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Negotiate a win-win relationship with private developers

Andrew Bremer, AICP | with 0 Comments


Negotiate a win-win relationship with private developers

Is private development picking up in your community―or do you wish it would? When that proposal lands on your desk, will you be ready to craft a Developer’s Agreement that protects your community, while still encouraging the project to move forward?

In the best case scenario, a developer builds a project that’s expected to increase a community’s tax base. Of course, tales abound of unsuccessful projects where cities are left with unfinished projects or poorly designed infrastructure. A comprehensive Developer’s Agreement establishes expectations and offers protection for all involved.

Set the Stage for Success
Planners and engineers work with their clients, developers and their legal teams to forge these agreements. It’s important to set the stage for mutual success. Each side must work at developing trust as the negotiations proceed. You need to have a well-defined process and consistently applied policies. Developer’s Agreements can help achieve those goals.

A community’s engineer and/or planner can be part of the team that prepares the agreement, typically with final review completed by each side’s attorneys. A successful outcome can lead to an increased tax base for the community, while providing financial rewards for the developer. During negotiations, each side should be sure to clarify their expectations and understand their obligations.

Developer’s Agreements are a best practice when creating Tax Increment Finance Districts.

Financing a Project
When tax incremental financing (TIF) is involved, developers typically work with municipalities in one of three ways:
  1. Municipality provides a loan to the developer
  2. Municipality provides grant dollars to the developer
  3. Developers are repaid a specified amount of the tax increment created by their project over a pre-agreed-upon time frame – this is referred to as “pay-as-you-go”
The first and second options provide the developer with upfront financing at the start of their development project, while the third does not. Sometimes a combination of these options are used to complete a project. In all cases the municipality should negotiate guarantees of the developer, such as property assessment targets, letters of credit, bonds, or a mortgage security. 

Developer’s Agreements allow a community to promote economic development while still protecting their interests. They can be customized to meet a community’s specific needs and goals.
 
Andrew Bremer, an award-winning senior planner, provides a variety of community planning services for clients across the Upper Midwest, including the creation of Tax Increment Finance Districts and Developer Agreements. Contact Andrew for more information on Planning

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