RESPONSE TO ASDA ASDA REPRESENTATIONS REPRESENTATIONS SDCSDCSDCSDC5555 : RESPONSE TO RESPONSE TO ASDA

COMMUNITY INFRASTRUCTURE LEVY

                             CHARGING SCHEDULE
                        INDEPENDENT EXAMINATION




                STATEMENT PREPARED ON BEHALF OF
                    THE LOCAL PLANNING AUTHORITY


SDC5
SDC5: RESPONSE TO ASDA REPRESENTATIONS

            1
STATEMENT PREPARED ON BEHALF OF
                           THE
                           THE LOCAL PLANNING AUTHORITY

                     SDC5
                     SDC5: RESPONSE TO ASDA REPRESENTATIONS

                                      CONTENTS

                                                                               Page

  1      OVERVIEW OF ASDA REPRESENTATIONS                                        3

  2      PROMOTING ECONOMIC DEVELOPMENT                                          4

  3      SECTION 106 AND SECTION 278 PAYMENTS
                                     PAYMENTS FOR COMMERCIAL                     6
         DEVELOPMENT

  4      DISTINCTION
         DISTINCTION BETWEEN DIFFERENT RETAIL USES                               9

  5      USE OF NET SALES AREAS IN DEFINING RETAIL STORES                       11

  6      CONVERSION SCHEMES AND NEW BUILD SCHEMES                               12

  7      LINK BETWEEN INFRASTRUCTURE AND DEVELOPMENT                            13

  8      S106 AGREEMENT FUNDING FOR CIL INFRASTRUCTURE                          14

  9      EXCEPTIONAL CIRCUMSTANCES RELIEF                                       15

  10     INSTALMENTS POLICIES                                                   16

  11     FLAT RATE FOR ALL DEVELOPMENT                                          17

  12     GOVERNMENT’S PROPOSED FURTHER CHANGES TO THE CIL                       18
         REGULATIONS

  13     CORE DOCUMENTS REFERENCED IN THIS STATEMENT                            19



Note:
Note: The abbreviation CD refers to the Examination Core Documents. These documents are
available on the Local Development Framework page at http://www.sevenoaks.gov.uk and at
                                     the Council Offices




                                          2
1.    OVERVIEW OF ASDA REPRESENTATIONS
                       REPRESENTATIONS
1.1   The Council considers the key claims from the ASDA’s representations to be:


      •   The Charging Schedule does not support the aim of promoting economic
          development and employment opportunities;
      •   The viability evidence has not fully taken account of planning costs and residual
          Section 106 and Section 278 payments for commercial developments;
      •   ASDA question whether a distinction between different retail uses has been
          identified.
      •   The Council should not categorise larger scale retail developments by reference to
          their net sales area;
      •   The Viability Study does not acknowledge that the economics of conversion schemes
          are very different to those of new build schemes;
      •   There is no evidence of the link between the charges for a particular development
          and the infrastructure required to support it. The Council's CIL document does not
          contain details of the actual or estimated cost of infrastructure provided to support
          the local plan;
      •   There is a risk that some of the infrastructure projects identified by the Council to be
          funded by CIL will already have been funded by undelivered projects funded by
          existing Section 106 commitments;
      •   The Council should adopt exceptional circumstances relief;
      •   The Council should adopt an instalment policy that takes account of major schemes;
      •   The Council should apply a flat rate across all development; and
      •   The Council should delay the preparation of its Charging Schedule until the results of
          the Government’s consultation on further changes to the regulations are clear.




                                                3
2.    PROMOTING
      PROMOTING ECONOMIC DEVELOPMENT
2.1   As noted in SDC03, the CIL Guidance (CD301) identifies that striking what the Council
      considers to be the appropriate balance between funding infrastructure and
      development viability is its critical test in setting levy rates. The Statutory Guidance is
      clear that ‘charging authorities should show that the proposed rate (or rates) would not
      threaten the delivery of the relevant Plan as a whole’ (CD301, para 29).


2.2   The CIL Viability Assessment (CD107) appraises the viability and scope for
      supermarkets/superstores and retail warehouses to accommodate a CIL charge, on the
      basis of assumptions for rental value, yield, build cost and other development costs
      (C107, section 2).    Section 3.5 of CD107 notes that the development scenarios
      generally showed ‘good viability prospects’ (para 3.5.1) and recommends that CIL could
      be set at £125/m² for these forms of development (para 3.5.3). The Council considers
      that this level of charge represents an appropriate balance between the desirability of
      supermarket and retail warehouse developments contributing to infrastructure
      requirements (as identified in CD110) and their ability to do so. CIL will support the
      delivery of the Council’s Core Strategy by providing additional infrastructure, including
      sustainable transport schemes that will help to support access to new retail
      developments and reduce their impacts on the local highways.


2.3   The Council considers that the CIL Viability Assessment indicates that these forms of
      retail development would remain viable with the proposed CIL charge. It is, therefore,
      not accepted that the Charging Schedule does not support the aim of promoting
      economic development and employment opportunities by restricting the development of
      either use. The Council also does not accept that a ‘massive subsidy’ is being offered to
      other sectors, given that the Viability Assessment has considered a wide range of
      development types (see para 2.1 of SDC1) and recommended CIL charges based on
      their viability in accordance with the Regulations and Guidance. The Council notes that
      ASDA has not put forward its own viability evidence to support its assertion that the
      Council’s CIL proposals will put the viability of supermarket/superstore and retail
      warehouse development at risk.


2.4   Notwithstanding the points above, the additional retail floorspace proposed in the Core
      Strategy (CD102), which the Charging Schedule is being prepared to support, has now
      been permitted. Only policy LO3 of the Core Strategy sets a target for additional retail
                                               4
floorspace. Core Strategy Policy LO3 provides for approximately 4000m² of new
      shopping floorspace (including approximately 1,700m² of convenience and 2,300m² of
      comparison floorspace) to be developed in Sevenoaks town to 2026.              Since that
      requirement was identified, the Council has permitted 4134.5m² of convenience
      floorspace and 3540.5m² of comparison floorspace serving Sevenoaks town
      (Sainsbury’s – SE/11/02087; Waitrose – SE/09/02322; Lidl – SE/12/01279; and
      Marks and Spencer – SE/12/01611). As a result, whilst the Council does not consider
      that the CIL charges will risk the viability of new supermarket and retail warehousing
      developments, the delivery of the Core Strategy is no longer dependent on the delivery
      of additional retail floorspace. The Council considers that it is the deliverability of the
      Core Strategy that is the key concern when preparing a CIL Charging Schedule rather
      than development that may come forward on a more ad hoc basis (CD301, para 29).


2.5   At £125/m², the proposed CIL charging rate for supermarket development (and other
      larger format retailing) is the same as the upper of the two residential charging rates.
      This is considered to be an equitable and appropriate rate supported by the viability
      evidence. The rate represents a modest circa 3% of Gross Development Value (CD107,
      Figure 12 - p75) and as the assessment states, has not been set to the margins of
      viability. The dynamics of development are acknowledged in the study, so that whilst
      particular site assumptions appraisal inputs may well vary, a reasonable overview has
      been made. The Council considers that, in line with the viability work, a higher charging
      rate might have been justified. The assumptions made on key drivers for the appraisals,
      are considered conservative (see para 3.4).




                                               5
3.        SECTION 106 AND SECTION 278 PAYMENTS FOR COMMERCIAL
          DEVELOPMENT
3.1       The Council’s draft Regulation 123 list (CD111) sets out the types of infrastructure that
          CIL will be used to fund and those that may still be sought through s106 agreements.
          This indicates that the majority of infrastructure currently sought from new development
          will be secured through CIL. Of those types of infrastructure that will continue to be
          secured through s106 agreements, site specific access improvements are likely to be
          the most costly. However, the requirement to make such improvements will be highly
          site specific and, therefore, difficult to account for in a strategic viability assessment. As
          noted at 2.6 above, allowance has been made in the viability assessment for significant
          development costs, acknowledging that in practice those will be variable. Furthermore,
          the Council could reasonably expect that the suitability of access would be taken into
          account by a developer in determining the value of the site.


3.2       Appendix A of CD112 sets out the planning obligations secured for infrastructure
          provision / contributions between January 2009 and March 2013. The table below
          provides more information on planning obligations related to retail-only schemes:


     Application   Address       Proposal
                                 Proposal         Decision                      Contribution
     No.
     No.                                          Date
                                                               Total            Contributions for
                                                               Infrastructure
                                                               Contributions
     09/02322      Waitrose      Supermarket      28/01/2010   £60,000          £45,000        Highways –
                   58 – 62,      redevelopment                                                 Pembroke
                   High Street   (1166 sq m of                                                 Road junction
                   Sevenoaks,    additional                                     £5,000         Travel Plan
                   Kent, TN13    floorspace)                                                   Monitoring
                   1JR                                                          £10,000        Air Quality
                                                                                               Contribution
     11/02087      J Sainsbury   Extension to     16/11/2011   £284,500         £12,000        Implementation
                   Plc, Otford   supermarket                                                   Contribution
                   Road,         (2650 sq m
                   Sevenoaks,    gross internal                                 £3,000         Survey
                   KENT,         area)                                                         Contribution
                   TN14 4EG
                                                                                £30,000        Air Quality
                                                                                               Contribution

                                                                                £200,000       Highways
                                                                                               Contribution –
                                                                                               Bat and Ball
                                                                                               junction

                                                                                £2,000         Road Signage
                                                                                               Contribution


                                                       6
£37,500      Bus Service
                                                                                    contribution

  12/01279    Caffyns, 80   Supermarket      05/09/2012   £5,000       Air Quality Monitoring
              London        development                                Equipment
              Road,         (1918 sq m
              Sevenoaks     gross internal
                            area)


3.3   The Council considers that, having reviewed previous schemes, the contributions for
      specific highway improvements are typically for schemes that are not directly related to
      access to the development sites (or indeed other site-specific mitigation) and are
      considered generally to be of a more ‘strategic’ nature, which would warrant the use of
      CIL contributions rather than s.106.        Both air quality contributions are for off-site
      monitoring schemes and an air quality alert system, which can best be secured through
      the pooling of developer contributions and are, therefore, more suitable uses of CIL. It
      can be seen that once the contributions towards these infrastructure schemes have
      been subtracted, the remaining s106 contributions are minimal and are not at a level
      that would meaningfully adjust viability outcomes in the context and scale of the
      influence of other appraisal assumptions.


3.4   Whilst it is acknowledged that some schemes could generate sizeable s.106 obligations
      on a highly variable basis, there are no such schemes relevant to the Core Strategy on
      which the CIL is to be based (see para 2.4). The Council considers that its view of the
      overall strength of the relationship between development values and costs is
      reasonable in informing the proposed rates. Again, the Council considers that the
      Viability Assessment (CD107) takes a ‘cautious’ view of viability, including through:


      •   Assuming 20% profit on Gross Development Value rather than, for example, 15% on
          cost (para 2.8.1);
      •   Assuming BCIS build costs plus 20% allowance for external works (para 2.6.2) and
          5% for contingencies (para 2.6.5);
      •   5.75% purchaser’s costs (para 2.8.1); and
      •   Conservative view on rental yields (para 2.4.5)


      On this basis, a reasonable viability overview has been provided that allows some
      response to site specific factors not specifically taken into account in the viability



                                                 7
appraisals, should that scope be necessary, in any particular scheme instances that
come under consideration in the context of the Core Strategy policies.




                                        8
4.    DISTINCTION BETWEEN DIFFERENT RETAIL USES
4.1   ASDA claim that the viability evidence produced by the Council does not adequately
      address the question of whether the forms of retail development proposed to be
      charged CIL are actually different retail 'uses' or whether the purported differences in
      their viability profiles are in fact a result of the differing locations and sizes of the stores
      in question.


4.2   Paragraph 35 of the statutory CIL Guidance (CD301) states that ‘Regulation 13… allows
      charging authorities to articulate differential rates by reference to different intended
      uses of development provided that the different rates can be justified by a comparative
      assessment of the economic viability of those categories of development’. It is clear
      that the definition of “use” is not tied to the Use Classes Order, or to any other restricted
      context for how to consider and describe development uses.


4.3   Para 41 of the Guidance also suggests that Charging Authorities consider examples of
      how differential rates have been set by other authorities. SDC has considered the
      approach taken in other sound charging schedules and notes that a number (including
      Portsmouth, Wycombe, Huntingdonshire and Plymouth) include differential rates for
      different types of retail (Examiner’s Reports for these Charging Schedules are at CD403,
      CD404, CD405, CD406). In two of these cases, the rates were underpinned by
      application of the same principles and the same consultants’ viability work.


4.4   The Council considers that the evidence from the Viability Assessment (CD107)
      indicates that supermarkets/superstores and retail warehouses will remain viable if
      developers are charged the proposed level of CIL (see section 2 of this statement). CIL
      is one of a range of factors that influence viability, and as can be seen from the gradual
      deterioration in viability outcomes as its rate increases (CD107, Appendix IIb). It is
      certainly not a key driver of viability outcomes.


4.5   The evidence from the Viability Assessment Addendum (CD108 & CD109) indicates that
      there is doubt that other forms of retail development envisaged by the Core Strategy
      (CD102) and ADMP (CD104) would be viable with the same level of charge. It indicates
      that town centre comparison goods stores (which, in contrast, are considered to be
      important components of Core Strategy policies – see LO5) would not be viable with any
      level of CIL charge at the current time. As a result all other forms of retail development
                                                 9
have been ‘nil-rated’, aligned to avoid potential risk to the delivery of these plan-
      relevant development types that are considered to show much weaker viability
      prospects.    CD112 (para 4.10) sets out the Council’s reasoning behind this and
      specifically notes that this is to ensure that a competitive advantage is not given to
      small comparison goods stores over small convenience goods stores, which the Viability
      Assessment found could still be viable with a lower CIL charge (CD107, para 3.12.1).


4.6   The CIL Charging Schedule includes definitions of supermarkets/superstores and retail
      warehouses to enable a judgement to be made as to whether CIL is chargeable (see
      section 5).




                                             10
5.    USE OF NET SALES AREAS IN DEFINING RETAIL STORES
5.1   The proposed Charging Schedule includes definitions of supermarkets/superstores and
      retail warehouses, which include floorspace thresholds, to enable a judgement to be
      made as to whether CIL is chargeable. The floorspace threshold is based on a local
      assessment of existing stores (set out in appendices C and D of CD112) but constitutes
      only one component of the definitions of a supermarket/superstore and retail
      warehouses. The Council expects that proposals that clearly meet the remainder of the
      definition will generally be well in excess of these thresholds. It is considered that net
      sales area is appropriate for this definition as it relates to the primary profit generating
      part of a supermarket/superstore or retail warehouse development. Whilst different
      local authorities have taken different approaches to the floorspace figure included in
      definitions of supermarkets/superstores and retail warehouses in CIL Charging
      Schedules, the Council notes that Wycombe’s adopted Charging Schedule applies a
      figure based on net sales space (CD407).




                                               11
6.    CONVERSION SCHEMES AND NEW BUILD SCHEMES
6.1   The Council’s CIL Viability Assessment (CD107) is based on the land supply that the
      Council expects to see coming forward, as noted in section 2 of SDC2. As also noted in
      that statement and section 3 of this statement, the CIL Viability Assessment takes a
      suitably ‘cautious’ approach to assessing viability through the assumptions made.
      Whilst the Viability Assessment notes that there will be circumstances where
      development will not be viable (which, as is acknowledged through the principles of CIL,
      may be unavoidable), these factors provide a reasonable ‘cushion’ to allow developers
      to overcome some issues that may arise on previously developed sites in the event that
      there has not been the usual opportunity to reflect those through an appropriate land
      price negotiation.


6.2   The Viability Assessment does not take into account any deductions in CIL charges that
      may result from the replacement or redevelopment of existing buildings on development
      sites, in accordance with regulation 40 of the CIL Regulations 2010 (as amended). The
      impact of this will vary on a site by site basis but could reduce the CIL payments
      required significantly and aid the viability of developments on previously developed
      sites. The Government’s proposal to allow floorspace from all ‘non-abandoned’
      buildings to be offset from floorspace to be developed may further reduce CIL payments
      from previously developed sites (CD302, para 62-66).


6.3   Notwithstanding the fact that the Council does not accept that the imposition of the
      proposed CIL charges will render conversions to supermarkets, superstores or retail
      warehouses unviable, the delivery of the Core Strategy is not dependent upon these
      types of schemes (see section 2 of this statement).




                                              12
7.    LINK BETWEEN INFRASTRUCTURE AND DEVELOPMENT

7.1   The statutory CIL Guidance (CD301) notes that, in setting levy rates, charging
      authorities must strike a balance between the funding of infrastructure and the effects
      on viability (para 7). Paragraphs 12 to 19 relate to the infrastructure planning work that
      should be undertaken to support a CIL Charging Schedule, which the Council considers
      it has complied with. The Council does not understand there to be any requirement to
      demonstrate how the CIL receipts secured from a particular development will be used to
      fund infrastructure related to it. The Council’s view is that the legislation and guidance
      requires that the determining factor of the CIL rate for a ‘use’ is its viability (CD301,
      para 34). As set out in the previous sections, the Council considers that the Viability
      Assessment supports the proposed charges for supermarkets/superstores and retail
      warehouses.




                                                13
8.    S106 AGREEMENT FUNDING FOR CIL INFRASTRUCTURE
8.1   As noted in the previous section, paragraphs 12 to 19 of the statutory CIL Guidance
      (CD301) relate to the infrastructure planning work that should be undertaken to support
      a CIL Charging Schedule, which the Council considers it has complied with. Section 2
      and annex 1 of the Council’s submitted ‘Consultation Statement’ (CD106) are clear that
      infrastructure providers were specifically asked to consider currently committed funding
      when they were asked to identify projects required to support development in the
      District, consistent with para 12 of CD301.


8.2   The Council’s CIL Infrastructure Plan (CD110) notes that the Council has sought to
      estimate the likely cost of providing the infrastructure required post-2014, when the CIL
      Charging Schedule is expected to be adopted (para 4.5). This allows for the fact that
      some funding towards infrastructure projects may be secured through s106
      agreements in the intervening period. The Council also notes that the CD112 (para 5.1-
      5.2) identifies a significantly larger infrastructure funding gap than the anticipated
      receipts. Therefore, the Council does not consider it realistic to assume that
      contributions secured through s106 agreements will close the funding gap prior to the
      introduction of CIL.




                                               14
9.    EXCEPTIONAL CIRCUMSTANCES RELIEF
9.1   Charging Authorities are able to prepare and publish exceptional circumstances relief
      policies, at their discretion, in accordance with Regulation 55 of the CIL Regulations
      2010 (as amended). Policies on exceptional circumstances relief do not need to be
      tested through a CIL examination. CD112 (paras 6.5 – 6.7) indicates that the Council
      will keep this issue under review. However, it also notes that the Council currently
      considers that there will be little benefit in introducing an exceptional circumstances
      relief policy due to the stringent regulations regarding its use, including the need to
      ensure compliance with EU State Aid Regulations.




                                               15
10.
10.    INSTALMENTS
       INSTALMENTS POLICIES
10.1 Charging Authorities are able to prepare and publish instalment policies, at their
       discretion, in accordance with Regulation 69B of the CIL Regulations 2010 (as
       amended). Instalments policies do not need to be tested through a CIL examination.
       CD112 (paras 6.8 – 6.10) indicates that the Council will keep this issue under review
       and that it currently considers that there will be benefit in introducing an instalment
       policy.


10.2 The Council recognises that instalments policies could help to maintain the viability of
       development, especially in respect of larger development schemes. The Council’s
       Viability Assessment (CD107, paras 3.12.8 – 3.12.9) does not allow for CIL to be paid in
       instalments in the viability appraisals and, therefore, any instalments policy could help
       to make marginal schemes viable.




                                                16
11.
11.    FLAT RATE FOR ALL DEVELOPMENT
11.1 Regulation 13 of the CIL regulations allows charging authorities, at their discretion, to
       introduce differential charging rates for different uses. The Council’s Viability
       Assessment finds that a number of the types of development expected to come forward
       in the District would not be viable with a CIL charge applied (sections 3.6, 3.7, 3.8, 3.9
       and 3.10 of CD107 provide further information). The Council’s proposal to ‘nil-rate’
       these forms of development whilst applying charges to residential and some retail
       developments is considered to balance the Council’s need to ensure that development
       planned for in the Core Strategy remains viable, whilst maximising the opportunities to
       fund necessary infrastructure from CIL. The Council considers that applying a flat rate
       charge for all new development would be contrary to the CIL Regulations, in the light of
       the findings of the Viability Assessment.




                                                17
12.
12.    GOVERNMENT’
       GOVERNMENT’S PROPOSED FURTHER CHANGES TO THE CIL REGULATIONS
12.1 The Council does not consider it necessary to delay the preparation of its CIL Charging
       Schedule until the Government has proposed further changes to the CIL Regulations
       following its recent consultation (CD302). CD302 does not suggest that local
       authorities take this approach.


12.2 The vast majority of the proposed potential changes relate to matters that do not affect
       the charge setting process. Those proposed changes that do, such as the requirement
       to submit a Reg. 123 list at examination stage, would ensure that the legislation is
       consistent with the Guidance (CD301). The Council considers that it has prepared its
       charging schedule in accordance with the Guidance and a draft Reg. 123 list (CD111)
       has been submitted.




                                               18
13.
13.   CORE DOCUMENTS REFERENCED IN THIS STATEMENT

      CD102       LDF Core Strategy
      CD104       Allocations and Development Management Plan
      CD106       CIL Consultation Statement
      CD107       CIL Viability Assessment including Appendices
      CD108       CIL Viability Assessment Addendum
      CD109       CIL Viability Assessment Addendum Appendices
      CD110       CIL Infrastructure Plan Submission Version
      CD111       Draft Reg. 123 List
      CD112       Summary of Evidence and Proposals
      CD301       Community Infrastructure Levy Guidance (CLG, April 2013)
      CD302       Consultation on CIL further reforms (CLG, April 2013)
      SDC1        SDC Response to GVA representations
      SDC2        SDC Response to Berkeley Homes
      SDC3        SDC Response to CLA Representations




                                        19
You can also read
Next part ... Cancel