Competing for investment
How can local authorities and other local public bodies gain access to the scarce regional investment opportunities for economic development and regeneration which are becoming available through public private partnerships and joint ventures? Rob Hann sets out how these investment opportunities arise and what a public body needs to do to stand the best chance of success of securing such investment.
The coalition government is taking steps to encourage local authorities and other public bodies to be more innovative and to explore ways of joining up with each other and with the private sector to address investment needs at the local level through public private partnerships and joint ventures.
One of the potential ways in which local authorities and private sector developers or investors might collaborate is through a joint venture of some kind. The term ‘joint venture’ (‘JV’) can describe a range of different commercial arrangements between two or more separate entities including public/public and public/private partnerships which collaborate for a common purpose.
A JV can be (and most commonly is) a contractual arrangement under which, with the support of each investor, a new business is created in which the parties work together and share the risks and benefits arising.
Additionally, JVs can involve the establishment of a separate legal entity or another form of partnership such as a Limited Liability Partnership or a Limited Partnership vehicle. Under these options each party would be likely to contribute resources into the entity to ring-fence risks and benefits associated and in order to combine expertise and focus effort on delivering the common objective(s).
In view of the fact that local authorities are very tax efficient creatures in their own right and that setting up a new vehicle of any kind inevitably involves additional processes, responsibilities, legislation and potential complexity, the authority will always have to weigh carefully the advantages and disadvantages of the direct contract JV approach as compared to the ‘new vehicle’ approach to JVs.
Each JV arrangement is unique but with JVs involving public and private sector partners seeking regeneration or economic development of an area or asset, a more common type of JV has evolved – sometimes known as an 'asset backed vehicle' .
These options are not ‘new’. Some local authorities can point to a very successful track record of delivering JVs. What is new is the very firm central government steer towards local public bodies exploring these options (and others) at a local level and on a more regular and consistent basis, where such approaches make sense.
Simultaneously, new funding and investment opportunities are being made available at the regional level and are aimed not at local authorities acting alone, but at sustainable public/private partnerships which deliver strategic regeneration or economic development benefits to an area. Again, a significant driver for local authorities to establish JVs might be to stand a better chance of accessing scarce investment from such sources as the recently announced Regional growth funds and/or under the various EU sourced funding such as the Jessica programme – ie Joint European Support for Sustainable Investment in City Areas – which has been developed by the European Commission as a new way to use existing European grant allocations.
These new funding sources have in common the fact that they are looking for sustainable, commercially deliverable projects in which to invest. Those authorities who understand how to develop and deliver such JVs and partnerships will be better placed to apply and access such funds. All local authorities going forward, will be effectively competing with other public bodies, PPPs and private sector developers and contractors to access such funding.
In order to better equip local authorities for these challenges Local Partnerships is developing guidance specifically for local authorities interested in JVs and accessing investment for regeneration and related purposes. This guidance builds upon earlier guidance developed by HM Treasury and published in March 2010.
The new LP guidance on JVs will seek to learn lessons from earlier JVs and will cover (amongst other things):
- Why consider JVs?
- Local authority powers issues
- Funding and investment options and opportunities
- Procurement issues
- Central government consents and processes (where relevant)
- And business case development
Local Partnerships is not developing this guidance in isolation but, on the contrary, we are working with several local authorities and the Department for Communities and Local Government Department in a pilot programme (known as the Capital and Assets Pathfinder or ‘CAP’ Programme) which looks at how better management of capital flows and the stock of assets can be developed as part of promoting economic growth and inclusion.
The DCLG has selected 11 pathfinder authorities to test the approach outlined above. These are:
- Cambridgeshire, Hampshire, Solihull, Swindon, Wigan, Worcestershire – the intensive authorities
- Durham, Hackney, Hull, Leeds, Leicestershire & Leicester City – the laboratory authorities.
Baroness Hanham is the Minister leading the CAP Programme.
The current financial position of public services, post CSR 2010 means that the work begun by public authorities on collaborating on assets in order to deliver significant savings falls into much sharper focus.
Through a new service – joint venture options reviews – Local Partnerships (a wholly owned public sector multi-disciplinary partnership between HM Treasury and the Local Government Association) is seeking to assist local authorities to develop sustainable and commercially deliverable schemes which can then compete for funding from the various funding streams which are now (or are shortly) becoming available.
Rob Hann is Director of Legal Services at Local Partnerships (www.localpartnerships.org.uk). He is also author/editor of Local Authority Companies and Partnerships (see www.lacaponline.com).
Together with Edward Craft of Wedlake Bell and Stephen Matthew of Nabarro, Rob will be presenting a workshop at the Annual Weekend School for Lawyers in Exeter on 15 April 2011.
- Details
How can local authorities and other local public bodies gain access to the scarce regional investment opportunities for economic development and regeneration which are becoming available through public private partnerships and joint ventures? Rob Hann sets out how these investment opportunities arise and what a public body needs to do to stand the best chance of success of securing such investment.
The coalition government is taking steps to encourage local authorities and other public bodies to be more innovative and to explore ways of joining up with each other and with the private sector to address investment needs at the local level through public private partnerships and joint ventures.
One of the potential ways in which local authorities and private sector developers or investors might collaborate is through a joint venture of some kind. The term ‘joint venture’ (‘JV’) can describe a range of different commercial arrangements between two or more separate entities including public/public and public/private partnerships which collaborate for a common purpose.
A JV can be (and most commonly is) a contractual arrangement under which, with the support of each investor, a new business is created in which the parties work together and share the risks and benefits arising.
Additionally, JVs can involve the establishment of a separate legal entity or another form of partnership such as a Limited Liability Partnership or a Limited Partnership vehicle. Under these options each party would be likely to contribute resources into the entity to ring-fence risks and benefits associated and in order to combine expertise and focus effort on delivering the common objective(s).
In view of the fact that local authorities are very tax efficient creatures in their own right and that setting up a new vehicle of any kind inevitably involves additional processes, responsibilities, legislation and potential complexity, the authority will always have to weigh carefully the advantages and disadvantages of the direct contract JV approach as compared to the ‘new vehicle’ approach to JVs.
Each JV arrangement is unique but with JVs involving public and private sector partners seeking regeneration or economic development of an area or asset, a more common type of JV has evolved – sometimes known as an 'asset backed vehicle' .
These options are not ‘new’. Some local authorities can point to a very successful track record of delivering JVs. What is new is the very firm central government steer towards local public bodies exploring these options (and others) at a local level and on a more regular and consistent basis, where such approaches make sense.
Simultaneously, new funding and investment opportunities are being made available at the regional level and are aimed not at local authorities acting alone, but at sustainable public/private partnerships which deliver strategic regeneration or economic development benefits to an area. Again, a significant driver for local authorities to establish JVs might be to stand a better chance of accessing scarce investment from such sources as the recently announced Regional growth funds and/or under the various EU sourced funding such as the Jessica programme – ie Joint European Support for Sustainable Investment in City Areas – which has been developed by the European Commission as a new way to use existing European grant allocations.
These new funding sources have in common the fact that they are looking for sustainable, commercially deliverable projects in which to invest. Those authorities who understand how to develop and deliver such JVs and partnerships will be better placed to apply and access such funds. All local authorities going forward, will be effectively competing with other public bodies, PPPs and private sector developers and contractors to access such funding.
In order to better equip local authorities for these challenges Local Partnerships is developing guidance specifically for local authorities interested in JVs and accessing investment for regeneration and related purposes. This guidance builds upon earlier guidance developed by HM Treasury and published in March 2010.
The new LP guidance on JVs will seek to learn lessons from earlier JVs and will cover (amongst other things):
- Why consider JVs?
- Local authority powers issues
- Funding and investment options and opportunities
- Procurement issues
- Central government consents and processes (where relevant)
- And business case development
Local Partnerships is not developing this guidance in isolation but, on the contrary, we are working with several local authorities and the Department for Communities and Local Government Department in a pilot programme (known as the Capital and Assets Pathfinder or ‘CAP’ Programme) which looks at how better management of capital flows and the stock of assets can be developed as part of promoting economic growth and inclusion.
The DCLG has selected 11 pathfinder authorities to test the approach outlined above. These are:
- Cambridgeshire, Hampshire, Solihull, Swindon, Wigan, Worcestershire – the intensive authorities
- Durham, Hackney, Hull, Leeds, Leicestershire & Leicester City – the laboratory authorities.
Baroness Hanham is the Minister leading the CAP Programme.
The current financial position of public services, post CSR 2010 means that the work begun by public authorities on collaborating on assets in order to deliver significant savings falls into much sharper focus.
Through a new service – joint venture options reviews – Local Partnerships (a wholly owned public sector multi-disciplinary partnership between HM Treasury and the Local Government Association) is seeking to assist local authorities to develop sustainable and commercially deliverable schemes which can then compete for funding from the various funding streams which are now (or are shortly) becoming available.
Rob Hann is Director of Legal Services at Local Partnerships (www.localpartnerships.org.uk). He is also author/editor of Local Authority Companies and Partnerships (see www.lacaponline.com).
Together with Edward Craft of Wedlake Bell and Stephen Matthew of Nabarro, Rob will be presenting a workshop at the Annual Weekend School for Lawyers in Exeter on 15 April 2011.
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