Wouldn’t it be nice if local governments, developers, and neighbors could sit together, talk through controversial large development proposals, and work to reach consensus about what would be a good project for all concerned? Wouldn’t it be nice if at least some of this process could be informal, not requiring witnesses under oath and subject to cross-examination, with no strict limits on individual conversations along the way?
And wouldn’t it be nice, should that lead to consensus, that an effective tool would be available to implement that agreement, something everyone could rely on over time?
It would be nice and the tool is available for use in North Carolina.
Some large development projects involve hundreds of housing units, often with substantial associated commercial, office, and institutional development. Some require substantial investments for the infrastructure to serve the development — roads, utilities, schools, parks, and so forth. In addition to these large-scale developments, other projects require careful design to meet the interests of the developer, the neighbors, and the local government.
Options Prior to Authorization for Development Agreements
There have traditionally been two basic choices for local governments on how to structure the process to review and apply binding agreements about how these complex and often controversial projects are developed – a legislative rezoning or a quasi-judicial special use permit. Both choices are available and widely used in North Carolina.
The first option — a legislative policy decision on a rezoning petition – has the value of allowing maximum flexibility and discretion for the local government. Apart from holding a public hearing and getting a planning board comment prior to a final decision, city or county officials can hold whatever discussions they want. They retain great leeway in deciding what course of action is in the best public interest. A key downside, however, is that the governing board can (following the same process) change their mind and a few years down the road rezone the property to something else. Or a subsequent developer can walk away from agreed-upon future contributions to pay for public infrastructure. Given the lengthy buildout period for large-scale projects, the possibility of things coming unraveled in a messy way prior to the completion of the project can be worrisome for both the developer and the local government.
The second option – using a special use permit – has the advantage of much greater certainty and predictability, but the decision-making process is much more formal and cumbersome. A very careful process must be followed with these quasi-judicial decisions in order to protect the legal rights of those affected by the decision. The decision-makers cannot engage in discussions outside the formal hearing. The decision must be based on pre-determined standards. There must be substantial evidence in the record to document whether those standards are met and to support the need for conditions that are imposed. This is a great tool in the right context, but one that does not allow negotiation, informal discussion, and building towards a consensus decision.
Development Agreement Authorized
A third option became available to North Carolina cities and counties in 2006 to bridge the gap between these two tools. Cities and counties can enter into development agreements with landowners. The authority to use development agreements, the process that must be followed, and details on their use is set out in Article 10 of Chapter 160D of the General Statutes. This report from the School of Government (The Use of Development Agreements to Manage Large-Scale Development: The Law and Practice in North Carolina) details the legal requirements for use of this option and how it was used across the state in the first three years it was been available. It also includes three brief case studies of agreements reached in Catawba County, Chapel Hill, and Wilmington, along with copies of those agreements.
With development agreements, local governments are free to use informal discussions with the landowner, neighbors, and interested members of the public in reaching the agreement. G.S. 106D-1003(a) requires that the final agreement must be approved by the governing board as an ordinance and G.S. 160D-1005 requires the same notice and hearing on a proposed agreement that is required for a rezoning. The statutes allow the agreement to be processed concurrently with a zoning text or map amendment and the terms of the agreement itself can be incorporated into the development regulations. G.S. 160D-1003(b). The agreement must be recorded with the register of deeds after approval so that all subsequent purchasers of the property are aware of and are bound by the agreement. G.S. 160D-1011.
The development agreement gives reliable local government approval to a development project. It sets the conditions that must be met, including long-term cost-sharing agreements for provision of public infrastructure to serve the development (the mandatory and optional contents of a development agreement are set out in G.S. 160D-1006). It commits the developer and the local government to meeting those conditions. It allows the parties to rely on the agreement for whatever duration the parties agree is needed. G.S. 160D-1008 sets out the enforcement mechanisms for the parties to the agreement.
This approach allows the flexibility, informality, and discretion of the legislative process to be used, but also results in a reliable, binding, contractual agreement. The government and the owner are both assured of long-term enforceability.
Conclusions
Development agreements offer an important opportunity, but one that must be used carefully to be successful. The developer must provide details on the scope and design of the project. Substantial investment in production and analysis of technical information (such as traffic studies, public service demands, infrastructure design, environmental impacts, and fiscal implications) is often necessary. The agreement itself can be a complicated legal document requiring substantial time of government and private attorneys.
The negotiation process can be lengthy and demanding upon staff, advisory boards, elected officials, applicants, neighbors, and the public. But the payoff can likewise be substantial. It allows an open discussion and negotiation among the public and private parties interested in and affected by large developments. It allows a consensus to be reached on the appropriate scale and design of development and the conditions needed to prevent adverse public impacts.
For the most part only relatively large and complicated projects will justify the time and effort needed to successfully negotiate and adopt a development agreement. The existing zoning and subdivision review process, along with standard cost-sharing agreements for utilities, are adequate to deal with routine projects.
Development agreements offer an effective way to reach a broad, reliable, and implementable resolution of the challenging issues often raised by more substantial and complex development proposals, especially those involving off-site public improvements or high cost, long-term investments. For these projects the development agreement offers a reasonable and effective alternative for meeting the needs of the local government, the land owner, and the public.
