Agenda item

Jamie Henderson (Deputy Cabinet Member for Economic Development, Environment and Coastal Regeneration) Colin Finch (Strategic Programme Manager for Infrastructure (GET)) was in attendance for this item

1.Mr Finch presented the item by highlighting that:

a)    KCC had a statutory obligation to produce an Infrastructure Funding Statement (IFS). The statement would set out the financial transactions related to developer contributions, specifically detailing the amounts secured, received, and spent during the preceding financial year.

b)    The report was structured around three principal categories of developer contributions. The most significant of these was Section 106 contributions. As shown in Table 1 at paragraph 2.5, the report provided a breakdown of the funding secured, received, and spent across each KCC service area.

c)    For 2024/25, the total amount secured for KCC services through developer contributions was £31.7 million. The amount received in-year was £23.4 million and represented funding that was now been fully banked from developments that were currently progressed and becoming occupied. In total, £17 million had been invested by KCC into infrastructure to support and enable the growth of new and expanding communities.

d)    Officers also discussed the Community Infrastructure Levy (CIL). There were five CIL?charging authorities in the County, but only one, Folkestone & Hythe District Council provided KCC with a regular and predictable stream of CIL income. KCC received 35% of their annual CIL revenue, and in the reporting period this amounted to £547,000. All of the funding had now been allocated, through policy decisions, to support the delivery of the new waste transfer station required to serve the district.

e)    Developer contributions were also secured and delivered through Section 278 agreements. These relate to highway improvements that developers undertake directly on the public highway network. The value of these works was demonstrated through financial bonds attached to each Section 278 agreement. The bonds reflected the cost of the infrastructure being delivered by the developer. During the reporting year, the total value of bonds secured had amounted to £12.7 million.

f)      The future spending and priorities balance had increased from £119 million to £126 million over the financial year. It was not unusual for funding to be held at this level, as a number of major infrastructure requirements associated with growth carried significant costs. Notably, substantial allocations were being retained for the Sturry Link Road (£6.8 million) and for the expansion of Chilmington Green Secondary School, alongside several other projects detailed within the report.

g)    Officers added that while the IFS was a useful tool for setting out what had been secured, it was important to recognise that secured contributions represented only a snapshot in time. Actual delivery and spending profiles would inevitably evolve as developments progressed, and infrastructure programmes moved forward.

h)    On average, over the past five years, KCC had received £33.4 million per year in developer contributions and represented a significant and ongoing contribution to KCC’s overall budget. Officers raised that a series of district?level meetings involving district and county members had taken place. These sessions were designed to set out the scale of growth taking place in each area and highlighted any local issues arising from that growth and explained the associated infrastructure that would be required to support it.

2. In response to comments and questions from Members, discussion covered the following:

a)    Developer contributions for Dartford were noted to be the lowest in the County, however Dartford itself had seen a significant population increase. Members raised concerns that the existing infrastructure present would struggle under such pressures as population growth and demand.

b)    Officers clarified how contributions were secured and encapsulated in the policy of the developer contributions guide. It was further accentuated that Dartford was a Community Infrastructure Levy authority, and this had impacted the amount of influence the County Council had on securing developer contributions.

c)    The level of developer contributions could be impacted due to financial viability issues of a proposed development. Many of these cases had arisen on brownfield sites, where developers had been permitted to submit a viability appraisal. Such appraisals could demonstrate that making the full contribution request would make the scheme unviable.  

d)    National legislation relating to viability allows developers to retain a profit margin of 15–20% which could result in the County not securing all of the mitigation it had requested. 

e)    In relation to the £126 million of unspent Section 106 contributions, Members queried If funds were received and held by KCC and if invested, what the level of return was being generated from the investment and if inflationary pressures had been factored into Section 106 contributions.

f)      In response officers addressed how inflation was captured through Section 106 agreements. In instances where KCC are a direct party to the agreement and where work jointly took place with the district, KCC ensured that indexation was applied within the S106 legal agreement.

g)    The charges set out in the Developer Contributions Guide were based on a cost position as of Quarter 1, 2022. Indexation was then applied from that baseline date up to the date the contribution was actually paid. The mechanism would be secured through the legal agreement linked to the relevant planning application.

h)    Once funding had been received it would be placed into an interest?bearing account. Most S106 agreements specify that contributions must be held in such an account. The detailed arrangements for how interest was applied and accounted for would sit with finance colleagues. Officers highlighted that it was the understanding that all S106 monies would be held in interest?bearing accounts in line with legal requirements.

RESOLVED to note the Report