SCRIF Stage 1A Outline Business Case

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1 PROMOTER S INFORMATION Promoting Organisation: Contact name and role: Address: Telephone: Doncaster MBC Stephen King Transportation Unit Manager Doncaster Council Civic Office Waterdale Doncaster DN1 2UB Stephen.king@doncaster.gov.uk SCHEME DETAILS Scheme name: DN7 Hatfield link Scheme location: Hatfield, north east Doncaster Lead delivery organisation: Doncaster MBC Other delivery partners & roles: Waystone, private sector deliverer of DN7 developments Scheme Type (refer to and complete Annex 1) T1 new highway and at grade junctions. Which category / code (Annex 1) does the majority of your scheme fall within: Total Scheme investment: Total Private investment: Total Other public sector investment (non-scrif funding): m The project assumes that SCRIF will fund the construction costs of 14.1m upfront and then the DN7 developers will repay c 3.5m. This is reflected in the net value below for SCRIF 1.200m (DMBC corporate resources) Total SCRIF funding sought ( ): m ( m net) SCRIF as % of total scheme investment: 92% 69% 1

2 SCHEME SUMMARY Please provide a summary description of your scheme (approx. 300 words). Append any graphics. [Description to include a summary of scheme purpose, required investment, location, and direct and indirect benefits that will be delivered] The purpose of the Hatfield link is to unlock over 200ha of brownfield development land known as the DN7 project which is a mixed use development with a focus on green renewable energy projects. DN7 is being progressed as a public private partnership with support from the HCA s ATLAS team and is founded on strong policy the LDF core strategy and sites and policies evidence base which has identified the need for the quantum of development at this location. The DN7 project will deliver close to 9,000 jobs with an estimated GVA of between 162m and 294m and over 3,000 new dwellings. More importantly the entire project focuses on sustainability and the green energy sector bringing forward a carbon capture plant supported by international investors and the European Union. The Hatfield link will be the catalyst for the project providing a new highway access from DN7 to the M18\M180 at an estimated gross cost of 15.3m. The partnership arrangement has enabled DMBC to contribute 1.2m corporate resources and a commitment from the private sector to 3.5m once end users are in place. As such SCRIF can be considered as pump priming recyclable loan at a net value of 10.6m. Planning approval for the link was granted in 2009 and outline agreements have been made with third parties (Network Rail, Environment Agency etc). The majority of land is in ownership of the partnership or has options to be secured. As such, the scheme can be readily delivered to a defined project plan. DMBC will utilise inhouse staff and external resource for these tasks building upon the successful governance and delivery models developed for past major schemes. Why is the Scheme needed and what it will deliver for the Sheffield City Region (approx. 300 words) The DN7 project is land locked and development can only materialise once new infrastructure is in place. As such the Hatfield link to the M18\180 needs to be constructed upfront an pump primed by SCRIF. Once accessibility is improved, a range of development plots across DN7 can be realised including carbon capture powerplant and R&D employment uses. 2

3 1. STRATEGIC CASE SHEFFIELD CITY REGION STRATEGIC VISION & OBJECTIVES Vision: Sheffield City Region will be the best place to collaborate, to invest, to innovate and grow a business, and live, work, play and study. It will be supported by an unrivalled skills base and quality of life. Objectives: this vision to be delivered by: Increasing the Sheffield City Region s Gross Value Added (GVA); Increasing the number of jobs in the Sheffield City Region / overall employment rate; Rebalancing the economic base of the City Region, by: 1) increasing the proportion of the workforce employed in the private sector; and 2) helping address the economic performance gap that exists between the City Region (as with other northern city regions) and the Greater South East; and Capitalising and enhancing the quality of life in the Sheffield City Region and delivering sustainable economic growth. 1.1 SCHEME RATIONALE What opportunity or barrier will SCRIF investment unlock? Please make specific reference to barriers to economic growth. The overall DN7 projects aims to regenerate approximately 200ha brownfield land in the Hatfield, Stainforth, Thorne triangle with a range of mixed use (primarily energy related industries, business parks and housing). The project is being promoted by the private sector (led by Waystone) who have engaged with Doncaster Council via a Memorandum of Understanding to produce an overall masterplan for this area in 2013 based on a long term shared vision which states that By 2038, the DN7 Initiative will have developed into a thriving and prosperous mixed-use community with a strong sense of place, bringing with it billions of pounds of investment and thousands of new jobs. This new community will act as an exemplar of high quality design with developments benefitting from recycled water, low carbon energy systems, green corridors and strong links to existing communities. At the heart of the DN7 Initiative will be a pioneering cluster of green-focussed businesses specialising in low carbon and renewable technologies (e.g. carbon capture and energy-from-waste), hi-tech manufacturing, logistics and cutting-edge research, making it one of the largest low carbon business communities in the region. Millions of tonnes of carbon dioxide will have been successfully captured and stored; significant quantities of waste will have been diverted from landfill and millions of homes will have been heated from renewable energy sources. The DN7 Initiative will have excellent links to the national transport network via the new link road which connects the area to the M18 motorway and the revitalised transport hub around the railway station. This has allowed the following objectives to be defined Creating a range of employment opportunities, especially for local people. Ensuring a comprehensive range of new homes. Creating a sustainable transport network. 3

4 Creating high quality and low carbon development. Ensuring an appropriate mix and range of uses and services. Creating an attractive and sustainable place where people choose to live, work and enjoy leisure. Ensuring a deliverable scheme How will your scheme contribute to the achievement of the City Region s Strategic vision and growth objectives? The DN7 project will generate major employment opportunities for a range of businesses in this landlocked brownfield site. This will increase the number of jobs and GVA within the city region by attracting inward investment a notable partner to the carbon capture plant is Samsung which will also deliver R&D opportunities and become an incubator for new high value green energy companies. The regeneration of a brownfield site (Hatfield colliery) and associated remediation of colliery waste tips will transform the area into an attractive location for investment and improve the quality of life for local residents. At the heart of this public private partnership is a commitment to deliver the highest level of sustainability enshrined in the MoU by for example incorporating local heating network into development plots using energy from the carbon capture site. Outline how the scheme fits with national, sub-regional and local investment plan policies. Also outline whether there are any conflicts, and whether any stakeholder consultation has been undertaken/received. National and regional Policy The SCR s own City Deal Made in Sheffield, A deal for growth, 2012 and the Government s response to Lord Heseltine s report ( No Stone Unturned, 2012) recognised the need to decentralise economic development activities and the City Deal allows the SCR Partners to implement activity designed to meet local needs and demands The overall DN7 project meets these objectives by Unlocking development to create 0ver 8,000 private sector jobs in the Sheffield City Region in the period to 2030 and beyond Raise the pace of employment growth in Doncaster Shift the economy in Doncaster from its dependence on public sector employment closer to the current national average Offer suitable jobs to deprived wards with poor skills and benefit dependency Raise the trend rate of GVA growth in Doncaster progressively narrowing the wide gap between per capita GVA in Doncaster and the national average Provide a range of housing options for local communities Local Policy 4

5 DMBC has an adopted Core Strategy (2013) which identifies the demand for new employment and housing across the Borough. DMBC has submitted its Sites and Policies Allocations DPD to government and expects to hold an Examination in Public in April and full adoption by the end of The DPD sets out specific site allocations within the plan period (up to 2026) and specifically for the DN7 area. The allocations are shown in figure 1 below To support the DPD a suite of evidence bases has been compiled as key documents available at the forthcoming EiP. Specifically the key document relating to the overall DN7 project is the DN7 Evidence Base prepared for the EiP submission in December This highlighted the need for the public sector to pump prime infrastructure to make the overall project viable and attractive to end users. The added value by improved accessibility will raise market values to the point where inward investment in business and housing can take place. Doncaster Council s Economic Strategy has three priorities; addressing current barriers and weaknesses; enabling economic drivers to perform at their full potential; and maximising economic linkages to wider functional economies. The DN7 project will help to achieve all of these aspirations. The South Yorkshire Transport Strategy (the Local Transport Plan) was published in The Plan sets out a number of policies and the ones relevant to this project include C Promote efficient and sustainable freight distribution G Deliver interventions required for development and regeneration The above demonstrates that this project fits with national, regional and local policies. In developing strategies at a local level, consultation identified overwhelming support for the need to improve access to DN7 from both business and local community perspective. This is demonstrated by the overwhelming support given to the current DN7 project with no objections when the planning application was approved in As part of the LDF process, the masterplanning exercise and past planning applications consultation has been undertaken at a number of levels over a number of years. At all events the community and stakeholders expressed support for the scheme and recognised the need for regeneration in this area. As the link road has granted planning permission (2009) consultation will be tailored towards keeping people informed as the project progresses. What are the implications if the scheme does not secure SCRIF investment? Without public sector funding the scheme will not be delivered by the private sector. This has been demonstrated by the 2013 Viability test which indicates that the housing allocations are not viable given other key public sector requirements (eg affordable housing, POS) and will not proceed without some form of public sector pump priming. The main developer (Waystone) has already contributed over 2m to the existing scheme and cannot bring forward funding to cover infrastructure costs. It has been agreed that SCRIF will be utilised to fully fund the link road upfront and that Waystone will repay a proportion of costs upon receipt of income from 5

6 end users. This has been calculated at approximately 25% of the SCRIF value approximating to 3.5m being returned to SRCIF. This sum will be index linked to ensure prompt repayment by the developer. The scheme is not affordable to be delivered by internal council funds (ie LTP or corporate resources) over and above those already committed to progress preparatory work. Are the economic outcomes of the scheme dependent upon any other project or investment? (approx. 300 words). [An example - SCRIF investment helps provide funding for access to a development site, but additional funding (either private or other public) is needed to develop out the site and therefore deliver the economic outcomes]. The only dependency relates to the need for the Highways Agency to undertake improvements to the M18\M180 interchange. These works are now committed to start in July 2014 funded through a successful Pinch Point bid. This has discharged the s106 agreement for the 2009 link road permission which required these works to be carried out by the applicant. The Pinch Point bid was successful because the HA were able to demonstrate the economic benefits of the DN7 project. Upon delivery of the link road, Waystone will be in a position to release development plots to end users. Waystone have had preliminary discussions with multinational companies and national house builders to deliver specific development plots. STRATEGIC CASE ASSESSMENT (TO BE COMPLETED BY THE ASSESSOR) Does the scheme have a clear strategic rationale and align to SCR Growth Plan objectives? 2. COMMERCIAL CASE 2.1 DEMAND CASE Please set out the demand justification for SCRIF investment in this scheme, in relation to the anticipated private sector investment and associated jobs and GVA outcomes. Draw on and set out the evidence that you have to support this A viability assessment has been made for the DN7 project which has identified that the overall DN7 project cannot be delivered in the current market conditions without some form of public sector intervention. The jobs/outcomes are detailed in the next section. Please outline any market testing which has been undertaken to evidence the demand case, and provide any evidence that demonstrates that the private sector will respond to this opportunity The lead developer for DN7 is Waystone who have a strong track record of developing regeneration projects across the region including brownfield sites at Chesterfield and Glass Houghton. The DN7 project will be phased over a number of years and detailed below are the current phases with planning approval Phase 1: Mixed use development of Hatfield Colliery Power Park (LDF site ref 91, 229), including environmental improvement and a business cluster of clean coal technology power generation, 6

7 industrial uses and coal mining operations including carbon capture and storage of approximately 5million tonnes of CO 2 annually. Phase 2: Mixed use development consisting of a new link road. Employment development at Hatfield Power Park and adjoining M18 Motorway Service Area (LDF site ref 89,228,233)and environmental improvements on approximately 132 ha of land Stainforth Marina: Outline approval for construction of 500 berth marina, access, car parking and ancillary marina facilities, including the provision of nature conservation areas, water features and public open space on approx. 13ha Whilst the above projects have planning consents, the current market demand and poor accessibility has limited investor commitment. The LDF S&P land uses are identified below in table and plan LDF Site Ha \ use Floorspace m 2 Jobs created 89: Hatfield east logistics park 29ha B8 12ha B2 109,326 46,854 1,242 1,511 91: Powerpark + energy from waste 16ha B2 60,800 1, : Hatfield east Moto site 9ha B2 32,338 1, : Powerstation 13ha : Moto south 21ha B2 79,116 2,552 Total 8,809 Ref: table 4 DN7 initiative evidence base December 2013 In addition Waystone aims to deliver over 3,000 housing units on 3 sites. 7

8 The second major partner in the DN7 project is 2COenergy who are proposing to develop a 700MW powerstation using clean coal technology and carbon capture and offsite storage (via consented pipeline to North Sea) to be at the forefront of the UK s green energy provision. The project was granted planning approval in 2003 and has been supported by the European Union and Department for Energy and Climate Change. Samsung are equity backers to this scheme which is currently in the process of securing government support for this scheme. The delivery of a carbon capture plant will also create the opportunity for spinoff research and development and links with academia. The innovative nature of this project (one of only three in the UK) has attracted international investment backing from South Korea (Samsung) If private developers will be required to deliver scheme outputs, at what stage are discussions/negotiations? The link road scheme will be delivered by DMBC who have entered into a partnership agreement with Waystone, 2COenergy and Hatfield Colliery via a Memorandum of Understanding in 2013 to jointly deliver the overall DN7 project. Heads of Terms have been drafted for the funding strategy for the link road which assumes that SCRIF will fully fund construction and that the MoU partners will repay approximately 25% of the cost upon realisation of funding from end users. The loan will be time limited to ensure recovery of funding from the developers. Waystone have a number of options to acquire land and these will be passported to DMBC to enable the link to be constructed. Preliminary design has been completed by Waystone which included approvals in principal with Network Rail (bridge crossing) and the Environment Agency. COMMERCIAL CASE ASSESSMENT (TO BE COMPLETED BY THE ASSESSOR) Has market potential / demand been adequately assessed / evidenced in relation to GVA and job outcomes? How robust is the evidence that the private sector will respond to the opportunity? 3A. ECONOMIC CASE ALL SCHEMES TO COMPLETE 3A.1 PREFERRED OPTION OUTPUTS ANALYSIS Please complete the following table as a summary of the direct and indirect gross outputs delivered by the Scheme. For Transport Schemes, also see section 3B. These developments will help to re-balance the Doncaster economy, reducing the proportion of public sector employment to around the current national average. In addition, they will improve the considerable multimodal logistics facilities within Doncaster to the Sheffield City Region and beyond. The jobs created will be available to deprived communities in Doncaster and the wider City Region. Doncaster itself is the 41st most deprived local authority in the national index of multiple deprivation rankings (2007). Deprivation is spread across Doncaster. Table 3A.1: Preferred option gross outputs 8

9 FTE construction job years Commercial Floorspace created (record use class) Potential Commercial Floorspace unlocked Housing units FTE Jobs GVA Private sector investment leveraged Other public sector investment leveraged Direct outputs dependent on or delivered by the Scheme 2,000+ over 5 years B2 219,000m 2 B8 109,000m 2 3,000 8,809 between 162m and 294m 2bn to develop the power station backed by international investors EU grant of 180m for carbon capture research 5.8m grant DECC for R&D at power park Indirect outputs associated with the Scheme Total Gross Outputs Othr (secify) For the outputs presented in Table 3A.1, set out below the assumptions from which these have been assessed: Table 3A.2: Preferred option gross outputs Key assumptions FTE construction job years Commercial Floorspace (record use class) Potential Commercial Floorspace unlocked Housing units FTE Jobs GVA Private sector investment leveraged Other public sector investment leveraged Other (specify) Direct outputs dependent on or delivered by the Scheme estimated LDF Evidence base Dec13 LDF Evidence base Dec13 LDF Evidence base Dec13 Based on Number of direct jobs times average wage of 18,392 and outputs from FLUTE (which includes indirect jobs) LDF Evidence base Dec13 LDF Evidence base Dec13 Indirect outputs associated with the Scheme ECONOMIC CASE ASSESSMENT (TO BE COMPLETED BY THE ASSESSOR) 9

10 Does the scheme appear to offer reasonable value for money in gross terms (making reference to benchmarks) 3B. ECONOMIC CASE TRANSPORT SCHEMES ONLY TO COMPLETE NOTE: COMPLETION IS NOT MANDATORY AT STAGE 1A, ALTHOUGH PROMOTERS HAVE THE OPTION TO COMPLETE IF THEIR SCHEME IS SUFFICIENTLY ADVANCED TO BE ABLE TO DO SO At Stage 1A it is not mandatory to complete the Transport Value for Money Case but if promoters do have evidence that they want to be taken into account, they can report it below. If not, promoters are asked to provide an estimate of the anticipated BCR position for their scheme, perhaps based upon comparator evidence. 3B.1 APPRAISAL SPECIFICATION REPORT Please outline whether an Appraisal Specification Report (ASR) has been completed setting out your proposal for transport modelling, or whether it is your intention to complete the ASR between Stage 1A and Stage 1B. A full ASR has been developed by AECOM who developed the systm+ model for SCRIF programme appraisal and is being submitted with this bid. It is proposed to utilise this model to assess the extension. Full details provided separately with key points extracted to inform section 3B.2. As part of the 2009 planning approval a Transport Impact Assessment was prepared by Scott Wilson and information form this report will be utilised in conjunction with the updated masterplan and systm+ model. 3B.2 DESCRIPTION OF FORMAL NETWORK MODEL If a formal network model has been used please describe it using the headings in the table below How is the scheme represented in the model Calibration and Validation of the Base Year Model in the area around the scheme Data Collection Relevant to the Scheme In Question How does it model demand responses route choice, mode choice, destination choice, and time of day? How has future year demand been forecast? Highway assignment ASR analysis shows 14 out of 21 links meet DMRB criteria 2005 Route & mode choice for peak and inter peak Uncertainty log produced for LDF scenarios to 2027 controlled to TEMPRO 3B.3 ECONOMIC APPRAISAL If a formal network model has been used there is no need to repeat the information from Section 3.1, but any off-line adjustments to the model outputs should be discussed here. 10

11 Estimates of PVB etc should be presented as they would appear in the Analysis of Monetised Costs and Benefits in the units defined in the version of WebTAG prevailing at the time this form is submitted. How have the unit benefits of the scheme been estimated How has the base demand been estimated? How has the forecast demand been estimated in the without the scheme case? How has the forecast demand been estimated in the without the scheme case? What time periods have been modelled What annualisation factors have been used What is the Present Value of Benefits ( 000 discounted to 2010 in 2020 prices) this should exclude wider economic impacts Present Value of Costs ( 000 discounted to 2010 in 2020 prices) Benefit to Cost Ratio Please describe any sensitivity testing that has been undertaken and provide a table showing PVB, PVC and BCR 3B.4 ENVIRONMENTAL APPRAISAL Describe the expected impacts and rate them on the standard 7 point scale from the WebTAG Appraisal Summary Table. The 2009 Planning application contained a Transport Impact Assessment report which assessed the key impacts which have been used to populate this table Impact Summary of Key Impacts 7 Point Scale 1. Noise Neutral no properties affected by rural \ brownfield road 2. Air quality Neutral no designated receptors \ AQMA 3. Greenhouse gases Slight negative associated with traffic generated by developments. 4. Landscape slight negative loss of hedgerows but opportunities to mitigate with landscaping 5. Townscape Neutral rural link 6. Heritage of historic resources Neutral no designated resources 11

12 7. Biodiversity Neutral loss of land but opportunity to mitigate by compensation areas. 8. Water environment Slight positive highway design includes SUDS and new balancing ponds 3B.5 SOCIAL AND DISTRIBUTIONAL At this stage it is necessary to complete only the screening Stage from WebTAG 3.17 Social and Distributional Analysis Item User Benefits Noise Air Quality Accidents Security Severance Accessibility Personal Affordability Expected Impacts positive or negative neutral Neutral Neutral Neutral Neutral Neutral Positive unlocks development sites ECONOMIC CASE ASSESSMENT (TO BE COMPLETED BY THE ASSESSOR) If an Appraisal Specification Report has been prepared, is it appropriate to the scale of the Scheme proposed and therefore suitable to enable a robust business case appraisal at Full Business Case Stage 1B What Value for Money Category have you ascribed to this scheme? Have any adjustments been made to the analysis provided by the bidder and why? What are the key risks, sensitivities and uncertainties relating to the analysis? Are there any significant environmental disbenefits or missing analyses? Are there any significant social and distributional impacts or missing analyses? 4. MANAGEMENT CASE 4.1 DELIVERABILITY What is the current position of the scheme? (please tick one option) Concept i.e. specified in outline form, but no detailed assessment has been undertaken Feasibility i.e. the scheme s feasibility has been assessed in engineering terms and an initial economic appraisal undertaken (if applicable) Planning permission for preferred route granted with engineering design produced. 12

13 Business case i.e. outline or full business case has been produced including preliminary engineering design and economic appraisal (if applicable) Assuming approval is given for the scheme to proceed to Stage 1B, Full Business Case, if the promoter is aware that their scheme is likely to require WebTAG appraisal and the agreement of an Appraisal Specification Report, then they should present their best judgment on how much modelling and data collection work they think will need to be undertaken based on what they know is already available (i.e. existing models and/or age of input data), and how long they think this will take to assemble and therefore impact on deliverability. Please see separate Appraisal Specification Report which details the traffic modelling scope. The intention is to utilise the existing systm+ multi mode model developed for the SCRIF programme to produce the initial economic appraisal during the summer. It is not envisaged that new data collection will be required for this stage. This assessment will produce a preliminary BCR. Assuming the SCRIF investment sought is approved, give a realistic indication of when the scheme would commence. Please justify your response taking into account factors such as the time required to secure statutory powers, secure match funding, procure contracts etc. Construction start 2016 and road open Statutory processes will be run in parallel to the SCRIF approval process and envisages acquisition of land by 2016 on the assumption of no public inquiry Please indicate whether the following have been secured/agreed fully or in part, or provide an estimation of when they are likely to be secured. Please provide any detail which will support your business case. Insert N/A if not applicable to the scheme. Delivery Constraint/Risk Scheme Position Planning consents Obtained 2009 CPOs Summer 2016 Public consultation Completed 2009 as part of planning Public Inquiry Na Traffic Restraint Orders TRO s spring 2016 Transport and Works Act Na Public sector match funding summer 2016 Private sector match funding Summer 2016 Procurement contracts Summer 2016 Please provide your anticipated timetable for delivery including the key milestones you anticipate at Stage 1B, Stage 2 and Stage 3 13

14 Submissions for each stage Stage 1B December 2014 Stage 2 spring 2015 Stage 3 autumn 2016 Please confirm whether the lead partner currently has the resource/expertise and structures in place to manage and deliver the scheme? If not, outline what would need to be undertaken to be delivery ready (e.g. project management arrangements, recruitment, governance structures etc). Project governance has been established with a project board chaired by Head of Service (Neil Firth) which will report to the overall DN7 project board (DMBC Director + Waystone and 2COenergy). The scheme will be designed inhouse. There will be a requirement to utilise external agency staff to carry out key tasks (rail bridge / NR interface, project management, highway design). The scheme is at an advanced stage with Waystone completing preliminary design to enable planning permission to be secured and sign off in principal by 3 rd parties Network Rail and Environment Agency. Detailed design with Network Rail will commence in 2014 to enable procurement to take place in 2016 and construction start early DMBC has set its corporate capital programme on 21 February and this included a commitment of 1.2m to cover preparatory works which demonstrates the high level support for this project in times of constrained public finances. General Arrangement scheme plans are appended to this document. 4.2 MONITORING & EVALUATION Set out in broad terms what you anticipate will need to be monitored and evaluated in order to assess whether the project has met its objectives. A full Evaluation Plan will be developed to DfT standards. This will follow the successfully completed White Rose Way evaluation model capturing information on Economic data (land developed, jobs) Traffic (volume, speed, mode) Environmental Along with a process evaluation which will analyse how the project is developed and managed. The lessons learnt report from the WRW and ongoing FARRRS project will be incorporate into this project MANAGEMENT CASE ASSESSMENT (TO BE COMPLETED BY THE ASSESSOR) How delivery ready is the scheme and what scope is there for significant delays were funding to be approved? 14

15 ASSESSMENT SUMMARY (TO BE COMPLETED BY THE ASSESSOR) Please summarise your assessment of the scheme s strategic fit and set out any recommendations Please summarise your assessment of the scheme s market potential in relation to the delivery of jobs and GVA outcomes, and set out any recommendations Please summarise your assessment of the scheme s value for money and set out any recommendations Please summarise your assessment of the scheme s deliverability (in terms of the risks to scheme commencement) and set out any recommendations Summarise your overall assessment of the scheme and recommendations for SCR 15