Q5. Do you agree with the proposed CIL rates for non-residential development?

This depends on whether a discretionary policy is introduced to give relief to private businesses wishing to provide a service which would fill a proven social, health or medical

The charging rate for assisted living housing seems high. As the population ages there will be more demand for these favcilities.

The Parish Council supports the findings of the viability study.

Do not agree. Forget private retail shops, the traditional perhaps long gone now mythical notion of a nation of shopkeepers idyll. There will be no chance of a return after this, room only for chain shops, no individual shops, may be anticipated unless they be of less than 100 sqm presumably including storage, wcs, restrooms and staff bicycle storage facility. If there is potential for profit it would seem that the local authority want a greater part of it (on top of LA fees, tax on profits, VAT, etc). The trouble is they want it before it has occurred. It has to be earnt and it not always is. There may not be any and by taking it before the business even opens its doors they lessen the prospect of profit arising. CIL is in danger of giving birth to cheaper construction as cuts are made to make development viable.

Under Regulation 14 of the Community Infrastructure Levy Regulations 2010 ("CIL Regulations") the Council's primary duty when setting the level of Community Infrastructure Levy ("CIL") charge is to strike an appropriate balance between the desirability of funding the cost of infrastructure required to support development from CIL and its potential effects on the economic viability of development.

In our view, the approach taken to assessing the Preliminary Draft Charging Schedule does not achieve an appropriate balance between these two objectives.

We wish to object to the approach taken to assessing the Preliminary Draft Charging Schedule on the following grounds:

1. The Viability Study fails to adequately take account of major changes introduced by the Community Infrastructure Levy (Amendment) Regulations 2014/385

2. the impact on policies enhancing economic performance;

3. the financial assumptions and viability assessments contained in the Council's Viability Study;

4. the proposal to split convenience and comparison retail development;

5. issues relating to State Aid; and

6. concerns about the Council's approach to setting CIL charges generally.


Question 5: Do you agree with the proposed CIL Rates for non - residential development?

We will not repeat the Council's strategic objectives contained in its Local Plan in full here, but in order to achieve its Vision and Overall Objectives, it will be important for the Council to set an appropriate CIL charge to encourage new development to come forward. An appropriate CIL charge will encourage new development and promote redevelopment to create employment and ensure a range of shopping choices for consumers and enhance the vitality and viability in district and local centres.

The proposed retail CIL rates would discourage larger retail developments and would not ensure that the relevant retail and employment aims of the Vision and Overall Objectives are met. This could have the effect of reducing the range, variety and choice of retail shopping and, if no redevelopment or regeneration schemes are put forward, then existing buildings are unlikely to be refurbished and re-used.

It is our view that if the retail charges set out in the Preliminary Draft Charging Schedule are adopted, there will be several consequences across the Borough that will put the Council's ability to achieve its key objectives at risk. For example:

* All other forms of development will receive a significant subsidy at the expense of retail schemes; and

* There will be a corresponding disincentive (and market distortion accordingly) to investment in this sector of the local economy.

The Government is keen to encourage the creation of additional employment across the economy and the retail sector as a whole is one of the largest employers and the largest creator of new jobs at the present time as well as being one of the most dynamic and innovative sectors within the UK economy.
Asda example 1

ASDA has a proven track record of investing in local communities and of creating jobs within these areas. For example, of the 123 colleagues recruited for the ASDA store in Tunbridge Wells, 76 colleagues (71%) were previously unemployed.

The supporting papers do not acknowledge this trend nor do they fully assess the role of retail within the national economy. They simply assert that large scale retail is performing stronger in comparison to the other aspects of the retail sector and accordingly, it implies that large scale retail establishments have the capacity to pay potentially very large sums of CIL.

Any CIL schedule that imposes a substantial CIL charge on superstores or supermarkets and a very low or nil rate on all other uses could effectively undermine the retail function of local and town centres, detracting from their viability and vitality as large scale retail developers would be discouraged by the imposition of CIL.

Rye Town Council notes again that the proposed charges are in the upper part of the band being set by other Charging Authorities. It is particularly concerned that high rates of CIL do not discourage development (reducing employment opportunities and local tax revenues) by increasing the cost (freehold or leasehold) of commercial property.

Rye Town Council considers that the charge applicable to developments for which it is know that the supply does not meet demand and there is a proven social need (for example, residential care homes) should be reduced.

Rye Town Council recommends that the rate level is reconsidered at a lower level.

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Introduction
Gladman Developments has considerable experience in the development industry in a number of sectors including residential and employment land. Gladman are aware that Rother Council have a Local Plan which has recently been found sound (subject to modifications) and that alongside this the Council are in the process of preparing a Community Infrastructure Levy for the area. This Consultation is for the PDCS stage of the CIL.

CIL is intended to have a positive effect on development. The latest CLG guidance notes that "The levy is expected to have a positive economic effect on development across a local plan area. When deciding the levy rates, an appropriate balance must be struck between additional investment for infrastructure to support development and the potential economic effect on the viability of developments...This balance is at the centre of the charge setting process" (Section 2.2, CLG Guidance, 2014).

In accordance with the latest CIL Regulations, the Council is required to strike an appropriate balance between the desirability of funding from CIL and the potential effects (taken as a whole) of the imposition of CIL on the economic viability of development across the local authority area. The Council must consider the impact of CIL together with the policies contained in the Local Plan on
developments within the borough when deciding an appropriate CIL rate.

Setting the levy at the appropriate rate will be key to ensuring that development comes forward in your local authority area and subsequently that the Local Plan is implemented. These representations address some key areas that local planning authorities must consider when preparing their CIL charging schedule, drawing on recent guidance produced by the CLG.

Funding gap / evidence base
Local planning authorities need to be able to demonstrate the infrastructure need and subsequent funding gap and must ensure that the level of total CIL receipts that could be generated through the levy reflects these true needs and the proposals in the Local Plan. The CIL should not be used by Council's as a mechanism for creating an unrealistic 'wish list' of infrastructure projects in their area.

When establishing a funding gap that CIL receipts are intended to contribute towards filling, it is vital that the Council take account of every possible income stream. This has to include an accurate assessment of future New Homes Bonus and council tax and business rates receipts generated as a result of new developments allocated in the Local Plan, as well as central government funding streams. This should also include an assessment of statutory undertakers' asset management plans, as these companies will at some stage be upgrading their systems/facilities. This also needs to be taken account of when assessing the infrastructure requirements of the authority.

The Council need to have an up to date, robust evidence base that fully justifies the infrastructure needs based on the amount of development that is required. Information on these infrastructure needs should, wherever possible, be drawn directly from the infrastructure planning that underpins the Development Plan, as this should identify the quantum and type of infrastructure required to realise their local development needs. If the authority's infrastructure planning is weak or out of date then the Council should undertake an exercise to refresh this. If the evidence base is not complete, robust and up to date the charging schedule will be unsound and the local planning authority will have difficulty adequately demonstrating their funding gap and subsequent CIL requirements.

The CLG guidance notes that: "Charging authorities should be able to show and
explain how their proposed Community Infrastructure Levy rate or rates will contribute towards the implementation of the relevant Plan, and support development across their area. Charging authorities will need to summarise their economic viability evidence. This evidence should be presented in a document (separate from the charging schedule) that shows the potential effects of the proposed levy rate or rates on the economic viability of development across the authority area" (Section 2:2:2:3, CLG Guidance, 2014).

It is important that in calculating the level of infrastructure the authority needs as a result of development the Council distinguishes between new and existing demands. New houses do not always create new pressure on infrastructure as evidence shows that a large proportion will be occupied by people already living in the borough, attending local schools, and registered with local GP surgeries. They will therefore require less infrastructure provision compared to new residents in the borough.

The available guidance makes it clear that CIL is expected to have a positive economic effect on development across an area in the medium to long term. As outlined in recent Inspector's Letters to East Devon District Council (April 2014), the CIL charging rates should not be set at such a level that would threaten development, and must be based on robust evidence and assumptions. The rate will also need to be appropriate over time, bearing in mind land values, market conditions and the wider economic climate change rapidly. The viability impact of incremental policy obligations, such as stepped Code for Sustainable Homes targets, must be assessed and reflected in the charging schedule.

The Council needs to ensure that they have a full understanding of the potential costs of infrastructure projects needed to meet the infrastructure needs. Gladman believe that it is inappropriate to set the levy based on a partial understanding of these infrastructure costs and in particular if the total money needed for infrastructure is unknown.

Differential charging rates
The CLG guidance notes that the use of differential charging rates can be an appropriate approach where there is clear viability evidence to justify this. The CIL regulations allow charging authorities to apply differential rates in a flexible way, to help ensure the viability of development is not put at risk.

The rules around the use of differential rates in the Charging Schedule are clear: they can only be applied in relation to different geographical zones in which development would be situated, related to different types of development, and/or scales of development. Furthermore as the Government's CIL guidance and inspectors have made clear, differential rates should be set "based on economic viability considerations alone, rather than any planning or any other public policy related choices" (Paragraph 14, Newark and Sherwood EIP report, August 2011), and "CIL is not intended to be a planning policy tool" (Paragraph 23, Huntingdonshire EIP report, April 2012). Charging schedules with differential rates should not have a disproportionate impact on particular sectors or specialist forms of development.

It is integral when setting differential rates for different geographical areas that these differential rates are based on accurate, up to date housing market intelligence forming the evidence base for this decision.

Discretionary Relief
Regulation 55 of the CIL Regulations allows local authorities to grant relief for exceptional circumstances from liability to pay CIL. Such provision should be factored into the Council's CIL and will avoid rendering sites with specific and exceptional cost burdens unviable should exceptional circumstances arise.

Payments in Kind
Regulations 73 and 73A of the CIL Regulations provides a mechanism for local authorities to accept infrastructure payments, or payments in kind, for land or infrastructure to be provided instead of money to satisfy a charge arising the levy. An allowance for infrastructure payments should therefore be made available by the Council, recognising that there may be time, cost and efficiency benefits in accepting land or infrastructure from parties liable for payment of the levy.

Requirement to consult
As with Local Plans, local planning authorities have an obligation to consult at various stages of the CIL preparation process. However, the guidance does not provide details as to the format that this consultation must take or length of the consultation period. Gladman echo the CIL guidance and would urge your local authority to engage with local developers and others in the property industry early and throughout the process. This will help your authority to gain opinions from the market to feed into the preparatory work.

Once the charging schedule is ready for Examination the local authority must publish the draft schedule for a further stage of formal public consultation. In accordance with the CIL Guidance this must be for a period of at least four weeks, although it is considered good practice to allow at least six weeks, and longer if the issues under consideration are particularly complex.

Examination
As outlined in Section 2:2:5:1 of the 2014 CLG guidance the charging authority must appoint the examiner. The examiner must be independent and have the appropriate qualifications and experience. The guidance confirms that a Planning Inspector would fulfil these criteria.

Conformity with the National Planning Policy Framework (NPPF)
The NPPF provides the current central government planning policy and requirements for local planning authorities to meet. The NPPF places emphasis on sustainable development and in particular ensuring that the objectively assessed needs of an area are met through the requirements and policies within the new Local Plan.

It is fundamental that the Council ensures that the proposed levy rates are realistic and not set too high. Arbitrarily high rates may jeopardise the delivery of housing schemes within the area. This would be contrary to the Government's aim outlined in the Framework to "significantly boost the supply of housing", as schemes may not come forward due to viability issues.

The Council's CIL charging rates must not threaten the overall delivery of the Local Plan, by making sites unviable. This point is reiterated in the CLG guidance, which states that "Charging authorities should set a rate which does not threaten the ability to develop viably the sites and scale of development identified in the relevant Plan" (Section 2:2, CLG Guidance, 2014).When testing the impact of CIL it is vital that the assumptions that underlie the standard residual valuation approach used to test the impact on viability of CIL are realistic and accurate.

This should include abnormal costs, contingency costs, preliminary costs, and developer profit, which should reflect the current level of risk perceived in the market.

Gladman would urge the Council to adopt an instalments policy for CIL payments as this will give developers the flexibility to pay contributions in line with development phasing schemes and will facilitate cash flow and therefore development viability. With this in mind, in accordance with Regulation 8(3A) of the CIL Regulations the Council should also accept the phasing of planning permissions, with each phase treated as a separate chargeable development.

Gladman also remind the Council of the need to review CIL tariffs once these have been set. The economic climate will inevitably change over the course of the plan period and as such the levy rates that can be set whilst ensuring development remains viable will also change. In accordance with the CLG guidance "Charging authorities must keep their charging schedules under review and should ensure that levy charges remain appropriate over time. For example charging schedules should take account of changes in market conditions, and remain relevant to the funding gap for the infrastructure needed to support the development of the area" (Section 2:2:6:3, CLG Guidance, 2014).

Gladman believe that the Council need to have a clear understanding of the level of residential development to be brought forward in the plan period when preparing the charging schedule as this will directly influence the scale of CIL that will be generated. Without this the charging schedule will not reflect the relevant and true infrastructure needs of the area.

Consultation on the Preliminary Draft Charging Schedule and Draft R123 List

I am writing on behalf of Marchfield (Strategic Land) Ltd in response to the consultation on the Rother District Council Preliminary Draft Charging Schedule and Draft R123 List. The relevant forms are enclosed and the representations are shown below.

Q1. Do you agree that Rother District Council should introduce a CIL?
No comment at this stage.

Q2. Do you agree that there is [a] clear infrastructure funding gap?
No comment at this stage.

Q3. Do you agree with the proposed residential CIL charging zones?
The supporting document to the Preliminary Draft Charging Schedule (PDCS) the 'Rother District Council Community Infrastructure Levy Economic Viability Assessment' (PBA, July 2014) states (para. 4.3.24) that:

"The Core Strategy identifies a strategic site at North East Bexhill and the Council considers that two further sites at Battle and Bexhill could also be considered as strategic in nature. Whilst the further site at Bexhill and the one at Battle has not been specifically tested, the Council may want to take a similar approach to North East Bexhill and separately identify them within the charging schedule."

At Bexhill the Local Plan Core Strategy (as proposed to be modified and adopted) identifies a 'Strategic Growth Location' to the north-east of the town, often referred to as 'North-East Bexhill' and two 'Potential Broad Locations for Future Development', one to the north of the town and one to the west, often referred to as 'North Bexhill' and 'West Bexhill'. The North-East Bexhill site is a continuation of the current, saved, allocation in the previous Local Plan. The two Broad Locations are new to the Local Plan Core Strategy.

Clearly, if one Broad Location (North Bexhill) is to be identified as a 'strategic site' then the other Broad Location (West Bexhill) should be similarly identified. No explanation is provided in any of the documentation relating to the PDCS as to why the West Bexhill site has been omitted.

On this basis our client cannot agree with the proposed residential CIL charging zones.

Moreover, the PDCS refers to the three 'strategic sites' as 'strategic allocations' yet the sites at North Bexhill and West Bexhill are only 'Broad Locations' and have not yet been allocated for development, thus the terminology used in the PDCS could be viewed as misleading.

Q4. Do you agree with the proposed CIL charge rates for residential uses?
Funding Gap
The gist of CIL is that a local authority identifies a level of growth and a level of infrastructure investment necessary to support that growth and then, if possible, requires a standard charge from new development to pay for that infrastructure.

However, it is unfortunately inevitable that due to the high cost of infrastructure, there is often a residual funding gap. For instance, in the neighbouring District of Wealdon, where 450 new homes are required every year and where the process of adopting CIL is more progressed, the total cost of all infrastructure is estimated at £67.5m, and with £19.1m of funding already identified it is estimated that CIL would deliver just over half (54%) of the remaining funding required (£26m out of £48.4m), leaving a residual funding gap of £22.4m.

In comparison, the PDCS explains that for Rother, where 335 new homes are required per year, a total infrastructure cost of £172m has been identified, and with £39m of funding already identified it is estimated that CIL would deliver around a quarter (24-26%) of the remaining funding required (£32-36.4m out of £133m), leaving a residual funding gap of £96.6-101m.

The Infrastructure Funding Gap Analysis (RDC August 2014) notes in conclusion that:
"...there will remain a significant shortfall in funding that will need to be found from other sources whose funding has yet to be determined." (RDC emphasis)
Thus our client is concerned that the significance of the residual funding gap could lead to pressure in the future to increase the CIL rate and adversely affect the viability of development proposals. To address this it would appear evident that the Draft Regulation 123 List requires reconsideration to reduce the overall infrastructure cost.

Anticipated Quantum of Development
Whilst the Economic Viability Assessment correctly identifies (para. 3.2.1) the Local Plan Core Strategy requirement for "at least 5,700" new homes between 2011 and 2028, later figures in the Assessment are both inconsistent and appear to reflect the lower housing target expressed in earlier versions of the Core Strategy; for instance (Table 4.7: Distribution of development):

Settlement - Anticipated number of dwellings (incl. affordable)
Bexhill & Hastings Fringe - 2,000
Battle - 400
Rye - 200
Villages - 900
TOTAL - 3,500

and (Table 6.2: Residential potential CIL receipts):

Settlement - Anticipated number of dwellings (incl. affordable)
Bexhill & Hastings Fringe - 2,600
Bexhill - 600
Bexhill Strategic sites - 1,950
Hastings Fringe - 50
Battle - 160
Rye - 120
Villages - 900
TOTAL - 3,780

whereas the figures in the Submission Core Strategy and as proposed to be adopted (Figure 8 / Proposed Modification 7.14) are:

Settlement - Anticipated number of dwellings (incl. affordable)
Bexhill & Hastings Fringe - 2,095-2,330 3,200-3,350
Bexhill - 2,050-2,250 3,100
Hastings Fringe - 45-80 100-250
Battle - 400-440 475-500
Rye - 250-350 355-400
Villages - 950-1,000 1,670
TOTAL - 3,700-4,100 At least 5,700

The modified Local Plan Core Strategy even highlights that (para. 7.50 / Proposed Modification 7.15):
"Taking account of outstanding planning permissions, there is a need to provide for a 4295* dwellings in the District as a whole between 2011 and 2028"

This would suggest that the calculations of the CIL required per area of floorspace has been miscalculated on the assumption that several thousand homes less than are in fact planned will be provided. On this basis it wold appear that the proposed CIL rates could be reduced and yet CIL overall generate the same contribution towards infrastructure funding.

Proposed CIL Rates
With regard to the proposed CIL rates for residential uses, there would appear to be no justification for these. Having analysed the potential maximum (CIL) headroom (Table 4.7) (otherwise referred to as the 'overage'), the Economic Viability Assessment then states (para. 4.4.1) that a CIL charge is set that is well under this point for a number of reasons. It then states (para. 4.4.2) that whilst it would be conceivable to adopt an arithmetic approach to converting the 'overage' into a CIL rate, the Assessment states that PBA "prefer to use our professional judgement based on experience...and make recommendations for the LPA to consider"; no other explanation is given for how the recommended rates were arrived at - in other words the figures appear to have been plucked out of thin air.

On this basis the Assessment (Table 4.8) makes the following recommendations:

Charging Zone, Charging Area, CIL Rate (£ / sqm)
1 - Battle & Rural North & West - £240
2 - Rye & Rural East - £160
3a - Bexhill Central & East - £40
3b - Bexhill West - £200
4 - Strategic Allocations - £100

Whilst the Assessment states that the recommended rate has not been calculated but rather that it is based on a professional judgement, it is notable that the recommended CIL rate is generally between 32-48% (i.e. almost exactly a third to a half) of the overage; it thus appears that the figures recommended do in fact derive from a very crude calculation.

Without any further explanation, the PDCS then proposes (Table 1) different rates for two zones:

Charging Zone, Charging Area, CIL Rate (£ / sqm)
3a - Bexhill Central & East - £100
3b - Bexhill West - £180

On the basis of an average three-bedroom house of circa. 100 sqm this equates to a CIL Levy of:

Charging Zone, Charging Area, CIL Rate (£ / sqm)
1 - Battle & Rural North & West - £24,000
2 - Rye & Rural East - £16,000
3a - Bexhill Central & East - £10,000
3b - Bexhill West - £18,000
4 - Strategic Allocations - £10,000

By way of comparison, the process of adopting CIL in the neighbouring District of Wealdon is more advanced than in Rother. Wealdon abuts two of the proposed charging zones - Zone 1: Battle, Rural North & West, and Zone 3a: Bexhill West.

Whilst the rates proposed for within Rother are, respectively, £240 and £180, the rates chargeable immediately across the District boundary are, respectively, £180 and £110. For an average three-bedroom house of circa. 100 sqm this equates to an additional cost of between £6-7,000.

Throughout the development of the Local Plan Core Strategy the Council emphasised the difficulty in bringing forward residential development within the District. Our client is this concerned that such a high CIL rate, and also such a high cost when compared to the neighbouring District, is likely to result in decreased in the housing market within Rother.
On this basis our client cannot agree with the proposed CIL rates for residential uses.

Q5. Do you agree with the proposed CIL rates for non-residential development?
It is presumed that the references in the PDCS to 'residential uses' are intended to refer to development in Use Class C3 'Dwelling Houses' and that the reference, under 'Non-Residential Development' to 'Assisted Living / Extra Care Housing' is intended to refer to development in Use Class C2 'Residential Institutions'.

It is noted that the CIL Rate for 'Assisted Living / Extra Care Housing' is specified where there is no affordable housing. As affordable housing is not required for solely Use Class C2 proposals, this caveat is not required.

As with the setting of the CIL rates for residential uses, the Economic Viability Assessment has not explained the method by which the recommended figure of £250 / sqm (which is first and only mentioned in the overall report

Recommendations (Table 6.1)) was arrived at. It is thus assumed that as with the recommended residential CIL rate where this appears to be between a third and a half of the overage, the figure recommended in relation to Assisted Living / Extra Care Housing of £250 / sqm is almost exactly half the overage (£498 / sqm, reported in the Assessment as £500 / sqm); no explanation or justification for the proposed rate has been provided.

For a nursing home of up to 3,000 sqm as proposed by our clients on land to the west of Bexhill, this would result in a CIL cost of £750,000, which our clients predict would have a significant effect on the viability of the development and the likelihood of it being delivered.

On this basis our client cannot agree with the proposed CIL rates for non-residential development.

Q6. Do you support the introduction of an instalment policy in Rother for CIL payments?
Yes; however, our client has no suggestions on the form of instalment policy that should be adopted by the Council, but would welcome the opportunity to discuss this matter further and make further submissions should these be considered of assistance, following this consultation or through later consultations.

Q7. Do you have any views on whether the District Council should introduce a discretionary and exceptional relief policy.
Yes; however, as the Council has not made a decision on whether to adopt a discretionary and exceptional relief policy, our client has no suggestions on the form of instalment policy that should be adopted by the Council, but would welcome the opportunity to discuss this matter further and make further submissions should these be considered of assistance, following this consultation or through later consultations.

Q8. Do you agree with the proposed draft R123 list?
The NPPG advises (Paragraph: 096 Reference ID: 25-096-20140612) that:
"Regulation 123 of the Community Infrastructure Levy Regulations...provides for charging authorities to set out a list of those projects or types of infrastructure that it intends to fund, or may fund, through the levy."

However, there is a distinct lack of correlation between the Draft Regulation 123 List of infrastructure and the infrastructure projects listed in the Infrastructure Delivery Plan (IDP) (RDC, June 2014), and many projects identified in the IDP are only listed as being at 'concept' stage, with some even only being described as 'desirable', yet they appear in the Draft Regulation 123 List.

A number of infrastructure projects identified in the Draft Regulation 123 List are also not identified in the IDP as being the recipients of CIL funding; for instance the £130m funding required for the upgrading of the rail line is identified in the IDP as being funded by the DfT, Network Rail and SELEP.

The NPPG also advises (Paragraph: 097 Reference ID: 25-097-20140612) that:
"Where the regulation 123 list includes a generic type of infrastructure (such as 'education' or 'transport'), section 106 contributions should not be sought on any specific projects in that category."
and (Paragraph: 100 Reference ID: 25-100-20140612) that:
"Individual projects on the charging authority's list of infrastructure that it proposes to fund from the levy...cannot be funded by s106 contributions."

The Draft Regulation 123 List as contained within the PDCS contains a number of generic entries such as "bus shelters", "public realm improvements", "improvements to walking and cycling corridors", "public car park facilities", "children and young people's play areas", "Coombe Valley County Park", and so on and notes that exclusions will be facilities required in direct relation to a specific development.

However, it is unclear exactly what is proposed to be funded by direct contribution and what is to be funded through CIL. As such it is not clear to developers whether they will be liable for CIL and for other unspecified facilities that the Council considers to be directly-related to a specific development proposal.

On this basis our client cannot agree with the proposed draft R123 list.

Q9. Do you have any further comments on the PDCS?
No comment at this stage.