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as COSLA noted


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as COSLA noted

  1. 1. ITEM 4 Regional Transport Partnerships Chairs Meeting Perth 9 September 2009 ITEM 4 : Alternative Funding Workshop Summary This paper provides an update on the stage one officer level workshop on alternative funding for transport in Scotland that took place on 28th January 2009. The stage one report was considered by the RTP/COSLA Joint Transport Strategy Group on 20th February where further detail was requested. Since then a further meeting of the officer level working group has taken place on 1st August 2009.including a finance director representing the interests of COSLA, a Scottish Government representative and an RTP representative and further work has been done on the options presented in the stage one report. This report details the outcome of that further work. Recommendation The members are asked to note the contents of this report and to consider its use as background for forthcoming discussions with COSLA and the Scottish Government. Background The joint RTP chairs considered reports in June, August and December 2008 on a proposal to hold a seminar on alternative funding sources for transport in Scotland. It was agreed that there would be a two stage process with stage one being at officer level leading to recommendations to the joint chairs before stage two which would be a political level meeting involving RTP Chairs, COSLA and the Scottish Government. Representatives of RTPs, COSLA and Scottish Government met on 28th January at the offices of SEStran to discuss ways of potentially attracting additional funding to transport in Scotland. The workshop took the form of a Chatham House rules event with no views expressed being attributable to individuals. The stage one report was considered by the RTP Chairs/COSLA joint Transport Strategy Group on 20th February when further detail was requested. Since then a further meeting of the officer level working group has taken place on 1st August 2009.including a finance director representing the interests of COSLA, a Scottish Government representative and a RTP representative and further work has been done on the options presented in the stage one report. This report details the outcome of that further work.
  2. 2. Output from the Workshop and further work The participants recognised that funding mechanisms for transport nested within a wider perspective of funding of infrastructure and services on a wide range of fronts both national and local. It was also recognised that discussions on funding mechanisms that could be applied to a range of services were likely ongoing in a number of forums. Consequently there was a feeling that the workshop should focus on what could be achieved within the transport sector generally within current constraints. Consequently issues such as land acquisition tax, development tax, roof tax, business improvement districts and municipal bonds were not discussed. The areas that were discussed along with suggested actions are as below. Single Outcome Agreements Within the context of the Local Government Concordat, it is recognised that Single Outcome Agreements, which from this year onwards are agreements with Community Planning Partnerships, are the mechanism for active involvement of RTPs with their constituent authorities and other agencies. The Capital Grant previously allocated to RTPs is now allocated to Councils. Securing funding for regional priorities now requires to be justified by their contribution to SOAs and the delivery of local and national outcomes. Consequently it is critical that the contribution the RTPs and RTSs make within the framework of SOAs is clearly identified by linkage to relevant outcomes within the single outcome agreements and their programmes of intervention. The RTP experience of engagement within the first round of SOAs was variable but engagement this year has been better with the move towards the SOAs being on behalf of the CPPs, and all the RTPs are now actively engaged throughout their regions in the SOA process. This has been facilitated by correspondence from both Scottish Government and COSLA reinforcing the role of RTPs in the process. The importance of transport, both local and regional, as an essential enabler in the achievement of many of the SOA outcomes needs to be continually emphasised. As agreed by the JTSG on 20th February, RTPs also need to be included in future discussions with Community Planning agencies on further development of the SOA framework and associated Indicators, through the Improvement Service’s “High Level Group” on SOAs. Action: RTPs need to continue to actively engage in the SOA process and emphasise the importance of local and regional transport in achieving the SOA outcomes. RTPs should engage with the Improvement Service’s “High Level Group” on SOAs on further development of the SOA framework. Involvement with the enterprise sector There are a number of examples in Scotland of major urban regeneration companies that are wholly or partly funded by Scottish Government through Scottish Enterprise. They are charged with encouraging urban regeneration and levering in additional funds from sources outwith government in order to achieve their objectives. Examples include: • Irvine Bay (Ayrshire)- • Riverside Inverclyde (Inverclyde) - • Clyde Gateway (Glasgow / South Lanarkshire)
  3. 3. • Clydebank Rebuilt (West Dunbartonshire) - • Raploch (Stirling) - • Craigmillar Parc(Edinbrugh) - • Dundee Waterfront, • Ravenscraig and • Waterfront Edinburgh. It is important for RTPs to engage with these organisations within their own area to make sure that the necessary transport infrastructure is considered adequately as the regeneration proposals develop. It is recognised that local authorities are already engaging with these organisations but the input of RTPs should focus on regional rather than local needs. In addition, the economic development objectives of the wider enterprise sector as represented by Scottish Enterprise nationally and regionally are often dependent on adequate transport facilities. RTPs should actively engage with Scottish Enterprise to ensure that regional transport priorities are adequately considered in the development and implementation of major economic development initiatives. The statutory nature of the Regional Transport Strategies and the “Key Agency” status of RTPs in the development of Strategic Development Plans and Local Development Plans will assist with this process. Actions: RTPs should engage actively with urban regeneration companies. RTPs should actively engage with Enterprise Companies. Scottish Futures Trust The Scottish Futures Trust has now been established as a body separate from the Scottish Government. While progress is being made in establishing a procurement centre of excellence, it appears that The SFT has changed its emphasis away from being a delivery partner to a facilitation partner. This means that there isn’t the same level of anticipated direct funding coming from the SFT, instead it will enable or facilitate projects through procurement frameworks aimed at establishing private sector partners who can be commissioned by public sector bodies to deliver actual work. This can be seen in practice through the ‘hub’ initiative. For example the North Territory hub is tendering for a private sector partner who is capable of delivering all aspects of project work across the whole of the North Territory in Scotland. Public Sector organisations will fund the work either through capital or revenue budgets, and they will benefit from an improved and quicker procurement process plus enjoy better pricing arising from economies of scale. Action: Contact the Scottish Futures Trust for direct discussions to establish the prospects for funding transport.
  4. 4. Prudential Borrowing Scottish Government does not have borrowing powers although the recent Calman Commission report recommends that Scottish Government should have in the future. On the other hand both local and regional government have prudential borrowing powers whereby they can borrow for capital projects from the Public Works Loan Board European Investment Bank and other market providers, provided it can be demonstrated that the borrowing is affordable, prudent and sustainable within revenue budgets. Borrowing is generally funded through use of earmarked savings, identified income streams, use of general revenue or a combination of these. All borrowing is measured by HM Treasury against national borrowing limits. Should the scale of total local/regional authority borrowing become excessive in comparison to HM Treasury limits protocols have been developed between Scottish local government, through COSLA, to enable a limit to be placed on such borrowing. This has not yet happened to date. The potential is therefore there for local/regional authorities to make use of prudential borrowing to achieve their own transport project delivery making use of general revenue support, savings elsewhere or identified revenue streams. In addition, the potential appears to be there to assist Scottish Government in the delivery of projects either identified as national within the STPR or agreed by Government as being of regional/national importance for other reasons, through the use of prudential borrowing supported by general revenue grant rather than project specific borrowing support. This would require the asset to be owned by the local/regional body and the scale of the borrowing not being sufficient to trigger the Treasury’s ability to apply a cap to local/regional borrowing. While Treasury has the power to cap local/regional borrowing should the proposed level be considered excessive, as outlined above this has not happened to date since the introduction of the prudential borrowing regime. However, in the current economic climate this should be considered as a real risk and COSLA has agreed a pro forma with Government officials in case limits are imposed. In the event of a number of local authorities along with an RTP wishing to borrow capital to invest in a joint venture company to develop infrastructure, the asset would then be owned by the JV. As there is no asset ownership, local authorities/RTP’s cannot use the infrastructure owned by a JV as security against borrowing. However, local authorities can carry shareholding in JV’s on their balance sheet as an asset. The risk to the authority lies in the value of the JV company and the potential for the value of the shareholding to be diminished during an economic downturn, with the consequent need to write-down the value of the shareholding. An alternative and potentially simpler approach would be a joint agreement between the RTP and appropriate Local Authorities to jointly develop the infrastructure with one body acting as the lead authority under a joint funding arrangement. If an RTP borrows for capital investment within its area but the asset is only located within one or a few of its LA areas the question arises as to whether the other authorities within the RTP would be prepared to share the borrowing risk. The reality of this proposal would be that the RTP could only borrow against the future grant payment stream from the constituent council. The business case for such borrowing would make this clear, prior to the RTP undertaking such investment. This could potentially be overcome by separate one to one
  5. 5. agreements with the authorities within whose area the asset is located, or through joint agreements where Capital investment is Revenue funded on the basis of cross-boundary benefit and agreement with two or more Councils. In the context of a RTP embarking on borrowing the role of Treasury Management will become more significant. Since all the RTPs with the exception of SPT currently take financial services from a partner local authority it is envisaged that the role of treasury management would be added to that service rather than establish a separate centre of expertise within the RTP. Scottish Government’s position is that support for prudential borrowing should be from the partner local authorities but given the wider implications they are happy to continue discussions. Actions: Open detailed discussions on the use of prudential borrowing to assist with delivery of elements of the STPR and with local/regional projects. Seek legal advice on the use of prudential borrowing to fund joint ventures. Open discussions with partner authorities on the use of prudential borrowing. Prudential Borrowing: A Case Study – Aberdeenshire Council Aberdeenshire Council is developing a model whereby it can provide an up front funding stream of capital in order to kick start infrastructure projects. The concept fits well with within the Prudential Borrowing Framework and at the same time utilises the Shared Services agenda by potentially bringing together private partners and other public organisations. For example, if the Council has a need for a new or replacement secondary school brought about by a forecast increase in population, the connected infrastructure requirements for this project could include roads, junctions, roundabouts, health, water, telecoms, private housing, social housing, electricity, gas, leisure and planning gain to mention a few. In order to bring together the timing of all of these infrastructure elements a partnership agreement can be created, led by the Council, whereby a structured plan is agreed to ensure the correct order, timing, scale, funding package and actual delivery of the project can be secured. Clearly this is not straightforward, but the experience of all partners, together with the Scottish Governments initiative, the hub (under the Scottish Futures Trust) will make this possible if a proper business case can be developed and could negate the need to set up a separate joint venture arrangement. Precept At present, RTP’s requisition contributions from constituent councils, in order to meet operating costs. Although the process of requisition does not legally require agreement to be reached with councils as to the level of requisition, in practical terms the level is generally reached by agreement. While it is possible that requisition could be extended to cover otherwise unmet costs related to the implementation of the RTS, such requisition would need to take account of the partner authorities’ ability to fund the level of such requisition. To date this mechanism has not been used by other than model 3 RTPs responsible for direct
  6. 6. service delivery and, should it be extended to other RTPs, fareness would demand that it would require the agreement of the partner local authorities In Scotland there is only one body separately identified when collecting the council tax, that being Scottish Water. In England and Wales that is not the case with bodies like Police, Fire and Parish Councils being subject to separately identified precepts. Council Tax is collected by the district-level council. Authorities such as the GLA, parish councils, county councils, passenger transport authorities, fire authorities, police authorities, and national parks authorities can make a precept. This shows up as an independent element on council tax bills, but is collected by the district and funnelled to the precepting authority. Further work needs to be undertaken to establish whether legally this could conceivably be applied to RTP funding. While this would be a significant change to the way RTP services are funded in Scotland it would provide a separate revenue stream for RTPs without having to depend on Central or Local Government for funding. It would, however require a change to the primary legislation that established the Local Government and Regional Transport Partnerships structures in Scotland. Action: The members should consider whether they wish to develop this approach and if so open discussions with COSLA and the Scottish Government. European Funding There are a number of European funds that are available to bid into. In general they require match funding from the participating body but can provide 40-50% of total project costs. It is important that the project meets the objectives and priorities of the fund concerned and shows a wider connectivity to initiatives being carried out elsewhere by others and leading towards the delivery of the same objectives. In this context linkages with the SOAs is important. The European Regional Development Fund (ERDF) is applicable in Scotland although some priorities do not apply in all local authority areas. It covers the period 2007-2013 and has four priority areas, Research and Innovation, Enterprise Growth, Urban Regeneration and Rural Development. The European Social Fund (ESF) is applicable throughout Scotland. It covers the period 2007-2013 and has three priority areas, Progressing Into Employment, Progressing Through Employment and Improving Access to Lifelong Learning. The European Structural funds are administered by two bodies in Scotland. For Lowland and Uplands Scotland, the administering body is ESEP Ltd. and they are the first point of contact for applications. Their web address is Within the Lowlands and Uplands Programmes there is a separate ring fenced allocation of funds for the Dumfries and Galloway and Scottish Borders area that is administered by the Global Grants Authority based in Dumfries and Galloway Council. Below is a timetable of key dates for the Third Application round of the Lowlands and Uplands Scotland Programmes.
  7. 7. Third Application Round Timetable Closing date for submission of First Stage Applications on €UROSYS 14 August 2009 Call for Second Stage Application Forms for successful First Stage 11 September Application projects 2009 Closing date for submission of Second Stage Applications on 9 October 2009 €UROSYS Programme Monitoring Committee Meeting to consider progress 28 October 2009 and where appropriate provide supplementary guidance to Advisory Groups Technical and eligibility checks completed by IAB and applicants 6 November 2009 notified Submission of revised Second Stage Application Forms by 20 November applicants 2009 Applications to Advisory Groups for scoring 4 December 2009 Advisory Group meetings 1-12 February 2010 Programme Monitoring Committee meeting to agree 24 March 2010 recommendations of Advisory Group Ministerial announcement of approved projects To be agreed For the Highlands and Islands the administering body is HIPP Ltd. and they are the first point of contact for applications. Their web address is The programme for applications is as below:- Round 4 Application Timetable 15 June Deadline for New Registrations 26 June Stage 1 deadline 21 August Stage 2 deadline Early October Stage 2 corrections deadline 2nd week November Advisory Groups Meetings 9 December PMC Meeting (project recommendations) To be Confirmed Ministerial Announcement INTERREG IV forms the co-operation strand of the ERDF aimed at co-operation between member states and regions within member states Strand A covers Cross Border Co- operation for member states with joint boundaries, Strand B covers Transnational Co- operation for member states in pan regions like North West Europe and North Sea Region and Strand C covers Interregional Co-operation allowing regions in a member state to co- operate with regions in other member states. Further information can be found on the INTERREG web site
  8. 8. Joint European Support for Sustainable Investment in City Areas (JESSICA) is a new policy initiative of the European Commission, supported by the European Investment Bank JESSICA responds to the request by several Member States and the European Parliament to give special attention to the need for renewal and/or regeneration of certain urban areas. The main objectives of JESSICA are: • To help the authorities in the Member States of the European Union exploit financial engineering mechanisms to support investment in sustainable urban development in the context of cohesion policy • To provide new opportunities to Managing Authorities responsible for the next generation of cohesion policy Further information is available on the ESEP web site The 7th Framework Programme (FP7) is the EU's main instrument for funding research. The core of FP7 is the Co-operation programme which fosters collaborative research across Europe and other partner countries, according to several key thematic areas. These themes include two areas relevant to RTPs: • environment (including climate change) • transport (including aeronautics) Further information is available from the ESEP web site and from the Scotland Europa web site Action: RTPs should consider the suitability of European funding to assist their projects and maximise their use wherever possible. Shared Services The shared services agenda has been progressing for some years with local authorities investigating areas where this is appropriate. To a certain extent RTPs are currently providing shared services where there are economies of scale and in the transport field could be a mechanism for further co-operation and sharing. Action: RTPs should engage with their partner authorities to investigate the scope for shared services within transport to achieve economies of scale where possible. Statutory Planning Development Control Process At present RTPs are not statutory consultees in the development control process. Consequently the opportunity for RTPs to become parties to Planning Agreements under the Planning Act is severely limited. If the only parties to a s75 planning agreement with a
  9. 9. prospective developer are the local Planning or Transport Authority, then the need for investment in regional transport improvements may be overlooked in favour of more local priorities, resulting in lost opportunities for potential private sector contribution towards key regional transport priorities. RTPs could be a party to a s75 agreement with the agreement of the local Planning Authority and the developer. This would give the RTP a much stronger contractual position to ensure the delivery of contributions from the developer to regional transport schemes and would allow contributions to be made directly to the RTP. To change this situation, the Scottish Government would have to revise schedule 5 of the new Development Management Regulations that were before Parliament in Dec 08; and come into force on 6 April 09 and 3 August 09 to include RTPs as statutory consultees for major development proposals. It is unlikely that the Government would wish to amend the regulations so soon after they have been approved by Parliament. While the affording RTPs key agency status in the SDP and LDP process provides the opportunity for appropriate policies to be introduced safeguarding the interests of regional transport priorities, it will take some time for the new planning system to provide total geographical coverage of SDPs and LDPs. Meanwhile there is the possibility of opportunities to fund regional transport projects being missed. While it could be argued that statutory consultee status for RTPs could result in a duplication of effort with the local authority rather it could equally be argued that it would provide a complementary input focusing on regional priorities and ensure that they are given the appropriate level of consideration in the planning process. While amendments to the regulations covering statutory consultees could take some time to evolve there is no reason why an RTP could not agree a protocol with its local Planning authorities whereby the Planning Authority would consult the RTP on developments of a regional and national nature. This would not require any alteration to regulations and with the agreement of the parties could be implemented relatively quickly and would facilitate early discussions on s75 agreements including the RTP as appropriate. Actions: RTPs should consider encouraging the Scottish Government to include RTPs as statutory consultees in the planning process for major developments of a regional significance. RTPs should consider developing a protocol with their local Planning Authorities whereby the RTP is consulted on developments of regional significance. RTPs should consider encouraging their local Planning Authorities to include RTPs in s75 agreements where appropriate to maximise developer contributions to relevant regional transport projects. Alex Macaulay (SEStran)