000 for 2010 till 2026 for Road Transport Facilities, Flood Defences, Education, Medical Facilities, Open Space, Sports and Recreation, Police and Electricity Supply – based on estimates and existing developer contributions. This equated to £17,800 per projected dwelling.

In a succinct but methodical Examiner’s Report to Shropshire Council September 2011 the Examiner Sue Turner concluded:

“Since the Core Strategy was adopted, work on infrastructure planning has continued. The Shropshire LDF Implementation Plan 2011-2012 provides an up to date picture of the infrastructure projects to which CIL is expected to contribute.  It identifies a funding gap of £212,815,912 and an indicative CIL requirement of £180,148,912.   All of the figures above show that there is a significant infrastructure funding gap and demonstrates the need to levy CIL”.

Shropshire’s prediction of £180mn over 15 years shows that CIL can be a significant source of future income. In accordance with the DCLG Code of Practice, 10% of net CIL monies will be directed to strategic infrastructure schemes, and 90% of net CIL monies will be spent on local infrastructure.

As CIL Charging Schemes proceed, their Examiners may need to revise some CIL estimates on account of the following:

  • Ageing population and changing implications for a range of social infrastructure facilities
  • Changing household patterns. Many current planning ratios are based on historical household demands. More single person households are changing the pattern of education demands. Primary and Second School contributions may gradually need changing
  • Digital Media and changing models of learning, particularly in the FE/HE sector
  • Externally commissioned service delivery and new models of delivering social infrastructure in partnership with retail and leisure establishments

It will take time before most local authorities have a CIL scheme in place. Only 35% have Adopted Local Plans. So there may be a need to look at other methods in the mean time.

Tax Increment Funding

In “Paying the Piper – Funding and Financing Infrastructure Issues in Scotland” by  Newhaven Research for the Chartered Institute of Housing on March 07 2011 on page 27:

“Tax increment finance (TIF) allows local authorities to fund the improvement of an area through the property tax revenue subsequently generated by that improvement ….

“Used in this way, TIF is intended to create the necessary conditions for attracting subsequent commercial and residential investment, but it has also been used directly by local housing authorities to secure additional market and affordable housing”

“In brief, the approach involves clearly designating a specific area, calculating the existing tax revenue generated in that area at some base date, specifying and costing a programme of improvement work, estimating the increase in tax revenue that will arise as a consequence of doing this work and then hypothecating that increase in tax revenue for a specific period to pay for the work to be done.”

In May 2011, the Scottish Government on set out its basic position on Tax Increment Funding:

“Any proposal for a TIF project must demonstrate to Scottish Ministers that:

  • the enabling infrastructure will unlock regeneration and sustainable economic growth
  • it will generate additional (or incremental) public sector revenues (net of a displacement effect)
  • it is capable of repaying, over an agreed timescale, the financing requirements of the enabling infrastructure from the incremental revenues”.

The Scottish Government set out the latest position in an announcement “Plans for funding building projects” on Tuesday 01 November 2011:

“Three local authorities have been given approval by the Scottish Government to develop proposals under the Tax Incremental Financing (TIF) model.

The successful councils plan to fund infrastructure projects by borrowing against the future business rate income that should be generated by the resulting development.

The following local authorities will now work with the Scottish Futures Trust (SFT) to develop full TIF business cases:

  • Falkirk Council – £52 million direct investment to key strategic road improvement, the Grangemouth flood defences and site enabling works. It is forecast to attract £365m of private sector funding and creating over 5,000 full-time equivalent (FTE) additional jobs at national level
  • Fife Council – £17 million for improved vehicle and marine access to Energy Park Fife, site remediation and enhanced delivery of a Levenmouth Low Carbon Investment Park. It is estimated that 1,000 new jobs will be created
  • Argyll and Bute – £20 million proposal to extend Oban’s North Pier and to construct a development road at Dunbeg/Dunstaffnage. 1,000 FTE jobs expected

Ministers have so far approved two TIF business cases:

  • City of Edinburgh Council – £84 million Leith Waterfront project has the potential to unlock £660 million of private investment generating 4,900 FTE jobs
  • North Lanarkshire Council – £73 million Ravenscraig Phase two scheme is expected to unlock £425 million of private investment and over 4,500 FTE jobs

In addition to those already agreed, work on developing further TIF business cases remains underway.

  • Glasgow City Council is in the process of developing a business case for a £80 million TIF project, Buchanan Quarter, which is expected to be submitted shortly
  • Aberdeen City Council’s plan to use TIF for Union Terrace Gardens project will be progressed if public support for the project can be demonstrated

Cabinet Secretary for Infrastructure and Capital Investment Alex Neil said on Tuesday 01 November 2011:

“Depending on progress with TIF pilots, we will bring forward primary legislation before the end of this Parliamentary session to roll out TIF more widely across Scotland. There may also be further opportunities to progress those bids not announced as successful, to ensure good geographical spread, before then.”

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LOCAL COUNCILS AND COMMUNITY BENEFIT FROM RENEWABLE ENERGY

With more onshore windfarms gaining planning consents and becoming operational, several local authorities are beginning to develop and formalise their policies and guidelines for Community Benefit, including funding for larger infrastructure programmes.

Dumfries and Galloway

Dumfries and Galloway conducted a Windfarm Community Benefit Framework Review in April 2011. “Windfarm Community Benefits. Revised Approach 2011 Information for Communities”  Section 7 refers to a Minimum Developer Contribution:

“The standard minimum rate of contribution is £5,000 per megawatt per annum based on the  installed/consented capacity of the windfarm. For example for a windfarm development with installed capacity of 25 megawatts, the community benefit fund would be £125,000 per annum. This rate will be index linked from 1st January 2011 based on the Retail Price Index”.

Windfarm Community Benefits Revised Approach 2011 Information for Developers” in Section 6 refers the establishment of a Regional Socio Economic Fund:

50% of the funding will be ring-fenced for a Regional Socio-Economic fund. The purpose of this fund is to invest in social, economic and environmental projects that support a sustainable low carbon economy. Projects will seek to deliver in one or more of the following areas:

  • Business and skills
  • Environment and community
  • Cultural and tourism
  • Affordable housing
  • Community transport
  • Improved broadband connectivity

The region-wide fund will take applications from constituted community groups, communities, organisations including the public sector from across Dumfries and Galloway.

South Lanarkshire

With Whitelee and the other windfarms, practice in South Lanarkshire is now established with its Renewable Energy Fund

The Fund’s basic options are:

  • Main renewable energy fund – grants over £10,000 up to 50% of total ‘eligible’ costs
  • Local grant scheme – grants of less than £5,000 and up to 100% of total ‘eligible’ costs for smaller community-based projects

Applications for financial assistance are eligible for projects within a 10km radius of participating renewable energy developments. These are accepted from:

  • public organisations and agencies
  • partnerships, trusts, co-operatives and other non-government organisations
  • community groups, associations or organisations
  • any business, co-operative or other trading enterprise located, or offering a service benefiting communities, within a 10km radius of participating developments

Applications will be considered from outside the 10km radius if it can be demonstrated that the people who will benefit those who live inside the eligible area. Any grants awarded would be proportional to the percentage of residents who would benefit from the project.

Scottish Borders

Scottish Borders’ Council has issued a comprehensive toolkit “Achieving Community Benefit from Commercial Windfarms” on page 10 says:

“There are no hard and fast rules about the level of community benefit which can be achieved, but some real examples include: – Highland Council aims to achieve £4,000 to £5,000 per installed MW per year”

Highland Council

Highland Council launched its renewable energy Community Benefit Policy in Inverness on Friday 24 February 2011. The policy is in line with examples above:

“The  Council’s policy applies to all onshore renewable energy developments.  It seeks a minimum payment to community benefit funds equivalent to £5,000 per Megawatt of installed capacity per year. The Council will seek to negotiate concordats with developers, which will ensure that developers operate within the Council’s policy and that developers negotiate directly with the Council on behalf of communities to secure the greatest level of benefit possible.

“The Council’s policy is a 3-tier system of benefit with all of the first £100,000 per year of benefit going to local communities and managed within a Local Fund.  Of the community benefit that remains:

  • 55% will also go to local communities through their Local Fund
  • 30% will go to one of ten local Area Funds covering Caithness; Sutherland; Dingwall and Black Isle; Easter Ross; West and Mid Ross; Lochaber; Inverness; Skye; Nairn and Ardersier; Badenoch and Strathspey
  • the remaining 15 % will go to the Highland Trust Fund”

The Council’s Community Benefit policy makes it clear that infrastructure may be funded:

“It is intended that all three funds would receive bids from communities, groups and other appropriate organisations for the following project types:

  • Financial and other support for business and community projects including provision of infrastructure
  • Alternative and renewable energy research
  • Energy generation and efficiency schemes (including community ownership or stakes in renewable energy developments
  • Community ownership or control of assets
  • Projects which address issues of fuel poverty
  • Other community interest projects based within the community
  • Skills development and apprenticeships”

Highland Council’s policy is one of the first in Scotland to explore in more detail a proposed allocation of Community Benefit from offshore wind developments.

OTHER ORGANISATIONS AND COMMUNITY BENEFIT FROM RENEWABLE ENERGY

As more windfarms receive planning consent, are being constructed and become operational, in addition to local authorities, other organisations are now formalising their approaches to community benefit associated with these developments. The following provides some Scottish national examples:

Scottish and Southern Energy (Scottish Hydro)

In November 2011 SSE announced details of a new Scotland Sustainable Energy Fund that could be worth more than £90 million over 25 years:

“The fund will be available for organisations promoting skills development, community energy schemes and improving the built and natural environment. The fund is in addition to the £150 million SSE has already committed to support community projects in Scotland over the 25-year projected lifetime of the company’s existing and planned wind farms”.

SSE’s commitment is based on a tariff of:

“£5,000 per megawatt for all new onshore wind farms constructed in Scotland from 1 January 2012. This will comprise £2,500 for local community initiatives and £2,500 per megawatt for the new Scotland Sustainable Energy fund”.

While all this is at an early stage, it means that in future there may be substantial community benefit funding available for larger projects. As progress is made, there will be further Huckfield briefings.

Forestry Commission

Forestry Commission Scotland is working with developers for wind and hydro projects on national forest land. FCS has published a helpful guide to its thinking in “Opportunities for Community Involvement In Hydro or Wind Renewable Energy Development on the National Forest Estate“.

Forestry Commission Scotland deserve credit for setting the “benchmark tariff” of £5000 per installed megawatt since this is becoming the standard tariff for wind farm community benefit across Scotland.

The Opportunities for Community Benefit document shows selected developers for Hydro and Wind Generation Lots across Scotland. The developers will engage with local communities about processing Community Benefit. All this is still at an early stage of development.

But further Huckfield briefing will be posted on this site as soon as it becomes available, especially if some developers follow precedents above of splitting benefits available into local community and more strategic projects.

CONCLUSION

All of this represents a rapidly unfolding scene in which the Scottish Government and some local authorities are emerging as UK pace-setters. Future Huckfield briefings will publish further details as these unfold.

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