Proving the HART Credit Via a Pilot Programme

Proving the HART Credit Via a Pilot Programme

A pilot scheme to prove concept and refine procedures

The programme should be enacted only after appropriate consultation, but also with the benefit of a pilot scheme(s) that prove its concepts. Key concepts to be proven are:

Flexibility, combination with other resources, and additionality.
Allocation mechanism viability: testing the delivery system.
Market mechanisms: selling the HART Credit for a discount.
Diversity of geography, use, and tenure.

Piloting a tax: use of a proxy

Under UK and EU law, one cannot pilot a tax. Instead the funding delivery will be simulated via a cash-payment proxy: a binding promissory note from the appropriate body of government.
HMRF is suitable as a proxy funding.
Cash payment proxy will demonstrate market involvement and factorability, and will allow programme designers to work out the nature of suitable instruments and the allocation/ award sequence.
Pricing will not be proxied because a cash payment is taxable, whereas actually HART Credits will be net of tax (and hence effectively tax-exempt). Thus, actual HART Credits will sell for higher value (lower discount) than the cash payment proxy.

Specific test case: Liverpool as a proxy for northern cities

Targets: Liverpool as proxy

The pilot will operate through the Fiscal Initiatives Board.
The nine Pathfinders are its consultation group.
The Merseyside Pathfinder area covers Sefton, Liverpool, and the Wirral (a large and diverse metropolitan area).
In addition to Liverpool as proxy for low-value regeneration areas, there will be developed a conceptual demonstration in high-value/ affordability areas.

Allocators

The Housing Markets Renewal Fund (HMRF) can be used as proxy for credit fulfilment with the Merseyside Pathfinder as proxy for the HART Credit allocator.
The HMRF board will approve Merseyside's pilot allocation plan.

Pilot programme award sequence

In consultation with the HMRF allocation board, the Merseyside Pathfinder will solicit proposals.
Developers (for-profit, non-profit, or teams) will submit competing proposals and compete the specific site / project (within the target area).
The Allocator will award the site and issue the Credit Proxy Award.
The Credit Proxy Award will be sold to an investor (who puts up cash capital), and the financing will go forward.
The planning permission approval will be obtained and ground will be broken.

Proving the concept

Ground-breaking constitutes proof of concept — because the scheme will be moving forward based on a forward pledge (of the Credit Proxy Award) without government having spent any cash.
Proof of concept will achieved on or before 31 March 04.

Funding mechanic

The pilot scheme will be funded with £4.00 million (of which 10% for SPO's) of Credit Proxy Award.
Since the Merseyside Pathfinder will already be receiving HMRF, the Credit Proxy Award can be funded by pledging to plus-up future HMRF allocations pound-for-pound (out of the HMRF 04 through 06 award years).
The Credit Proxy Award will be evidenced by a binding promissory note from the relevant body of government (form and body to be determined) that can be pledged/ sold/ collected upon.