viability rate setting

Community Infrastructure Levy

Rate Setting

July 2014

Context

The Funding Pie

The levy cannot be expected to pay for all of the infrastructure required:

• 5-10%

• Consider CIL as just one small part of a more complex blend of

funding.

Local Government

Grants

CIL

s106

Business Rate Retention

Capital reciepts

Borrowing

Regional Growth Fund

Value

The proportional impact of CIL on

development viability

1

6

11

16

21

26

31

36

£10/ sq m variance in CIL rate 10% variance in build costs 10% variance in sales values

Preparatory work

Getting started

Developing a

Working Hypothesis

What might the

schedule of rates

look like in your

area?

Charging

Authority:_________________________

Development

Type/ scale

Area 1

_______________

Area 2

_______________

Area 3

_______________

Area 4

_______________

Type 1 £ £ £ £

Type 2£ £ £ £

Type 3

£ £ £ £

Type 1, Scale A £ £ £ £

£ £ £ £

£ £ £ £

Simplicity v Complexity

Simplicity

• single rate (?)

• requires minimal evidence

• need to set near the lowest

value use / area (an

opportunity cost?)

Complexity

• differential rate (probably)

optimises income for

infrastructure

• “Progressive”: the most

profitable developments pay

more

• too complex may be off-

putting and awkward to

operate

• too complex likely to require

greater justification through

evidence.

Differential vs Single Rate

Use / Area A Use / Area B Use / Area C

CIL

Viability

levels

Differential Rate 2

income (£/time)

Single Rate

income (£/time)

Differential Rate 1

income (£/time)

Workshop

Format and considerations

• Hosted by project sponsor

• With or without members depending on level of knowledge

• Viability advisor in attendance

• CIL income projection model linked to charging schedule

• A buffer of around 25% below maximum CIL rates

• How do changes in CIL rates effect income

CIL Income Projections

Maximum CIL Rates

Summary

Summary

• Direct the viability work using your own local knowledge.

• You are required to involve developers prior to the

publication of draft rates

• Use a rate setting workshop that brings together viability

and projected income to reach an optimal solution

Questions

www.CILknowledge.com