Development Agreements: A Primer

Municipal Law Alert, May 2008

INTRODUCTION

A Development Agreement is a contract between a municipality and a real estate developer that governs the land use allowed in a particular project. The agreement is a planning tool that allows a municipality to control development within its boundaries and ensure it is advancing its local planning policies.

A well-crafted agreement will provide a useful roadmap for the developer and the municipality.[1] Development Agreements are used in residential, commercial and industrial developments. A residential development agreement generally focuses on infrastructure, such as streets and utilities. A commercial or industrial development agreement addresses the same issues and in addition deals with tax increment financing and real estate tax agreements.

WHY DEVELOPMENT AGREEMENTS SHOULD BE USED

As developments move into Western Wisconsin’s smaller communities, the municipalities can have parameters of their smart growth planning. For example, it may be very easy to stray from the comprehensive land use plan when a business employing 200 people comes to town. Development Agreements should be used as a tool to insure the proposed development follows the overall municipal plan. Using Development Agreements encourages communities to think ahead, in a comprehensive manner, about the impacts of development within their jurisdiction.[2]

Developments are an economic risk, not only to the developer, but also to the municipality. The developer risks losing its initial investment if the government withholds approval of a development or changes a requirement halfway through the development’s construction. The local residents risk losing open space, other development opportunities, increases in traffic and other aesthetic and environmental burdens that come with development. Municipalities use Development Agreements to address the new demands the development will have on municipal resources, roads, schools, sewer and police protection.[3]

Development Agreements lessen the risks to all parties. They provide developers with greater certainty regarding the municipality’s expectations and allow communities to establish their own requirements to limit their exposure to the impact of the development. Development Agreements allocate the benefits and burdens of projects predictably and in a controlled setting.[4]

Development Agreements have three defining characteristics: (1) negotiations regarding appropriate land use; (2) greater flexibility for municipalities imposing conditions and requirements on projects; and (3) assurance that, once approved, there will be no surprises for either the developer or the municipality during the process. A rational nexus between the public benefits offered and the project impacts should be demonstrated in all formal or informal Development Agreements.


[1] Development Agreement Manual: Collaboration in Pursuit of Community Interests, p. 41 (2005).

[2] Development Agreement Manual: Collaboration in Pursuit of Community Interests, p. 25 (2005).

[3] Goodwin Proctor, Environmental Law Advisory (April 2002).

[4] Goodwin Proctor, Environmental Law Advisory (April 2002).

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