The Use of Financial Contributions in Practice

Abstract

Public services are an essential part of urban development projects. Usually, municipalities aim to recover the costs of these services from developers that initiate projects that benefit from these services. Many countries have implemented various value capturing instruments to be able to achieve this. However, only fragmented data is available about the use of financial contributions from developers in practice. This study focuses on the situation in the Netherlands and researches whether negotiated financial contributions are mentioned in municipal policy reports and if these are incorporated in development agreements. The research provides insight into the use of financial contributions and the results of its usage in practice. Although the legislation in the Spatial Planning Act on cost recovery is extensive, the practice of recovering above-plan costs is messy. Different types of above-plan costs are used inconsistently and interchangeably in various municipal policies. The policy analysis conducted for 50 municipalities shows that only few municipalities have stated a cost allocation for financial contributions and indicated explicit contribution sums. Municipalities can have different approaches towards the allocation of costs for off-site works, whereby some policies are more detailed than others. The contributions for above-plan costs that are mentioned have a broad bandwidth, in height and type of investments. With case studies, the implementation of these policies is analysed. The research shows that financial contributions are an important topic in negotiations in some municipalities, while others barely negotiate on it and incorporate the stated contributions from their policy in almost all development agreements. Municipalities are willing to lower contributions if developers can show their project becomes infeasible by them. It then depends on project characteristics if contributions or lowered or weaved entirely. Most municipalities do not expect that the new Environment and Planning Act, which introduces publicly enforceable financial contributions, will result in more received contributions, although they think the new legislation could potentially improve their negotiation position. This research has provided an overview of how municipalities deal with financial contributions in practice and has thereby contributed to the knowledge on the implementation of cost recovery policies in the Dutch context.