Station Area Redevelopment On Hold as Infrastructure Payments Renegotiated


Sunday, February 21st, 2010. 3:29am


Cambridge Station Area Plan

City Council Planners “Outwitted and Outflanked” by Station Area Developers Warns Ex Councillor.

On the 18th of February 2010 Cambridge City Council’s Director of Planning, Simon Payne, was summoned to appear in-front of the East Area Committee. Councillors and members of the public wanted to grill the senior officer over payments the company behind the CB1, station area, development will have to pay to mitigate the effect of what is to be built.

In November 2009 the developer sought to alter the agreement for making their contributions to the city’s infrastructure. Primarily they wanted “re-phase” the payments allowing them to build 1062 highly profitable student rooms without making an originally proposed £261,093 contribution to the Southern Corridor Area Transport Plan or £926,604 contribution to the guided bus. These payments were to be directly linked with the student accommodation, but the developers were seeking to pay at a different point.

The current position is that the agreement is unsigned and without it the development cannot go ahead. A deadline set by the planning committee for signing the agreement has expired. It emerged at the East Area committee that the deadline had in-fact expired a number of times but the Liberal Democrat chair of the city council’s planning committee Cllr Baker, and the opposition (Labour) planning spokesman Kevin Blencowe have been granting repeated extensions. At the moment the latest extended deadline has expired and Cllr Blencowe announced at the East Area committee that he would not authorise the new extension to the 31st March which was being sought, forcing the discussions on the agreement back to the City Council’s main planning committee.

Cllr Blencowe’s statement threw the council’s director of planning, and senior planning officer Sarah Dyer into confusion; neither could confirm that Cllr Blencowe could actually do what he’d done. Officer Sarah Dyer reported Cllr Baker, the chair of planning had already approved yet another extension to the deadline and appeared unsure what, if any, Cllr Blencowe’s withdrawal of support would have. I think its quite clear that if the planning committee delegated the decisions on the deadlines to the chair and spokesperson then Cllr Blencowe clearly does hold a veto.

I felt that while councillors succeeded in getting their planning director to appear in front of them at the area committee, with a fair few members of the public present, they let him off very lightly. Mr Payne wasn’t forced to answer the key question of if renegotiating the arrangements for paying for infrastructure had resulted in an increased risk that the developer won’t actually make these payments and Cambridge will lose out, and have a huge amount of new student housing built which the station area of the city can’t cope with. The key thing we still don’t know is if the council has assessed the level of the risk that these sums will not be paid and how the re-phasing has changed any risk assessment. It is looking likely that such considerations simply didn’t cross the minds of the officers and councillors involved.

At the previous East Area committee in December 2009 councillors had called for the S.106 agreement to be reviewed in the light of the fact the developer Ashwell Property Group plc, had gone into bankruptcy and its directors had reformed a new debt-free company, Brookgate Limited, which had bought the profitable assets back. Both members of the public and councillors expressed concern at this scurrilous, albeit legal, behaviour.

At the February 2010 East Area committee meeting the City’s Director of Planning Mr Payne addressed the suggestion that the directors dumping their old company and its debts ought result in the s.106 agreement being looked at again in a written statement saying:

The recent acquisition of the majority of assets of Ashwell Property Group plc, including CB1 land, by Brookgate Limited does not alter the position with respect to the Section 106 Agreement. Section 106 Agreements are legally binding obligations on land and continue in force even if landownership changes. In any event the Ashwell negotiating team remain in place in the continuing discussions with Brookgate Limited and the City Council has been advised that Brookgate are prepared to sign the S106 Agreement in accordance with the package previously reported to Planning Committee

Neither the developer not the council officers can have it both ways; they can’t argue for S.106 payments to be reduced or rephased because of the developer’s financial situation but say its unreasonable to revisit those decisions when the developer’s financial position changes. I agree with the principle Mr Payne is now outlining; what shouldn’t happen though in the first place is negotiations with developers to reduce or rephase payments when they plead financial hardship. If a developer can’t afford to mitigate the effects of their development then they can’t afford to build it. If what’s needed can’t be afforded then we must say no to the development and either build something else which the city’s infrastructure can cope with or wait until it does make economic sense for the project to go ahead.

Member of the public, Ex Councillor Frank Gawthrop, led the questioning of the councils action at both the February 2010, and December 2009 East Area committees. It was through Mr Gawthrop drawing councillors’ attention to the potential problems in the open forum of the December East Area Committee that the item was on the February agenda.

In December Mr Gawthrop claimed that the attempts to renegotiate the S.106 agreement had resulted from a change of ownership of the site. He explained that student housing is highly profitable, offering investors a 10% return on their money so developers wanted to build it. He said Ashwell’s accounts, filed nine months late, showed a deficit of £118m owed to HBOS. As it was tax-payer funded banks essentially funding the scheme now Mr Gawthrop claimed that gave extra impetus to the need to obtain public benefits from the scheme.

In December Cllr Howell described S.106 as a developers tax and a glorified pyramid scheme. This resulted in a spat between Conservative Cllr Howell writing on his blog and Liberal Democrat Nichola Harrison writing on hers. Cllr Howell called the state of cycle parking at Cambridge Station a “national disgrace” and stressed the importance of getting transport improvements in place. He was sceptical of council officers saying “everything’s fine” and called for “urgent steps to be taken now”.

Cllr Harrison said s.106 is not a development tax, yet that is exactly how her, and her party see it, promote it, and use it. Harrison claimed the charge really is about mitigation, but what Liberal Democrats do is look to see what local residents can “get out of” a new development. Despite Cllr Harrison’s interest in the station area she said she was surprised by the points which Mr Gawthrop had brought to the East Area committee’s attention. Cllr Harrison supported being as nice to the developers as possible; saying it was fantastic that we now have a developer with the funds and who are prepared to continue with the development; she said the proposed development was “the best chance we’ve got for comprehensive development of the area”. Cllr Harrison fairly explicitly said her primary interest was Tenison Road / Devonshire road traffic calming; from her point of view it appeared as long as funding for that was forthcoming all was fine.

In December Green councillor Sedgwick-Jell called for reconsideration of the S.106 rephasing, saying it was better to wait than get second best. Cllr Walker said the councils should take a firm approach and call the S.106 agreement back as there was she said “a danger of losing things we wanted”.

One of Mr Gawthop’s main points which he made both in December and again in February, was that the pre-pack administration which has removed the debts from the development company yet allowed its directors to carry on running the scheme has resulted in the publicly owned banks losing money. As well as the rephased elements of the payments, Mr Gawthrop spoke of elements of infrastructure the developers are not now paying for but public funds are picking up – the Cycle Park at £750,000 and the bus interchange at £1,500,000.

Mr Gawthrop told the February meeting the council has rejected his freedom of information request via which he is seeking a report which the council had employed consultants to carry out assessing the financial status of the developer. He reported that this was now under appeal within the council; council’s planning director said he felt Mr Gawthrop’s request had been handled correctly.

With Mr Payne the Director of Planning having been brought in-front of him, Mr Gawthrop was able to put his core suggestion that council officers had been “outflanked and outwitted by the developer” directly to the officer in charge. Mr Payne did not agree with Mr Gawthrop’s summary of the what had happened. Speaking to me after the meeting Mr Gawthrop suggested that if necessary he would complain about the City Council’s behaviour to the local government ombudsman, on the grounds that they had not properly protected the interests of city residents.

Mr Payne said that Government circular 0505 highly restricted what S.106 payments can be used for, he said they were not a bribe, and were not to be used to “get something for the community out of a development” they had to be only to mitigate the impact of a development. He said there was a “need to form a view of what makes development acceptable”.

Mr Payne said it was not 100% certain that the s.106 payments would be obtained; but did not quantify that risk. Cllr Howell gently prodded the officer to go further, and asked what had been done to mitigate risks, he wanted to know if a new viability study on the newly formed company had been carried out, he elicited a response from the officer admitting: “no viability study has been carried out”.

Cllr Bradnack was scathing about the performance of the planning committee (commendably aiming had councillors rather than officers), he said they had failed to do their job and had failed to ensure the area gets the mitigation it needs. He called for the situation to be rectified.

Clearly worried that the new proposed multi-storey car-park and cycle parking at the station site wouldn’t be happening any time soon councillors appeared to be asking their officers to see what could be done in the mean-time with respect to improving the existing cycle parking; perhaps requiring some improvements to the existing situation rather than waiting for something which might be a very long way off.

Cllr Nichola Harrison did not attend the February East Area Committee, despite having taken a strong stance while campaigning that traffic calming on Tenison Road ought be paid for out of the CB1 developer’s contributions.

My View

S.106 agreements are taxes; they affect developments of all sorts of sizes from small businesses wanting to expand to large developments of new homes. In respect of new housing, they can make schemes uneconomic to deliver and exacerbate the lack of housing in the city. They also have the effect of pushing property prices up as they make development more expensive.

I think it is right that if a planning application would otherwise be refused, because it would put too much strain on local infrastructure, then the developer ought be able to pay for improvements enable that development to go ahead. In some cases though it will be in the public interest to help developers with public money and attract private investment to an area. In Cambridge we are seeing development of such a scale that the infrastructure improvements required along with it are much greater than is, or can be, funded by taxes on the development alone.

A holistic view of each development, what benefits it will bring to an area and what impacts it will have has to be taken and agreements on who pays for what come to democratically and at an appropriate level of government. Where an area, like Cambridge, is destined for substantial growth nationally funded infrastructure investment (and in Cambridge’s case it would genuinely be a national investment not merely spending) has to follow that growth. Where there is a planning gain to be shared, which is primarily a factor with green field sites, I would like it not to all go into the pockets of landowners and developers but mechanism used to ensure shares are also used to keep house prices affordable and to fund infrastructure.

I strongly oppose recent Liberal Democrat proposals to expand the range of ways in which funds raised by S.106 payments can be spent to include items completely unrelated to the development on which the charge is levied. The Liberal Democrats want to make the S.106 even more of a development tax than it already is; and disconnect it from what’s really needed – appropriate investment in infrastructure associated with new housing development; the Parliamentary debate is to continue on Friday 26 February.

Raw Document:

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5 comments/updates on “Station Area Redevelopment On Hold as Infrastructure Payments Renegotiated

  1. "Taxes"

    Whether you call them taxes or something else, without them (indeed with them) we the community pay for increased developers profits in the impact the developments cause. The schools and transport infrastructure that is needed to support a sizeable development has to be funded from somewhere and if it isn’t provided as part of the development, then people end up paying it through other “taxes” or paying for it individually. Bu that means I, as a local taxpayer, have to pay for someone else’s new school while the developer makes more profit. I would be subsidising the developer’s profit – naturally they want to build only the profitable bits and leave someone else to pay for the necessary and contingent but unprofitable other parts of a community. There’s no point in building more houses if you can’t build the rest of the stuff that is needed to make a proper community.

  2. Richard Taylor Article author

    David,

    I agree that we shouldn’t be building new houses without everything else that’s needed to support them.

    As for developers only wanting to build profitable elements of schemes; that’s true, and that’s why we need strong local councillors backed up by planning laws which enable things like timetables for development to be set and enforced.

    You are referring to direct impacts of development on schools and transport infrastructure where it is perfectly reasonable to levy a charge on developers; however the Liberal Democrat proposals are to drop the connection between a development and its effects and start taxing developers to provide other things a local area might want; they already treat it as a source of free money, without consequences, and don’t properly consider the impacts on property prices, the cost of living, time-scales for development and if development will go ahead or not.

    I disagree though that not charging the full costs of providing infrastructure to developers amounts directly to subsidising developer’s profits. S.106 agreements are typically very local schemes and don’t address at all strategic transport improvements they don’t significantly fund railways, trunk roads, or even guided bus ways. Where we nationally, for example, say we want to support what’s happening in Cambridge with more housing, or when regional decisions are made to increase housing density in an area then those decisions are being made in the interests of society as a whole and it is right in my view that a contribution is funded out of general taxation. It’s entirely right that the costs of new schools are not solely funded by those looking for somewhere to live, such a strategy would massively exacerbate our housing problems, and is therefore not the direction I think we ought to take.

    As I have said there are differences between a city centre scheme where land already has a high value compared to green field sites, in the latter case arrangements to ensure the planning gain are shared are crucial.

    Much of this is already stated in the “My View” section of the above article; but I hope this has provided additional clarification.

  3. Martin

    “S.106 agreements are typically very local schemes and don’t address at all strategic transport improvements”

    That’s not correct in Cambridge (at least, as I’ve always understood it). S106 moneys accrue to area-based pots. I think there are whole formulae which describe the value for different impacts.

    Area-based scheme allocations are much more sensible in my view, because if S106 payments were limited to very localised streets, then a developer could easily argue against them, but the wider impacts on an area are undoubtedly caused in many cases.

    I agree though that they don’t affect things at a city level.

  4. Richard Taylor Article author

    I mentioned in the article a contribution from the CB1 scheme to the Southern Corridor Area Transport Plan (an £8.4m collection of projects).

    My point is, as you’ve agreed, S.106 contributions do not address infrastructure requirements at a strategic, city wide / “greater Cambridge” scale.

    They’re not on the scale of the £500,000,000 amount central government would have been willing to invest in the city had we submitted to a congestion charge experiment. It’s not the kind of money needed to sort out the A14, and it’s certainly nothing like what’s needed for railway works.

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