Development strategies, local transport networks and funding C.A. Brook Clive Brook Associates (Town Planning and Development Consultants) Limited, 2 Northwest Business Park, 1. Introduction 1.1 In the UK and other western economies private sector funding contributions towards components of local transport networks are increasingly important. In the context of reductions in government resources devoted to transport infrastructure projects, the increasing costs of such projects and the need for modernisation/renewal of existing transport facilities, the private sector is being encouraged both directly and indirectly to make funding contributions. In certain circumstances this can act as a major incentive to a private companies plans, while in others it can be a deterrent. In this paper I concentrate on financial contributions achieved via development projects and developer contributions. 1.2 The trend towards private sector funding is occurring at the national, regional and local levels alongside increasing environmental pressures to reduce, emissions and the level of use of the private car and to encourage modal shifts to public transport. Development companies generally have a greater awareness of their environmental responsibilities and the need for a better balance between personal car transport and enhanced public transport systems. Developers have traditionally looked to local government to provide planning and transport strategy frameworks within which they can operate but increasingly they are becoming the advocates and promoters of new sections of the transport network. 1.3 Town planners and transportation consultants and their development company clients are beginning to realise that they can strongly influence the production and implementation of Development Plans and transport strategies in ways which are more environmentally acceptable and in conformity with emerging transport policy while at the same time ensuring the promotion and acceptance of their individual or collective projects. Developments can be planned in locations and formats which encourage fewer and shorter journeys by car and which increase the propensity to use public transport.
4 Urban Transport and the Environment 1.4 The aims of this paper can be summarised as follows:- i) to examine the mechanisms used to achieve funding agreements with developers; ii) iii) iv) to examine best practice in negotiating developer contributions; to assess the future scope for attracting and utilising private sector funds at the local network level to examine the relationship between developer funding contributions to components of local transport networks and the formulation and implementation of development strategies by local government. 1.5 The development funding contributions covered in this paper need to be distinguished from a number of other private sector funding schemes for transport projects, including privately financed toll roads and bridges, Design Build Fund and Operate schemes (DBFO) or Design Build Operate and Maintain (DBOM) and the Private Finance Initiative (PFI), launched in the UK in 1992. The aim of the PFI is to bring the private sector into the provision of services and infrastructure traditionally regarded as exclusively public. The new approach was to be dealdriven rather than rule based and the two fundamental requirements included the private sector assuming the risk and expenditure by the public sector showing value for money. The first DBFO road schemes are now underway in the UK, including the M1-A1 motorway link around the eastern side of Leeds. Under these schemes the successful private sector contractor will be responsible for constructing the road and then financing and operating the roads for a period of 15 to 25 years. The contractors remuneration will be linked to the usage of the road by a 'shadow toll' system. In a limited number of cases contributions have been secured from private commercial and retail companies who perceive that they will benefit from a new transport facility such as light rail via an enhanced revenue stream or as a result of indirect benefits stemming from the heightened profile of the city in which the company is located. Examples of these types of private sector funding are provided in a Department of Transport report - "Building Tomorrow's Transport Network" [ 1 ]. 1.6 Large scale developments (e.g. new settlements, business parks, mixed commercial developments and major regional shopping centres) and groups of individual development projects promoted by the private sector increasingly incorporate proposals for new transport infrastructure or financial contributions towards a new/enhanced transport network. In some cases the local planning authority take the initiative via their development plan and tie specific network improvements to particular individual developments or groups of development project (e.g. the completion of a small town by-pass by complete development funding arising from the release of residential and commercial development on land within the new by-pass line). In other cases the developer takes the lead and seeks
Urban Transport and the Environment 5 to influence the outcome of the development strategy by offering to fund or partly fund an identified element of the new local transport network. The UK Development Plan system allows developers and landowners to advance project proposals, which are not already accepted in the Draft Plan, via an objection to the Plan. Their chances of success at the subsequent Development Plan Inquiry can be greatly enhanced if they are able to link the promotion of their development scheme to an offer to fund a required element of the local transport network. In certain cases the private sector developers are more pro-active and advocate their own improvement to the local transport network following a review of the requirements by their consultancy team. 1.7 The project examples covered in my paper are at various stages in the planning/implementation process and a number of them are projects in which my Company are the lead consultants. There is considerable scope for innovation in the conception, planning and design of such projects. 2. Methods of Securing Development Contributions 2.1 General and site specific policies in Development Plans and Transport Strategies. Local authorities in formulating their plans can seek to secure the implementation of local transport schemes via private sector funding sourced from the development profits of a project which is tied in physical and implementation terms to the transport scheme or part of it. Such policies contain clauses which limit the extent to which the particular development can proceed prior to a requirement to complete the transport scheme. In a situation where local government is increasingly short of fimds for such projects this is an attractive option for securing them in whole or in part. The basis of such an approach is that traffic generated by the development cannot be accepted or accommodated on the road network without the completion of either a new section of road, an improved junction, or the opening of an alternative public transport network which it is hoped will divert traffic from the existing congested network. This particular method is used on an ad hoc basis by local planning authorities. 2.2 Legal Agreements Agreements under Section 106 of the 1990 Town and Country Planning Act and Section 278 of the 1980 Highways Act are normally used to secure funding contributions in association with specific developments for which a planning application has been made. A valid planning permission does not exist until the Section 106 Planning Agreement has been signed. The application for planning permission and the negotiation of the Agreement now tends to follow the identification of the policy requirement outlined at 2.1, but there are still examples of local network improvements being negotiated solely on the basis of the
6 Urban Transport and the Environment planning application stage. These schemes are often referred to as 'planning gain' and the Government has established guidelines which seek to ensure that the gain offered or sought is directly related to the development project. Such guidelines are necessary for example where 3 developers are applying for a superstore project on different sites within the same catchment area and there is only scope for one to be approved. In a recent legal test case the Court held that one superstore developer's offer to build a new road was not a fair requirement or a consequence of that particular proposal and therefore fell outside acceptable planning gain. Where a local authority are not in agreement with the developer's package of proposals it is still possible for these to be advanced as a Unilateral Obligation under Section 106 of the Planning Act 2.3 Funding contributions from several development schemes. Attempts to secure funding contributions to new, high cost, local transport network schemes are increasing and this is particularly true of light rail systems. The research carried out by Walmsley and Perrett [ 2 ] found that private sector developers and landowners contributed little finance to the capital costs of LRT systems. This research covered systems in operation in the UK, France, USA, Canada and Germany. They did conclude that contributions from property developers are becoming increasingly important. This certainly matches my recent experience in the UK where due to the high costs involved, the decrease in Government taxation (grants and subsidies) and the strong competition between cities to secure new LRT systems places greater emphasis on private sector contributions. In these circumstances the promoters of the particular schemes are increasingly looking to increase the level of development project contributions often to the extent that they will select routes which in part are concentrated on linking to particular developments. In some cases this can prove to be a costly mistake as the Sheffield Supertramfirstline has shown. Much lower revenues than expected have been achieved to date largely due to the routeing of the line through the Don Valley an area of ongoing and future development, rather than an established corridor of residential and commercial areas. This should not preclude LRT route extensions where there is a major development magnet at the end of that extension and the route can be designed to serve this and existing centres of population. An example of this type of scheme is the Trafford Line through the densely developed Trafford Park Industrial Estate (one of the largest in Europe) to the regional shopping centre (The Trafford Centre) at Dumplington. However sponsoring authorities, in this case the Greater Manchester PTE, are learning from the experience of Sheffield and other schemes and have indicated that they will not provide funding and will look to a very high rate of private sector contribution, much of which it is anticipated would have to be development generated funding. 2.4 Landowner Contributions Due to the heavy outlay of funds required to own land UK developers in recent years have secured land via option agreements with the landowners where, for an
Urban Transport and the Environment 7 initial option fee, they can secure the future purchase of the land once the appropriate planning permission has been granted. In exercising the option typical purchase prices tend to be in the range of 75 to 85% of the market value with planning permission. This does not leave much spare financial return to cover a reasonable development profit and any contributions to transport infrastructure. Consequently option agreements are becoming more complex and involve the discounting of certain essential infrastructure costs from the market value to be paid to the landowner. In this way landowners can indirectly contribute to the costs of off-site local network improvements. In some cases there is a generalised infrastructure contribution clause in the option agreement and this can lead to difficulties in the final negotiation of the agreement with the landowner. The extent to which the infrastructure scheme needs to be clearly defined and precosted is a matter for negotiation between the parties in each case. It may be possible to persuade the landowner(s) to provide land towards the new transport link at nil or low cost and this can considerably reduce the overall capital cost of the scheme. This approach is facilitated where the landowner is also the developer of the project, which will make the contribution, since 100% of the land value is available from which to source a contribution, or, as I outline in the example of the Crossgates - Austhorpe Relief Road in East Leeds, to fund the whole of a particular phase of a new scheme via the combined landowner/developer contribution. 3. Project examples which illustrate how developer funding can be achieved. 3.1 The project examples I have used can be divided into four separate groups:- A. By-pass and relief road schemes B. LRT schemes C. Motorway/Trunk Road junction improvements D. A new settlement - designing in a sustainable transport system. 3.2 Group A -Scheme 1 -The Crossgates-Austhorpe Relief Road, East Leeds. 3.2.1 This relief road proposal is a privately sponsored scheme which is to be funded entirely from private sector development contributions. The first phase, which has been approved in detail, will form the main access spine road for a major new business park linking from a motorway junction with the new M1-A1 link road (a DBFO scheme). This first phase and the development funding have been negotiated via an outline planning permission and Section 106 Agreement for the road and the business park. Only a limited % of the total floorspace can be constructed prior to the opening of this first phase of the Relief Road and the
8 Urban Transport and the Environment associated motorway junction. The second phase is being pursued on an advocacy basis by a landowner/ developer through the Leeds Unitary Development Plan Inquiry. The scheme being offered is the provision of land for the road at nil cost and the funding of the whole of the capital cost of phase two ( 3.5m estimate) if an allocation of 22 hectares of residential land, on the City side of the Relief Road is adopted in the Development Plan and subsequently granted planning permission. The development would be conditional on none of the houses being occupied until the relief road was open to traffic. 3.2.2 The proposed Relief Road is a partial replacement for a Government financed trunk road scheme which was abandoned following a cost cutting exercise. The trunk road proposal was for a longer relief road to dual carriageway standard. The requirement for the trunk road was identified following the usual traffic, cost-benefit and environmental analyses, its main purpose being to divert traffic from the congested Leeds Outer Ring Road. The new Relief Road project is single carriageway and is currently proposed to be shorter in length but incorporates a segregated cycle track provision and a dedicated public transport corridor alongside the road. 3.2.3 The linear nature of the development proposals at the eastern edge of the City adds to the feasibility of this new 3 purpose transport corridor. Initial studies of the type of public transport system best suited to this corridor have eliminated an extension of the City Centre to East Leeds LRT route on cost and viability grounds. A guided bus system, extending the experimental route planned for East Leeds or a conventional bus lane are the most likely options. Construction of the first phase of the road will commence shortly, funded from the development profits of the business park; the second phase, to be funded from land sale profits, will have to await the outcome of the Development Plan Inquiry and a subsequent grant of planning permission for the residential development and this section of the road. The promoters of the Relief Road project have realised that it is possible to create a new transport link which is less costly, more environmentally sustainable, and still provide some traffic relief to the Outer Ring Road and shorter commuter links between existing and proposed residential and employment developments. In addition the land values of the commercial developments will be enhanced with the creation of the new link to the motorway. The funding and design parameters will also be covered by a Section 278 Highways Agreement and following completion of the works each phase of the road will become a public highway. 3.3 Group A - Scheme 2 - The Normanton By-Pass, City of Wakefield. 3.3.1 This by-pass scheme is a local authority proposal which was to have been funded from Government Transport Supplementary Grant (TSG) which local authorities apply for each year via their Transport Policy and Programme (TPP) bids. Cutbacks in TSG funding led to the search for a private sector contribution and a promise of a 40% contribution was achieved via a major landfill waste disposal development which was to have been carried out by a public/private sector
Urban Transport and the Environment 9 consortium. The waste disposal consortium has since been disbanded and the scheme is being reduced in scale. As a result there is no longer a firm offer of any contribution and alternative developer contributions are now being sought. My Company are advising the landowners of an allocated site who are being indirectly approached for a contribution by the local authority's negotiations with a prospective developer. My clients have not as yet granted an option to this particular developer. 3.3.2 The previous development contribution via the waste disposal scheme achieved a high value for money rating on the Department of Transport's assessment criteria, but there was an over reliance on this one scheme. Without a private sector contribution the Department of Transport's grant funding will not be released, yet no indication is provided as to the level of private sector funding required to ensure the approval and progress of such schemes. Alternative private sector funding is being sought by the local planning authority from three development proposals allocated in the Development Plan, but there is no policy linking the development of any one of these sites to the programming, funding and implementation of the road. 3.4 Group A - Scheme 3 - The Otley By-Pass, North West Leeds. 3.4.1 The final part of the by -pass scheme is firmly allocated in the Leeds Unitary Development Plan together with associated residential and industrial allocations. A site specific policy in the draft Unitary Development Plan for Leeds requires the developers of the allocations, which lie on the town side of the By-Pass, to fund the last phase of the By-Pass. The route of the By-Pass has been altered in the Plan to ensure the close physical and development relationship of the road and the development sites. 3.4.2 A consortium of landowners and developers has come forward and via the public inquiry into the Development Plan they have undertaken to fund the road via development profits and enhanced land values. This will achieve further residential development as well as the routing of heavy goods vehicles and extraneous traffic out of the town centre. 3.5 Group B - Scheme 1 - Manchester Metrolink - City Centre to Salford Quays and Eccles. 3.5.1 This project is a four mile extension to the Manchester Metrolink light rail system. The scheme has a very high cost-benefit rating by the Department of Transport and while the Transport Secretary did not provide Government funds for the new line in the 1996/1997 transport grant allocations he suggested to the Greater Manchester Passenger Transport Executive that it should make a start on the extension while awaiting Department funding. To date the private sector in the form of developers, landowners, and the potential operators are prepared to contribute some 43m. of the 110m. cost. Strong economic and social benefits
10 Urban Transport and the Environment will result from the developments and the regeneration of areas lying on the route. Promoters of light rail systems who can demonstrate these strong economic and social benefits together with a good level of local funding will move to the head of the queue of cities attempting to achieve LRT schemes. 3.5.2 Amongst the objectives of the Manchester to Eccles project are the desire to support the planned re-development of Eccles Town Centre, to improve access to further developments in Salford Quays, including the Lowry Arts Centre, Pomona and Combrook and to improve accessibility of development sites along the Eccles New Road Corridor. Amongst the funding sources being utilised, contributions from property owners and developers will be in the form of the free transfer of land and cash contributions. Annex A to Department of Transport Circular 3/89 [ 3 ] provides guidelines for appraising public transport projects and applications for Government Grant. These were carefully considered and applied in this case. With regard to developer contributions applicants for grant are expected to assess " what can be captured from developers and this will form an important part of the appraisal. " The guidelines recognise that it may be more difficult to obtain a substantial proportion of added value from this source when there are a large number of small beneficiaries, rather than a few large ones. The need to consider modifications to the system (e.g. station location and access) in order to attract developer contributions is suggested. 3.5.3 It is estimated that 13m. of the total cost of 110m. will come from contributions from property interests, 30m. from the operating concession, 25m. from the PTA Grant, 32m. from the Government Section 56 Grant, and 10m. from a European Regional Development Fund Grant arising from the levels of regeneration to be achieved. The contributions from property interests comprise two elements. The first is the transfer of land in Salford Quays, needed for the construction of the line, to the Passenger Transport Executive. These transfer agreements have been negotiated to the point where the majority are the subject of legally binding agreements, the second element comprises contributions in cash towards the construction of the line, these will be made by property owners, developers and occupiers and will be conditional on the line being built The contributors are the Manchester Ship Canal Company, the Property Enterprise Trusts who own Exchange Quays in Salford and a number of other developers, plus various owners and occupiers including the Royal Mail and MGM Cinemas. In comparison with schemes outside London this is a very significant contribution by property interests. ( Source information -proofs of evidence by the GMPTE team of witnesses [ 4 ]). 3.6 Group B - Scheme 2 - Leeds Supertram Line 1 - South Leeds. 3.6.1 My Company are advising a small number of landowners and developers close to the southern terminus of this proposed LRT line. A decision on Government funding has been deferred for a further year due to the lack of private sector funding contributions. Again the DOT have not given a target figure for the
Urban Transport and the Environment 11 Transactions on the Built Environment vol 23, 1996 WIT Press, www.witpress.com, ISSN 1743-3509 level of private sector funding required, though at a recent meeting between the Minister and Leeds commercial interests he promised to give this consideration. The Leeds scheme was in close competition for this funding with the Midland Metro and the Croydon Tramlink light rail systems. 3.6.2 Via a planning application and a Section 106 Unilateral Undertaking our developer clients are offering a 0.5m contribution from the enhanced land values anticipated on a proposed 40 hectare employment park. As the employment park is situated near the southern terminus of the LRT it would encourage commuter flows in the reverse direction to the peak flows into the City Centre, thereby enhancing the potential revenue stream of this line. My clients have also offered to fund the construction of a station to serve the employment park. 3.6.3 This 7 mile line presents few opportunities for development contributions due to the nature of the residential areas through which a large part of the line passes, and to the fact that the City Centre and inner area developments which might have contributed were largely completed in advance of the planning of the line. Consequently other private sector funding sources including the joint venture funding partners of the PTE will have to raise a higher proportion of the total costs. 3.7 Group C - Scheme 1 - Junction 28 of the M62 3.7.1 The employment park referred to at 3.6.2 will generate additional traffic onto this motorway junction and developer funding of improvements to the junction will be required when the traffic generated by the development passes a certain design threshold. The DOT use high growth traffic forecasts looking ahead 15 years from the completion of the development as the basis for modelling when the improvements will be required and how much the developer will have to contribute above any base improvements which might be required. This high growth forecast takes no account of the greater propensity for modal trip transfer in this location due to the density of bus services and the likely impact of the proposed South Leeds Supertram route. The first set of improvements to this junction, the installation of traffic lights at each entry to the roundabout, are to be funded via the earlier development of a regional shopping centre, which is a committed scheme. The requirement to use a 15 year traffic growth factor from the year of opening is a matter of dispute and is considered to be excessive. 3.8 Group C - Scheme 2 - The Welton Junction on the A63 Trunk Road, East Yorkshire. A number of potential development schemes in the approved development plan will if approved feed traffic onto this already sub standard junction. The junction does not meet current safety standards and yet the DOT have sought in initial negotiations to achieve all the costs of improvement via developer contributions. The development plan does not provide for a negotiated and shared basis for
12 Urban Transport and the Environment making these contributions and in early negotiations the DOT have been adopting a negotiating stance which seeks the full contribution from the first development scheme to be advanced to the planning stage. This type of funding request is currently a problem with many such schemes. The department did attempt to resolve this in a policy paper produced as a consultation document in July 1992 [5]. The intention was to rationalise the process and make it fairer by using a cost sharing scheme and the identification of road capacities and " Development Road Projects", where a specific proposal or a series of development proposals in the plan might lead to the need to carry out a highway improvement to accommodate future traffic. This policy proposal has not been progressed. 3.9 Group D - Springswood New Settlement - North East Leeds 3.9.1 This proposed new settlement is a satellite for the City of Leeds but it is intended that it should be as sustainable a development as possible, though a full level of self containment is not likely to be achievable. The development of 5000 houses, and further potential expansion of this new settlement, in close proximity to an existing system of villages and a market town and with 5000 existing jobs close at hand presented an opportunity for the integration of old and new development. This is an area with a limited public transport service and consequently the plans for the new settlement comprise a new community bus system which will run on a circuit between Springswood, the industrial estates, the market town and the existing villages. Private funding of the capital and revenue costs of this new community bus network is proposed as part of the new settlement infrastructure. It is intended that the funding will last for 5 years, at which point it is hoped that the service will then be self -financing. 3.9.2 The proposed circuit would benefit existing communities and encourage local modal transfer for trips to work, school and the retail centres. Buses would operate on a 10 to 15 minutes interval ensuring an attractive frequency essential to attracting local trips. 3.9.3 In addition to the above the master plan proposals contain new pedestrian and cycle route links between the neighbourhoods and out to link with the existing settlements. All these proposals will be secured via a Section 106 Agreement. 4. Concluding Statement 4.1 The scope for development funding contributions is increasing as the public sector funds are reduced. The current Government in the UK is 'encouraging' such contributions by reducing grant aid for schemes and making it more difficult to achieve grant without a higher leverage of private sector funding. Until recently private sector developers in the UK have been reluctant to offer funding but increasingly they see this as an opportunity to influence the outcome of development plans and to achieve planning permissions for their projects.
Urban Transport and the Environment 13 4.2 There is an urgent need to produce clear ground rules for the negotiation of developer contributions. These will differ for different types of scheme. Wherever possible realistic targets should be set at the earliest possible stage and wholly privately funded schemes and contributions to schemes should be negotiated within a clear and up to date Development Plan and Transport Strategy context. 4.3 Earlier planning of local transport proposals within the Development Plan framework increases the opportunity to achieve greater developer contributions and enhanced community benefits. The contrasts between the Manchester LRT extension to Eccles and the South Leeds LRT line illustrate this point 4.4 A complete re-appraisal is necessary of the loose methodology used to obtain developer contributions to off-site motorway and trunk road improvements in order that costs are more realistically and fairly apportioned. 4.5 The great potential for achieving more widespread developer contributions needs to be realised and to form part of a proactive planning system which encourages greater co-operation between the public and private sectors in the planning and implementation of local transport networks. Developers will need to become more aware of public transport issues and deliberately support new initiatives in order to realise their development objectives. References [ 1 ] Department of Transport - Building tomorrow's transport network - Nov 1994. [ 2 ] Walmsley D and Perrett K - The effects of rapid transit on public transport and urban development- Transport Research Laboratory - London HMSO 1992. [ 3 ] Department of Transport Circular 3/89 Annex A - Guidelines for public transport project appraisal:- applications for Section 56 grant - London HMSO 1989. [ 4 ] Greater Manchester Passenger Transport Executive - The Greater Manchester (Light Rapid Transit system) (Eccles Extension) Order - Proofs to Transport and Works Act Public Inquiry - Sept 1995. [ 5 ] Department of Transport - Developers' contributions to highway works - Consultation Document - July 1992.