Project proponents should consider stewardship vehicle options from the outset. These vehicles are likely to be important for the management and maintenance of public and private properties, the operation of community facilities and, where applicable, the management of public services within the garden community.
Stewardship vehicles must be well funded to function as intended, but if configured correctly they can become self-funding and essential to providing a desirable environment to live and work in.
Funding models and overview of business cases for stewardship vehicles
Early consideration of the role and scale of the stewardship vehicle is critical to the success of its financial planning and implementation.
The provision of common facilities within the garden community will guide the scope of the future stewardship vehicle and shape the financial requirements both in terms of capital costs for initial construction and revenue costs for maintenance. continued.
A typical new housing construction program would typically involve green infrastructure maintained by a site-specific management company and paid for through service fees, levied on residents. The ambition for garden communities means that there is a potentially wider group of community facilities, in addition to green infrastructure, that would fall under the stewardship vehicle and that there is a need for a more creative approach to funding sustainability of these entities.
The aim at the outset of any stewardship vehicle should be to maintain communal facilities to appropriate standards for a garden community in a financially self-sustaining manner without dependence on public funds. This will involve identifying and costing the facilities to be included in the stewardship vehicle and identifying the corresponding revenue streams through which the facilities can be created and maintained.
This data will then inform the financial model and early-stage business case for the stewardship vehicle once management and administration costs have also been considered. The creation of the business model will determine not only whether the revenue sources are able to cover the annual costs in the long term, but also whether the model operates in financial deficit during the years when the site establishes itself and reaches full occupancy. . This in turn will guide thinking around the need for up-front requirements for capital grants, developer contributions, or other sources of potential capital injections.
Access to well-maintained communal facilities is part of what sets garden communities apart. The creation of a fully costed business model, with locally tested revenue streams and administration cost assumptions, should provide evidence of the overall deliverability of communal facilities and, in doing so, help demonstrate the deliverability of the overall view.
To establish, fund and operate an effective stewardship vehicle, some important questions need to be considered.
This includes stewardship vehicle functions and primary funding sources – particularly where up-front capital outlays are required to help fund the provision of strategic open space, other public property or private land, community facilities and public service infrastructure. A mix of funding could be obtained from developers and landowners, local authorities and parish councils.
The pros and cons of different legal structuring options should also be considered. The choice between the various unincorporated and incorporated bodies that could be created depends on the proposed functions, the assets managed, the type of financial arrangement and the governance approach adopted for the stewardship vehicle, as well as the tax position. Options include unincorporated bodies such as unincorporated associations, trusts or partnerships and incorporated bodies such as private companies limited by guarantee or stock, incorporated charities, community benefit corporations and registered companies, such as cooperatives or a community benefit society. A bespoke structure can be formulated to combine the appropriate options into the ‘best fit’ for an individual garden community.
Governance is another important consideration. Governance options are informed by the identity and percentage of control that the “shareholders” of the stewardship vehicle wish to have and should be linked to the overall governance of the project. Ideally, the vehicle will be led by representatives of the organizations that contributed primary funding and who retain an interest in the success of the garden community.
It is desirable that the governance arrangements provide for the involvement of:
- the entire local community, for example via a parish council or a neighborhood forum;
- landowners and developers who would otherwise consider management company agreements; and;
- the host local authority(ies), long-term partners of the project.
Building local buy-in requires consideration of how best to capture the views of existing local communities and future residents. For example, a stewardship vehicle board could involve an existing or new parish council or neighborhood forum, a long-term development partner and a local authority.
Consideration should also be given to how regular income can be generated and captured from the assets of the garden community and the best stewardship vehicles for this purpose. More information on this important aspect is presented below.
Revenue streams for stewardship vehicles
One of the main risks of stewardship vehicles is that they may not have enough income to meet the responsibilities they wish to take on. In particular, endowment or start-up funds are sometimes sufficient to establish the stewardship vehicle and provide community facilities and public and private land, but not sufficient to meet all operating costs or rehabilitation costs. nine of fixed assets. However, financial models are available to account for various revenue streams, including those subject to regulatory requirements.
Income can come from:
- service fee structures;
- Permanent contributions under Article 106 or the CIL;
- Grants, loans, endowments or bonds;
- ESCO or MUSCO – the revenue streams of energy service companies (ESCO) or multi-service companies (MUSCO) can be substantial and the operational management of these can sometimes be integrated with the operational management of the stewardship vehicle overall, depending on regulatory requirements . More below.
- Parking Revenue – Revenue from parking within the garden community can be recycled into the stewardship vehicle, depending on how parking is regulated and enforced.
- Net biodiversity gain Habitat income – i.e. any income from providing land to others in terms of providing habitat for the net biodiversity gain. Some garden villages have a surplus of strategic open spaces and these can be used for the enhancement of the net biodiversity gain, or for the provision of alternative sustainable natural green spaces, where appropriate, for other programs third parties and generate revenue accordingly.
- Sports Fields – Revenues from 3G or 4G artificial synthetic sports fields can be a potential source of revenue for a popular communal facility. Costs and benefits can potentially be shared when located near a school.
- Income from data trusts – more details below.
Data Trust Revenues
The installation of electronic communications services and other infrastructure, such as smart meters in homes and business premises, the monitoring of travel patterns and preferences through intelligent transport systems and smart ticketing, the use broadband, data regarding resident, consumer and visitor trends – for example, why customers and visitors visit local centers for retail, leisure or civic purposes or why they visit parks or community facilities – provides revenue stream opportunities for landowners, developers and data collectors within the garden community.
Data collection and monitoring is valuable and can be structured to put in place important data protection safeguards. This can be achieved by establishing a data trust – a legal structure that provides independent data management.
The Data Trust will hold or may grant access to large, diverse and high quality datasets from multiple sources. The data trust acts as the custodian or steward of that data, similar to other legal structures that are used to care for and make decisions about assets – e.g. land trusts, trust vehicles stewardship or community interest corporations that manage land on behalf of local communities and other stakeholders.
Data Trusts are a means of sharing Garden Community user data in a manner that complies with data protection law and other regulatory requirements arising from the use of data.
The Data Trust may enter into data sharing and use agreements with data collection companies and organizations wishing to collect and use data collected from residents, occupants and visitors to the garden community, as well as with data providers who collect community data. These arrangements provide the data trust, and by extension the relevant stewardship vehicle, to share data revenue.
ESCO and MUSCO integrated into management vehicles
ESCOs or MUSCOs work to capture a revenue share for the business owner(s) that would otherwise be entirely received by a utility provider. There are proven models across the UK and we have been involved in setting up and running many successful examples.
ESCOs and MUSCOs can be created and operate independently of stewardship vehicles, but can also be part of a valuable revenue stream for a stewardship vehicle and share many of the same governance structures, avoiding cost duplication staff and operations.
The other benefit of ESCOs and MUSCOs being part of a stewardship vehicle is the sustainability benefits they can bring to the garden community. Examples could include the provision of renewable technologies for electricity generation – such as solar energy, combined heat and power or air-source heat pumps; reduced water consumption and increased gray water recycling; and improved connectivity leading to carbon footprint reductions.
Given the desire to achieve “net zero” emissions, these are increasingly important areas of interest.