The Audit Committee

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					    Edinburgh Business Assembly

Public/Private Sector Provision of Infrastructure

               Donald McGougan
               Director of Finance
               31st January 2008
Presentation will cover:

•   Capital resources available to council;
•   Capital projects/aspirations;
•   Council’s private/public delivery models;
•   Update on Bid proposals;
•   Possible future capital funding sources;
•   Assistance Edinburgh Business Assembly can
Importance of Efficient Infrastructure Investment

• Recognised by Scottish Government to achieve core
  purpose of increasing sustainable economic growth;

• Scottish Futures Trust consultation runs until
  14th March;

• Key Issues:
   – Affordability;
   – Borrowing costs and funding.
Capital Budget
Scottish Government supports capital expenditure in
Edinburgh approximately £110m p.a. However, majority
required for specific purposes including:
• Housing Development Funding             36
• Private Sector Housing                   7
• Schools Fund                             6
• Flood Prevention                        11

leaving only £29m for Asset Management and £11m for City

Scope for Prudential Borrowing/Receipts
Capital Budget

Council projects totalling > £400m identified including Council
contribution to trams (line 1b), flood prevention, Meadowbank,
RCP, Ross Bandstand and King’s Theatre;

Possible sponsorship opportunities;

Need to review and improve existing infrastructure;

Affordable Housing requirements;

Must free spend for Asset Management requirements.
Other Infrastructure Works

 Number of significant projects across City requiring public
 and/or private sector investment:
 •      Airport expansion;
 •      Sheriffhall upgrade;
 •      Gogar Railway/Dalmeny Chord;
 •      M8 Link road;
 •      Cruise Liner Terminal;
 •      Princes Street improvements.

 Need for joined-up private/public sector working.
Current Private/Public Arrangements
2 PPP Schemes providing 25 Schools - construction costs > £200m;

Shawfair - JV with Midlothian Council and Miller Group;

New Edinburgh Limited - JV established in 1990 with Miller Group;

EDI - Development Company established by Council;

Waterfront Edinburgh - JV with Scottish Enterprise;

Edinburgh Leisure - provision of leisure facilities across the City;

Lothian Buses - 91% owned by Council;

Business Improvement District (Bid)

Legislation allowing Bids in place from 1st April 2007

Enables local businesses to plan and deliver
additional improvements to benefit their local area

Ballot being held in City Centre area from 11 April to
23 May

Based on rateable threshold of £25,000 a levy of 1%
would raise £0.9m per annum
Section 75 Contribution

S75 agreements relate to planning purposes and
applied to/for road/education/tram/affordable

Trams S75 contribution > £30m;

Contribution should be reasonable and
appropriate to the development;

Been used extensively in Edinburgh.
Need to Provide Funding Streams to
Meet Infrastructure Requirements
Possible Solutions:
Capital Receipts - Opportunities diminishing: over
£400m achieved last ten years mostly ring-fenced for
Prudential Borrowing - Council Tax Freeze may limit
Funding of Borrowing Costs;
Cities Growth Fund - Funding is modest and not
assured long term. Thus not suitable as long term
funding source for infrastructure;
New Funding Streams - Tax Increment Finance (TIF)
and Supplementary Business Rates.
Tax Increment Finance Scheme (1)

Enable councils to keep uplift in non-domestic rates
Incentivises Council to undertake required
Would provide funding on a long-term basis to fund
infrastructure improvements;
Would accelerate works required to generate
development and economic growth;
Could be used on a local (Waterfront and City Centre)
basic or across city.
Tax Increment Finance Scheme (2)
Similar Scheme been used successfully in USA;

Would provide income source to fund works undertaken using
Prudential Framework;

Waterfront would create additional £56m per annum in
business rates. Allow investment of > £650m;

COSLA Technical Working Group examining possible

Needs focused schemes around growth areas - Waterfront,
Bio-quarter, West Edinburgh and City Centre;

Displacement an issue.
Supplementary Business Rates (SBR)

 • Issue raised elsewhere on agenda;

 • A 2p SBR in Edinburgh would raise £13m p.a.
   allowing investment of £168m.
Capital City Supplement

• Principle of specific funding for Edinburgh
  accepted by Scottish Parliament;
• Submission to be made by summer;
• Need to demonstrate unique costs associated
  with being capital city.
• Smart evidence required that demonstrates
  Edinburgh’s benefits to Scotland’s economy
  linked to costs incurred;
• Edinburgh Business Assembly input is
Next Steps
Prioritise projects within defined areas based on
evidence/economic case and added value

Explore all funding options;

Redefine proposals and discuss/agree with

Role of Assembly.
Key Objective

To find funding solutions to long term
infrastructure requirements/aspirations of city