Responding to the Challenges of an Economic Downturn: How Income Released from Land and Property Can Fund Transport Projects
T Wilding, Mott MacDonald, UK
This paper proposes a method of generating income for transport projects using untapped resources, namely land and property assets.
In January 2011 the Department for Transport produced a Local Transport White Paper "Creating Growth, Cutting Carbon" outlining a sustainable approach to public transport development alongside the funding to be made available. Through the Local Sustainable Transport Fund £560 million will be made available over four years. However, given the recent round of budget reductions, this funding alone will be unable to meet the growing transport needs in the UK. Government, both locally and nationally, will need to find new sources of funding to plug the gap.
This paper proposes a method of generating income for transport projects using untapped resources, namely land and property assets. In order that delegates may get a flavor of how this may be achieve a summary of a case study for the new high speed rail line into St Pancras is set out below.
Purpose and Objectives
The overall purpose and objective of this paper is:
1 To encourage delegates to think about how they can leverage land and property as an asset to fund transport projects using the HS1 model
2 To help Local Authorities think about how they could release value from Land and Property via a “Property Realisation Income Plan” and how this opportunity can be maximized by:
• Undertaking resource profiling and mapping
• Identifying land and property opportunities and looking to maximize income from the same
• Identifying regeneration opportunities associated with property portfolios
• Fully understanding how to unlock value from 106 agreements
3 To provide an avenue through a workshop process for further exploration for delegates with the “Land and Property Team” as to how the HS1 model could be applied to their own individual circumstances.
Implementation and Results
HS1 Case Study
The implementation of HS1’s 68 mile route required the acquisition of vast swathes of land for both work sites and the line itself, adding significantly to the cost of the project. In the past land and property matters were regarded as a mere irritation by engineers with little thought given to the ‘hidden opportunity value’. However, the Department for Transport – project promoter – was well aware that once construction had been completed a significant proportion of the land acquired would no longer be required for operational purposes. A decision was thus taken to sell off surplus land, with the revenue raised being put back into the project to offset construction costs. As such the project became somewhat self-financing. Other projects such as Crossrail and The Thames Tideway Tunnel have realised the benefits of this financial model and are applying it accordingly.
Application of HS1 to Local Authorities
The challenge is how the HS1 model can be applied to local authorities and NGOs which are primarily geared to providing services and are not generally land developers. The fact is they do have Land and Property assets which largely remain a source of untapped finance. In order to fully leverage this opportunity and resource, the model developed as part of HS1 needs to be understood, together with thinking innovatively about how it can be applied on an individual basis to reduce overall costs of transport schemes.
Without the injection of additional funding many aspiration schemes will be put at risk. Injections of funding from the release of value from Land and Property via a ‘Property Realisation Income Plan’ will assist the overall budget process and reduce the amount of cuts that have to be made. In order to maximise the value to be released it will be necessary to look at each situation or geographical area on an individual basis. Local conditions, knowledge and priorities need to be taken into consideration and as such a bespoke plan needs to be developed for each situation.
• Costs of projects can be offset by releasing value from untapped Land and Property assets using the HS1 model
• That to apply the HS1 approach to local projects an individual funding/asset plan needs to be developed
• The plan makes a linkage between 106 agreements and the release of value from property assets.
To be able to benefit from the HS1 financial model Local Authorities need to have a policy which makes best use of the assets which they have in their particular geographical area.
That Local Authorities need to have a financial plan, based on 1 to 10 year returns, on land and property to be able to plan as to how to make best use of the income lever from this.
That to continue to achieve best value Local Authorities need to review the policy and plan on a regular basis
Association for European Transport