Municipal finance sustainability: a new territorial management instrument to redistribute surplus-values accrued by plans

Abstract

The research reported in this article fits the main goals that guide the revision of the Land,Territorial Ordinance and Urbanism Act, currently under way in Portugal. One of the maingoals searched by this revision consists in the inclusion of new territorial managementinstruments in plans that support the economic and financial sustainability of urbandevelopment operations.Considering that planning decisions concerning zoning delimitation and urban indexes settledin plans engender land unearned increments (surplus-values), it is legitimate that municipalpowers recapture them, and reassign them later on to social purposes framed by themunicipalityŽs urban goals, namely in urban regeneration and social housing grounds. Withinthis scope it is proposed the collection, by each municipality, of a 30% fee on the buildingcapacity assigned by plans to new buildings aimed at trade, industry, tourism or servicesdeducted by the value of non-buildable land, and respective costs on urban infrastructure andmunicipal development charges.This new territorial management instrument is applied, as a case study, to the interventionarea of the Urban Development Plan of the Planning Unit 11 (UP 11) of the municipality ofLagoa (Algarve), according to the following methodology: computation of (i) the nonbuildableland surface; (ii) the urban infrastructure costs; (iii) the municipal developmentcharges; (iv) the costs of non-buildable land, according to land trade market prices/m2; (v) theconcrete net building capacity of each planning and management operational subdivision, forrespective profitable uses; (vi) the base value this fee falls on; and (vii) the proper value of thefee to collect.The implementation of this new territorial management instrument is able to strengthenmunicipal finance, and to foster municipalitiesŽ economic and financial sustainability; it clearsup the origins and applications of municipal funds from urban development processes; and itgrants that surplus-values accrued by most profitable urban operations are allocated on behalfof populationŽs general social interest.