Open Management is closely linked with Open financing: a separate financing based on the level distinction. In the nineties the SAR already researched this topic and recognised the wise implications. Within a neighbourhood financed by the municipality, the various investors and managers have the right to finance their investment in the base building in their own way. But, at the parcelling out stage in development areas, agreements are made about categories of financing. This is, of itself, not a new development. Within a base building, residents can decide for themselves about how they want to finance. That is new.
To explain this way of financing, let’s take a normal municipal extension. Let’s follow the main plan of the levels of decision making. The difference in the number of years that a fit-out lasts relative to a base building means that the repayment terms also differ. In addition, there is very little residual value after repayment of fixtures and fittings, while a base building, the supporting structure and foundation, technically has a much longer life span than the usual financial terms of 30 to 40 years. A base building can be seen as an investment while with fixtures and fittings it is more a case of an expense that is completely written off. In Japan, a technical life span of 200 years has been determined by law for a base building included as the basis for a government contribution.
City Level (urban fabric)
At city level, the community invests in common amenities. In between, the urban fabrics for different neighbourhoods are developed. For each neighbourhood, a budget of the exploitation is drafted which includes a contribution from the city on the expenditure side for the land acquisition and the inter-neighbourhood facilities; within the neighbourhood for its own planning, construction and management of the urban fabric, such as ground works, artworks, paving, drainage, lighting and greenery. The income side includes the proceeds from the allocation of land to individuals and institutions, according to the parcelling out of the urban fabric plan. Each neighbourhood is a development domain and therefore has its own exploitation, with extremely long investment periods, maintenance and depreciation. This makes it possible to give local officials, councillors, residents, workers and/or owners insight into what is happening financially. The plots to be parcelled out are the new domains at base building level.
Construction Site Level (base building)
Every ‘building owner’ develops his own project. The expenditure side includes the cost of the land (in which all the costs of the higher levels have been processed) and the costs for preparation, building, maintenance and management of the base building. The incomes side includes the proceeds from the allocated indoor units: homes, offices, shops, schools etc. Each building site has its own exploitation with a medium term investment, maintenance and depreciation. Therefore the financiers can be explicitly informed of how the base building will develop economically in the coming years. As collateral for the loan, the base building is transparent in terms of value, reducing the risk of the money lender. The indoor units to be allocated stem from the parcelling out of the base building and form the domains at fit-out level.
Every household, business or institution makes its own fit-out plan. In the purchase price or rent of the base building space each contributes to the provisions of early mentioned levels and adds to that its own planning, installation and maintenance costs of the fit-out. These investments are relatively short term: fixtures and fittings have a life span of less than 25 years. The economic life span may be equally long, but certainly not longer.