This case study, which refers to the compensation deal between the Municipality of Herceg Novi and construction company “Energoprojekt” for the purpose of constructing a sports hall, is one of many examples of illegal disposal of municipal land at the expense of the local budget.
Municipality of Herceg Novi and the company “Energoprojekt” from Belgrade signed the General Agreement in January 1996, in which this construction company made a commitment to build a sports hall in Igalo for the needs of the Municipality, while in return it obtained a valuable location in the city center, on the Savina hill, where it was allowed to build residential and commercial buildings and sell them in the market.
The agreement specified for “Energoprojekt” to get a permanent use of 14.5 thousand square meters in Savina, the total value of which was estimated at 6.3 million Deutche marks or 437.5 marks per square meter (which corresponds to the amount of €3.1 million or €220 per square meter).
Value of the location in Savina according to the General agreement from 1996.
It is unusual that the value of the new sports hall was roughly estimated in this agreement at €6.7 million. However, what was particularly controversial was a provision obliging the construction company to invest only €2.8 million marks in construction works on the sports hall by the end of 1996, while the rest should have been paid only after the company finished building residential and commercial buildings and sold them in the market. Since the sports hall should have been completed by the end of 1997, the Municipality of Herceg Novi completely unduly undertook the obligation to provide funds for the continuation of works of over 2.8 million marks, which was undoubtedly detrimental to the local interest and represented a favoritism of investors.
A year and a half after signing the General agreement, in October 1997, the first annex to the agreement was signed, stipulating that “Energoprojekt” had fulfilled all the obligations, and that the Municipality of Herceg Novi had provided a loan of 1.5 million Deutch marks from the government (€750,000) to continue the construction of the sports hall.
Complete case study donwload HERE (PDF)
