Revolving Infrastructure Funds. Learning from the SW RDA and

West of England experience.

Antony Corfield(07807 452026

ajcorfield@btinternet.com)

What is the RIF?

• Forward funding of developer contributions required toward the provision of essential infrastructure, unlocking significant sustainable growth.

– Recouping investments through the planning obligations process.

– Reinvesting as funds are returned.

RIF – what it’s not.

• Not an ‘Investment Fund’ - no return on investment.

• It is not gap funding.

• It is not Public Sector borrowing, but might be accounted for as prudential borrowing.

• Not an off-balance sheet special purpose vehicle.

Why create the RIF?

• What does it do?– Unlocks development– Accelerates development– Co-ordinate funding– Creates a private sector sourced revolving

fund.

• One model of a revolving fund– Proven concept that works.

A

Motorway junction improvements require £5m developer contribution.

Development A first into the planning system.

Can not pay, up front, the full £5m required.

Pure S106

A

Other benefitting developments (B, C and D) at different stages in the planning process.

RIF allows you to forward fund the contributions of A, B, C and D (more than £5m).

Unlocks all the developments.

B

C

D

S106 Tariff/Pooling Approach

A

Motorway junction improvements.

New sewers.

Combined Heat and Power infrastructure.

Additional bus lanes and routes.

Schools, health, community facilities.

B

C

D

Community Infrastructure Levy (CIL)

Issues Menu:

• CIL and ‘borrowing’• Forms of support• State Aid• Governance• Programme

Management• Appraisal• Identifying schemes

• Contractual arrangements

• Risk• Private sector

leverage• Small funds v Large

funds.• Infrastructure

Planning

Potential future forms of Support

Growing Places could be released as:– Forward Funding (RIF)– Loan (Debt)– Equity– Grant– Conditional Grant (Overage)

State Aid

• Funding Infrastructure and being State Aid compliant:

• Four options:– Charge interest at market rates (not attractive).– Equity investment (equal share of risk and reward).– Fund public open access infrastructure through public

works or joint procurement (RIF).– Seek approval from Commission (best avoided).

State Aid

• State Aid meets each of the following:– Granted by the State or through State

resources.– Favours certain undertakings or production of

certain goods.– Distorts or threatens to distort competition.– Affects trade between Member States.

Infrastructure Costs V Funding

-£30,000,000

-£25,000,000

-£20,000,000

-£15,000,000

-£10,000,000

-£5,000,000

£-

£5,000,000

£10,000,000

£15,000,000

£20,000,000

Years 1 to 10

Infrastructure costsCIL collectedRIF InvestmentPublic investmentNHBNet Deficit/Surplus

Infrastructure Costs V Funding (With RIF)

-£15,000,000

-£10,000,000

-£5,000,000

£-

£5,000,000

£10,000,000

£15,000,000

£20,000,000

£25,000,000

£30,000,000

Years 1 to 10

Infrastructure costsCIL collectedRIF Investment/repaymentPublic investmentNHBNet Deficit/Surplus

Without RIF

-£100,000,000

-£50,000,000

£-

£50,000,000

£100,000,000

£150,000,000

Years 1 to 6

Gross Costs

Value of Planning Obligation (£15m)

Net surplus/cost

With RIF

-£100,000,000

-£80,000,000

-£60,000,000

-£40,000,000

-£20,000,000

£-

£20,000,000

£40,000,000

£60,000,000

£80,000,000

£100,000,000

£120,000,000

Years 1 to 6

Gross costs

Value of Planning Obligation (£15m)

Net surplus/cost

£24m Fund cash flow

£-

£2,000,000

£4,000,000

£6,000,000

£8,000,000

£10,000,000

£12,000,000

£14,000,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

1st round investments

Contributions back

2nd round investments

Contributions back

£6m Fund cash flow

£-

£500,000

£1,000,000

£1,500,000

£2,000,000

£2,500,000

£3,000,000

£3,500,000

£4,000,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

1st round investments

Contributions back

2nd round investments

Contributions back

Governance (WofE)

Scheme fundingcontracts

LEP Board

AccountableBody

Technical AdvisoryGroup / Programme

Manager

Investment AwardPanel (Chief execs

and LEP reps)

Contractual arrangements (WofE)

B&NES

North SomersetCouncil

Bristol City Council

South GlosCouncil

B&NES(Sponsor Authority)

BISRegional Growth Fund

CLGGrowing Places

Section 106 agreements and CIL

Funders:

Accountable Body:

Sponsor Authorities (recipients of funding):

Payback mechanism:

Governance (SW RDA)

RDA Board

ProgrammeManagement

RIF Investment Panel

DfT

Regional Bodies

Contractual arrangements (SW RDA)

SW RDAAccountable Body

Developers Local Authorities

DfTRegional Funding Allocation

(Major scheme)

Section 106 agreements and/or direct contract

Funder:

Accountable body:

Recipients of funding:

Payback mechanism:

Planning obligations Circular 5/2005

B23. In cases where an item of infrastructure necessitated by the cumulative impact of a series of developments is provided by a local authority or other body before all the developments have come forward, the later developers may still be required to contribute the relevant proportion of the costs. This practice can still meet the requirements of the Secretary of State’s policy tests if the need for the infrastructure and the proportionate contributions to be sought is set out in advance.

CIL Regulations60.—(1) A charging authority may apply CIL to reimburse expenditure already incurred on infrastructure.(2) Where a charging authority, other than the Mayor, has borrowed money for the purposes of funding

infrastructure, it may apply CIL to repay that money, and any interest, if the conditions set out in paragraphs (4) and (5) are both met.

(3) Where the Greater London Authority or a functional body has borrowed money for the purposes of funding infrastructure consisting of roads or other transport facilities, the Mayor may apply CIL to repay that money, and any interest, if the conditions set out in paragraphs (4) and (5) are both met.

(4) Condition 1 is that the charging authority has collected CIL, or CIL has been collected on its behalf, for at least one full financial year before the date on which CIL is to be applied to repay the money.

(5) Condition 2 is that the total amount to be applied in any one financial year does not exceed the relevant percentage of CIL collected by or on behalf of the charging authority in the preceding financial year.

(6) For the purposes of paragraph (5), the relevant percentage is such percentage as the Secretary of State may direct or, in the absence of a direction, zero per cent.

(7) A direction under paragraph (6)—(a)must be made in respect of authorities generally; (b)must be in writing; (c)may be substituted or revoked at any time, any substitution or revocation being made by a further

direction in writing. (8) In this regulation “functional body” means—(a)Transport for London; or (b)the London Development Agency.