Ministers have announced a £500 million capital funding package, the 'Growing Places Fund', aimed at kick-starting stalled development projects, in order to deliver new homes and jobs.
Local authorities, Local Enterprise Partnerships (LEPs) and their private sector partners will need to consider how they will work together to deliver value for money and investment in key projects. This might involve several LEPs working together to create a critical mass in order to bring about the necessary quantum, and phased programme, of investment. Local authorities will also need to embrace the need to collaborate where the LEP crosses local authority boundaries.
Applications to the Department for Communities and Local Government (CLG) for funding will need to set out how the investment fund will be managed and administered. While LEPs and their partners are encouraged to innovate, there are some important factors that need to be taken into account in setting up and administering the fund.
The funding allocation will be paid by CLG to the local authority. Where the geographical extent of the LEP spans local authority boundaries, these authorities will need to agree which authority will be the lead partner as well as its terms of engagement. This lead authority will have responsibility for drawing down funding from CLG, investing in projects and administering the fund, in addition to procedures for ensuring transparency and accountability.
The lead authority will work with the LEP to assess which projects are to be prioritised for investment, the terms of investment and how funding is to be recycled so that it can be made available on a revolving basis. The authority will enter into funding agreements with delivery partners setting out pre-conditions to draw down, a timetable for delivery and the terms on which the investment, and any upside, will be repaid.
In relation to the private sector, the lead authority must also take account of procurement and state aid issues. To address this, the LEP, in partnership with the local authority, will need to invite bids for funding from the private sector.The LEP must therefore agree evaluation criteria with CLG and its partners that ensure value for money and allow for the clear prioritisation of projects. This should take into account the overarching objective of a phased approach to investment and development, which recycles funds to release additional sites to the market.
Developers and landowners should demonstrate how investment in particular projects could result in accelerated development, job creation, the potential for financial returns and the ability for investment to generate third party funding. Successful bidders will need to demonstrate value for money through the appropriate procurement of construction works.
Investment in projects could be recouped through project specific overage arrangements, s106 obligations or community infrastructure levies on future development. With regard to the collection of planning charges by authorities, in the case of a 'cross-border' LEP, commitments to the lead local authority would need to be made to ensure reimbursement of the fund.
In our earlier alert, we highlighted the potential that exists for tax incremental funding schemes, where borrowings for infrastructure needs are financed through growth in business rates. There is a clear opportunity with the Growing Places Fund to create a viable platform from which such schemes might develop in the future.