By Bill R. Shelton, CEcD
As discussed in the last issue of The Competitive Community (August 29, 2016), a Development Agreement between the local jurisdiction (usually a city) and the person who owns or controls the property (usually a developer) helps to reduce the risks associated with economic development projects for the community and increases the project’s chances for success. The development agreement also protects the community’s interest by outlining the benefits the community will receive by participating in the project.
The development agreement is often called “The Master Agreement,” but it is not a generic, master agreement for all developments. Instead, it is unique to the specific development to which it relates and spells out numerous obligations and responsibilities of both parties.
Here are three ways to make the development agreement work even more effectively for the local government by engaging the developer to help accomplish the community’s economic development goals. Two of the ways are supplemental agreements to the master development agreement and the third is a structured monitoring procedure. All are designed to make enforcement easier.
Execute a Performance Agreement
The performance agreement, also called “economic development agreement,” is a written enforceable contract that is typically used when the development involves any types of financial or tax incentives or special entitlements from local governments. It includes binding covenants for the benefit of the government entitles providing the incentives. The benefits for the public are in consideration for the public funds used in the incentive grants and may include number and types of jobs created by the development, property and sales taxes generated, environmental mediation and public improvements. In addition, this agreement also details the monitoring procedures used to validate compliance with all agreements and penalties for non-compliance.
Ensure Community Concerns Are Addressed With a Community Benefits Agreement
The Community Benefits Agreement (CBA) ensures that the concerns of community groups, particularly those neighborhoods affected by the development, have a voice in shaping the project to fit their needs. Concerns such as historical preservation, traffic, and environmental issues such as noise and bright lights can be addressed in the CBA.
As a part of the Master Development Agreement, both the Performance and the Community Benefits Agreements are legally binding and enforceable.
For the purposes of accountability, a clearly defined monitoring procedure is a key part of the process. The monitoring procedure determines and verifies that the company is in compliance with the provisions of all agreements by answering these questions:
• How will the community know it is receiving what it paid for?
• How will the community know that the company is complying with the terms of the agreements?
• How will the community know when all agreements are complete and it is time to determine closure?
Monitoring good agreements limits risks, shows that the community is a responsible steward of public funds and makes transparency, reporting and enforcement easier.
By engaging the private developer to help accomplish economic development objectives, the community is assured that it has maximized the benefits received from the investment of incentives and has made a sustainable investment in the community’s future.