Rail station-related development and major redevelopment projects having the station at their core have often been automatically placed into the ‘too difficult’ box. Resolving land ownership issues and use priorities has proved a challenge that has left potential unrealised in many places. That is all about to change.
A new shared public and private sector agenda will positively encourage and support the development and third party funding of these key opportunities at and around rail stations. Developers, operators and travelers all stand to gain. Network Rail, TfL, the Passenger Transport Authorities and the DfT all have positive new outlooks to development as new funding streams are sought. Wider impacts are anticipated as smart thinking and ingenuity may now come together bringing a new age of station-led regeneration.
The focus of discussion at this event will be on the ‘bigger picture’ of strategic investment in property and place, and the win-win of partnership building to unlock benefit. Alexander Jan for Arup discussed the issues of seeking funding from a range of sources at a conference held to explore the outcomes of the UCL-led Sintropher regional transport project. ‘When people say “more for less”, what they mean is: can we attract finance from another party in order to build our scheme? This equates to more for less in the sense that can we put less public money into the project, plus changing some of the structures may also have the effect of increasing the efficiency with which the money is spent.’
To find out more about the unlocking the potential for sites and land surrounding rail stations, join us in London for debate and discussion at Railway Stations & Property 2011, on the 24 November 2011
Rail station related development and major redevelopment projects having the station at their core have often been automatically placed into the ‘too difficult’ box. Resolving land ownership issues and use priorities has proved a challenge that has left potential unrealised in many places. That is all about to change.
In terms of transport, says Jan, transport issues are perceived as the main barrier to growth, with around 65 per cent of business leaders indicating that they’re not satisfied with how funding is secured for infrastructure projects. The UK Crossrail project, for example, is using a range of funding components, with core funding (c£15bn) comprising:DfT grant (£5bn); London Business Rate Supplement (£4.1bn); other TfL (£3.2bn); NR RAB) (guaranteed) (£2.3bn); plus additional funding (see image).
Doing more with less: key points
• Regions (in the UK) have suffered disproportionately in the latest recession and are likely to continue to do so
• Structural issues around local government finance core to unlocking resources (more for less ~ funding from elsewhere) – constant change in non – central govt structure
• Need for continued serious debate around which projects to fund – raises the fundamental issue of long term economic viability
• Who will make difficult choices at a regional level about which projects to pursue (abolition of RDAs, arrival of LEPs)
• In the UK many of the funding mechanisms identified have taken many years to arrive on statute and even more to be used
• A need for almost ‘astrological’ alignment of:
• the economic cycle
• planning permission and consents
• political support
• agreement on funding structures
The UK’s recent change in GDP is one of the most dramatic over the last 20 years, and many other economies in North-West Europe have performed at similar levels of retrenchment. Within the context of UK regions, and taking unemployment climate as measure of economic performance, the cities which are outside of the core regions suffer disproportionately – the 10 cities that have had the highest increases in employment rate tend to be in the regions.
UK regions have already experienced higher than average decreases in private sector activity and employment. And, as we know, the public sector in the UK is also in the process of retrenchment. There a disproportionate level of retrenchment for the regions because the sort of activities that they undertake in the public sector are more ‘back office’ and lower value-added, unlike London which has a high public sector exposure but that tends to be more in the higher echelons of government decision-making. London and the South-East has historically outstripped the level of economic growth in what we call the regions. The regions are also more vulnerable to planned reductions in public sector expenditure because of the size of the public sector in their economies and the impact of changes in local authority funding settlements.
There are several potential methods of funding available in the regions to help fund infrastructure (see chart). The big issue here is that a number of these have been talked about for a long time, they’ve been put on the legislative books, but they haven’t been used: for example fare supplements or workplace charging where one pays in order to park a vehicle in the centre of the town – although we may be just about to see its first use in the UK.
‘I think a key tension is the fact that,’ said Jan, ‘politically, a number of these approaches are quite high risk, even though they are attractive from a financial point of view. Similarly, when you’re looking at recycling local assets – local authorities putting in land or other assets into a project – it tends to be very cyclical in terms of the economy. The economy has to be growing in order to unlock the value associated with those types of projects.’
There are also more interesting ways of funding infrastructure, for example borrowing against the future revenue associated
with new buildings/new development. But in the UK context that’s yet untested and, again, economic growth is needed in order to help get started.
We need to be clear as to what the money is for. We need to focus on schemes that will increase employment and tax-raising activity. Local authorities need the ability to raise funds locally in whatever form. And there must be accountability. If this sort of virtuous circle can be achieved, then we might make some real progress in getting projects off the ground.
Debating which project to fund will be challenging in the UK, particularly in the regions, because there are a number of cities competing against each other for projects. This touches a very politically sensitive issue: the economic viability of a number of the UK’s regional cities.
The evolving range of possible means to finance infrastructure is possibly only matched by the change in the local government structure in the UK. This has taken place over the last 50 years or so, and the subsequent lack of stability makes it very difficult for the private sector to trust mature, well-tried funding structures that have been tested and proven durable, and therefore attractive from the private finance point of view. The latest change in the UK is the abolition of the RDAs, which had some transport responsibility, and the arrival of the Local Enterprise Partnerships (LEPs).
Timing is also important. Crossrail was first proposed in the 1970s. In reality it was first talked about in the 1940s in the Greater London development plan. So when we talk about success, a big factor in the equation is the length of time taken for a project to come to fruition. Does this mean that more modest, incremental projects (value-engineered, descoped, less ambitious) are more likely to succeed?
Along with long lead times, many projects seem to require an almost astrological alignment of stars and planets in order for anything to move forward. The UK is a crowded island, with a very articulate electorate in many parts of the country.
To catch the economic ‘wave’, especially when looking for property development contributions, to get planning permissions and consents in order, to secure political support – which needs to override a political cycle, either locally or nationally – and to get consensus on all these funding structures, all means that it takes an extremely long time to get projects into creation mode.In this context, it seems likely that more modest, incremental, value-engineered projects will be viable than larger schemes in the current climate.
This article is based on a presentation given at the Sintropher conference in London, 201i. Sintropher is a five-year cooperation project with the aim of enhancing local and regional transport provision to, from and within five peripheral regions in North-West Europe
