The function and its origin
The principle that land must be serviced before it is built on has consolidated progressively in Italian planning law, and the obligation to pay infrastructure charges dates from the 1967 statute that introduced it. The component measured against construction cost was added a decade later, and both regimes have since been consolidated into article 16 of the building code.
That genesis explains the structure of the contribution. It is not a single levy but two components with distinct logics, and the infrastructure charges answer the first of the two questions: how much does this project weigh on collective provision.
Primary and secondary infrastructure
Article 16 identifies infrastructure works in paragraphs 7, 7-bis and 8, distinguishing two categories. The distinction has operational and not merely descriptive effect.
| Category | Typical content | Paragraph |
|---|---|---|
| Primary infrastructure | Roads, drainage, street lighting and the other works the rules list | 7 and 7-bis |
| Secondary infrastructure | Schools, places of worship, social and cultural centres and the other works the rules list | 8 |
The distinction is operational rather than descriptive, and matters for one precise reason: only primary infrastructure works may be carried out directly by the holder of the permit under the simplified arrangements the rules provide. Only one of the two categories falls within the offsetting mechanism.
Primary infrastructure serves the plot and the project directly; secondary infrastructure serves the community over a wider area. Different delivery regimes follow from that difference of scale.
Who sets the rate
This is the point that makes any national reference impossible, and it is worth restating precisely. The charges are set by municipal resolution.
The incidence of primary and secondary infrastructure charges is set by resolution of the municipal council, based on the parametric tables the region defines by class of municipality. No national table can therefore stand in for it.
The chain therefore has three levels. National law defines the mechanism and the categories of works. The region defines the parametric tables by class of municipality. The municipality resolves the rate applicable in its own area.
It follows that no figure read elsewhere is usable for the municipality where you are working, and that two identical projects in different municipalities can attract appreciably different charges. The municipal resolution in force and the regional tables it refers to are the only usable sources for an estimate.
Article 16 also provides for a further charge related to the increase in value that land and buildings acquire through planning variations, derogations or changes of use. This situation arises frequently in conversion projects and should be checked in the municipal resolution.
When it is paid
The portion of the contribution relating to infrastructure charges is paid to the municipality on issue of the permesso di costruire and, at the applicant's request, may be paid in instalments. The timing differs from that of the construction cost portion.
Two elements bear directly on the project's cash flow. They concern the timing and the possibility of instalments.
The first is the timing: the outlay falls on issue of the consent, therefore before work starts and at a stage when the project has generated no revenue. This is a substantial difference from the construction cost component, which follows its own timing.
The second is the instalment facility, which is a right on the applicant's request but whose terms and security are set by the municipality. The conditions applied by the competent municipality should be checked at feasibility stage, because they affect the initial funding requirement.
Offsetting through works
This is the most significant mechanism from a construction economics standpoint, and the least well known. It is also the least well known.
By way of total or partial offset against the amount due, the holder of the permit may undertake to carry out the infrastructure works directly, on the terms and against the security set by the municipality, with the works so carried out passing into the municipality's inalienable public assets. The undertaking must be given formally.
The mechanism therefore converts a monetary obligation into an obligation to perform. The works carried out do not remain with the private party: they pass into municipal ownership, and it is that transfer which justifies the offset.
A simplified regime applies to primary infrastructure. Within implementing plans and equivalent instruments, and for projects directly implementing the general planning instrument, direct delivery of the primary infrastructure works serving the project, where their value falls below the EU threshold, falls to the holder of the permit and does not require the public procurement procedures of the contracts code.
The procedural constraint should nevertheless be known so as not to fall foul of it. The national anti corruption authority has clarified that, for offset works, the estimated value must be calculated by cumulatively taking into account all primary and secondary infrastructure works connected with the works covered by the permit, even where they belong to different lots.
The effect is that the threshold is tested not on the individual lot or the individual work but on the whole of the infrastructure connected with the project. Fragmenting the award does not move the threshold, and exceeding it brings the project back within public procurement procedures.
Assessing whether offsetting is worthwhile
The decision is an exercise in construction economics rather than procedure, and comes down to comparing two figures. It comes down to a comparison between two quantities.
On one side the offsettable amount, meaning the portion of charges that direct delivery avoids paying, determined under the applicable criteria. The amount is fixed by the municipal resolution.
On the other the actual cost of delivering the works, including design, works supervision, safety costs, the security the municipality requires and final inspection, together with the financing cost of funding them up front. The comparison must be made on like quantities.
Three elements tend to be underestimated in that comparison. The security the municipality requires has a cost and ties up credit capacity. Final inspection and taking over by the municipality run to timescales the private party does not control. And the works must meet the municipality's construction standards, which may be more onerous than those the private party would adopt.
Offsetting is therefore worthwhile where the operator has the capacity to deliver those works efficiently and where the infrastructure serves the project in any event. It is not worthwhile as a mere financing deferral.
Where the charges sit in the project budget
Infrastructure charges do not belong to the cost of the works and do not appear in the bill of quantities. They belong to the other elements of the project, and placing them correctly in the budget is a condition of its reliability.
In public works the formal home exists: the quadro economico, in the section covering the sums at the contracting authority's disposal. In private work the home has to be built, and its absence is the most frequent cause of divergence between the estimate given to the client and the actual spend.
Three points for building the budget follow. They concern isolating the item, the timing and the offsetting.
The item should be isolated rather than aggregated with taxes or professional fees, because it follows its own timing and derives from a different source. It follows its own timing and its own source of determination.
The timing should be respected: outlay on issue of the consent for the charges, during construction for the construction cost component. Presenting both components as a single initial payment overstates the funding requirement at start up.
Any offsetting scenario should be presented as an alternative rather than a reduction: it substitutes an obligation to perform for an outlay, and the actual cost of performing must be estimated separately. It substitutes an outlay with an obligation to perform.
The most frequent errors
Estimating the charges from figures read elsewhere is the first, and produces budgets the municipal determination contradicts. The municipal determination then contradicts the budget.
Placing the outlay at the wrong point in the cash flow is the second. The charges are paid on issue of the consent, not on completion.
Testing the offsetting threshold on the individual lot is the third, and contravenes the cumulation test the supervisory authority has clarified. The aggregation rule provided is thereby breached.
Overlooking the additional charges linked to variations, derogations or changes of use is the fourth, and is the item conversion projects discover latest. It is the item that surfaces latest and with the greatest effect.
Note: the legislative references in this page relate to Italy and are current as at the date of publication. Amounts are set by municipal resolution based on regional parametric tables, and the rules on offset works intersect with the public contracts code: the resolution in force in the competent municipality and the regional legislation should be consulted before any operational use.