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eco-towns
Financial viability study of the
eco-towns programme
eco-towns
Financial viability study of the
eco-towns programme
March 2009
Department for Communities and Local Government
Important notice
This report is being published by Communities and Local Government (the Department) to inform its consideration of whether the locations listed have the potential to support a viable eco-town scheme.
The financial assessments set out in Section 3 of the report have been carried out by the Department’s advisers (as set-out in Appendix A) in accordance with the terms of their engagement. The financial assessments in Section 4 of the report which relate to the schemes submitted as alternatives in the course of the Sustainability Appraisal are those submitted by the schemes themselves. The assessments presented in Section 4 have not been subject to review or verification by the Department’s advisers. The Department’s advisers do not accept or assume any liability or duty of care for any other purpose or to any person other than the Department in relation to the work they performed under this engagement.
Much of the content of this report is based on information provided by scheme promoters to the Department and its advisers and as such is the promoters’ property. It should be noted that the assessment undertaken may be based on additional or more detailed information than is contained in this report.
This report and the assessment presented herein are not to be used as the basis for investment decisions by any party.
A further technical report will be published in the next few months with detail on the assumptions and methodology used in Sections 1-3 of the study. This will not affect the substance of the material presented.
Communities and Local Government
Eland House
Bressenden Place
London
SW1E 5DU
Telephone: 020 7944 4400
Website:
© Crown Copyright, 2009
Copyright in the typographical arrangement rests with the Crown.
If you require this publication in an alternative format please email
Communities and Local Government Publications
PO Box 236
Wetherby
West Yorkshire
LS23 7NB
Tel: 03 0 0123 1124
Fax: 030 0123 1125
Email:
Online via the Communities and Local Government website:
March 2009
Reference No: 08 SCG 05738
ISBN: 978-1-4098-1322-4
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Contents
Contents
Section 1Introduction4
1.1Project overview4
1.2The Departmental context and project limitations4
1.3The Department’s advisers5
1.4Structure of the report5
1.5Consultation arrangements6
Section 2Overview of interim site assessments9
2.1Introduction9
2.2Technical provision for site issues and infrastructure11
2.3Ability to meet draft PPS standards11
2.4Outline financial assessment12
Section 3Individual site assessments18
3.1Weston Otmoor, Oxfordshire18
3.2Ford Airfield, West Sussex28
3.3Whitehill Bordon, Hampshire36
3.4Pennbury, Leicestershire46
3.5St Austell China Clay Community, Cornwall54
3.6Rossington, South Yorkshire65
3.7Middle Quinton, Warwickshire74
3.8North East Elsenham, Essex82
Section 4Individual site assessments of SA alternative schemes90
4.1North West Bicester (Cherwell), Oxon90
4.2Rackheath, Norwich103
4.3Rushcliffe, Nottinghamshire110
Section 5Next steps118
Appendix A:Further details of the Department’s advisers for
this assessment119
Appendix B:Key issues, assumptions and limitations121
Appendix C:Draft Heads of Terms Template126
Glossary276
The results presented in this assessment should be treated with caution. The reliability of conclusions to be drawn from data provided at an early stage of the development cycle, and projected over 30 years, is necessarily, limited.
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Section 1 Introduction
Section 1
Introduction
1.1Project overview
Sections 1 – 3 of this report provide an overview of the findings of the assessments of the submissions made by the promoters of the following eco-town schemes up to 19December 2008 (the Cut-Off Date):
- Weston Otmoor, Oxfordshire
- Ford Airfield, West Sussex
- Whitehill Bordon, Hampshire
- Pennbury, Leicestershire
- St Austell China Clay Community, Cornwall
- Rossington, South Yorkshire
- Middle Quinton, Warwickshire
- North East Elsenham, Essex
Each of the promoters’ submissions was reviewed on a consistent basis from a development, technical and financial perspective. The cost data used in this report and its assessment have not been subject to formal appraisal by Government or its Agencies.
In addition, a number of further proposals have come forward subsequently in response to the Sustainability Appraisal (SA) and could not be included in the external review and assessment process described here. However available information on these schemes is set out as far as possible on a comparable basis in Section 4. Other schemes may exist which the Department is not aware of and may come forward in future local and regional plans as envisaged in the draft Planning Policy Statement (PPS).
1.2The Departmental context and project limitations
The purpose of this project has been to provide a financial assessment of potential eco-town locations as an input to the Stage 2 consultation ahead of decisions by Ministers on the PPS and programme, using the evidence that is currently available. However at this early stage in the development of proposals of this type extreme care is needed in the interpretation of the assessment’s outcomes. There are three major areas ofqualification:
i.The outcomes are sensitive to the assumptions, in particular on land values and future sales over a 30 year period;
ii.Government and its Agencies have not endorsed the costs of new and unplanned infrastructure and its deliverability. For large schemes involving major new infrastructure substantial further work will be required and this is a significant consideration;
iii.The assessments of the SA alternative projects in Section 4 have been carried out individually using different assumptions and cannot be compared directly to those in Section 2.
Accordingly in the Department’s view these assessments should not be used in any sense of pass/fail but to assist in the consideration of the deliverability and affordability of developing eco towns at the potential locations.
1.3The Department’s advisers
The assessments (other than those in Section 4) were carried out by a team of advisers ledby PricewaterhouseCoopers LLP (PwC), which includes: (see also Appendix A for furtherdetails):
- Real estate, development economics and financial modelling assessment inputs fromDTZ
- Engineering, utilities and environmental assessment inputs from Buro Happold (BH)
- Building and infrastructure cost assessment inputs from Davis Langdon (DL)
- Draft Section 106 (s106) Heads of Terms and related planning inputs from DentonWildeSapte (DWS)
1.4Structure of the report
The remainder of this report is structured as follows:
Section 2.1 provides a summary of the different components to the outline assessment
Section 2.2 provides an overview of the assessment of the technical provision for site development issues and provision of infrastructure
Section 2.3 provides an overview of the assessment of the provision to meet the standards for eco-towns as set out in the draft Planning Policy Statement (PPS)
Section 2.4 provides an overview of the outputs from the outline financial assessment
Section 3 provides details of individual assessments undertaken for each of the proposed schemes
Section 4 provides details of the assessments undertaken for each of the schemes brought forward as alternative locations as part of the Sustainability Appraisal
Section 5 outlines the next steps for the assessment process
Appendix A provides a summary of the advisers supporting the Department
Appendix B provides a breakdown of key issues and assumptions underpinning the assessment
Appendix C provides an overview of the draft s106 heads of terms for schemes where available.
1.5Consultation arrangements
This report supports the current round of consultation on the eco-towns programme, which was launched on 4 November 2008 with publication of the following documents:
- Draft Planning Policy Statement (PPS) – This provides further detail on the proposed planning process for eco-towns, with detail on the high standards that an eco-town application would need to meet in order to be approved through the planning system. We are seeking people’s views directly on the standards proposed in the draft PPS and have set out a number of key consultation questions for respondents to consider. Afinal PPS is due to be published alongside the final list of prospective locations later in2009.
- Sustainability Appraisal (SA) and Habitats Regulation Assessment (HRA) – This is an evidence based suite of documents undertaken by Scott Wilson for Communities and Local Government which set out the strengths and weaknesses of the programme and the locations being considered. Undertaken at a strategic level, itis necessarily broad in its assessment, conclusions, and recommendations. The SA should be read in four parts:
1)The SA of the PPS
2)The SA of the Programme – Introduction
3)The SA of the Programme – Locational chapters
4)The SA of the Programme – Conclusions
- The sections above are accompanied by a Non-Technical Summary which summarises the findings of the SA and HRA of the draft Eco-Towns PPS and Programme.
- Impact Assessment – This assesses the likely costs, benefits and impacts of the eco-towns planning policy statement. The Impact Assessment will be updated and published alongside the final PPS.
The financial viability study is intended to advise on whether, on the basis of an initial high level assessment, an eco-town could be economically viable in the locations listed. The study is primarily about the viability of the location. The particular scheme put forward is considered because it helps illustrate whether that location could be viable.
Comments are invited on the information presented, in particular on the following questions:
- Do you consider that as a high level strategic assessment this study has identified the main issues affecting viability?
- Are there major areas of cost or infrastructure provision and funding or other issues affecting financial viability which are not identified and could be considered at this stage?
- Are you aware of evidence which would lead you to different conclusions to those set out here? For example, where the assessment shows a negative financial outcome are there additional public policy reasons (e.g. regeneration or site restoration) which would justify an alternative approach?
Responses to the financial viability study and wider documentation are invited by 30 April 2009 and should be sent to:
Eco-towns Team
Communities and Local Government
Housing and Growth Programmes Division
Zone 2/G9
Eland House
Bressenden Place
London, SW1E 5DU
Telephone: 020 7944 4400
Fax: 020 7944 3949
Or by email:
It would be helpful if responses from representative groups could give a summary of the people and organisations they represent.
A summary of responses to this consultation will be published later this year on the Communities and Local Government website. Paper copies will be available on request. Allresponses will be made public unless confidentially is specifically asked for. It would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances.
Please note that further information is available for the locations listed in this report through promoter and local authority websites, for example local impact studies. Details of how to find these are included at the end of each location assessment.
Further details on the consultation process and how to respond are set out at the Communities and Local Government website at Ifyou would like further information on any of the above or hard copies of documents where necessary please contact the Eco-towns Team at Zone 2/G9, Eland House, London, SW1E 5DU or by email to: .
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Section 2 Overview of interim site assessments
Section 2
Overview of interim site assessments
2.1Introduction
Much of the content of this report is based on information provided to the Department by scheme promoters and as such is the promoters’ property. Each promoter has approved the inclusion of this information to help facilitate communication with key stakeholders. Elements of the information provided to the Department by the promoters were considered by them to be “commercially confidential” and at their request have been excluded from this report. Such information is indicated as redacted or summarised “at the promoter’s request”. This report is also a summary of the assessments completed and therefore the conclusions drawn from the assessment may, as a result, be based in part on additional or more detailed information than is presented.
The assessment of the proposed schemes has been undertaken in order to inform the Department of the potential for an eco-town to be viably delivered over the medium to long-term in the proposed location drawing on the evidence of scheme proposals and the inherent technical, commercial and financial implications and challenges. It is recognised that, given the scale, complexity and longevity of the schemes under review, and the relatively early stage in their development, the conclusions reached can only be viewed as indicative and are likely to be subject to change as promoters further develop their schemes in light of additional investigation and analysis and consultation and engagement with relevant Local Planning Authorities (LPAs).
The assessment of whether a scheme, as defined by the promoter at December 2008, is “potentially viable” includes consideration of whether the scheme has reasonable potential to deliver, albeit with a range of risks and uncertainties, the higher sustainability standards expected of an eco-town without requiring significant additional public subsidy. This means that the scheme proposed has the potential to generate sufficient revenue over the development lifecycle to cover the costs associated with its delivery, including those costs related to delivering the higher environmental standards required for eco-towns, without needing to rely on public funds beyond those that would normally be available to support the proposed development.
Those elements of the proposed scheme which have the potential to be delivered by the use of obligations made under Section 106 of the Town and Country Planning Act 1990 (s106) have been distilled in a draft form within a standard template. The purpose of the template is to provide further clarity on the proposal and to act as a sense check that the promoter, in its financial assessment, has made sufficient allowances for what, while recognising that the fact
that scheme proposals are generally at an early stage, could reasonably be expected to be provided under s106. This information is also expected to aid further consideration by the relevant LPAs. The template – referred to as the draft s106 “Heads of Terms” (s106 HoTs) – is attached separately in Appendix C. We emphasise that the purpose of the template is not to pre-empt the normal development control processes and associated negotiations. The Department recognises that LPAs will wish to carry out their own assessment and determination of planning applications (including the accompanying Environmental Statement (ES)) and secure appropriate s106 obligations through the normal process of dialogue and negotiations with promoters and other stakeholders.
Accordingly, neither the Department nor its advisers have taken a view on whether the s106 “offer” set out in the draft s106 HoTs is likely to be satisfactory in planning terms. Indeed, at this stage, prior to any planning application, the list of matters to be considered can only be identified at a high-level and it is likely to be subject to change at a future date. Nevertheless, a high-level assessment has been made of the potential for the scheme, as currently proposed, to meet the higher sustainability standards that will be expected for eco-town developments (with reference to the current draft eco-towns PPS).
It is appreciated and anticipated that the promoter will continue to develop the scheme beyond the assessment phase, through consultation with the relevant LPAs and others. The draft s106 HoTs template is therefore only indicative (as are the associated costs that would be incurred in its delivery). Both the draft s106 Heads of Terms templates and the cost allocated to their delivery (where such elements can be costed) are based on a complex range of assumptions, many of which are currently highly uncertain, that will be further clarified as the promoter works up its outline planning application. As the precise nature of those elements of the development proposals to be secured by s106 become more certain it will be the responsibility of the promoter and the responsible public sector counterparties to assess in more detail the timing and impact of the scheme and the need for specific additional infrastructure or other impact mitigation measures. The draft s106 HoTs are designed to be used as a base-line reference for further refinement of these obligations. They are “living” documents that will change and develop through the development control process.
The draft PPS sets out the planning process for eco-towns, and confirms the Government is committed to the plan-led system. Eco-towns will be considered in the same was as any other development and all eco-towns will be the subject of a planning application, to be considered by the relevant LPAs. This financial and technical assessment is, therefore, intended only to provide the Department with initial guidance on whether current scheme proposals for locations identified in the PPS have the technical and financial potential to be viable and deliverable. Whilst the potential for schemes to meet the draft PPS standards has been assessed this exercise is not designed to circumvent the normal planning process or to aid LPAs in their determination of any future planning application. Neither should any part of this assessment be used by promoters to make investment decisions.
When promoters have refined their schemes to a point where they are ready to make a planning application, the relevant agencies will request the promoters to provide them with the required financial or technical information to assist in assessing proposals. LPAs may request this process to be carried out on an “open book” basis. In accordance with the final PPS, and other relevant development controls and guidance (including the Local Development Framework), the LPA would be required to make a determination as to whether or not the proposed eco-town scheme should be permitted. The performance of the scheme against criteria set out in the draft PPS is one of the factors the LPA will need to consider.
2.2Technical provision for site issues and infrastructure
The schemes have also been reviewed by the Department’s advisers as to the extent of their provision for site development issues and provision of infrastructure including transport, utilities, drainage, flood risk and other environmental issues.
The purpose of the exercise is (a) to check that material costs have been included for the purposes of the viability assessment and (b) to indicate the potential technical deliverability of the scheme proposals and areas where further work would likely be needed for the scheme to meet the eco-town planning requirements. Where gaps in infrastructure provision or site issues were identified the potential impact on scheme costs was considered and an estimate made of the potential cost implications. The results of these reviews, along with assumptions submitted with promoters’ proposals, were then used to guide the generation of a set of high-level cost assumptions for use in the financial assessment.