Are you a representative of a community that has long struggled with inadequate public infrastructure?
Does your municipality lack amenities or transport infrastructure?
Is the financing of project construction triggered by, among other things, new residential or non-residential construction?
If the construction of new infrastructure of the municipality is beyond its financial possibilities, it is advisable for the municipality to establish rules that will regulate the principles of cooperation between the municipality and investors (including individuals who have the intention to build their own housing), as well as the financial participation of the investor in the development of public and transport infrastructure.
Municipal rules for dealing with investors
The adoption of the rules is an effective way to transparently regulate the relationship between the municipality and investors so that mutual negotiations lead to the satisfaction of both entities. Through the principles, the municipality can address a number of problems that are almost always associated with new housing development – such as water and sewerage capacity, lack of public spaces and green spaces, inadequate transport infrastructure and parking, or lack of school places and facilities. The principles can thus determine what share of the cost of building public infrastructure investors will bear, depending on the nature of the planned project. If the municipality does not have a policy in place, the municipality must bear these costs exclusively on its own, or it can negotiate an individual agreement with the investors. In this case, however, the municipality’s negotiations will be more complex, non-transparent and the municipality will not be legally entitled to the contribution. .
If the document is adopted, the municipality conducts negotiations with the investor, the rules of which are predetermined by the principles. The principles form the main framework of the agreement, the negotiation process and the limits for both parties. The result of these negotiations is the conclusion of a cooperation agreement, in which the investor may commit to pay a contribution in the amount calculated in accordance with the principles, or may commit to other non-monetary benefits – to carry out a specific development at its own expense, such as the construction of a sports ground, the construction of a school or kindergarten, the adoption of adaptation measures, the construction or improvement of a public space, or even the transfer of part of the development from its project to the ownership of the municipality. The municipality may also negotiate with investors in advance, on the basis of the principles, a possible amendment to the development plan and a corresponding contribution for the implementation of such an amendment. The value of the investor’s contribution should be appropriate to the nature and size of the project. If the municipality does not adopt the principles, it risks being ineffective, unsuccessful or even inactive in its negotiations with developers, which may lead to a waste of municipal budget funds.
Process for adopting rules for dealing with investors
The principles for negotiations with investors are adopted by the council in its independent competence by resolution, and the principles are attached to the resolution. The document must subsequently be published to make it clear that the rules are binding. The exact form and format of the document is not specified, but the rules should reflect the needs of the specific municipality. The municipality should monitor its evolving requirements over time and modify the rules for dealing with investors as appropriate in response.
What benefits they will bring to the municipality
Through the rules, the municipality can take care of its sustainable development and protect the public interest in the preservation and development of the settlement. The adoption of the principles can thus be recommended even for small municipalities. By adopting rules, a municipality can make its priorities for building new or repairing existing amenities and transport infrastructure known to investors and residents, which in turn can strengthen residents’ confidence in the municipality’s leadership and management.
If your municipality does not already have a policy for dealing with investors, consider adopting one. Through such policies, the municipality can contribute to the realization of quality construction that also makes sense from an urban planning perspective.
If you would like more information in this regard, please do not hesitate to contact us.
This article is for informational purposes only and does not constitute legal advice or guidance for any particular case.