Leisure, transport and community projects worth millions of pounds could be scrapped because recession-hit developers are refusing to hand over the money they promised Birmingham City Council in return for being granted planning permission.
At least £13million is at risk of being withheld as property developers begin to break Section 106 agreements – legally binding contracts requiring builders to pay cash sums to fund projects which are of benefit to the community.
Under planning law, councils can negotiate the payments in return for approving development projects.
The community schemes can be anything from pelican crossings, roundabouts, improving local parks and providing children’s play facilities to building new classrooms for local schools.
Although sizeable sums, they are generally a small percentage of the total value of the project.
At the moment there are 350 “active” 106 agreements in Birmingham, worth over £50 million.
Seen by cynics as blatant bribes, they are a way of getting firms to compensate for the adverse impact their schemes may have on local communities.
But they are also a major source of income – getting the private sector to pay for infrastructure improvements, leisure and transport facilities the council would not otherwise be able to afford.
Substantial amounts of 106 monies have already been paid or promised to the council to help fund transportation projects such as the New Street Station Gateway scheme and the Metro tram extension.
But councillors have been told evidence is emerging of firms either delaying payments or attempting to avoid paying altogether with the council was currently owed more than £24 million in 106 payments, but has so far only received about £11 million.
Director of regeneration and planning, Clive Dutton, told councillors the outlook was gloomy.
He said while the big strategic schemes were not at risk, other smaller developments were less safe.
“We are beginning to see developers who were given planning permission through a 106 agreement but are now coming back to renegotiate these agreements,” he said.
Projects where the council is actively seeking payment include £142,000 for improved children’s play facilities in Sutton Coldfield, £20,000 to improve Selly Oak Park and £33,000 to provide more public open space in Harborne.
But Mr Dutton said they stood a good chance of getting the money in the long term because 106 agreements were a legally binding charge on the land.
“Even if the developer goes bust whoever takes the land over is liable for the charge,” he said.
“So planners end up negotiating with the administrators, but as the biggest asset is the land we get it eventually from the subsequent developer.”
Planners are now getting tough with developers and passing the case straight to its legal services department within 14 days to speed up getting the money.
Mr Dutton said: “There isn’t a problem yet, but some developers are having to re-design the character of their sites.”
He added: “If you have a downturn in the economy there has to be an upturn and what’s important in our role is to hold our nerve and we will make decisions that are in the best long term interests of Birmingham.
“We look at every issue on its own merits with a sympathetic ear.
“But it will be an iron fist in a velvet glove because what we would not want to do is lower our standards to suit the economic conditions because these are buildings we are talking about.”