Overview

The scarcity and high cost of available land in various regions of the State, where public improvements and developments are needed, along with the inefficiency in utilizing the land from both planning and economic viewpoints due to the nature of some public improvements and developments, necessitate and justify, where feasible, the sale or lease of air rights over existing and proposed public improvements. The funds gained through the sale or lease of air rights can be used for public improvements and developments or combined with other compatible, desirable, and lawful uses constructed on such sold or leased air rights. This approach reduces the cost of public improvements and developments and leads to more effective land utilization from both planning and economic perspectives, while also placing the non-public portion of any such improvement back on the tax rolls.

Terms Used in the Act and Their Meanings

1. Public Agency or Public Agency of the State: Refers to various counties, townships, cities, villages, and incorporated towns, school districts, sanitary districts, boards of education, park districts, housing authorities, public building commissions, or any other municipal corporation or governmental agency of the State, now or hereafter created, whether specifically enumerated herein or not.

2. Governing Body: Includes a county board, city council, board of trustees, board of managers, board of commissioners, or any other body or board, by whatever name it may be known or designated, charged by law with governing a public agency.

3. Combined Occupancy Structure: Refers to any improvement on real property or any interests therein, including fee interests, leaseholds, easements, space rights, or air rights, containing a public improvement in combination with other compatible, desirable, and lawful non-public uses. It also refers to compatible, desirable, and lawful non-public uses constructed in whole or in part over an existing public improvement, designed to increase the efficient utilization of available land areas from both planning and economic viewpoints.

4. Developer: Any private individual, partnership, joint venture, trust, corporation, or other legal entity, or any combination thereof, approved by the governing body of a public agency as qualified and eligible to enter into agreements with a public agency for the purchase or lease of air rights and the construction of any combined occupancy structures, including facilities and appurtenances. Such agreements are subject to the approval of the governing body of the public agency.

5. Real Property: Includes lands, waters, rights in lands or waters, structures, franchises, and interests in land, including air space rights, and any other things and rights usually included within the term. It also encompasses interests in such property less than full title, such as easements, perpetual, permanent or temporary rights-of-way, uses, leases, licenses, and any other incorporeal hereditaments in every estate, interest, or right, legal or equitable.

6. Public Portion or Public Portion of a Combined Occupancy Structure: Refers to the part of a combined occupancy structure designed, constructed, and improved for the sole and exclusive use and occupancy by a public agency for public use or public purpose, including facilities and appurtenances.

7. Fair Use Value: Refers to the fair cash market value of air rights, sold or leased, over existing or proposed public improvements or developments when used for the non-public portion of a combined occupancy structure.

Conditions for Developers

Any developer who purchases or leases air rights from a public agency over an existing public improvement or development must agree with the public agency, as a condition of such purchase or lease, to construct the non-public portion of a combined occupancy structure in accordance with the development plan prepared by the developer and approved by the public agency. Such agreements may be made a covenant running with the land and shall be enacted as a covenant running with the land by ordinance or resolution of the governing body of the public agency.

Any developer who purchases or leases air rights from a public agency over a proposed public improvement or development must agree with the public agency, as a condition of such purchase or lease, to construct or cause to be constructed both the public and non-public portions of a combined occupancy structure in accordance with:

1. The plan of development for the public portion of the combined occupancy structure prepared by the public agency and the plan of development for the non-public portion prepared by the developer and approved by the public agency, or

2. The plan of development for both portions prepared by the developer and approved by the public agency.

Such agreements may be made a covenant running with the land and shall be enacted as a covenant running with the land by ordinance or resolution of the governing body of the public agency.

Public Agency Responsibilities

The public agency may negotiate with developers for proposals for the sale and purchase or lease of air rights and consider all proposals submitted for the construction of a combined occupancy structure or any portion thereof. The public agency must assess the financial and legal ability of developers to carry out their proposals. At a public meeting, which must be announced in a newspaper of general circulation within the territorial limits of the public agency at least 15 but not more than 30 days prior to the meeting, the public agency may accept proposals deemed in the public interest and in furtherance of the purposes of this Act.

The construction of the public portion of any combined occupancy structure shall be let upon open competitive bidding to the lowest responsible bidder. The sale or lease of air rights must be made at no less than fair use value. Periodic payments may be made by the public agency to the lowest responsible bidder as work progresses. The developer selected to construct a combined occupancy structure, or any portion thereof, shall furnish a performance and payment bond to the public agency. This bond serves as security for the faithful performance of the contract and the payment of all parties legally owed by the developer or contractor for labor, materials, facilities, or services used in performing the work. The bond amount and surety must be approved by the public agency.