Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

COMMUNITY INFRASTRUCTURE LEVY - PRELIMINARY DRAFT CHARGING SCHEDULE

We are instructed by Land Securities Ltd to respond to the Rother District Council's preliminary draft charging schedule. Our representations on the consultation document are set out below.

Proposed CIL Rates

The draft charging schedule proposes for all in centre convenience retail for all three centres (Bexhill, Rye and Battle) a flat rate of £100 per sqm. For out of centre retail, the proposed rate for convenience floorspace is £120 per sqm and comparison floorspace is £250 per sqm. There is a nil chargeable rate for in centre comparison goods.

We are concerned that the CIL rates proposed for out of centre retail floorspace are unrealistic, have not been properly substantiated by appropriate evidence, and are inconsistent with rates now being charged or promoted by other local authorities in the region. If the rates for out of centre floorspace were to be adopted at the level proposed, this will discourage not only our client from making its investment but are also likely to deter other potential developments in Rother. We believe that the proposed charges will directly lead to new development, investment and jobs being lost from Rother to other areas nearby with lower, more realistic CIL rates.

In making the representations CgMs, wish to formally request:

(a) Notification of the draft schedule being submitted to the Examiner appointed by the Secretary of State to consider the Draft Charging Schedule;
(b) The right to be heard by the appointed Examiner at the examination;
(c) Notification of the publication of the recommendations of the Examiner; and
(d) Notification of the approval of the adopted Charging Schedule.

Government Advice makes it clear that contributions should not be set at levels which will discourage development; it clearly states:

"Charging authorities wishing to introduce the levy should propose a rate which does not put at serious risk the overall development of their area. They will need to draw the infrastructure planning that underpins the development strategy for their area. Charging authorities will use that evidence to strike an appropriate balance between the desirability of funding infrastructure from the levy and the potential effects of the levy upon economic viability of development across their area."

Rationale for Different Charges for Retail

The Schedule seeks to impose substantially higher rates on retail development at out of centre locations. However, conversely the turnover, rents and indeed, the traffic generation associated with retail stores is not directly proportionate to the size of the retail unit. For example, most retailers on retail parks would have larger proportions of back of house use than the town centre units.

Applying the proposed rate to larger retail park operators as explained above could be prohibitive and significantly affect potential viability.

Level of Charge

It is noteworthy that the level of charge for major retail development contained in the draft Schedule for Rother is not consistent with those levels already adopted and/or being charged for out of retail development elsewhere in the region.

Table 1 summaries charging schedules for large scale retail development in other nearby districts that are being proposed at the time of writing. These districts are in more advanced stages in terms of CIL preparation.

Table 1 Proposed Charging Schedules for Retail Development across the region

Local Authority - Eastbourne, CIL Rate for Retail development (£/sqm) - £80, Date of Adoption/ Charging Commenced - TBC, Stage 2 consultation finished in August 2014.

Local Authority - Wealden, CIL Rate for Retail development (£/sqm) - £20-£100, Date of Adoption/ Charging Commenced - TBC, Stage 2 consultation finished in Feb 2014, Examination to be confirmed.

Local Authority - Lewes, CIL Rate for Retail development (£/sqm) - £75, Date of Adoption/ Charging Commenced - TBC, Examination expected in Autumn 2014, expected approval in late 2014/early 2015.

In light of the above, we have reviewed the Council's evidence which seeks to substantiate the proposed rate. We consider that this evidence, in itself, does not adequately justify what is, for comparison goods development in particular, an exceptionally high rate for out of centre retail development.

The Economic Viability Assessment supporting the proposed DCS for retail warehouse acknowledges that the retail warehouse market has been relatively flat in recent times, in terms of new build the consultants consider that there may potentially be more activity in the future. The figures are based on the assumption that building costs for retail warehouses are relatively low, and generate more value when there is occupier demand. However, there is a lack of information on how this has been calculated. Furthermore, we consider that this does not reflect likely future costs and values. The retail warehouse market has been affected by rising costs and diminishing margins partly affected by the growth in internet retailing. In addition, many Councils, including Rother, require high quality design for new retail development and do not accept standard retail designs, which significantly increase development costs and, necessarily affect profitability. If the nature of the site is constrained, further costs would arise such as highway solutions and ground conditions.

The proposed comparison goods CIL level in the draft Schedule is more than double the convenience figure although Valuation Office figures within the District do not show a material difference in rateable value psm and turnover densities for convenience goods are generally much higher for foodstores than for retail warehouses. For example, turnover psm for Tesco is £11,715 whereas B&Q is £1,433 psm and Pets at Home is £2,156. In most areas, accordingly, the CIL rate for convenience goods is higher than for comparison goods and Rother's figures are inconsistent with that pattern.

Having reviewed the evidence issued in support of the proposed charging rate, we believe that insufficient evidence has been presented to explain the significant differential that exists between rate being proposed for out of town retail development in Rother with comparable rates already proposed elsewhere in the region.

In the light of advice contained in the Council's own evidence base, and the experience of other districts in arriving at their own rates for out of centre retail scheme, we would recommend that the proposed rate in the draft Charging Schedule be reduced to a more realistic level which will not discourage inward investment into the district.

Discretionary Relief for Exceptional Circumstances

The Regulations provide the Charging Authority with discretionary powers to grant relief in exceptional circumstances. We are concerned that the Council does not intend to implement any discretionary exemptions.

By at least safeguarding the option for discretionary relief, the Council will be able to assess major development on a case by case basis. We would strongly recommend that the Council maintains the flexibility in its Charging Schedule to assess whether the provisions contained in a S106 or other agreement might represent a more appropriate mechanism to secure contributions and/or infrastructure than monies raised via CIL. The preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting (known as "double -dipping" ).
In conclusion therefore, we believe that, in accordance with prevailing guidance, the Council needs to pay closer regard to the balance between funding required infrastructure through its CIL and the potential impact that the imposition of the levy might have on economic viability of large scale retail development. As a result, we believe that the proposed rate for large scale retail development in the draft Charging Schedule is too high. Were it to be applied in the way proposed to large retail proposals, it would put development at risk and, in doing so, prevent much-needed economic development coming forward in the Borough and/divert it elsewhere.

I would be grateful if in the light of the above representations, the Council consider appropriate amendments to rates for out of centre retail development contained in the draft Charging Schedule in order to address the issues raised. If you have any queries on the points raised, or would like to discuss the matter further please do not hesitate to contact me.

COMMUNITY INFRASTRUCTURE LEVY - PRELIMINARY DRAFT CHARGING SCHEDULE

We are instructed by Land Securities Ltd to respond to the Rother District Council's preliminary draft charging schedule. Our representations on the consultation document are set out below.

Proposed CIL Rates

The draft charging schedule proposes for all in centre convenience retail for all three centres (Bexhill, Rye and Battle) a flat rate of £100 per sqm. For out of centre retail, the proposed rate for convenience floorspace is £120 per sqm and comparison floorspace is £250 per sqm. There is a nil chargeable rate for in centre comparison goods.

We are concerned that the CIL rates proposed for out of centre retail floorspace are unrealistic, have not been properly substantiated by appropriate evidence, and are inconsistent with rates now being charged or promoted by other local authorities in the region. If the rates for out of centre floorspace were to be adopted at the level proposed, this will discourage not only our client from making its investment but are also likely to deter other potential developments in Rother. We believe that the proposed charges will directly lead to new development, investment and jobs being lost from Rother to other areas nearby with lower, more realistic CIL rates.

In making the representations CgMs, wish to formally request:

(a) Notification of the draft schedule being submitted to the Examiner appointed by the Secretary of State to consider the Draft Charging Schedule;
(b) The right to be heard by the appointed Examiner at the examination;
(c) Notification of the publication of the recommendations of the Examiner; and
(d) Notification of the approval of the adopted Charging Schedule.

Government Advice makes it clear that contributions should not be set at levels which will discourage development; it clearly states:

"Charging authorities wishing to introduce the levy should propose a rate which does not put at serious risk the overall development of their area. They will need to draw the infrastructure planning that underpins the development strategy for their area. Charging authorities will use that evidence to strike an appropriate balance between the desirability of funding infrastructure from the levy and the potential effects of the levy upon economic viability of development across their area."

Rationale for Different Charges for Retail

The Schedule seeks to impose substantially higher rates on retail development at out of centre locations. However, conversely the turnover, rents and indeed, the traffic generation associated with retail stores is not directly proportionate to the size of the retail unit. For example, most retailers on retail parks would have larger proportions of back of house use than the town centre units.

Applying the proposed rate to larger retail park operators as explained above could be prohibitive and significantly affect potential viability.

Level of Charge

It is noteworthy that the level of charge for major retail development contained in the draft Schedule for Rother is not consistent with those levels already adopted and/or being charged for out of retail development elsewhere in the region.

Table 1 summaries charging schedules for large scale retail development in other nearby districts that are being proposed at the time of writing. These districts are in more advanced stages in terms of CIL preparation.

Table 1 Proposed Charging Schedules for Retail Development across the region

Local Authority - Eastbourne, CIL Rate for Retail development (£/sqm) - £80, Date of Adoption/ Charging Commenced - TBC, Stage 2 consultation finished in August 2014.

Local Authority - Wealden, CIL Rate for Retail development (£/sqm) - £20-£100, Date of Adoption/ Charging Commenced - TBC, Stage 2 consultation finished in Feb 2014, Examination to be confirmed.

Local Authority - Lewes, CIL Rate for Retail development (£/sqm) - £75, Date of Adoption/ Charging Commenced - TBC, Examination expected in Autumn 2014, expected approval in late 2014/early 2015.

In light of the above, we have reviewed the Council's evidence which seeks to substantiate the proposed rate. We consider that this evidence, in itself, does not adequately justify what is, for comparison goods development in particular, an exceptionally high rate for out of centre retail development.

The Economic Viability Assessment supporting the proposed DCS for retail warehouse acknowledges that the retail warehouse market has been relatively flat in recent times, in terms of new build the consultants consider that there may potentially be more activity in the future. The figures are based on the assumption that building costs for retail warehouses are relatively low, and generate more value when there is occupier demand. However, there is a lack of information on how this has been calculated. Furthermore, we consider that this does not reflect likely future costs and values. The retail warehouse market has been affected by rising costs and diminishing margins partly affected by the growth in internet retailing. In addition, many Councils, including Rother, require high quality design for new retail development and do not accept standard retail designs, which significantly increase development costs and, necessarily affect profitability. If the nature of the site is constrained, further costs would arise such as highway solutions and ground conditions.

The proposed comparison goods CIL level in the draft Schedule is more than double the convenience figure although Valuation Office figures within the District do not show a material difference in rateable value psm and turnover densities for convenience goods are generally much higher for foodstores than for retail warehouses. For example, turnover psm for Tesco is £11,715 whereas B&Q is £1,433 psm and Pets at Home is £2,156. In most areas, accordingly, the CIL rate for convenience goods is higher than for comparison goods and Rother's figures are inconsistent with that pattern.

Having reviewed the evidence issued in support of the proposed charging rate, we believe that insufficient evidence has been presented to explain the significant differential that exists between rate being proposed for out of town retail development in Rother with comparable rates already proposed elsewhere in the region.

In the light of advice contained in the Council's own evidence base, and the experience of other districts in arriving at their own rates for out of centre retail scheme, we would recommend that the proposed rate in the draft Charging Schedule be reduced to a more realistic level which will not discourage inward investment into the district.

Discretionary Relief for Exceptional Circumstances

The Regulations provide the Charging Authority with discretionary powers to grant relief in exceptional circumstances. We are concerned that the Council does not intend to implement any discretionary exemptions.

By at least safeguarding the option for discretionary relief, the Council will be able to assess major development on a case by case basis. We would strongly recommend that the Council maintains the flexibility in its Charging Schedule to assess whether the provisions contained in a S106 or other agreement might represent a more appropriate mechanism to secure contributions and/or infrastructure than monies raised via CIL. The preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting (known as "double -dipping" ).
In conclusion therefore, we believe that, in accordance with prevailing guidance, the Council needs to pay closer regard to the balance between funding required infrastructure through its CIL and the potential impact that the imposition of the levy might have on economic viability of large scale retail development. As a result, we believe that the proposed rate for large scale retail development in the draft Charging Schedule is too high. Were it to be applied in the way proposed to large retail proposals, it would put development at risk and, in doing so, prevent much-needed economic development coming forward in the Borough and/divert it elsewhere.

I would be grateful if in the light of the above representations, the Council consider appropriate amendments to rates for out of centre retail development contained in the draft Charging Schedule in order to address the issues raised. If you have any queries on the points raised, or would like to discuss the matter further please do not hesitate to contact me.