The TDR Handbook: Designing and Implementing Transfer of Development Rights Programs

LAND USE PLANNING | LAW

Nelson Pruetz

Foreword by Dwight H. Merriam

Woodruff

The TDR Handbook is the first comprehensive guide to transfer of development rights programs, from the thinking behind them to their implementation, including statutory guidance, model ordinances, suggestions for program administration, and comparisons with other preservation programs.

“The TDR Handbook will be the primary source on the topic for years to come. The authors provide detailed explanations of the strengths and weaknesses of transfer of development rights programs, illuminated by useful, insightful case studies with a range of applications from urban design and historic preservation to farmland protection and environmental management.” —Frederick Steiner, FASLA, Dean, University of Texas School of Architecture “The authors have succeeded in making the tricky concepts of TDR understandable and accessible to readers ranging from the casual interested citizen, to experienced planners and practitioners of TDR, to elected policy makers. Especially worthwhile is the thorough review and analysis of the demand and supply dynamics of TDR economics—a most important ingredient to creating effective markets in transferable development rights.” —Darren Greve, manager of King County, Washington’s TDR program

Arthur C. Nelson, FAICP, is Presidential Professor of City & Metropolitan Planning and Director of the Metropolitan Research Center at the University of Utah. Rick Pruetz, FAICP, was City Planner of Burbank, California before becoming a planning consultant specializing in TDR workshops, feasibility studies, and ordinances. Doug Woodruff is a landscape architect in Salt Lake City.

Cover image: Urban sprawl taking over agriculture in Ventura County, California by Rich Reid, National Georgraphic Collection, Getty Images ® Cover design: Maureen Gately

Washington | Covelo | London www.islandpress.org All Island Press books are printed on recycled, acid-free paper.

TDR Handbook

“The TDR Handbook is thoroughly comprehensive, addressing virtually every conceivable issue about TDR. It provides copious examples and explanations of when to use TDR in short, readable chapters, particularly for urban redevelopment, which few sources have previously explained. It should be on the shelf of every public official, attorney, and planner dealing with preservation of open spaces, natural resources, and the built environment.” —David L. Callies, FAICP, Kudo Professor of Law, University of Hawaii, author of Regulating Paradise: Land Use Controls in Hawaii (2010)

The

Advance Praise for The TDR Handbook

The

TDR Handbook Designing and Implementing Transfer of Development Rights Programs

Arthur C. Nelson, Rick Pruetz, and Doug Woodruff with James C. Nicholas, Julian Conrad Juergensmeyer, and Jonathan Witten

the tdr handbook arthur c. nelson, faicp rick pruetz, faicp doug woodruff, rla with james c. nicholas julian conrad juergensmeyer jonathan witten foreword dwight h. merriam, faicp

The TDR Handbook Designing and Implementing Successful Transfer of Development Rights Programs Arthur C. Nelson, FAICP Rick Pruetz, FAICP Doug Woodruff, RLA With

James C. Nicholas Julian Conrad Juergensmeyer Jonathan Witten Foreword

Dwight H. Merriam, FAICP

Washington | Covelo | London

© 2012 Island Press All rights reserved under International and Pan-American Copyright Conventions. No part of this book may be reproduced in any form or by any means without permission in writing from the publisher: Island Press, Suite 300, 1718 Connecticut Ave., NW, Washington, DC 20009 ISLAND PRESS is a trademark of the Center for Resource Economics. Library of Congress Cataloging-in-Publication Data The TDR handbook : designing and implementing successful transfer of development rights programs / Arthur C. Nelson . . . [et al.]. p. cm. Includes bibliographical references and index. ISBN-13: 978-1-59726-980-3 (cloth : alk. paper) ISBN-10: 1-59726-980-8 (cloth : alk. paper) ISBN-13: 978-1-59726-981-0 (pbk. : alk. paper) ISBN-10: 1-59726-981-6 (pbk. : alk. paper) 1. Development rights transfer—United States. 2. Development rights transfer—United States—Case studies. 3. Land use—United States—Planning. 4. Environmental protection—United States—Case studies. 5. Historic preservation—United States—Case studies. I. Nelson, Arthur C. HT169.9.D4T37 2011 333.73′15—dc22 2011009467 Printed using Electra Text design and typesetting by Karen Wenk Printed on recycled, acid-free paper

Manufactured in the United States of America 10 9 8 7 6 5 4 3 2 1 The materials contained herein represent the opinions of the authors and editors and should not be construed to be those of either the American Bar Association or the Section of State and Local Government unless adopted pursuant to the bylaws of the Association. Nothing contained herein is to be considered as the rendering of legal advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. These materials and any forms and agreements herein are intended for educational and informational purposes only. Keywords: affordable housing, density transfer charge, downtown revitalization, farmland preservation, habitat conversation, historic preservation, land use law, land use planning, model ordinance, neighborhood preservation, purchase of development rights (PDR), state enabling statutes, transit-oriented development, urban infill, wetland preservation

We dedicate this book to the pioneers of modern transfer of development rights practice, in particular but in no particular order: B. Budd Chavooshian John Costonis Madelyn Glickfeld Royce Hanson Don Hagman John Stokes Richard Tustian with sincere apologies for overlooking everyone else who has helped move this important and evolving planning innovation into the mainstream of practice.

contents

acknowledgments

xi

foreword

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prologue: a simple concept

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PART 1

1

Chapter 1 How TDRs Work

3

Chapter 2 Comparing TDRs to Other Preservation Solutions

15

Chapter 3 The Economics of TDRs

27

Chapter 4 Purchase of Development Rights

41

Chapter 5 Density Transfer Charges

45

PART 2

51

Chapter 6 TDRs and the Planning Connection

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Chapter 7 The Seven Steps of TDR Planning

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Chapter 8 Designing Sending Areas

75

Chapter 9 Designing Receiving Areas

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PART 3

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Chapter 10 Legal Issues

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Chapter 11 A Review of State Statutes

105

Chapter 12 TDR Program Administration

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PART 4

129

Chapter 13 Programs by Purpose

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Chapter 14 Farmland Preservation Case Studies

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Chapter 15 Farmland and Environmental Preservation Case Studies

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Chapter 16 Environmental Preservation Case Studies

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Chapter 17 Rural Character Preservation Case Studies

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Chapter 18 Historic Preservation Case Studies

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Chapter 19 Urban Design and Revitalization Case Studies

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Epilogue: The Promise and Future of TDRs

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appendix a: a model tdr ordinance

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appendix b: sample tdr form

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appendix c: state listings of tdr programs

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glossary

285

notes

287

references and selected bibliography

295

about the authors

303

contributors

305

index

307

acknowledgments

We gratefully acknowledge that much of the information in this book originated with colleagues with whom many of us have collaborated on plans, studies, presentations, and publications, including Mike Pelletier, Chris Duerksen, Noah Standridge, Bill Fulton, Chris Williamson, Aaron Engstrom, Donald Berger, Tom Daniels, Cindy Nickerson, Michael Kaplowitz, Patricia Machemer, Jeff Dorfman, and Jamie Baker Roskie. In addition, numerous planners and others have contributed to the profiles in this book, including (in no particular order): John Zawitoski, Jeremy Criss, and Judy Daniel, Montgomery County, Maryland Gregory A. Bowen and Veronica A. Cristo, Calvert County, Maryland Susan Craft, Amada Gottsegen, and Mark Remsa, Chesterfield Township, Burlington County, New Jersey Dan Zimmerman, Warwick Township, Lancaster County, Pennsylvania Marc Roberts and Susan Frost, Livermore, California John Stokes, John Ross, and Richard Osborn, New Jersey Pinelands Russell Legg, Larry Timm, and Steve Ryder, Larimer County, Colorado Jennifer Madgic and Randy Johnson, Gallatin County, Montana Mimi Ross, John Doughty, and Pete Wysocki, Douglas County, Nevada Patrick Rutter, Susan Miller, and Kathleen Gerard, Palm Beach County, Florida Gabby Barrett and Lyn Barnett, Tahoe Regional Planning Agency, California/Nevada; John Gussman, Bruce Eisner, and Gerry Willmett, California Tahoe Conservancy Michael Bosi, Joseph Thompson, Noah Standridge, and Ronald F. Nino, Collier County, Florida Stefanie Edmondson, Malibu, California; Steve Harris and M. Elizabeth Wiechec, Mountains Restoration Trust Raymond Corwin and Timothy Hopkins, Long Island Pine Barrens, New York Ray Belknap, Land Conservancy of San Luis Obispo County, California; Kami Griffin and Karen Nall, San Luis Obispo County, California xi

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Peter Fogg, Boulder County, Colorado Suzanne Wolff, Cindy Houben, and Ellen Sassano, Pitkin County, Colorado Dewitt Pennypacker, Susan Craft, Amada Gottsegen, and Mark Remsa, Chesterfield Lumberton Township, Burlington County, New Jersey Angela Threadgill, Dan DiBartolo, and Lawrence Badiner, San Francisco, California Ellen Ittelson and Jennifer Moulton, Denver, Colorado Richard Barth, Tony Levy, Khalid Afzal, and Pares Bhattacharji, New York City, New York David Riccitiello, Allyne Winderman, Frank Quon, and Robert Sutton, Los Angeles, California Dennis Meier, Laura Hewitt Walker, Jane Voget, Vince Lyons, and Diane Althaus, Seattle, Washington Darren Greve and Michael Murphy, administrators of King County, Washington’s TDR program Peter Fogg, manager, Long Range Policy Team, Boulder County Land Use Department Trent McCorkell, Rice County, Minnesota Don Dressen, administrator, and Isnarda Machuca, planning and zoning, Payette County, Idaho Paul W. Goldstein, development review specialist, Washington, DC, Office of Planning We also acknowledge Jeannette Benson at the University of Utah, whose management of the City and Metropolitan Planning Department helped to make this book possible. This book would not have been possible without the incredible support we received from Island Press, especially from Heather Boyer, Courtney Lix, Sandy Sabo, and Sharis Simonian. Lastly, Arthur C. Nelson acknowledges the support of his wife, Monika; Rick Pruetz acknowledges the memory of his father, Eric Pruetz, and the support of his family, Adrian, Jean, Jay, Gena, Erica, Jeromy and Joshua; and Doug Woodruff acknowledges the support of his father and mother, Roger and Dawna Woodruff. Our sincerest apologies to anyone we should have acknowledged. Arthur C. Nelson, FAICP Salt Lake City, Utah Rick Pruetz, FAICP Hermosa Beach, California Doug Woodruff, RLA Salt Lake City, Utah

foreword

If you picked up this book knowing nothing of the subject matter—perhaps not even knowing what “TDR” stands for—let’s just say that TDR is like clustering, except that the open space goes to noncontiguous properties. The notion is simple (but sufficiently nettlesome to result in the substantial handbook before you): Development rights from one parcel are lifted up and placed on another. This transfer protects the first parcel from further development and causes the other parcel to carry the new, additional load of the transferred density in the form of more building area, more units, or some combination of the two. Most anyone in the business of land use planning, regulation, development, and preservation has to be a fan of TDR. Think about it: TDR seemingly lets us put the development where we really believe it should be— where sufficient infrastructure, the need for density, the advantages of economies of scale, and so forth exist. At the same time, TDR promises to let us save what we must—wetlands, vistas, farmland, wellhead protection, you name it—without paying a nickel, with no Kelo-esque angst of eminent domain, and with the pleasure of watching the property owner smile all the way to the bank. It should make us sing out in Gullah—“Kumbaya, my Lord, kumbaya”—planners and property owners swaying rhythmically back and forth, arm in arm. So is TDR the alchemy of property rights made real—or is it three-card monte that leaves suckers with empty pockets and destroyed dreams? Turns out, it’s a little of each. I fell fast for the siren song of TDR while a second-year law student. I already had a master’s in planning and became intrigued by the clever legal mechanics of TDR and how they made planned preservation work. Space Adrift: Landmark Preservation and the Marketplace (1974) by Professor John J. Costonis was an exciting find for me. I spent a semester researching and writing a paper later published under the title “Making TDR Work,” which lockstep-listed the issues and then tried to map out what TDR programs xiii

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needed to succeed. Only a second-year law student tainted with a graduate planning degree would be so foolish as to take on that impossible job. As I read The TDR Handbook while looking back forty-something years to that time in the late 1960s and early 1970s—when TDR seemed to come into the world virtually fully formed, like Athena, from the forehead of Zeus, armed with weapons—I can only think of the old French proverb “The more things change, the more they stay the same.” The TDR issues of today hardly differ from yesterday’s. Then again, you will learn from this handbook that the concept of TDR, now residing in two hundred communities, has learned a few new tricks as it has become an old dog. The epilogue, which summarizes a survey by Kaplowitz and colleagues (2008), says essentially what we came to recognize at the outset: that orchestrating techniques—such as including a purchase of development rights component to take and extinguish development rights—can make these programs both work better. TDR banks, the authors conclude, can help avoid market failure during weak market conditions as well as provide a sense of security, credibility, and confidence. Call it the federal reserve of development rights. But, wait, there’s more—as a marketer might say—about TDR. Something new, the authors have discovered, is that state enabling legislation may not help and could hinder flexibility and adaptability to changing conditions. Most of us previously thought that even if we didn’t like the constraints and compromises of enabling legislation, the education and encouragement outweighed those shortcomings. Also, it was found that if TDR had two or three—not one or four or more—initiating proponents, success was more likely. It is right that the authors call this a “handbook,” and ironic, too. Checking my Merriam-Webster (where else would I look?), I find that handbook is defined as “a book capable of being conveniently carried as a ready reference” and “a concise reference book covering a particular subject.” This handbook is indeed that. You can jump in at any chapter and find just what you need—theory, economics, planning, the law, a model ordinance, and some interesting case studies of TDR. Calling this a handbook is also apt given this second dictionary definition: “a bookmaker’s book of bets; a place where bookmaking is carried on.” TDR is about betting: betting on the size of the areas to be preserved and those to which the development rights will be transferred with build-out at higher densities, betting there will be demand, betting a developer’s brother-in-law doesn’t become mayor and eviscerate the TDR program through zoning amendments, betting the neighborhoods receiving the density from the preserved areas don’t sue claiming the transfers create an unreasonable burden for them, and betting the development rights bank doesn’t go bust. Wouldn’t it be swell to see a failing TDR bank at the center of a remake of It’s a Wonderful Life? Still, the promise is so great and, when it works, TDR is magnificent. I

Foreword

haven’t given up on it, not by a long shot. This handbook makes me even more hopeful that we can make TDR work.

All for the Good Henry Wadsworth Longfellow made up a little rhyme for his daughter, Edith, when she refused to submit to the application of a curling iron. The little poem might as well describe TDR: There was a little girl Who had a little curl Right in the middle of her forehead; And when she was good, She was very, very good But when she was bad she was horrid.

It goes on for twelve more lines. Look it up—it’s fun to read and endearing. For sure, you will learn from this handbook that when TDR is good, it is very, very good. It has the power to cut through that Gordian knot of property rights versus preservation in one fell swoop, with the land itself finally set free of the overlay of property rights we put there. It wasn’t that way, of course, before the white settlers arrived in the New World. Chief Massasoit, the Great Sachem of the Wampanoag Federation in what is now Rhode Island and Massachusetts, once said: “What is this you call property? It cannot be the earth, for the land is our mother, nourishing all her children, beasts, birds, fish and all men. The woods, the streams, everything on it belongs to everybody and is for the use of all. How can one man say it belongs only to him?” We are the children of an Anglo-American real property system. The private ownership of property helps us advance in many ways, economically and otherwise. At the same time, it fundamentally fetters us in our efforts to do the right thing when it comes to land use. TDR, like the less-desirable government ownership of land, enables us to move those property rights around the landscape, to make them more fungible, to even monetize them so they can be separated from the land itself. In so doing, TDR gets the right use in the right place. Yet problems remain. How do we delineate the areas to be preserved? What does preservation mean when some areas are building facades and others are open spaces? Preserving land does not mean preserving the use. Farmland preservation saves the land but no more means that farmers will keep farming than it does that too-eager rural industrial development authorities will get new factories if they put up a sign saying “East Podunk Industrial Park—Build Here and Build a Future with Us.” Sometimes a field of dreams is just a field of dreams.

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What is to be preserved must be so desirable for development that the property’s owners will be courted by every rapacious developer in town to sell their development rights. Yet the areas we often want to preserve are often not all that developable—wetlands, ridge tops, and the like. As for the receiving areas, if they are so desirable, why aren’t the developers encamped on the city hall steps with rezoning applications in hand, seeking upzonings, downzonings, or whatever you might call it for more density, larger land coverage, and taller buildings? Is there sufficient demand? And why, tell me, should I buy a development right when a good land use lawyer, expensive as one might be to hire, could get me the development rights cheaper and faster with a rezoning? One of my most beloved developer clients, who became a friend along the way, hired me twenty-five years ago to get his property rezoned from an essentially industrial and commercial use to multifamily residential. It was in a high-amenity area. The fee, with a lawsuit or two, plus federal, state, and local permits, came to about $100,000. The client worked hard himself and had put much sweat equity in the property over the years. The property increased in value by $7.5 million with the permits we received. He eventually sold out and retired, quite fortuitously before the 1990 recession. Why would he ever buy development rights? Transaction costs are like methicillin-resistant Staphylococcus aureus (MRSA) to TDR—they will kill a deal in days. There’s a deal to be negotiated, lawyers to hire, documents to draft, a closing to schedule, plus taxes, adjustments, title searches, and title insurance. It is all a big real estate deal, on top of getting approvals for the higher density at the receiving site with neighbors who are anything but a local chapter of the TDR Welcome Wagon®. Sellers of development rights often overvalue those rights. For instance, the farmer who owns a back forty near a proposed interstate is bound to think the next McDonald’s will go in right at the interchange, which is sure to be built on his property. In the farmer’s mind, the price of his land can only go up and up. Besides the obvious need to make money, developers want just two things: certainty and speed. TDR offers neither, unless you are willing to fast-track permitting in return for taking the TDR deal. And don’t forget banks. Who trusts banks of any type, least of all the First National Bank of TDR? Do you get an ATM card to pull out a few development rights to throw up a small subdivision? Banks can help, yes indeed, but the overhead in institutional and other support infrastructure is substantial. Few small towns or rural counties are able open a bank to help the process. Assuming a deal is done and the development completed, now what? Does the status quo remain forever? Hardly. Restrictions can be and are set aside. And think how absurdly presumptive it is of us to require that something remain the same in perpetuity. Perpetuity is a very long time. When I do restrictive easements and other such controls, I sometimes challenge the parties to consider something more time limited than perpetuity. Not only

Foreword

do I think it inappropriate for us to tie the hands of future generations, but also I believe that a court will be less likely to bust a restriction where the term is for some reasonable period, say fifty or a hundred years. This is not to say that some restrictions shouldn’t apply forever, but too many pocket-park open spaces and buffers are set aside forever; two hundred years from now, I will say, “I told you so.” There is a fundamental conundrum when it comes to receiving areas. On the one hand, we need to have a site-specific discretionary process to approve increased density on those sites. We cannot allow negative externalities to take property rights away from abutters. On the other hand, we must provide incentives to close TDR deals. One way to do that is make development at the receiving sites as-of-right or close to it or at least highly expedited. I don’t want to be caught in that policy crossfire. One modest approach, pioneered in New Jersey in the 1970s, is the transfer of development credits (TDC). TDC basically is clustering with noncontiguous lands. Conventional clustering, amazingly still suspect in some places after more than a half century, maintains the overall, gross density of a parcel but places the development—say, single-family homes—on smaller lots with shorter roads and utility lines, thus saving development costs and leaving useful areas of open space. That’s the theory. The reality is that clustering sometimes saves open space that is simply the dregs of the site and ultimately serves only as a convenient place for neighbors to dump yard clippings. Clustering may be as-of-right or discretionary, as by a special permit. TDR works exactly the same except that the open space, or part of it, can be on other land in the same ownership—no negotiation, no closing on the transfer of the development rights, no bank. A developer buys a parcel in a potential receiving area and also buys a developable parcel in the preservation area. The developer might develop just a small portion of the parcel in the preservation area with clustered mansion homes, where the positive externalities—you’ll get plenty of that planner-economist speak in this handbook—can pour over into the value of those mansion lots. The open space left over is credited to the density in the distant parcel in the receiving area, where the developer builds some much-needed cottage homes and live-work units on lots of just a few thousand square feet. Another problem with TDR, overcome in most cases with TDC, is that it takes sophisticated professional staff and citizen planners to analyze these deals and decide what to approve. Not enough local governments have adequate professional staff. Indeed, many places under development pressure and being destroyed by haphazard land conversion don’t have any professional help. I have worked in backwater communities and college towns and wealthy suburbs, one in particular where the joke is the chair of the planning commission never saw a subdivision she liked. The only difference among them all is that the public officials were more outspoken in what some people might perceive as the less sophisticated places. Towns with more than

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their fair share of really smart, highly educated people make just as many mistakes and seem to understand cutting-edge regulatory techniques no better than other places. Planning for, implementing, and administering TDR is simply beyond the capacity of many places. But don’t let me discourage you. Like little Edith Longfellow, TDR can be very, very good. This handbook will help you make the best of it. Just don’t think this is a quick fix. You need to orchestrate the techniques presented on the following pages; they will not work without tuning. Don’t be surprised if the transfers are few and far between, at least until the program has stabilized. The overarching key to success is a strong comprehensive plan and a commitment—legal, cultural, and moral—to consistency of land use decisions made in accordance with that plan. When landowners, developers, and the neighbors all see and believe in a long-term, steadfast dedication to a future landscape—and when they don’t make backdoor deals to increase density that would otherwise come from transfers—then you will see TDR work. As planners, our most important constituents are those with no voice— the people who live elsewhere, those who are disenfranchised, and future generations who will inherit the earth from us. What we do as planners is for them, and they will thank us, though we may never hear it, if we do our job right. TDR can help in some way, in some places, at some times, and under some conditions—and this handbook will serve you well in making TDR work. Dwight H. Merriam, FAICP

prologue: a simple concept

Communities across the nation struggle with preserving open spaces, historically significant buildings and sites, farmland, and other local assets from development. They also seek ways to steer development away from areas with little or no infrastructure and toward areas where public services already exist or can be efficiently provided. Such communities may find a solution in the transfer of development rights (TDR) from a site or area to be preserved to an area targeted for development. The TDR concept is quite simple. Think, for example, of residential clustering. Instead of placing one house on a one-acre lot, clustering allows smaller lots, groups the houses together, and sets aside substantial areas of open space for public or private use. Residential clustering moves the development potential (the development rights) from the area to be preserved as open space into the area proposed for the cluster. The density of development in the open space is reduced down to as low as zero, while the density of development in the residential cluster becomes greater—perhaps considerably—than one house per one acre. This is the essence of transferring development rights. Clustering, however, typically occurs on one parcel while TDR involves transfers between two or more properties, as described below. When all is said and done, as long as a one-to-one transfer ratio is maintained, the overall density in the community or region does not change through TDR, because the density is merely being transferred from one place to another. As a result, areas capable of somewhat higher densities receive those densities, and areas of special interest for preservation can be preserved. TDR programs are a novel planning tool because they use market mechanisms to implement and finance the redistribution of development rights in ways that planning and zoning cannot.1 In general, TDR programs result in landowners severing their development rights from properties in “sending areas” and selling them to others to use in “receiving areas.” Sending areas can range from farmland and other open spaces in the rural countryside to xix

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Prologue: A Simple Concept

Figure 0.1. TDR sending and receiving areas. Figure by Doug Woodruff.

historically significant buildings and sites to established neighborhoods—or any other landscape intended for preservation. The development rights then transfer to receiving areas, where developers can exceed a baseline level of development provided in the zoning code and supported by the community’s comprehensive plan (see figure 0.1). TDR programs take a voluntary, market-driven approach to preserving targeted landscapes or sites and directing development to areas targeted for growth. TDR programs are also incentive based: property owners in both sending and receiving areas benefit from participation. For these reasons, TDR programs tend to be well accepted by the public.

The Historical Context TDR programs exist, essentially, as a supplement to zoning, and their history parallels the history of zoning.

Prologue: A Simple Concept

In the United States, New York City adopted the first comprehensive zoning act in 1916, partly in response to public opposition to skyscrapers that blocked sunlight from neighboring properties. It was also enacted, in part, to prevent future warehouses and factories from encroaching on the city’s fashionable retail and residential areas. New York’s zoning ordinance established height and setback requirements and separated such incompatible uses as factories and residences. New York City’s 1916 zoning code included the ability to transfer development rights between properties. For instance, it allowed property owners to sell their unused air rights to owners of adjacent lots within the same block; the new owners could then use those air rights even if their buildings exceeded the new height and setback requirements, as long as the average floor area of the affected buildings complied with zoning limits. The city changed this provision in 1968 to allow transfers between lots several blocks away, provided the properties met a tortured definition of the term adjacency that included lots across streets or connected by a contiguous chain of properties under common ownership (Johnston and Madison 1997). This definition applied especially to historically significant properties, which led to the 1978 landmark Supreme Court case Penn Central v. City of New York. The city had prevented Penn Central from building an office tower on top of Grand Central Station. Penn Central claimed a taking, but the Supreme Court found that Penn Central’s rights were, in fact, not taken, because the railroad company did not have to build an office tower on top of Grand Central Station to enjoy reasonable economic return from its investment. Significantly, the Supreme Court’s decision added that the transferable development rights available to Penn Central might not have constituted “just compensation” if a taking had occurred but that those rights nevertheless mitigated any financial burdens caused by the New York City Preservation Law. With this brief mention, the U.S. Supreme Court gave the TDR concept considerable credibility as a means of mitigating the impacts of regulation (see chapter 10). Figure 0.2 illustrates the issues in the Penn Central case.

A Policy Overview At their heart, TDR programs provide local governments with another tool to control land use as well as compensate landowners for land use restrictions that may reduce a property’s market value. Some people believe TDR programs would not be needed if planning and zoning were done right to begin with or improved to effect the right outcomes. In other words, if an area is more suitable for farming than for other uses, it ought to be planned and zoned as such; if other areas are more suitable for development, they ought to be developed. For instance, Barrese

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Figure 0.2. Grand Central Terminal TDR process. Figure by Doug Woodruff.

Prologue: A Simple Concept

(1983) argues that TDRs are not superior to traditional zoning, because TDRs depend on voluntary exchanges to achieve desired land use outcomes whereas zoning can achieve those outcomes more efficiently upon implementation. Johnston and Madison (1997) echo this sentiment, arguing that TDR programs are not as effective as zoning in achieving the scale of land preservation needed for agricultural and environmental protection. These arguments, however, suggest that TDR is a substitute for zoning. In fact, TDR works with zoning. TDR can help make zoning more effective, and strong zoning is essential for a successful TDR program. Oregon, for instance, did not enable TDRs during its statewide land use planning process from the middle 1970s into the twenty-first century because, ostensibly, its planning and zoning practices arranged for the most appropriate land uses. Farmland and other open spaces were downzoned. (Downzoning reduces the development density or intensity of a property, such as from one dwelling unit for every two acres to one unit for every forty acres; it also tends to reduce property value.) In court, affected property owners nearly always failed in their claims for damages and takings. Eventually, those owners prevailed at the ballot box in the 2000s, when Oregonians passed amendments to statewide land use laws that allowed for certain remedies. Those new laws have since been refined, including enabling TDRs in all Oregon planning jurisdictions. The lesson from Oregon’s experience is that while planning and zoning aim to designate land for its most appropriate uses, changes that substantially reduce value—even while meeting constitutional tests—may impose a burden on those whose rights have been changed. TDRs offer one way to make appropriate land use planning changes while providing adversely affected parties with an opportunity for compensation. TDR programs are thus a pragmatic solution to achieving broad planning goals. Effective TDR programs create a market that compensates property owners whose development rights have been changed to preserve such public goods as open space, agriculture and forestry (or other “working” landscapes), historic sites or buildings, and affordable housing. They also help make these preservation efforts equitable and politically palatable by compensating landowners whose property value is reduced because of those efforts. In addition to helping make stronger land use regulations politically feasible and providing landowners affected by these regulations with a means of compensation, TDR typically leads to the permanent preservation of important community resources, such as green infrastructure, farmland, and historic landmarks. One school of thought holds that good zoning alone should be sufficient to protect these resources indefinitely—or at least as long as the community considers them vital. But, in reality, zoning in many U.S. communities is as permanent as the next election or perhaps the next meeting of the county board. This creates uncertainty for the owners of resource lands,

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who are unsure whether sprawl will ultimately engulf them. Consequently, they often forgo long-term investments in land stewardship, creating the selffulfilling prophecy seen surrounding most U.S. cities: unused or poorly used land awaiting development. Contrast such “rural blight” with the prosperous agricultural land in Lancaster County, Pennsylvania, where more than eighty-four thousand acres of farmland is permanently preserved. Of course, agricultural easements didn’t singlehandedly create this healthy landscape—but permanent preservation plays a key role. When farmers see their neighbors recording conservation easements, they gain confidence in the future of local agriculture. They begin to believe that the farm-supporting industries will stay in business and that they won’t be surrounded by residential neighbors complaining about agricultural noise, dust, and odors. And many of them decide to make longterm commitments to the land, including permanent preservation.

Overview of The TDR Handbook Over the past forty years, a growing number of communities have adopted TDR programs. Yet TDR is still considered “innovative” and is not widely used. In fact, as of 2010, a thorough review identified only 239 TDR programs throughout the entire country. The purpose of The TDR Handbook is to help advance this important tool. The handbook consists of nineteen chapters organized into four major parts, plus an epilogue. Part 1, which covers economic and policy foundations, posits a theory of TDRs (chapter 1); compares TDRs to other alternatives, such as zoning and purchase of development rights (chapter 2); reviews the economics of TDRs (chapter 3); and introduces two important tools as companions to TDRs, namely, purchase of development rights (chapter 4) and density transfer charges (chapter 5). TDR planning takes center stage in part 2, which reviews TDR and the planning connection (chapter 6), the seven steps of the TDR planning process (chapter 7), and designing sending and receiving areas (chapters 8 and 9). We devote part 3 to administrative considerations, including a review of legal issues (chapter 10), an analysis of state statutes (chapter 11), and recommendations for TDR program administration (chapter 12). A model ordinance is provided in Appendix A. Part 4, the largest component of The TDR Handbook, summarizes the wide range of TDR programs by purpose (chapter 13) and offers case studies of successful TDR programs in farmland preservation (chapter 14), combined farmland and environmental preservation (chapter 15), environmental preservation (chapter 16), rural character preservation (chapter 17), historic preservation (chapter 18), and urban design and revitalization (chapter

Prologue: A Simple Concept

19). The epilogue synthesizes key lessons of successful TDR programs and looks into the future. The handbook concludes with useful reference materials—specifically, a glossary and three appendices. Appendix A offers a model TDR ordinance, ready for customization to address local concerns, while appendix B contains sample forms for use with a TDR program. Appendix C provides detailed and descriptive state-by-state listings of all current TDR programs in the United States. As you will see in the chapters that follow, the TDR concept has worked in many different settings, most notably the Pinelands of New Jersey, in Montgomery County, Maryland, and historic preservation from Washington, DC to Seattle, Washington. It can work for most any municipality or region—but it certainly should not be seen as the sole method to address planning for new growth and development. Instead, the TDR technique is one instrument in a large orchestra of ways through which to address the complexities of land conservation, development, and the protection of private property rights.

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part i

Chapter 1

How TDRs Work

Conceptually, the idea of transferring development rights from one property for use by another (TDR) dates from America’s first zoning ordinance, adopted by New York City in 1916. The ordinance allowed density to be transferred between lots under common ownership in the same block. The city amended this provision in 1968, allowing for transfers initially between contiguous properties and eventually between lots that were across streets (Hanly-Forde, Homsy, Lieberknecht, and Stone, n.d.). Since then, the TDR concept has evolved steadily. How do TDRs work? As an example, let’s look at the TDR program used in King County, Washington (2010). King County’s TDR program allows landowners of designated sending areas to sever the right to develop land from the “bundle” of other property rights (described in more detail later in this chapter). Sending areas are rural or resource lands with farm, forest, open space, or amenities. The severed right(s) are turned into a tradable commodity that can be bought and sold— essentially, a development credit. Suppose there is one transferable development right per 10 acres, and the owner wishes to sell ten development rights. Those ten development rights are severed from the land, and the owner applies a conservation easement to the affected 100 acres.

The landowner retains all other property rights, and the land remains in private ownership. The development rights held by a property owner can then be sold to developers building in receiving areas. These areas are typically targeted for higher density. The comprehensive plan should clearly show this intention. Figure 1.1 illustrates the basic TDR principles. TDRs are also used for urban-center affordable housing, urban infill/redevelopment, habitat conservation, and many more functions (see chapter 6). Still, TDRs are probably best understood in the context of farmland preservation, through the sale of TDRs in sending areas to their application in receiving areas.

What Is a Property Right? The TDR Handbook focuses on the right to develop property, which is only a part of the bundle of property rights. The relevant property—especially land—is known as “real property,” as opposed to personal property (such as a boat), business property (such as computers), intangible property (such as bonds), and intellectual property (such as patents). In many Western traditions, though not all, real property has certain rights, all or any one of which may be owned by

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Property rights, however, do not include the following (see Juergensmeyer and Roberts 2003):

Figure 1.1. TDR sending and receiving areas illustrated. Figure by Doug Woodruff.

Figure 1.2. Bundle of property rights. Figure by Doug Woodruff.

one person or a collection of persons (through a corporation, for instance). That bundle of rights may include the right to farm, mine, grow and harvest timber, harness wind power, or develop the property (figure 1.2). It may also include the right to sell, lease, mortgage, subdivide, or grant easements for the enjoyment of those who otherwise do not own the property (Juergensmeyer and Roberts 2003). In the United States—and other nations sharing British common law traditions—property rights basically include the following: • One’s ability to control the use of one’s property • The right to benefits of the property (such as farming, mining, and renting) • The right to sell or transfer the property • The right to exclude others from the property

• Use of one’s property that can interfere unreasonably with the property rights of another person. This is known as the “right of quiet enjoyment” and is subject to enforcement in civil courts under the nuisance doctrine. • Uses or activities that can interfere unreasonably with public property rights, such as those that compromise the public health, safety, and general welfare of society. Enforced through such public policies as building codes and zoning ordinances, this is subject to enforcement in either civil or criminal courts under the police power doctrine. For several hundred years, a deep philosophical debate has surrounded real property rights and the role of government in defining them. “Natural rights” (Blackstone 1765–69) is essentially a libertarian perspective arguing, in its extreme, that individuals are sovereigns over their property, thus severely limiting the ability of government to interfere in the individual’s use of property. The alternative perspective, known as “positive law,” is generally considered a law that creates new rights. Unlike natural law, it is law made by human beings, that is, “law actually and specifically enacted or adopted by proper authority for the government of an organized jural society” (Black’s Law Dictionary 1979). In the context of land use planning, positive law defines rights, and courts adjudicate and enforce property rights. Property rights are perfected in several ways. One is through title, which clarifies the rights conveyed from a prior owner to the current owner. Another is through legal systems that have evolved to resolve disputes over the possession, use, transfer, disposal, and other activities of and relating to property.

Chapter 1: How TDRs Work

What Is a Development Right? How land can be used, and especially developed, has been a subject of debate since the human race invented the concept of land and its ownership (Powelson 1989). Considering that the right to develop property is only one of a bundle of rights, we find it odd that no satisfactory definition of “development right” exists. Moskowitz and Lindbloom (1993) define the term simply as “the right to development property.” The Town and Country Planning Act of 1971 provides the meaning of development in a planning context (Hagman 1980): “Development means the carrying out of building, engineering, mining, or other operations in, on, over, or under land, or the making of any material change in the use of any buildings or other land.” Thus, by extension, a development right is the right to carry out such activities. We then find a temporal modification from Random House (2010), which defines development rights as “rights to use real property, such as farmland, in ways that differ from the current use.” In other words, a development right is the right to change land from a current use to another use. It is the act of changing uses that falls under the purview of land use regulations. For the most part, in the modern American context, local land use regulations define the right to development—and, in particular, what to develop (Byers and Ponte 2005). In the absence of land use regulation, there are not clearly defined development rights (Juergensmeyer and Roberts 2007).1 Further, without regulations defining what development rights there may be, there can be no transfer of them either from one property to another.2 As one commentator laments: “The whole concept of transferable development rights is based on the faulty notion that government is the source of all rights and that it can give and take . . . rights as it pleases” (Wake 2010).

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Yet within constitutional constraints, especially the Fifth Amendment, TDRs would not exist but for government, especially local government, conferring explicit development rights.3

What Is a Transferable Development Right? Even if a development right exists, however, it may not be clear whether the right can be transferred. A market must exist for this to happen: “Markets involve multiple exchanges, multiple buyers and multiple sellers, and thereby a degree of competition. A market is an institution in which a significant number of commodities of a particular, reasonably well-defined type are regularly exchanged” (Hodgson 2002, p. 44). Thus, to be transferable, a development right needs rules by which to function (Webster and Lai 2003). Typically, government promulgates those rules. In land use planning, rules do not replace but, rather, modify market functions so the outcome is more consistent with the public interest, as advanced by elected governing bodies (Williamson 1975).

Market Inefficiencies To most people, TDR is simply the sale of a preordained number of rights to develop one’s property in sending areas to buyers who would transfer those rights to receiving areas. In the end, density shifts away from urban fringe, exurban, and rural areas into suburban and urban areas at higher density than would have occurred otherwise. To be sure, TDRs work principally because of imperfections in land use planning and zoning. For instance, once an area is zoned, it is usually difficult to reduce development rights in the future through downzoning. When local

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governments realize current zoning threatens the long-term viability of landscapes for uses other than development—such as farming, forestry, and open-space preservation—it is often politically difficult to rezone land to sustain these functions. One solution is to retain the underlying development density but restrict development to a lower, more appropriate density. The difference between the underlying zoning and the allowable development density is the basis for transferable development rights. Why should anyone want to meddle with the market? Thanks to markets, the quality of our lives has been enhanced immeasurably, especially over the past two centuries. And thanks to markets, prices for goods and services fall, people find employment, and total wealth expands. Markets work best, however, when they are efficient. Economic efficiency occurs when the marginal (incremental) cost of producing the next unit of something equals the marginal (incremental) benefit of consumption. At $5 per slice of pizza, for example, you might buy just one. At $3 per slice, you might purchase two. But at $2 per slice, perhaps you might still purchase two slices because you can’t eat more than that anyway (assuming no one else is around to “pool” the purchase). The marginal, or incremental, benefit of the next slice is zero, so the restaurant produces only two slices at $3 each and you eat just two slices. Two slices maximize revenue ($6) and fully satisfy the consumer’s cravings.4 The market for pizza is efficient. There would be little sense for government to regulate the pizza market’s supply-and-demand interaction.5 When should government consider intervening in markets? Conservative economists would answer, “Hardly ever.”6 Marxist economists would say that government should manage all markets to ensure no one is made worse off from any market exchange.7 The mainstream school of thought, which borrows features from both extremes and creates its own, characterizes the American economic system.

Douglass B. Lee Jr. (1981) does perhaps the best job of outlining the conditions in a mainstream economic system when it comes to intervening in land markets through planning and zoning. According to Lee, urban sprawl is a form of market failure caused by the land market being unable to fully internalize its marginal social costs—that is, its impacts on society. The market comprises many individual and interrelated markets, such as housing, commerce, recreation, agriculture, public facilities, and so forth. From the perspective of society, efficiency is achieved when resources are allocated to each market such that society gains the largest net benefits for the least cost—or, when marginal benefits equal marginal cost. In the ideal world, these and related markets operate efficiently without any government intervention. Such markets would require the following: • Many buyers and sellers for any given property, providing plenty of choices and competition among them. • Perfect information about any given real estate choice so buyers and sellers fully understand the tradeoffs they make. • Developers who can enter and leave markets at will, thus meeting market needs just when they arise and leaving markets without inventory overhang. • No transaction costs—such as title searches, negotiations, legal services, and contract enforcement—and no public hearings or zone changes. • Predictable revenues and profits to investors, achieved through constant returns. • Users of property who fully internalize externalities they impose on society. For example, those who pollute pay all damages, and those whose actions improve society receive financial rewards. • All buyers and sellers have about the same needs and preferences.

Chapter 1: How TDRs Work

By definition, land markets fail to provide efficient development patterns because none of those conditions is ever completely present. Many markets don’t have many buyers and sellers or choices between options; information is imperfect, so there will always be risks and uncertainties; developers are unable to enter or leave markets at will, even in the least regulated markets; transaction costs are necessary to meet legal, fiduciary, and other obligations; revenues and profits are impossible to predict; users of property simply do not internalize their marginal social costs or receive their marginal social benefits; and buyers and sellers vary widely in their needs and preferences. Planning and zoning enter into the picture to address these inefficiencies. Communities use planning and zoning to offset inefficient development patterns caused by other government policies—such as inefficient utility pricing or subsidized mortgage financing policies—and to prevent negative externalities by anticipating the nature of conflict between different land uses. They also rely on planning and zoning to assert the overarching public interest in environmental quality, social equity, and other social benefits (albeit not without compensation as necessary), and to achieve development patterns consistent with public policy, as expressed through elected representatives at all levels of government. Eminent land economist Marion Clawson (1971) proclaimed that the central purpose of planning and zoning is to contain urban sprawl and offset sprawl-inducing effects of both public policy and market imperfections, all while meeting the development needs of an urban area: If planning, zoning, and subdivision were firm—enforceable and enforced—then the area available at any one time for each kind of use would bear some relationship to the need for land for this use. That is, area classified for different purposes could be consciously manipulated or determined in rela-

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tion to market need. Sufficient area for each purpose, including enough area to provide some competition among sellers and some choice among buyers, should be zoned or classified for development, but no more. By careful choice of the areas concerned, sprawl would be reduced, perhaps largely eliminated. (p. 109, emphasis added)

All too often, we have observed that zoning assigns development rights to rural land far in excess of market needs, and that development rights assigned to urban land are insufficient to meet urban development needs. Planning and zoning thus may contribute more to inefficient land use patterns than intended. TDRs become a potential tool for rebalancing the allocation of development rights, especially if downzoning rural areas and upzoning urban ones in a wholesale fashion is not politically expedient. A key feature of TDR programs is to internalize externalities caused by imperfect market interactions between land uses, plus imperfections caused by policy itself (Field and Conrad 1975). In a world without externalities, the land market will allocate land to urban and agricultural uses (Nelson and Duncan 1995).8 There would be a clean break (“green line”) between those uses at U1 in figure 1.3. Public policy, however, creates positive externalities in the form of tax breaks and underpriced utilities (Peiser 2001) that are capitalized into the urban land market; this artificially increases the value of land for urban development. On the other hand, the value of land for agricultural uses declines because of negative externalities, such as urban residents preventing agricultural operations that create nuisances on residential land uses, pets interfering with livestock, and sometimes outright theft of ripening crops within reach of (or a short walk from) residential development. TDRs can compensate owners of agricultural land for such negative externalities imposed on them by nearby residential development.

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Figure 1.3. Externality Interactions.

ferred from sending areas on the boundary’s other side. Second, because the value of agricultural land just outside the boundary suffers most, TDR designers might increase the number of TDRs assigned to this band of land. This not only will compensate owners for incremental losses associated with negative externalities but also could dissuade them from lobbying in the future to expand the urban development boundary because of the negative externalities.9 Third, TDR programs might consider acquiring some of the land just outside the boundary to buffer agricultural and urban uses. The land could be permanent open space.

Improving Fiscal Efficiency

Figure 1.4. Amenity and Disamenity Interactions.

Many TDR programs limit urban development through an urban containment boundary, urban growth boundary, or urban service boundary. When this happens, the value of urban land approaching the boundary internalizes positive amenities because it enjoys exclusive views and improved privacy. As noted in figure 1.4, however, agricultural land internalizes negative amenities the closer it is to the boundary (Nelson 1992). These interactions might prompt some policy refinements to TDR programs. First, as urban land value rises close to the boundary, it may be able to absorb a higher share of TDRs trans-

With few, if any, exceptions, lower-density development costs more to serve than higher-density development serving the same market needs (see Burchell et al. 2000). Lower-density development requires more lane miles of road, more linear feet of utilities, and more fire and police services per person than does higher-density development, not to mention more school bus miles per pupil. Yet, property tax and utility fee structures charge all users on the basis of average cost, not costs related to location. As a result, higher-density development closer in pays more than its proportionate share of costs, and lowerdensity development farther away pays less. In effect, low-cost development (which sometimes means lower-income households) subsidizes high-cost development (which sometimes means higher-income households). This is an inefficient, and socially inequitable, outcome. TDRs help improve fiscal efficiencies, especially if they are tied to very low-density development by right in sending areas. For instance, if all potential development allowed by current zoning in rural areas (perhaps based on previous, ill-informed decisions that are difficult to undo politically) could be shifted to targeted ur-

Chapter 1: How TDRs Work

ban areas, much—if not all—of the cost of serving new development in rural areas could be avoided. Moreover, because many urban areas already have the capacity to serve new development, much of the increased cost of serving development shifted from rural areas could also be avoided. Indeed, a design strategy for receiving areas is the extent to which existing facilities and services have sufficient capacity to accommodate development at the base density plus TDRs.

Transaction Theory In our view, TDR programs are an alternative form of dispute resolution called “transaction theory.” This theory posits that parties in potential disputes who have the same information, and who accept it as accurate, are likely to negotiate a solution. TDR programs provide information on the amount of development rights, where they can be used, and how much they are worth. TDRs thus work to prevent political and legal conflicts between property owners wanting a return from their investment in property and others who do not want the property to be developed. Let’s explore this theory further. Coase (1960) and Dawkins (2000) develop the idea that social conflicts could be resolved through other than legal means (Coase) and apply the concept to planning problems (Dawkins). The presence of disamenities, for instance, could lead urban residents to sue farmers for nuisance effects (such as noise, odors, or pesticide/herbicide drift across property lines). If urban litigants win, the value of land for farming is diminished and farmland becomes ripe for subdivisions rather than for farming. Under transaction theory, farmers would be compensated by being able to sell severable development rights. They could then engage in less obtrusive farming activities near urban development, while urban residents would be provided

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an opportunity to preserve farmland as an openspace amenity.

Political-Economic Theory While land use regulation is necessary to create development rights, rules are needed to make their transfer possible. Many states enable the transfer of development rights (see chapter 11), but some states are notable for their absence. For instance, Oregon, which is considered a national leader in state-mandated growth management planning, initially did not enable the transfer of development rights from farming or forest districts outside urban growth boundaries (UGBs) to urban areas within those boundaries (although it did allow TDRs within UGBs). The logic was that farmland has no inherent development rights anyway, so why should there be a mechanism to transfer such rights? Oregon’s logic unraveled in 2004 with the voter-approved initiative called Ballot Measure 37.10 The majority of Oregon voters agreed that it was unfair (though perhaps legal) to remove development rights to farmland, which owners had possessed before state law changed in 1973 in areas outside UGBs. Ballot Measure 37 ostensibly restored rights to anyone whose use of land had been reduced by any planning action essentially since statehood. Ballot Measure 49, passed in 2007, clarified several confusing points about Ballot Measure 37; in effect, the clarifications reduced the potential to develop farmland and other open spaces. In 2009 (with amendments in 2010), the Oregon legislature broadly enabled TDRs from sending areas outside UGBs to receiving areas inside them.11 In some states, including Arizona and Florida, recent state laws require local governments to compensate for any loss of land value associated with local government land use decisions. Florida’s Bert J. Harris, Jr., Private Property Rights Protection Act of 2004 states that

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compensation is due to any land use decision that “may inordinately burden, restrict, or limit private property rights without amounting to a taking under the State Constitution or the United States Constitution.”12 In these states, TDRs could offer an attractive alternative to some land use planning options. They can help strike a political-economic balance between broad planning objectives, such as preserving farmland, and crafting a compensatory option to do so. For example, had Oregon formally adopted TDR legislation and encouraged local governments to use TDRs when designing land use plans to create exclusive farming and forest districts, opposition to the whole program may not have been widespread or extreme enough to warrant a statewide ballot initiative.

Determining Market Potential Without growth, creating a TDR program becomes difficult. As noted above, a development right typically applies to a new use on an existing site; if demand for a new use does not exist, there really are not any development rights to be concerned with. Moreover, if the demand for new development does not affect areas or places needing preservation—perhaps all new development must be on public sewers, which are not allowed to be extended into rural areas, for example—there would be no market for TDRs. As simple as this seems, market potential needs to be addressed. Indeed, New Jersey requires a market analysis as part of a feasibility study before TDR policy is initiated. More commonly, a market for TDR exists but the program still fails. The failure typically occurs because the market is already oversupplied with sufficient development opportunities, negating the need to expend extra funds (and effort) to acquire TDRs. Another reason for failure is that the incremental value of TDRs in a re-

ceiving area is insufficient to induce the market to acquire and use TDRs. As an example of the second situation, consider fictitious Lloyd County, named after Gerald Lloyd, whose pioneering writing for the Urban Land Institute opened the eyes of both the development and the planning communities to the benefits of TDRs. (We will refer to Lloyd County throughout this book.) Suppose Lloyd County has a TDR program that is not working.13 County officials retain an economist to figure out why. The economist points out that, under current zoning at five units per acre in the receiving area, with two more units allowed per acre through a TDR program, the incremental value of one TDR is $0. In other words, a developer will not be willing to pay anything for a TDR because current zoning offers no reward for doing so. (Table 1.1 illustrates this issue.) At one unit per acre, the land value to the developer is $100,000. As density increases, the developer can get more lots and the total value of land increases and peaks at some point—at five and six units per acre in this example—and then falls. With the current zoning at five units per acre, the developer earns nothing by adding a sixth or seventh unit, as the TDR program allows. Indeed, the developer loses money by go-

table 1.1 Marginal Value of Incremental Lots Density (Units per Acre) 1 2 3 4 5 6 7 8 9 10

Land Value per Unit

Total Land Value

Marginal Revenue

$100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000

$100,000 $180,000 $240,000 $280,000 $300,000 $300,000 $280,000 $240,000 $180,000 $100,000

$80,000 $60,000 $40,000 $20,000 $0 ($20,000) ($40,000) ($60,000) ($80,000)

Source: Arthur C. Nelson.

Chapter 1: How TDRs Work

ing to a seventh unit with a TDR—and that assumes the TDRs are free. Lloyd County could downzone residential densities in the receiving areas to four units per acre. At that level, a developer would be willing to pay $10,000 per TDR and buy two of them to increase density to six units per acre. Atlanta, Georgia, may have learned the lesson that downzoning land in receiving areas can create a better market for TDRs. In the early 1990s, Atlanta created a historic preservation TDR program. In theory, office developers could purchase TDRs from designated historic buildings and sites and use them to increase office space. In much of downtown Atlanta, however, office builders were not even building to the maximum intensity allowed by existing zoning. That meant there was no market for historic preservation. To the chagrin of the city’s historic preservation community, several historic buildings had been lost, though some were saved when office buildings outside the main corridors needed additional space. Figures 1.5 and 1.6 show one example of the relation between density and the value of development rights from Pierce County, Wash-

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ington, in the late 2000s. Figure 1.5 shows that the value per acre of land increases as the number of dwelling units increases, whereas figure 1.6 shows that the actual value per additional dwelling unit decreases as density increases. Based on market conditions, TDRs may have little or no value because of this relationship. Moreover, the “transaction cost” of the TDR program must be considered from both the seller’s and the buyer’s perspective. For instance, if use of TDRs in receiving areas is not “by right” and developers need to secure entitlements, many may be reluctant to incur the transaction cost associated with the process. TDR value is also likely to decrease because developers will capitalize the additional costs of TDR use in their purchase negotiations. Another component of the transaction cost is informing developers of the TDR market itself. For instance, King County, Washington, reports recent TDR transactions, prices, and uses on its website, in addition to occasionally purchasing TDRs and then reselling them. Before implementing a TDR program, King County undertook a feasibility study. The results led to a combination of some downzoning of

Figure 1-5. Pierce County, Washington, Property Values per Acre

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Figure 1.6. Pierce County, Washington, Property Values per Dwelling Unit

land in receiving areas but mostly accommodation of greater density—because the market was already headed in that direction. Instead of upzoning on a case-by-case basis, King County increased density substantially throughout receiving areas. Now, instead of seeking zone changes, developers often need only acquire TDRs, which is less costly and certainly less time consuming. Perhaps by understanding market forces well, and tailoring its TDR program accordingly, King County has preserved more than 130,000 acres of rural land since 2000—the most of any TDR program in the country (see table 1.2).

Not a Panacea Even with a solid market rationale for doing so, TDR programs can be difficult to adopt. Developers may object to paying for density increases that are currently granted without charge— though not without the cost and time involved in securing rezoning or other land use approvals and occasionally having to litigate. Residents near proposed receiving areas may assume that developments using TDRs will be incompatible with the existing neighborhood. Sometimes, even sending-area landowners argue over pro-

table 1.2 King County, Washington, TDR Density Bonus Schedule

Zone RA-2.5 R-4 R-6 R-8 R-12 R-18 R-24 R-48 NB CB RB O

Description

Base Density (du/ac)

Maximum Density (du/ac)

Rural Area Residential Residential Residential Residential Residential Residential Residential Neighborhood Business Community Business Regional Business Office

0.2 4. 6. 8. 12.0 18.0 24.0 48.0 8. 18.0 36.0 36.0

0.4 6. 9. 12.0 18.0 27.0 36.0 72.0 12.0 24.0 48.0 48.0

Source: King County, Washington, http://www.kingcounty.gov /environment/stewardship/sustainable-building/transfer -development-rights/receiving.aspx.

posed TDR allocations as a form of taking without compensation. When faced with these objections, elected officials may be tempted to retreat unless the public strongly supports preservation. Unfortunately, when implemented, TDR does not always work as well as anticipated. Although TDR programs have preserved more than 400,000 acres throughout the United States, about 40 percent of that total (135,000

Chapter 1: How TDRs Work

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THE REAL WORLD OF TDRS Expanding on a cautionary assessment offered by Walls and McConnell (2007), TDR programs offer these advantages: • They can preserve land without public investments. • Compared to zoning or other traditional tools, they can provide developers and landowners with more flexibility. • They have the potential to compensate landowners for downzoning or other restrictions on their land that may reduce value (though perhaps by not enough to trigger constitutional takings challenges). • They can accommodate growth while preserving land from development. On the other hand, TDR programs have these downsides: • Outcomes are uncertain, given the voluntary exchanges inherent in the programs. • Programs designed to work effectively under one set of market conditions may prove ineffective under other conditions. • No one can predict which landowners will sell TDRs, which will buy, and how many acres of land will actually be preserved. For instance, in the early years of Montgomery County, Maryland’s program, most TDRs were sold in the most remote parts of the large county, where development pressures were the least. • More development will occur in receiving areas than otherwise would have been the case. This can lead to neighborhood-based opposition during the planning stages, especially if using TDRs requires a public approval process. • TDR programs can be complicated to design and implement, may require substantial economic and market analyses that need periodic updates, and can lead to confusion about which party has which rights and whether those rights have already been used.

acres) comes from one jurisdiction alone: King County, Washington (King County, Washington 2010). In contrast, between 1982 and 2007, the United States lost 23 million acres of farmland (Farmland Information Center 2010). Even during the most productive period of American farming in decades—the result of competition for crops for food and fuel (ethanol)—the United States still lost 4 million acres between 2002 and 2007 (the most recent period for which data are available). In addition, it is not clear that one purpose of TDRs—increasing development density of urban areas—has met its promise. A 2007 study of Montgomery County, Maryland, for instance, indicated that, despite the addition of TDRs, densities in receiving areas remained substantially less than the zoning capacity allowed.14 TDRs, however, are intended to do more than increase the density of receiving areas. A key element is to preserve the viability—even

sustainability—of sending areas in their current use. A simple comparison of two counties in the Washington, DC, area underscores this goal. Montgomery County, Maryland, which has had a TDR program since the 1980s, lost about 20 percent of its farmland to development and other uses between 1992 and 2007. During that same period, Fairfax County, Virginia, which has roughly the same population dynamics but no TDR program, lost more than half of its farmland.

Facing the Challenges The challenges related to TDR programs may explain why they number just over two hundred around the nation. For starters, TDR programs work best in conjunction with strong land use plans and zoning ordinances. This often requires building political consensus on key zoning

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decisions; successful TDR programs thus require the commitment and political will of the community (Lane 1998). This commitment often comes from an educational and engagement process that includes citizens, real estate professionals, lawyers, assessors, and planners. The outreach effort includes such activities as mailings, public meetings, and advertisements. TDR programs are also more complex and expensive to implement than traditional zoning, and new staff is often needed. Local planning staff need to keep records of development rights that are assigned to properties within sending areas and are then used in receiving areas. Some staff can facilitate TDR transactions by setting up an online exchange or bank that assists with the third-party purchase and sale of TDRs. These banks involve a local government’s purchasing development rights and then reselling them to developers in the future, often for more than the initial purchase price. Thus, a share of the sales proceeds can offset administrative costs. The Oregon Department of Land Conservation and Development, which is marshaling the nation’s most recent state-authorized TDR statute, notes the following additional challenges: • Not every community is a good candidate for a TDR program. Because these programs are market based, development pressure of some type is needed to fuel the market for the purchase and sale of TDRs. At a minimum, developers must want to exceed the baseline development levels permitted to them as a matter of right. • Infrastructure, either in place or planned, is needed to accommodate the increased development densities in receiving areas. This challenge is less applicable in TDR programs that use relatively low density receiving areas (see chapter 9). • Neighbors in receiving areas often oppose

increased density. Design standards or special neighborhood amenities can alleviate many neighbor concerns. Designating new neighborhoods or transit hubs as receiving areas can minimize local opposition. • Many cities are already zoned for relatively high residential densities. In these cases, communities can use other development incentives, such as increased lot coverage or floor area ratios for commercial or industrial development, or waivers of some requirements, such as parking or open space. (Additional receiving area strategies include crafting agreements with other jurisdictions better situated to require TDRs for bonus development, and designating receiving areas on a community’s expanding urban edge. In the latter case, TDR can become a requirement for all dwelling units resulting when the land changes from lower-density rural zoning districts to higher-density urban zoning districts.) • TDR programs need to identify entities that will hold and monitor conservation easements over the long term; in most cases, a local government or a land trust handles this responsibility. • Local governments need to amend their comprehensive plans and zoning ordinances to implement TDR programs, which may mean creating special overlay zones. (Existing comprehensive plans often identify the areas to be saved and places where future upzonings are appropriate; in such TDR-ready communities, the comprehensive plan amendment could simply impose a TDR requirement on the additional development created by these future plan– consistent upzonings.) Above all, local governments need to recognize that a TDR program is not a substitute for good planning and zoning. Indeed, successful TDR programs depend on strong planning and zoning codes, often through amendments that can be highly politically charged.

Chapter 2

Comparing TDRs to Other Preservation Solutions

TDRs offer one approach to preserving important community resources. Other approaches, including zoning and clustering, offer similar promise to preserve desired landscapes. To provide a comparison, we assess the advantages and disadvantages of each approach in five categories: fairness, permanence, cost, administration, and adoption.

TDR Programs Perhaps the difficulty of adopting a TDR program can best be demonstrated by the fact that we have found only a little more than two hundred communities with such a program, out of the country’s thousands of cities, towns, and counties. Seeing how the TDR option compares with other approaches may motivate more communities to seriously consider it.

Fairness People’s opinions of the fairness of a TDR program will vary depending on how the program is designed. TDR programs offer these advantages: • Unlike traditional zoning and development requirements, TDR programs give

sending area landowners and receiving area developers a choice of whether to use the TDR option. • Also unlike traditional zoning, TDR programs provide compensation to sending area owners who elect to participate. On the other hand, disadvantages include the following: • Sending area landowners may argue that they are being treated unfairly if their land is downzoned in conjunction with the adoption of a TDR program. On the other hand, the community could have downzoned these properties without providing the potential for compensation through TDRs. Second, the downzoning may be needed so that regulations reflect the community’s land use goals for these areas. In many cases, the previous zoning failed to implement those existing goals. Consequently, the new zoning often corrects past zoning mistakes rather than reducing properly granted development potential. (Many communities do not downzone sending areas in conjunction with the adoption of a TDR program, thereby eliminating this disadvantage.) • Receiving area landowners and developers may argue that TDR programs unfairly 15

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place preservation obligations only on them and not on all development. Admittedly, some might consider development fees for preservation purposes to be more equitable because all development—not just the development that exceeds the TDR threshold in receiving areas—would have to pay them. Communities should consider whether developments in receiving areas would have to buy TDRs to achieve the same densities that developments in comparable areas receive as a matter of right; otherwise, TDR receiving area landowners and developers could find themselves at a competitive disadvantage. Under these circumstances, the community should ensure that there are good reasons why the same level of development requires the purchase of TDRs in some areas but not others. Some communities respond to this concern by rezoning exclusively to TDR receiving areas; this imposes TDR requirements on all developers who want to exceed the TDR threshold.

Permanence To create TDR programs, development of sending sites must generally be prohibited or reduced forever. This requirement for permanent deed restrictions gives TDR programs two big advantages: • Traditional implementation tools, such as zoning, provide only temporary protection. Zoning can change from one election to the next. Consequently, a community can assume that open space and agricultural land are protected when, in fact, the possibility of development has only been delayed. With TDR programs, however, the sending site must forever comply with the deed restric-

tions once those have been recorded. This requirement provides greater certainty to the community. • Permanent preservation gives property owners more confidence when planning for the future. For example, farmers may rightly question whether they should make long-term agricultural investments when elected officials could approve a subdivision next door. But as the number of conservation easements grows, more farmers feel that agriculture has a long-term future in their township or county, which in turn generates additional preservation. Of course, the permanent deed restrictions recorded on sending sites make TDR programs difficult for some communities to adopt. While recognizing the need to permanently preserve significant ecological areas and important landmarks, the communities may be unsure about what agricultural areas deserve protection in perpetuity and where to draw the final line between rural and urban areas. These communities may worry that their decisions will result in the permanent preservation of land later found to be critical for development. In response to this concern, some TDR programs allow development potential to be reattached to previously preserved sending areas under limited conditions. For example, the TDR ordinance in Charlotte County, Florida, allows deed-restricted sending sites to convert to receiving sites if the county’s comprehensive plan ultimately redesignates the sending sites for growth and if the owners buy TDRs to restore their previously transferred development potential. The Charlotte County approach could become a model for communities reluctant to adopt a TDR program: it allows permanent preservation with the potential for correction, but only when the property owners buy back the development potential they had previously sold.

Chapter 2: Comparing TDRs to Other Preservation Solutions

Communities should also recognize that property owners themselves can unilaterally preserve their land with conservation easements sold or donated to private land trusts or preservation programs funded by other public agencies. In other words, the preservation of TDR sending areas is just one occurrence that can influence the direction of urban expansion.

Cost In TDR programs, the money to preserve sending sites comes from a portion of the profits generated by the extra development approved through TDRs on the receiving sites. Consequently, TDR programs can achieve substantial preservation without money from bonds, the general fund, state/federal grants, sales taxes, property taxes, or even private foundation funding. One disadvantage is that TDR programs add extra costs to projects that exceed the TDR threshold. These extra costs may reduce the profit margin for developers or increase the prices charged to the final consumers, the home buyers. Of course, developers could experience higher profits if they were allowed to exceed the TDR thresholds without having to buy TDRs. But the cost of those TDRs must be outweighed by the additional profits available through the TDR option or developers would simply elect not to buy TDRs. In some cases, developers can pass on some or all of the cost of the TDRs to home buyers. If that happens, the extra cost should not be excessively high; otherwise, people would not purchase projects using TDRs and developers would not build them. In reality, higher-density TDR projects may be more affordable than non-TDR projects. This is because the TDR projects are more compact than the non-TDR projects, creating cost reductions for roads and other infrastructure as well as cost savings through economies of scale.

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Administration Administration refers to the personnel, time, and effort needed to manage a preservation solution after it is adopted. Simple TDR programs have the advantage of usually requiring a portion of one member of a community’s planning staff. It is also possible for a nonprofit organization to administer portions of a TDR program, which frees the community’s professional staff from daily TDR responsibilities. The program in San Luis Obispo County, California, for example, has authorized the Land Conservancy of San Luis Obispo County to run its Cambria TDR program. Traditional TDR programs have the disadvantage of requiring either staff or an outside agency to approve and record deed restrictions, monitor sending sites for compliance with deed restrictions, approve and record documents extinguishing TDRs, track TDRs, maintain lists of potential TDR buyers/sellers, and promote the use of TDR, depending on the program’s nature and complexity. In other words, the ongoing administration of a TDR program generally seems more demanding, especially when compared to more traditional approaches such as zoning and clustering. To address this concern, some communities have adopted TDR programs that reduce or eliminate some administrative duties.

Adoption With TDR, preservation is implemented by extra development profits rather than by bond measures, special taxes, jurisdiction-wide development fees, or increased zoning restrictions, all of which can be difficult to adopt. Consequently, many communities assume that TDR will prove relatively easy to introduce, until they begin to encounter some of these disadvantages to adoption:

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• Traditional TDR programs require several important decisions to be made at one time: designation of sending areas, allocation of TDRs, designation of TDR receiving areas, and establishment of the TDR threshold. In addition to requiring coordinated decision making, any of these decisions could be controversial. For example, people could disagree about the areas suited for permanent preservation, or adjacent residents may object to proposals for particular receiving areas. • Some communities balk at identifying areas for permanent preservation. This decision may not be difficult for environmentally sensitive areas, but it could be for preserving open space, greenbelts, or farmland. For example, during agricultural recessions, people often question whether even prime farmland can be profitably farmed forever. In response, if a community has doubts about planning for perpetuity, it might consider a TDR program that allows development of deed-restricted sending sites if the comprehensive plan ultimately changes former sending areas to receiving areas and if the landowner acquires the necessary TDRs. • Disagreements can arise over the appropriate number of TDRs to allocate to sending areas, often because communities have little or no experience with conservation easements. The value of development rights from average parcels might have to be estimated based on the prices paid in other communities. Furthermore, people may disagree about how to define the average parcel. If the community wants to motivate the owners of small parcels, it may allocate more TDRs based on the higher per-acre value of these smaller parcels; this could raise other concerns about whether there is sufficient demand to accommodate high al-

•

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location rates. Such disputes can delay and even scuttle TDR program adoption. The designation of receiving areas is often the most difficult aspect of TDR program adoption. When receiving sites are proposed at the urban fringe, adjacent neighbors often object, even if the density allowed through TDR does not exceed the density allowed by the community’s comprehensive plan. New town locations may also be criticized as promoting growth in currently rural areas. The establishment of a TDR threshold can be controversial. If the threshold allows more development in receiving areas than the comprehensive plan currently calls for, neighbors could object. Alternatively, if the TDR threshold is lower than the maximum density allowed in the comprehensive plan, developers and receiving area landowners may object. Some communities fear that some receiving area developers will buy TDRs and others will not, creating adjacent properties with different densities. In reality, differences in density can occur even without TDR programs. Unless a community has minimum density requirements, any developer can choose not to build to the densities allowed by the current code. Of course, developers who decline to use the TDR option, or who decide not to build to baseline densities, know that higher-density projects may surround their own developments. Some communities want the owners of all sending area properties to find TDR equally attractive. This is difficult because the development value of sending area properties can vary substantially depending on location, site characteristics, parcel size, and property amenities. Some communities respond by providing different per-acre TDR allocations for land in different loca-

Chapter 2: Comparing TDRs to Other Preservation Solutions

tions and categories of development capability. Areawide allocation, however, cannot recognize site-specific differences in development value. Most communities adopt allocation rates that should motivate most sending site owners, recognizing that the remaining owners may not participate. At least one community, San Luis Obispo County, California, allocates TDRs based on an appraisal of the sending site’s development value. • Some communities believe TDR could discourage the development of receiving areas at the maximum densities allowed in their comprehensive plans. If TDRs are not affordable, developers may not be able to buy them and still make a reasonable profit when building at densities above the TDR threshold. There are several responses to this concern: 䊏

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When TDR programs are designed to produce affordable TDRs, TDR prices will not discourage developers from building above the TDR threshold. A desire for lower density, rather than TDR requirements, may be the reason developers decline to build to the maximum densities allowed in the comprehensive plans. Some communities allow relatively little density bonus via TDR. Consequently, the resulting density is similar whether or not developers choose the TDR option. A TDR program is intended to implement land use goals for the sending as well as the receiving areas. If the community were able to implement all of its preservation goals without TDR, it could avoid requirements, like TDR, that might discourage the desired development of its growth areas. Few communities, however, achieve their preservation goals en-

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tirely through zoning, land acquisition, fees, or purchase of development rights. To implement preservation and development goals, TDR programs should ideally be designed so that developers as well as landowners find the TDR option to be a profitable alternative to the non-TDR option. If the community fails to achieve both preservation and development goals despite a well-designed TDR program, that failure may stem from home buyer preferences and factors other than TDR. • Communities may struggle with how to plan for infrastructure in a receiving area without knowing whether developers will elect to build above or below the TDR threshold. In reality, communities always face the possibility of planning for too much infrastructure regardless of whether they have a TDR program. This is because developers typically have the option of not building to the densities assumed for infrastructure planning purposes. Some communities address that concern with minimum density requirements. To encourage future development at densities above the TDR threshold, communities can design a program in which TDRs remain affordable and TDR represents a profitable option for landowners and developers. Furthermore, communities have the option of changing their infrastructure plans if lower-than-expected development levels occur for any reason—including the unwillingness of developers to choose the TDR option. Finally, some communities allow relatively little density bonus under the TDR option. This ensures that the necessary infrastructure remains fairly constant regardless of whether developers stay below the TDR threshold or build to the maximum densities allowed under the TDR option.

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Zoning The following points assume that the community changes its zoning code to reduce maximum density or to increase development restrictions in the areas where it wants to reduce development without any potential for corresponding compensation (such as TDR).

Fairness Many communities consider the adoption of more restrictive zoning, without the potential for compensation, as fair provided the new zoning implements the land use goals of the comprehensive plan. This advantage becomes clear if the old zoning is generally considered ineffective in implementing long-standing land use goals. Many communities, however, do not believe it is fair to downzone open space or farmland, possibly reducing its development value, without the potential for compensation. Most states have no legal requirement to compensate for reductions in development value as long as economic use is not eliminated. Rather, the decision makers in these communities remain reluctant to downzone without compensation because of community traditions, personal beliefs, or a desire to avoid financially harming fellow residents and registered voters.

Permanence Zoning may be easier to adopt than TDR because it is not permanent. Having to decide what areas deserve perpetual protection makes some communities apprehensive. Because they can change zoning relatively easily, communities are less concerned about making what they fear may be a permanent mistake. A disadvantage is that zoning itself does not guarantee long-term

preservation. Zoning can be changed from one election to the next, reversing whatever progress may have been made in the implementation of the comprehensive plan. If the comprehensive plan calls for permanent preservation, zoning alone is not sufficient.

Cost Zoning involves minimal additional public cost to preserve community assets, other than perhaps promulgating new rules that may be subject to litigation. Without compensation, however, downzoning can reduce the development value of land and thus affect the “fairness” issue.

Administration Zoning has the advantage of being relatively easy to administer; it does not require deed restrictions, tracking, facilitation, or marketing.

Adoption Most communities use zoning, making the general public familiar with this technique. Consequently, a lack of understanding probably would not hamper its adoption. In addition, zoning is relatively simple compared with most other techniques, particularly TDR. As for the disadvantages, some communities are reluctant to adopt meaningful zoning restrictions because of possible reductions in development value. This reluctance is evident from the number of communities that rely entirely on zoning, even though they acknowledge that zoning alone does not achieve their land use goals. Some communities, such as Montgomery County, Maryland, adopt new zoning restrictions in conjunction with TDR. That enables the community to adopt zoning that reflects the goals of the

Chapter 2: Comparing TDRs to Other Preservation Solutions

comprehensive plan yet also provides a means of compensation to the affected property owners.

Clustering Clustering is similar to TDR except that the transfers occur within a single parcel. It allows the property owner to concentrate development on the least sensitive part of the property. The owner permanently deed-restricts the rest of the property as open space, natural areas, or farmland.

Fairness Clustering offers the advantage of compensating property owners for preserving most of their land. In some communities, the property owners receive this compensation through the reduced development costs associated with compact development and the ability to enjoy agricultural income or open-space amenities from the deedrestricted land. Other communities also offer an overall increase in density through the clustering technique.

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Cost On the plus side, clustering involves relatively little public cost for adoption and project approval. Clustering, however, allows pockets of development in rural areas that are often far from jobs, schools, shopping, and public services. After several clustered developments have been approved, rural roads may experience traffic congestion because the residents of these developments must drive long distances for everyday activities. Public costs are likely to rise if the community builds roads to solve the congestion problems. Similar costs could be incurred over time if these areas are eventually attached to public water, sewer, and stormwater systems.

Administration Compared to TDR, clustering is easier to administer because the development and preservation occur on one property and involve one property owner. Compared to zoning, clustering has more administrative requirements because the community must properly record and enforce the deed restrictions.

Permanence

Adoption

Clustering offers the primary advantage of permanently preserving the deed-restricted land. One disadvantage is that the permanently preserved land may not implement the goals of the community’s comprehensive plan. This is particularly true if the plan envisions the permanent preservation of intensive agriculture, which involves spraying, dust, odors, and noise. If the preserved portion is adjacent to the developed portion of the lot, the potential arises for land use conflicts between residential uses and intensive agriculture. Over time, these land use conflicts can result in abandonment of active farming.

Clustering is relatively easy to adopt. Simpler than TDR, it is usually popular with property owners because it does not require complicated transactions. It also provides communities with an inexpensive tool to minimize potential land use conflicts, especially if the clustered developments can mitigate infrastructure needs. One disadvantage is the concern that clustering may not actually create a desirable land use pattern within the community. In farmland preservation programs, for example, clustering may locate the preserved farmland immediately adjacent to residential development, which can create

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conflicts among property owners. Clustering also scatters pockets of urban development throughout rural areas, requiring residents to drive long distances for everyday needs.

Purchase of Development Rights Programs Similar to TDR, purchase of development rights (PDR) programs give owners of farmland, open space, and natural areas the option of recording a deed restriction on their properties to ensure permanent preservation. In return, the property owners are allowed to sell the development rights severed from these sites. With TDR, developers buy those development rights; with PDR, however, the purchases are made with public dollars and the development rights are retired rather than sold for bonus development. These public dollars might come from special taxes, the general fund, bond proceeds, or grants from state and federal sources. The following points assume a PDR program funded by local taxes.

Fairness While preservation policies may prevent development of property to the extent wished by an owner, PDR programs allow the owners of sensitive land to voluntarily preserve their property and receive compensation in return.

Permanence The deed-restricted land that results from a PDR program is permanently preserved. Furthermore, the compensation for this preservation does not take the form of development. Consequently, PDR does not lead to the land use conflicts associated with clustering or the receiving area controversies often associated with TDR programs.

Cost PDR programs require public funds to pay for preservation—a chief disadvantage because many taxpayers are not yet willing to tax themselves to implement land use goals. Furthermore, unlike with TDR, PDR results in the retirement of a property’s development value. That loss is not counterbalanced by the use of development rights at receiving sites but, rather, represents a net loss to the community’s tax base. Finally, the public actually pays twice—once for the infrastructure and other growth-related investments that create the very value being purchased and then to purchase the value itself (Nelson 1990). On the other hand, PDR programs often acquire development rights at a discount, sometimes up to 50 percent, when there are more willing sellers of the rights they possess than there is money in the PDR program.

Administration Some types of PDR programs have the advantage of being easier to administer than TDR. For example, elected officials may simply approve the use of a finite amount of general fund money to purchase development rights. Similarly, grants from state or federal sources typically carry fewer administrative burdens than TDR, despite the documentation requirements often attached to grants. Some funding mechanisms for PDR programs, however, can require as much—or even more—administration as TDR. These more complex mechanisms include the use of special taxes and bond proceeds.

Adoption Development does not fund PDR programs. Consequently, the adoption of PDR programs is not likely to be sidetracked by development-

Chapter 2: Comparing TDRs to Other Preservation Solutions

related controversies, such as the potential for land use conflicts posed by clustering or the opposition to TDR receiving sites from adjacent residents. One disadvantage is that a PDR program often requires voter approval—and convincing taxpayers to tax themselves requires a considerable commitment to preservation. Many communities do not yet enjoy that level of commitment and rely entirely on grants from state or federal sources. Although these grants can be an important component of a larger implementation program, they alone are unlikely to achieve more than a fraction of a community’s land use goals.

Development Fees A community may require development fees for all building projects, with the proceeds earmarked for open space, environmental purposes, or farmland preservation.

Fairness When all building projects are required to pay development fees, all development becomes responsible for preservation rather than just those developments within a TDR receiving area. Also, as with all of these approaches except zoning, development fees offer compensation to landowners who volunteer to permanently preserve their properties. On the other hand, some might argue that development fees are not as fair as TDRs because developers have no choice but to pay the fee or forgo development. At least with TDR programs, developers can choose whether to exceed the TDR threshold.

Permanence The deed-restricted land that results from earmarked development fees remains permanently preserved.

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Cost Development proceeds, rather than taxes, fund development—a big advantage to taxpayers. The downside is that development can support only a finite level of development fees for all purposes. If open space fees are too high, other public services that could be paid through fees might instead need to be paid through taxes.

Administration Generally, development fees are collected through the process of obtaining a building permit. This straightforward requirement gives development fees the advantage of being easier to administer than TDR and some forms of PDR. Still, development fees involve the acquisition of property or development rights, the recording of deed restrictions, and the enforcement of easements, where appropriate. These disadvantages of the development fee option require administrative duties similar to PDR and TDR programs.

Adoption Development fees have the clear advantage of not requiring increases in taxes, making this option easier to adopt than PDR. Development fees also do not require the designation of sending areas and receiving areas and all the other hurdles that discourage the adoption of classic TDR programs. Disadvantages include the fact that many communities find it difficult to adopt adequate development fees; perhaps these communities underestimate the protection of environmental areas and open space necessitated by development. In addition, substantial openspace fees may be difficult to adopt because they compete with fees for schools, emergency services, roads, and other essential public services.

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In the face of this competition, the open-space fees finally adopted may be capable of achieving a fraction of a community’s land use goals.

Density Transfer Charges The density transfer charge (DTC) reduces the TDR technique to its essential purpose: recapturing part of the extra value generated by increased development potential and using it to compensate for the reduction of development potential elsewhere. With this approach, developers can achieve additional receiving site development by making a cash payment, which the community uses to preserve sending areas. We know of six TDR programs that offer cash payments as the only method of compliance, and of another fourteen programs that allow compliance via cash in lieu—the developer can either pay cash or achieve actual preservation, usually by retiring TDRs. To create a greater contrast with traditional TDR, the following discussion assumes a DTC program in which developers choose between making a cash-in-lieu payment and directly obtaining an easement on a parcel of sending area land. Berthoud, Colorado, pioneered this approach, and other features of its program demonstrate how reducing TDR to its basics can facilitate program adoption. Rather than designate receiving areas, Berthoud’s ordinance simply states that future upzonings, or changes from a lower-density zone to a higher-density one, create the receiving areas. The maximum density of the previous zoning becomes the baseline, and all dwelling units above baseline made possible by the new zoning are considered bonus units. For each bonus unit, developers must either preserve an acre of open space or make an inlieu payment in the amount stated in the TDR ordinance (see chapter 5 for more details on Berthoud’s program).1

Fairness As practiced in Berthoud, Colorado, the DTC approach offers advantages similar to those of traditional TDR. Unlike zoning, for example, DTC creates a funding source to compensate landowners who permanently preserve properties of significance to the community. As in traditional TDR, developers can decide whether they want the additional development offered by the DTC provisions. In addition, Berthoud did not rezone or even designate sending and receiving areas, thereby avoiding potential property value impacts from the rezonings that often occur in conjunction with traditional TDR ordinances. Some landowners and developers may argue that DTC unfairly places preservation costs only on projects with higher density rather than on all development permits, which would spread preservation costs over larger numbers and kinds of developments. But developers and landowners are just as likely to argue that mandatory development fees are unfair—that if you want to develop, you have no choice but to pay the development fee. At least with DTC, developers can choose to build within baseline and thereby avoid the density transfer charge.

Permanence Like TDR, PDR, development fees, and clustering, DTC generates revenues that enable communities to permanently preserve important resources either through the purchase of deed restrictions or through land acquisition. DTC also addresses the disadvantage of permanence sometimes encountered with TDR; it allows community officials to decide which properties to permanently preserve via DTC proceeds. If community officials have concerns about certain areas, they can concentrate, at least initially,

Chapter 2: Comparing TDRs to Other Preservation Solutions

on preserving areas where the appropriateness of preservation is not an issue, such as critical wildlife habitat or large, remote areas with highly productive farmland. In fact, Berthoud cites this advantage in its density transfer fee ordinance. As a disadvantage, in-lieu programs, like Berthoud’s, give developers the option of selecting qualifying land for preservation rather than paying the DTC; when developers choose the inlieu option, the community cannot target this cash for its highest preservation priorities.

Cost DTC, as in traditional TDR, designates a portion of the extra profits created by higher-density

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development for preservation. Consequently, communities can achieve many of their land use goals without money from bonds, the general fund, state/federal grants, sales taxes, property taxes, or even private foundation funding. This advantage makes DTC especially attractive to communities where support for preservation is not strong enough that taxpayers are willing to tax themselves for this purpose. One disadvantage is that DTCs add extra cost to participating projects, which may not be completely offset by the reduced per-unit cost of building at higher densities. These extra costs may reduce the profit margin for developers or increase the prices charged to home buyers and other consumers. A reasonable density transfer charge can minimize these potential disadvantages.

COMMON MISUNDERSTANDINGS We have found TDR programs in more than two hundred communities, which represent a minuscule share of the more than thirty-nine thousand cities and counties in the United States. In response to a survey form (Pruetz 1997), 558 planners explained why their communities had not adopted TDR. The reasons fell into ten categories, with the most frequently selected reasons receiving slightly more than 20 percent of the total number of responses and the least frequently selected reasons receiving less than 5 percent of the total number of responses (survey respondents could choose more than one reason). In many cases, these responses suggested misunderstandings about TDR, as described in the following examples: • In 22 percent of all responses, the planners explained that their communities relied on zoning and other traditional techniques, even though they did not expect those techniques to achieve most of the community’s land use goals. This suggests that some respondents consider TDR to be an alternative to zoning and other traditional tools. In fact, many communities that are achieving their land use goals view TDR programs and other tools not as alternatives but as complements to one another. In Montgomery County, Maryland, for example, the compensation offered by TDR helped the county adopt effective zoning. In turn, the strong zoning helped Montgomery County create the market demand for a successful TDR program. • In 11 percent of all responses, the planners reported that their communities preferred to use outright purchase to acquire land, easements, and development rights. Yet, even communities with aggressive acquisition programs, such as Boulder County, Colorado, can supplement those programs with TDR programs. Otherwise, most communities find it difficult to achieve all of their preservation goals using only taxes or development fees. • In 8 percent of all responses, the planners expressed concern about TDR programs’ complexity. Admittedly, many TDR programs are complex. As proved by Berthoud, Colorado, however, communities can simplify TDR to create a basic yet functional tool. • In 6 percent of all responses, the planners reported that their developers might not be interested in higher-density development. They mistakenly believe that TDR requires demand for high-density development, when, in fact, it requires only demand for more density than allowed by current zoning. The TDR threshold can be established so that developers must buy TDRs in conjunction with changes from low-density rural densities to single-family residential densities.

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Administration DTC programs require more administrative effort than zoning and clustering and about the same amount of effort as development fees. With respect to paperwork, they should require less administration than TDR because the community does not need to maintain a registry of interested TDR buyers or keep track of development rights between the point of severance and their retirement in receiving site projects.

Adoption DTC eliminates or reduces many factors that impede adoption of other implementation tools. Unlike zoning, DTC provides the potential for compensation to landowners who voluntarily preserve their properties. It does not raise the potential for density impacts when it is adopted because it postpones the actual rezoning decision until a developer submits a rezoning application. It funds preservation with the profits from development, eliminating total reliance on tax dollars. And it achieves many of the goals of TDR without requiring public officials to proac-

tively rezone or even designate sending and receiving sites. These advantages greatly reduce the chances of opposition and facilitate ordinance adoption. As a disadvantage, developers might oppose the adoption of DTC ordinances more than TDR ordinances. That possibility exists because more development sites are likely to have an offsite preservation requirement under the DTC approach (at least the way DTC operates in Berthoud, where essentially all upzonings create receiving areas and all development in excess of baseline must comply with DTC requirements). This potential for increased developer opposition might be offset by developer preference for DTC because it affects all rezonings and could, therefore, reduce TDR’s potential to put developments in some locations at a competitive disadvantage. In fact, many developers should prefer DTC because it gives them the choice of cash compliance. The cash-in-lieu option enables developers to comply with DTC requirements at a known price, without having to find landowners willing to sell their development rights and then negotiating an affordable price for those rights.

Chapter 3

The Economics of TDRs

The conversion of lands from one use to another is controversial in many parts of the country. The economic pressures for converting from one, less-intensive use (such as agriculture) to another, more-intensive use (such as suburban or urban development) are well known (Clawson 1971). Regulatory measures, such as land use plans and zoning, can retard and even stop such conversions. Such regulatory measures, however, have their own problems. The most obvious consequence of conversion-ending regulatory programs is the inability of developers, speculators, or landowners to profit from the increase in land value when development potential cannot be realized. Thus, land use planning agencies find themselves in the middle of a conflict between two competing interests. On the one hand, communities want to protect and preserve agricultural or environmentally sensitive land and prevent, or at least control, certain environmental and social costs commonly associated with land conversion. On the other hand, development regulatory bodies face protests against any perceived diminution of property rights. These protests become particularly vocal if the new regulation would further restrict land conversion, but they arise even when a long-standing regulation is not lifted during a period of development pressure.

New regulations that substantially eliminate all economically beneficial use of an individual’s land may be an unconstitutional taking of private property and could require the payment of just compensation (see chapter 10). Local governments are caught between a duty to protect public health, safety, and welfare and a potential mandate to compensate landowners whose property has been taken or inordinately burdened—even if by regulations that justifiably protect public health, safety, or welfare. Many areas have experimented with land management techniques that permanently retain lands in existing low-intensity uses. Sometimes these techniques are applied at the same time new regulations are imposed, in an effort to retain low-intensity uses without destroying the land’s developmental values. In other cases, these techniques are applied independently of new regulations, either to substitute permanent protection for land that had been protected only by regulations or to encourage landowners to voluntarily exercise their existing development rights in a different manner than allowed by existing regulations. The most notable of these programs are purchase of development rights (PDR) and transfer of development rights (TDR). Both separate development rights from the other use rights associated with the land. With PDR, the development 27

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right is purchased and extinguished, or not used. In the case of TDR, the development right is transferred so the development that would have been undertaken on the subject land is undertaken elsewhere. Both approaches protect the development value of the land slated for preservation. Because TDRs are market-based mechanisms that depend on the market to fulfill public policy aims, they must be designed so the market responds in desirable ways. The tangible application of economic principles to a specific application helps build an understanding of this key feature of TDR program design. Therefore, the economic analysis presented in this chapter refers to farmland or open-space preservation—the most common use of TDRs. Specifically, the example refers to southeastern Lee County, Florida, so it connects TDR design and implementation to specific provisions of Florida state law. Not only does Florida’s law enable TDRs but state planning policies also encourage local TDR efforts. Florida state law mandates planning by all municipalities and counties, which is similar to about half of all states (Nelson and Lang 2009). In addition, Lee County’s comprehensive plan identifies the preservation of important farmland as meeting broader county planning objectives. Yet, while presented in the context of Florida and Lee County, the following example offers broadly applicable lessons. In this case, land in Lee County commonly tends to be more valuable in development than in farming or laying fallow; converting from lowvalue to higher-value uses tends to be rewarded with profit. This example analyzes the potential for Lee County to use TDRs to facilitate agricultural land conservation in its density reduction/ groundwater resource (DR/GR) area.

The Economics of Land Value If TDRs are essentially an economic policy, it is important to understand land economics.

Land has two fundamental values: use and exchange. The value in use refers to the value of the land to the owner based on the land’s existing uses. This value can be both economic and noneconomic. The value in exchange refers to what someone else would pay for the land. Generally, when the value in exchange exceeds the value in use, the property will be sold. The economic return received by the owner primarily determines the value in use. Many properties, however, also provide noneconomic returns, especially when those lands are environmentally sensitive. These noneconomic returns typically take the form of an enhanced “quality of life,” enjoyed by all. When environmentally sensitive lands are converted from their natural state, the owner benefits from an economic gain but may not bear all costs associated with the sale, both economic and noneconomic. Often, the conversion of land involves a cost borne by the community as a whole. For instance, development of upstream floodplains can exacerbate downstream flooding that may require downriver communities to incur flood repair and protection costs. This cost is felt as a loss in the “quality of life.” It is also known as an externality—a cost incurred by someone that results from the action of others. The problem is that the value of upstream floodplain land does not reflect the costs incurred by owners of land downstream from floodplain development. Owners place a value on their land, either subjectively or based on the results of appraisals or similar objective data. Regardless of how they arrive at the number, owners have a sense of what their land is worth. When market values exceed owners’ sense of worth, the owners will sell the land—not necessarily because of the price offered but, rather, because of the owners’ sense of the land’s worth. Figure 3.1 illustrates two different situations. In the first, the owner attaches some noneconomic value to the land with the result that a sale does not happen, even though the offer is higher than that justified by the existing economic use. In the second instance, the

Chapter 3: The Economics of TDRs

Figure 3.1. Land value with and without positive externality value. Figure by Doug Woodruff.

sale would occur because the owner did not attach any noneconomic value to the property. The point is that the offer—the value in exchange—is not the sole determinant of the sale. The opposite is also true. Bidders may go beyond the economic value of property for noneconomic reasons. In both instances, prices—the values in exchange—seem beyond the underlying use value of the land. Of necessity, buyers will have to buy out both the economic and noneconomic values to acquire that land. It would follow that only those buyers who attached the same or higher noneconomic values to that land would acquire the property. In this manner, subjective values are capitalized into market prices of land. An owner with speculative expectations tends to hold land even when offers to purchase meet or exceed the value in exchange. Likewise, buyers tend to exceed values in exchange when they have speculative expectations. So much of the dramatic rise in Lee County prices during the 2000s can be attributed to speculative expectations; also, a great deal—if not all—of the decline in the 2010s can be attributed to the loss of those speculative expectations. This market process creates a problem. Buyers pay prices that reflect all factors relating to the land. Any potential buyer who places little or no value on noneconomic or speculative

29

qualities will lose out in the bidding process to those who value such qualities. The resulting capitalization of those qualities into market prices means that if those qualities were to be lost, buyers would suffer a loss both in the subjective and objective values of their land. The second set of columns in Figure 3.1 depicts a situation where a buyer made an offer that covered or exceeded both the economic and noneconomic values of a property. These columns show what would happen if noneconomic values were lost. The net effect is that the new owner would incur both economic and noneconomic losses as a consequence of the loss of the particular quality that was the source of the original noneconomic value. Say, for example, a parcel offered a view of spectacular scenery; the value of that view would be capitalized into the price of the land. If that view were subsequently lost, the landowner would incur both economic and noneconomic losses.

The Economics of Density With land economics, density matters—to a point. The more intensively land may be used, the more value it has—depending on local market conditions. TDRs will succeed or fail based on their ability to influence the land market to reduce development pressure on sending areas and increase market acceptance of them in receiving areas. This goal necessarily means increasing the developed density of receiving areas. What determines the value of land? You’ll hear, “Location, location, location!” as the standard, almost knee-jerk, response. Of course, location is critical to the value of a parcel of land. Once location is fixed, other factors come into play. The most important of these is the land’s productivity. All other things (such as location) being equal, the more productive land will command higher prices than the less productive land. The precise value of a parcel would be a

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function of the land’s yield per unit of land, usually an acre. For agricultural land, this is commonly measured in bushels per acre (or some other recognized measure of output). The more goods that can be produced on a particular parcel, the more valuable that land. The same economic forces apply to urban land. The productivity of urban land is basically the same as agricultural: yield per acre. Of course, urban land yields different units than agricultural land does; the measurements are dwelling units or square footage of floor area per acre rather than bushels per acre. Still, the basic point remains true for both agricultural and urban land: the more that can be produced on a parcel of land, the greater its expected value. Unlike agriculture, however, the more product produced per unit of urban land tends to change the nature and value of the product. In agriculture, for example, the one hundredth bushel produced on an acre would have the same market value as the first or the fiftieth bushel. But with urban products, such as residences, the market tendency is for unit value to decline with density (O’Sullivan 2008). Thus, in an urban market, the land’s productivity must be viewed together with the market for the various types of units capable of being produced on the land. Land capability is a function of the land’s physical characteristics and the legal restrictions placed on the land. Either physical limitations or legal restrictions, working in conjunction with market forces, will determine the productivity of land in terms of production per acre—otherwise known as density. When the market demands less density than both the physical limitations on the land and the legal restrictions could allow, the market is the sole determinant of density. When market demands and legal restrictions would allow higher density than the physical limitations will allow, attempts to modify those physical limitations will occur until either the market or the legal limits become the upper limit. When legal re-

strictions allow less density than the market demands and physical limitations will allow, requests for rezonings and similar types of regulation changes will follow. In a residential land market, the general tendency is for value to increase per land unit, or acre, with density but at a decreasing rate. In other words, each additional unit of density will add less to total value as density increases. In economics, this is known as the law of diminishing returns. Figure 3.2 shows a typical per-acre value with respect to residential density. While the value per acre is increasing with additional units of density, it is clearly increasing at a decreasing rate. If this process of increasing density on a given unit of land continues, it will eventually lead to a declining total value, as shown in figure 3.3. This situation would occur because each additional unit of density would be of negative value, thus detracting from parcel value: the development would be so dense that buyers would offer less to buy or rent there. Of course, rational people would not knowingly increase density to such a level. Rather, they would cease density increases at levels that maximized total values. Figure 3.4 shows a limiting factor—something that results in less than market density and thereby limits value and returns. Zoning, for instance, can lower market value if it restricts de-

Figure 3.2. Diminishing but positive returns to increasing density. Figure by Doug Woodruff.

Chapter 3: The Economics of TDRs

Figure 3.3. Diminishing and eventually negative returns to increasing density. Figure by Doug Woodruff.

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neighbors will accept. Concerned about externality effects, communities often enact regulatory programs that limit development densities to less than what the market would accept and reward. When development intensity is reduced to less than what the market will accept, various petitions result; the petitioners want to increase permissible density to what the market would accept. In situations where allowable densities are less than market densities, TDR presents a way to increase densities as well as economic returns. In situations where market densities are at or below permitted densities, TDRs will have no economic feasibility and thus no ability to achieve land preservation.

Market Research and Results

Figure 3.4. Limited return to land with density cap. Figure by Doug Woodruff.

velopment at a density that the market would otherwise support. If the limit could be eliminated (probably unlikely in the case of zoning) or raised (such as through a zone change), density of development would rise and so would property values and returns. If this limitation were physical, such as being flood prone, modifying the land by providing drainage could result in increased value. Likewise, relaxation of any regulatory constraints that limited density below what the market would set could increase values. In the situation depicted in figure 3.4, the property owner would find it advantageous to increase the density of development. This is the prime situation for TDRs. It is an unfortunate fact of modern life that the market tends to accept more density than most communities or

Let’s walk through the economic analytic steps used in Lee County, using real estate sales data for the analysis. The sample comprises recent sales of mostly vacant properties within the study area. We divide the analysis into retail sales (single buildable lot sales) and bulk sales (multiple buildable lot sales), with the summary shown in table 3.1. From these data, we run regression analysis, a statistical technique that correlates one set of data, known as the dependent variable, with one or more independent variables. The objective is to test whether there is significant correlation table 3.1 Distribution of Land Sales in Lee County Parcels Total Sales: Parcels Total Sales: Lots Total Sales: Acres Average Lot Size in Acres Sales Price per Acre Sales Price per Lot

Retail

Bulk

All

268 268 597

12 563 398

280 831 995

2.23 $131,811 $293,624

0.71 $145,319 $102,730

1.20 $137,203 $164,294

Source: James C. Nicholas.

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between the dependent variable—in this case, the price per unit of land (an acre) and the independent variables (such as lot size, location, and zoning). The reliability of the model is measured by a statistic known as the coefficient of multiple determination, otherwise known as R2, which indicates the percent of the variation of the dependent variable—price per acre—associated with the values of the independent variables. The higher the R2 measure, the greater the association between the value per acre—the dependent variable—and the variation of the independent variables; or, the better the “fit.” (Technically, the R2 is adjusted for sample size, and thus the notation is shown as “R2 Adj.”) The t-statistic, sometimes called the t-ratio, is also used. This statistic measures whether the coefficient of an individual independent variable is significantly different from zero. If so, then it is accepted that the independent variable affects the dependent variable in proportion to the magnitude of the coefficient. In comparison, the correlation coefficient—R2—assesses the explanatory power of all independent variables collectively, while the t-statistic is relevant to each individual variable. For samples of the type analyzed, t-statistics between 1.796 and 2.624 indicate that the odds of the results being random with respect to the association between a given independent variable (such as lot size) and the dependent variable (such as price per acre) are between a 95 percent and 99 percent level of significance. Another measure, the F-statistic, assesses the degree of co-variation between the dependent and independent variables. It is an overall test of the multiple regression model. For the number of observations used in this example, F-statistics of 3.09 (indicating a 95 percent level of acceptance) and 5.07 (indicating a 99 percent of acceptance) are required. A total of three statistics are thus used: • R2, which measures the percent of variation in the dependent variable explained by the variation in the dependent variable(s)

• The t-statistic, which measures whether an individual, independent variable contributes to the explanation of the variation in the dependent variable • The F-statistic, which measures the degree of co-variation and thus the reliability of the overall association We use multiple regression analysis to assess the factors that influence the value of land sales prices in Lee County. We assume that the factors influencing parcel sales price include the number of acres within the parcel, the number of dwelling units authorized by existing zoning, the amenities available to the parcel, and whether the parcel is within the TDR study area. This case study focuses on the incremental (or marginal) value of allowable residential density, as measured in dwelling units per acre. To establish a basis for this estimation, all qualifying 280 land sales were analyzed. The expectations are that per-acre values will increase with allowable density and that per–dwelling unit values will decrease with allowable density. We also expect that both per-acre and per-parcel values will vary based on the presence or absence of amenities. Amenities include being within a planned unit development (PUD), having frontage on a golf course, having water frontage, and being within a gated community. (Amenities in other locations will differ, but the statistical analysis would be similar.) Given the nature of the land market, it is expected that the interactions among these variables will be logarithmic rather than linear; this enables us to measure the association between a 1 percent change in zoning density and the percent change in market value per acre. The general model we use to explain variations in parcel price (the dependent variable) is Parcel Price = f(Acres, Units, Time, TDR Sending Area, Amenities) where Acres is the number of acres of a parcel; Units is the number of dwellings allowed by enti-

Chapter 3: The Economics of TDRs

tlements; Time is the date on which the parcel was sold; TDR Sending Area indicates whether the parcel was sold within (1) or outside (0) the study area; and Amenities includes location in a PUD, golf, golf course frontage, water frontage, and/or gated community (1 if any and 0 if none). The statistical analysis enables us to estimate the economic value of increasing the number of units (or density) allowed on a given parcel of land. We assume that increasing units to a given parcel should increase the value of that parcel, though perhaps with diminishing returns. The resulting value increase would be the incremental or marginal revenue product of increased units. This product would be the value of transferred development.

The Total Sample We postulate that significant economic differences will arise within the study area. The observed differences relate to the different characteristics or situations of the properties, such as the amenities offered and the size of the lots. In fact, we find that properties within the TDR study area sell for significantly less than other properties. This is demonstrated by the negative sign of the coefficient of the TDR study area (significant at the 99 percent level of the t-test). Here is the model used in this multiple regression analysis: LnPrice = A + [(b1*LnAcres) + (b2*LnUnits) + (b3*LnTime) – (b4*TDR Study Area) + (b5*Amenity)] We use natural logs (Ln) since we are looking for the shape (curvilinear) relationship between price (the dependent variable) and the independent variables; we expect to find the property of diminishing returns to price with respect to parcel size (acres) and density allowed (units). The regression results for the total sample ap-

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table 3.2 Regression Results for Retail Lot Sales Regression Statistics

Figure

Multiple R R Square Adjusted R Square Standard Error Observations

Variable Intercept Ln(Acres) Ln(Years) Amenity TDR Study Area

0.8408 0.7070 0.7026 0.4894 268.0000

Coefficients

Standard Error

t-Score

12.338 0.619 –0.214 1.240 –1.481

0.127 0.043 0.056 0.116 0.127

97.492 14.520 –3.823 10.651 –11.629

Source: James C. Nicholas.

pear in table 3.2. (We exclude the analysis of variance results for brevity, noting that the F-statistic was significant beyond the 99 percent level). The coefficient for “Time” is not important because it merely controls for parcel sales extending over the period of analysis, though we do see the mean sales prices falling over time. We also note that the presence of at least one amenity will increase the mean sales price. As expected, the mean value of land inside the TDR study area is lower, likely because of its environmental limitations. We focus on the coefficients for acres and units, which tell us something about the extent of diminishing returns. The coefficient for acres is 0.502, and that for units is 0.297. The fact that they are each less than one means that parcel price will increase with additions of either acres or units, but at a diminishing rate. Also, the total of both is less than one, which means that the parcel price will increase at a decreasing rate as both parcel size and units increase.

Bulk and Retail Sales Sales in the study area comprise retail sales of individual lots to builders (including those building their own home) and bulk sales of two or

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more lots (usually to a builder). Analysis of bulk and retail land sales shows important differences between these two submarkets. As would be expected, the prices realized for retail lots sales are more individualistic, responding more to the existence of amenities and less to the size of the parcel (see table 3.3), but not with respect to units because each retail sale involves a single lot. The analysis of the retail market shows that the size of the lot and the existence of suburban amenities are the most important determinants of prices (see table 3.4). For bulk sales, the more important determinant of sales price was simply the number of residential units allowed by regulations (see table 3.4). Thus, the R2 for bulk sales drops to 64 percent, whereas it is 70 percent for retail sales. The significant factors explaining retail sales prices are lot size, the existence or absence of suburban amenities, and location within or outside the TDR study area. The bulk sales sample size numbers only 12, so conclusions have to be considered in light of this small number. The analysis shows that the only significant variable in parcel price is the number of buildable subdivision lots (“units”). This result is expected. The dummy variable amenity was not included because all of the table 3.3 Regression Results for Retail Lot Sales Regression Statistics

Figure

Multiple R R Square Adjusted R Square Standard Error Observations

0.8813 0.7767 0.6490 1.1813 12.0000

Variable Intercept Ln(Acres) Ln(Units) Ln(Years) TDR Study Area

Coefficients

Standard Error

t-Score

12.564 0.469 0.631 –0.626 –0.624

1.787 0.449 0.329 1.046 1.352

7.03 1.05 1.92 –0.60 –0.46

Source: James C. Nicholas.

table 3.4 Regression Analysis Regression Statistics

Figure

Multiple R R Square Adjusted R Square Standard Error Observations

Variable Intercept Ln(Acres) Ln(Units) Ln(Time) TDR Study Area Amenity

0.8331 0.6941 0.6885 0.5651 280.0000

Coefficients

Standard Error

t-Score

12.347 0.502 0.297 –0.236 –1.302 1.052

0.143 0.044 0.087 0.063 0.140 0.124

86.422 11.462 3.412 –3.750 –9.277 8.498

Source: James C. Nicholas.

parcels offered some amenity so there was no variation. These analyses suggest substantial market pressure to add allowable dwelling units to larger parcels of land and then add amenities to those lots. Significant increments to value will result from both.

Prices per Acre and Buildable Unit Prices per acre typically decline as the parcel size grows from smaller to larger. The same is true for prices per buildable unit as the number of buildable units on a given parcel goes from fewer to greater. This gain demonstrates the law of diminishing returns. Both of these tendencies were tested for in the total sample and were found to exist. Within the study area, we find that the price per acre declines precipitously with the number of acres, with all other variables behaving as before. Figure 3.5 plots the study area sales, showing the rapid decline in price per acre with parcel size. It is always comforting when generally accepted principles of land economics are found to exist in a sample, as they do here. (For brevity, we do not report the regression equation.) Addi-

Chapter 3: The Economics of TDRs

Figure 3.5. Price per acre of land with respect to parcel size. Figure by Doug Woodruff.

tionally, price per acre is positively associated with the number of dwelling units authorized and the presence of an amenity. Prices per acre were rising during the study period—thus the negative size of the “Time” variable—and are negatively associated with being within the TDR study area. The positive time trend is most likely associated with the earlier portion of the period, as the number of sales dropped dramatically in the later portion of the period when the local real estate market collapsed. Like price per acre, price per buildable unit declines with the number of residential units allowed within a given parcel, as illustrated in figure 3.6. Interestingly, price per unit declines with increased units more rapidly than price per acre declines with increasing number of acres. This suggests a market preference for larger lots within the study area. However, this apparent preference for larger lots could be a result of existing Lee County development regulations that have not allowed smaller lots. Nevertheless, these data suggest the viability of a TDR program: adding more residential units will tend to increase land prices, and the result should be an increase in total revenue, thereby constituting an economic incentive to increase intensity of land use at specified receiving areas.

Density Density refers to the land market’s capacity to absorb higher density in the TDR receiving areas at

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Figure 3.6. Price per acre of land with respect to density. Figure by Doug Woodruff.

Figure 3.7. TDR sending area lot price by density. Figure by Doug Woodruff.

a level that will induce owners of rights in sending areas to sell. In Lee County, the TDR sending area has always been a low-density market. This pattern was reinforced by the imposition of agricultural zoning in 1962 and a later “1 DU/10 acre” density cap in 1990. While this effect may simply be the result of the densities permitted by Lee County land development regulations, market values nonetheless appear to be clear, showing a sharp decline in lot price with density, as illustrated in figure 3.7. Our analysis suggests that higher densities may be generally uneconomic in much of this market area, particularly the portions most remote from jobs, services, and urban infrastructure. Indeed, our analysis further suggests that densities in the two homes per acre range would maximize value. Additionally, analysis indicates that there will be the highest value for TDRs used in the lower-density zoning classifications.

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and instead retain those rights for future use or investment.

Characteristics of Sending and Receiving Areas Lee County identified about 29,250 acres of uplands as potential TDR sending properties, along with 42,540 acres of wetlands (see table 3.5). It is expected that a significant portion of these TDR rights would never be transferred because the landowners are public or nonprofit agencies. Setting that factor aside, and assuming for the moment one TDR per each 5 acres, the maximum potential TDRs would be 11,433 units. TDR sending area property owners may develop one unit per ten acres, in what are called ranchettes. Lee County decided to maintain this density level but require that the subdivision of larger tracts would be clustered and subject to a special review process. For the owners of designated TDR receiving areas, the new option would allow the development of additional land at urban densities, provided that the additional units are achieved by transferring rights from other TDR sending area properties. The owners of sending area properties, in exchange for their right to develop at one unit per ten acres, will be able to transfer their development rights to receiving area properties. This analysis suggests that it would be profitable for some of the sending area property owners to sever and sell their rights for use in the receiving areas. Of course, sending area property owners are free not to sever their developments

Receiving Area Analysis As seen in table 3.6, Lee County has two areas of about 850 total acres as receiving areas, which it has targeted for traditional neighborhood development (TND). We come now to the need to estimate the value of a TDR within the market area. This value is estimated from the regression analysis reported earlier. Table 3.7 reviews the key elements of value. Let’s begin with a property allowed to be developed into ranchettes at one unit per ten acres, further assuming that a fifty-acre tract within the study area has been designated as a potential mixed-use community. With TDRs, lot sizes can range from one unit per ten acres to as much as ten units per acre. The model shows that a typical ten-acre tract deep inside the TDR study area table 3.6 TDR Sending Area Allocations Area

Acres

Acres per TDR

Potential TDRs

Existing Ranchettes Potential Receiving Areas Upland Clusters Wetlands Other Total

10,000 350 500 42,540 29,250 82,640

na Receiving Receiving 5 10 na

0 0 0 8,508 2,925 11,433

table 3.5

table 3.7

TDR Sending and Receiving Area Characteristics

TDR Sending Area Land Value Components

Land Use Category

Acres

Share

Existing Ranchettes Potential Receiving Areas Upland Clusters Wetlands Other Total

10,000 350 500 42,540 29,250 82,640

12.1% 0.4% 0.6% 51.5% 35.4% 100.0%

Source: James C. Nicholas.

Variable Intercept Ln(Acres) Ln(Units) Ln(Years) DR/GR Amenity Source: James C. Nicholas.

Coefficients 12.347 0.502 0.297 –0.236 –1.302 1.052

Chapter 3: The Economics of TDRs

would sell for $144,068. If this land were outside the TDR study area, the price would be $529,655 for a tract of this same size due to its higher development potential from both a market and a regulatory standpoint. Going from a ten-acre to a five-acre configuration adds additional, incremental, or marginal revenue of $32,880 per tract. Assuming no additional development and transactions costs, this would be the value of adding additional density to a defined parcel. Taking this hypothetical parcel through a reasonable range of densities yields the results shown in table 3.8. Note that the incremental value declines with the decrease in lot sizes, again demon-

strating the law of diminishing Returns. Parcel value, however, increases throughout the density ranges. If this parcel were outside of the preservation area, all values would be substantially higher, as seen in table 3.9. Taking this fifty-acre parcel from one unit per ten acre to six units per acre would increase parcel value by $1.8 million if this parcel was in the DR/GR area and by $6.7 million outside the DR/GR area. Obviously, the DR/GR designation is a substantial factor in value. This difference may be due more to the inherent differences between the development regulations than to any other factor. Nonetheless, shifting property from the DR/GR to not DR/GR would

table 3.8 TDR Value within Study Area at Different Densities Acres 50 50 50 50 50 50 50 50 50 50

Units

Units per Acre

Parcel Value

Per Lot

Incremental Value per Lot

5 10 20 50 100 150 200 250 300 350

0.1 0.2 0.4 1.0 2.0 3.0 4.0 5.0 6.0 7.0

$720,342 $884,743 $1,086,665 $1,425,987 $1,751,435 $1,975,235 $2,151,160 $2,298,338 $2,426,036 $2,539,523

$144,068 $88,474 $54,333 $28,520 $17,514 $13,168 $10,756 $9,193 $8,087 $7,256

$32,880 $20,192 $11,311 $6,509 $4,476 $3,518 $2,944 $2,554 $2,270

Source: James C. Nicholas.

table 3.9 TDR Value outside Study Area at Different Densities Acres 50 50 50 50 50 50 50 50 50 50

Units

Units per Acre

Parcel Value

Per Lot

Incremental Value per Lot

5 10 20 50 100 150 200 250 300 350

0.1 0.2 0.4 1.0 2.0 3.0 4.0 5.0 6.0 7.0

$2,648,276 $3,252,683 $3,995,031 $5,242,518 $6,439,000 $7,261,779 $7,908,552 $8,449,640 $8,919,110 $9,336,334

$529,655 $325,268 $199,752 $104,850 $64,390 $48,412 $39,543 $33,799 $29,730 $26,675

$120,881 $74,235 $41,583 $23,930 $16,456 $12,935 $10,822 $9,389 $8,344

Source: James C. Nicholas.

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Figure 3.8. Difference in incremental value per acre within and outside TDR study area. Figure by Doug Woodruff.

appear to result in a substantial increase in values. These incremental values reach $20,000 per right or higher, depending on the density range involved, as illustrated in figure 3.8 and shown in table 3.10. The incremental values were calculated by estimating total parcel values, using the same model for all four configurations, and then dividing the total change in parcel value by the number of increased lots. For instance, the fifty-acre parcel in the TDR study area with 5 lots at ten acres each would be $144,068. That same parcel with 300 lots would command $2,426,036. The incremental value of $1,705,694, divided by the 295 increased units, equals the $5,782 incremental value per lot. There are costs associated with increasing the number of lots within a parcel and with transferring development from one parcel to another. These costs would include additional infrastructure, acquiring development rights, closing costs

associated with that acquisition, and forgone interest while awaiting the sale of transferred units. The offer price of a TDR would be the incremental revenue less these transaction costs. At the low end, studies undertaken for the New Jersey Pinelands Commission suggested a reduction of as much as 50 percent from the incremental value to the TDR price (Nicholas 1986), or $20,000 per TDR. At the high end, a study of the Long Island Central Pine Barrens found a discount of 20 percent (Nicholas 1998), which would increase the TDR value to $16,000. Given the strength of the local market—Lee County is growing faster than the areas in either study noted above—a TDR value for as much as $16,000 is warranted for conventional development.

Receiving Area Capacity Analysis Lee County has a number of potential receiving areas that could absorb up to six thousand development rights. These receiving areas could be developed as TNDs to minimize land consumption and avoid further development of lot types that are already in oversupply. Moreover, TNDs would be at higher than underlying densities. Indeed, separate analysis has shown that densities higher than seven units per acre could be achieved in those receiving areas with a TND designation. For the study area as a whole, an estimated 14,358 TDRs could be created, which may be

table 3.10 Difference in Incremental Value per Acre within and outside TDR Study Area Acres 50 50 50 50

Units

In DR/GR

Parcel Value

Per Lot

5 300 5 300

Yes Yes No No

$720,342 $2,426,036 $2,648,276 $8,919,110

$144,068 $8,087 $529,655 $29,730

Source: James C. Nicholas.

Incremental Value per Lot $5,782 $21,257

Chapter 3: The Economics of TDRs

table 3.11 Receiving Area Capacity with and without TND Designation

Area Receiving Areas Conventional Development TND Development Urban Clusters Conventional Development TND Development TOTALS Conventional Development TND Development

Acres

DUs per Acres

Potential TDRs Absorption

350 350

4:1 7:1

1,400 2,450

500 500

4:1 7:1

2,000 3,500 3,400 5,950

Source: James C. Nicholas.

absorbed over a twenty-year planning horizon. The first phase of receiving areas within the study area could absorb about six thousand rights (see table 3.11). While absorption could be less than the supply, there is a tendency for a substantial portion of sending area property owners not to participate in transferring their development rights. Should the receiving area approach TDR absorption capacity, however, other receiving areas could be identified to absorb the remaining share. In this case study, the local land market behaved as expected and the estimated TDR values were

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reasonable based on comparable studies conducted elsewhere. We believe this approach can be applied in most other areas considering TDRs. The result would be an improved level of confidence in the ultimate success of an anticipated TDR program. Although the case study focused on preserving environmentally sensitive land with some agricultural use value, its method has numerous extensions. For instance, it is possible to estimate the value of development rights related to historic preservation, based on sales of comparable property in the sending area, as well as the ability of the market to pay for rights transferred to a receiving area. The redevelopment value of neighborhoods in the path of urban development and the ability of the market to absorb those rights elsewhere can also be estimated using the market-based sales approach. Essentially, two elements are needed. First, there must actually be a market to develop areas intended to be preserved; otherwise, there can be no value attached to TDRs. Second, there must be value in using those rights elsewhere; otherwise, the market has no incentive to acquire those rights.

Chapter 4

Purchase of Development Rights

Land ownership includes the possession of a “bundle of rights” (see chapter 1). Subject to local planning and zoning, that bundle includes the right to develop land for residential, commercial, industrial, or other purposes. Sometimes the right to develop allows for the removal of land from other uses the community may consider desirable, such as farming or other open-space uses. When urban development occurs on former farmland, the new residents occasionally act in ways to make other farms in the area less profitable, such as by restricting hours and kinds of operation, prohibiting the use of chemicals, and limiting road access; they may also affect farming by stealing produce and interrupting livestock operations. Prohibiting farmers from selling their property for development, however, may prompt political, if not legal, challenges. One solution is a purchase of development rights (PDR) program. As summarized by Joe Daubenmire and Thomas W. Blaine of the Ohio State University Department of Community Development, a PDR program calls for the local government, or a third party, to acquire the land’s development rights.1 The farmer is compensated for relinquishing the option to develop but still retains possession of other rights, such as the right to continue farming.

The Right Price PDR programs are voluntary and involve the sale of development rights. Once the development rights have been transferred, a deed restriction— in the form of a conservation easement—is placed on the property to restrict the type of activities that can occur on the property in perpetuity. The problem that often arises is that the farmland is worth more for development than for farming. The difference between the value for development and the value for farming serves as the basis for establishing the value of development rights. The farmer, however, will rarely sell the farm for the full development value; it is the developer who incurs the risk of securing entitlements and developing the property for sale to builders. Typically, appraisers and economists objectively estimate the value of land for development purposes, discounting various costs and uncertainties. Still, the value of farmland in the path of urban development is often a multiple of its value for farming.

PDR Program Basics Communities often use planning and zoning restrictions on land to preserve agriculture. But

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A STRONG CONNECTION Effective TDR programs include PDR as part of an overall plan to preserve landscapes or sites, as evidenced by the most successful TDR programs in the country: Boulder County, Colorado; the New Jersey Pinelands; Montgomery County, Maryland; and King County, Washington, all have major PDR programs as well. This correlation suggests that communities considering TDRs should also consider PDR programs and that communities with only a TDR program should consider launching a PDR program. The presence of both PDR and TDR programs signals the community’s commitment to achieving its preservation goals.

planning and zoning are not permanent. Furthermore, even when agricultural zoning remains unchanged, it usually allows farmland owners to subdivide their land into smaller tracts for sale as estate lots, hobby farms, or ranchettes. PDR programs create a financial alternative to subdividing farms. Farmers who elect to participate receive funds in exchange for relinquishing development rights yet still retain ownership of the property. PDR programs help farmers who rely on their property to fund their retirement and make it easier for farmers to pass their land to heirs interested in continuing to farm. This often can reduce the inheritance tax liability. PDR purchases fall into three main categories: 1. The full value of the development rights is purchased in a money transaction. The seller of development rights typically pays a capital gains tax on the difference between the net sale price and the original purchase price. 2. To maximize its limited funds, the government (or other third party) negotiates a lower purchase price for the development rights than indicated by the appraised value. The seller can then claim the difference between the appraised value and the sale price as a charitable contribution and recover perhaps a third or more of the difference in tax savings. 3. A like-kind exchange—technically, a “1031” exchange—is arranged. A third party

purchases the development rights through an inkind exchange, through which the farmer receives other property (such as townhouses) instead of cash. This approach is often used when a farmer has a small basis (the original purchase price was far less than the PDR value) and would thus owe a large capital gains tax. An exchange defers the ultimate capital gain until the townhouses are sold. In the meantime, the farmer can transfer the farm to an heir with little or no tax impact and receive rental income from the townhouses until they are sold—and then only at the more favorable capital gains tax rate. PDRs are almost always purchased from taxes—often the property tax used to retire bonds (debt) incurred to purchase development rights. Raising taxes is always controversial regardless of the purpose. Nonetheless, PDR programs generally enjoy broad public support in communities that have implemented them. Creating a PDR program is usually a local affair, sometimes enabled by state legislation that includes funding options. Often, a local farmland preservation board is created to initiate and then manage the program. Members may include elected officials along with representatives from the public. Typically, these boards review applications for development rights sales, obtain appraisals, prioritize purchases, negotiate terms, and ensure enforcement of deed restrictions. The board needs to manage the PDR pro-

Chapter 4: Purchase of Development Rights

gram to gain the most from its investment of public resources. Ideally, PDR programs will permanently preserve large contiguous areas to create a “critical mass” of farms to sustain agriculture as a viable industry. If the number of

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farms in an area becomes too small, there is not enough demand for agricultural supplies (fertilizer, equipment, and so forth) to sustain the industry.

Chapter 5

Density Transfer Charges

At least twenty jurisdictions around the United States currently use some form of density transfer charges (DTCs), through which developers gain bonus development potential at receiving sites using a cash payment instead of TDRs. The jurisdiction uses the revenue from these payments to preserve land in the sending area. Compliance via cash payments offers these advantages:

cludes a donation of part of the easement value. • The cash revenue can be added to a purchase-of-development-rights program funded by general fund money, state or federal agencies, or state or federal grants. This eliminates duplication of administration and allows DTC revenue to serve as matching funds.

• Developers know their compliance costs in advance. They do not have to find, negotiate, and buy actual TDRs, a process that can be daunting for smaller developments, particularly in programs where no TDR banks or other intermediaries have created a stockpile of ready-to-use TDRs. • Jurisdictions can use cash to target their highest preservation priorities. Ideally, this enables them to implement a more focused conservation strategy than is typically possible when developers choose where to buy TDRs within a sending area. • The revenue from cash payments allows more flexibility in the preservation process. For example, the jurisdiction can create an annual competition in which landowners offer easements that fit their plans and propose a compensation package that in-

Of course, the ability to comply with cash is just one feature of a multicomponent TDR program. At least five TDR programs use cash payments as the only method of compliance. Another fifteen programs allow compliance via cash in lieu, meaning the developer can either pay cash or achieve actual preservation, usually by retiring TDRs (Pelletier, Pruetz, and Duerksen 2010). DTCs can accomplish many of the same objectives as TDR programs but with far fewer complications. The following case study of Berthoud, Colorado, illustrates one of many possible approaches to DTC. The Berthoud program might best be characterized as “TDR-less TDR”: although Berthoud uses a cash-in-lieu mechanism, it does not issue, track, or retire actual TDRs. This program feature relieves the small town of many administrative duties. In fact, the 45

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Berthoud program is so simple that its entire code section fits on one page.

Case Study: Berthoud, Colorado With a population of more than 5000 (in 2010), Berthoud is located in Larimer County, Colorado, twenty miles south of Fort Collins and forty-five miles north of Denver. The town tried to develop a traditional TDR program in 1999 but was unable to resolve certain key issues quickly. While some community factions were in favor of designating Berthoud’s final development pattern, others were not. This disagreement made it difficult to identify the boundaries of sending and receiving areas. Residents also expressed concern about the possible repercussions of government-initiated rezonings of receiving and sending areas. Anticipating a wave of development applications, the town wanted to finalize a preservation tool fairly quickly. The tight timetable motivated Berthoud to find a simpler technique than traditional TDR. In 2000, the town adopted a land preservation requirement that applies to all land subsequently upzoned, or changed from a lower- to a higher-density zoning classification. After each upzoning, the maximum density allowed under the previous zone is established as baseline density. Developers can exceed baseline density by choosing between two compliance options: actually preserving open space or paying a density transfer charge. When developers choose the latter option, Berthoud uses the resulting revenues exclusively to preserve open space and agricultural land.

adopted plans and in compliance with all applicable regulations. Now, however, the maximum density allowed under the former county zoning—such as one unit per 2.29 acres—becomes baseline. The new zone also limits maximum density, in keeping with the comprehensive plan, such as four dwelling units per acre. The dwelling units between baseline and maximum density are considered bonus units and therefore subject to the requirements of the Berthoud ordinance. Not surprisingly, most developers want to exceed baseline, thereby triggering TDR compliance. Although Berthoud refers to this mechanism as its “Density Transfer Fee” program, it actually offers two choices to developers who want to exceed baseline. Under the traditional option of actual preservation, developers can preserve one acre of open space or farmland for each receiving site bonus dwelling unit for which a building permit is issued. The preserved land, which serves as the sending site, must be deed restricted and used for agricultural, environmental, or open-space purposes. Alternatively, developers may pay a DTC for each bonus dwelling unit for which a building permit is issued. The DTC fees, paid when building permits are issued, are $3,000 per singlefamily house and $1,500 per multiple-family residential dwelling unit. In developing these amounts, Mike Pelletier, Berthoud’s former planning director, calculated that rezoning from a density of one unit per one hundred thousand square feet to one unit per seven thousand square feet would increase property value fourfold. Berthoud spends 6 percent of the DTC revenues on program administration and reserves the remaining 94 percent for acquisition of open space.

Process Performance Offering a DTC program does not change Berthoud’s traditional growth approval procedure. As the town annexes land from surrounding Larimer County, it changes the zoning, consistent with

By 2009, the program had preserved more than four hundred acres. The program would have preserved more land had the town continued to

Chapter 5: Density Transfer Charges

experience the high growth rates of 2000, the year the ordinance was adopted. In 2009, however, this fee and many others were waived indefinitely until the local economy recovered from the recession of the late 2000s and early 2010s.1

Designing a DTC Program

Lessons

Step 1: Determine Whether DTC Is an Option

Berthoud’s approach offers a way to reduce the time and resources needed to adopt and administer a traditional TDR program while still reaping its benefits. • The Berthoud approach reduces administrative burdens by relieving jurisdictions of having to calculate, issue, track, and retire actual TDRs. • Jurisdictions can avoid the potentially controversial process of designating sending and receiving areas, thereby facilitating the rapid adoption of a workable preservation tool. In Berthoud, sending areas are significant resource lands as identified in preexisting documents. The town creates receiving areas through upzonings that allow additional density. • Jurisdictions do not have to develop and adopt TDR allocation ratios for sending areas or bonus density allowances per TDR for receiving areas. This is because the Berthoud approach eliminates the need to use TDRs as currency. • Developers know how much it will cost to comply with bonus density requirements. They do not need to find interested landowners and negotiate a reasonable price when seeking final project approval. • Eliminating developers’ uncertainty about costs reduces their reluctance to exceed baseline density. • Revenue from DTC payments enables the town to target its highest preservation priorities and possibly match preservation funds from other sources.

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Using the Berthoud program as a template, here are the three steps for preparing a DTC ordinance.2

Before considering whether to pursue DTC, assess the community’s chances for success. Are its procedures for approving upzonings compatible with DTC? Are people concerned that the community might continue to rezone development sites to non-DTC rather than DTC zones? Does the city or county attorney agree with this approach?

Step 2: Decide to Adopt a DTC Program DTC intentionally maintains current plans and zoning to minimize controversy and to increase the likelihood of adopting a single new feature: density transfer charges. After adopting density transfer charges, a community should develop criteria for the use of DTC funds. Similarly, the community may also have to approve comprehensive plan amendments, often in response to developer applications. Many of the decisions made simultaneously in a traditional TDR program are made incrementally in a DTC program. When making decisions incrementally, it is important to maintain consistency in policy and to coordinate with infrastructure development and other programs.

Step 3: Determine the DTC Amount Under a DTC program, every upzoning adds DTC provisions to the newly adopted zone. The baseline density in the new zone is the maximum density allowed under the former zoning,

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and the new maximum density (with DTC) is consistent with the community’s general plan. There is no DTC requirement to build at or below this baseline. All dwelling units in excess of baseline are considered bonus units and subject to a density transfer requirement. Using the Berthoud model, developers may comply by permanently preserving one acre of open space (approved by the town board) for each bonus single-family residential dwelling unit. Alternatively, developers may pay a density transfer charge. To arrive at the appropriate charge, the community must consider the value increment created by each additional unit and then agree on a reduced amount to reflect profit expectations and political considerations. Estimate the Value Increment Both DTC and TDR require an estimate of the value increment created by the ability to build an additional dwelling unit on a property. One estimation method requires a comparison of return on investment calculations with and without the density allowed by the upzoning. Although comprehensive, this technique requires individual estimates of various components within the larger categories of land values, construction costs, site preparation, off-site expenses, financing charges, and sales prices of the final products. Each individual estimate introduces not only extra complexity but also the opportunity for error. This complexity increases considerably when the extra density calls for a different construction type or entirely different infrastructure needs. A simpler approach compares land values of property pairs that are similar in every way except for the density allowed by their zoning. The only estimate involved is the difference in raw land value itself. This technique works best when done by an appraiser with experience in the local real estate market. As a hypothetical example, an appraiser might value land zoned for one-acre lots at $30,000 per acre while and value comparable

land zoned at a density of three units per acre at $50,000 per acre. The land value difference is $20,000, or $10,000 for each of the two extra units allowed under higher-density zoning. Consider Profit Expectations and Other Factors Using the hypothetical example above, developers would, theoretically, have little incentive to participate if the community adopted a density transfer charge of $10,000. A $10,000 density transfer charge would eliminate the entire value increase created under the DTC option, leaving no additional value as profit. To allow reasonable return on investment, the community may want to consider a density transfer charge of less than the created value under the DTC option. Reasonable return on investment will differ from one community to the next. Assuming that a 25 percent return was considered reasonable, for example, the community might consider $8,000 as the maximum appropriate density transfer charge. Note that communities are not obligated to set the density transfer charge at the amount that would maximize proceeds while still allowing a reasonable return on investment to developers. A community may want to make further adjustments so that it does not put local development at a competitive disadvantage with development in adjacent communities. Similarly, the density transfer charge may be reduced to acknowledge the fact that developers may pass some portion of it to the home buyers, with corresponding implications for housing affordability. Finally, the density transfer charge could be reduced as a gesture of compromise with the development community, which previously had not paid anything to achieve higher densities. Make Necessary Amendments to the Comprehensive Plan Communities often turn to DTC to avoid initiating numerous simultaneous zoning code

Chapter 5: Density Transfer Charges

changes. Instead, they evaluate upzonings proposed by developers based on traditional criteria, including environmental review, compatibility with adjacent land uses, infrastructure capacity, and consistency with the comprehensive plan. In some cases, the developers will have to apply for comprehensive plan amendments as well as upzoning to maintain consistency. These comprehensive plan amendments, if needed, would occur after adoption of the density transfer charge ordinance. Nevertheless, the community may have to adopt a comprehensive plan amendment along with the density transfer charge if its legal counsel believes that policy support for the DTC is legally necessary or at least preferable. The amendment could be as simple as a sentence or paragraph of text explaining that the community’s land use goals may be implemented with the help of a density transfer charge.

Drafting a DTC Ordinance The primary advantage of DTC is its simplicity (see chapter 2 for other advantages and disadvantages). DTC, as practiced in Berthoud, does not require identification of areas to be preserved or areas to be developed. Unless public officials want to add traditional TDR components, they can prepare a DTC ordinance once the proposed density transfer charge amount has been developed. Using Berthoud’s density transfer fee ordinance as an example, an ordinance should contain the following components.

Preface This introductory section should state that the ability to achieve higher-density development increases land value. The Berthoud ordinance adds that traditional TDR involves “significant administrative cost and effort” while the DTC

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would “simplify the transfer of development units to the Town of Berthoud from agricultural lands in the surrounding area.” By collecting the charge, the town can “target where development units are purchased, thus controlling the quality not just the quantity of the transfers.” Finally, Berthoud declares that the “Town is charged with the responsibility of protecting the environmental assets of the Town while ensuring quality development that will preserve and enhance the quality of life for the residents of the Town.”

Density Transfer Charge The ordinance should state the DTC procedure even if it seems self-explanatory. For example, Berthoud’s ordinance notes the following: There is hereby implemented a fee to provide for the purchase of residential development units from agricultural areas, environmentally significant areas, and community separator areas to the Town of Berthoud. This may be accomplished by the purchase of the property in fee title or though restrictions on development or conservation easements or any combination of these or other rights, which would preserve or promote the open space aspects of the real property. A re-zoning of land from either a residential, agricultural, or transitional zoning district to a district that allows a higher residential density triggers payment of the fee. The total fee for a subdivision will be determined at the final development plan stage and then allocated to each unit for payment with the building permit. The total fee will be the sum of the total number of units in the final development plan, minus credits earned as listed below.

The ordinance should, of course, state the amount of the density transfer charge. The Berthoud ordinance goes on to say: “The fee for a single-family house is $3,000 and $1,500

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per dwelling unit for multi-family structures. Calculation of the fee is provided in a document entitled ‘Density Transfer Fee Calculation Guidelines.’”

ing to the stated purpose of the ordinance. In addition, the Berthoud ordinance specifies that the density transfer fee would also apply if, in the future, the town allows additional division of previously subdivided lots.

Disposition of Revenues

A Workable Tool The ordinance should clarify that that the funds collected are earmarked exclusively for preservation. Berthoud’s ordinance reads: “Six percent of the total Density Transfer fee collected will be used for administration of this process. The balance of these fees shall be exclusively used for the open space acquisition and preservation purposes as described in this Ordinance. These fees shall be separately accounted for within the Town’s annual budget.”

Additional Components Communities can add whatever other components they find appropriate to DTC ordinances. Berthoud, for example, has special provisions regarding credits that can offset the required fee. Its ordinance explains: “For every acre of permanent open space provided in the subdivision, one single-family unit equivalent credit is given. Qualifying permanent open space includes deed-restricted land that is used for agricultural, environmental, or equivalent open space purposes. It does not include parkland required by the Town or buffer strips. Credit can also be earned for equivalent open space acquired offsite in areas approved by the Board of Trustees.” Berthoud allows its planning director to increase or decrease the amount of credit accord-

As Berthoud has found, DTC facilitates the rapid adoption of a workable preservation tool by omitting components that often cause traditional ordinances to founder: sending site designation, TDR allocation ratios, easement requirements, receiving site designation, and the maximum receiving site density allowed when developers choose to exceed baseline. Keep in mind, however, that DTC does not eliminate but, rather, postpones many of these tough decisions until developers apply for an upzoning in the future. DTC does little to reduce the potential contentiousness of the approval process for these future upzonings, and the upzoning applications subsequently approved will be subject to the DTC requirement. Communities should carefully consider whether DTC is right for them based on their past performance in adopting multifaceted ordinances, such as a traditional TDR program. Based on the growing number of DTC programs observed in the past ten years, it is likely that more communities in the future will favor this approach as a means of implementing a workable preservation tool while something remains to preserve.

part ii

Chapter 6

TDRs and the Planning Connection

Effective TDR programs rely on markets to achieve planning objectives. Consequently, a program’s success depends on two critical features: a strong connection to a plan and a strong market. Lacking one of those elements, a TDR program becomes more likely to fail. Too many communities simply do not consider how they will implement their land use goals until they have adopted comprehensive plans. It is not uncommon, for example, for a community to adopt a traditional land use plan containing an implementation section that calls for future adoption of a TDR ordinance. Typically, the newly adopted plan establishes the maximum-density limits planned for each land use designation without even mentioning that the community might require developers to buy TDRs to reach these maximum densities. A few months or even years later, the planning staff proposes an ordinance that requires developers to purchase TDRs to achieve maximum densities. At that point, the developers and the receiving area property owners often object to the TDR program. They argue that the adopted plan already allows the maximum density without the need for TDR acquisition. The community probably has the legal ability to impose a TDR requirement for achieving a maximum density previously established by a comprehensive plan or zoning code. But the receiving site property own-

ers and developers often convince elected officials that it would be unfair for the community to charge them for density that, they contend, had been previously given to them. This scenario may lead some communities to abandon efforts to adopt TDR. Yet even when facing opposition, other communities may proceed to adopt TDR programs that do not fit the community’s realities. For example, the TDR ordinance may require developers to acquire TDRs when they propose to exceed the maximum-density limits previously established by their comprehensive plans. These densities may be quite appropriate and effective, or they can lead to at least three problems. • The densities allowed only by TDR may lead to projects incompatible with adjacent, existing development. (A community could minimize this potential problem through good design requirements.) • Property owners adjacent to the receiving areas could object to TDR projects. In doing so, they may point out that the proposed projects exceed the maximum densities originally established by the comprehensive plan. These objections often lead to the denial of TDR applications, if the TDR program requires elected officials to make discretionary decisions on each 53

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proposal. After the denial of one or two applications, developers will become reluctant to spend the time and money to propose TDR projects. • The maximum density originally established in the comprehensive plan may represent the highest density at which developers currently want to build. Many TDR programs fail because developers are simply not interested in the higher densities available through TDR. Of course, interest in these higher densities may increase over time. In addition, communities can actively encourage developers to use the higher densities through education programs, incentives, and demonstration projects. The TDR program, however, is unlikely to generate many transfers during the years needed for the local development community to appreciate the benefits and profits of compact development. Careful and thoughtful development of the comprehensive plan can minimize or even eliminate these types of problems. Ideally, the comprehensive plan should identify receiving areas and establish maximum densities without the use of TDR and maximum densities with the use of TDR. If that is not possible, the comprehensive plan might simply establish a threshold density beyond which the acquisition of TDRs will be required. If political or logistical reasons prevent the establishment of TDR thresholds, the plan should clearly state that a future zoning code amendment will require the acquisition of TDRs to achieve the plan’s maximum densities. At the least, this gives the planning staff language to point to if later accused of trying to take back density that the plan arguably gave to receiving areas.

Forging the Link To enable use of TDRs, a comprehensive plan requires linkages between it and implementing

devices, such as zoning and subdivision codes— and, of course, a TDR ordinance. We will use farmland preservation as the example here— specifically, farmland in King County, Washington, which has preserved more land through a TDR program than any other U.S. community. To illustrate what to address in a comprehensive plan, the accompanying boxes reproduce language from King County’s actual plan.

Relation to State Planning Statutes The local comprehensive plan needs to reflect the relevant statutory requirements or enabling legislation (see box 6.1). About half of the states mandate local government preparation of comprehensive plans consistent with state objectives (Nelson and Lang 2009). Florida, New Jersey, Oregon, Virginia, and Washington, among others, require local plans to address farmland and other open-space preservation. In addition, where statutes exist, the plan needs to connect to state policies that advance the preservation of farmland. Although King County alludes to this, making a more explicit connection is highly recommended (see box 6.2 for suggested language). These connections to state policies are crucial to guiding local planning efforts and improving the legal defensibility of a TDR program, should it be challenged after implementation.

Guidance to Stakeholders The plan should explain to all stakeholders how the jurisdiction will address any given planning issue (see Kent 1961). This can be done in three ways: • Establish the need for a particular planning solution, such as TDRs (see box 6.3). • Frame the planning policy (see box 6.4). • Provide sufficient specifics to guide the

Chapter 6: TDRs and the Planning Connection

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Box 6.1 Relation of Local Comprehensive Plan to State Planning Requirements The following is an excerpt of the introduction to the King County comprehensive plan showing the connection to the Washington State Growth Management Act (RCW 36.70A.010), with highlighted text (in boldface type) showing the connection to agricultural preservation and rural area planning. B. Planning in King County King County’s comprehensive land use planning dates back to 1964. Its first comprehensive plan under the State Growth Management Act (GMA) was adopted in 1994. The GMA, passed by the Washington State Legislature in 1990, seeks to further protect the quality of life in the Pacific Northwest. The GMA directs the state’s most populous and fastest growing counties and their cities to prepare comprehensive land use plans that anticipate growth for a 20-year horizon. Comprehensive plans adopted in accordance with GMA must manage growth so that development is directed to designated urban areas and away from the Rural Area and Resource Lands. The GMA also requires jurisdictions to designate and protect critical areas and commercially significant forestry, agriculture, and mining areas. The GMA requires each comprehensive plan to adhere to a set of thirteen goals and to include the following elements: land use, housing, capital facilities, utilities, rural, and transportation. Source: King County Comprehensive Plan, 2008, introduction p. 3 (emphasis added in boldface type).

preparation of planning maps and implementing ordinances, such as those for zoning, subdivision, and TDRs (see box 6.5).

riety of purposes, including farmland preservation. Figure 6.1 illustrates a sample overlay map for sending and receiving areas for a smaller area than King County.

Zoning Code

Outside the Planning Framework

Finally, the zoning code needs to facilitate implementation of TDRs. Most communities accomplish this through a special chapter in the zoning code that specifies how TDRs are calculated and perfected in sending areas and where TDRs can be used (including any special conditions for use in receiving areas). Both the zoning code and map usually designate sending and receiving areas as “overlay” zones. While the King County zoning code does this, box 6.6 offers a more detailed example of how to include overlay zones for sending and receiving areas for a va-

Including TDR policy in a local comprehensive plan not only improves legal defensibility if someone challenges the TDR program but also explains to all stakeholders what the community is trying to accomplish—and how. This is not to say, however, that a TDR program can only be adopted in compliance with a comprehensive plan designed to be implemented by TDR. Many communities have refrained from planning and zoning large areas of undeveloped land for urban or suburban development. These communities may not have anticipated using

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Box 6.2 Relation of Local Comprehensive Plan to State Planning Goals A comprehensive plan should note the state goals or policies it must follow. For King County, this would be the fourteen goals of the Washington State Growth Management Act, with highlighted text (in boldface type) showing the connection to purposes of the TDR program. GMA plans and regulations are to be guided by 14 goals that are summarized below:

• • • • • • • • • • • • • •

Focus urban growth in urban areas. Reduce sprawl. Provide efficient transportation. Encourage affordable housing. Encourage sustainable economic development. Protect property rights. Process permits in a timely and fair manner. Maintain and enhance natural resource–based industries. Retain open space and habitat areas and develop recreation opportunities. Protect the environment. Encourage citizen participation and regional coordination. Ensure adequate public facilities and services. Preserve important historic resources. Manage shorelines wisely.

Source: State of Washington Growth Management Act overview, http://www.commerce.wa.gov/_cted /documents/id_892_publications.pdf (emphasis added in boldface type).

TDR. But they also have not previously given away large amounts of development potential. Through good planning—or good fortune— these communities do not have to deal with the argument that they are trying, through TDR, to charge for development potential that they had previously given away. Certainly, a community can still adopt a TDR program even if its comprehensive plan did not specifically address implementation through TDR. If a prior plan allowed too much density as a matter of right, however, the community may need to amend its comprehensive plan to create the conditions needed for TDR implementation.

An amendment, for example, could estimate the amount of land that could realistically be preserved through TDR over a reasonable time period. The community could limit the size of the proposed sending area, perhaps designating only the most critical environmental areas or the best farmland; even a limited number of transfers could have considerable impact if concentrated in a smaller sending area. The community might consider TDR as an incremental process, in which sending areas are added as the TDR program succeeds in preserving the original sending areas. (See the case study in chapter 13, in which New Jersey’s Lumberton Township takes this approach.)

Chapter 6: TDRs and the Planning Connection

Box 6.3 Identifying the Problem in Need of a Planning Solution Comprehensive plans are legal documents that identify a public policy concern that the plan is intended to address. These are sometimes called findings. In King County, the following concerns were raised with respect to the preservation of farmland. A. Rural Growth Forecast Since adoption of King County’s initial comprehensive plan under GMA in 1994, annual building permit activity in the Rural Area has continued to drop to an average of approximately 570 new building permits per year for the period 1999–2002. Application of new zoning measures and other regulatory tools have also helped to reduce subdivision activity, but if the current rate of 570 new homes per year continues, the Rural Area could be built out to its full capacity within 20 years of the date of this plan. The application of lower-density zoning or more restrictive standards could reduce the creation of new lots, but there are limited opportunities to address development of existing legal lots. One measure that would slow the growth rate on existing lots would be the establishment of an annual limit on the number of building permits to be issued in the Rural Area. This alternative would be more palatable if it were linked to a transfer of development rights program or a development rights purchase program.

B. Residential Densities The low-density residential living choices available in the Rural Area provide an important part of the variety of housing options for King County residents. The residential land use policies in this section, together with their implementing regulations, strike a balance between making rural housing available to those who desire a rural way of life and keeping densities and the number of housing units low enough so they can be supported by a rural level of public facilities and services, be compatible with nearby commercial and noncommercial farming and forestry, and prevent or significantly reduce adverse impacts of development on the natural environment. These policies and implementing regulations could allow 14,000 to 24,000 more housing units at ultimate buildout in addition to the roughly 58,000 residences existing in the designated Rural Area in 2000. The Transfer of Development Rights Program will help reduce development capacity in the Rural Area, and King County should continue to seek other programs that provide economic incentives for property owners to voluntarily limit residential development of their land. Source: King County Comprehensive Plan, ch. 3, “Rural Legacy and Natural Resource Lands,” 2008, pp. 3–16 (emphasis added in boldface type).

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Box 6.4 Framing the Planning Solution The comprehensive plan should pose a general framework in which to address the planning problem. In this case, it describes how farmlands are threatened by development in King County and suggests that TDRs will be used to help address the concern (see highlighted text). Chapter Three: Rural Communities and Natural Resource Lands Protecting a rural way-of-life in King County is a major thrust of the comprehensive plan. This chapter delineates the county’s approach to conserving rural and natural resource lands integral to providing diversity in lifestyle choices, continuing farming and forestry economies, protecting environmental quality and wildlife habitat, and maintaining a link to King County’s resource-based heritage. This chapter also includes the policy basis for King County’s Transfer of Development Rights Program. Source: King County Comprehensive Plan, 2008, introduction p. 10 (emphasis added in boldface type).

Box 6.5 Planning Policy Guidance The comprehensive plan should provide sufficient guidance to implementation as to make clear to all stakeholders what is intended and how. This is done for TDRs in King County through an extensive, detailed set of policies that are presented here. Notice three things. First, the TDR policy itself is tied back again to state planning policy (highlighted text). Second, the TDR purposes are tied indirectly back to state planning goals (compare highlighted text below to highlighted text in box 6.2). Third, specific areas, through zoning categories, are identified for TDR use, including TDR units from sending areas and density bonuses in receiving areas. C. Transfer of Development Rights Program The Growth Management Act encourages the use of innovative techniques for land use management. King County has a long tradition of using such techniques, including programs promoting transfers of development rights, to achieve its land management goals. To that end, King County promotes the transfer of development rights from land valuable to the public (“sending sites”), to land better able to accommodate growth (“receiving sites”). The Transfer of Development Rights (TDR) Program is a voluntary program that allows sending site landowners to achieve an economic return on their property while maintaining it in forestry, farming, habitat, parks, or open space in perpetuity. It also increases housing opportunities in Urban Area receiving sites where urban services and infrastructure can accommodate additional growth. Sending site landowners choose to sever the right to develop their land from the land itself and sell their development rights to receiving site landowners who are permitted to build at greater densities than allowed under current zoning with the purchase of development rights. When transferable development rights are allocated to sending site property owners, the land is protected from future development in perpetuity through a conservation easement. In so

Box 6.5 Continued doing, the TDR program: (1) benefits small rural property owners by providing them financial compensation to not develop their land, (2) directs rural development growth into urban areas, and (3) preserves land through private market transactions.

R-312 As an innovative means to permanently preserve private lands with countywide public benefit, to encourage higher densities in urban areas and reduce residential development capacity in Rural Area and Resource Lands, King County shall continue to operate an effective TDR Program. R-313 The priority of the TDR Program is to reduce development potential in the Rural Area and Resource Lands by encouraging the transfer of development rights from private rural lands into the Urban Growth Area. R-315 To promote transfers of development rights, King County shall: a. Facilitate transfers from private property owners with sending sites to property owners with receiving sites; b. Operate the King County TDR Bank to buy and sell development rights; c. Work with cities to develop interlocal agreements that encourage transfers of development rights into cities; and d. Seek public amenity funding to enhance the livability of incorporated area receiving site neighborhoods accepting increased densities. 1. Sending and Receiving Sites R-316 Eligible sending sites shall be lands designated on the King County Comprehensive Plan land use map as Rural Area (RA), Agriculture (A), Forestry (F), and Urban Separator, and shall provide permanent land protection to create a public benefit. Priority sending sites are: a. Lands in Rural Forest Focus Areas; b. Lands adjacent to the Urban Growth Area boundary; c. Lands contributing to the protection of endangered and threatened species; d. Lands that are suitable for inclusion in and provide important links to the regional open space system; and e. Agricultural and Forest Production District lands. R-317 For transfer of development rights purposes only, qualified sending sites are allocated development rights as follows: a. Sending sites with Rural Area or Agricultural zoning shall be allocated one TDR for every five acres of gross land area; b. Sending sites with Forest zoning shall be allocated one TDR for every eighty acres of gross land area; c. Sending sites with Urban Separator land use designation shall be allocated four TDRs for every one acre of gross land area; d. If a sending site has an existing dwelling or retains one or more development rights for future use, the gross acreage shall be reduced in accordance with the site’s zoning base density for the purposes of TDR allocation; and

Box 6.5 Continued e. King County shall provide bonus TDRs to sending sites in the Rural Area as follows: 1. The sending site is a vacant RA zoned property and is no larger than one-half the size requirement of the base density for the zone; and 2. The sending site is a RA zoned property and is located on a shoreline of the state and has a shoreline designation of conservancy or natural. R-318 Prior to the county’s allocation of transferable development rights to a sending site landowner, the landowner shall record and place on title of the sending site parcel a conservation easement documenting the development restrictions. If a development right(s) is being retained for future development, the subsequent development must be clustered, and the tract preserved with a permanent conservation easement shall be larger than the developed portion. In the case of lands within the Rural Forest Focus Areas, no more than one dwelling unit per 20 acres shall be retained, and the tract preserved with a conservation easement shall be at least 15 acres in size. R-319 TDRs may be made to receiving sites as follows: a. Unincorporated urban areas. Preference should be given to locations within designated urban centers, and to areas adjacent to transit stations and park-and-ride lots; b. Transfers into incorporated areas shall be detailed in an interlocal agreement between the city receiving the development rights and the county; c. Rural Areas zoned RA-2.5, that are not on Vashon Island, may receive transfers of development rights only from the Rural Forest Focus Areas. Source: King County Comprehensive Plan, ch. 3, “Rural Legacy and Natural Resource Lands,” 2008, pp. 3–19 (emphasis added in boldface type).

Box 6.6 Sending and Receiving Area Zoning Code Language Though not always done or needed, TDR sending and receiving areas are commonly implemented through overlay districts. Sample language for overlay zones implementing TDRs for a variety of purposes including farmland preservation is offered by Cape Cod Commission’s Model Transfer of Development Rights Bylaw. 3.0 Establishment of District Overlays 1.1 Preservation Districts Preservation Districts are overlay districts, shown on the zoning map on file with the Town Clerk entitled [INSERT TITLE] and dated [INSERT CITATION] and include the following resource areas. • Wellhead protection areas. • Potential public water supply areas as identified in the Town’s Master Plan.

Box 6.6 Continued • • • • • •

Land designated under G.L. c. 61, 61A and/or 61B. Locations of historic and/or cultural significance. Land areas providing public access to an ocean, forest or other resource. Areas of Critical Environmental Concern Prime Farmland Areas identified as Priority Habitat or Estimated Habitat for Rare or Endangered Species by the Natural Heritage Endangered Species Program.

The areas listed above represent a list of potential preservation areas that could be included in the Sending Area inventory. Not all of these areas will be applicable to each community and there may be other candidates that are not listed here. The list illustrates how communities can draw from existing state level resource protection programs as well as local initiatives to bring several different resource protection efforts into a single growth control mechanism.

3.2 Receiving Districts Receiving Districts are overlay districts, shown on [REFERENCE MAP ON FILE WITH CITY/TOWN CLERK], in districts/zones in the Town defined as a growth activity center by the local comprehensive plan and/or zoning bylaw/ordinance and shall not include any areas included within Section 3.1. Source: Cape Cod Commission (n.d.).

Figure 6.1. Riverhead, New York, TDR sending and receiving areas. Figure by Doug Woodruff.

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Alternatively, instead of reducing the potential sending area, the community might acknowledge that other implementation mechanisms must be used to supplement TDR to

preserve particular areas. Most communities with successful TDR programs also use other implementation mechanisms, such as the purchase of development rights.

Chapter 7

The Seven Steps of TDR Planning

Let’s assume that a community’s elected officials have decided to consider implementing a TDR program. Reaching that agreement could have been relatively easy, particularly if the community was embarking on an update of its comprehensive general plan. More likely, the elected officials need to be convinced of the benefits of TDR-based planning and zoning. This can be done by any combination of sending area owners, developers, environmental organizations, and citizen groups, as well as by the community’s planning staff. Whatever their mind-set, the elected officials should know they are not being asked to approve a product. Rather, they are being asked to authorize the start of a process: preparation of a draft plan that they will ultimately approve or disapprove. Merely drafting a TDR-based plan can be beneficial, even if it is not ultimately adopted, because the planning process itself helps communities set aside their everyday pessimism and envision a preferred future. The seven steps outlined in this chapter assume a largely citizen-driven planning process, facilitated through a citizens’ advisory committee (CAC). In our experience, the most effective TDR programs rely on citizens to provide leadership, while depending on staff and consultants for technical assistance. Staff certainly play a leadership role, but, in the final analysis, a pre-

sentation to the governing board by the committee’s chair usually proves more influential than a staff presentation. This guide may give the impression that creating a TDR program involves constant, forward progression from one step to the next. In reality, like most complicated projects, TDR planning often involves repeating several steps as working goals are created, alternatives are rejected, and objectives are clarified. In fact, most project teams will probably revisit several steps repeatedly. As frustrating as that may seem, this repetition is positive; it shows that the program is responding to reality and public comment.

Step 1: Form a Citizens’ Advisory Committee Some communities rely on planning boards to assist with the development of land use plans. The members of these boards are already knowledgeable about land use issues and, presumably, represent various interest groups in the community. But most planning boards already have enough work to do without tackling the TDR planning process. Furthermore, few planning boards likely have the balance of expertise and geographical representation that fits the needs of the TDR planning process. 63

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ON THE PATH TO A PLAN Here are the seven main steps involved in the TDR planning process. Depending on the local situation, some steps may be combined, repeated, or not needed at all. Step 1: Step 2: Step 3: Step 4: Step 5: Step 6: Step 7:

Form a citizens’ advisory committee. Assemble information. Identify and assess alternative scenarios. Receive public input; select preferred scenario. Create sending and receiving areas; refine preferred scenario. Present final analysis with preferred scenario. Recommend the final plan.

One option is to charge a standing committee with spearheading the TDR planning process. For example, an existing agricultural committee may develop the plan for a farmland preservation program. Or, for a landmark preservation plan, the community might look to the local historical society or cultural commission. These groups have the advantage of already being in place and knowledgeable about the preservation subjects. But, by their very nature, such groups are subject to the criticism of being onedimensional. These standing committees, for instance, may not include representation from the real estate profession, the development community, or the neighborhoods surrounding the areas likely to be designated for development through the transfer process. Instead, we recommend forming a citizens’ advisory committee to help with the development of a TDR-based plan or zoning ordinance. Appointed by a governing body before the TDR planning process begins formally, this group should include representatives of various interest groups. All CAC members should provide the following.

Information Although consultants and staff typically have a general knowledge of land use and development

dynamics, no one knows how a community actually works better than the affected property owners, builders, real estate experts, businesspeople, and other community leaders. When collecting data (see step 2), for example, CAC members will be able to identify sources that staff and consultants are not likely to be aware of, such as information about real estate values and trends. Likewise, CAC members will be in a better position than staff or consultants to evaluate whether the conclusions reached through the planning process are reasonable (see step 6). In fact, in communities where finances do not allow the hiring of staff or consultants, CAC members may conduct their own analysis rather than simply reviewing and commenting on the work of others.

Communication CAC members provide a two-way communications link to the members of their interest groups. They can present the ideas and concerns of interest groups to the CAC for inclusion in the plan. Conversely, CAC members can provide background information and updates to their respective interest groups throughout the planning process. In that way, the program will at least be familiar, if not immediately accepted, long before the elected officials consider approving it.

Chapter 7: The Seven Steps of TDR Planning

Support The CAC typically becomes the main proponent of the proposed plan. After spending countless meetings to resolve their differences and reach a compromise, committee members generally become staunch advocates for the final recommendations. Moreover, CAC members often lead by example in implementing the adopted plan. For example, the farmers on a CAC are often the first to offer their development rights for sale to demonstrate that TDR makes sense. Similarly, developers on the committee are the most likely to buy and use these development rights. By immediately demonstrating feasibility, these pioneering transfers are often critical to a program’s success.

Committee Size and Composition Communities using a CAC for the first time should take note that discussion becomes difficult with more than a dozen people in the room. Less aggressive CAC members may hesitate to enter the discussion, and their resulting frustration could reduce the chances of the committee reaching a consensus. In general, committees ranging from five to nine members work best. Quorum can be difficult to achieve with fewer members, and committee work can bog down with more members. The composition of the committee should reflect differing points of view within the following categories. • Sending area landowners. The owners of potential sending sites will probably bring differing expectations and motivations to the planning process. In the case of environmentally sensitive land, for example, motivations may depend on the size of the parcel. The owner who purchased a single hillside parcel to build a

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“dream house” will likely be less interested in the ability to sell development rights. Ironically, the owner of a large parcel of land, purchased for speculation or development, may be more inclined to consider a TDR proposal that is at least as profitable as developing the parcel; that owner is primarily motivated by profit. • Receiving area landowners. Most TDR programs allow development of receiving sites to a reasonable density without TDR and to a higher density with TDRs. Again, these landowners may have different expectations that should be represented. Those who are not currently considering development may view the density bonus provided by TDR as an unexpected windfall. Conversely, some owners may have purchased their land based on general plan designations or other indications suggesting that the land would ultimately be rezoned for higher density without the need to purchase TDRs. • Developers. No transfers will occur unless the development community anticipates a reasonable profit from developments using transferred rights. Smaller communities may struggle to find developers who appear willing to tackle innovative projects with no proven demand. In these instances, the community may want to include on the CAC one local builder and one out-of-town developer with experience—or at least interest—in TDR-based projects. • Real estate professionals. Even if the community hires real estate consultants to assist the planning process, local real estate professionals provide both site-specific information and local support. The real estate community often becomes a strong advocate of TDR because it provides an alternative to the inertia created when pro-growth and no-growth forces deadlock. A CAC considering a farmland preservation program might want two real estate professionals as members—for example, one who specializes in agricultural property and another who handles residential and commercial listings and sales.

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• Homeowner groups. Many TDR programs fail, or fail to be adopted, because the owners of property near the proposed receiving sites worry about how the development will affect their environment, public services, aesthetics, property values, and general quality of life. Clearly, if organized home owner groups exist near likely receiving sites, they should be represented on the CAC. • Community activists. To broaden its scope and maximize representation, the CAC should include members who represent larger communitywide issues—even different or competing sides of the same issue. If a farmland preservation program is being considered, for example, CAC membership should include a known proponent of agricultural preservation from the ranks of a local agricultural organization or a local member of a national organization such as the American Farmland Trust. For an environmental preservation program, the community might appoint a representative from the Sierra Club, Audubon Society, or The Nature Conservancy—or, better yet, a homegrown environmental organization. In the case of a historic preservation planning process, the community could select a representative from the local historical society or landmarks commission. Not surprisingly, these stakeholder groups will have competing goals. While many residents have a strong desire to preserve their community’s environment or rural character, others will express an equally strong desire for more immediate, pragmatic objectives such as job creation or economic growth. (The ideal person to represent the latter concerns might be found within the local chamber of commerce.) Further complicating the member selection process is the fact that many, if not every, member of the CAC could be aligned with at least two interests—for example, a real estate professional who also owns property in the receiving area.

Based on our collective experience around the nation with advisory committees, we recommend that one member of the community’s governing body chair the CAC. This ensures a connection between CAC members and the elected officials whom they serve and helps focus the CAC’s work on the charge it received from the governing body. Moreover, having an elected official chair the CAC increases the likelihood that the governing board will respectfully consider the work of the committee—and adopt its final recommendations.

Committee Formation Rather than formally appointing a committee, some communities encourage the participation of all interested citizens. This approach may work well for simple projects. But for complex plans, erratic attendance and disproportionate representation from one or two interest groups will hamper a committee’s progress. For these reasons, elected officials should officially appoint the members of the CAC. The elected officials should also clarify that the CAC is authorized only to make recommendations. To avoid hard feelings at the end of the planning process, elected officials must clearly state this expectation when forming the CAC. Sometimes, CAC members operate under the impression that the staff and elected officials must agree with their proposals. While obligated to carefully consider the CAC’s recommendations, however, the governing body must also weigh the concerns of staff, the planning board, and the general public. Once formed, the CAC should elect a chair, vice chair, and secretary, as well as establish meeting times. Whenever possible, staff should assist the committee by responding to information needs and providing advice on request. Other staff members, particularly the municipal

Chapter 7: The Seven Steps of TDR Planning

attorney, would provide support as needed. Staff should also provide logistical support in the form of public notices of CAC meetings and minutes. Dedicated CAC members can accomplish the seven steps of TDR planning without support from either professional staff or consultants. The assistance of consultants, while not a necessity, can streamline preparation of a TDR-based plan. For example, a real estate economist or a local appraiser can help estimate the profitability of receiving site density bonuses and the value of sending area development potential. Similarly, planning consultants could help determine whether receiving site projects can be accommodated by public services systems and would be compatible with adjacent neighborhoods.

Step 2: Assemble Information At its first meeting, the CAC should inventory the information currently available. If detailed enough and well organized, that information may be all the CAC needs to proceed. If, for example, the community prepared a comprehensive land use analysis as part of its most recent revisions to the general plan or zoning code, the TDR-based planning process could simply consist of creating alternative scenarios using the same zoning districts as identified on the existing zoning map.

A CAC facing a lack of readily available information needs to prepare a list of what it needs. In the context of farmland preservation, that list requires the assembly of maps and data in four thematic areas. • Natural resources. The natural resources map should clearly depict the areas a community might want to preserve. Likely sources of information include U.S. Geological Survey (USGS) topographic maps, soil classification maps from the U.S. Soil Conservation Survey, floodplain maps from the Federal Emergency Management Agency (FEMA), and aerial photographs clarifying the locations of woodlands, wetlands, streams, rock outcroppings, and other significant physical features. The map should be accompanied by data indicating acreages for each category, along with changes in that acreage over time. If information is not immediately available—an inventory of critical habitat, for example—the CAC can continue its work and return to complete the map later. The map should show overlapping data, with soil classification information overlapping all other information in the map. This task is relatively easy if the community has a geographic information system (GIS); otherwise, staff will need to prepare maps that combine color and crosshatching to indicate soil quality and other resource data.

ON THE MAP A natural resources map typically provides the following information. The CAC can add to or delete from this list as the needs of the study dictate. • • • • • • • •

Soil classifications Woodlands Wetlands Rock outcroppings Steep slopes Waterways Floodplains Critical habitat

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• Current land use and ownership. To facilitate comparisons, a current land use map uses the same land use categories found in the community’s general plan and zoning code. While the general plan and zoning code maps depict what the community plans or allows, the current land use map shows what currently exists, such as the following: 䊏 䊏

䊏 䊏

䊏 䊏 䊏

agriculture open space (including woodlands, wetlands, waterways, and other natural areas) parkland residential (including the same distinctions found in the community’s general plan/zoning code, such as singlefamily, multiple-family low-density, and multiple-family high-density) commercial industrial other classifications found in the community’s zoning code, such as quarry, institutional use, or public facility

In addition to these traditional land uses, this map should show existing infrastructure: streets, highways, sanitary sewers, stormwater facilities, water distribution systems, fire stations, and other public facilities. This map could also include land ownership information so that CAC members can see where large land holdings remain intact and where extensive subdividing has already occurred. Including the names of the owners of the larger land parcels will remind committee members of who has the greatest stake in the study’s outcome. The names could also reveal other patterns helpful to the study, such as ownership of multiple properties. This information can be obtained from the government office that assesses property taxes for the community. Communities without GIS capabilities may not update their land use inventory between

general plan amendments. However, a serviceable land use map can be put together by asking the CAC to correct the most recent general plan update and field-checking areas in which questions arise. Recent aerial photographs in the correct scale can help greatly. • Current zoning. Almost every community has a zoning map depicting where it currently allows various land uses under the conditions specified in the zoning code. If the current zoning is relatively restrictive, the CAC may recommend a TDR-based plan and zoning code that imposes few or no additional land use restrictions. Alternatively, if the current zoning is permissive, political difficulties may hamper implementation of a TDR-based plan. For example, it may be necessary to reduce allowed densities on potential sending sites to reflect the community’s goal of preserving rather than developing these areas. • General plan. Unlike a zoning code, which regulates how property owners may use their land today, a general plan has a future orientation; it depicts how the community would like to see land uses evolve over the next ten to twenty years. Many states do not require that municipalities have a general plan. If a community does have one, the general plan should show where the community has, to date, believed it should locate future development and preserve natural resources. A proposed TDR-based plan that adheres to the main tenets of the existing general plan will typically be more acceptable to landowners, elected officials, and the general public than a TDR-based plan that proposes major changes to a long-standing general plan. The information outlined above should enable the CAC to move to the next step of the planning process. But, in reality, this step of assembling information never ends because all future steps will call for additional information that cannot be anticipated at the start of a project.

Chapter 7: The Seven Steps of TDR Planning

Step 3: Identify and Assess Alternative Scenarios A common planning exercise is called scenario planning (Bartholomew 2010). Conceptually, a planning process identifies several reasonably likely scenarios—typically three and no more than five—and assesses outcomes of each based on different mixes of policies and development patterns. The selection of scenarios will depend greatly on such local factors as growth rates, planning area size, complexity of the landscape, diversity of the population, and time frame. For an example, we will use the fictitious Lloyd County; its major urban center is Lloyd City. Located within long-distance commuting range of a major and growing metropolitan area, the county is clearly in the path of suburban development. It has farmlands and other sensitive landscapes, as well as historically significant resources. For simplicity, the Lloyd County scenarios are based on a twenty-year planning horizon. Each scenario is characterized as one of the following types: • Trend. This type of scenario addresses how much more farmland would be lost based on trends over the past decade—or any other time period the CAC chooses to reflect future directions without planning. Staff, consultants, and the CAC itself can make trend assessments, drawing on the data and maps assembled during step 2. This scenario could include both the amount and the location of farmland lost, based on past conversion trends. • Maximum preservation. This scenario assumes no further loss in farmland. • Hybrid. As its name implies, this type of scenario assumes a situation somewhere between the trend and maximum preservation scenarios. For example, it may assume that any further farmlands lost would be in or near areas already being converted to de-

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velopment, while other areas would not see losses—perhaps because of planning policies such as TDRs. Although designed around the farmland preservation issue, each scenario could generate assessments on development patterns. For instance, the maximum preservation scenario would require all new development to occur in existing developed areas or at least those areas containing no critical resources. The trend scenario would result in a certain share—perhaps a high share—of all new county development occurring in farming areas. The hybrid would fall somewhere in between. The committee, staff, or consultants can estimate the densities, infrastructure costs, fiscal changes, and other outcomes resulting from each scenario, in addition to identifying advantages and disadvantages of each set of outcomes. More specifically, each scenario should assess outcomes in the following areas.

Environmental Resources How might increased density in the receiving area threaten important natural features, including wildlife habitat, waterways, wetlands, woodlands, steep slopes, significant topographic features, or prime agricultural soils? Although unregulated development could potentially damage these resources as well, the proposed program typically will include development regulations that preclude most environmental degradation and protect sensitive environmental areas.

Infrastructure How would development in additional receiving sites affect community services and infrastructure, including utilities, roads, sewers, schools,

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emergency services, and other public facilities? Many rural communities, for example, find that they cannot achieve an efficient density in receiving sites without sanitary sewer systems. If not recognized at this point in the planning process, this impact would be identified later in an environmental study, possibly leading to changes in the proposed program. If the need for a sewerage system in the receiving area emerges from the scenario planning, it could prompt changes in the size and location of the receiving area.

Community Character In addition to any environmental protection and adequate infrastructure concerns, how might the community’s quality of life change? An environmental review, done as part of an analysis of land use or aesthetics, can address potential impacts. Perhaps receiving area developments need transitional densities, with lower-scale structures near existing low-density development and higherdensity components where compatibility with existing structures is not as big a concern. The selection of the receiving sites themselves can be critical. Many communities select receiving areas that are not surrounded by existing development, thereby avoiding many compatibility issues. Such a location, of course, would not be the preferred location for receiving sites in a community with a need for infill development. While each scenario may not identify the receiving areas with precision, these issues should be anticipated broadly.

Growth Management How might the scenario induce growth, encourage more development than would otherwise occur, or otherwise affect growth patterns that may need to be managed? This question may

arise frequently during the planning process, as people express concerns that the increased density allowed to projects using TDR will be so desirable as to attract developers who would otherwise not be interested in the community. TDR-based plans with an attractive transfer ratio will result in a plan that allows more development, at least theoretically. But TDR-based plans are, by nature, more permanent than traditional plans; they preserve important properties in perpetuity through recorded deed restrictions. Conversely, a community may amend its traditional plan over the years, reaching the point where it ultimately could allow more development than a TDR-based plan. In fact, this exactly describes the progression experienced at the edge of most urban areas. Semirural areas, initially developed on septic systems at low densities, are later rezoned for development when growth pressures become too great; ultimately, the entire community is converted to development. In other words, when responding to this concern, the environmental document should have a long-term perspective.

Significant Impacts What are the potential impacts caused by TDRbased zoning, and can they be mitigated? In most instances, communities can protect sensitive environmental resources, even in receiving areas; provide infrastructure to accommodate additional development; and pass regulations to increase compatibility and address aesthetic concerns. Nevertheless, some impacts cannot be mitigated. For example, in some farming communities, the best areas for receiving development rights might still have prime agricultural soils. The community can recognize that fact and still approve the TDR-based plan by also recognizing that the benefits of the TDRbased zoning outweigh this significant, adverse effect.

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ALTERNATIVE SCENARIOS FOR LLOYD COUNTY Based on the Lloyd County example, here is a comparison of current conditions and three future scenarios for land use outcomes and several quantifiable effects. In an actual scenario evaluation, the analysis could expand to include additional quantifiable effects as well as impacts that do not facilitate quantification, such as community character and local self-sufficiency.

Effects/Scenarios

Current

Trend

Maximum Preservation

Hybrid

Land use in acres

50,000 50,000 0 50,000 100 45

100,000.0 0.0 0.0 0.0 250.0 112.5

50,000.0 20,000.0 30,000.0 50,000.0 150.0 67.5

60,000 20,000 20,000 40,000 200 90

1,000

2,000.0

1,000.0

1,200

Urbanized Unpreserved farmland Preserved farmland Total farmland Vehicle miles traveled annually (billions) Vehicular CO 2 (million metric tons) Roads, water lines, sewers to build and maintain (miles)

Some states require communities to acknowledge such findings before adopting a project with significant effects. Even if not required, this exercise can help the public understand the value of the resources being preserved and the benefits of not having to extend roads and other public services into rural areas. It also forces the community to decide whether the preservation of certain resources takes precedence over the impacts that might occur because of the preservation.

Step 4: Receive Public Input; Select Preferred Scenario At this point, after investing considerable time and energy in developing a TDR-based plan, the CAC needs to solicit public input on the alternative scenarios and revise the scenarios based on the feedback received. If the CAC merely presents its conclusions without the benefit of public input, the community may reject the plan’s ultimate adoption or implementation. Conversely, residents are likely to be much more receptive to a concept they had a hand in shaping. Plus, sharing the plan gives CAC members

a feel for whether the public agrees with much of it or whether they need to restart the planning process. Some communities may prefer to reverse steps 3 and 4. With the process proposed here, however, the CAC can both present the alternatives it is considering and provide models that the general public can use to develop their own alternatives. The CAC’s membership itself is designed to maximize feedback from various interest groups. As the planning process progresses, the landowners, developers, business leaders, and activists on the committee should all be communicating with their peers, either informally or formally, via meetings, newsletters, and surveys. Nonetheless, soliciting broader public response will ensure better representation and likely generate new insights that the CAC had not envisioned. A public review could be conducted in a “charrette” format. During an evening session or perhaps Saturday morning, everyone attending first becomes acquainted with the issues and the scenarios and then has the opportunity to suggest modifications to the scenarios. After soliciting public response, the CAC revises the

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scenarios accordingly and selects the preferred scenario, which becomes the basis for the rest of the TDR planning steps. The preferred scenario includes all the “scary” details: precise boundaries of the sending and receiving areas, sending area TDR allocations, receiving area density bonuses, downzoning proposals for the sending areas, and TDR-based upzoning proposals for the receiving areas.

Step 5: Create Sending and Receiving Areas; Refine Preferred Scenario The preferred scenario establishes the broad parameters of overall TDR program design, such as whether the trend scenario takes preference over the maximum preservation or hybrid scenarios—or even a hybrid of the hybrid, based on public input. This gives the CAC important guidance, yet its members still need to work out the details of the TDR program (see chapters 8 and 9 for additional information). These details include the following: • Sending area size • Sending area density limits for on-site development • Incentives for sending site owners to transfer development rights • Receiving area size • Receiving area density without TDR • Receiving area density with TDR • TDR requirement per unit of density bonus • Balance of TDR supply and demand During this step, the CAC also makes key refinements to the preferred scenario. Perhaps the design stage finds the urban areas do not have enough market demand to absorb all the TDRs that could be sent from the sending areas, yet meeting demand requires some conversion of farming areas for urban development. After

identifying the most appropriate areas to convert, the CAC would adjust sending and receiving area boundaries accordingly. Ultimately, the CAC needs to find a “solution” through sending and receiving area design and TDR allocation, one that achieves a reasonable balance between supply and demand. The CAC should pay as much attention to the receiving area objectives as the sending area ones. The community should select areas that would not only accommodate but also positively benefit from development. Consequently, the plan should encompass all aspects of the planning area. For example, in addition to identifying several classifications of sending sites, the New Jersey Pinelands program selected receiving sites in twenty-three separate communities; those receiving sites could accommodate twice the number of Pineland Development Credits generated by the sending sites. In addition to being optimistic about what can be saved, or preserved, under each scenario, the CAC should remain open-minded about which receiving sites are most appropriate to accept additional development. Sometimes, for example, the most appropriate receiving site will not be in the same community as the sending site. Boulder County, Colorado, and seven incorporated jurisdictions have signed interjurisdictional agreements, without state intervention, that allow for controlled transfers of development rights. Interjurisdictional agreements are also used in King County, Washington, and Larimer County, Colorado. Morgan Hill, California, allows transfers from adjacent county land without a formal agreement.

Step 6: Present Final Analysis with Preferred Scenario By now, the CAC has developed and analyzed scenarios, selected the preferred scenario, and refined the analysis of the preferred scenario. All

Chapter 7: The Seven Steps of TDR Planning

affected property owners should now know how and why the plan will affect them—and benefit them—within the overall context of guiding the community’s future over the planning horizon. It is now time for the CAC to formally present the overall TDR plan to the governing body. This may occur during a workshop or public hearing convened by the governing body. Regardless of the venue, rolling out the details enables the committee to identify any final issues to address and to gauge the willingness of the elected officials to implement the plan. After receiving public input, the governing body conveys its instructions to the CAC to refine the analysis and details of the preferred scenario.

Step 7: Recommend the Final Plan Before adopting the TDR program, the governing body will likely ask the CAC to make minor—or perhaps major—changes. Every situation is different. In our experience, however,

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having a CAC chaired by a member of the governing body reduces the odds of having to make substantial changes. As local circumstances require, the final TDR Plan should contain sections that address the following areas: • Public involvement. Describes the selection and composition of the CAC. Lists all the public meetings, CAC meetings, articles, and community outreach efforts. • Alternatives. Summarizes the alternatives developed and analyzed by the committee. • Analysis. Explains the selection criteria and the analysis used to identify the preferred alternative. • Proposed plan Describes the features of the proposed TDR plan, including what each component is designed to do. Once completed, the final TDR program goes to the governing body for its final deliberations, which may include further changes.

Chapter 8

Designing Sending Areas

In principle, TDR programs do not require the designation of specific sending and receiving areas, as noted by Walls and McConnell (2007). In a true market exchange, one owner could sell her development right to another, regardless of the seller’s or buyer’s location. But this would not necessarily achieve such planning objectives as preserving important landscapes or buildings or sites. As a practical matter, therefore, TDRs require both sending areas and receiving areas (see chapter 9). TDR programs logically start with the people they probably affect the most: owners of the sending area. Depending on the program, sending area owners may own farmland, forest, other sensitive landscapes, historically significant buildings and sites, or sites in neighborhoods bordering commercial areas in need of large-scale redevelopment. Practically speaking, a sending area is one that can realistically be saved. For example, a TDR program has a greater chance for success if the sending area does not include developable land in the path of near-term development. The owners of developable land on the urban fringe will likely have high estimates of its development value and little interest in preservation, unless they can sell a relatively high number of TDRs per acre. If the community allows that, it actually may preserve less land in the long run.

The TDR program in Montgomery County, Maryland, has preserved more than fifty thousand acres, in part because the ninety-thousandacre sending area was located far away from the developing fringe when the program began in 1980. Sending area owners can become the strongest supporters of both adoption and maintenance of TDR programs—provided they know what such a program offers them. Many sending area owners may believe that supporting a TDR program will undermine their long-term economic interest because they must give up current rights (even hypothetical ones, based on speculation). On the other hand, other owners will likely see the near-term, pragmatic advantage in the prospect of receiving more compensation than they otherwise would receive based on current or pending land use changes. Still others will want to preserve what they have rather than sell their property for conversion to another use, or they may prefer their legacy to include preservation of a place or a lifestyle. In general, we have found that involving sending area owners in the design and implementation of a TDR program increases their interest and participation. Not surprisingly, sending area owners who serve on TDR-related committees are more likely to support the TDR programs that their communities eventually adopt. In more 75

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ways than one, these owners have a vested interest in the programs’ success. To illustrate the various steps in creating sending areas, we’ll use the example of fictitious Lloyd County. It has an urban area, Lloyd City, surrounded by farms, forests, and sensitive landscapes. Because all of the steps involve feedback loops, the order in which they occur is not as important as the particular outcome.

Designate the Sending Area Mechanically, establishing a sending area is simple: identify an area or a building to preserve, draw a line around it (perhaps codifying it as part of an overlay zone), and then determine both the allowable uses of the sending area and the TDR allocations from it. (Refer back to figure 1.1 in chapter 1 for a simple designation of sending and receiving areas.) In practice, however, designating and designing a sending area is more complex, involving as much political and economic acumen as analysis. Let’s assume that Lloyd County, through its citizens’ advisory committee (CAC), has identified agricultural land that it wants to preserve. When evaluating potential sending areas, the CAC should consider the balance of TDR supply and demand. If too much vacant land is proposed as sending areas, the community may not have enough receiving areas to absorb the TDRs. Suppose the Lloyd County CAC started with fifteen thousand acres of agricultural land that could potentially comprise its sending areas. Perhaps the CAC estimated that the five thousand acres immediately adjacent to Lloyd City was already affected by, and needed for, future urban expansion. Further, perhaps the CAC estimated that the receiving areas were likely to absorb only five thousand TDRs—or enough to preserve only ten thousand acres of sending area land at the assumed allocation rate of one TDR per

two acres, based on a market study. Based on their analysis of the situation, CAC members reduce the proposed sending area to ten thousand acres and design the sending area to comprise the largest concentrations of contiguous prime farmland.

Establish Sending Area Regulations Sending area owners should receive clear explanations of how to exercise development rights to their property or sell some (or all) of those rights through the TDR program. In the case of Lloyd County, the owners could decline to use the TDR option and simply develop their properties as allowed by the underlying zoning. The county’s TDR program should clarify for sending area owners whether any of the following conditions apply. • Rezoning by request. Some communities impose preservation zoning only at the property owner’s request. In those cases, TDRs offer an incentive for owners to agree to downzoning. This method has an obvious political advantage: elected officials aren’t imposing regulations on reluctant property owners. Its major disadvantage is that if owners are not interested in the incentives, transfers occur and sending sites are not preserved for their TDR purpose. Rezoning by request is fairly common in historic landmark programs because historic zoning prevents property owners from demolishing or altering designated landmarks. With the exception of highdemand places such as New York City and San Francisco, however, few communities completely prohibit the demolition or alteration of a property without the owner’s consent. • Restrictions imposed on sending sites. The appropriate level of regulation for sending areas will depend on the land use goals as articulated in the community’s comprehensive plan and upon local circumstances. In the case of farm-

Chapter 8: Designing Sending Areas

land preservation, for example, a community might choose a maximum density that gives reasonable assurance that the land will continue to be farmed, while allowing small but viable farms. Viability will vary based on climate, soil quality, and the types of crops grown. More difficult to determine are appropriate sending area regulations in an environmental protection program because environmentally sensitive land often has little or no profitable use outside of development. Some sending areas might generate income from timber sales or outdoor recreation, such as ecotourism or private hunting grounds, but other sending areas could be treeless hillsides or scenic areas with little opportunity for nondevelopment income generation. • Maintenance of current density limit. If the current zoning of the proposed sending area does not adequately protect resources, the community should change the zoning, being mindful of potential takings considerations. Landowners generally oppose any proposals that reduce development potential, such as downzoning designated sending areas. Downzonings

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are more likely to occur where the public strongly supports preservation. The challenge is to “reset” the baseline zoning from one that does not preserve important landscapes to one that may, while also creating incentives to participate in the TDR program. Montgomery County, Maryland, for instance, downzoned its five-acre agricultural district to twenty-five-acre minimum lot sizes for dwellings but allowed one TDR per five acres.

Establish the TDR Allocation Rate The TDR allocation rate refers to the number of TDRs that a sending site owner can sell per acre. In general, a sending area property owner should consider selling TDRs when the amount of compensation from that sale equals or exceeds the property value that will be lost when the property is preserved. A conveyance of title can preserve a sending site. With an environmentally sensitive sending site, for example, the government may prefer to

THE LOCAL ANGLE Even when a sending area offers little likelihood of income generation, the citizens’ advisory committee still needs to determine how much regulation is necessary to preserve the resource. In some cases, the resource can be protected without imposing severe restrictions. Belmont, California, for example, has a hillside preservation program with a sending area density that ranges from 4.2 units to 0.3 unit per acre, depending on the slope of the site. Following are other examples of communities that have tailored TDR programs to local conditions: • One sending site in Blacksburg, Virginia, is an overlay zone designed to protect floodplains, preserve wetlands, and safeguard other environmental resources. This zone allows only agriculture, parks, and passive recreation. • Largo, Florida, prohibits development in wetlands and floodplains. • Pitkin County (Aspen), Colorado, limits residential dwellings in its “Rural/Remote” zone to one thousand square feet. • The Tahoe Regional Planning Agency in California/Nevada allows almost no land coverage in stream environment zones. • Morgan Hill, California, prohibits development on slopes greater than 20 percent. Some communities add regulations to maximum densities to protect natural resources. Dade County, Florida, for example, has zoned some sending areas for on-site development of one unit per forty acres. Further constraining that on-site development are development standards, such as limitations on road construction and requirements that new development continue to permit the natural sheet flow of water in the Everglades.

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own land outright rather than achieve its objective through easements. With title conveyance, full compensation would be equal to the property’s market value. With TDR, assuming that the sending site owner retains title and sells only a conservation easement, TDR sales that equal or exceed the property’s development value would constitute full compensation. Development value is the monetary difference between full market value and the property’s value after the recording of a conservation easement that restricts the property’s future use and development. Development value can also be thought of as the cost of buying a conservation easement for a sending site. Some communities prefer not to relate TDR allocations to development value, seeing TDR as an alternative that landowners are allowed but not necessarily encouraged to use. Most likely, little or no preservation will occur if local property owners have no interest in the program. Yet even TDR programs that do not fully compensate sending site owners for lost development value may attract the interest of sending area owners who • believe in preservation regardless of the level of compensation; • find any TDR allocation beneficial because their properties have little or no development potential because of physical constraints, location, or development regulations; • are in financial difficulty and would rather sell development rights at any price rather than the land itself. In other words, TDR programs can succeed even when the allocation rate is not necessarily related to development value but a market for TDRs still exists. A market exists when sending area owners are willing to sell TDRs at a price that allows buyers to use the TDRs profitably. Then, one could expect land to be preserved for

the TDR transactions made. But if there isn’t a market for TDRs, the program may be ineffective in achieving its aims and could come under pressure to be abandoned. Communities that decide not to study the relationship between development value and compensation can proceed directly to selecting a TDR allocation rate based on other factors. In doing so, however, they may reduce their ability to predict the success of their TDR programs over time. Communities that decide to relate TDR allocations to development value should estimate the value of TDRs and then ascertain the market for them. Appraisers, economists, or other qualified professionals can help determine the value of TDRs. Taking the “average cost” approach, the value is simply the difference between development value at the underlying density as determined by the sending site zoning—say, one unit per 2.5 acres—and the value with only one home on the site, divided by the number of TDRs allocated. Suppose an acre is worth an average of $75,000 with 2.5 units and $35,000 with one unit. The difference is $40,000. If two TDRs are allowed, each is worth an average of $20,000. This approach may not lead to efficient outcomes. If a property is allocated ten TDRs but only one home could be built on it anyway, perhaps because of terrain or accessibility to urban areas, the owner of those TDRs might sell them for lower than the average cost. The owner would, in effect, receive a windfall relative to his or her expectations for the property. In these cases, TDR transactions could be brisk. On the other hand, sending area properties could have higher values than the average. Perhaps they are located close to the urban area, enjoy exceptional views, or fall in the path of future development. If so, the owner of those TDRs may be inclined to withhold them from the market until most other TDRs have been sold or future planning decisions increase the property’s value or development potential.

Chapter 8: Designing Sending Areas

Suppose a TDR program aims to create a “green wall” of undeveloped green space at the current urban edge; TDRs closest to the urban area become the most desirable to acquire. With a uniform allocation ratio—essentially, an averaging approach—these most desirable TDRs would be the least likely to be sold. The least desirable TDRs—those located farther from the urban edge or on less valuable land—would be the most likely to sell because TDRs are less costly when farther away than when closer in. The reason is that, relative to actual market values, the average allocating—and, thus, average cost—approach makes TDRs farther away from urban development as attractive to buyers as those closer to urban development. Some communities, fully aware that a uniform allocation ratio will result in developer preference to preserve more remote land with cheaper TDRs, use the ratio anyway to concentrate preservation in areas farthest from current urbanization. Other complications may arise. Suppose a sending area adjacent to urban development falls outside an urban containment boundary (UCB). Urban development at the UCB enjoys exclusive views and privacy thanks to the adjacent sending area, so the urban land’s market value at the UCB will be higher than other urban land farther away. In this case, the trouble is that the market for TDRs does not capture the “positive externality” value of TDRs (Nelson 1992). Now suppose the receiving area is adjacent to the sending area. Then, a developer purchasing TDRs would reap higher returns because the TDRs add a positive externality value to the development site, especially if it was just inside the UCB. Shrewd developers—as most are—would buy the cheapest TDRs, from sending area owners the farthest away or from those least likely to be able to develop at the underlying density. This brings us to the last complication. Research has shown that urban development next to farms depresses farmland value because of “negative externalities” (Nelson 1992). Simply

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put, urban residents object to noise, smells, and other farming activities and will act to reduce farming productivity to avoid these “nuisances.” In addition, pets of urban residents often wander into and disrupt farming operations, especially those engaged in livestock. Finally, farmland devaluation occurs because urban residents will literally steal “low-hanging” fruit just across the property line, sometimes wiping out the farmer’s profit margin. Our fictitious Lloyd County prefers that the pace of land preservation at or near the UCB at least match the pace of preservation in the most remote parts of the sending area. With that goal in mind, Lloyd County needs to refine actual TDR allocations, ideally to reflect differences in relative value between categories of property. The county’s analysis showing a market demand for four thousand TDRs may also have estimated the average market price of $12,500 per TDR. Treating all land in the sending area the same, a simple TDR program allocates rights at the rate of one TDR per 2.5 acres, plus the 25 percent market factor. But suppose there are three distinct sending areas. One, located along the edge of the UCB, comprises 1,000 acres. Another, a 6,000-acre sending site, represents the bulk of the county’s agricultural area. The third, a 3,000-acre agricultural area the farthest away from the UCB, has steeper slopes and floodplains. Do TDRs have the same value in each area? Not hardly—as seen in table 8.1. At $12,500 per TDR, the value of all TDRs in the sending area comes to $50 million—about $5,000 per acre. An analyst determines that the market value of TDRs in the remote area averages about $1,667 per acre. Naturally, at an average market value of $5,000 per acre, owners of these rights would likely sell out their TDR inventory first because they will receive three times the market value for the same commodity. But this really does little to advance Lloyd County’s preservation goals or its goal to contain urban development with the UCB.

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table 8.1 Hypothetical TDR Allocations Based on Overall Market Demand and Adjustment Factors

Sending Area Category

Acres

Initial Allocation at 1.0 TDRs per 2.5 Acres

Prime agricultural land adjacent or near UCB Prime agricultural area Marginal agricultural area Total

1,000 6,000 3,000 10,000

400 2,400 1,200 4,000

Initial Aggregate TDR Value at $12,500 per TDR

Market Value of Category for TDR Purposes

Average TDR Value per Acre in Sending Area Category

Adjusted TDRs Based on Market Value

TDR Allocation with Market Factor @ 125%

$5,000,000 $30,000,000 $15,000,000 $50,000,000

$25,000,000 $20,000,000 $5,000,000 $50,000,000

$25,000 $3,333 $1,667 $5,000

2,000 1,600 400 4,000

2,500 2,000 500 5,000

Table 8.1. Here are the end results of Lloyd County’s analysis. Predicting an overall market demand for 4,000 TDRs over the planning horizon, plus a 25 percent market factor, the county has allocated 5,000 TDRs. The county would monitor progress periodically, possibly altering the allocations based on how the market responds to the TDR program.

The analyst further finds that the prime agricultural land away from the UCB has an average value of about $3,333 per acre. TDR owners in this area would also be induced to sell because they would realize about 50 percent more than the underlying market value. While this may help preserve land in the large agricultural area, it would hardly reduce pressure to develop agricultural land along and near the UCB. Also, based on the analyst’s findings, owners of agricultural land along the UCB need an inducement of about $25,000 per acre. Clearly, these owners are unlikely to sell their TDR allocation unless they get this price. If they do not get their price, however, many owners of agricultural land near the UCB would pressure local officials to extend the urbanized area into their property. Their arguments would be bolstered by the negative externalities that nearby urban development imposes on them. The initial TDR allocation may yield a TDR allocation rate that proves more of a benchmark than an absolute target. Communities may decide to refine or even increase TDR allocations when they

• want to encourage the preservation of all parcels in the sending area. The countywide TDR program in San Luis Obispo County, for example, allocates TDRs based on a site-specific appraisal of each proposed sending parcel. This approach incorporates the many factors that could influence development value, including exact location, site characteristics and special features, and parcel size. • have little experience with conservation strategies or have reservations about the effectiveness of TDRs. In such situations, communities may initially allocate more TDRs than the market might justify. Later, they can assess the extent to which the market responds and make revisions according to local experience. • sense that exact compensation of estimated development value will not adequately motivate sending site owners to sell. Sending site owners may dispute the analyst’s estimates of development value. Or, even if they agree that the estimates reflect current values, sending site owners may intend to retain their development rights in anticipation of future value increases. In such a case, the community may simply increase the

Chapter 8: Designing Sending Areas

TDR allocation rate, although this would increase supply relative to demand and depress values of TDRs that may be sold. • believe that the exact compensation formula will be adequate once a few TDR sales have occurred. Landowners may be reluctant to sell first, not knowing where TDR prices will ultimately settle, so increasing the TDR allocation might jump-start the program. Larimer County, Colorado, motivated early use of the transfer option by allowing 1.5 dwelling units to be built on a receiving site for each TDR transferred from a sending site. (This feature was originally intended to phase out after the first two years of the program but, as the two-year start-up phase was ending, Larimer County retained this ratio beyond the sunset date.) • want to encourage the preservation of certain key resources. Colorado’s Larimer County starts with a baseline TDR allocation but then allows increased allocations when sending areas contain significant natural resources, community buffers, wildlife migration corridors, agriculture, park sites, historic landmarks, and scenic views. Just as some communities may increase the TDR allocation rate, others may allow the sale of TDRs at a rate lower than the benchmark TDR allocation. For example, many TDR programs related to preserving historic sites, environmental sites, and farmland have one-to-one transfer ratios: the number of TDRs transferred to a receiving site equals the number of dwelling units allowed on the sending site. Such a seemingly low TDR allocation rate may, in fact, fully compensate sending site owners for their development rights when receiving site developers highly value those TDRs. Pitkin County/Aspen, for example, allocates sending site owners only one TDR per thirty-five acres. But those TDRs are extremely valuable to developers near Aspen who need them to build mansions and avoid quota restrictions.

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A seemingly low allocation rate may also be accurate when the sending areas have low development value, whether because of physical constraints, density restrictions, or development regulations. Montgomery County, Maryland, downzoned its sending area when it adopted a TDR program. This downzoning may have reduced the development value of the sending areas, providing an even greater incentive for owners to sell their TDRs rather than build on-site. Development value can be difficult to estimate, particularly in communities with few or no conservation easements. Just as some communities respond with liberal allocation rates, others may proceed conservatively, seeing if sending site owners will participate at the lower TDR allocation rates before considering higher rates. Other communities may proceed cautiously to avoid, at least initially, a TDR program that would allow a net increase in development by offering a TDR allocation rate that is greater than one to one. Finally, a community may conclude that a relatively low allocation rate will motivate some, but not all, sending site owners to preserve their land. This outcome may be in keeping with the community’s goal to reduce development in the sending area. Similarly, a jurisdiction might have the ideal of preserving the entire sending area but still be satisfied if preservation occurred primarily in areas farthest from the expanding urban edge, which have the least development pressure and the cheapest TDRs. The allocation of TDRs is one of the few factors that can be controlled in the short term. Planners will have to work with whatever support for preservation exists in the community, and the community may not have the political will to change the density limits or other development requirements on sending or receiving areas. Furthermore, the community may have few options in the location of receiving areas.

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PROVIDING APPROPRIATE INCENTIVES Let’s say that land in Lloyd County’s proposed sending area is currently zoned for agriculture, with a maximum density of one dwelling per five acres. Because the county is growing and falls within longdistance commuting of a large metropolitan area, the current zoning could result in five-acre hobby farms and ranchettes. Such development would likely remove land from agriculture and threaten the viability of the resource-based part of the county’s economy (see Nelson and Duncan 1995). With assistance from the agricultural extension office, the county finds that twenty acres represents the smallest farm capable of supporting a family. Specifically, the calculation is the median county household income (usually from the U.S. Department of Housing and Urban Development’s most recent fair market rent report) divided by the average net income per acre for farms in the county (usually from the most recent Census of Agriculture); both figures would be adjusted for inflation to arrive at a constant dollar comparison. Based on the result, Lloyd County considers downzoning the sending area to a baseline density of one unit per twenty acres. Because the sending area representatives on the citizens’ advisory committee object strenuously to this proposal, other CAC members fear the entire preservation effort is in jeopardy. They consider the option exercised by Montgomery County, Maryland, which rezoned sending areas from an on-site density of one unit per 5 acres to one unit per 25 acres but allowed the sale of TDRs at the former zoning density of one TDR per 5 acres. In Lloyd County, the market will absorb about four thousand TDRs, which can be produced from 10,000 acres at a rate of one TDR per 2.5 acres. As a result, the CAC recommends downzoning to 20-acre minimum lot size, with the right to build one home, but allowing TDRs at the rate of one per 2.5 acres. Another option is a “market factor” adjustment (see Nelson 2004). For a twenty-year planning horizon, a typical market factor adjustment would be 25 percent, meaning Lloyd County’s TDR program might provide for as many as five thousand TDRs (four thousand plus 25 percent). Keep in mind that allocating more TDRs in sending areas than the market may absorb over a planning horizon will reduce overall TDR values and could result in fewer TDR transfers and, thus, less land preserved. Allocating fewer TDRs may ensure a higher price, but if the overall development needs of the urban area are not met, additional land may need to be urbanized, thereby thwarting the overall preservation aim of TDRs. Supplying the market with more than the four thousand TDRs needed ensures reasonable price competition between TDR sellers and buyers.

TDR allocations—when they remain affordable for use in receiving areas—can create a desirable market exchange between owners of sending area rights and developers who desire higher density in receiving areas. If sending area landowners charge too much, developers may not be able to make sufficient profit after incurring the added expense of buying the TDRs. Even when TDR programs are thoughtfully designed from the beginning, a few years usually have to pass before the market understands and values them and real estate brokers become active agents in TDR transactions.

Minimize Alternatives to TDR Often unwittingly, many communities undermine their TDR programs by enabling people to

bypass the use of TDRs. This commonly occurs when agricultural rezoning is changed piecemeal to low-density urban zoning or planned developments. Sometimes TDR faces competition from other preservation techniques. New Orleans, Louisiana, for instance, has not experienced any transfers under its TDR program. But facade easements on twenty-five historic buildings in that city have been donated to one historic preservation organization alone. Not all alternatives to TDR will achieve the community’s objectives. In communities that allow clustering, landowners can group development on one portion of their land at densities greater than the baseline density. Sending site owners do not have to find buyers for their development rights or negotiate a sales price; they control whether to use the bonus development rights on their own land. This ease of implemen-

Chapter 8: Designing Sending Areas

tation makes clustering attractive to many communities. Often clustering is allowed only if the landowner deed restricts the majority of the land. Boulder County, Colorado, allows a doubling of density for property owners who cluster development on one portion of their property and place a conservation easement on 75 percent of the site. With this approach, Boulder County has deed-restricted more than ten thousand acres. But clustering can be so attractive that sending site owners select it rather than TDR. Officials in both Agoura Hills, California, and Collier County, Florida, believe their TDR programs have suffered because of the availability of clustering. For an extreme example, in Warrington Township, located in Bucks County, Pennsylvania, owners can obtain more development rights by clustering units on-site than by transferring development rights to receiving sites. In many cases, clustering occurs on the land the community wants to preserve, such as environmental areas, open-space sites, or farmland. In addition, clustering allows pockets of development to occur in potential sending areas. In particular, small residential subdivisions developed adjacent to farmland often lead to land use conflicts because of the noise, dust, and odors associated with farming activities. These residential pockets often force residents to use rural roads for everyday work, school, and shopping trips. This is why Marin County, California, uses a TDR program, rather than clustering, to steer development to locations targeted for development and away from those targeted for preservation.

Discourage On-Site Development In addition to creating incentives to sell rights, TDR programs need to include disincentives to maintaining the property rights. Following are four common disincentives.

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• Physical Constraints. A site’s topography, soil suitability, distance to infrastructure, or relative isolation can motivate sending site owners to sell their TDRs. TDR programs might seek to reduce or prohibit TDR transactions that involve land considered too problematic for development—the land may, for example, have steep slopes, floodplains, or wetlands. Indeed, some programs require landowners to submit subdivision applications that demonstrate how much development opportunity actually exists on a sending site before determining the number of TDRs available for transfer. Some communities take the opposite position, allowing TDRs without regard to on-site physical constraints. Other communities go even further; they allocate more TDRs to land with specified environmental resources. In other programs, those very same environmental resources might disqualify these sending sites. • Density restrictions. TDR programs typically reduce development density of sending areas; this often motivates TDR sales because the lots are large and, therefore, expensive to develop. Lower density, however, does not necessarily eliminate subdivisions of rural land. A growing number of communities report that affluent people are willing to pay high prices to build homes on estate lots of five, twenty-five, forty, or more acres. Sometimes it does not matter that the market has relatively few of these estate-lot buyers. Once one or two estate lots sell at high values, sending area landowners might assume that they, too, can sell their land as estate lots and receive more income than they would by selling their TDRs. Such lack of participation leads to failure of the TDR program. One solution employed by Montgomery County, Maryland, is to ensure that the minimum lot size for a home in sending areas is very large—in its case, twenty-five acres—while also providing TDRs at a density sufficient to create a market—in its case, one TDR per five acres. Another solution, used in Oregon, requires homes

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in sending areas to meet a test ensuring they are necessary for the management of a farming operation. • Development regulations. Many successful TDR programs use development regulations other than—or in addition to—density-based zoning. San Luis Obispo County, California, protects the steep, coastal slopes that create the habitat of the Cambria pine with a maximum building footprint of four hundred square feet and a maximum floor area of six hundred square feet. In Colorado, Pitkin County/Aspen similarly restricts development in its sending area to a maximum floor area of one thousand square feet. In addition to a forty-acre minimum lot size requirement, Dade County, Florida, requires development in sending areas to minimize envi-

ronmental impacts on the fragile Everglades environment. In the area of historic preservation, San Francisco makes it difficult, if not impossible, to alter or destroy a designated landmark; in effect, the city prohibits development on the site, so TDRs must be used to maximize economic return. • Off-site requirements. Because sending areas are often in rural areas, development at suburban densities could contaminate groundwater, crowd parks, and congest schools and highways. To mitigate these impacts and enhance the attractiveness of TDR programs, communities could require off-site improvements or payment of fees to finance the infrastructure necessitated by development in the sending area.

Chapter 9

Designing Receiving Areas

The design of a sending area is vastly more straightforward than that for a receiving area. Ineffective design of either one, however, will likely doom the other. The most important factor in designing receiving areas is to engage property owners in and near them, as well as members of the real estate community, in accomplishing the steps outlined in this chapter.

Identify Optimal Receiving Areas The very nature of the TDR program often determines receiving sites. In the case of historic preservation TDR programs, for example, one geographic area often contains both sending and receiving sites. But, in most other TDR programs, the community must undertake the difficult task of deciding where to transfer development rights. Following are categories of places where a community might look for receiving areas.

Sites Consistent with the Existing Comprehensive Plan In this option, TDR works within the maximum densities set forth in a jurisdiction’s existing general plan. Typically, the general plan establishes

a baseline that may, or may not, reflect the maximum density allowed by current zoning. The plan, for example, might set two tiers for maximum development—one at two-thirds or three-quarters of the maximum without TDRs, and the second at the maximum with TDRs. Alternately, the general plan might establish maximum-with-TDR densities, with the baselines determined by the maximum density allowed under current zoning. Under either scenario, this plan-consistent approach should meet with community support because it does not change the maximum densities already approved in an adopted general plan. Elected officials, however, must find it reasonable to require developers to comply with TDR requirements to achieve the maximum densities depicted in the general plan.

Sites Offering Additional Density Only via TDR Under this option, the community must amend its general plan to increase planned densities in some or all areas previously designated for lower-density development. This plan-amending approach generally takes more time and resources than the plan-consistent approach because most communities require environmental 85

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studies, infrastructure plans, and other analyses to ensure suitability. The public involvement effort becomes critical because some residents of neighborhoods near those areas identified for increased density often object to amending the general plan, assuming that higher density will be detrimental. Public workshops and meetings can help educate these neighboring residents about benefits of the proposed additional development and/or preservation of the sending area.

New Development Areas These are places that the comprehensive plan has not yet identified for development and that do not currently abut existing neighborhoods. These receiving areas, which are often comprehensively planned new towns or new villages, promote public acceptance. But they also require considerable time and resources to adopt because they call for environmental studies, infrastructure analysis, and public involvement.

fact, developers do not need to prefer highdensity development; they just need to prefer exceeding baseline density. As demonstrated by some case studies in this handbook, the higher density achievable via TDR can still be quite low—as low, for example, as one unit per four acres in Calvert County, Maryland, and one unit per ten acres in Blue Earth County, Minnesota. Admittedly, these densities are inconsistent with smart growth principles. Still, TDR programs using this approach often preserve substantial acreage in return for one additional receiving site lot (forty acres, in the case of Blue Earth County). Consequently, many jurisdictions identify low-density receiving sites, particularly if past community practices make the approval of requests for new rural lots practically inevitable. In other words, if low-density development will continue anyway, adopting a TDR requirement at least secures permanent preservation in return.

Different Jurisdictions Low-Density Areas People often erroneously associate TDR with high-density development in receiving areas. In

Sometimes, the best receiving areas are not even located in the same jurisdictions as the sending areas. Here are some examples of interjurisdictional cooperation:

THE BEST FIT What makes receiving areas suitable for accepting TDRs? The following criteria come into play. • Appropriateness for development. Compared to sending areas, receiving areas should provide the people who eventually live there with better access to jobs, schools, shopping, and other opportunities. In addition, receiving areas must already have—or plan to have—adequate public facilities and services to accommodate the additional demand created through TDRs. (Some communities even go so far as to show the fiscal benefits of more efficient development in receiving areas because of TDRs.) Finally, receiving areas should be compatible with nearby development. This can be done through land use planning, urban design, and other physical planning efforts. • Community acceptance. Including residents and property owners in the planning and design of receiving areas increases the likelihood of efficient implementation of the TDR program. Larger community benefits of the TDR program, as well as benefits to receiving areas, need to be clearly presented through public information, workshops, hearings, and other opportunities for involvement. • Developer interest. Not only the public but also the development community needs to view the receiving areas as appropriate and acceptable. If developers have concerns about physical constraints or the condition and capacity of infrastructure, the community may need to first address those barriers to make receiving areas attractive to TDRs.

Chapter 9: Designing Receiving Areas

• The New Jersey Pinelands program requires twenty-three of the sixty jurisdictions within the Pinelands to accept TDRs transferred from jurisdictions that do not have suitable receiving areas. • In a voluntary and informal program, the City of Morgan Hill, California, accepts TDRs from sending site areas in unincorporated Santa Clara County. Morgan Hill’s main goal is to preserve El Toro Mountain, a prominent natural feature that is mostly outside the city but that nevertheless enhances its identity and quality of life. • Boulder County, Colorado, has entered into receiving area agreements with six incorporated cities and three unincorporated towns. The cities and towns benefit because TDRs used in them will come from sending areas that create greenbelts and community separators adjacent to them.

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• Fort Collins, Colorado, has an agreement with Larimer County whereby the city does not annex land used as a receiving area until the county approves development plans that require the preservation of sending areas. Unfortunately, interjurisdictional agreements can be difficult to adopt because they often increase density in urban areas to preserve open space outside the jurisdiction. For interjurisdictional agreements to work, citizens must recognize the benefits of open-space preservation outside of the urban areas in which they live.

Determine Size of Receiving Areas How large should a receiving area be in terms of accommodating TDRs? Many communities

A SPECIAL CASE: THE DENSITY TRANSFER CHARGE A variant of TDRs known as the density transfer charge (DTC) allows developers to gain bonus development potential by making a cash payment, either as the sole means of compliance or in lieu of another compliance mechanism (such as purchase of actual TDRs). The jurisdiction uses the revenue from these cash payments exclusively for open-space preservation. Using DTC, developers can meet compliance requirements at a known price, landowners have more flexibility in structuring the preservation of their land, and the community can use the cash proceeds to leverage additional funds and target preservation priorities. (See chapter 5 for a detailed discussion of DTCs.) The TDR program in Berthoud, Colorado, was one of the first to incorporate DTC. Berthoud’s Density Transfer Fee ordinance states that any future upzoning—rezoning from a lower to a higher residential density—triggers compliance with the DTC requirement. The maximum density of the former zoning serves as the baseline, and all units in excess of the baseline are bonus units subject to a charge of $3,000 per bonus single-family dwelling unit and $1,500 per bonus multifamily unit. The town uses DTC proceeds exclusively for open-space acquisition and preservation. Berthoud intentionally designed its ordinance to separate adoption of the preservation mechanism, the DTC requirement, from the other decisions commonly needed for a traditional TDR ordinance. The town avoided controversy by not designating sending areas or adopting any components associated with formal sending areas, including detailed sending site qualifications, easement requirements, TDR allocation rates, and transfer ratios. With no TDRs involved, Berthoud did not have to adopt procedures for issuing, tracking, and retiring TDRs. Also, the Berthoud ordinance did not designate receiving areas; it simply states that all areas upzoned in the future would be subject to the DTC requirement. Consequently, Berthoud adopted the DTC requirement without having to designate receiving sites and establish maximum densities for those receiving sites—decisions that commonly delay and even derail TDR program adoption. Keep in mind that the Berthoud approach does not eliminate controversies surrounding increased development potential. Instead, this mechanism postpones these disputes; in the future, the community must decide whether to approve specific upzoning applications. The critical difference is that the upzoning decisions occur after the DTC ordinance decision, thereby greatly improving the community’s chances of adopting a workable preservation tool in relatively little time.

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design receiving areas capable of accommodating more TDRs than the number of TDRs available from the sending areas. At the other extreme, some programs, including the one in Montgomery County, Maryland, designate new receiving zones as needed. Ideally, communities should design receiving areas with a capacity at least equal to the TDR allocations, including the market factor (see chapter 8). In California, the Pismo Beach and Moraga TDR programs have been hampered, in part, because the receiving areas have relatively little or no undeveloped land left to accommodate TDRs. In instances where sending and receiving areas are adjacent or very close, enlarging the receiving area may mean reducing the sending area size. Although this seems counterproductive, it may make perfect sense. Consider the sending areas adjacent to the UCB of Lloyd County (as described in chapter 8): adjacent urban development could render some sending area land of marginal agricultural use. One option may be to convert a band of sending area land around the UCB into a receiving area, clustering the TDRs to create an open-space buffer between urban development and the lessaffected agricultural land. This is essentially the practice followed by Manheim Township in Lancaster County, Pennsylvania. As an added benefit, having sending and receiving areas adjacent to each other may reduce neighborhood conflicts because the change in density is essentially internalized. In other instances—notably, historic preservation and urban redevelopment programs—it is imperative that sending and receiving areas be adjacent. This adjacency generally promotes program adoption because residents in the receiving area can easily recognize the benefits of preservation in the nearby sending area. Of course, the best receiving areas are often not adjacent or even close by; in the King County, Washington program, for example, the City of Seattle accepts TDRs from sending areas as

much as twenty-five miles away. Fortunately, Seattle’s elected officials and citizens understand the interdependent relationship of urban areas to their rural hinterlands.

Set the TDR Threshold Traditional TDR programs allow receiving area developers to build up to the baseline density without having to acquire TDRs. This is known as the threshold. TDRs are thus used only as a density bonus, allowing density beyond the threshold. The threshold is the cap without TDRs. In some communities, developers might content themselves with the lower density to avoid purchasing TDRs. In Calvert County, Maryland, one zoning district has a TDR threshold of one unit per twenty acres without TDRs or one unit per four acres with them. Calvert County has preserved almost fourteen thousand acres with its TDR program. This program succeeds largely because Calvert County established its TDR threshold at a density lower than the level supported by the market in receiving areas. Nonetheless, some communities with TDR programs allow development beyond density thresholds without purchasing TDRs. Others offer competing incentives for higher density. Portland, Oregon, for example, allows more floor area in downtown office buildings when developers provide on-site amenities, such as childcare, housing, retail space, public art, and theaters, or preserve off-site historic structures. These competing incentives may explain why the Portland historic preservation TDR program has been used only twice to date. Mindful that competing incentives can undermine TDR programs, San Francisco has strict density limits and—with the exception of affordable housing—does not allow developers to obtain density bonuses through design features or on-site amenities; TDR provides the only means of exceeding the TDR threshold. The New Jersey

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PROBLEMS WITH PERMISSIVE ZONING Problems can arise when current zoning allows for more density than the market supports. Without demand for additional density, no TDRs will be purchased and no properties will be preserved. Consider these examples: • In downtown Pittsburgh, Pennsylvania, the baseline densities allow millions of square feet of future development as a matter of right without having to use TDR. • San Diego, California, actually increased allowable densities in receiving areas in conjunction with adoption of the Golden Hill TDR program, thereby negating motivation to buy TDRs. • In downtown Dallas, Texas, buildings can achieve a density of 24 square feet of floor area for each square foot of lot area—a floor area ratio (FAR) of 24:1. Consequently, developers in Dallas have had little need to buy TDRs to achieve additional density. • The TDR program in Talbot County, Maryland, has generated few TDR transactions because the market has greater demand for large-lot estates than for the higher densities allowed by TDR. • The historic preservation TDR program in Atlanta, Georgia, is undermined because the allowable FAR—which exceeds the market demand for the office space that could be constructed anyway— obviates the need for TDR purchases. To address the problem of permissive zoning, many communities reduce density allowed by-right in receiving areas or stimulate demand for higher-density development in receiving areas. The difficulty in high-intensity areas, such as downtowns, is that the market has been operating for so long at a given level of FAR expectations that property owners will object, often successfully, to reductions.

Pinelands Commission reviews the land use decisions of the sixty jurisdictions within its 1million-acre planning area to ensure that communities always require TDRs when approving additional development in receiving areas. Reducing the maximum density allowed in receiving areas has worked for Seattle, Washington: the city’s downtown plan reduced floor area ratios but allowed bonuses through TDRs, which resulted in the preservation of affordable housing and historic landmarks. Pasadena, California, reduced density maximums to control the scale of future development in its downtown and offered TDRs for use elsewhere as compensation. San Francisco lowered its density limits in downtown, creating an incentive for developers to buy historic preservation TDRs. Still, communities report aggressive political opposition to reducing density thresholds, making many TDR programs mostly ineffective. If reducing density thresholds does not appear feasible, local governments might stimulate demand for higher-density development in receiving areas. The community may not have sufficient infrastructure in place to accommodate higher density, but it could fund upgrades

in infrastructure, which may need modernization anyway. Another option could be targeting higher-density development at or near transitoriented development (TOD) stations; emerging evidence indicates that markets respond favorably to TOD and rail transit in general, and sometimes the underling density will not accommodate the increased demand. Because local developers may be reluctant to consider higher density because they are not accustomed to it, the community can learn about and share developers’ experiences elsewhere.

Establish Maximum Density with TDR Many effective TDR programs use a density bonus to induce TDR transactions. Based on our assessment of dozens of programs across the country, density bonuses range from a low of 10 percent more units than the density threshold to a high of twenty-nine times more, with an average bonus of about three times. The majority of programs, however, provide a 100 percent bonus (two times) or less.

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A small density bonus has the advantage of creating relatively little difference between receiving site projects using TDR and adjacent development that does not incorporate the density bonus. But a small density bonus may not provide enough market incentive. Small, lowdensity bonuses also require very large receiving areas to accommodate the number of TDRs available in sending areas. If the receiving areas cannot be expanded, a TDR program could exhaust its capacity without achieving all of its preservation goals. A large density bonus is more likely to allow the market to achieve the public purpose objectives of TDR programs. In addition, because density bonuses accommodate more development rights per acre, the community can achieve its goals with either a smaller receiving area or increased sending area sizes and allocations, or both. To ensure that receiving areas accommodate large numbers of TDRs, Montgomery County, Maryland, has a minimum density bonus that receiving area projects must achieve when developers decide to use the TDR option. Of course, the higher the density bonus, the greater the chance that conflicts will arise among adjacent or nearby lower-density development. Careful site design and architecture can minimize most conflicts. In our view, large-density bonuses work best when the receiving areas are in new towns, are in areas targeted for annexation, or are otherwise separated from existing neighborhoods.

Consider Starting a TDR Bank Some communities limit their TDR programs to the direct transfer of development potential from a sending site to a receiving site. This approach misses an opportunity to facilitate transfers through intermediaries—organizations or individuals who buy TDRs from sending site landowners and hold them for eventual sale to developers. The term TDR bank refers to in-

termediaries that are governments or public agencies. TDR banks buy development rights from sending area landowners when those landowners wish to sell, even if TDR buyers are temporarily unavailable. Sometimes the initial funding to purchase TDRs comes from a third party; for example, San Luis Obispo County, California, jump-started its TDR bank with a $275,000 seed loan from the California Coastal Conservancy. More typically, the funds for TDR purchases come from a local government, through a revolving loan fund arrangement. Alternatively, seed money for TDR banks can come from state funds or from municipal bonds. Occasionally, TDRs purchased at one point in time greatly escalate in value, enabling the TDR bank to return the local government’s seed money. Or, proceeds of TDR sales at higher value than initial cost are simply plowed back into the program to acquire more TDRs; this is an important leveraging function of TDR banks. Because the bank requires staffing, however, a small share of TDR transactions to developers is retained for staff operations. TDR banks can take advantage of economic cycles, holding TDRs until developers need them for receiving area projects. Developers like TDR banks because they do not have to become involved in acquiring TDRs, which are ready and waiting for them. For its TDR program, for example, King County, Washington, maintains a list of TDRs currently available for sale, their price, and their terms, such as which receiving areas they must be applied to. Beyond facilitating transfers, a TDR bank can provide continuity for a TDR program by promoting the use of TDRs, maintaining lists of potentially interested buyers and sellers, and assisting applicants with the paperwork for executing and recording deed restrictions. The TDR prices established by a bank can serve as a benchmark and encourage private transactions that otherwise might not happen due to uncertainty about TDR values.

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Finally, a TDR bank can help jump-start TDR programs. For example, starting in 1980, Palm Beach County, Florida, had a succession of TDR ordinances. In the late 1990s, the county used a bond to buy the most important environmental land within its boundaries; the nine thousand TDRs severed from this environmental land were placed in the county’s TDR bank and held for future sale. This enabled Palm Beach County to achieve many of its preservation goals up front and to use proceeds from TDR bank sales to maintain and expand its natural areas system. Communities with TDR banks operate some of the most successful TDR programs in the

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country, including Long Island Pine Barrens, New York; Malibu Coastal Zone, California; New Jersey Pinelands, New Jersey; Palm Beach County, Florida; San Luis Obispo County, California; Tahoe Regional Planning Agency, California/Nevada; and King County, Washington. Although TDRs are not new, they represent a new and innovative approach in many communities. Over time, as all the actors in a local real estate and development market understand TDRs, their collective knowledge can be used to craft changes and improvements that further enhance program effectiveness.

part iii

Chapter 10

Legal Issues

Land use planning agencies often find themselves in the middle of a conflict between two different interests. On the one hand, there is a need to protect and preserve land and to prevent, or at least control, certain environmental and social costs commonly associated with land development. On the other hand, development regulatory bodies face a fierce property rights sentiment that any scheme which reduces land value is a compensable taking. Constitutionally, governmental agencies are caught between a duty to protect public health, safety, welfare, and morals and a duty to justly compensate landowners whose property is taken. TDRs—and land use, market-based mitigation tools in general—offer a quasi–market based alternative to Euclidean zoning. Due to inherent differences in the condition or location of land, Euclidean zoning and related regulatory means frequently result in uneven impacts on landowners. Landowners in areas where higherintensity development is encouraged economically benefit, while landowners in areas where land is protected from development are hurt. A fairer system would allow all landowners to benefit from the area’s development and would require all benefiting landowners to pay the costs associated with preserving and protecting sensitive land. TDR programs offer that alternative by separating the need to preserve a particular par-

cel of land from any rights a landowner has to develop that land. TDR provides economical benefit to owners of sensitive land by a means other than development of that land. A TDR program promises to be more effective and efficient than standard zoning because it uses quasi-market mechanisms. As developers compete for development rights in an open market, market forces will determine the value of development rights within the guidelines set by the regulating agency. The economic value of development will be shared among all property owners who contribute to that value, not just the owners of the land on which the development will take place. The owners of lands retained in historic or agricultural uses participate in the creation or enhancement of the development value of the other parcels of land. By requiring landowners of nonsensitive land to buy development rights from the owners of sensitive land, the government is forcing developers to “internalize” the costs associated with land development. The standard approach to development regulation permits private landowners who benefit from environmental amenities not to consider the social costs of destroying environmental or similar benefits enjoyed by a community. The whole community, for example, is better for providing places for bald eagles to nest. If those places are lost to development, the whole 95

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community—not to mention the bald eagles—is worse for it. TDRs create a greater social efficiency by forcing the developers who benefit from land preservation to recognize the costs associated with such preservation. Under Euclidean zoning, local governments must either buy sensitive land or regulate it heavily and risk a takings challenge. To prevent takings challenges that drain public coffers, local governments often grant some development on each parcel through a variance or similar procedure. This piecemeal approach results in urban sprawl, environmental resource depletion, and public safety problems. The constitutional and budgetary limitations of zoning thus limit the effectiveness of land protection programs. Conversely, by separating the development potential of the parcel from the land itself—and creating a market in which that development potential can be separately purchased—TDR programs provide value to the owners of preserved properties and avoid takings challenges without threatening the effectiveness of the preservation plan. It would follow that, if the TDRs were not to be considered in the takings calculus, development-regulating entities may be disinclined to use a program that is potentially more fair and efficient than current, regulation-based, land use controls. Simply put, TDR programs separate the development potential of a parcel from the land itself and create a market where that development potential can be sold. Planning agencies then identify areas they wish to protect (sending areas) and other areas suitable for development (receiving areas). Generally, sending area property owners must record a covenant, running with the land permanently, that removes certain development rights. The regulating agency should also prepare a list of residual uses of the land after the TDRs have been sold. This helps protect against a categorical takings claim if TDRs are not considered relevant to the takings analysis and helps determine the “nondevelop-

ment” value of the land. Nondevelopment uses might include agriculture, beekeeping, bird watching, primitive camping, and other recreational uses. One popular residual use of wetlands near metropolitan areas is as “antenna farms.” Once an owner of land in a sending zone has recorded the necessary covenants and received her TDRs, she no longer has the right to develop the land in the manner restricted by the general regulations or by any additional restrictions contained in the covenants. Ideally, each owner of restricted land would receive enough TDRs to mitigate the loss of development value, with the value of using those TDRs in the receiving areas providing compensation.

TDR and the Courts In 1978, the Supreme Court of the United States decided the first case involving TDRs: Penn Central v. City of New York.1 The majority held that the application of New York City’s Landmarks Preservation Ordinance did not affect a regulatory taking of the landowner’s air rights over Grand Central Station when an application to build an office building over the station was denied. The majority also held that New York City’s action was a legitimate exercise of police power. The New York Landmarks Preservation Ordinance in question included a TDR arrangement that would have allowed the plaintiffs to transfer restricted developmental potential to other property they owned in the area. Justice Brennan devoted the last paragraph of the majority opinion to the TDR aspect of the controversy. This paragraph—especially the part indicated in italics— established the federal constitutional legal context for TDRs until the Suitum decision of 1997: Second, to the extent that appellants have been denied the right to build above the ter-

Chapter 10: Legal Issues

minal, it is not literally accurate to say that they have been denied all use of even those pre-existing air rights. Their ability to use these rights has not been abrogated; that are made transferable to at least eight parcels in the vicinity of the Terminal, one or two of which have been found suitable for the construction of new office buildings. Although appellants and others have argued that New York City’s transferable development-rights program is far from ideal, the New York courts here supportably found that, at least in the case of the Terminal, the rights afforded are valuable. While these rights may well not have constituted “just compensation” if a “taking” had occurred, the rights nevertheless undoubtedly mitigate whatever financial burdens that law has imposed on appellants and, for that reason, are to be taken into account in considering the impact of regulation.2 (Emphasis added.)

TDR advocates interpreted Justice Brennan’s analysis to mean that TDRs are relevant in determining whether a regulatory taking has occurred; TDRs provide an off-site use for restricted land that must be evaluated when determining whether investment-backed expectations of landowners have been so destroyed as to constitute a taking. TDR advocates argue that TDR programs allow regulating agencies to mit-

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igate any economic unfairness of their regulations and, at the same time, provide those authorities with a defense to takings claims. This conception of TDRs has been questioned in the Supreme Court’s second and most recent analysis of TDRs, Suitum v. Tahoe Regional Planning Agency.3 In Suitum, the petitioner, Bernadine Suitum, was refused permission to build a home on property near Lake Tahoe by the respondent, Tahoe Regional Planning Agency (TRPA), because the land was classified as a stream environment zone (SEZ). (A SEZ is an area where surface water tends to collect on its way to Lake Tahoe.) Federal law required TRPA to consider environmental capacity when approving new development.6 The agency had concerns that development in SEZs would reduce the clarity and quality of Lake Tahoe’s famous waters. The petitioner was not allowed to suggest any mitigation schemes to limit the impact of her development. After completing the agency appeals process, the petitioner filed a regulatory takings claim under 42 U.S.C. section1983. TRPA, created under the Tahoe Regional Planning Compact to manage growth in the interstate Lake Tahoe region, provided the petitioner with several types of TDRs to mitigate the property’s loss in value. TRPA issues three different development rights.

THE DEFINITION OF PROPERTY The constitutional concept of property has never been well defined. Many commentators describe property using the “bundle of sticks” concept (see chapter 1). Under this theory, property is simply a combination of the things one can do with the land: develop, occupy, exclude others, extract resources, cultivate, and use airspace. Each of these can be separated from the fee and sold or given to another buyer. This approach to property, however, fails to provide the nuanced functionalism that may be needed to answer the difficult questions that TDR raises. Justice Jackson, in United States v. Willow River Power Co, presents an alternative approach.4 Justice Jackson states: “Not all economic advantages are ‘property rights’; only those economic advantages are ‘rights’ which have the law back of them, and only when they are so recognized may courts compel others to forbear from interfering with them or to compensate for their invasion.”5 Justice Jackson was suggesting that property is a constantly changing social and legal construct that can only be identified on an ad hoc basis by the courts. In effect, Jackson was espousing the civil law concept of the social function theory of property. That social function analysis is also the essence of the common law concept of property ownership as a mixed bag of rights and responsibilities.

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A residential development right is granted to the owner of each vacant parcel in the region. Parcels in SEZs receive three bonus TDRs. To build a multiunit development, the developer must purchase TDRs from the owners of vacant lots, valued at $1,500 to $2,500 each. Residential allocations are needed to build in a particular year. TRPA distributes three hundred residential allocations annually to local jurisdictions, which hold annual lotteries. Washoe County, where the subject property is located, reserves six of its sixty residential allocations for properties that cannot be developed. At the time of the suit, there were fewer than six applicants for those permits. Together with a residential development right, a residential allocation is worth $30,000 to $35,000. Also, land coverage rights are needed for each square foot of impermeable cover above that allowed by zoning law. SEZ owners receive land coverage rights authorizing coverage equal to 1 percent of surface area. The petitioner received 183 land coverage rights, each worth between $6 and $12. Without the TDRs, her undevelopable land was worth between $7,125 and $16,750.7 She bought the property in 1972 for $28,000. Because the TDRs were valued at $56,000, the total value of her property was estimated to be about $72,000. The petitioner argued that the Tahoe TDR program had nothing to do with transferring development rights. She argued that the right to develop is a property right that runs with the land. It can be separated from the other rights in the bundle, but it cannot be transferred to another site. The plaintiff argued that instead of transferring development, TRPA was allowing the petitioner to sell a variance to a third party. While such a salable variance may have value and may provide partial compensation for the taking of the petitioner’s right to develop, the plaintiff stridently argued that it is not an alternative use of the land in question.

At the trial and lower appellate levels, the petitioner had simply claimed that TRPA’s TDR market was a sham and that the TDRs lacked any value. When the Pacific Legal Foundation took over the case on behalf of the petitioner, it asserted as the basis for a writ of certiorari that under Lucas v. South Carolina Coastal Council the Court should find a categorical taking since the regulation had made the land worthless.8 So the plaintiff first raised the idea that TDRs should not be considered in the takings analysis in its brief on the merits before the U.S. Supreme Court. Ignoring ripeness, the final legal issue Suitum raised is what Justice Brennan really meant in a single sentence on TDRs near the end of the Penn Central opinion. The relevant sentence reads: “While these rights may well not have constituted ‘just compensation’ if a ‘taking’ had occurred, the rights nevertheless undoubtedly mitigate whatever financial burdens the law has imposed on appellants and, for that reason, are to be taken into account in considering the impact of regulation.”9 For obvious reasons, the petitioner’s brief on the merits did not raise Penn Central but, rather, focused on the latter part of Brennan’s sentence (“. . . the [TDR] rights . . . are to be taken into account in considering the impact of the regulation”10). The “Petitioner’s Reply” brief argued that by the time the Penn Central court got to TDRs, they had already decided that New York City had not taken Grand Central Station. The petitioner points to the first half of the sentence—“These rights may well not have constituted ‘just compensation’ if a ‘taking’ had occurred”—and points out that the Court never had to decide whether the TDRs would have made the difference.11 The court decided as follows: While the pleadings raise issues about the significance of the TDRs both to the claim that a taking has occurred and to the consti-

Chapter 10: Legal Issues

tutional requirement of just compensation, we have no occasion to decide, and we do not decide, whether or not these TDRs may be considered in the issue of whether there has been a taking in this case, as opposed to the issue of whether just compensation has been afforded for such a taking. The sole question here is whether the claim is ripe for adjudication, even though Suitum has not attempted to sell the development rights she has or is eligible to receive. (Suitum at 728)

Because the Suitum decision did not resolve the issue of whether TDRs are a compensatory mechanism, communities may be advised to not rely entirely on TDR as their sole defense against a takings claim.

Market-Based Mitigation after Suitum The Suitum court decided the case on narrow ripeness grounds, avoiding the larger question

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raised by the petitioner: how TDRs should be considered in a takings analysis. Justice Souter wrote the majority opinion.17 It was unanimous except for parts II-B and II-C, which Justices Scalia, O’Connor, and Thomas declined to join.18 Part II-B dealt with the “final decision” framework as applied to the TDR program.19 Part II-C addressed ways to determine the value of the TDRs. The majority avoided this question by explaining that, even if TDRs should be considered in that calculus, the case was ripe for adjudication because the number and value of TDRs that the petitioner will ultimately receive were fully known. The Suitum court explained that the value of the TDRs could be determined prior to sale, through other valuation techniques. Even though TRPA must approve any transfer, the agency has no discretion with respect to approval of the TDRs if the conditions specified in TRPA’s own ordinance are met. Because all decisions of TRPA that might affect the

A CONFUSING CO-MINGLING In Pennsylvania Coal v. Mahon (1922), Justice Holmes argued that a regulation which goes “too far” would be a taking.12 While a healthy debate continues over what he meant at the time, everyone agrees that when Justice Brennan resurrected the case in 1978, it became the foundation for today’s regulatory takings doctrine. In Penn Central Transportation Co. v. New York City, Justice Brennan interpreted Pennsylvania Coal to stand for the proposition that even if a statute advances legitimate state interests, it can “so frustrate distinct investment-backed expectations as to amount to a ‘taking.’“13 Although he accepted this notion, Justice Brennan appeared uncomfortable calling it a taking. Almost every time he used the word taking, he placed it in quotes. In this regard, he stated: “It is, of course, implicit in Goldblatt that a use restriction on real property may constitute a ‘taking’ if not reasonably necessary to the effectuation of a substantial public purpose.”14 If Justice Holmes had not already done the deed, here it was—a due process violation became a “taking.” This co-mingling of due process and takings has an effect in many different areas. John D. Echeverria and Sharon Dennis argue that as a consequence of this “muddle,” the presumption of constitutionality that generally follows a due process challenge may not have been incorporated into the regulatory takings doctrine.15 The normal due process remedy—injunctions—clearly has not been incorporated into the regulatory takings doctrine. A major course correction occurred in 2005 when the Supreme Court decided Lingle v. Chevron and admitted that the “substantially advances” formula has no proper place in takings jurisprudence. 16 Lingle‘s importance lies in the doctrinal clarity it brings to the takings issue. It eliminates, or should eliminate, the confusion between due process and takings that has existed since the 1922 Pennsylvania Coal decision. It remains to be seen if this change of course will prove significant in determining whether or not a taking occurs when a mandatory TDR program is enacted.

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number and value of the petitioner’s TDRs had been made, the case was ripe for a decision on the merits. The concurring opinion in Suitum more directly addresses the role of TDRs. Writing for Justices O’Connor and Thomas, Justice Scalia disagreed with the Court’s discussion of the value of TDRs because it assumed that their value would affect the ripeness decision. Scalia stridently disagreed with the notion that TDRs were some type of use of the property. Instead, Scalia argued that TDRs are administrative contrivances, a peculiar type of chit, created to mitigate the impact of government regulation, and thus are distinct from the rights inherent in landownership. Scalia argued that giving the petitioner the TDRs was the same as giving her a cash gift. Just as cash would be viewed as compensation for a taking, these TDRs are also simply partial compensation. Justice Scalia commented that “putting TDRs on the taking rather than the just compensation side of the equation . . . is a clever, albeit transparent, device that seeks to take advantage of a peculiarity of our takings clause jurisprudence: Whereas once there is a taking, the Constitution requires just (i.e., full) compensation . . . a regulatory taking does not occur so long as the land retains substantial (albeit not its full) value.”20 Justice Scalia clearly views TDRs as a means of payment for a regulatory taking. If a taking has occurred without considering any value associated with TDRs, the value of those TDRs may have to be supplemented to achieve just (full) compensation. This would raise an interesting question if the value of the TDRs exceeded the land’s reasonable, fair market value. Justice Scalia, however, recognizes one exception: that TDRs should be treated as an alternative use of property as long as they are applied to nearby property of the affected landowner. This exception is perplexing in light of Scalia’s opinion in Lucas v. South Carolina Coastal Council, in

which he described this idea as “extreme” and “unsupportable.”21 The Suitum court does not explicitly accept or reject the Penn Central approach to TDRs. (The “Penn Central approach” refers to the respondent’s understanding of that case—that TDRs can be considered in determining whether a regulatory taking has occurred.) Rather, the Court explicitly rejects the opportunity to decide whether to consider TDRs in the takings analysis. Yet, the Suitum court based its analysis on the implicit proposition that the TDRs are relevant to the petitioner’s regulatory takings claim. As Scalia’s concurrence makes clear, there would be no need to analyze the value of the TDRs if the TDRs were meaningless to the takings claim.22 Perhaps the Court is simply taking the view that even if TDRs are valuable and should be considered in determining whether a taking has occurred, the case is still ripe and the appropriate consideration will evolve from a hearing on the merits. Yet, Scalia was clearly concerned that the Court has at least given the impression that TDRs might be relevant to whether a taking had occurred. Alternatively, the Suitum decision may spell the beginning of the end for TDRs as protection against takings challenges. The practical consequences of rejecting Penn Central could be enormous for land and environmental management programs. In an article discussing possible negative outcomes of the Suitum decision, Richard Lazarus notes that the court could possibly declare that TDRs were the “sham” that the plaintiff claimed: they had no value and should not be considered for any reason.23 This would reject the Penn Central view of TDRs, which declared that TDRs were a helpful tool in mitigating the impacts of regulations. If the Court did reject the use of TDRs for any purpose, it could potentially backfire on the property rights movement. Property owners have adopted TDRs as a useful means to avoid costly governmental regulation, and many property rights protection stat-

Chapter 10: Legal Issues

utes allow governments to offer TDRs to mitigate any loss in land value. For instance, the Burt J. Harris, Jr., Private Property Rights Protection Act allows a governmental entity to offer a settlement that includes TDRs.24 If TDRs are not considered, the courts will be left with a simple choice: either a taking has occurred and compensation is due, or no taking has occurred and thus no compensation is due. The property rights interests representing Bernadine Suitum seem to assume that removing TDRs from the picture would lead to more frequent findings of regulatory takings and payment of compensation. It is also possible that there will be no such findings and property owners will be denied those economic “mitigations” that TDRs can provide. The scope of the Court’s decision would be crucial if it made such a decision. Alternatively, if the court came to an opinion that focused on the particular failings of TRPA’s TDR program, it could improve the quality of other TDR programs as they attempt to avoid TRPA’s mistakes. TRPA feared the Court might declare that TDRs cannot be considered in the takings analysis and that the only appropriate use for TDRs is as partial compensation for a taking. The Court would have to reject or distinguish Penn Central, which declared that TDRs “are to be taken into account in considering the impact of regulation.”25 In cases where the regulated parcel has no remaining post-TDR value, such a decision could lead to a categorical taking under Lucas.26 If the parcel retains some post-TDR economic value, however, and if the mitigation provided by TDRs would have to be ignored, this would increase the possibility of a regulatory taking. It would also discourage regulatory agencies from attempting to mitigate the impact of their regulations with TDRs. Who would “win” with such an outcome could be debatable. If TDRs are merely a way of paying compensation, or some type of “consolation prize,” and are not relevant to the takings

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analysis, then their usefulness as a quasi–market based mechanism to equalize and mitigate the effects of land regulation would be questionable. Certainly, the usefulness of a TDR program in defending takings claims would no longer exist. To better understand the different perspectives of Justices Scalia and Souter, review the graphs below. Figure 10.1 depicts a situation in which a regulation has reduced the land’s fair market value—specifically, its use value. (These are not the values of the Suitum land; they are used to demonstrate and differentiate the Scalia and Souter positions.) Suppose the value of the land has been reduced by 80 percent, but it could be any substantial amount. Should the property owner pursue a takings claim, this is what would be presented to the court. If the regulating agency offered a TDR, it would be considered, yet differently by the two justices even though they could arrive at the same conclusion. Figure 10.2 shows how the two would view the value of the property to the owner. Scalia would take the position that the value to the owner is the fair market value of the land, excluding the value of any “chits.” Souter, in contrast, would look at all values associated with the ownership, including any TDRs (or chits). The point here is that in Scalia’s view the property

Figure 10.1. The land’s fair market value (FMV) drops by 80 percent because the landowner could not build on the lot.

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Figure 10.2. With TDRs, the evidence showed that Suitum’s total loss would be about 20 percent, because TDR sales would be equal to 60 percent of the previous fair market value (FMV).

would have been devalued by 80 percent and whether a taking had occurred would be based on that degree of diminution. The value of any TDR would be compensation offered to the property owner by the agency. In Souter’s view, the value of the ownership has diminished by 20 percent—the remaining fair market value plus the value of the TDR. In Souter’s view, the TDR value to the owner is 60 percent of the original value, meaning the resulting fair market value is 80 percent of the pre-TDR policy, as seen in figure 10.3. Without the TDR, Scalia would award 80 percent but Souter would award nothing. Even if Scalia acknowledged a compensatory value associated with TDRs, however, he may still hold for a taking on the remaining 20 percent where Souter may not, as illustrated in figure 10.4. The lesson of Suitum, however, is not that the Court demurred on the takings issue, finding the question was not “ripe,” but how local governments would be advised to design and implement their TDR programs to avoid scrutiny under takings claims. After all, Scalia’s and Souter’s views could be the same in there was not taking by either definition and hence no compensation is due. Or, their views could be the same if there was a taking found and just compensation would be due.

Figure 10.3. Justice Scalia accepts the full loss of 80 percent as a taking.

Figure 10.4. Justice Souter accepts the 80 percent loss of value because of the land use policies but accepts that TDRs will equal 60 percent of the total value prior to land use change, for a total loss of 20 percent (which would not be a taking).

The important point is what factors are considered in determining whether a taking has occurred. Scalia says there is an 80 percent impact of the property owners, while Souter is saying there is only a 20 percent impact. Whether the owner retains 20 percent or 80 percent of the value of the ownership would tend to be critical to the outcome of a takings case. This is the “clever, albeit transparent, device that seeks to take advantage of a peculiarity of our takings clause jurisprudence.” One can debate whether TDR is a contrivance to take advantage of takings law, but the fact remains that it is much more likely for a taking to be found when values

Chapter 10: Legal Issues

decrease by 80 percent than by 20 percent. For this reason, the agency must do everything within its power to ensure that the TDRs have clarity and that their value can be appraised. Otherwise, there will not be an opportunity to advance the argument of TDR providing an alternate use of the property.

Legal Issues Remaining for the Court Ultimately, the Supreme Court should address the question of whether TDRs are some type of use of property. In doing so, the Court will have the opportunity to take another look at its regulatory takings jurisprudence. More important, the Court may take the opportunity to express more clearly its views of property. It will likely be a landmark case, both in practical effect and precedential value. Clearly, internal transferring of development—as with cluster developments—would be a use of land. For example, in Graham v. Estuary Properties,27 where the ability to cluster development on the uplands was one component of a decision that there had not been a taking of the wetlands, Justice Scalia writes that TDRs may be a use of land as long as they are usable to “nearby” property owned by the same individual.28 If “nearby” means contiguous, this has been done for years as clustered development. Clustering development within a single parcel would be a transfer of development rights. Mov-

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ing development to adjacent parcels would also be a transfer of development rights. Clustering development within a parcel or “moving” it to adjacent parcels is not considered offensive, so at what point would “moving” development from one location to another stop being an acceptable means of land management and become a possible taking of the sending parcel? Even though TDRs present many complicated issues for courts to evaluate, the major issue is the relationship—or lack thereof—between TDRs and a court’s takings analysis. The U.S. Supreme Court’s response to TDRs in future cases may depend on the type of program that comes before it. If the Court does not declare that all TDRs are per se excluded from the takings analysis, the courts must still sift through the various plans. In deciding whether a TDR program is real or a sham, courts should consider three things: 1. Does the agency have the authority to create the program? 2. Has the agency clearly outlined the program’s purpose and objectives? 3. Is there an active market for TDRs? Additionally, the courts may wish to examine the extent to which the price (value) of TDRs is near the lost development value and the extent to which any diminution in value would constitute a regulatory taking.

Chapter 11

A Review of State Statutes

By 2010, twenty-five states had adopted TDRenabling legislation. These acts represent legislators’ understanding of principles laid down by the courts in decisions regarding the constitutionality of TDRs. A knowledge of case law can contribute to an understanding of the intent of the statutes, while the statutes themselves provide interpretations of the meaning and application of case law. Figure 11.1 illustrates the distribution of those twenty-five states. North Carolina is the only state with an enabling statute in place that has yet to see any local programs develop from it, although the North Carolina Agricultural Development and Farm Protection Trust Fund has made efforts to develop local programs. As shown in table 11.1, eight states and the District of Columbia currently have active local TDR programs but no enabling legislation (Illinois, Louisiana, Montana, Nevada, South Carolina, Texas, Wisconsin, and Wyoming). This circumstance is possible due to precedents set through case law and the powers delegated through a state’s home rule. The term home rule refers to the delegation of power from the state to its subunits of governments (including counties, municipalities, towns or townships, and villages). That power is limited to specific fields and subject to constant judicial interpretation.

Home rule states differ from “Dillon Rule” states. In the former, local governments have inherent powers to advance the public health, safety, and general welfare even if a state’s constitution or legislation does not enable or prescribe those powers. In contrast, local governments in Dillon Rule states have only those powers expressly enabled in the state constitution or legislation; often, these powers are unique to specific local governments rather than all local governments.1 A review of the state enabling acts reveals little agreement on what form state regulation should take. The second column of table 11.2, showing the length of various acts, illustrates that enabling acts vary from brief grants of power (Colorado, Florida, Massachusetts, and Utah) to lengthy statements of general principles, implementation and administrative process, and welldefined ordinance standards (New Jersey, Washington). The brief grants of authority provide little guidance to local communities wishing to develop ordinances or programs that produce results. On the other hand, the lengthy process detailed in New Jersey’s statute constricts the ability to create effective ordinances that respond to local circumstances and political realities. Georgia, Idaho, New York, and Washington serve as good examples of comprehensive yet flexible

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Figure 11.1. As of 2010, half of the country—25 states—had enacted TDR-enabling legislation. Courtesy of Doug Woodruff.

statutes that have historically produced successful local ordinances.

Three Main Principles TDR-enabling acts typically embody three main principles. As explained below, states differ significantly in how they approach and express these principles.

Principle 1: Authorize the Conveyance of Development Rights Almost all state enabling acts contain words or phrases that authorize the severing and conveyance of development rights. Development rights are commonly defined (Arizona, Georgia, Idaho, New York, Virginia, and North Carolina) as

the development that would be allowed on the sending property under any comprehensive or specific plan or local zoning ordinance of a municipality or county in effect on the date the municipality or county adopts an ordinance pursuant to this chapter. Development rights may be calculated and allocated in accordance with factors including dwelling units, area, floor area, floor area ratio, height limitations, traffic generation, or any other criteria that will quantify a value for the development rights in a manner that will carry out the objectives of this Code section. (Georgia; state laws; GA. Code. Ann. § 36-66A-1)

The extent to which the authority to transfer development rights is defined varies. Utah’s granting of authority is brief, stating: “A municipality may adopt an ordinance, designating sending zones and receiving zones within the municipality; and allowing the transfer of trans-

Chapter 11: A Review of State Statutes

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table 11.1 State TDR Legislation and Activity State Arizona California Colorado Connecticut Delaware District of Columbia Florida Georgia Idaho Illinois Kentucky Louisiana Maine Maryland Massachusetts Minnesota Montana Nevada New Hampshire New Jersey New Mexico New York North Carolina Ohio Oregon Pennsylvania Rhode Island South Carolina Tennessee Texas Utah Vermont Virginia Washington Wisconsin Wyoming

Enabling Statutes

Active TDR Programs

Dillon Rule

Yes No Yes Yes Yes No Yes Yes Yes No Yes No Yes Yes Yes Yes No No Yes Yes—Individual Statutes Enabling TDR Transfers and TDR Banks Yes Yes—Individual Statutes Enabling Transfers in Villages, Towns, and Cities Yes No—House Bill 471 Proposes Explicit TDR Transfer Enabling Statutes Yes Yes Yes No Yes—Individual Enabling Statutes for TDR Transfers in Counties and Municipalities No Yes—Individual Enabling Statutes for TDR Transfers in Counties and Municipalities Yes Yes Yes No No

Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Yes Limited* Limited* Yes Yes Yes Yes Yes Yes Limited* Yes Limited* Yes Yes No Yes No Yes Yes No

Yes Yes

No Yes

No No

Yes No

Yes Yes Yes Yes Yes

No Yes Yes No Limited*

Yes Yes

Yes No

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

*They are Dillon Rule states, but only for certain types of municipalities.

ferrable development rights from an owner of land within a sending zone to an owner of land within a receiving zone.” Idaho, Georgia, Tennessee, and New York have more extensive language, similarly stating that ordinances providing for the transfer of development rights shall prescribe procedures

for the issuance and recording of the instruments necessary to sever development rights from the sending property and to affix the development rights to the receiving property. These instruments shall specifically describe the property, shall be executed by all lienholders and other parties with an interest of record in any of the affected property,

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table 11.2 State TDR Enabling Acts State

Year

Word Count

Arizona Colorado Connecticut Delaware Florida Georgia Idaho Kentucky Maine Maryland Massachusetts Minnesota New Hampshire New Jersey

2005 2004 2009 1999 2004 2005 2005 2002 2001 2005 2005 2004 2004 2005 2004 2004 2004 2004 2004 2009 2009 2009 2004 2004 2004 2007 2007 2004 2009 2009

320 84 252 660 77 1,153 795 305 185 275 78 108 900 2,465 5,903 337 1,280 1,304 1,359 1,055 2,502 233 118 543 617 47 51 420 2,289 2,782

New Mexico New York

North Carolina Oregon Pennsylvania Rhode Island Tennessee Utah Vermont Virginia Washington

Citation AZ; State Laws; Ariz. Rev. Stat. Ann. § 9-462.01(A)(12) CO; State Laws; Colo. Rev. Stat. §§ 30-28-401 to 404 CT; State Laws; Conn. Gen. Stat. §§ 8-2, 8-2e to 8-2f DE; State Laws; Del. Laws. § 310 and §2653 FL; State Laws; Fla. Stat. § 163.3202(3) GA; State Laws; GA. Code. Ann. §§ 36-66A-1 to 36-66A-2 ID; State Laws; Idaho Code § 67-6515A KY; State Laws; Ky. Rev. Stat. Ann. § 100.208 ME; State Laws; ME Rev. Statutes. 30-A §4328 MD; State Laws; Md. Code. Ann., Art. 66B, § 11.01 MA; State Laws; Mass. Gen. Laws. ch. 40A, § 9 MN; State Laws; Minn. Stat. § 394.25 NH; State Laws; N.H. Rev. Stat. Ann. § 674:21 NJ; State Laws; N.J. Stat. Ann. §§ 4:1C-49 to 4:1C-55 NJ; State Laws; N.J. Stat. Ann. §§ 40:55D-137 to 40:55D-163 NM; State Laws; N.M. Stat. Ann. § 5-8-43 NY; State Laws; N.Y. Village Law § 7-701 NY; State Laws; N.Y. Town Law § 261-a NY; State Laws; N.Y. Gen. City Law § 20-f NC; State Laws; N.C. Gen. Stat. §§ 136-66.10 to .11 OR; ORS; Volume 3, Chapter 94.531 to 538 PA; State Laws; 53 Pa. Cons. Stat. § 10619.1 RI; State Laws; R.I. Gen. Laws § 45-24-33(b)(2) TN; State Laws; Tenn. Code Ann. § 13-7-101 TN; State Laws; Tenn. Code Ann. § 13-7-201 UT; State Laws; Utah Code. 10-9a-509.7 UT; State Laws; Utah Code. 17-27a-509.7 VT; State Laws; Vt. Stat. Ann. Tit. 24, § 4423 VA; State Laws; Code of Virginia. § 3.2-201, § 15.2-2316.0 to .2 WA; State Laws; RCW Chapter 43.362

Note: Illinois allows municipalities and counties to preserve historic landmarks using TDR. Kansas cities and municipalities are allowed to use TDR. West Virginia authorizes growth counties to establish TDR programs that allow the rights transferred to be for ten years.

and shall be recorded with the county recorder. Transfers of development rights without such written and recorded consent shall be void.” (Idaho; state laws; Idaho Code § 67-6515A)

The more extensive language grants the authority to transfer rights, as well as instruments to sever the rights and the way to record the transfer. Defining how the rights are to be transferred and recorded clarifies how an ordinance should be crafted and then administered. While most states enable TDR ordinances with standards and restrictions for TDR pro-

grams, Florida and New Hampshire enable TDRs as one of many innovative land use controls. Florida, for example, encourages TDRs as an innovative land use regulation by compiling TDRs, incentive and inclusionary zoning, planned unit development, impact fees, and performance zoning into a single land development code for each jurisdiction. This approach creates a variety of options for community development but lacks a clear definition of how to convey, administer, and report TDR transactions. Similarly, New Hampshire’s land use and zoning enable a bundle of innovative land use controls—including TDRs. In what is referred

Chapter 11: A Review of State Statutes

to as a “village alternative plan,” TDRs can occur during the subdivision of a parcel of land. The statute allows the development rights that would be gained in the subdivision of land to be transferred to 20 percent or less of the original parcel, if the remainder of the original lot is used for a range of open-space uses. In effect, this is a clustering approach.

Principle 2: Identify the Types of Resources That TDR Ordinances Can Be Used to Preserve TDR has traditionally been associated with preserving environmental areas, farmland, and historic landmarks. In other instances, communities have invented uses for TDR, such as to revitalize downtown areas, promote desired urban design, stimulate housing production, or ensure that development does not overwhelm the capacity of infrastructure systems (Pruetz 2003). A review of the twenty-five enabling acts, illustrated in table 11.3, reveals ten explicitly expressed types of preservation: • • • • • • • • • •

Open-space preservation Wildlife habitat protection Preservation of agricultural land uses Preservation of forestry land uses Protection of environmentally sensitive lands Management of infrastructure capacity Historic preservation Low-income housing Recreation Renewable energy

Virginia’s act details a unique type of preservation in enabling TDRs for renewable energy purposes. The intent is to promote renewable energies that utilize local wind, falling water, energy from waste, and so forth.

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States acts that do not limit the preservation goals of TDR ordinances allow local governments leeway to develop innovative TDR programs to preserve resources or economic conditions pertinent to the local area. The acts that perform best loosely construe the intended types of preservation and leave the statute open ended for creative preservation methods created by local ordinances.

Principle 3: Express the Voluntary Nature of TDR Not all enabling acts are clear on this point, but a majority codify this principle, as evidenced in the following examples. Arizona: “A. Pursuant to this article, the legislative body of any municipality by ordinance may in order to conserve and promote the public health, safety and general welfare: (12.) Establish procedures, methods and standards for the transfer of development rights within its jurisdiction . . . and shall be subject to the approval and consent of the property owners of both the sending and receiving property” (Arizona; state laws; Ariz. Rev. Stat. Ann. § 9-462.01[A][12]). Oregon: “The holder of a recorded mortgage encumbering land from which credits are transferred shall be given prior written notice of the proposed conveyance by the record owner of the property and must consent to the conveyance before any development credits may be transferred from the property” (Oregon; ORS Volume 3; Chapter 94.531 [3]). Idaho: “Any city or county governing body may, by ordinance, create development rights and establish procedures authorizing landowners to voluntarily transfer said development rights subject to: (b) Voluntary

X

X

X

X

X

X

X

X X

X

X X X

X

X X

Enviro Sensitive Lands

X

X

X X X X

X X

X X X

X X X X

X

X X

X

X

X X

X X X

X

Maintain Agriculture/ Forest

X

X

X

X

Maintain Rural Character

X

Protect Wildlife Habitat

X

Infrastructure Capacity

X

X

X X X

Historic Preservation

X

X

X

Low Income Housing

X

X

Recreation

X

Renewable Energy

Table 11.3. Of the 17 enabling acts that explicitly state desired types of preservation, 12 note agriculture, 11 mention open space, 9 cite environmentally sensitive lands, and 8 note wildlife habitat.

Arizona Colorado Connecticut Delaware Florida Georgia Idaho Kentucky Maine Maryland Massachusetts Minnesota New Hampshire New Jersey New Mexico New York North Carolina Oregon Pennsylvania Rhode Island Tennessee Utah Vermont Virginia Washington

State

Preserve Open Space

Enabling Act Preservation Categories

table 11.3

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Chapter 11: A Review of State Statutes

acceptance by the landowner of the development rights and any land use restrictions conditional to such acceptance” (Idaho; state laws; Idaho Code § 67-6515A [1]). Tennessee: “This subdivision (a)(2) shall be strictly construed with the specific intent to allow a local government to establish its own plan whereby the owners of property in a restrictive area (historical, agricultural, rural area as designated in the county’s growth plan, or environmental) can sell the development rights to a developer or another individual and only with the consent of the property owner and through negotiations of development rights in the free marketplace” (Tennessee; state laws; Tenn. Code Ann. § 13-7-101 [a][2][B]). Washington: “A transfer of development rights is a market-based exchange mechanism that encourages the voluntary transfer of development rights from sending areas with lower population densities to receiving areas with higher population densities” (Washington; state laws; RCW Chapter 43.362.005 [2]).

Clearly, the basic standards regarding voluntary participation vary greatly. In Arizona, both sending and receiving parties must give consent. In some states, the local ordinances must codify voluntary acceptance into the law, while others require written notice prior to consent. Washington’s enabling legislation implies voluntary participation in a section titled “Findings” but does not express it in the section authorizing TDRs.

Ordinance Standards Beyond setting guiding principles, an enabling act should define standards for local ordinances. A review of TDR enabling acts revealed eight categories of standards that are commonly defined or required. The standards, listed in table

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11.4, are somewhat vague; typically, they only require the local ordinance to include the standard, with few parameters or measures of the standard’s performance. The act of severing the rights from a property and conveying them to another property is, by far, the most explicitly expressed standard set in the states’ enabling acts. Often referred to as instruments or conveyance of rights, this standard essentially authorizes the legal tools and legal processes that can be used to transfer development rights. As illustrated in table 11.5, the two most common legal tools used in TDR are deed transfers and conservation, or restrictive, easements. Kentucky’s act does an especially good job of defining how the rights are to be conveyed among landowners. It reads: “Transferable development rights may be transferred by deed from the owner of the parcel from which the development rights are derived and upon the transfer shall vest in the grantee and be freely alienable. The zoning ordinance may provide for the method of transfer of these rights and may provide for the granting of easements” (Kentucky; state laws; Ky. Rev. Stat. Ann. § 100.208 [4]). Some states explicitly define a standard process that applicants interested in selling or buying TDRs must follow. This process can range from joint application submittals as expressed in Connecticut’s act (“shall authorize the transfer of the development rights to land only upon joint application of the transferor and transferee”) to New Hampshire’s standard procedure (“the submission and approval procedure for a village plan alternative subdivision shall be the same as that for a conventional subdivision”) (New Hampshire; state laws; N.H. Rev. Stat. Ann. § 674:21 [c]). Idaho’s unique statute requires the buyer and seller to determine the permanence of the transfer. It states: “It shall be at the discretion of the persons selling and buying a transferable development right to determine whether a right will

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table 11.4 Ordinance Standards State Arizona Colorado Connecticut Delaware Florida Georgia Idaho Kentucky Maine Maryland Massachusetts Minnesota New Hampshire New Jersey New Mexico New York North Carolina Oregon Pennsylvania Rhode Island Tennessee Utah Vermont Virginia Washington

Instruments / Conveyance

Applicant Process

Transaction Monitoring

Explicit

Explicit

Explicit

TDR Valuation

Incentives

Intergovernmental Agreements Explicit

Explicit Explicit Explicit Explicit Explicit

Explicit Explicit Explicit

Explicit Explicit

Explicit

Explicit Explicit

Explicit Explicit Explicit Explicit

Explicit

Explicit Explicit

Explicit Explicit

Explicit

Explicit Explicit

Explicit

Explicit

Explicit Explicit Explicit Explicit

Explicit

Explicit

Explicit Explicit

Explicit

Explicit Explicit

Explicit Explicit Explicit

Explicit

Explicit Explicit Explicit

be transferred permanently without being exercised in a designated receiving area or whether a right will have requirements to be exercised within a designated receiving area within a set time period” (Idaho; state laws; Idaho Code § 67-6515A[5]). Many of these procedural requirements are probably not necessary. In fact, excessive micromanagement from the state can prevent the adoption of effective TDR ordinances. In general, enabling legislation should allow local governments to develop the procedures that will work best for them. Some statutes require TDR programs to monitor transfers to provide information for performance reviews—a handful of statutes require an annual review of ordinances—and to ensure that development rights will not be used more than once. As is common with other ordinance

Explicit Explicit

Explicit

Explicit Explicit

standards found in TDR-enabling statutes, the language is often vague. Typically, TDR transfer ordinances require only inclusion of a monitoring system and leave it to local officials to develop an effective system. Following are some examples. Washington: “The department will develop quantitative and qualitative performance measures for monitoring the regional transfer of development rights program. The performance measures may address conservation of land and creation of compact communities, as well as other measures identified by the department. The department may require cities, towns, and counties to report on these performance measures biannually. The department shall compile any performance measure information that has been reported by the counties, cities, and

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table 11.5 Legal Tools State Arizona Colorado Connecticut Delaware Florida Georgia Idaho Kentucky Maine Maryland Massachusetts Minnesota New Hampshire New Jersey New Mexico New York North Carolina Oregon Pennsylvania Rhode Island Tennessee Utah Vermont Virginia Washington

Conservation Easement

Deed Transfer

X

X

X

X

X X X

X

Variance

Tax Abatement

X

X X X

towns and post it on a web site (Washington; state laws; RCW Chapter 43.362.070). Oregon: “(5) The governmental units administering a transferable development credit system must: (d) Require that the record owner of development interests transferred as development credits from a sending area to a receiving area cause to be recorded, in the deed records of the county in which the sending area is located, a conservation easement that: (A) Limits development of the lot, parcel, or tract from which the interests are severed consistent with the transfer; and (B) Names an entity, approved by the governmental units administering the system, as the holder of the conservation easement. (e) Maintain records of: (A) The lots, parcels, and tracts from

X X X X X

which development interests have been severed; (B) The lots, parcels, and tracts to which transferable development credits have been transferred; and (C) The allowable level of use or development for each lot, parcel, or tract after a transfer of development credits. (f) Provide periodic summary reports of activities of the system to the department” (Oregon; ORS Volume 3; Chapter 94. 538). New Jersey: “All development potential transfers shall be recorded in the manner of a deed in the book of deeds in the office of the county clerk or county register of deeds and mortgages, as appropriate. This recording shall specify the lot and block number of the parcel in the sending zone from which the development potential was transferred

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and the lot and block number of the parcel in the receiving zone to which the development potential was transferred. . . . All development potential transfers also shall be recorded with the State Transfer of Development Rights Bank in the Development Potential Transfer Registry” (New Jersey; state laws; N.J. Stat. Ann. § 40:55D–147 [d-e]). The statutes in four states specify the impact of TDR transfers on the assessed value of the affected properties. Georgia deems the TDR “appurtenant to the sending property until the transferable development right is registered as a distinct interest in real property with the appropriate tax assessor or the transferable development right is used at a receiving property” (Georgia; state laws; GA. Code. Ann. § 36-66A-1 to 36-66A2 [8]). New Jersey states: “Property from which and to which development potential has been transferred shall be assessed at its fair market value reflecting the development transfer” (New Jersey; state laws; N.J. Stat. Ann. § 40:55D–153 [b]).

Intergovernmental transfers can greatly improve the performance of TDR programs. Allowing the transfer of development rights from unincorporated county lands (often the location of the majority of agricultural or sensitive lands) to incorporated cities can generate demand and often a more stable and healthy TDR market. Of the twenty-five states with enabling acts, thirteen allow local governments to form intergovernmental agreements for the purpose of interjurisdictional transfers. There is not unanimity among the statutory language, as evidenced in the following examples. Georgia: “Municipalities and counties which are jointly affected by development are authorized to enter in to intergovernmental agreements for the purpose of enacting interdependent ordinances providing for the transfer of development rights be-

tween or among such jurisdictions, provided that such agreements otherwise comply with applicable laws. Any ordinances enacted pursuant to this subsection may provide for additional notice and hearing and signage requirements applicable to properties within the sending and receiving areas in each participating political subdivision” (Georgia; state laws; GA. Code. Ann. § 36-66A-2 [f]). Virginia: “A county adopting an ordinance pursuant to this article may designate eligible receiving areas in any incorporated town within such county, if the governing body of the town has also amended its zoning ordinance to designate the same areas as eligible to receive density being transferred from sending areas in the county” (Virginia; state laws; Code of Virginia § 15.2-2316.2 [11][M]). Pennsylvania: “No development rights shall be transferable beyond the boundaries of the municipality wherein the lands from which the development rights arise are situated, except that, in the case of a joint municipal zoning ordinance or a written agreement among two or more municipalities, development rights shall be transferable within the boundaries of the municipalities comprising the joint municipal zoning ordinance or, where there is a written agreement, the boundaries of the municipalities who are parties to the agreement” (Pennsylvania; state laws; 53 Pa. Cons. Stat. § 10619.1). Washington: “(1) To facilitate participation, the department shall develop and adopt by rule terms and conditions of an interlocal agreement for transfers of development rights between counties, cities, and towns. Counties, cities, and towns participating in the regional program have the option of adopting the rule by reference to transfer development rights across jurisdic-

Chapter 11: A Review of State Statutes

tional boundaries as an alternative to entering into an interlocal agreement under chapter 39.34 RCW. (2) This section and the rules adopted under this section shall be deemed to provide an alternative method for the implementation of a regional transfer of development rights program, and shall not be construed as imposing any additional condition upon the exercise of any other powers vested in municipalities. (3) Nothing in this section prohibits a county, city, or town from entering into an interlocal agreement under chapter 39.34 RCW to transfer development rights under the regional program” (Washington; state laws; RCW Chapter 43.362.050).

Statutes that truly facilitate interjurisdictional transfers improve the likelihood that local governments will adopt successful TDR programs. Statutes that unnecessarily inhibit interjurisdictional transfers will have the opposite effect.

Sending and Receiving As shown in table 11.6, eighteen of the twentyfive states have statutes that address sending and receiving areas. Topics typically covered in those statutes include the following: • Definitions. Sending areas are commonly defined (Arizona, Georgia, Idaho, New York, Virginia, Washington) as “one or more areas identified by an ordinance and designated by the comprehensive plan as an area from which development rights are authorized to be severed and transferred to a receiving area” (Virginia) or simply as “includes those lands that meet conservation criteria as described in [prior section]” (Washington). Receiving areas are defined as “one or more areas identified by an ordinance and designated by the comprehensive plan as an area authorized to receive development rights transferred from a sending area” (Virginia).

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table 11.6 Sending and Receiving State Arizona Colorado Connecticut Delaware Florida Georgia Idaho Kentucky Maine Maryland Massachusetts Minnesota New Hampshire New Jersey New Mexico New York

North Carolina Oregon Pennsylvania Rhode Island Tennessee Utah Vermont Virginia

Washington

Guiding Methods and Terms

Designation of receiving area only Definition, Designation, Administration Definition, require market analysis Designation, overlay on zoning map

Implies, special districts Implies, areas Designation, subdivision of parcel Definition, Designation, Administration Designation, areas on zoning map Definition, Designation, Administration, a well-considered plan, general environmental impact statement, provide equivalent low-income housing Designation, receiving area only Definition, Designation, Administration Designation, refers to zoning ordinance Definition, Designation, district maps Designation Designation, Administration Definition, Designation, Administration, notes inappropriate areas within the receiving area Definition, Designation, Administration

Table 11.6. The majority of state statutes (72%) specifically address sending and receiving areas.

• Designated sending and/or receiving areas. Virginia’s act requires “a map or other description of areas designated as sending and receiving areas for the transfer of development rights between properties; . . . the identification of parcels, if any, within a receiving area that are inappropriate as receiving properties.” Idaho is unique in that, prior to area designation, the statute requires that the “city or county shall conduct an analysis of the market” in an attempt to ensure development right market demands are met. • Administration. Only six states require administration of the sending and receiving areas.

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Depending on the language, this requirement can greatly constrict administrators. Set standards often do not align with the tempo of the market, causing area updating at inappropriate times. A good example of enabling act administration requirements appears in Georgia’s act, which requires that, “prior to any changes in an area designated in an ordinance as a sending or receiving area, the local governing authority shall provide for notice and a hearing as provided in paragraph (1) of this subsection.” Allowing localities to make changes and updates when deemed necessary, but requiring public notice, offers a good blend of accountability and flexibility.

TDR Banking In TDR enabling legislation, less is generally more. This is because highly prescriptive stat-

utes can create a straitjacket that prevents local governments from tailoring solutions to local circumstances. Conversely, simple, straightforward permission for individuals and local governments to buy and resell TDRs can be comforting to local governments trying to craft successful programs. For example, Georgia grants authority in a brief statement, which also grants authority to individuals to bank rights, as evidenced in the following: “(6) The right of a municipality or county to purchase development rights and to hold them for conservation purposes or resale; (7) The right of a person to purchase development rights and to hold them for conservation purposes or resale” (Georgia; state laws; GA. Code. Ann. § 36-66A-2 [6-7]). Oregon’s enabling act includes a 246-word section that enables TDR banking. It is comprehensive but still allows flexibility in the organization and administration of TDR banks. It grants

table 11.7 Rights of TDR Banks

State Arizona Colorado Connecticut Delaware Florida Georgia Idaho Kentucky Maine Maryland Massachusetts Minnesota New Hampshire New Jersey New Mexico New York North Carolina Oregon Pennsylvania Rhode Island Tennessee Utah Vermont Virginia Washington

Right to Purchase

Right to Sell

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Right to Establish TDR Value

Right to Apply for Funds/Accept Donations

Yes

Yes Yes

Yes

Yes

Yes

Chapter 11: A Review of State Statutes

power to “establish a transferable development credit bank to facilitate . . . buying severable development interests . . . Selling transferable development . . . Entering into agreements or contracts and performing acts necessary, convenient or desirable to achieve the requirements set forth in this section . . . managing funds available for the purchase and sale of transferable development credits . . . Authorizing and monitoring expenditures associated with the system . . . accepting donations of transferable development credits . . . soliciting and receiving grant funds” (Oregon; ORS Volume 3; Chapter 94. 538 [8]). Table 11.7 outlines the TDR banking rights granted in state enabling acts.

Program Implementation Process The substantive process of implementing a TDR ordinance is a fundamental part of state enabling acts. The extent to which standards are defined and required in the process is minimal. New Jersey has substantial requirements; however, most states express brief requirements for implementation process standards. Generally, as shown in table 11.8, implementation standards call for complying with a general or comprehensive plan and following the steps of an approval process. Delaware’s enabling act requires compliance with the comprehensive plan, stating: “In

table 11.8 Implementation Process State Arizona Colorado Connecticut Delaware Florida Georgia Idaho Kentucky Maine Maryland Massachusetts Minnesota New Hampshire New Jersey New Mexico New York North Carolina Oregon Pennsylvania Rhode Island Tennessee Utah Vermont Virginia Washington

Compliance with Plan

Public Notice

Approval Process

Administration Standards

Performance Review

Explicit Required Explicit 15–45 Days Yes Explicit

Yes Yes

Yes Yes

Explicit After first 3 Years and then annually

Required Yes Periodic summary

Yes

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Yes

Explicit

Table 11.8. With the exception of New Jersey, most states do not have substantial requirements for implementing a TDR ordinance.

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furtherance of the authority to adopt, amend, and implement comprehensive plans or elements or portions thereof to guide and control future growth, counties are expressly granted the authority to develop and adopt regulations governing the transfer of development rights from identified residential and nonresidential districts, zones or parcels of land to residential and nonresidential districts, zones, parcels or areas designated to receive such development rights; provided that such receiving districts, zones, or areas are within the same planning district as defined by the county” (Delaware; state laws; Del. Laws. Chap. 3 § 310). Georgia’s enabling act requires an approvals process within a certain timeline. It states: “Prior

to the enactment of an ordinance as provided in subsection (c) of this Code section, the local governing authority shall provide for a hearing on the proposed ordinance. At least 15 but not more than 45 days prior to the date of the hearing, the local governing authority shall cause to be published in a newspaper of general circulation within the territorial boundaries of the political subdivision a notice of the hearing. The notice shall state the time, place, and purpose of the hearing” (Georgia; state laws; GA. Code. Ann. § 36-66A-2 [10][d]). Also, although not commonly expressed except in New York’s statute, the adoption of TDR ordinances is expected to follow the same substantive processes as any other zoning ordinance.

Chapter 12

TDR Program Administration

After adopting a TDR program, many communities simply expect it to succeed without any additional effort. In fact, success depends on the community’s active implementation of the program through public information programs, marketing efforts, ongoing funding and facilitation, and administrative support. Successful programs also have the active support of the public and of public officials. This support ensures that the TDR program will remain true to its original commitment: that property owners who sever and transfer their development rights can use those rights in economically feasible receiving areas. It also ensures continuing interest in the program so that adjustments and corrections can be made as problems arise. Specifically, a successful TDR program depends on these eight factors: • Authority. Without question, enacting a TDR program requires the appropriate authority. This may be implicit authority in home rule states or explicit statutory authority in both home rule and Dillon Rule states, which would include procedures and restrictions on application (see chapter 10). • Clarity of purpose. Having clearly defined and attainable goals enables a TDR program to be not only managed but also mea-

•

•

•

•

sured. Communities must resist the temptation to add other goals to their TDR programs. Resources. TDR programs are not costless; indeed, some may be more complex to administer than other planning programs. But if a community does not commit fiscal and staff resources to ongoing administration, the program will dwindle away. Economic incentives. TDR programs depend on developers in receiving areas purchasing TDRs from sending area property owners. If the price of attaining higher density through rezoning or other means in the receiving area is lower than the cost of purchasing TDRs, developers will eschew TDRs in favor of the cheaper route. In designated receiving areas, TDR must offer the only means of increasing density. Economic feasibility. Development rights will be traded and transferred if doing so makes economic sense to both buyers and sellers. The community will have to monitor the program and, where necessary, make appropriate corrections and adjustments to retain economic feasibility. Use by right. Successful programs grant the use of TDR in receiving areas as a matter of right or, at the least, offer developers reasonable certainty of their ability to use 119

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TDR. An approach is to require some type of discretionary approval, but this requirement removes the certainty that forms the basis for economic feasibility.1 Additionally, requiring discretionary approvals can put the program in legal jeopardy if the community relies on TDR as its only defense against a taking challenge. (See chapter 10 for a more detailed discussion.) • Simplicity. Any land development regulatory program tends to become complex. Ideally, the community should exert strong efforts to keep its TDR program simple and resist efforts to add requirements that could constitute a fundamental threat to the program’s viability. • Minimal transaction costs. The greater the administrative or public “hassle” that confronts a prospective buyer or seller of rights, the less economic value the rights have and the less effective the program will be. Restrictions on the use of rights by buyers—or uncertainty about the ability of sellers to sell rights—inhibit participation in a rights transfer program. “Real world” practitioners who work with TDR programs—and make TDR programs work— have identified these eight factors as the keys to TDR success. Following them does not guarantee success. Failure to follow them, however, ensures failure.

Administrative Considerations Although reasonably efficient and cost effective to administer once running, TDR programs require careful implementation during the startup phase. Based in part on recommendations from the Montana Department of Transportation, here are the key implementation issues for any jurisdiction considering a TDR program.2

Staff Resources and Budget Generally, a TDR program needs dedicated staff to set up and manage the program, with some level of continuing effort thereafter. If, for example, TDRs from sending areas occur in one jurisdiction—such as a rural part of a county—and receiving areas are located in another jurisdiction—such as a municipality in the county— staff will need to engage in multijurisdictional coordination. Staff resources need not become burdensome, however. In King County, Washington, the equivalent of about 1.5 full-time employees administers the TDR program. These employees have processed TDRs preserving about nine thousand acres of farmland annually since 2000, although activity slowed during the recession of 2008 and 2009. The program costs about $245,000 annually, which represents a tiny share of the county’s $2 billion-plus budget.3 Indeed, the cost averages about $25 per acre preserved, depending on the level of activity in any given year (see the case study in chapter 15). Typically, local government provides the funds to administer a TDR program. Communities that use a density transfer charge may designate a portion of those proceeds for program administration, while programs with TDR banks sometimes set TDR sale prices to reimburse certain administrative costs. King County’s relatively small TDR budget comes from local stormwater management fees, the local openspace property tax, TDR bank revenues, and federal grants. In New Jersey, staff from the Burlington County Department of Resource Conservation provides certain administrative functions through the Burlington County Development Credit Bank, such as program monitoring, promotion of credit sales, and funding of public education, as well as TDR banking for the TDR programs in two townships. Similarly, the New

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BANK ON IT Two early and successful TDR programs—the New Jersey Pinelands and the Central Pine Barrens of Long Island, New York—garnered support by using TDR banks to purchase the rights at a stated but heavily discounted price.4 Additionally, developers could approach these banks to purchase development rights.5 Certainly, having a TDR bank is not a requirement for a program’s success—but it sure is a good idea.6 To establish a TDR bank, seed money may come from state or federal grants, grants from private foundations or conservancies, or from the community’s own general fund. The TDR bank acquires an initial batch of TDRs, in effect jump-starting the local TDR marketplace (see chapter 9). Over time, TDRs resold through the bank generate new revenues to purchase additional TDRs; some funds may be retained for staff support as well. Using a revolving fund to purchase development rights provides the following benefits: • The sending site owners are assured of having a buyer whenever they want to sell. • The price of development rights is more likely to stabilize when institutions operate in the market. Conversely, TDR prices can be more volatile and unpredictable when private parties make all sales and purchases. • Developers have some assurance that they will be able to buy TDRs when needed, without having to negotiate individually with numerous sending site property owners. • With the right procedures, TDR transactions can become fast, certain, and easy, comparable to banking transactions. If a community doesn’t have the resources to create a TDR bank with the rest of a TDR program, it can always start one later, when funding becomes available.

Jersey State TDR Bank assists with administrative duties by providing a TDR registry and a TDR bank for any municipality in the state.

Technical Expertise The technical expertise needed to administer a TDR program is not materially different from the skills needed to perform other municipal

functions. Consequently, TDR programs can be run by in-house staff or professionals already under contract to perform other duties. For example, municipalities should have an attorney review and approve easements and other legal documents other than preapproved forms. In a larger community, staff attorneys will generally perform that function, while smaller communities might contract with a private attorney to perform this review along with other legal work.

THE PRICE IS RIGHT An economic analysis (see chapter 3) will show whether transferable development rights are economically feasible for the community. If TDRs are not available at economically feasible prices, this situation should trigger a reconsideration of the program. Options include the following: • Adding more sending areas. • Changing the allocation ratio or the allowance rate so that developers receive more bonus development potential per acre of sending area land preserved. This enables developers to afford higher compensation for sending area landowners. • Adding a cash-in-lieu feature. This allows developers to comply with TDR requirements by paying a legislated density transfer charge, which the jurisdiction then uses to preserve sending area land. • Abandoning the program.

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Geographic Scale A TDR program can be run on any scale, although economic factors favor larger markets with more potential TDR buyers and sellers. The larger the planning area, however, the greater the distance between sending and receiving areas. Some communities recognize the importance of preserving resource land outside their city limits. Seattle, for example, accepts TDRs from sending areas twenty-five miles outside its borders. But many communities will participate only if the sending area benefits are within their borders or at least nearby. In other words, TDR programs with large planning areas may have a greater chance of market viability, but they can be difficult to adopt unless mandated by the state, as in the case of the New Jersey Pinelands.

Public Education Early and sustained public education, typically handled by TDR staff, will ensure program success. Over time, as local real estate brokers become familiar with TDRs, they can become an important source of continuing education. Education should also include informing landowners in sending areas of the potential for reducing their property taxes once development rights have been severed. Depending on local tax laws, the annual savings can be considerable and the long-term, capitalized savings substantial.

Marketing Developers may need no encouragement to buy and use TDRs. But most programs could benefit from an active marketing program initially targeted at developers with projects in the concept

phase. It is particularly important for the community to point to a successful demonstration project when encouraging developers to use TDR. To facilitate this, the community may need to help the demonstration project get under way, perhaps by paying development fees or off-site costs to demonstrate that a market exists for higher-density development. If the demonstration project is not financially viable once in operation, however, other developers may view it as proof that higher-density projects cannot succeed in the community. Once developers become convinced and start buying TDRs, demand for development rights could outstrip supply. If this occurs, the community may need to direct its marketing efforts toward sending site owners. This can be done by sending letters to and arranging meetings with the owners of the sending properties in which the community has the greatest interest. And, once a demand for development rights emerges, real estate professionals will contact potential sending site owners to convince them of the benefits of selling their development rights. In addition, staff can maintain a list of sending area landowners interested in selling TDRs and receiving area developers interested in buying TDRs. By keeping this list on a public website, staff can facilitate TDR transactions with minimal effort.

Facilitation Sending site owners may shy away from selling TDRs if they believe the sale will involve legal research, the drafting of legal documents, and expensive fees. TDR programs can address some of this apprehension by creating model documents, such as agricultural easement forms; of course, some sending site owners will hire attorneys regardless of the availability of these forms. In addition to forms, the community should de-

Chapter 12: TDR Program Administration

velop a step-by-step handbook to guide prospective buyers and sellers through the process. This handbook should include blank forms and samples showing how to complete, plus explanations of where potential buyers and sellers can find the information required on the forms.

Use of TDRs in Receiving Areas A community has two options for how to administer TDRs in receiving areas. In a quasi-judicial (or discretionary) process, the community’s planning commission and governing body hold noticed public hearings on proposed receiving site projects. Following public testimony on a rezoning, a planned unit development, or a conditional use permit, these decision makers either deny the proposed project, approve it, or approve it subject to conditions. This approach enables the community to scrutinize individual projects for site-specific compatibility issues and provide input. Decision makers may tailor conditions to the specific project, making it more acceptable to surrounding property owners. Soliciting public input and response takes time, however, making approval schedules unpredictable for developers. Also, because it can attach conditions to a project, a discretionary process may lead to unexpected mitigation. The developer may not have considered these extra costs when doing an initial financial assessment of the project. Finally, there is no guarantee that the project will be approved at all. In other words, the developer could invest substantial time and money in a project only to see it disapproved. With the preferred ministerial (or administrative) process, the receiving area is rezoned for dual development standards: one set of standards applies to projects that do not incorporate the extra density provided by TDR, while the second set applies to projects that use TDR to

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achieve higher density. In our experience, programs with administrative approval of receiving site projects using TDR tend to have higher transfer activity. Often, a ministerial process can include requirements that may seem burdensome. This is because in delegating authority to an administrator, the governing body is often conservative in constraining discretionary decisions. On the other hand, at least the developers will know the rules before starting on the project. The rules essentially provide a road map for developers who want projects approved in a reasonable amount of time and with additional costs estimated at the start of project development.

Exemption from Quotas Some communities limit the number of homes or the amount of commercial/industrial space that can be built each year. Although not appropriate for all communities, quotas can become an effective incentive for receiving site developers to use TDR. For example, some programs use the purchase of TDRs as a criterion when deciding which projects will proceed in a given year. Morgan Hill, California, uses a point system to determine which projects are allowed to go forward and which must wait when the quota is reached; projects incorporating TDR receive extra points and have a greater chance of being approved. In other programs, an unused development right exempts a project from the quota system. Developers in Pitkin County/Aspen, Colorado, can transfer TDRs from the “Rural Remote” zone to the Aspen metro area to gain a development permit and/or an increase in floor area within an individual dwelling unit under the county’s quota system. This program has produced some of the most expensive TDRs in the nation, partly because the county’s permit quota

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systems allow as few as twenty-four units per year in a ski resort community with tremendous demand for additional growth. Similarly, San Luis Obispo County, California, allows the transfer of unused sewer and water connection rights created by its Cambria TDR program (see the case studies in chapter 17). Finally, some communities want to eliminate inappropriate existing development. As an incentive for property owners to remove dwelling units in stream environment zones, the Tahoe Regional Planning Agency and the City of South Lake Tahoe, California, make the development rights created by these demolitions exempt from their quota system (see the case study in chapter 16). Similarly, Santa Barbara, California, encourages larger, obsolete structures to be replaced by new, smaller buildings. To compensate for the reduced building size, Santa Barbara allows the difference in floor area to be transferred; this transferred floor area is exempt from the city’s growth limits. A quota system can work against a TDR program if projects using TDRs are not exempt from the quotas or not given priority within the permit limitation system. The quota can limit development in general and demand for transferred density in particular. When Williston, Vermont, imposed an annual quota on building permits, the town gave no preference in the quota system for projects using TDRs. Because few units can be put on the market, these homes tend to be on large lots in the sending areas rather than the more expensive land served by sewerage in the receiving areas.

Managing Development Rights Transfers After development rights have been transferred, they need to be managed. Here are the key issues to consider.

Ensuring Preservation of the Sending Area Site When development rights are severed, the sending site can be preserved from development either through public ownership or through a deed restriction. Public ownership involves a public entity receiving the conservation or preservation easement on the sending area site. If the sending site will be used for a park or other public facility, for example, the sending site may be dedicated to the local government. Some communities prefer to own fee title to the sending site when environmental protection is the primary goal; Collier County, Florida, strongly encourages sending area site owners to donate environmentally sensitive sending sites to the county (see the case study in chapter 16). While it may seem natural for the local government to receive title to the easement, preference is often given to a third party approved by the Internal Revenue Service to operate a conservancy. Possession of the easement requires the grantee to manage it, which can include ensuring the grantor upholds conditions and covenants contained in the easement. Local government may be ill equipped to manage a wetland easement, for instance, while a third-party, nonprofit, and IRS-approved entity may have more interest in managing the easement. In addition, as times change, the local government may eventually want to change the underlying planning and zoning regulations affecting the site, perhaps allowing development in the future. As the easement holder, the local government can agree to changes in the conditions of the easement allowing for development, where a third party may be less inclined to agree to changes. With deed restrictions, the landowner and at least one other party agree to preserve the sending site using an agricultural easement, preservation easement, conservation easement, deed restrictions, or covenants. Whatever their name,

Chapter 12: TDR Program Administration

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THE LOCAL ANGLE The first TDR transfer in Hillsborough Township, New Jersey, involved the transfer of thirty development rights from a farm; the sending area site was then deeded to the township. Still, it is not always appropriate for the community to accept fee title. For example: • Many sending sites can still be put to productive uses other than development, such as farming, grazing, forestry, or private game farms. Typically, municipalities are not equipped to manage these activities. • Municipal ownership means maintaining the sending sites at public expense. • A municipality’s commitment to preservation could change from one election to the next. Consequently, preservationists may be apprehensive about municipal ownership unless a nonprofit organization is a party to an easement that permanently preserves the sending site. • Fee-simple ownership is typically more expensive to acquire than an easement. If the community needs only an easement, there is generally little reason to incur the added expense of acquiring fee-title ownership.

documents prevent incompatible use of the sending site and prevent any changes to the contract without the approval of all parties to the agreement. Typically, the deed restriction prohibits all development of the sending site, with the exception of specific uses consistent with the community’s goals. For sensitive environmental land, permitted uses might be limited to passive activities such as hiking trails, nature study, and outdoor recreation. A farmland preservation deed restriction typically allows agricultural activities, housing for agricultural workers, and limited sales of agricultural products. Historic preservation easements may allow any use consistent with zoning, provided the owner does not alter or demolish the structure. In many programs, a sending site must retain the right to have one dwelling unit built on it; the implementing ordinances should clarify this requirement to give guidance to program administrators. The preservation of the sending site can simply be secured by a recorded agreement between the property owner and the municipality. In many communities, preservationists are concerned that the government’s commitment to preservation could change from one election to the next. Consequently, most programs call for a

nonprofit organization—such as a conservancy, land trust, or another group devoted to preservation—to be a party to the agreement.

Regulations Affecting TDR Purchases and Transfers To streamline program administration, the local government should include the procedures relating to TDR purchases and transactions in its implementing ordinance. One option is for the local government to require common ownership of sending and receiving sites, as is the case in Lower Chanceford Township and Hopewell Township in York County, Pennsylvania. There, sending site owners can transfer TDRs only to themselves, and receiving site owners can obtain TDRs only from themselves. Consequently, this requirement severely restricts transfer options and effectively prevents TDR from being a marketable commodity. More commonly, communities allow transfers between owners but require the simultaneous creation of the rights at the sending site and the redemption of those rights in a receiving site building project. Specifically, these communities require the deed restrictions on the sending

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site to be recorded simultaneously with the approval of the receiving site development that needs those rights for bonus density. This approach minimizes the need for documentation; specifically, the community does not have to create a mechanism for keeping track of TDRs that have been severed from a sending site but not yet used. In addition, the TDR’s property value is always attached to a property—either the sending or the receiving site. Conversely, this approach has several disadvantages: • The number of potential TDR buyers is limited to developers of receiving site projects. • Potential buyers of TDRs must find sending site owners who are not only willing to sell development rights but also willing to sell at the same time the buyer needs those rights. • These limitations on potential buyers and transaction timing could unpredictably reduce or inflate the price of the TDRs depending on the circumstances at the time the transaction needs to occur. • With all this uncertainty, developers may be inclined to forgo TDR and continue to build more predictable, lower-density projects.

The Transaction Process To simplify transactions and record keeping, some programs require simultaneous recording of the deed restrictions on the sending site and approval of the receiving site development. The market for TDRs can be greatly expanded, however, if TDRs are treated as a commodity to be bought by anyone, held for investment, resold, and eventually redeemed at a receiving site. Even with this amount of flexibility, transactions can be documented using a system similar to the

one described below, which was derived from the process used by the New Jersey Pinelands program (see the case study in chapter 15). The process consists of seven steps: 1. Determine TDR allocations. Sending site owners can request that the community determine the number of TDRs that can be transferred from the sending site, also known as TDR allocations. Receiving the calculation does not mean that the owner has committed in any way to deed-restricting the sending site. The owner can then use the calculations to compare the relative merits of selling TDRs versus selling the sending site itself for development. 2. Conduct a title search. An owner must have clear title to the sending site to place an easement on the property. A title search should be required to ensure that the title is marketable. 3. Submit a draft deed restriction. Sending site owners submit draft deed restrictions to the community’s legal staff, who then ensure that the allowed uses are consistent with the program requirements and that the parties to the contract are acceptable to the community. To facilitate this process, the community can offer model deed restrictions that landowners can complete without an attorney’s assistance. 4. Record the deed restriction. After checking the information in the draft, the community executes and records the actual deed restriction. 5. Issue a TDR certificate. When the deed restriction is recorded, the community issues a TDR certificate to the sending site owner. 6. Transfer the TDR certificate. When the TDR certificate is sold, the buyer completes the information on the back of the certificate and sends it to the municipality. The municipality issues a new certificate bearing the new owner’s name. The certificates can be bought and sold indefinitely using this procedure. 7. Redeem the TDR certificate. Eventually, the TDRs will be used to provide extra density to a development at a receiving site. When the

Chapter 12: TDR Program Administration

community approves the project, the developer completes the back of the certificate and sends it to the municipality. The municipality notifies the developer that the receiving site project can proceed with the bonus density permitted by the redeemed TDR. Some states dictate certain steps that municipalities must follow in their TDR transaction

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process. For example, Vermont stipulates the nature of the conservation easement that must be placed on sending sites, as well as four other procedural requirements. When finalizing a transaction process, communities should ensure they comply with their respective state requirements.

part iv

Chapter 13

Programs by Purpose

By reviewing planning publications, state enabling statutes, and previous research on TDR programs—including a survey sent to 3,500 communities throughout the United States—we identified 239 communities with TDR programs. Although thorough, the research undoubtedly did not uncover all existing TDR programs. Nevertheless, an analysis of the 239 TDR programs by major category, or main purpose, shows an impressive variation of TDR applications. These programs are summarized below. (Because a TDR program may have multiple purposes—or, occasionally, an unclear purpose—in some instances we have assigned a program to a specific category based solely on our best judgment.) Table 13.1 shows the TDR program purpose ranked by the number of communities with each kind of TDR program, while table 13.2 lists communities engaged in specific TDR function.

Environmental and Sensitive Landscape Preservation In the following dual-purpose environmental categories, one TDR program has multiple goals.

Environmental Areas Of the 239 TDR programs studied in this book, nearly two-thirds (152) have environmental protection as their primary goal. In many cases, the program appears designed to meet a specific environmental objective as well as a broader goal of environmental protection. But in fifteen communities, the program seems designed to meet the more general purpose of environmental protection. For example, Everett, Washington, uses TDR to preserve land designated as an “Environmentally Sensitive Area.”

Environmental Areas/Farmland Seventy-six communities use TDR for the multiple purposes of preserving environmental areas and protecting farmland. King County, Washington, and the New Jersey Pinelands have registered the greatest success in this category (see the case studies in chapter 15). The Pinelands program allows transfers among sixty municipalities to preserve both valuable agricultural areas (which specialize in cranberries and blueberries) and a unique ecosystem of forests and swamps (which house 850 species of plants and 350 species of birds, reptiles, mammals, and amphibians).

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table 13.1

table 13.2

Program Purpose Ranked by Number of Communities with TDR Programs

Review of TDR Programs by Function

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

Category

Count

Environmental/Farmland Farmland Environmental Historic Environment: Hillsides Environment: Groundwater Environmental/Rural Environment: Coastal Rural/Farmland Environment: Wetlands Revitalized Downtowns Environmental/Open Space Infrastructure Capacity Environment: Water Quality Historic: Preservation and Rehab Rural Character Urban Design Environment: Wildlife Habitat Environmental/Infrastructure Environment: Scenic Flexibility Historic/Cultural Open Space Rural/Infrastructure Environmental/Historic Environmental/Revitalized Downtown Environment: Minerals Environment: Modern Subdivisions Housing Landfill Buffer Recreation Redeveloped Areas Total

76 39 15 14 11 10 7 7 7 6 6 5 5 4 4 4 4 3 2 2 2 2 2 2 1 1 1 1 1 1 1 1 247

Note: Total number of programs is higher due to jurisdictions with multiple programs.

Historic Landmarks In Charlotte County, Florida, sending areas can be land with historic or archeological resources as well as environmental resources.

Infrastructure The Malibu Coastal Zone of California contains about five thousand undeveloped, substandard lots in antiquated subdivisions. A TDR program

Function Environmental

Environmental/ Farmland

Jurisdiction Crystal River, FL Collier County, FL Highlands County, FL Largo, FL Brunswick, ME Plymouth, MA Bernards Township, NJ Bluffton, SC Greenville County, SC San Marcos, TX Williston, VT Everett, WA Portland, OR* Pima County, AZ San Bernardino County, CA Summit Township, WI Waukesha County, WI Berthoud, CO Fruita, CO Gunnison County, CO Larimer County, CO Larimer County and the city of Fort Collins, CO Mesa County, CO Hillsborough County, FL Marion County, FL Palm Beach County, FL Polk County, FL Blaine County, ID Fremont County, ID Payette County, ID Cape Elizabeth, ME New Gloucester, ME Scarborough Town, Cumberland County, ME Cecil County, MD Queen Anne’s County, MD Talbot County, MD Carver, MA Easthampton, MA Groton, MA Hatfield, MA Sunderland Township, MA Townsend Township, MA Westfield, MA Blue Earth County, MN Douglas County, NV Lee Township, NH Hillsborough Township, NJ New Jersey Pinelands, NJ Eden, NY Lysander, NY Pittsford, NY Chanceford Township, PA Hellan Township, York County, PA Lower Chanceford Township, PA

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Function

table 13.2

table 13.2

Continued

Continued

Jurisdiction Middle Smithfield Township, Monroe County, PA Mount Joy Township, Adams County, PA Pocopson, PA South Middleton Twp., Cumberland Co., PA Springfield Township, PA West Vincent Twp., Chester Co., PA Thompson Station, TN American Fork, UT Tooele, UT Blacksburg, VA Jericho Township, VT South Burlington, VT Arlington, WA Clallum County, WA Bainbridge Island, WA Bellevue, WA Black Diamond, WA King County, WA Kittitas County, WA Pierce County, WA Puget Sound Region, WA Redmond, WA Dane County, WI Dekorra Town, Columbia County, WI Mequon, WI Mount Joy Township, Lancaster County, PA West Lampeter, PA Chestnuthill, PA East Vincent, PA Hereford, PA West Bradford Twp, Chester County, PA West Hempfield Twp. Lancaster County, PA West Pikeland, PA Dover, NH Clifton Park, NY North Kingstown, RI

Environmental/ Historic Environmental/ Infrastructure Environmental/ Open Space

Environmental/ Revitalized Downtown Environmental/ Rural

Charlotte County, FL Malibu Coastal Program, CA Summit County, CO La Quinta, CA Douglas County, CO Avon, CT Westborough, MA Teton County, WY

Sunny Isles Beach, FL Crested Butte, CO Alachua County, FL Raynham, MA Summit County, UT

Function

Environment: Coastal

Environment: Groundwater

Environment: Hillsides

Environment: Minerals Environment: Modern Subdivisions Environment: Scenic Environment: Water Quality

Environment: Wetlands

Environment: Wildlife Habitat Farmland

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Jurisdiction Weber County, UT Island County, WA* Sussex County, DE Oxnard, CA Brevard County, FL Clearwater, FL Fort Lauderdale, FL Hollywood, FL St. Petersburg, FL Clatsop County, OR Hebron, CT New Jersey Highlands, NJ Central Pine Barrens, NY Long Island Pine Barrens, NY Southampton Township, NY Deschutes County, OR Austin, TX Bellingham, WA Kitsap County, WA Whatcom County, WA Agoura Hills, CA Belmont, CA Brisbane, CA Claremont, CA Milpitas, CA Moraga, CA Morgan Hill, CA Pacifica, CA Pismo Beach, CA Mapleton, UT Scottsdale, AZ* Carroll County, MD

Sarasota County, FL Monterey County, CA Santa Fe County, NM South Lake Tahoe, CA Tahoe Regional Planning Agency, CA Lake County, FL Falmouth, MA Dade County, FL Indian River County, FL Lee County, FL Monroe County, FL Smithtown, NY West Valley City, UT San Luis Obispo County, CA* Marathon, FL Issaquah, WA Island County, WA City of Livermore, CA Marin County, CA San Mateo County, CA Kent County, DE

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Function

table 13.2

table 13.2

Continued

Continued

Jurisdiction

New Castle County, DE City of Chattahoochee Hill Country, GA Winchester/Clark County, KY Calvert County, MD Caroline County, MD Charles County, MD Harford County, MD Howard County, MD Montgomery County, MD St. Mary’s County, MD Town of Hadley, MA Town of Plymouth, MA Rice County, MN Chisago County, MN Churchill County, NV Chesterfield Township, NJ Buckingham Township, PA East Nantmeal Township, PA Hopewell Township, PA Honey Brook Twp., Chester Co., PA London Grove Township, PA Manheim Township, PA Peach Bottom Township, PA Shrewsbury Township, PA Warrington Township, PA Warwick Township, PA Washington Township, PA Snohomish County, WA Thurston County, WA Cottage Grove Twp., Dane Co., WI Troy, St Croix County, WI Brentwood, CA St. Lucie County, FL Riverhead, NY East Hopewell, PA Flexibility Oakland, CA Windsor, CT Historic New York City, NY* Delray Beach, FL West Palm Beach, FL Atlanta, GA New Orleans, LA Nashville, TN Vancouver, WA Scottsdale, AZ* Palo Alto, CA San Diego, CA San Francisco, CA Aspen, CO Minneapolis, MN Historic/Cultural Pittsburgh, PA New York City, NY* Historic: Preserva- West Hollywood, CA tion and Rehab Denver, CO Dallas, TX Los Angeles, CA*

Function Housing Infrastructure Capacity

Landfill Buffer Open Space Recreation Redeveloped Areas Revitalized Downtowns

Rural Character

Rural/Farmland

Rural/ Infrastructure Urban Design

Jurisdiction Irvine, CA* Irvine, CA* Burbank, CA Cupertino, CA El Segundo, CA Gorham, ME Northbrook, IL Northampton, MA Perinton, NY West Windsor, NJ Traverse City, MI Portland, OR* Los Angeles, CA* Washington, D.C., DC Ketchum, ID Cambridge, MA Seattle, WA Boulder County, CO Pitkin County/Aspen, CO Waseca County, MN Warwick, NY East Nottingham, PA Montezuma County, CO San Luis Obispo County, CA* Gallatin County, MT Lumberton Township, NJ Birmingham Township, PA Los Rancheros de Albuquerque, NM Goshen, NY Huntington, Suffolk County, NY Los Angeles, CA* Pasadena, CA Santa Barbara, CA Bay Harbor Island, FL

*Indicates a community with more than one TDR program.

is being used to preserve environmentally sensitive areas and reduce the number of residences threatened by environmental hazards, such as wildfires and landslides. In addition, the TDR program addresses infrastructure capacity problems; for example, the rugged topography of the Santa Monica Mountains does not easily lend itself to new roadways or the expansion of existing roadways. Summit County, Colorado, also uses TDR both to preserve natural areas and to channel development to places where it can be served

Chapter 13: Programs by Purpose

by infrastructure (see the case study in chapter 16).

Open Space In Douglas County, Colorado, just south of Denver, potential sending sites are areas designated as open space. Protecting these openspace areas also would preserve wildlife habitat, promote water conservation, and safeguard scenic areas, such as the red-rock formations of what is now Roxborough State Park. Northampton, Massachusetts, uses TDR to preserve the open space surrounding the site of a former state mental institution. In Perinton, New York, TDR helps implement the Open Space Preservation ordinance designed to preserve natural features, prevent soil erosion, and create open-space/recreational areas. In the following specific-purpose categories, the TDR program is intended to save environmental resources in general but also to preserve a specific environmental resource in particular.

Coastal Areas Seven communities use TDR to preserve environmental resources in general and coastal areas in particular. For example, Brevard County, Florida, uses TDR to encourage the preservation of coastal areas and to compensate the owners of coastal land that was rezoned from thirty units per acre to one unit per acre. Clatsop County, Oregon, uses TDR to allow the transfer of development potential between properties in the Clatsop Plain, a coastal region of the county. The portion of the sending parcel to be preserved must be rezoned to the Open Space Parks and Recreation zone, the Natural Uplands zone, the Conservation Shorelands zone, or the Natural Shorelands zone.

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Groundwater Through TDR, ten programs protect environmental resources in general and groundwater supplies in particular. Southampton, in Suffolk County, New York, and New York State’s Central Pine Barrens both have programs that focus special attention on preserving the groundwater aquifer that provides drinking water for much of Long Island. Austin, Texas, adopted watershed ordinances that allow the transfer of impermeable surface area within different zones. Bellingham and Whatcom County, in Washington, use TDR to protect the watershed of Lake Whatcom; located partly within the city and partly within the county, the lake provides drinking water to both areas. Bellingham allows developers bonus development through at least three variations.

Hillsides Eleven communities use TDR in conjunction with zoning ordinances that restrict hillside development for several environmental reasons. These reasons include providing recreational opportunities, protecting open space, preserving scenic views, reducing infrastructure needs in difficult topography, preserving habitat and sensitive environmental areas, and avoiding development hazards in areas subject to wildfires, floods, and landslides. For example, Morgan Hill, California, uses TDR to protect El Toro Mountain, a symbol of the city.

Mineral Resources Carroll County, Maryland, uses TDR to protect underground stone deposits. The community wants to promote the long-term viability of the building materials industry, a key factor in the local economy.

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Antiquated Subdivisions

Wildlife Habitat

In Sarasota County, Florida, TDR helps preserve sensitive environmental areas and discourages the development of antiquated subdivisions with small, substandard lots.

San Luis Obispo County’s successful TDR program encourages the preservation of steep, substandard lots in an effort to protect one of the remaining habitats of the Monterey Pine. Marathon, Florida—a center of sport fishing, with reefs popular among snorkelers and scuba divers—preserves wildlife habitat through TDR. The city contains some well-preserved natural areas and supports a wide variety of bird species, including the burrowing owl (see the case study in chapter 17).

Scenic Two programs use TDR to protect scenic resources. In Monterey County, California, TDR mitigates the financial impacts of development restrictions on portions of the Big Sur coastline visible from Highway 1. The TDR program in Santa Fe County, New Mexico, encourages property owners to preserve environmental and scenic areas close to two highways.

Water Quality The Tahoe Regional Planning Agency, representing both California and Nevada, has a TDR program that preserves surface-water quality through four different transfer techniques. The goal: to preserve the water quality and clarity of Lake Tahoe, a primary reason for the region’s popularity (see the case study in chapter 16).

Wetlands Six communities, including Dade County, Florida, protect environmental resources in general and wetlands in particular. Dade County’s East Everglades Ordinance is designed to protect 242 square miles of wetlands to recharge the groundwater aquifer, provide surface water to Everglades National Park, create flood storage capacity, maintain water quality, and protect environmental resources that include thirty endangered or threatened species.

Farmland Preservation As shown in table 13.1, seventy-six TDR programs have a joint Environmental/Farmland purpose, seven have a joint Rural/Farmland purpose, and thirty-nine are devoted exclusively to Farmland preservation. Consequently, following the broad category of environmental programs, farmland preservation represents the secondlargest category of TDR programs. Montgomery County, Maryland, boasts the most successful farmland TDR program. The county rezoned ninety-two thousand acres of its Agricultural Reserve to a Rural Density Transfer Zone, which allows on-site development of one unit per twenty-five acres and permits transfers of one development right per five acres. As of 2009, Montgomery County had saved more than fifty-two thousand acres of farmland using TDR alone (see the case study in chapter 14).

Historic Preservation Behind environmental protection and farmland preservation, historic preservation represents the third-largest category of programs. Specifically, 28 TDR programs in the United States have the overarching purpose of historic preservation. Of

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MAINTAINING FLEXIBILITY Most TDR programs provide flexibility. For example, farmland TDR programs typically give farmers the option of transferring development rights rather than building on agricultural lands. Likewise, infrastructure programs—including those in Cupertino, California, and Burbank, California—allow for concentrations of development while maintaining an overall development limit to ensure that future growth does not overwhelm the capacity of public service systems. In the case of two TDR programs, categorization proved difficult either because the ordinance did not specify the need for flexibility or because the program uses flexibility for numerous reasons. In Oakland, California, transfers can occur between adjacent, high-density residential lots simply to give property owners flexibility in complying with development restrictions. Likewise, in Windsor, Connecticut, TDR is used to achieve flexibility in locating development closer to public services and to preserve historic, environmental, aesthetic, agricultural, or recreational resources.

those, half (14) are devoted exclusively to historic preservation, allowing transfers in return for the preservation of historic landmarks. Seven other historic preservation programs emphasize downtown revitalization. New York City, for example, uses TDR to save individual landmarks as well as the entire South Street Seaport Historic District. Similarly, San Francisco created a TDR program to facilitate successful preservation of 253 historic landmarks (see the case studies in chapter 18).

Historic Landmarks/Cultural Resources Two communities have programs with a joint historic/cultural purpose. Pittsburgh, Pennsylvania’s TDR ordinance aims to save historic structures and promote the creation of performing arts facilities. Under an ordinance adopted in 2000, New York City uses TDR to promote the restoration and maintenance of live-performance theaters on Broadway.

Restored Landmarks In four other communities, the landmark can be rehabilitated as well as preserved to qualify for TDR. For example, property owners who rehabilitate historic landmarks in Denver, Colorado,

can transfer four square feet of floor area for each square foot of floor area in the rehabilitated landmark (see the case study in chapter 18).

Housing Some communities use one TDR program to achieve multiple objectives, including providing or retaining housing. Seattle created one TDR system for its downtown to retain varied building scale, encourage low-scale infill development, and preserve or restore historic landmarks, as well as retain low-income housing. Similarly, Washington, DC, designed its Downtown Development District Overlay Zone to preserve historic structures and promote centers for the performing arts, the visual arts, and shopping, as well as to retain and expand housing opportunities. The TDR program for downtown Los Angeles also allows transfers that facilitate numerous public benefits, including open-space protection, historic preservation, public transportation, and public amenities, as well as the provision of housing. Finally, Portland’s Central City District uses TDR to provide open space and allow for flexibility in concentrating density as well as to promote the preservation of single-room-occupancy housing in the downtown. Only one community—Irvine, California— created a separate program specifically to address

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housing concerns. Under Irvine’s approach, TDR provided relief from a prohibition against all-office development in its downtown; developers were allowed to build housing on a sending site and transfer the unused office development rights to build an all-office development on a receiving site.

Rural Character Seven TDR programs have the dual purposes of environmental protection and preservation of rural character. For example, Florida’s Alachua County uses TDR to protect open space, agriculture, wildlife habitat, recreational areas, and sensitive environmental lands in general and, in particular, the rural character of Cross Creek— the area made famous by Marjorie Kinnan Rawlings, author of The Yearling and numerous short stories about life in rural Florida. In fact, the Alachua County Comprehensive Plan specifically recognizes that the character of Cross Creek is a combination of people and homes as well as natural resources. In addition, at least seven communities have TDR ordinances that explicitly state a dual purpose of rural/farmland preservation. (Many more imply this intent but for reasons of categorization are not included in this tally.) For example, Lumberton Township, New Jersey, allows transfers of development rights from its Rural Agriculture TDR Sending Area as long as receiving site projects comply with detailed development standards, including requirements for architectural style (see the case study in chapter 17). In 1989, Boulder County, Colorado, adopted its first TDR program to deed-restrict rural lands through a process known as Non-Contiguous, Non-Urban Planned Unit Development. Today, Boulder County and seven communities maintain intergovernmental agreements that allow the transfer of development rights from rural

county lands to nearby urban areas that are more appropriate for development (see the case study in chapter 17). The joint county-city government of Pitkin County/Aspen, Colorado, adopted a RuralRemote zone to prevent the spread of roads, utilities, wells, and septic systems into a rural area subject to wildfires, slope failure, and avalanches. As an alternative to developing the potential sending sites, Pitkin County/Aspen allows the owners to transfer development rights (see the case study in chapter 17).

Rural Character/Infrastructure Capacity Two TDR programs in New York preserve rural character while limiting the growing demand of the existing infrastructure. Huntington Township, in Suffolk County, uses TDR to address development limitations imposed by the policies of the Suffolk County Department of Health Services. Specifically, the health department will not approve the development of properties smaller than twenty thousand square feet that are located outside of sewer districts. The township adopted an ordinance for the transfer of density flow rights. As its stated goals, the ordinance aims to preserve natural open space while encouraging responsible economic development, to promote affordable/workforce housing, to reduce sprawl, to encourage smart growth, and to facilitate economic development (particularly the revitalization of infill and brownfield sites).

Urban Redevelopment/Urban Design TDRs lend themselves to urban redevelopment through density bonuses, which can make a redevelopment project financially feasible. The density bonuses associated with TDRs can also be used to encourage attractive urban design.

Chapter 13: Programs by Purpose

Infrastructure Capacity Five communities use TDR to allow flexibility in building concentrations while keeping overall growth within the capacity of the public infrastructure system, particularly the street system. For example, Cupertino restricts development within one planning area to ensure the functioning of its street system. Developers, however, can transfer development rights to achieve desirable density variations while still ensuring that future growth would not overwhelm the transportation network’s capacity.

Landfill Buffer Northbrook, Illinois, zoned a seven-hundredacre area for development even though an abandoned landfill releases methane gas and therefore makes a portion of the area unsuitable for many kinds of development. The city allows density transfers to encourage property owners to deed-restrict the land near the landfill for compatible uses.

Recreation Often, TDR programs designed to preserve environmentally sensitive areas, or open space, also provide outdoor recreation opportunities. At least one TDR program has recreation as its primary purpose: West Windsor, New Jersey, adopted a Recreation Preservation Development Credits code section. Designed to save a private golf course, the program allows the owner to transfer development rights from the golf course to a commercial receiving site.

Redeveloped Areas Some TDR programs in the historic preservation and downtown revitalization categories deal with

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areas that are part of redevelopment projects. One redevelopment-related TDR program does not fit the other categories. Traverse City/Garfield Township, Michigan, created a redevelopment project area for a state hospital complex built in 1885. TDR is used to implement the redevelopment plan for this project area by providing incentives to preserve or restore open space, farmland, historic buildings, and natural areas that include woodlands and wetlands.

Revitalized Downtowns Six cities use TDR to help implement a wide range of land use goals related to their downtown areas. Examples include the following: • In Los Angeles, transfers can occur between properties in the Central Business District Redevelopment Project Area to promote historic preservation and to provide open space, housing, cultural/community facilities, and public transportation. • Portland, Oregon, uses its several TDR programs to implement various goals for its Central City District. The goals include preserving and promoting single-roomoccupancy housing, providing open space, and allowing for flexibility in the concentration of density while maintaining the downtown’s overall development cap (see the case study in chapter 19). • Seattle uses TDR to achieve a wide range of goals in its 1985 downtown plan. The goals include the retention and creation of affordable housing, preservation of historic landmarks (particularly performing arts theaters), construction of compatible infill development, and creation of a variety of building scales (see the case study in chapter 19). • Washington, DC, provides density bonuses to projects that fulfill land use goals

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ranging from historic preservation to the provision of art facilities, retail shopping, preferred building design, entertainment venues, and housing. Because height limits in its downtown core often prevent the use of density bonus on-site, Washington allows the density to be transferred to receiving sites outside the core (see the case study in chapter 19).

Urban Design Los Angeles has a TDR program that allows transfers between contiguous properties; the goal is to create unified developments that are functionally linked, employ common architectural features, and appear as a consolidated

whole when viewed from the street. Pasadena, California, uses TDR to compensate the owners of property who experienced reductions in development potential as a result of its Downtown Urban Design Plan. Also in California, Santa Barbara recognized that owners of obsolete buildings had little incentive to construct smaller, code-compliant replacements. Consequently, the city adopted a Transfer of Existing Development Rights ordinance, which allows the difference between the floor areas of the old and new buildings to be transferred to a receiving site. The transferable floor area is not subject to Santa Barbara’s development quota system. For detailed tables of TDR programs organized by state, including brief descriptions of program goals, please see appendix C.

Chapter 14

Farmland Preservation Case Studies

Farmland preservation ranks among the most popular purposes of TDR programs. Of the many successful programs we reviewed, here are five that focus on preserving agricultural lands.

Montgomery Country, Maryland Montgomery County, which has a population of nearly 1 million (2010), lies immediately north of Washington, DC, and includes the employment centers of Bethesda, Silver Spring, and Rockville. Despite intense growth pressure, Montgomery County has managed to preserve 132,603 acres in farmland and parks, with TDR being responsible for almost 40 percent of that total. In 1969, Montgomery County adopted a general plan titled On Wedges and Corridors to concentrate most future development in a central growth corridor and preserve much of the remaining rural land—the so-called wedges. In 1974, to implement that plan, Montgomery County downzoned much of the undeveloped portion of the county to a maximum density of one unit per five acres. This action, however, only led to a spate of five-acre-lot subdivisions. In the next five years, Montgomery County lost almost twelve thousand acres of farmland to development, making farmers uncertain about the future of county agriculture.

In 1980, Montgomery County adopted its master plan titled Functional Master Plan for the Preservation of Agriculture and Rural Open Space in Montgomery County, which emphasized farmland preservation.1 The plan established an “agricultural reserve” with ninety-three thousand contiguous acres that include wooded areas, stream corridors, wildlife habitat, and parkland, as well as most of the best remaining farmland in the county. Most of the agricultural reserve was downzoned from a maximum density of one unit per five acres to one unit per twenty-five acres, based on an agricultural economist’s determination that at least twenty-five acres of land is needed to support a farm family in Montgomery County. The preservation plan also launched what was to become the most famous, most studied, and most emulated TDR program in the nation.2

Process In this program, the sending area is the agricultural reserve. Montgomery County wants landowners in the agricultural reserve to record easements that permanently restrict development to the density limit of one unit per twenty-five acres imposed by the rural density transfer (RDT) zoning adopted for the reserve. The owners of farm141

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land who choose to record such easements are granted transferable development rights at a ratio of one TDR per five acres of restricted land. In keeping with the plan’s goal of preserving the agricultural reserve as an integrated whole, all RDT properties in their entirety qualify for the same TDR allocation ratio regardless of their agricultural characteristics or suitability for development.3 When owners in the RDT zone choose to preserve their land, they must retain one TDR for each existing dwelling unit on the sending site. Owners can also choose to retain one TDR per twenty-five acres of land, thus maintaining the ability to develop their land at the maximum density allowed by the RDT zone: one dwelling unit per twenty-five acres. These fifth TDRs are sometimes called “super TDRs” because they can actually be used to achieve the maximum allowed on-site density. In fact, many participating property owners have retained these super TDRs, which are estimated to have ten to twenty times the value of the other TDRs. If the county wants the program to result in sending area densities lower than one unit per twenty-five acres, it may have to adopt a mechanism for motivating landowners to sell these super TDRs (Walls and McConnell 2007). Montgomery County places the receiving areas outside the agricultural reserve in areas designated as appropriate to receive transferred residential density because they are planned for urban uses and served by public infrastructure. Several zoning districts include a baseline density, which developers can achieve with no TDR requirement, plus a maximum allowable density that can be reached only by using TDRs. The program allows one single-family residential unit per TDR or two multiple-family residential units per TDR. The amount of land preserved by TDR demonstrates that Montgomery County created a sufficient number of receiving areas to create a successful program. But, according to some ob-

servers, the program has been constrained because a collaboration of developers, planners, and the general public decides the formation of receiving areas and the amount of TDR-related development allowed in these receiving areas during the master planning process conducted in each planning area. As a result, some planning areas have accommodated few or no TDRs. In fact, only 6 percent of the subdivisions built in Montgomery County between 1981 and 2004 were in TDR zones (Walls and McConnell 2007). When developers choose to exceed baseline in TDR zones, they must achieve density of at least two-thirds of the maximum density allowed by the TDR option. This requirement was intended to maximize utilization of TDRs. But, some observers believe, this provision prompts many developers to avoid the TDR option altogether. One study found that more than onethird of the subdivisions built between 1981 and 2004 did not use the TDR option even when it was available (Walls and McConnell 2007). Montgomery County established a Development Rights Fund in 1982 primarily to buy TDRs, bank them, and resell them at auction to the highest bidder. Without assistance from the fund, however, sending site owners found developers willing to buy their TDRs at prices established through private market transactions. Consequently, after the Development Rights Fund went unused for eight years, the county terminated it. To this day, independent real estate agents who specialize in TDR facilitate and broker the transactions. In fact, unlike most TDR programs, Montgomery County has not seen a need for a publicly maintained clearinghouse through which potential buyers and sellers can find one another. In addition to TDR, Montgomery County motivates farmland preservation through four easement acquisition programs and the Maryland Environmental Trust, which provides tax benefits to owners who donate conservation easements.

Chapter 14: Farmland Preservation Case Studies

Finally, Montgomery County recognizes the need to support farming as well as preserve farmland. Consequently, its Agricultural Services Division combines the coordination of all land preservation efforts with other programs that support the county’s agricultural industry, including buy-local campaigns, farmers’ markets, farm tours, and the promotion of farms that allow urbanites the opportunity to pick their own apples and pumpkins, chop their own Christmas trees, take hayrides, and wander in corn mazes. The division also assists the farming community with technical assistance, regulatory compliance issues, and advocacy. This effort has paid off, as demonstrated by Montgomery County’s vigorous agricultural sector: 577 farms and 350 horticultural businesses generate more than $251 million in revenue and 10,000 jobs for the local economy (Montgomery County 2010)

Performance Despite the occasional imperfections discussed above, Montgomery County remains one of the

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most successful TDR programs in the country. As of June 2009, the Montgomery County TDR program had protected 52,052 acres—the fourthlargest amount of acreage, behind King County, Washington; the New Jersey Pinelands; and Collier County, Florida. According to Montgomery County’s calculations, these TDRs represent $115 million worth of investment financed by the private sector rather than tax dollars.4

Lessons from Montgomery County Montgomery County continues to exemplify most features found in effective TDR programs, including the following: • The sending area clearly implements the county’s goal of preserving all rural resources within a holistic countryside. Meaningful zoning and a complete array of preservation tools, as well as TDR, reinforce the county’s goals for this sending area. This gives landowners greater certainty that farming will remain a viable

Figure 14.1. TDR has preserved over 52,000 acres of Montgomery County’s Agricultural Reserve. (Photo by Rick Pruetz.)

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•

•

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activity in the agricultural reserve and that farmers will not regret their decision to permanently preserve their land. Although Montgomery County may have missed some opportunities, it has nevertheless established enough optimum receiving areas and employed TDR zoning that developers want to use. The sending area zoning controls land speculation, creating an affordably priced TDR that can be more than offset by higher development profits. Compared with other large TDR programs, Montgomery County’s program is relatively simple and administratively streamlined. The program has encouraged real estate agents to broker TDR transactions, a decision that may partly explain why Montgomery County is highly successful despite the absence of a TDR bank.

Calvert County, Maryland Thirty-five miles southeast of Washington, DC, on a peninsula formed by the Patuxent River and Chesapeake Bay, lies Calvert County, Maryland. Its population numbers about ninety thousand (2010). In 1974, Calvert County adopted a comprehensive plan calling for the preservation of agricultural and forest lands. By July 2010, the County had preserved more than twenty-seven thousand acres using three programs sponsored by the State of Maryland, two local purchase of development rights programs, and a TDR program adopted in 1978. Calvert County has amended its TDR program many times. For example, the county did not initially downzone the sending area. Over time, however, the minimum lot size in the sending area increased from five acres to ten acres and eventually to twenty acres. Likewise, in receiving areas, Calvert County changed the baseline density and bonus development achiev-

able with TDR. By regularly monitoring transfer activity and making the necessary amendments, Calvert County has demonstrated how a TDR program can succeed even at relatively low densities.5

Process Roughly 80 percent of Calvert County is zoned either “Farm and Forest” (formerly called the Farm Community and Resource Preservation District) or “Rural Community.” Qualifying parcels within these districts can serve as either sending or receiving sites, depending on owner preferences. Consequently, when zoning code changes cut maximum density in half in 1999 and again in 2003, potential receiving areas were downzoned along with potential sending areas. Researchers have noted that these downzonings were intended to encourage the use of TDRs as well as reduce alarming growth rates occurring at the time (Walls and McConnell 2007). Both the Farm and Forest and the Rural Community districts now allow on-site development at a density of one dwelling per twenty acres. Owners of land in these districts may apply for designation as Agricultural Preservation Districts if their land meets various criteria, such as parcel size, productivity potential, and soil quality. Agricultural Preservation Districts involve five-year agreements in which the owner pledges to continue farming in return for exemption from county property taxes. Status as an Agricultural Preservation District also allows parcels to become TDR sending sites. Specifically, one TDR is allocated per acre of land placed under easement in Agricultural Preservation Districts. At receiving sites, however, five TDRs are needed per bonus dwelling unit. Consequently, the transfer ratio is five to one. The owners of land enrolled in Agricultural Preservation Districts may withdraw their land

Chapter 14: Farmland Preservation Case Studies

after five years if development rights have not been transferred from the land during that time. If they choose to permanently preserve their properties, owners can record an easement that converts the parcel into a sending site eligible for TDRs. The easement does not become effective until at least one TDR is transferred from the site. Thereafter, the easement applies to the entire site in perpetuity, restricting on-site development to no more than one unit per 25 acres, with no more than three additional lots possible regardless of the size of the sending site parcel. For example, a TDR easement would limit the effective maximum density of a 160-acre sending site to one unit per 40 acres (total site size divided by one original lot plus three future lots) . When the owners of qualified properties in these two districts elect to become receiving sites, maximum density can increase from one unit per twenty acres to one unit per ten acres in the Farm and Forest District and one unit per four acres in the Rural Community District. Furthermore, receiving sites in the Rural Community District can achieve a maximum density of one unit per acre if they are within one mile of a town center. The use of TDRs at Calvert County receiving sites is a matter of right; the approval of TDRs does not rest on a public hearing followed by a discretionary decision. Qualifying parcels in a third zoning district, the Residential District, can also serve as receiving sites. The Residential District has a baseline density of one unit per four acres and a maximum density of one unit per two acres. Qualifying sites within one mile of a town center can achieve a maximum of four units per acre. In addition, specific TDR provisions apply within certain town centers. For example, in Prince Frederick, baseline is one unit per acre and maximum density via TDR is four units per acre. In St. Leonard, TDR can be used to double the baseline density in some single-family residential districts. And in some zoning districts in Lusby, TDR can be used to increase density

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from a baseline of one unit per acre to a maximum of nine units per acre. In 1993, Calvert County supplemented TDR with a Purchase and Retire (PAR) agricultural preservation program that buys and permanently retires TDRs. It also added a Leverage and Retire (LAR) program that distributes payments for TDRs over a specified contract period to create favorable conditions for the tax and retirement planning of participating property owners. Every year, the county announces the price at which the PAR and LAR programs will buy TDRs. This has facilitated transactions under the original TDR program by stabilizing TDR prices and setting benchmarks for private market transactions. Calvert County does not have a TDR bank, and real estate brokers have not tended to facilitate transactions. Buyers and sellers find out about one another through a newsletter and program information maintained by the county’s department of planning and zoning (Walls and McConnell 2007).

Performance As reported by officials in Calvert County, the county preserved 13,896 acres as of July 2010 using TDR. Although TDR prices averaged $2,500 in the 1990s, they rose to an average of about $7,000 in 2006 (Walls and McConnell 2007). Because one bonus dwelling unit requires five TDRs, TDR costs averaged roughly $35,000 per bonus dwelling unit in 2006. The TDR program has primarily saved land in the Farm and Forest District—the county’s highest priority for preservation—even though sending areas can be created in the Rural Community District as well. Likewise, most receiving areas have occurred in the Rural Community District, even though the Farm and Forest District also allows receiving areas. Since the downzonings of 1999 and 2003, TDR has become

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Figure 14.2. Most of Calvert County’s land area can become a TDR sending or receiving site. (Photo by Rick Pruetz)

increasingly popular in the Residential and Town Center districts (Walls and McConnell 2007).

• Calvert County demonstrates that developers will buy TDRs to exceed low baseline densities, even if the TDRs produce a relatively low-density receiving site development. • The range of potential receiving areas may allow the program to maintain demand over time, permitting a trend toward greater use of the higher-density zones as receiving areas (Walls and McConnell 2007). • In addition to restrictive zoning, sending area landowners are positively motivated to participate by a reported preference to remain in agriculture—particularly when TDR allows owners to liquidate development potential without having to risk the cost, effort, time, and uncertainty of the development process. • The county has developed transfer ratios that result in TDR prices attractive to sending area landowners and receiving area developers. • Use of TDRs in receiving site projects does not require public hearings or discretionary decisions, thereby giving developers certainty of their ability to use the TDR option. • Although the program has no TDR bank, the PAR and LAR programs facilitate TDR transactions by promoting TDR price stability.

Lessons from Calvert County Calvert County proves that TDR programs can succeed even at relatively low densities. Most transactions in this program have involved receiving areas in the Rural Community zoning district, where density is allowed to increase from one unit per twenty acres to one unit per four acres when developers submit five TDRs for each bonus unit (representing five acres of land placed under permanent preservation easement).

Rice County, Minnesota Rice County, with about sixty-five thousand residents (2010), lies thirty miles south of Minneapolis. The county contains seven cities and fourteen townships, with three dozen lakes dotting its western half. Despite Rice County’s proximity to the Twin Cities and growth pressure, agriculture continues to play an important role in the local economy.

Chapter 14: Farmland Preservation Case Studies

County officials, concerned about the steadily decreasing distinction between urban and rural areas, adopted ordinances to launch a TDR program in 2004. The voluntary, incentivebased program primarily intends to protect farmland and to concentrate development in areas where public utilities and services are available. Transfers are also allowed to protect areas with steep slopes and wetlands in areas surrounding the county’s numerous lakes.6

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per development right forgone. The minimum lot size is 20,000 square feet in the General Development Shoreland District (or 40,000 square feet for riparian land), 40,000 square feet in the Recreational Development Shoreland District, and 80,000 square feet in the Natural Environment Shoreland District. In all three Shoreland districts, the number of TDRs available for transfer equals the number of development rights forgone based on zoning. Sending areas can only be created in the Shoreland districts on land with either of the following characteristics:

Process The sending sites are located in the Agricultural District, the Urban Reserve District, or any of the three Shoreland zoning districts: General Development Shoreland (the designation placed on six lakes), Recreational Development Shoreland (the designation for nine lakes), and Natural Environment Shoreland (the designation placed on twenty lakes). In the Agricultural District, maximum on-site density is limited to one unit per forty acres and the transfer ratio is generally one to one: one TDR for each development right forgone. The following exceptions also apply: • Undeveloped parcels can transfer one development right regardless of parcel size. • Undeveloped lots in existence upon adoption of the TDR Ordinance that are at least ten acres in size may receive 0.5 TDR as long as some development potential remains within the quarter-quarter section— or, forty acres—containing the parcel.7 • When two undeveloped parcels, each more than one acre in size, are located in a quarter-quarter section that qualifies for two development rights, each parcel can receive one TDR. In the Urban Reserve District, minimum lot size is thirty-five acres. One TDR can be created

• More than half of the site consists of steep slopes or wetlands. • The site cannot be accessed from existing public roads. Development rights may be transferred to receiving areas, provided these are located within the same township as the sending area; an exception applies when the sending and receiving areas are contiguous and in common ownership yet cross township boundaries. Transfers in this circumstance must be authorized by both Township Boards of Supervisors based on the following conditions: • TDRs from the Agricultural District can be used in receiving sites in the Agricultural District that are being developed as minor cluster or golf course cluster developments. TDR can allow a 25 percent increase in the baseline density of a minor cluster development and as much as a 100 percent density bonus for a golf course cluster. TDRs from sending sites in the Agricultural District can also be transferred to receiving sites zoned Agricultural or Village Mixed Use but being developed as village extensions via the planned unit development (PUD) process. Village extension PUDs must be at least ten acres in size. Developers of village extension PUDs must acquire one TDR

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per two acres within the sending site. Each TDR, however, allows two bonus units. In other words, the developer does not have to buy TDRs to achieve a density of one unit per acre; acquisition of one TDR per two acres is required, resulting in an overall density of two units per acre. Developers may exceed this two-unit-per-acre density by providing sanitary sewer systems and other urban infrastructure. • TDRs zoned Shoreland District may also be transferred to a golf course cluster development or a village extension area on land zoned Agricultural as well as to land around the same lake as the sending site and in the same Shoreland District. When transfers occur between properties in separate ownership, the owners must record a development agreement on the deeds of all affected parcels. Rice County allows this development agreement to provide for reacquiring de-

velopment rights for use on the sending site. In addition, if the sending site is upzoned, the development rights allowed under the new zoning can be used on the sending site minus all development rights previously transferred off the site. If the sending area is annexed into a city, the restriction must be removed entirely.

Performance In the first four years following adoption of the TDR program in 2004, Rice County experienced thirty to forty transfers annually. Between 2008 and 2010, transfers slowed to four or five per year. One county official attributes the trend to the national recession and believes that transfers will pick up in concert with the housing market. As of 2009, the TDR program had preserved 3,252 acres of land. The program offers an incentive to generate more cluster developments and better utilize

Figure 14.3. Rice County has preserved 3,252 acres of farmland using TDR and other tools. (Photo by Rick Pruetz)

Chapter 14: Farmland Preservation Case Studies

new infrastructure. When moving ten units into a cluster, the county requires only eight TDRs. This incentive has been well received and used often.

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frastructure improvements without threatening the existing municipalities’ health.

Chesterfield Township, Burlington County, New Jersey

Lessons from Rice County Planning staff point to the following program features as contributing to the success of Rice County’s TDR program:8 • The code in the ordinance is straightforward and simple. Discussions with neighboring counties’ program administrators revealed challenges with the complexity of their ordinances. In response, Rice County enacted a simple code that is producing the land preservation set out in the county’s goals. • TDRs are limited to the county’s agricultural zones. The residential zones’ permitted density is high enough to satisfy development demand. • The county considered intergovernmental agreements with municipalities but decided to keep all transfers within the county boundary due to the lack of incentives for the municipalities. • Limiting receiving site size at 1- to 2.5-acre parcels preserves the county’s rural character. This change was made after a 2004 amendment, when the demand for 5- to 10acre receiving sites created development inconsistent with the county’s rural character. A 5- to 10-acre parcel is too small to be a legitimate working farm and too large to be considered suburban development. • To eliminate the possibility of a large-scale TDR creating a new town center, county commissioners have set the maximum transfer size at ten TDRs. This still allows for cluster developments and efficient in-

Given its location thirty miles east of Philadelphia and ten miles southeast of Trenton, New Jersey, Chesterfield Township has experienced development pressure for decades. Located in Burlington County, Chesterfield has about eight thousand residents (2010) and a total land area of fourteen thousand acres—ten thousand acres of which still remain in farmland. Chesterfield’s first TDR ordinance, adopted in 1975, failed to generate any transfers. Undaunted, the township explored alternatives for a workable TDR program throughout the 1980s. In 1989, the State of New Jersey approved the Burlington County TDR Demonstration Act. In response, Chesterfield adopted yet another TDR program in 1998 and approved a master plan for the receiving area in 2002. Some TDR programs are incremental in nature, postponing various decisions to allow certain elements to resolve over time. Chesterfield’s current TDR program offers a good example of the opposite approach. The township has calculated the number of TDRs available to each qualified sending site parcel. Similarly, Chesterfield comprehensively planned the receiving area and divided it into parcels, while calculating the maximum number of TDRs that each parcel can accommodate as well as the number of TDRs needed to achieve the ideal level of development envisioned in the plan. This amount of detail required extraordinary involvement from all stakeholders. But all that up-front time and effort greatly facilitated the permitting process, ensuring developers of their ability to build as long as they comply with the plan and provide the necessary TDCs. As a result, the program has

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Figure 14.4. The Chesterfield TDR Program is projected to preserve 7,500 acres of farmland. (Photo by Rick Pruetz)

experienced rapid implementation, and Chesterfield has won numerous awards, including a National Outstanding Planning Program Award from the American Planning Association.

Process Sending areas must be at least 10 acres in size and zoned Agricultural District (AG). The AG zone allows on-site development at densities slightly greater than one dwelling per 10 acres. A clustering option allows overall on-site density in the AG to average one dwelling unit per 3.3 acres when half of the site is preserved for agriculture. Alternatively, owners of land in the AG zone may participate in the TDR program by recording a conservation easement that permanently limits on-site development to a density of one unit per 50 acres (Walls and McConnell 2007). After a sending site owner records this easement, TDRs are granted based on the sending site’s

suitability for septic systems (considered the true determinant of actual maximum on-site development potential). Consequently, the TDR allocation differs depending on soil type: one TDR credit per 2.7 acres of land with only slight septic constraints, one credit per 6 acres of land with moderate constraints, and one credit per 50 acres for land with severe constraints. To motivate participation, the ordinance adds a 10 percent bonus. Using this process, the township calculated that 1,383 credits were available to the 7,472 acres of qualifying sending sites, an average of roughly one TDR per 5 acres (Walls and McConnell 2007). Dissatisfied sending area landowners may contest their TDR allocation by filing an appeal prior to a TDR easement being recorded. Under one appeal procedure, a landowner can submit a soil analysis prepared by a licensed soil scientist. Alternatively, the landowner can submit a conceptual subdivision plan showing that more units could be built on-site than the number of credits resulting from the soil-based formula.

Chapter 14: Farmland Preservation Case Studies

Although the conservation easements are permanent, the Chesterfield ordinance contains a mechanism through which property owners can petition to reassign development rights to a previously preserved sending site if they cannot sell their TDRs. The process requires the Township Planning Board to agree that it is not feasible to use the credits within a reasonable time frame. The ordinance authorizes the Township Committee to agree to use the Burlington County Development Credit Bank to facilitate the marketing of credits. The credit bank can use a match of county and town funding to buy credits at a price initially set by the board but ultimately determined by market conditions. The bank can only sell credits when unmet demand exists. The sales can be made at a predetermined price or by sealed bid. In either case, the ordinance clarifies that the bank must maximize the value of the credits. Finally, the ordinance establishes a formula to limit purchases of credits from individual landowners when funding is inadequate to buy all the credits available for sale.9 Chesterfield Township has only one receiving area: Old York Village, a 560-acre site near the New Jersey Turnpike and close to, but not abutting, the historic village of Crosswicks. The master plan for Old York Village allows for 1,200 residential dwellings, mostly single-family resi-

dential mixed with triplexes, apartments, and affordable housing.10 The village center will have an elementary school and forty thousand square feet of commercial floor area. The plan for Old York Village uses traditional neighborhood development principles—the same principles that guided the evolution of historic American settlements such as Crosswicks. Architectural design standards have been added to the township’s zoning ordinance to ensure that all buildings reflect the styles, details, building materials, and colors commonly found in Chesterfield’s historic villages.

Performance With TDRs selling at an average price of $50,000 each, sending area landowners have provided an ample supply of TDRs. The buildout plan anticipates the preservation of about seventy-five hundred acres of farmland through the use of TDRs. 11

Lessons from Chesterfield Township After the lackluster performance of its initial program, Chesterfield adopted one of the most

REQUIRED CREDITS No TDR credits are needed to build low- and moderate-income housing units and public buildings in Old York Village. But development credits are required for other uses according to the following schedule. Number of Credits 1.00 0.90 0.75 0.50 0.00 1.00 0.50 1.00 1.00 0.00

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Type of Development Permitted Detached perimeter village house Detached village house Triplex dwelling unit Apartment units and carriage houses Low- and moderate-income housing units Retail/office per 2,000 square feet Home office Institutional/acre cemetery, private outdoor recreation, etc. Institutional/2,000 square feet for churches and childcare center Institutional: public buildings, schools, libraries, and facilities

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Figure 14.5. The Chesterfield zoning ordinance includes standards for style, architectural details, building materials, and color within the old receiving area. (Photo by Rick Pruetz)

acclaimed TDR programs in the nation, one tailored to fit local circumstances. • Thanks to years of close coordination with stakeholders, Chesterfield crafted a program that appealed to both sending area landowners and receiving area developers. • A buffer strip separates the receiving area from the historic village of Crosswicks, thereby reducing the potential for opposition from current residents. • At $50,000 per TDR, developers pay for the privilege of building in Old York Village; in return, they receive reasonable assurance of being able to implement their plans on schedule. • The TDR bank has facilitated program implementation.

Warwick Township, Lancaster County, Pennsylvania Warwick Township, with more than seventeen thousand residents (2010), is located five miles

north of the city of Lancaster in Lancaster County, Pennsylvania. Lancaster County has gained fame as the heart of Pennsylvania Dutch country, where visitors can buy fresh food and handicrafts as well as see Amish families working their farms with horse-drawn machinery. But the storybook appearance of the landscape is more than a tourist attraction. Lancaster leads all counties in the northeastern United States in revenue from agricultural products. It also is a leader in conservation, with more than eightyfour thousand acres of permanently preserved agricultural land as of 2010. That accomplishment is largely the result of the Lancaster County Agricultural Preserve Board working in close cooperation with the Commonwealth of Pennsylvania and the private, nonprofit Lancaster Farmland Trust. Credit also goes to the county’s forty-one townships that directly make land use decisions. Three of these townships—most notably, Warwick Township— now supplement other preservation efforts with their own internal TDR programs. Warwick Township skillfully uses its TDR program and TDR bank to stretch limited

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Figure 14.6. Warwick Township wants to preserve natural, scenic, historic, and aesthetic value when it saves farmland. (Photo by Rick Pruetz)

preservation dollars, often in partnership with the Lancaster County Agricultural Preserve Board and the Lancaster Farmland Trust. It also avoids a not-in-my-backyard (NIMBY) backlash by having a receiving area mechanism based on land coverage in an industrial zone. In the process, Warwick also demonstrates how a relatively small community can institute a highly effective TDR program by observing key success factors and pioneering new, creative approaches.

Process Sending areas are farms within the Agricultural (A) Zone. This zone limits on-site development to a maximum density of one dwelling per twenty acres. Landowners, however, can also choose to record an easement on their land that permanently restricts development to agricultural uses allowed in the A Zone. The landowner can restrict only a portion of a sending site by

mapping the restricted and unrestricted parts of the parcel and documenting the number of TDRs being reserved versus the number being transferred. One TDR is granted for every two acres of restricted land. These TDRs can be given or sold to anyone, including Warwick Township.12 The receiving area is the Campus Industrial Zone, a 163-acre site at the township’s southern border. The program’s baseline is 10 percent lot coverage—in other words, no TDRs are required to cover up to 10 percent of a lot in this zone. To exceed that baseline, developers must buy one TDR for each four thousand additional square feet of lot coverage above baseline, up to a maximum coverage of 70 percent. Warwick’s TDR code specifies that the Lancaster County Agricultural Preserve Board and private, nonprofit organizations, such as the Lancaster Farmland Trust can acquire TDRs by gift or purchase and resell those TDRs, provided the proceeds from the sale are used to purchase

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TDRs from other land within Warwick Township. In practice, the township, often in partnership with the trust, will jointly preserve a farm in conjunction with the purchase of development rights (PDR) program managed by the Lancaster County Agricultural Preserve Board. When that board acquires easements in a township with no TDR program, there are, of course, no resulting TDRs to sever and resell. But Warwick’s TDR program allows what would otherwise be a single-easement acquisition to become an acquisition of TDRs. Lancaster County permits Warwick (and the Lancaster Farmland Trust, if it is participating) to bank and sell these TDRs in accordance with the requirement that sale proceeds be reinvested in future acquisitions of TDRs from additional Warwick farms. Unlike PDR programs, which do not recycle preservation funding, Warwick’s program of purchasing and reselling TDRs allows it, the agricultural preserve board, and the trust to convert limited dollars into an ongoing, revolving fund.

Performance As of 2010, Warwick’s TDR program had preserved twenty farms with a total of 1,318 acres. The cooperative partnership of the Lancaster County Agricultural Preserve Board, the Lancaster Farmland Trust, and Warwick Township had purchased 649 TDRs and sold 278 TDRs, generating $685,000 for additional TDR acquisitions. Warwick Township alone had purchased 489 TDRs and sold 154 TDRs.

Lessons from Warwick Township For a relatively small community, Warwick has achieved a remarkable level of preservation, largely by adapting TDR’s success factors to local circumstances. • Developer demand for TDRs is almost inevitable given a receiving area baseline of 10 percent land coverage.

Figure 14.7. As of 2010, Warwick Township’s TDR program had preserved 1,318 acres. (Photo by Rick Pruetz)

Chapter 14: Farmland Preservation Case Studies

• The receiving area (an industrial park) and the receiving area mechanism avoid controversy by allowing bonus land coverage rather than additional residential density— often a hot-button issue. • Meaningful on-site development restrictions in the sending area motivate landowners to participate in TDR. They also demonstrate Warwick’s commitment to preserving farming. • TDR is the only means of gaining additional receiving area development potential. • The amount of bonus lot coverage allowed per TDR creates a viable TDR market. • The TDR mechanism is simple, and the township works with developers to facilitate TDR use in the receiving area. • Warwick not only established a TDR bank but also formed strategic partnerships with the Lancaster County Agricultural Preserve Board and the Lancaster Farmland Trust. These partnerships maximize the use of limited preservation funding.

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component that preserved 370 acres of parkland and 213 acres of agricultural land. The North Livermore transfer of development credits (TDC) program started in 2002, when the city council adopted the North Livermore Urban Growth Boundary Initiative. North Livermore includes fourteen thousand acres of natural terrain and farmland north of the city’s UGB and south of the Alameda–Contra Costa County border. The initiative aims to protect agricultural land and open space in North Livermore, partly through the TDC program. Livermore encourages sending area landowners to exceed the minimum conservation requirements by offering more TDCs to those who accomplish additional preservation, such as the removal of existing dwelling units. Similarly, Livermore motivates receiving area developers to choose the TDC option by letting them use TDCs (or cash in lieu of TDCs) to exceed baseline density or to secure building permits under the city’s annual permit quota system.

Process

Livermore, California Livermore lies forty miles east of San Francisco in eastern Alameda County. The city, which has a population of about eighty-two thousand (2010), prides itself on being the center of the first wine-producing region in California. In 1997, to maintain its agricultural heritage and viticulture industry, the city adopted the South Livermore Specific Plan; the plan allows residential construction on the southern edge of the city by developers who improve, cultivate, and preserve vineyards south of the urban growth boundary (UGB). As of 2010, this mitigation mechanism had preserved 4,000 acres of vineyards. The South Livermore Specific Plan, which won a national award from the American Planning Association, also included a TDR

Livermore limits most of the 14,000-acre sending area to a minimum lot size of 100 acres but allows 40-acre lots in one portion. Landowners who choose to participate in the TDC program at the minimum level of preservation receive one TDC per 5 acres when they record conservation easements that permanently limit a property to those minimum lot sizes. To encourage landowners in the 14,000-acre sending area to voluntarily pursue greater levels of protection, Livermore’s TDC ordinance provides the following incentives: • Eleven TDCs to permanently forgo a lot that otherwise would be permitted by the 100-acre (or 40-acre) minimum lot size provisions • Ten credits for each undeveloped lot that

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an owner deed-restricts to remain permanently undeveloped • Twelve credits for each existing dwelling unit removed from a parcel, including the recording of an easement permanently restricting development of the parcel The initiative did not create receiving sites but rather required the city to find a use for the credits created through any of the options listed above. In response, Livermore updated its general plan in 2003 to stipulate that TDCs are required to exceed baseline density on any parcel where the general plan update—or any subsequent general plan amendments—allows increases in residential density. The 2003 general plan also specified baseline as the residential density in effect prior to the general plan amendment. Livermore’s TDC Ordinance, adopted in 2004, implements the policies and provisions previously articulated in the 2002 initiative and the 2003 update of the general plan.13 Receiving area zoning can come in any of three varieties: a planned development, a newly adopted zone incorporating TDC baselines and densities bonuses, or a TDC combining district. In all three options, baseline is the maximum density allowed by the previous or underlying zoning district, and all dwelling units in excess of baseline are considered bonus units, subject to the following TDR requirements: • Two TDCs for each single-family detached dwelling in excess of baseline density. Alternatively, developments with accepted applications as of the effective date of the ordinance were required to submit only one TDC for each single-family detached dwelling in excess of baseline density. This provision was designed for projects already “in the pipeline” when TDC compliance became a requirement. Some communities choose to exempt such projects entirely, and other communities exempt only

projects that are vested. Livermore chose the compromise of a reduced requirement, making the “pipeline” projects the first to participate in the program but at a reduced cost. • One-half TDC for each multifamily attached dwelling in excess of baseline density. • Developers have the option of paying a TDC in-lieu fee for each required TDC. The revenues from these fees are used to preserve sending area land and for program administration. In addition to the density bonus, the Livermore TDC Ordinance offers the incentive to use TDCs in conjunction with its Housing Implementation Program (HIP). HIP limits the number of dwelling units issued building permits each year, to maintain Livermore’s desired growth rate. Dwelling units that promote important city goals, however, receive a specified number of those limited building permits. In addition to dwelling units in the South Livermore and Downtown Specific Plan areas, the TDC Ordinance stated that HIP allocations would be granted for an annual average of two hundred TDC-retiring units for ten years. There are two types of TDC-retiring units: • All housing units—both within and in excess of baseline density—in developments approved to exceed baseline density in TDC receiving zones are TDC-retiring units and qualify for housing allocations. In other words, when developers use TDCs, all of the dwelling units in their application qualify for HIP allocations. This provision acknowledged that the HIP allocations would be a meaningless incentive if they did not allow developers to proceed with entire projects. • Housing developments that do not need TDCs for a density bonus can nevertheless receive housing allocations when the de-

Chapter 14: Farmland Preservation Case Studies

veloper submits TDCs or in-lieu fees for every dwelling in the proposed development. This provision was intended to respond to the need for developers to stay on schedule. When developers must postpone their projects for a year or more, their costs increase and they risk missing market cycles. The Livermore ordinance states that TDCs may be sold or purchased, or otherwise transferred or received, by any person—including the city and other governmental entities. It also authorizes the city to buy TDCs using funding from settlement agreements, mitigation agreements, general fund, loans, grants, and other sources appropriate for the acquisition of open space. In addition, the ordinance allows Livermore to create a revolving fund for purchasing and reselling TDCs. Livermore set the in-lieu fee at $24,000. Because two TDCs are required for each additional single-family detached dwelling unit above base-

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line, the in-lieu requirement totals $48,000 for each single-family detached dwelling unit above baseline. Conversely, two multifamily attached dwelling units above baseline are allowed for each TDC; consequently, the in-lieu fee is $12,000 for each multifamily attached unit above baseline.

Performance As of 2010, all developers using the TDC option have paid the in-lieu fee rather than acquire and retire actual TDCs. Since its 2004 adoption, the program has collected $1,576,000, almost all of which is devoted to purchasing a 150-acre environmentally sensitive site.

Lessons from Livermore The Livermore TDC program incorporates most ingredients of successful programs.

Figure 14.8. Livermore’s TDC program aims to preserve Farmland and open space in Alameda County, outside the city’s urban growth boundary. (Photo by Rick Pruetz)

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• All increases in density after 2004 require TDC compliance. As a supplemental source of demand, developers can also buy TDCs as assurance of receiving building permits, despite Livermore’s annual permit quota system. • The general plan update process, which involves substantial public input, leads to selection of Livermore’s receiving sites. As a result, more people know that the TDC program is not promoting growth but, rather, allowing Livermore to implement its preservation goals and development objectives. • The sending area’s minimum lot size of one hundred acres or forty acres demonstrates commitment to conservation and encourages property owners to choose the preservation option.

• TDC is the only means of exceeding baseline (with the exception of affordable housing units, which are exempt from TDC requirements). • With assistance from a real estate economist during ordinance preparation, Livermore adopted TDC requirements that developers can afford and yet achieve meaningful preservation. • Public officials, as well as the general public, understand the importance of preserving farmland and open space in Livermore. • The program is simple in concept and contains easy-to-use features. For example, developers can comply by making in-lieu payments, which the city can combine with funding from other sources to accomplish its highest-priority preservation goals.

Chapter 15

Farmland and Environmental Preservation Case Studies

TDR programs often combine purposes, with environmental and farmland preservation leading the way. Indeed, this category of TDRs seems the most prevalent. This chapter highlights eight communities whose programs feature combined purposes.

King County, Washington King County, with more than 1.9 million residents (2010), includes the Seattle metropolitan area on the west and the Cascade Mountains and Mt. Baker–Snoqualmie National Forest on the east. The county’s original TDR program, adopted in 1993, allowed receiving sites exclusively on land under county jurisdiction. In 1998, King County adopted a second TDC ordinance referred to as the TDC Pilot Project Program. For a three-year trial period, the newer ordinance allowed transfers from rural portions of King County to incorporated cities within it. As incentives, participating cities received countyfunded amenities to offset the impacts of increased densities in receiving areas. In 1999, the county budget included $1.5 million for the purchase of TDCs and another $500,000 for receiving area amenities. In March 2000, King County adopted an ordinance that created a TDC bank and established transaction

procedures. Also that year, the City of Seattle and King County entered into an interlocal agreement that put the county’s TDC Pilot Program into effect. In 2001, based on progress with the City of Seattle and a significant transfer to another incorporated city, King County made the provisions of the TDC Pilot Program a permanent fixture of its code. A full-time professional and a part-time assistant manage the TDR program.1

Process King County designed its program to permanently conserve rural resources and urban separators while encouraging increased density within cities, where it can best be accommodated by urban services. Sending areas include several low-density residential zones as well as agricultural and forest zones. To qualify, TDR sites must have at least one of the following public benefits: • • • • •

Agricultural potential Forestry potential Critical wildlife habitat Open space Regional trail connectors separators

or

urban

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Figure 15.1. King County used TDR to preserve the 90,000-acre Snoqualmie Forest, the largest preserved sending area in the nation. (Photo by Rick Pruetz)

The number of TDRs that can be transferred is based on the gross area of the sending site less the land area of any existing easements, the minimum lot size requirement for any existing or planned residences, code-required setbacks, and all submerged land (see appendix B for forms developed by King County). The program features the TDR Exchange, a site that facilitates the purchase and sale of TDRs in the county, primarily used by TDR certificate holders (owners) and potential buyers (often developers).2 In addition, a TDR bank was established in 1999 with $1.5 million from the Metropolitan King County Council and $500,000 for urban amenity improvements for neighborhoods that accept additional density through the TDR program. The TDR bank can purchase development rights only from qualified sending sites in the rural area or in agricultural or forest production districts. Sending sites within these areas may be prioritized to ensure that sites providing the greatest public benefits receive protection, given the limited public funds available to the TDR bank.

Development rights purchased from the TDR bank can be used only on receiving sites in urban unincorporated King County or in urban incorporated cities. An interlocal agreement must be in place between King County and a city before TDR bank development rights may be transferred to a development project within the city. The source of the development rights must also meet any additional sending site criteria specified in the particular interlocal agreement before the rights may be applied to a development project. For example, an interlocal agreement may specify that the city will accept only development rights that originated from the agricultural production district. Therefore, not all development rights in the bank would be suitable for a project in that city. The amenity funds are intended to assist cities with infrastructure improvements needed to accommodate the extra density being transferred into an area. TDR amenities may include acquisition, design, or construction of public art, cultural or community facilities, parks, open space, trails, roads, parking, landscaping, side-

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ENROLLED TO SELL King County’s TDR program requires the enrollment of prospective sellers. Enrollment involves three steps: 1. The landowner decides to transfer development rights and, with staff assistance as needed, determines eligibility. 2. TDR staff reviews application materials and supporting documents (title report, permit history, and so forth) before “qualifying” the property to transfer development rights. 3. TDR staff then “certifies” TDRs as available to transfer; a conservation easement is placed over the sending site to protect the property from future development according to the terms of the easement. (It is possible to reserve development rights on a sending site for future use.) The process does not always proceed in this order, but each step is required.

walks, other streetscape improvements, or transit-related improvements. Before amenity funds may be spent in a city, the city and the county must have an interlocal agreement in place.

Performance TDR prices have ranged from $8,000 to $30,000. Development rights are most often bought and sold through private-party transactions; under limited circumstances, they may be purchased from the King County TDR bank, through which TDRs held by the public may be sold. From 2000 to 2010, the TDR program • averaged about 7 transactions per year; • averaged more than 150 TDRs bought and sold annually (this includes a single deal involving 990 TDRs in 2004); • facilitated the exchange of more than $6.5 million between developers and landowners; • allocated 750 TDRs to rural sending area landowners and 190 TDRs to urban sending area landowners, resulting in permanent protection of more than 140,000 acres; and • developers redeemed about 330 TDRs by for increased density in receiving areas. King County itself made several major acquisitions of development rights through its TDR

program. The largest occurred in 2005, when the county used $22 million of Conservation Futures Tax revenues to buy TDRs protecting nearly 90,000 acres east of Seattle known as the Snoqualmie Forest. The 990 TDRs severed from the forest—which is twice the size of Seattle— were placed in the county’s TDR bank for resale. With this purchase, King County leapt ahead of all other TDR programs in the nation for the amount of land protected. By 2010, King County had preserved more than 140,000 acres of targeted farmland, forest, critical habitat, and other open spaces. By 2020, King County expects to add 350,000 new residents and anticipates using TDRs to help meet some of the need for growth.

Lessons from King County King County, which has preserved more than 140,000 acres, is arguably the most successful TDR program in the nation. It offers numerous lessons: • King County effectively leverages finite conservation funding—for example, by using conservation futures to buy TDRs and bank/resell them. • King County has secured interjurisdictional agreements with the incorporated cities of Issaquah, Bellevue, and Seattle.

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Seattle demonstrates what might be dubbed an “enlightened” approach for its willingness to accept TDRs from distant parts of the county. (In many TDR programs, cities enter into interjurisdictional arrangements primarily to preserve land close to their city limits.) • A full-time manager and assistant administer the TDR program; this staffing enables the county to assist landowners and do “big deals” to preserve land. • The county’s extensive website markets and facilitates the program. It also builds and maintains public support for the TDR program, which helps ensure that elected officials do not waver in requiring compliance with TDR requirements.

passing seven counties and fifty-three local jurisdictions. In 1980, the Pinelands Commission adopted the Pinelands Comprehensive Management Plan, which divides the planning area into two parts: an inner Preservation Area, consisting of approximately 368,000 acres of environmentally sensitive land, and a peripheral Protection Area, encompassing 566,000 acres. Development is closely controlled in the Preservation Area. In addition to acquisition efforts, the comprehensive plan provides an opportunity for compensation to affected property owners through the Pinelands Development Credit program, arguably the most ambitious TDR program in the nation.3

Process

New Jersey Pinelands, New Jersey The New Jersey Pinelands occupies roughly the southeastern quarter of the state of New Jersey. The 1-million-acre area features pine and oak forests, cedar and hardwood swamps, pitch pine lowlands, bogs, and marshes. The Pinelands also includes more than twelve thousand acres of “pygmy forest” (stands of dwarf pine and oak), 850 species of plants, and more than 350 species of birds, reptiles, mammals, and amphibians, including the Pine Barrens tree frog. In addition, the Pinelands accounts for about one-quarter of New Jersey’s agricultural income, with specialization in cranberries and blueberries. It contains one of the largest and least polluted aquifers in the northeastern United States and provides numerous recreational opportunities, particularly for residents in New York City and Philadelphia, who live within a one- to three-hour drive. In 1978, the U.S. Congress designated the Pinelands as the country’s first national reserve. The next year, New Jersey established the Pinelands Commission, a regional agency encom-

Sending sites in the Pinelands program fall within three subareas: Preservation Area District, Agricultural Production Area, and Special Agricultural Production Area. To implement the comprehensive plan, municipalities had to establish strict land use restrictions and allow residential development only by conditional use permit rather than as a matter of right. To encourage these owners to record conservation easements and transfer their development rights, the plan offers four development rights at the receiving site for every Pinelands Development Credit (PDC) transferred from a sending site. With 5,625 PDCs assigned to the preservation areas, a complete transfer of these credits would result in 22,500 additional homes in the Regional Growth Areas. Development potential and environmental sensitivity determine the number of PDCs allocated to a sending site. In the Preservation Area District, 1 PDC per 39 acres of land is granted to uplands; 0.2 PDC per 39 acres is allocated to wetlands; 2 PDCs per 39 acres are allocated to land approved for mining but not yet disturbed; and no credits are allocated to land mined as a

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result of a resource extraction permit. A similar, but not identical, credit allocation formula applies in the Agricultural Production and Special Agricultural Production areas. In 1981, Burlington County, one of the seven counties within the planning area, established the Burlington County Conservation Easement and Pinelands Development Credit Exchange to purchase PDCs severed from land in the county. Six years later, the State of New Jersey established the New Jersey Pinelands Development Credit Bank and capitalized it with $5 million from the state general fund. The PDC bank acts as a “buyer of last resort,” ensuring there will always be a market for PDCs should a PDC seller be unable to find a buyer. Bank purchases can alleviate hardships, including those that might occur when an owner has applied for and been denied a waiver from the development restrictions of the Pinelands plan. The bank’s purchase price may not impair private transactions of PDCs. In fact, the state legislation prohibits the bank from buying PDCs for greater than 80 percent of market value. The Bank can sell the PDCs it owns only if sufficient demand warrants a sale and if the sale would not substantially impair private sales of PDCs. The bank, which sells PDCs through auctions, can increase the minimum bid requirement to avoid a substantial impairment of private PDC sales. Most transactions, however, occur in the private market, where negotiation between buyers and sellers determines sale prices. In addition to buying and selling development rights, the PDC Bank does the following: • Guarantees loans secured by PDCs as collateral • Facilitates all PDC transactions • Issues PDC Certificates • Reissues PDC Certificates when ownership changes • Maintains a registry of all PDC transactions

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• Uses the registry to help PDC buyers find PDC sellers • Maintains a list of developers who want to buy PDCs • Prepares an annual report of all PDC transactions The Pinelands Infrastructure Trust Bond Act greatly assisted the Pinelands TDR program. This legislation has helped fund about $50 million worth of sewer improvements in Regional Growth Areas, making it possible for developers to use development rights to increase the density of receiving site projects. Receiving sites are lands in the Regional Growth Area determined to be capable of accommodating additional development and recognized as having a high demand for development. To ensure there would be enough land to receive transferred credits, the plan designated receiving areas capable of accommodating up to 46,200 transferred units; this is more than double the number of units (22,500) that would be generated by the severing of all credits allocated to the sending areas. Land designated as a Regional Growth Area is located in twenty-three Pineland municipalities. The zoning codes in each of these jurisdictions spell out the bonus density available by transferring development rights. In a typical lowdensity example, baseline is 1 dwelling unit per acre and maximum density via TDR is 1.5 dwellings per acre. The twenty-three Pinelands communities with receiving areas have conformed their zoning codes to implement this transfer mechanism. The bonus density is awarded as a matter of right, not as a result of a discretionary approval process. Previously, some of the twenty-three municipalities with receiving sites had granted extra density in response to developer applications for planned unit developments (PUDs) or simple rezoning requests. The Pinelands Commission required discontinuation of this practice; developers would have little incentive to buy PDCs if

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lands through organized outings, school field trips, and outdoor learning opportunities.

Performance By 2010, more than 7,000 rights had been severed, protecting more than 58,900 acres of farmland and environmentally sensitive land. In the receiving areas, 633 development projects were either built or approved, involving 4,446 development rights, or 1,111 PDCs.

Lessons from the New Jersey Pinelands Perhaps the nation’s most complex TDR program, the New Jersey Pinelands program includes multiple counties and enjoys a special federal charter because of the unique environmental features it preserves. Although it operates on a vast scale, the program nonetheless offers lessons to much smaller jurisdictions: Figure 15.2. The New Jersey Pinelands protects one of the largest and least-polluted aquifers in the northeastern United States. (Photo by Rick Pruetz)

they could achieve their desired density for free. Similarly, the Pinelands plan requires the use of PDCs whenever a municipality approves a zoning variance that increases residential densities or allows residential uses in areas zoned for nonresidential uses. In addition, the Pinelands Commission prevents local governments from imposing stringent development standards for higher-density development, which could discourage developers from buying development rights. A substantial public outreach effort—including brochures, guidelines, and a comprehensive website—supports the Pinelands program. The general public is invited to experience the Pine-

• The Pinelands plan was designed with TDR in mind. The State of New Jersey required the fifty-three municipalities within the planning area to conform their plans and ordinances to ensure implementation of the TDR program. • Optimum receiving areas were selected in twenty-three jurisdictions based on demand for growth, environmental suitability, and infrastructure capacity. • Sending areas were rezoned to density limits that accomplish the goals of the regional plan and motivate property owners to preserve their land. • The Pinelands Commission ensures compliance with TDR requirements and monitors local jurisdictions for conditions that might discourage developers from using the TDR option.

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• TDR allocation rates help create a market for TDRs while reflecting the significance of sending area resources. • The bonus density is awarded as a matter of right, not as a result of a discretionary approval process, thereby giving developers certainty about their ability to use PDCs. • The State of New Jersey supports the transfer process by providing an oversight commission, a capitalized TDR bank, and funding for infrastructure in the receiving area communities. • The PDC program is marketed to stakeholders, and the oversight commission promotes the benefits of Pinelands preservation though outings and educational programs. • Public recognition helps maintain commitment to the program. The Pinelands became the first national reserve in the United States and has been recognized as a United Nations International Biosphere Reserve.

Larimer County, Colorado Larimer County, with a population of about three hundred thousand (2010), lies fifty miles north of Denver, within Colorado’s fast-growing Front Range region. Much of the county is publicly owned—most notably, Rocky Mountain National Park and the Roosevelt National Forest. Nevertheless, the general public strongly supports further protection; the voters in the City of Fort Collins and Larimer County have adopted a quarter-cent sales tax to fund openspace preservation. Larimer County’s master planning process, initiated in 1994, called for creation of community separators and proposed a TDR program related to the Fossil Creek Reservoir. In 1998, the county established its Fossil Creek Reservoir

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Transfer of Development Unit (TDU) Program, which depends on intergovernmental cooperation. The county views this as a pilot program, laying the foundation for expanded TDR efforts countywide.4

Process In addition to separating communities, the Fossil Creek TDU program is designed to preserve agricultural land, open space, scenic vistas, natural features, recreational land, habitat, and environmentally sensitive land. The resolution that created the TDU program maps potential sending areas. Owners of sending area properties may request a determination of the number of TDUs available for transfer. The baseline determination is 114.5 percent of the density allowed by the existing zoning. This baseline determination can be increased for sending sites that include significant natural resources, community buffers, corridors for wildlife migration or hiking, agriculture, park sites, historic landmarks, or important scenic views. The baseline TDU determination can be decreased based on parcel sizes of forty acres or less, diminished development potential, property location, and existing development on the property. Larimer County designated TDU receiving areas on land still under county jurisdiction but expected to ultimately be annexed to Fort Collins after development under the TDU program. Developers who choose not to use the TDR option may develop in the receiving area at a maximum density of one dwelling per two net acres of land. Developers interested in using TDUs must submit a plan for the proposed receiving site. The number of units shown in this plan must fall within the range of units allowed by the adopted area plan for the subject site. The Board of County Commissioners determines the actual number of units allowed on the receiving

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site, and allowed to be transferred, through the approval of development review and the preliminary plat. When developers choose the TDU option, they must develop the entire site using TDUs. Receiving site projects can be developed in phases, so developers can acquire TDUs in phases as well. Affordable housing units are exempt from TDU requirements. The number of TDUs required for a receiving area project is calculated by taking the number of proposed dwelling units in the project, subtracting the number of units allowed by the underlying zoning, and dividing by 1.5. This 1.5 transfer ratio was intended to remain in place for only the first two years, essentially to jump-start the program. When the two-year start-up period concluded, however, the development community argued that transfers would not be profitable unless the county retained the 1.5-to-1 ratio. The county board, persuaded by the argument that all receiving site projects should receive equal treatment, voted to retain the 1.5-to-1 ratio after its original sunset date. The most significant aspect of this program involves the cooperation between Larimer County and Fort Collins as memorialized by an interjurisdictional agreement (IGA). In some programs—Boulder County, Colorado, for example—incorporated cities voluntarily agree to transfer development from rural county areas into receiving sites within their city limits. This option requires city residents to understand how their quality of life can benefit from the preservation of land in another jurisdiction. Because this level of understanding can be difficult to achieve, city officials often hesitate to designate TDR receiving sites that allow increased density within their jurisdictions in return for decreased density in another jurisdiction. The Fossil Creek Program avoided some of this political turmoil by not creating interjurisdictional transfers. Specifically, the Larimer County–Fort Collins agreements do not require Fort Collins to designate TDU receiving sites

within the city limits. Instead, the IGA states that Fort Collins will not annex a TDU receiving site until Larimer County has approved the development for that site (and required the TDUs that represent the preservation of sending areas). In return, the IGA requires receiving site projects to file for annexation several months before plat recordation. In fact, properties are annexed as soon as possible after TDUs are transferred to the receiving area. Receiving site projects must comply with Fort Collins’s development standards. The city also acts as a referral agency on development projects in the receiving areas. As a result, Fort Collins conducts its own review process on projects proposed for the receiving areas and inspects the construction of new development infrastructure in the receiving area. Instead of actually obtaining TDUs, receiving site developers can elect to pay an in-lieu fee if they meet the following three conditions: • The receiving site must be twenty-five acres or less, or the proposed project must require ten or fewer TDUs. • The developer must be able to demonstrate a good-faith effort to obtain TDUs. • The developer and the county board must agree on a reasonable fee. Payments under this in-lieu fee option can only be used to acquire open space in the sending areas. The fee was originally calculated by taking the per-acre amount paid by the county for a comparable easement, multiplying it by 2.29, and multiplying that amount again by the number of TDUs to be represented by the inlieu payment. (The density allowed in the sending areas is one dwelling unit per 2.29 acres.) The original formula tended to make the in-lieu fee option more expensive than private sector transactions. The in-lieu fee formula has since been changed to the following: per acre price for a similar open-space interest, multiplied by two, multiplied by 75 percent, and multiplied

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Figure 15.3. Larimer County preserved a portion of Fossil Creek Regional Open Space using TDR. (Photo by Rick Pruetz)

again by the number of TDUs that the fee represents.

Performance The Fossil Creek TDU program has transferred 721 TDUs and preserved 503 acres of land with an estimated value of $5.5 million. The parcels preserved by this program include 200 acres immediately north of the Fort Collins–Loveland Airport runway, an expansion of Fossil Creek Reservoir Regional Open Space, and a quartermile natural resource buffer on the north side of Fossil Creek Reservoir. All developments in the receiving area built to date have used the TDU option and have subsequently been annexed by the City of Fort Collins. In 2010, the last large vacant site in the receiving area submitted an application that will require a significant number of TDUs.5

Lessons from Larimer County Larimer County creatively overcame obstacles that bedevil many TDR programs. • By interlocal agreement, Larimer County and the City of Fort Collins cooperate in locating receiving areas that are under county jurisdiction but will soon be annexed to the city. This creates urban receiving areas—and their resulting benefits, such as efficient infrastructure, compact neighborhoods, and rational city expansion—while avoiding the logistics of interjurisdictional transfers. • The receiving area was selected for its appropriateness for development and its proximity to both the sending area and Fort Collins. • Developers can comply with TDU requirements using either actual TDUs or in-lieu

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fees. This assures developers they will be able to comply with TDU requirements at a predictable cost if they choose not to look for willing sellers and negotiate a price for TDUs.

Payette County, Idaho With nearly twenty-five thousand residents (2010), Payette County lies thirty miles northwest of Boise, on Idaho’s border with Oregon. Agricultural lands lie within the Payette River Valley in the center of the county. Much of the remainder of the county consists of publicly owned land. Payette County defines an “original parcel” as a property that has not been subdivided, or segregated, since 1979. The zoning ordinance allows subdivision of these original parcels, so two residences can be located in an area that previously allowed only one residence. This provision was designed to allow retired farmers to live on a single farm property along with a son, daughter, or other individuals who actively worked the farm. Over the years, the county realized that a second residence was not always appropriate or desirable. Consequently, in 1990, it adopted a TDR ordinance allowing the transfer of one development right from the original farm property to a separate, abutting property owned by the same person. In deciding whether to grant these requests, the county could consider environmental factors, such as whether the transfer would eliminate the need to build a road through productive farmland. Between 1990 and 1998, this transfer option was used four times. In 1998, Payette County amended the TDR ordinance so that the applicant, the sending site owner, and the receiving site owner could all be different individuals. The amendment also specified that the sending site had to have greater agricultural value than the receiving site. To

clarify agricultural value, the county uses a numeric system that assigns points to a given property based on various factors. In 1999, the State of Idaho adopted TDR legislation. In 2000, Payette County again changed its TDR ordinance to comply with state requirements. This amendment also expanded the purpose of the TDR program to include the preservation of wildlife habitat and the maintenance of rural character.6

Process In Payette County, a sending site must qualify as a building site for a single-family dwelling. A sending site must also be designated as land that should be preserved because it is prime agricultural land, is in an area where open space is needed, contains critical wildlife habitat, or maintains rural character. Prime agricultural land is any parcel that achieves twenty-two or more points using a checklist that assigns points based on tract size, percent of land irrigated, percent of land with slopes greater than 7 percent, percent of land with higher soil capability ratings, and type of irrigation. Water rights are required to remain with the sending site. Receiving areas are parcels that do not qualify as building sites and do not meet the other criteria set forth for sending parcels. Payette County designates receiving areas based on their capacity to accommodate the number of development rights that potentially may be generated by the sending areas. A receiving area must fulfill one of the following conditions: • Located within a city area of impact, designated as Residential on the comprehensive plan, and at least two acres in size • Designated as Rural Residential on the comprehensive plan and at least three acres in size • Designated as Ag land on the comprehensive plan and at least twenty acres in size

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The board may also approve transfers to a parcel that was not predesignated as a receiving parcel if that property has the capacity to accommodate an additional dwelling. The county allows the first division of an original lot, thus creating one additional lot. This division allows for placement of one residence on the original lot and one residence on the lot created by the division. Two more land divisions, creating a third or fourth lot, can be approved via rezoning or TDR. When more than four lots are created, the request is processed as a subdivision and no additional TDR purchases are required. The Payette County Planning Commission must hold a public hearing on each transfer request and transmit its recommendation to the county board. In turn, the county board may hold another public hearing or make its decision based on the record created at the planning commission hearing. In approving or denying each request, the board must decide whether the application is consistent with the county code and make specific findings required by state law. When TDRs are transferred, the sending site owner testifies that the site qualifies for permanent farmland preservation. Consequently, barring special circumstances, the sending site is effectively eliminated as a candidate for future rezoning or as a potential TDR receiving site. A sending site that transferred its TDRs could conceivably be developed in the long-range future as a subdivision. That would occur only if a city expanded to the sending area, making farming impractical. The amendments adopted in the year 2000 contain additional requirements when the receiving sites are located near incorporated cities or in places designated as city impact areas. Specifically, the proposed receiving site project must be consistent with the city’s expansion and transportation plans. The applicant must also agree that when the land surrounding the receiving property becomes an improved subdivision, the receiving property will become part of the subdivision and the applicant will pay for any

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improvements needed for the receiving site to become part of the subdivision. The 2000 amendment also established time limits on transfers. At the point of a decision to approve, the county will draft an agreement to be signed by all parties involved in the transaction—including the county. The agreement must be recorded within ninety days of approval or the approval will be withdrawn and the application process will have to start over, with no refund of fees. In addition, a development right must be used within five years of its approval by the board; if not extended before its expiration date, the development right becomes null and void. No building permit shall be issued based on an expired transferred development right. Once a TDR has expired, an applicant must again go through the complete process of applying for a TDR, which includes submitting an application and having a public hearing.

Performance From adoption of the 1998 amendments and the end of 2000, Payette County approved 28 transfers. Sending sites typically ranged from 15 to 20 acres in size. Consequently, the program preserved approximately 500 acres of farmland in its first two years. Between 2000 and June 2010, Payette County averaged 18 transfers annually; with 24 transfers, 2006 was the high point. Agricultural land preservation ranged from 300 to 450 acres per year. Since 1999, the TDR program has successfully preserved roughly 4,200 acres through 177 transfers. The market value of TDRs is negotiated between parties involved, but $10,000 is often the value discussed in conversation.7

Lessons from Payette County TDR allows farmers the alternative of selling the right to build rather than selling a portion of

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their property. During periods of agricultural financial difficulties, these TDR sales may tide farmers over for one more season.8 Sending site owners may be less reluctant to sell their TDRs because the Payette County program does not preclude them from requesting future subdivisions that could conceivably replace the development rights lost in the original transfer. Staff have expressed concern with mortgageholding property owners selling TDRs, potentially transferring value away, without informing lien holders on the property. To date, however, no problems have arisen; the county requires potential sellers to notify their lenders as a preventive measure. Successful attributes of the Payette County TDR program include the following: • After several years of program operation and education, the community became comfortable with the process and transfer approvals were expedited. • The county maintains a list of potential sellers as a resource for potential buyers. • Amending the code to allow transfers to properties beyond adjacent parcels increased the program’s marketability and success. • Broadening the sending areas to include sensitive lands and floodplains has created a larger supply of TDRs.

Blue Earth County, Minnesota Blue Earth County, with a population of about sixty-one thousand (2010), lies in the flat plains of southern Minnesota, ninety miles southwest of Minneapolis/St. Paul. Except for the city of Mankato, the county is primarily rural and agricultural. In 1977, the county adopted an Agricultural district to preserve large areas for agricultural use, prevent scattered development, and preserve woodlands, natural habitat, scenic values,

green space, water retention areas, and other beneficial uses. This agricultural preservation zone limits development to one residential unit per forty acres of land. The ordinance also allows transfer of development rights to contiguous properties subject to the conditional use permit process, provided the receiving site does not exceed one dwelling unit per ten acres. Similarly, Blue Earth County also allows transfer of development rights in its Conservation zoning district. That district is designed to protect environmentally sensitive areas, preserve natural groundcover, and conserve natural resources in general and water resources in particular. As in the Agricultural district, transfers are made on a one-to-one ratio with contiguous properties. With TDR, receiving site densities increase from one unit per forty acres to one unit per ten acres, a 300 percent increase.9

Process In the Blue Earth TDR program, sending sites are in the Agricultural and Conservation zoning districts. Single-family residences are permitted in these districts at a density of one unit per quarter of a quarter section, or one unit per forty acres. Development rights may be transferred to a contiguous lot through a conditional use permit. The lots do not have to be under the same ownership; in fact, a multiple TDR transfer often involves three to five different owners. The transferred development rights cannot make the density of the proposed receiving site project greater than the density of the surrounding neighborhood. Moreover, the density of the proposed receiving site project exceed one unit per ten acres; in other words, TDR offers a 300 percent density bonus. In addition, the proposed receiving site project must meet fifteen other requirements; for example, the project cannot create pollution hazards or be injurious to adjacent properties. A 2010 update to the county’s zoning ordinance requires that all quarter of a quarter

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In all, Blue Earth County has processed approximately 125 transfers, resulting in the protection of up to five thousand acres of farmland.10

Lessons from Blue Earth County The county is primarily an agricultural community dedicated to preserving its rural character and fertile lands. The TDR program has been perceived as a way to facilitate development rather than to preserve prime farmland. The majority of development in Blue Earth County is located adjacent to contoured areas of land. The prime farmland is flat and currently draws little interest in development. In the future, when premium development sites are built out and prime farmland becomes appealing, the community will value the preservation of the land through the TDR program.

Figure 15.4. Agricultural land preserved in Blue Earth County, Minnesota. (Photo by Rick Pruetz)

sections applying for a conditional use permit must meet all county building requirements. This ordinance limits possible receiving sites to areas that meet the building requirement code. The transfer agreement process includes legislative actions to approve the conditional use permit. First, the county planning commission makes a recommendation on proposed conditional use permits; then the county board of commissioners approves a resolution granting the transfer of development rights and authorizing execution of a transfer agreement.

Performance County staff report that the program averages about 5 or 6 transfers annually in a normal year.

Gallatin County, Montana Gallatin County, in southwestern Montana, has a population of more than ninety thousand (2010) and surrounds the city of Bozeman. Conservation easements, state resource agencies, or the federal government protects almost half of the county’s land area, which includes a portion of Yellowstone National Park. Nevertheless, many citizens are concerned about the rapid pace of development occurring on the other half. Fueled by world-class fishing, skiing, and other outdoor pursuits, roughly one-fifth of the county’s privately owned lands were converted from farming between 1978 and 1992. In 2000 and 2004, the voters authorized Gallatin County to use bond proceeds to fund an open-space preservation program that had saved almost thirty thousand acres as of 2008. Gallatin County does not have countywide zoning. Portions of the county, however, fall within individual zoning districts formed by petition of the property owners. Of the twenty-two

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existing zoning districts, five use TDR. In the Bridger Canyon Zoning District, for example, one TDR provision allows the concentration of development at the base of the Bridger Bowl Ski Area. Another promotes the preservation of remote open-space parcels that would be difficult and expensive to develop. But typically, the TDR programs in Gallatin County’s zoning districts aim to preserve farmland, scenic vistas, and natural areas—particularly wildlife habitat.

Process One of Gallatin County’s zoning districts, known as Middle Cottonwood, encompasses about 10,000 acres at the base of the west slope of the Bridger Mountains, ten miles north of Bozeman. About 4,200 acres in the district are within the boundaries of the Gallatin National Forest, and another 640 acres constitute the State School Section. The zoning regulation is intended to preserve groundwater quality, wildlife habitat, agricultural lands, and scenic resources, as well as limit density. The national forest lands and the State School Section are zoned as Natural Resource (NR). These lands were in public ownership when the zoning regulations were adopted. But the NR zone is intended to preserve the environmental quality of this area in the event any of this land is transferred into private ownership in the future. All privately owned land at the time of the zoning regulation adoption was in the second zone—Agricultural and Rural Residential (AR). (Although TDR would apply in the NR zone if public lands transferred to private ownership, this discussion is confined to land in the AR zone.) In the AR zone, maximum density is one unit per twenty acres when TDR is not used. A Deer Winter Range Overlay Zone covers roughly three thousand acres of the AR zone. Within the Deer Overlay, maximum on-site density is limited to one unit per forty acres. The Middle Cot-

tonwood regulations refer to development rights as density units; they are defined as the right to build a single-family dwelling unit on a parcel other than the parcel from which the density unit is being transferred. Density units may be transferred between any two AR parcels. But density units may not be transferred from outside the Deer Overlay to land within the Deer Overlay. In other words, three transfer options exist: from and to land outside the Deer Overlay, from and to land within the Deer Overlay, and from land within the Deer Overlay to land outside it. The program uses a one-to-one transfer ratio, except for the third transfer scenario. For example, one density unit can be transferred for each twenty acres of land outside the Deer Overlay. Similarly, one density unit can be transferred for each forty acres of Deer Overlay land when the receiving site is also within the Deer Overlay. But three density units can be transferred per forty acres of preserved Deer Overlay land when all three density units are transferred out of the Deer Overlay. Up to two density units can be transferred by approval of a land use permit, although the PUD process must be used when more than two units are transferred. The PUD must further the goals of the Middle Cottonwood zoning district. In addition, at least half of the transferee lot (the receiving site) must be open space. PUDs are processed under the county’s procedures for a conditional use permit.

Performance As of 2010, the TDR provisions of the Middle Cottonwood Zoning District had preserved 514 acres of farmland.11

Lessons from Gallatin County As demonstrated by Gallatin County, TDR can prove useful even when land use controls do not

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Figure 15.5. Five of Gallatin County’s twenty-two zoning districts use TDR, typically to preserve natural areas, farmland, and scenic vistas. (Photo by Rick Pruetz)

apply to the entire jurisdiction. Middle Cottonwood, in particular, demonstrates that a simple TDR program can work within a low-density environment. • Middle Cottonwood’s baseline density of one unit per twenty acres motivates those who want to develop their land to use the TDR option. • Likewise, landowners are encouraged to use their land as TDR sending sites by Middle Cottonwood’s on-site development restrictions: one unit per twenty acres in the AR and one unit per forty acres in the Deer Overlay. • A three-to-one transfer ratio applies for transfers from sending sites within the Deer Overlay to receiving sites outside of it. This ratio enhances the incentive to protect habitat while helping to create a viable market for transfers. • The simple transfer mechanism confirms that TDR programs do not have to be complicated to achieve results.

Douglas County, Nevada Approximately forty-six thousand people (2010) live in Douglas County, Nevada, which extends from the Nevada-California border—on the shores of Lake Tahoe—to the Carson Valley and the Wassuk Range of western Nevada. Although the TDR program of the Tahoe Regional Planning Agency applies to the western portion of Douglas County, the county itself operates a separate TDR program. In 1996, Douglas County adopted a growth management element in its master plan that included TDR as a means of preserving agriculture and natural resources. The county allows transfers within the Carson Valley and the Antelope Valley but not between these two watersheds. The sending area contains 38,294 acres in the Agricultural zone and 66,176 acres in the Forest and Range zone. Designated receiving areas lie within the urban service areas for the communities of Minden-Gardnerville, Gardnerville Ranchos, and Topaz Ranch Estates; additional receiving areas can be added through

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the master plan amendment process. In 1998, Douglas County amended its zoning code to further implement the TDR provisions described in the growth management element. Specifically, Douglas County’s original program languished mainly because the initial allocation ratio created a TDR price that was too high for receiving area developers to profitably use. When the county adopted new allocation ratios in 2001, the program began to generate transfers and preservation.

Process Sending sites in the Douglas County program are zoned either Forest Range (FR-19) or Agricultural (A-19). In both of these zones, the baseline zoning allows on-site development at a density of one residential unit per nineteen acres. Under the original 1998 ordinance, the allocation ratio was one TDR per nineteen acres in the FR-19 zone, or a one-to-one transfer ratio. In the A-19 zone, 1.5 TDRs could be sold for each nineteen acres of land with appurtenant water rights but with no additional restrictions on the future sale of those water rights. When deed restrictions to retain water rights were recorded on land in the A-19 zone, two TDRs could be sold per nineteen acres of land, resulting in a two-toone transfer ratio.12 To transfer or acquire TDRs, interested owners must apply for a certificate showing the subject site is eligible. After determining eligibility, the county’s community development director issues a certificate. The transferor must grant a perpetual open-space easement to the county or a nonprofit conservation organization. The transfer is not effective until the certificate, the easement, and the instruments of transfer have been recorded. Douglas County’s original TDR program was hampered because developers could obtain bonus density through other means. Before 2000,

for example, the county allowed a 10 percent density bonus through the Planned Development (PD) process. The county subsequently removed this PD bonus provision, reducing the incentive to use the PD mechanism to avoid TDR requirements. A coalition of business leaders, builders, developers, and ranchers reported another issue: the original allocation ratio resulted in a TDR cost that was either too low to satisfy sending area landowners or too high to benefit receiving area developers. In response, the county adopted a significant amendment in 2001 to correct this problem. Under this amendment, land in the A-19 zone could transfer nine units per nineteen acres of sending area land in conjunction with the following opportunities for bonus allocations: • Seven bonus units per nineteen acres when at least half of the sending site is within a one-hundred-year floodplain • Seven bonus units per nineteen acres when water rights are permanently attached to the sending site (in fact, the 2001 amendment requires that water rights be attached to transfer any development rights) • Twenty bonus units for every one hundred acres of sending site land at least one hundred acres in size The 2001 amendment provides similar bonus allocations to sending areas in the FR-19 zone: • One bonus unit per nineteen acres when at least half the sending site is within a onehundred-year floodplain • One bonus unit for every one hundred acres of sending sites at least one hundred acres in area In both the A-19 and FR-19 zones, one bonus unit per nineteen acres of deed-restricted land is

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As of 2010, the TDR program had preserved 4,003 acres. As a model for future preservation successes, the county points to the GaleppiByington Ranch, where the owners protected 700 acres of land by selling TDRs to developers for a reported $5.1 million.

Lessons from Douglas County Douglas County demonstrates how to revitalize an underutilized TDR program by investigating the causes of inactivity and fixing them.

Figure 15.6. Douglas County revived its program mainly by adjusting its TDR allocation ratios. (Photo by Rick Pruetz)

allowed for dedication of public access easements and easements to rivers, public lands, and historic resources. In addition to increasing TDR allocations, the 2001 amendments limit transfers to parcels in excess of forty acres. If the owner of a parcel larger than forty acres transfers less than all of the development rights to which the parcel is entitled, the portion from which the transfer is made must be described in the deed restriction.

Performance Following the 2001 amendments, developers and property owners began using the program. Douglas County certified its first TDRs in 2002.

• Under the original program, developers received a 10 percent density bonus when they used the PD mechanism. The free density bonus for PDs was subsequently eliminated to prevent developers from using PDs to circumvent the off-site preservation requirements that the TDR program imposes on bonus density. • The original allocation ratio—one or two TDRs per nineteen acres—failed to create a market because the TDR price desired by the sending area landowners was too high for receiving area developers to profitably use. By increasing the allocation ratio, a more affordable TDR price provided the per-acre compensation sought by sending area landowners while still generating a TDR price that allowed receiving area developers to make more profit despite the extra cost of purchasing the TDRs.

Palm Beach County, Florida Palm Beach County, located about forty miles north of Miami, extends from the Atlantic Ocean to the center of the Florida Peninsula. One of the fastest-growing places in the nation, Palm Beach County expanded from a population of 114,000 in 1950 to more than 1.3 million

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in 2010. Between 1943 and 1970, the county lost a major percentage of its native ecosystems to growth. In 1980, Palm Beach County adopted its first TDR ordinance, which succeeded in preserving 644 acres of environmentally sensitive land. In 1993, the county adopted another TDR program with lower receiving area baselines and fewer ways for developers to achieve bonus density other than TDR. Most important, the county created a TDR bank and stocked it with nine thousand TDRs severed from thirty-five thousand acres of land acquired with a $100 million voter-approved bond. Developers buy TDRs from the bank, at prices established by the county board, so they can exceed baseline in the county’s TDR receiving areas. The proceeds from these sales are applied to the county’s Natural Areas Fund, which is used to acquire and maintain environmentally sensitive lands. If the TDR bank ultimately sells all nine thousand TDRs at current prices, the proceeds would exceed the amount spent on the open-space bond.

Process Palm Beach County has amended its TDR code provisions at least five times since 1993. Current provisions identify five sending area categories: • Land classified as RR-20 (Rural Residential, one unit per twenty acres) • Lands with exceptional biological diversity and/or species listed as endangered, threatened, rare, or of special concern • Land designated as Agricultural Reserve • Privately owned land designated as Conservation • Other environmental or agricultural sites determined by the county board as worthy of protection

The minimum sending area parcel size varies depending on the category in which it is located. Likewise, the allocation ratio ranges from one TDR per acre to one TDR per ten acres with land in the three categories capable of transferring one TDR per five acres. Preexisting dwelling units are allowed to remain on sending sites. The easement needed to enroll a parcel as a sending site must permanently preclude all future development other than farming or conservation. On agricultural sending sites, all development rights must be severed. On conservation sending sites, however, the owners may elect to transfer only some of the development rights available to the property, provided the county is satisfied that the portion of the site subject to the easement maximizes open-space linkages and environmental benefits. Development rights created by agricultural easements can be reassociated with a sending site, subject to approval of the county board, if none of the development rights has been sold. Receiving sites must meet the following five qualifications: • TDR receiving site projects can be proposed for residential subdivisions inside as well as outside a Planned Development District (PDD) or a Traditional Development District (TDD). • The sites must be located within the Urban/Suburban (U/S) tier and found to be compatible with surrounding land uses and adjacent environmentally sensitive lands. • Buffer zones of native vegetation must be maintained between the proposed development and adjacent environmentally sensitive lands. • Buffer zones must likewise be enhanced for receiving area projects located near certain single-family residential neighborhoods or zones. • Receiving areas cannot qualify as sending

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areas unless all dwellings in the project are deed-restricted as affordable units. As indicated by the number of TDRs purchased from the County’s TDR bank, the baseline density created by receiving area zoning motivates many developers to buy TDRs to achieve bonus density. For example, TDR is an option in many single-family residential zones, where baseline density is sometimes less than two units per acre. Palm Beach County wants to encourage eastern development and a tapering off of density toward the western edge of the Urban/Suburban tier. Consequently, the potential density bonus available through TDR varies depending on location of the receiving site.

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was used to acquire thirty-five thousand acres of environmentally sensitive land, which forms most of the county’s Natural Areas Program. The nine thousand TDRs severed from these properties were placed in the county’s TDR bank. The proceeds from sales of banked TDRs are applied to the Natural Areas Fund to maintain existing preserves and acquire new natural areas. Developers can still buy TDRs directly from sending area landowners, as well as from the county’s TDR bank. Periodically, the county commissioners adjust the price per TDR. In 2002, for example, each TDR carried a $10,000 price tag; by 2005, the price had risen to $25,000 per TDR. Four or five years later, developers could purchase TDRs for $50,000 each. Bear in

• West of the Florida Turnpike, receiving sites can receive a bonus of up to two extra dwelling units per acre. • Sites east of the turnpike but not in the Revitalization and Redevelopment and Infill Overlay can receive up to three extra dwelling units per acre. • Sites within a Revitalization and Redevelopment and Infill Overlay can receive up to four extra dwelling units per acre through TDR. One additional dwelling unit per acre of density bonus is available to receiving sites near parks and community commercial, mass transit, regional commercial, and major industrial facilities. In certain districts, bonus density is limited to a doubling of the baseline density of the underlying zoning. Half of the bonus units resulting from TDR must qualify as workforce housing. To facilitate transfers, Palm Beach County created a TDR bank to hold development rights purchased by the county using bond issue proceeds and other county funds. In 1991, county voters passed a $100 million bond measure that

Figure 15.7. The Palm Beach County TDR bank sells TDRs severed from 35,000 acres of environmentally sensitive land purchased with an openspace bond. (Photo by Rick Pruetz)

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mind that this price pertains to TDRs used for market-rate bonus dwelling units. The bank charges a very small amount—as low as $1 each during the first decade of the twenty-first century—for TDRs used to create bonus dwelling units that qualify as workforce housing.

Performance As of 2010, fifty-six receiving area projects had purchased TDRs from the Palm Beach County TDR Bank, buying a total of 2,657 TDRs. Since the preservation of thirty-five thousand acres in the Natural Areas Program stocked the TDR bank with nine thousand TDRs, more than six thousand TDRs remain available for purchase through the TDR bank. Developers seldom buy TDRs directly from sending area landowners, primarily because TDR bank prices tend to cost less than the prices sought by individual landowners in sending areas. Also, the TDR bank makes transactions predictable, fast, and easy for developers.

Lessons from Palm Beach County The Palm Beach County TDR program demonstrates how TDR programs can create a fund-extending alternative to traditional approaches in which development rights are allowed to expire after being purchased. Developers want to buy the TDRs, which indicates the county’s program works well.

• The receiving area zoning establishes baselines that developers want to exceed, as demonstrated by the fact that developers have purchased 2,657 TDRs from the TDR bank. • The TDR bonus option is available to land in a variety of zoning districts, effectively creating potential receiving areas throughout Urban/Suburban tier. • Meaningful land use restrictions, which apply to many of the sending area zoning districts, motivate owners to sell sending area land or TDRs. • The TDR code provisions incorporate transfer ratios, demonstrating Palm Beach County’s determination to design a viable TDR market. • The TDR bank gives developers certainty about the availability and cost of TDRs. • Palm Beach County residents support land preservation efforts, as demonstrated by the fact that the voters have approved $306 million in open-space bonds to date. Palm Beach County used an open-space bond as seed money to stock its TDR bank. The proceeds from TDR bank sales are used to maintain existing preserves and protect additional lands. Over time, the receipts from TDR sales could exceed the total spent on the original open-space bond. Communities across the United States are studying Palm Beach County’s creative combination of TDR and traditional funding as a way to stretch their limited preservation dollars.13

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Environmental Preservation Case Studies

Dozens of TDR programs are designed to protect selected environmental resources, often multiple ones. This chapter showcases five such programs, including the nation’s only bi-state TDR effort.

Tahoe Regional Planning Agency, California and Nevada In 1969, California and Nevada formed the Tahoe Regional Planning Agency (TRPA) to protect the clarity of Lake Tahoe, located high in the Sierra Nevada Range on the border of these two states. In fact, Lake Tahoe is so famous for its clarity that the federal Clean Water Act designated it as an outstanding national resource. The entire Tahoe Basin comprises 207,000 acres of land and includes portions of two counties in California, three counties in Nevada, and the city of South Lake Tahoe. Nearly twenty years after its founding, TRPA adopted new zoning codes that regulate land use, density, growth rates, scenic impacts, and—most particularly—land coverage. Increased land coverage degrades water quality by removing the land’s ability to slow down stormwater runoff, remove nutrients, and reduce erosion. Under the land coverage regulations, adopted in 1987, the

owners of some parcels would not be able to build a small home or even a small addition or garage to an existing dwelling. To provide some flexibility while still maintaining land coverage limits on average, TRPA instituted a land coverage transfer program. Under this program, receiving site owners can acquire coverage from a sending site to obtain the coverage rights needed to build or expand on a receiving site. In addition to the land coverage transfer program, TRPA provides for transfers of other marketable rights. These programs include some of the most innovative (and complicated) TDR mechanisms in the United States.1

Process In the Tahoe Basin, an “allocation” is the right to build a residential unit under TRPA’s building quota system. A building allocation and a development right, plus the necessary land coverage rights, are all needed before a building permit can be issued. In addition, TRPA distinguishes between transfers of development rights from undeveloped properties and transfers from properties that contain existing buildings. In total, TRPA provides for four types of transfers. 179

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Transfers of Land Coverage TRPA has rated land throughout the Tahoe watershed for the capability of the soil to accept increasing coverage from impervious surfaces without producing unacceptable rates of sediment runoff and erosion. For example, the most sensitive sites, known as Stream Environment Zones, might be limited to 1 percent coverage. Up to 30 percent coverage might be allowed on sites with soils of greater capability. Transfers of coverage rights are allowed when sending sites are classified as being more sensitive than receiving sites. In addition, sending and receiving sites must be located in the same hydrologic region, of which the Lake Tahoe Basin has nine. When coverage is transferred from a sending site, the sending site must be deed-restricted to reflect the retirement of land coverage rights. With the exception of certain commercial projects, the program uses a one-to-one transfer ratio: the amount of coverage available for transfer equals the amount of coverage precluded at the sending sites. The maximum coverage on residential sites varies, depending on the development’s type and size. TRPA sets different maximum coverage limits for commercial buildings, tourist accommodations, and public facilities (including public roads). Developers can buy coverage rights privately or through the California Tahoe Conservancy, a state agency created in 1984. In 1987, the California Tahoe Conservancy began its Land Coverage Bank, which creates land coverage rights, allocations, and development rights by acquiring and restoring sending sites. The bank enables developers to comply with TRPA regulations by buying rights rather than having to acquire, restore, and retire properties themselves. The conservancy uses the proceeds from the sale of these rights to acquire additional sending sites. Transfers of Residential Allocations To ensure the public infrastructure keeps pace with the rate of growth, TRPA limits the amount

of development that can be added to the basin every year. Under this quota system, TRPA sets a different allocation for three different land uses and may change these allocations over time. A typical set of allocations might be three hundred dwelling units per year, four hundred thousand square feet of commercial development over a ten-year period, and two hundred rooms of tourist accommodations per ten years. To transfer allocations, the sending site must be a vacant parcel of land not eligible for development due to a highly sensitive land-capability classification. After an allocation transfer, the sending site must be permanently precluded from development by either deed restriction or transfer of title to a public agency or nonprofit agency established to preserve land for openspace purposes. The site receiving the transferred allocation must be planned for residential development and have a less sensitive landcapability classification than the sending site. The appropriate local unit of government as well as TRPA must approve the transfer. Transfers of Development Rights from Vacant Land In the TRPA program, any lot has the right to build one dwelling unit at most, regardless of the density designation found in the zoning code. For example, even if the multiple-family residential zoning on a lot would allow additional dwelling units, the owner must obtain development rights to build more than one unit. The rules for these transfers differ somewhat depending on whether the sending site is vacant or already contains some existing development. Transfers of development rights from undeveloped property must meet six provisions. For example, the development rights on the sending site must be retired following the transfer, and the project proposed for the receiving site must comply with the property’s use and density requirements. Transfers between sites in different

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counties require the approval of affected local governments. Transfers of Existing Development Rights TRPA encourages the elimination of existing structures from Stream Environmental Zones and other sensitive areas by allowing property owners to create development rights through the demolition of inappropriately located structures. When transfers of existing development occur, the existing structures or facilities must be removed and the land restored to as natural a state as possible. In addition to creating a transferable development right, the demolition creates the equivalent of a building allocation because no new structures are created when a building is demolished. Under TRPA’s quota system, this combination gives property owners a strong incentive to remove improperly sited buildings. The types of existing development that can be transferred include residential units, tourist accommodations, commercial space, public service uses, and recreational facilities. Some marketable rights can be converted to other rights, often under limited circumstances. For example, existing residential units or tourist accommodation units can be converted to residential, tourist, or commercial units or floor area—but only if the sending site is a sensitive parcel restored in conjunction with the transfer. Many landowners and developers in the region rely on planning facilitators and other experts to guide them through the various options. The relative value of various rights changes over time and can vary from one location to another. In some hydrologic regions, coverage rights from sensitive land become quite valuable because of dwindling supplies of land that meet the requirement of sending sites being more sensitive than receiving sites. In certain economic cycles, the value of development rights can be quite low, creating little incentive for potential sending site owners to participate unless they

Figure 16.1. The TDR program established by the Tahoe Regional Planning Agency aims to protect the clarity of Lake Tahoe. (Photo by Rick Pruetz)

have other, more valuable rights to sell. Conversely, allocations are often extremely valuable, and TRPA periodically considers ways to generate more preservation from that value. Individual communities must decide whether to allow rights to be transferred into or out of their jurisdiction given their own needs for future development and the additional benefits sometimes received from transfer fees required of these transactions.

Performance Through the TRPA program, the California Tahoe Conservancy has acquired 1.2 million

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square feet of coverage and has sold coverage and other marketable rights to more than 215 private residential and commercial projects. Through these sales, the conservancy has generated more than $2.3 million for reinvestment in additional acquisition and restoration projects.

Lessons from TRPA The TRPA program does not adhere to the general rule of keeping TDR programs as simple as possible. Nevertheless, in coordination with TRPA’s overall environmental regulations, this program continues to protect and improve water quality in the region largely by observing key success factors. • Low baselines in receiving areas motivate developers to use the TDR option. For example, only one dwelling unit is allowed per parcel of land unless TDR is used, regardless of the number of units permitted by the zoning code. • At least one jurisdiction, the City of South Lake Tahoe, has successfully used transferred marketable rights in its downtown revitalization efforts, a highly desirable receiving area scenario. • Strict development regulations motivate the owners of environmentally sensitive sites to preserve their land and transfer the marketable rights. • In many cases, transfers are the only way developers can achieve the coverage and other rights they need for their receiving site projects. • TRPA uses numerous strategies to promote preservation, such as conversions from one marketable right to another. • Widespread recognition of Lake Tahoe’s uniqueness and fragility has helped build strong public support for TRPA regulations and the transfer program.

• The California Tahoe Conservancy provides a valuable TDR banking function.

Collier County, Florida Collier County, with about 340,000 residents (2010), includes the city of Naples as well as part of the Everglades and the Gulf of Mexico shoreline at the southwestern tip of Florida. In total, roughly 80 percent of the land area of Collier County is protected in county, state, and federal parks and preserves—notably, the Audubon Society’s Corkscrew Swamp Sanctuary, Big Cypress National Preserve, Florida Panther National Wildlife Refuge, and Fakahatchee Strand Preserve, home to fifty-eight native orchid and bromeliad species. In 1974, Collier County adopted a new zoning ordinance to control growth and preserve coastal islands, marshes, and other ecologically sensitive areas. Most of the county was zoned Special Treatment Overlay, which imposes stringent environmental regulations and requires a special permit for all new development. To encourage the preservation of these areas, landowners are allowed to transfer development potential to land outside the zone. The owners of larger properties, however, can often use their development potential on-site by clustering development on portions of their land not affected by the Special Treatment Overlay. Consequently, the 1974 TDR program preserved only 325 acres in its first twenty-five years. In 2004, Collier County adopted another TDR mechanism as part of its Rural Fringe Mixed Use District. This district contains roughly 90,000 acres of land held by approximately ten thousand property owners. To save valuable environmental lands, including wetlands and habitat for protected species, the program started with a base allocation of one TDR per 5 acres. To motivate greater participation among sending area landowners, the county ap-

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proved an amendment in 2005 doubling the base allocation for early enrollment and granting additional TDRs to owners who convey land in fee to a public agency or conduct site restoration and maintenance in accordance with an approved plan. As of 2010, the Rural Fringe TDR programs had preserved 3,519 acres and granted more than three hundred TDRs for restoration and maintenance of sending sites. Collier County’s third TDR program, Rural Lands Stewardship (RLS), calculates transferable credits based on a combination of the resource value of a specific sending site and the level of conservation selected by the owner of that site. In receiving areas, developers are allowed to build to planned densities by retiring credits based on the number of acres to be developed, rather than the number of bonus dwelling units to be developed. Most important, the overall design of the first RLS project largely resolves the neighborhood acceptance issues that bedevil some TDR programs. This is because the receiving area is a smart growth new town surrounded by its own sending area.

Process In 1999, landowners, environmentalists, and Collier County were facing off for extensive litigation over the future of three hundred square miles of land surrounding the city of Immokalee, thirty miles northeast of Naples. Fortunately, the parties instead collaborated on a planning effort that led to adoption of Florida’s first RLS program. In 2004, Collier County approved plans for Florida’s first RLS new town, construction started, and significant environmental resources in the sending area land were rapidly placed under conservation easements. The planning area for this program contains 195,000 acres, most owned by fewer than a dozen people. The land is primarily zoned a Rural Agricultural Zoning District, which allows

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one unit per five acres, and used for livestock grazing, citrus orchards, and row crops. But the land also includes environmental resources, including wildlife habitat and flow ways that recharge the groundwater aquifer. Sending and receiving areas are not specifically designated. Areas with higher resource values, however, have higher TDR allocations, thereby creating an incentive to use the most sensitive lands as sending areas and the least sensitive lands as receiving areas. Specifically, Collier County determines a base allocation by using a natural resource rating system that assigns higher scores to wildlife habitat, flow ways, water retention areas, and other environmental resources. In addition, property owners decide which of seven layers of development potential they want to forgo on the sending area land to create Stewardship Credits. These layers include residential development, conditional uses, mining, recreation, crop agriculture, agricultural support, and pasture agriculture. The more layers forgone, the greater the number of Stewardship Credits created for transfer. In Collier County’s RLS program, developers can achieve some or all of the development potential allowed by the approved master plan by submitting eight credits for each receiving area acre they intend to develop (with the exception of land developed as schools and other public uses). Once developers submit eight credits to develop one acre of receiving area land, they actually have incentive to maximize whatever density the plan allows for that acre, to spread the fixed cost over more dwelling units. The receiving area—the new town of Ave Maria—occupies a relatively remote location six miles south of Immokalee. The location alone minimizes opposition from nearby residents because the immediate vicinity features few existing homes. Ave Maria is also intended as a model for future receiving area developments; it employs smart growth principles, such as compact, mixed-use development with pedestrian-friendly

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Figure 16.2. The receiving area new town of Ave Maria is anchored by the Oratory in the center of its piazza. (Photo by Rick Pruetz)

neighborhoods. The town square, or piazza, at the center of Ave Maria surrounds a 1,200-seat church called the Oratory. Ringing this focal point are multistory buildings that combine residential with office space and retail commercial. The new town is also home to Ave Maria University, which already generates significant local employment and reduces the need for residents to commute to outside jobs. Plans call for eleven thousand dwelling units in various styles and price ranges, served by multiple swimming pools, fitness centers, and other amenities.

Performance Collier County’s RLS program registered immediate success, preserving 54,962 acres as of February 2010.2 Only the TDR program in King County, Washington, has exceeded this rate of preservation.

Lessons from Collier County By introducing several innovations, Collier County’s RLS program advances the TDR concept to a new level of sophistication. • Demand for development is common in Florida. Less common are large property owners who are willing to experiment with new forms of TDR that use development to preserve farmland and environmental resources. • The density-neutral credit requirement in the receiving area is likely to be copied by many TDR programs in the future. • Not only does the receiving area location minimize the potential for opposition, but its design incorporates smart growth principles, making Ave Maria a likely model for future new-town receiving areas. • Ave Maria offers no alternative means of

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development other than compliance with RLS requirements. In return, developers have assurance that they can build to approved plans when they submit the required number of credits. • The receiving area RLS requirements are simple, while the sending area allocation formula is complex. Nevertheless, the instant success of this program suggests that sending area complexity is not a drawback when the sending area includes sophisticated owners of larger properties.

Malibu Coastal Zone, California The Malibu Coastal Zone stretches along twenty-seven miles of Pacific Ocean shoreline, ranging from the city of Los Angeles to the border of Ventura County, and extends five miles inland to encompass part of the Santa Monica Mountains. Antiquated subdivisions in these mountains contained more than five thousand vacant lots in the late 1970s. Although often small, steep, and inaccessible, these lots still have potential as home sites because they offer rural living near the heart of the second-largest city in the United States. But building homes on these lots would create adverse environmental and public safety outcomes for several reasons: • The coastal zone’s ecosystem supports exceptional biodiversity, with more than nine hundred species of plants, more than half of the bird species found in the entire United States, and habitat for mountain lions, bobcats, and golden eagles. Plans call for the protection rather than the development of these natural resources. In fact, the U.S. Congress created the Santa Monica Mountains National Recreation Area in 1978 to preserve as much of the area as possible.

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• In addition to natural resources, the Malibu Coastal Zone is known for natural disasters, including wildfires, floods, and landslides. In one subdivision alone, repeated fires and floods destroyed over twothirds of the homes. • The rugged coastal topography does not easily lend itself to new roadways or even the expansion of existing roads. This makes access difficult, particularly if residents need to evacuate in advance of a wildfire or flood. • Septic systems installed on these small, steep lots can fail, causing raw sewage to seep into nearby streams that enter the Pacific Ocean near some of southern California’s most popular beaches. Between 1977 and 2004, the California Coastal Commission—an agency created by the 1976 California Coastal Act—regulated development within the Malibu Coastal Zone. The act permitted new subdivisions only where 50 percent of the existing lots were already developed. In 1978, however, 64 percent of the 13,475 lots of record in the Malibu Coastal Zone remained vacant. That meant the commission would have to allow the development of hundreds of substandard lots in antiquated subdivisions while denying new subdivisions that would comply with modern environmental standards and be located in areas suitable for development. In 1979, to solve this dilemma, the California Coastal Commission adopted guidelines requiring that one existing lot be retired from development for each lot created through new subdivisions. Specifically, these guidelines established a process for developers to buy transfers of development credit (TDCs) from the owners of sending area lots in the Santa Monica Mountains to have new lots approved in the Malibu coastal plain—the receiving area. Through this TDC program, the commission has allowed new

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subdivisions without increasing the area’s overall development capacity.

Process Originally, the guidelines confined potential sending sites to existing substandard lots in small-lot subdivisions. When amendments were made to the guidelines in 1981, however, TDCs could be transferred from land parcels of any size within Significant Ecological Areas designated in the Los Angeles County General Plan. The success of the program hinged on ensuring developers could find TDCs at a reasonable price. To provide a dependable supply of TDCs, the California Coastal Conservancy—a division of the California Resources Agency—spent $2.6 million to buy 213 TDCs in four small-lot subdivisions in the sending area and banked those TDCs for resale to developers. The conservancy also started a program allowing developers to pay fees in lieu of actually purchasing TDCs. The conservancy used the funds generated by the fees to purchase TDCs. The Coastal Commission relaxed the TDC allocation formula and established the Mountains Restoration Trust with a $300,000 grant to be repaid over time with proceeds from in-lieu fees. From 1982 to 1986, developers hesitated to buy TDCs because the land use plan for the Malibu Coastal Zone was still in flux. When the land use plan was adopted in 1987 with the TDC concept intact, the program stabilized. At the same time, the Malibu real estate market was very active, with new building sites selling for as much as $1 million. To reduce developer discontent about having to buy TDCs to create new lots, both the Mountains Restoration Trust and the California Coastal Conservancy tried to maintain a reasonable price and adequate supply of TDCs. With each TDC averaging about $20,000, developers generally accepted the con-

cept and treated the purchase of TDCs as part of the cost of developing in Malibu. Even though the voters approved cityhood for Malibu in June 1990, incorporation did not occur until March 1991. During this ninemonth gap, developers scrambled to get subdivisions approved while Malibu was still in the County of Los Angeles. In the year prior to incorporation, approximately 150 TDCs were exchanged. During this period, one-quarter of all the credits transferred since the beginning of the program were bought and sold. Without sufficient supply, developers would have called for elimination of the TDC requirement. But the Mountains Restoration Trust purchased enough TDCs to meet the spike in demand, which ended abruptly when Malibu incorporated and imposed a development moratorium.3 The California Coastal Commission operated the original TDC program for thirteen years following the formation of the City of Malibu in 1991. In 2004, Malibu adopted its own Local Coastal Plan, which includes a transfer mechanism similar to the original TDC program started in the 1970s. Approval of new lots or multiple-family residential dwelling units anywhere in Malibu requires the retirement of donor lots within the sending area in the Santa Monica Mountains and under the jurisdiction of Los Angeles County. The sending area has six categories of donor sites: • Any lots in seven small-lot subdivisions • Lots containing sensitive habitat in four other small-lot subdivisions • Land with sensitive habitat outside smalllot subdivisions • Parcels within eight Significant Watersheds • Parcels adjacent to parkland • Parcels in wildlife corridors4 The number of credits available to a donor site depends on the lot’s size and slope and the category of the sending site subdivision.

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tion, the few parcels in Malibu with actual subdivision potential often prove unsuitable because they contain sensitive habitat or must provide shoreline protection mechanisms that preclude lot splits.

Lessons from the Malibu Coastal Zone During its heyday, the Malibu Coastal Zone program enjoyed many of the factors typically found in successful TDR programs:

Figure 16.3. The Santa Monica Mountains are famous for natural beauty as well as natural disasters like wildfires, floods, and landslides. (Photo by Rick Pruetz)

• Strong demand for additional development could be achieved only by TDC. • The profitability of additional development in the receiving areas justified the added expense of retiring lots in the sending area. • All stakeholders and the general public easily understood the “no net gain” policy. • TDC supply was ensured by the banking capital provided by the California Coastal Conservancy and by skillful intervention from the conservancy and the Mountains Restoration Trust.

Performance

Miami–Dade County, Florida

Before the incorporation of Malibu in 1991, this program was one of the most active in the nation. Roughly eight hundred acres of sending area land were preserved through the retirement of 924 vacant lots in antiquated subdivisions— almost 20 percent of the undeveloped, substandard lots originally inventoried in the late 1970s. Since 1991, the program has seen little use. Malibu adopted zoning changes that increased minimum lot sizes and reduced the number of parcels that could potentially be candidates for subdivision. For example, current zoning limits the larger remaining parcels in the city to twenty- or forty-acre minimum lot sizes. In addi-

Dade County, which occupies the southeastern corner of the Florida peninsula, numbers about 2.5 million residents (2010). Even though half of its land area lies in the Everglades, Dade County contains the Miami metropolitan area and is Florida’s most populated county. The Everglades originally consisted of a gently sloping wetland flowing in a forty-milewide path from Lake Okeechobee one hundred miles south to the mangrove and coastal glades of Florida Bay. This huge wetland flushes and recharges the coastal aquifers and reduces saltwater intrusion near the coast. For decades, however, the county has recognized that

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human-made alterations have reduced the Everglades’ ability to replenish the groundwater and perform various other environmental functions. In 1980, a proposed management plan was prepared for the East Everglades area, the 242square-mile portion of the Everglades that covers the western half of Dade County. The plan recognized that protection of the Everglades is critical to supplying freshwater to metropolitan Dade County, the Florida Keys, and Everglades National Park. The plan also described how preservation of the Everglades was needed for flood control, commercial fisheries, recreation, wildlife habitat, and the efficient provision of utilities and public services. In 1981, the Dade County Board of County Commissioners adopted the East Everglades Ordinance, which exhaustively describes the area’s geologic, groundwater, physiographic, and topographic characteristics. The ordinance declared the East Everglades an Area of Critical Environmental Concern because it recharges the Biscayne Aquifer, provides a surface water supply to Everglades National Park, creates flood storage capacity, maintains water quality, protects the economic vitality of Dade County, and contains numerous natural features—including thirty endangered or threatened species. Finally, the ordinance implements its goals and policies through land use regulations and procedures, including the ability to transfer development rights.5

Process In 1981, Dade County adopted a severable use rights (SUR) ordinance. Potential sending sites are parcels in the East Everglades, and eligible receiving areas are unincorporated lands within the urban boundary line designated in Dade County’s Comprehensive Development Master Plan. The SURs available to sending sites vary, de-

pending on the management area of the East Everglades in which the sending site is located. The ratio varies from one SUR per five acres to one SUR per forty acres. The expectation of being able to develop is usually highest in Management Area 1; land in this subarea is generally closest to urban areas and contains altered wetlands and agricultural lands with some existing residences. Some of this management area is allocated one SUR per five acres. Even within Management Area 1, however, the expectation of being able to develop depends on whether the land in question is protected from floodwaters. As a matter of right, the owners of parcels in Management Area 1 may build homes on these parcels at a density of one unit per forty acres. Because SURs can be generated at the rate of one SUR per five acres, the land in this management area can carry a substantial transfer ratio of eight to one. Management Area 3B contains agricultural lands farther removed from urbanized areas; in this management area, one SUR is allocated per twelve acres. Management Area 3C, considered a transitional area, allows one SUR per forty acres. The remaining management areas have water at or above the surface for at least three months of the year, so the county determined that those areas have no realistic development value; consequently, no SURs are available in these areas. Any potential sending parcels smaller than these minimum lot sizes but legally entitled to develop one dwelling unit prior to 1981 can be allocated one SUR, if the property owner registered within one year of the adoption of the SUR ordinance. The SURs transferred from the sending sites can be used to deviate from density, lot area, frontage, and other development requirements on residential and commercial receiving sites in the unincorporated portions of Dade County designated for urban development. In fact, only the environmental, open-space, agricultural, and recreation zones are ineligible to receive SURs.

Chapter 16: Environmental Preservation Case Studies

The density increases that can be attained through transfers vary between the eighteen different zoning districts capable of receiving SURs. For example, in the RU-TH Townhouse zoning district, a project using SURs can be granted a 10 percent reduction in the minimum lot size, a one-third reduction in the required front setback, and an 18 percent increase in density (from 8.5 to 10 dwelling units per acre). In the commercial and office park zoning districts, SURs are converted to floor area ratio (FAR). For each SUR transferred, a receiving site in a commercial zone is granted an additional .015 FAR per acre as long as all other development and zoning code requirements are met. In the office park zone, an SUR allows an additional floor area of .010 FAR per acre. To be granted an SUR density bonus, developers of receiving sites must demonstrate that they own the SURs, that the SURs have not already been used, that the SURs are recorded in the chain of title of the sending parcel, and that the sending site has been restricted to residential uses. The Dade County program does not require a rezoning or any other discretionary approval of the receiving site; the use of SURs at a receiving site is a matter of right. In 1997, however, Dade County adopted an ordinance requiring a special exception for site plan approval as part of residential rezoning applications for sites of three acres or more in size. The ordinance requires the applicant to disclose the intention to obtain a density bonus via SUR and the number of SURs to be used.

Performance Dade County continues to experience strong demand for additional development. In the past, developers often found it cheaper to acquire SURs than to buy the additional land needed to accommodate more dwelling units. SURs can cost about $2,500 each when purchased directly

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from major SUR holders. When purchased through an intermediary, SUR prices can range from $3,000 to $5,000. Under the right circumstances, however, landowners can still benefit from purchasing these SURs at “retail” prices. Significant SUR supplies are created as a byproduct of the land acquisition programs of the U.S. Army Corps of Engineers and the U.S. Department of the Interior. These federal agencies, pursuing watershed protection and environmental preservation missions, often acquire properties in the Everglades through condemnation. The SURs from these condemned properties remain in the possession of the former landowners. The federal agencies consider SURs as personal property that cannot be acquired via condemnation. This policy leaves the former owners of the condemned land with SURs to sell. While SURs can be transferred and held indefinitely, the sheer number of available SURs has kept them affordably priced. When it began, the Dade County program proved one of the most successful TDR programs in the country. Within one year of adoption of the East Everglades Ordinance, about four hundred owners of land parcels that did not meet the minimum requirements for whole SURs registered, as required by the code, to convert those fractional SURs to whole SURs. The county is not able to track the number of SURs severed from sending sites. A 2001 analysis, however, revealed that approximately 829 of the estimated 4,500 to 4,700 SURs had been used through the platting process for residential purposes. In 2010, to better understand the remaining supply, Dade County began evaluating the number of SURs used.6 Based on initial estimates, more than half of the 4,500 SURs remained unused. As of 2010, SURs have not been used for commercial purposes but continue to be used for single-family and some multifamily projects. People who own less than two acres of land in a receiving area zoned at one unit per acre can

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double their development potential by purchasing a SUR. The administrative process does not require a public hearing, provided all zoning codes are met.

Lessons from Miami–Dade County The Dade County program has many factors found in successful TDR programs: • Provisions of the Comprehensive Development Master Plan encourage the use of SURs. • The ample supply of SURs keeps them affordable to use. • Environmental regulations and restrictive density limits discourage property owners from developing on sending sites. • In some management areas, transfer ratios are as high as eight to one, providing a significant incentive to transfer SURs. • The SUR ordinance has eighteen different zoning districts that can receive SURs, and the code clearly spells out the density bonus. • The use of TDR is a matter of right once receiving site zoning has been secured. This provides levels of speed and certainty that make the use of SURs attractive to developers.

Long Island Pine Barrens, Suffolk County, New York Suffolk County, with more than 1.5 million residents in 2010, includes the entire eastern end of Long Island in the state of New York. In the center of Suffolk County lies the Long Island Pine Barrens, the largest single undeveloped area on Long Island. The Pine Barrens contains pitch pine and pine-oak forests, coastal plain ponds, marshes and streams that provide nu-

merous recreational opportunities, and open space. The area also has the largest concentration of endangered, threatened, and special concern plant and animal species in the state, including dwarf pines. In addition, the Pine Barrens serves as the deep recharge area for one of the largest sources of groundwater in the state—an aquifer that provides drinking water for much of Long Island. Development has reduced the Pine Barrens, originally 250,000 acres in size, to a 100,000-acre area shared by the townships of Brookhaven, Riverhead, and Southampton. In 1989, environmental groups sued the three towns and Suffolk County over whether more than two hundred pending building projects should be allowed to proceed. In 1992, the New York State Court of Appeals agreed with the environmental groups that the area needed a protection plan. The New York State Legislature responded with the Long Island Pine Barrens Protection Act of 1993. This legislation created the Central Pine Barrens Joint Planning and Policy Commission, consisting of representatives from each of the three townships, Suffolk County, and the State of New York, and charged it with developing a plan for protecting the Pine Barrens. In June 1995, each of these jurisdictions adopted the Central Pine Barrens Comprehensive Land Use Plan. This plan divided the Pine Barrens into a 52,500-acre Core Preservation Area and a 48,500-acre Compatible Growth Area. The Core Area is designed for agriculture, recreation, and other open-space uses, while the Compatible Growth Area permits appropriate patterns of growth, including some development redirected from the Core. To implement these goals, the plan proposed acquiring 75 percent of the remaining privately owned vacant land in the Core, or 10,000 acres. Owners of land in the Core can use a transfer of development rights program called the Pine Barrens Credit Program.7

Chapter 16: Environmental Preservation Case Studies

Process Sending sites are private properties within the Core. Owners can use these properties for certain recreational uses and agricultural activities that do not require substantial alteration of native plants. Most residential development is prohibited, except for the expansion of existing homes; development approved before June 1, 1993; and cases involving extraordinary hardship. Despite these restrictions, the plan allows one single-family residence to be built on existing lots at least ten acres in size if the lots front on existing streets and are within areas already partly developed. This exception reflects the belief that a limited number of homes in the Core could serve a stewardship function by deterring illegal dumping and other activities that damage the environment. Alternatively, these owners can retain fee title to the sending sites but sell the development rights, referred to as Pine Barren Credits (PBCs). To determine the PBCs allocated to each sending site, a yield factor is applied to the acreage eligible for PBCs based on the density allowed on the site under the zoning regulations that applied when the plan was adopted in 1995. The yield factors reduce gross acreage to account for rights-of-way but otherwise assume that the resulting net acreage is completely developable. In reality, many Core properties are substandard lots created in the early 1900s that would be difficult or impossible to develop due to site constraints and the high cost of providing roads and other public services. Consequently, many owners prefer to sell PBCs at this nominal one-to-one transfer ratio rather than undergo the time, expense, and risk of trying to develop onsite when that is an option. The commission does not review sending site applications that use the preapproved conservation easement. Alternatively, applicants may submit their own easements for the commission’s review and approval. After the easement

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has been recorded, the Pine Barrens Credit Clearinghouse, an agency created by the Pine Barrens Commission, issues a PBC Certificate. The owner of PBC Certificates may sell them, hold them for future use, or redeem them to receive additional density at a receiving site. Owners wishing to sell PBCs may consult lists of potential buyers provided by the clearinghouse or list their PBCs with a real estate broker. Alternatively, PBCs may be sold directly to the clearinghouse. The State Natural Resources Damages Account contributed $5 million to the clearinghouse to establish a revolving fund for this purpose. (This seed money came in the form of an interest-free loan that would have to be repaid only if the clearinghouse is terminated.) The clearinghouse purchases PBCs at a price established by its board of advisors and sells them at auction. PBCs are redeemed when they are used to increase residential density or nonresidential intensity at a receiving site. Unless the town grants special permission, PBCs can be used only at receiving sites in the same town as the sending sites that generated the PBCs. Southampton requires the sending and receiving sites to also be within the same school district. Each of the three towns identifies receiving sites capable of accommodating 2.5 times the number of PBCs that could be created at the sending sites in that town. Furthermore, each town must establish “as of right” receiving areas that will accept PBCs without the need to obtain a special permit. These “as of right” receiving areas must be capable of accepting at least as many PBCs as the sending sites in that town are capable of generating. Southampton designates nine residential zoning districts that can receive PBCs. In these receiving districts, the maximum density achievable with PBCs ranges from 1.5 to two times baseline density; higher increases are permissible through the Planned Development District process. In Brookhaven, the receiving sites include

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of land. In the process, more than nine hundred PBCs were severed, making this one of the more active TDR programs in the nation. PBC prices have ranged from $7,500 to more than $96,000, with an average price of $42,000 for the program’s first fourteen years.

Lessons from the Long Island Pine Barrens The Central Pine Barrens Plan adapted lessons from the New Jersey Pinelands and other programs to create a TDR strategy that incorporates several success factors:

Figure 16.4.The Long Island Pine Barrens program helps protect the largest single undeveloped area in Long Island. (Photo by Rick Pruetz)

non–environmentally sensitive land in seven residential districts, eleven nonresidential districts, and the planned development district. One PBC allows two bonus multiple-family residential dwellings, 1,000 square feet of additional nonresidential floor area, two extra beds in a congregate care facility, or one extra unit in a planned retirement community. In Riverhead, industrial developments in the Receiving Industrial District achieve bonus intensity at the rate of three hundred additional gallons per day of sanitary sewage flow per PBC, up to the maximum flow allowed by the town’s sanitary code.

Performance As of 2010, the Central Pine Barrens program had preserved 737 parcels equaling 1,828 acres

• TDR receiving areas must fit the community. The Pine Barrens plan wisely set goals for the three townships but let these governments decide individually where to place the receiving areas and how to generate demand for PBCs. • The plan imposed severe restrictions for on-site development of sending areas, ensuring protection for sensitive resources and motivating property owners to choose the TDR option. • Even though it uses a nominal one-to-one transfer ratio, the program offers incentives, such as a PBC allocation formula that ignores the likelihood of sending site development constraints. • The three townships offer as-of-right use of PBCs, providing greater certainty to receiving site developers. • Detailed administrative procedures and an extensive website help promote and facilitate transfers; an active clearinghouse, capitalized by the State of New York, buys and sells PBCs.

Chapter 17

Rural Character Preservation Case Studies

Some areas want to preserve their ethereal nature, such as their rural character. This chapter offers case studies of four communities pursuing that goal.

San Luis Obispo County, California San Luis Obispo County, with nearly 270,000 residents (2010), lies midway between San Francisco and Los Angeles on California’s Pacific Coast. Its original transferred development credit (TDC) program, introduced in 1986, focused on retiring substandard lots that provide habitat for Monterey pine and Cambria pine in the coastal community of Cambria (population 5,000). Ten years later, San Luis Obispo County adopted a Countywide TDC Program to preserve agricultural land and natural resources as well as retire thousands of legal, undeveloped lots scattered throughout the county’s rural portions. The stakeholders were concerned about equitable allocation of TDCs despite a diversity of land values, with potential sending sites that included coastal areas, vineyards, and remote rangeland. In response, San Luis Obispo County pioneered an approach that calculates the transferable TDCs from a site-specific appraisal of each con-

servation easement proposed by a potential sending site owner. The Countywide Program encourages other communities to follow Cambria’s example and develop local, community-based TDR programs to accomplish specific preservation goals. So far, South County and South Atascadero have added programs.

Process Cambria In the late 1800s, long before adoption of modern development standards, nine thousand very small lots were created in the Lodge Hill subdivision of Cambria, often on steep and highly erodible slopes. Many of these lots remain undeveloped despite Cambria’s highly desirable coastal setting. The Cambria program aims to minimize hazards and save Cambria pine habitat by reducing the size of the homes that can be built on small lots and retiring these lots wherever possible.1 Sending sites are environmentally sensitive lots in the Lodge Hill subdivision designated as special project areas (SPAs) by the county’s Local Coastal Program (LCP). These sending sites are known as SPA #1, Fern Canyon, and SPA #2,

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Figure 17.1. San Luis Obispo uses TDR to encourage the retirement of undeveloped rural parcels as well as preserve farmland and environmentally sensitive areas. (Photo by Rick Pruetz)

a scenic hillside visible from the coastal highway. Different development standards apply depending on whether a parcel is in SPA #1 or #2, whether the slope is greater or less than 25 percent, and the parcel’s dimensions. For example, a single lot in SPA #1 that is 25 feet wide and 1,750 square feet in area is allowed a house footprint of 500 square feet and a total floor area of 900 square feet if the lot has a slope of 25 percent or less. If the slope exceeds 25 percent, the maximum footprint is 400 square feet and the total floor area is limited to 600 square feet. Consequently, to build a home with more than 1,000 square feet of floor area on such a lot, a property owner must either acquire an adjacent property or buy transferred development credits for additional floor area. The LCP specifies the lots eligible to receive TDCs. Lodge Hill subdivision lots that do not lie within SPA #1 or #2, for example, can receive

floor area transferred from lots within the two SPAs. Lots within SPA #1 or #2 cannot receive development credits from lots outside of the special project areas, but they can be increased through transfers of floor area from lots in the same SPA. The San Luis Obispo County LCP requires a public agency or nonprofit organization to participate in the TDC process, primarily to provide public information, record easements, and— most important—buy and sell development credits. Since 1986, the Land Conservancy of San Luis Obispo County is the only nonprofit organization that has sought and been granted authority to implement the program. The Land Conservancy of San Luis Obispo County, after approval from the California Coastal Conservancy, buys lots from willing sellers using a revolving fund (started with a $275,000 loan from the California Coastal Conservancy). The land

Chapter 17: Rural Character Preservation Case Studies

conservancy records a conservation easement on these lots and, in turn, offers the development credits from these retired lots to receiving site owners who want to build a larger house than the code’s slope-density requirements would normally allow. The proceeds from these sales are returned to the revolving fund and used to buy more sending sites. The Cambria program offers a one-to-one transfer ratio. The floor area purchased by the receiving site owner equals the amount of floor area that cannot be built in a sending area because it has been purchased and deed-restricted by the land conservancy. Even using transferred floor area, the maximum footprint cannot exceed 45 percent of the receiving lot area and the total floor area cannot exceed 90 percent of the receiving lot area. In actuality, most receiving site applicants do not need the maximum allowed footprint or floor area. As the only purchaser of land in Lodge Hill strictly for the purpose of transferring development credits, the land conservancy carefully considers its pricing strategy. As a benchmark, the conservancy reviews the sales price for TDCs and estimates a fair purchase price based on the transferable floor area that each lot will yield. Rather than maintaining an inflexible purchase formula that could lead to disgruntled sellers, however, the conservancy will negotiate a reasonable purchase price. It has acquired sending sites at an average price of $10 per square foot and sold TDCs at an average price of $20 per square foot. Countywide The unincorporated portions of San Luis Obispo County contain twenty-three thousand undeveloped lots, of which twelve thousand are in rural areas. In addition, the county’s general plan would allow the creation of another eight thousand new lots in rural areas. A series of re-

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ports prepared by the county between 1990 and 1995 concluded that serious adverse consequences could occur if this latent development potential was actually used.2 Consequently, in 1996, San Luis Obispo County adopted its Countywide TDC Program to relocate development from environmentally sensitive land, agricultural land, and antiquated subdivisions to more suitable areas. Instead of predesignating sending areas, the county establishes criteria and requires interested landowners to document why their properties qualify as sending areas under these criteria. A property would normally be approved as a sending area if it meets specific criteria in the three sending area categories: Agricultural, Natural Resources, and Antiquated Subdivisions. For example, a sending site in the Agricultural category must meet these specific criteria: • At least 50 percent of the site must be Class I or II soil, and the site must be at least 40 acres in size. • Grazing land must have been used for grazing for more than ten years and be at least 320 acres in size. The county may also approve a proposed sending site that fulfills general criteria. Based on their qualitative characteristics, sites can qualify by showing how preservation would do the following: • Maintain demonstrated productive capacity • Protect microclimates supporting specific crops • Retire development protection in areas with limited groundwater resources • Reduce potential for soil erosion Using one of two methods, the county assigns base credits to qualifying sending sites. Under

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the Existing Lot Method, the number of base credits equals the number of primary residences allowed on the underlying legal lots. Under the Development Value Method, the applicant submits an appraisal of the proposed sending site. If the applicant proposes to transfer title, the development value is equal to the property’s full value. If the applicant proposes to retain title and continue using the property for appropriate activities, the appraisal must estimate the development value by calculating the difference between the property’s full value and its value under the proposed deed restrictions. This development value is then divided by $20,000 to determine the number of credits. This formula does not determine the price of TDCs, which is established by negotiations between private buyers and sellers, but, rather, establishes the number of TDCs available for sale. The County based TDC allocations on value diminution, concerned that only undesirable lots would be preserved unless property value was taken into consideration. Developers seeking receiving site designation must submit an application that demonstrates how the property meets all eight eligibility criteria, including proximity to an urban reserve line; absence of important environmental resources, agricultural preserves, and areas prone to floods, wildfire, earthquakes, and other potential hazards; and compliance with all development standards, land division rules, and infrastructure requirements. The development potential allowed via TDC varies depending on the location of the proposed receiving site. When a site is within an urban or a village reserve line or within 2.5 miles of that line, the additional development may be 50 percent of the base density. When the proposed project is located 2.5 to 5.0 miles from an urban or a village reserve line, the density bonus may be 35 percent of the base density. Following an amendment of the original ordinance, no addi-

Figure 17.2. The Countywide Program has preserved 5,464 acres to date including this vineyard. (Photo by Rick Pruetz)

tional density is available beyond 5 miles from an urban or a village reserve line.

Performance Cambria By 2010, the Land Conservancy of San Luis Obispo County reported the purchase and permanent preservation of almost 450 lots. This has redirected a significant amount of potential future development away from substandard lots unsuitable for residential dwellings and resulted in preservation of Fern Canyon Preserve, one of the best remaining habitats of the rare Cambria pine.

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A BLUE RIBBON RECOMMENDATION Opponents of the Countywide Program sued San Luis Obispo County in 1997, one year after the TDC ordinance was adopted, in an effort to confine the program exclusively to community-based programs, thereby maintaining local control over the creation of sending and receiving sites. A 2001 grand jury report recommended that subcounty regions be given three choices: adopt their own community-based program, accept the Countywide Program, or reject any form of TDC. The County appointed a Blue Ribbon Committee that met from 2006 to 2008 and ultimately developed fourteen recommendations, including one to add more community-based programs. This, the committee reasoned, would allow receiving site neighborhoods to “see, touch, and feel” program benefits, create more certainty, and improve community support. In response, the County Board of Supervisors directed staff in 2010 to prepare amendments that would confine new sending sites to community-based TDC program areas and limit new receiving sites to urban or village areas or community-based TDC program areas.

Countywide Also by 2010, the Countywide Program had permanently preserved 5,464 acres. Roughly onethird of the 174 credits involved were transferred to rural areas; the remaining two-thirds were used in urban or village area subdivisions.

Lessons from San Luis Obispo County Cambria This program demonstrates how the TDC mechanism can convert a modest amount of seed money—$275,000—into a perpetual revolving fund for preservation. It also shows how a private land conservancy can assist with program administration, exemplifying a partnership between a local government and a nonprofit. • The Cambria program uses strict baseline limits on individual dwelling size to create demand for transferable floor area. • The development restrictions on both the sending and the receiving sites cannot be circumvented by variance or some other deviation process. • Working closely with the County, the Land Conservancy of San Luis Obispo County has provided the dedication and continuity

that can be difficult to achieve in a governmental agency, where priorities often change with the latest “crisis du jour.” Countywide This program provides lessons for TDR programs in large, diverse counties. • San Luis Obispo County allocates TDCs based on site-specific appraisals. This addresses the goal of creating a level playing field for all potential sending area property owners despite widely different land values. • The County requires proximity of sending and receiving sites: receiving sites must use TDCs from sending sites within a five-mile radius. If there are not enough credits within this five-mile radius, the TDCs must come from sending sites within the same geographical region, as identified in the code.

Boulder County, Colorado The southeastern boundary of Boulder County, Colorado, with more than three hundred thousand residents (2010), lies about fifteen miles northwest of downtown Denver. The eastern

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third of the county rests within the Great Plains. The western two-thirds consists of mountainous terrain, primarily within the Roosevelt National Forest, Rocky Mountain National Park, and other parks, preserves, and wilderness areas. In 1981, Boulder County adopted a clustering technique known as a non-urban planned unit development (NUPUD). This technique allows a density bonus for on-site development when a conservation easement permanently preserves at least 75 percent of the parcel. In 1989, the program expanded to allow the density bonus gained by NUPUD to be transferred to a noncontiguous parcel. This process, known as non-contiguous non-urban planned unit development (NCNUPUD), provided additional bonus density for transferring. It was not extensively used in the early 1990s because receiving sites were not predesignated. In 1994, Boulder County and the City of Boulder jointly prepared and adopted a draft framework for the Boulder Valley Transfer of Development Rights Program. The planning area for this program included the unincorporated portion of the county adjacent to the City of Boulder, known as Boulder Valley, as well as the City of Boulder, which has ninety-five thousand residents and is located twenty miles northwest of Denver. The Boulder Valley TDR program marked a significant step forward from the NCNUPUD process because it identified sending sites, spelled out the criteria for receiving sites both within and outside the city limits, and defined the number of TDRs that could be transferred. The Boulder Valley TDR Program was implemented through an intergovernmental agreement (IGA) between the City of Boulder and Boulder County. Between 1995 and 1997, IGAs were signed with the cities of Longmont and Lafayette and the town of Niwot. Eventually, Boulder County also signed IGAs with the cities of Louisville and Broomfield and the towns of Erie, Lyons, and Superior. Planning areas were

created around each community participating in the TDR program. In this way, each community could maximize the benefits of open-space preservation by requiring that a minimum percent of TDRs come from the rural areas immediately surrounding them.3

Process Since 1981, Boulder County has encouraged open-space preservation via a clustering option known as a non-urban planned unit development. With this process, base density can be doubled, from one unit per 35 acres to two units per 35 acres. The process also allows an extra unit per each additional 17.5-acre increment, if the property owner concentrates all development on 25 percent or less of the property and preserves the remaining 75 percent or more with a conservation easement. By 1995, more than 10,000 acres had been permanently protected using this technique. In 1989, Boulder County introduced transfers of development rights through a process called non-contiguous non-urban planned unit development. The county relied on the PUD process because Colorado state law did not explicitly authorize the use of TDR. The NCNUPUD process allows a single PUD to encompass two or more noncontiguous sites and, furthermore, allows the transfer of development rights between these noncontiguous properties. By using NCNUPUD, receiving sites can achieve up to three times the density permitted under the older NUPUD process. For example, a thirty-five-acre site would be allowed one unit by right, two units through NUPUD, and six units with NCNUPUD. Sending and receiving sites are not predesignated, but the county controls the direction of the transfer. Specifically, development rights can be transferred from mountain parcels to plains parcels and from one plains parcel to another plains parcel. Develop-

Chapter 17: Rural Character Preservation Case Studies

ment rights cannot be transferred from a plains parcel to a mountain parcel. To date, the NCNUPUD process has not been as popular as the NUPUD process. Because the receiving sites are not predesignated, the applicant must prove that the proposed parcels meet the criteria for receiving sites. The owners of property near the proposed receiving sites are likely to contest the transfer at the required public hearings, which creates uncertainty about whether an individual application will be approved. The NCNUPUD process remains available for transfers between sending and receiving sites that are both under the jurisdiction of Boulder County. In addition, transfers can also occur from sending sites under county jurisdiction to receiving sites under the jurisdiction of a city when an intergovernmental agreement is in effect. For example, Boulder County and the City of Longmont entered into a TDR IGA initially

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in 1996; they signed a second IGA in 2006 that remains effective until 2016. The Longmont IGA includes a map designating sending areas that fall outside Longmont’s city limits—and, therefore, under county jurisdiction—but still within the Longmont Planning Area, which extends from one to five miles beyond the city limits. If this sending area were entirely preserved, it would create a greenbelt that secures Longmont’s rural setting and also protects local farms and other valuable resource lands. When property owners choose to preserve sending sites, the conservation easements are granted to Boulder County and the city jointly. These easements must preserve the sending sites for agricultural production or environmental resource values and may also allow recreational uses agreed to by both the county and the city. The map attached to the Longmont TDR IGA also depicts qualifying receiving sites that

Figure 17.3. Boulder County has interjurisdictional transfer agreements with several incorporated cities, including one in which the City of Longmont agrees to accept TDRs from rural county land surrounding the city. (Photo by Rick Pruetz)

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are either within the city limits or outside the city limits but within the Longmont Planning Area. The IGA, however, requires all receiving site projects to be served by city sewer service and specifies that these sites will be subject to the city’s sewer fees and regulations, including a requirement to annex to the city at the city’s request.

Performance Boulder County’s clustering technique, NUPUD, has preserved more than ten thousand acres of land, far outpacing the original transferring mechanism (NCNUPUD), which has been used only five times since 1989. Demand for rural lots continued through the recession of the early 1990s and into the 2010s. Nevertheless, builders prefer to use the NUPUD process even though the NCNUPUD process could yield three times the density.4 Initially, the development community considered NCNUPUD too complex and time consuming. Leery developers were particularly concerned by the uncertainty inherent in a decision made by a planning commission and county commissioners through the public hearing process. Still, developers should be attracted by the ability now to achieve six times the baseline density limit by using NCNUPUD. Boulder’s interjurisdictional TDR program had been used on eighteen transfers as of the end of 2005. These transfers will result in the permanent preservation of 4,400 to 5,900 acres, depending on whether sending areas retain their water rights. By 2010, the supply of receiving area TDRs had shrunk noticeably. All of the Niwot community-designated TDR receiving areas had been approved and platted, with the majority of the lots built out. The same holds true for the designated TDR receiving areas adjacent to the city of Longmont. In 2008, Boulder County embarked on a new program, Transferable Development Credits

(TDCs), to address the trend toward larger homes that is compromising the county’s rural character. The TDC program sets maximum residential square footage at 6,000 square feet. It allows houses of 2,000 square feet or less to use a conservation easement to limit the home to its current size and sell the remaining allowable square feet through TDCs in 500-square-foot increments. The county operates a TDC bank and, as of 2010, the credits were selling for roughly $10,000 per unit. The county may let the current TDR program run its course and then focus on TDCs.

Lessons from Boulder County By transferring development rights from unincorporated county land to incorporated cities, Boulder County’s program clearly addresses the goal of preserving rural land and concentrating development where it can be efficiently served. These factors have contributed to the program’s success: • Intergovernmental agreements with several municipalities increase TDR’s credibility with developers and the general public. • Refinements of the eligibility criteria under the NUPUD program has made the TDR PUD the preferred option for rural development above the individual building permit level. • Despite the high cost, there continues to be a market for TDR receiving site developments. • As the public becomes more comfortable with TDR as a growth management and preservation tool, opposition to TDR receiving site proposals diminishes somewhat. • Boulder County’s commissioners and planning commissioners promote the use of TDR in their official actions, speaking en-

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gagements, media interviews, and other venues. • The receiving site criteria allow developers significant latitude in site design and density.

Pitkin County, Colorado Pitkin County, Colorado, has a population of more than sixteen thousand (2010). It lies in the Elk Range of the Rocky Mountains, in the center of the state, surrounding the former mining town of Aspen. The federal government owns about 83 percent of Pitkin County land, mostly as part of the White River National Forest. Tourism is a major industry here, with the county now home to four world-class ski resorts. Due to its historic character and recreational opportunities, Pitkin County attracts upscale residential development; the mean value of a singlefamily detached home is $1.4 million—four times the average for Colorado as a whole. In the late 1980s and early 1990s, Pitkin County recognized that future residential development in the backcountry would require the costly extension and maintenance of roads and other public services. In 1994, the county adopted a new Rural Remote (RR) zoning district to preserve alpine and subalpine environments in areas far from utilities and public services and to discourage development in areas subject to wildfires, slope failure, and avalanches. The RR zone established a minimum lot size of thirty-five acres and severely limited the size of new dwellings. To promote preservation rather than on-site construction in the RR zone, Pitkin County provided a transfer of development rights alternative that has evolved over time. The program always offered TDR as a way to obtain a building permit or gain additional floor area within an individual dwelling unit without having to compete in the county’s Growth Management Quota System (GMQS), which limits the amount of develop-

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ment allowed each year. Originally, for example, the program allowed single-family homes to exceed a baseline floor area of fifteen thousand square feet when developers bought one TDR for each five thousand square feet of additional floor area. By 1996, the Pitkin County program had experienced its first transfer. TDRs in Pitkin County often sell for $250,000 each, some of the highest TDR prices in any U.S. community. By the end of 2006, 204 TDRs had been severed, representing the preservation of 5,358 acres of sending area land. In 2006, the county also realized it could make the sending and receiving area provisions more effective. Now revised, the program continues to be one of the most successful in the nation, largely by offering TDR as an easy—although expensive—way to start construction and build more floor area without being delayed, perhaps indefinitely, by the GMQS.5

Process The Pitkin County TDR program now encourages the preservation of sending area land not just in the Rural Remote zone but in six distinct scenarios. • One TDR per thirty-five acres of sending area land is the basic allocation in the RR zone and the Transitional Residential–1 (TR-1) zone—which, like the RR, has a minimum lot size of thirty-five acres. • The Transitional Residential–2 (TR-2) zoning district also has a thirty-five-acre minimum lot size but allows clustered development and offers an allocation ratio of one TDR per ten preserved acres. • The county board can grant one or more TDRs to sites deemed to be “Constrained” (difficult or impossible to develop) or “Visually Constrained” (where development would destroy or severely affect a public scenic view).

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• Within a conservation development planned unit development (CD-PUD), one TDR can be granted for every twentyfive acres of undeveloped land. • Within limited development conservation parcel sites, the allocation ratios are one TDR per 20 acres for parcels less than 640 acres and one TDR per 35 acres on parcels 640 acres or larger. • The County Board of Commissioners can approve the severance of TDRs from properties designated on the Pitkin County Historic Register. In addition to a minimum lot size of thirtyfive acres, land in the RR zone is largely limited to agriculture and outdoor recreation by special permit. With certain exceptions for existing structures, dwelling size in the RR cannot exceed one thousand square feet, including decks, porches, patios, terraces, platforms, garages, and carports. Participating landowners record a restrictive covenant on the sending site prohibiting future development, including the building of any additional dwellings. For properties at least thirty-five acres in size, one TDR is granted for each thirty-five acres of parcel area. A legally created parcel larger than one acre but less than thirty-five acres can also receive one TDR. In addition, RR parcels smaller than one acre can qualify for one TDR if the parcel has legal access and can be developed with a one-thousandsquare-foot footprint, a well, and an on-site wastewater disposal system. TDRs are used in receiving areas to maintain a desired building schedule within Pitkin County’s Growth Management Quota System. Through the GMQS, the county annually evaluates and ranks project proposals by awarding points for meeting various criteria. A high-scoring project, for example, may be granted a new development right or a permitted increase in floor area in that year’s round without having to buy TDRs. But if the project fails to earn enough points, it will be denied a development permit

that year. Denials could conceivably continue year after year. Alternatively, applicants can use the TDR option to build sooner rather than later despite the GMQS. As a third alternative, applicants may combine GMQS allocations with TDRs and proceed according to their construction schedules. Receiving sites can be created in eleven zoning districts. In seven of these districts, TDRs can be used as an alternative to the GMQS to create a new development right for a single-family residential unit on a lot that currently does not have a development right. The lot must be located in the Aspen UGB or the Rural Area, if approved as part of the conservation development option. When used to create new development rights, TDRs can come from any sending area. A TDR used to create a new development right also allows the resulting house to have 2,500 square feet of floor area. This essentially is a baseline floor area that builders can exceed by following the TDR procedures. In nine zoning districts, developers can use TDRs instead of, or in combination with, the GMQS to exceed base maximum floor area and achieve up to a final maximum square footage per dwelling unit. Baseline is typically 5,750 square feet of floor area within an individual dwelling unit. The maximum floor area achievable via TDR is generally 15,000 square feet per individual dwelling unit. (In certain subareas, lower maximum floor area limits apply.) When exceeding base minimum, each TDR grants an additional 2,500 square feet of floor area.

Performance As of 2009, TDRs had been used to restrict development on 6,976 acres of sending area land. Most sending sites—approximately threequarters of them—have been in the RR zone. On receiving sites, 314 TDRs had been approved: 89 of these TDRs were used for new development rights, and 225 for additional floor area.

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Figure 17.4. Pitkin County uses TDR to protect land in its Rural Remote zone, where on-site dwellings are limited to 1,000 square feet. (Photo by Rick Pruetz)

Lessons from Pitkin County Pitkin County has developed one of the most successful TDR programs in the country, largely by understanding the characteristics of the local real estate market and adopting a code that makes TDRs a highly valuable commodity. • Pitkin TDRs do not allow increased density. Rather, they allow developers to obtain building permits without having to compete under Pitkin County’s permit quota system. For many property owners, this could mean the difference between being able to build now or having to wait, possibly years, to start building a house. • Pitkin has a baseline floor area that can be exceeded only by competing in the GMQS process or by TDR. Not surprisingly, given the affluence in the Aspen area, many buyers want homes that exceed these baselines and can afford one or more TDRs to secure their desired house size. • Sending area development restrictions are

customized to local circumstances. In the RR zone, landowners are motivated to use the TDR option by a thirty-five-acre minimum lot size and on-site development limited to dwelling units of one thousand square feet of floor area or less. • Pitkin County allows the creation of receiving sites in eleven different zoning districts, thereby maximizing opportunities to create demand. • Pitkin County encourages the use of TDR by limiting alternative means of getting development rights and additional floor area other than the GMQS.

Lumberton Township, Burlington County, New Jersey Lumberton Township, with a population of more than twelve thousand (2010), lies twenty miles east of Philadelphia, in Burlington County, New Jersey. In 1989, the State of New Jersey adopted the Burlington County TDR Demonstration Act

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to test the feasibility of TDR programs adopted and administered at the municipal level. In 1995, Lumberton Township became the first community to adopt a TDR program under this act. Based partly on the success of the Lumberton program, the State of New Jersey adopted TDRenabling legislation in 2004, allowing communities throughout the state to use TDR in compliance with this legislation. Under Lumberton’s 1995 TDR program, called TDR I, development credits are created by recording agricultural easements on rural land in the western portion of the township. These credits can be used as a matter of right on designated receiving sites near historic Lumberton Village, as long as the proposed projects adhere to detailed requirements for environmental protection and compatibility with the community’s traditional character. In 2000, Lumberton adopted TDR II to preserve farmland in the eastern portion of the township.6

Process The sending area in the TDR I program includes 1,513 acres of land in the western end of the township designated as RA/S (Rural Agriculture TDR Sending Area). To qualify as sending sites, parcels must be at least six acres in size, assessed as farmland, and not already deedrestricted from further development. The suitability of soils for septic systems is considered to be the best indication of development potential in the sending area. Consequently, the township uses a formula that allocates development credit to sending areas at the rate of 0.5 unit per acre for soils with slight limitations for septic system use, 0.25 unit per acre for soils with moderate limitations, and 1 unit per 50 acres where soils have severe septic limitations. Following this calculation, one TDR is subtracted for an existing housing unit. Then a 10 percent bonus credit allocation is added. This

transfer ratio is intended as an incentive for sending area landowners to use the TDR option rather than develop their properties. Sending site owners may appeal their allocations either through a soil survey prepared by a licensed soil scientist or by submitting a conceptual subdivision plan based on separate soil borings. The township planning board decides whether to grant these appeals. Sending site landowners who choose to participate must record a permanent easement limiting development to no more than one unit per fifty acres. Lumberton, however, allows owners to remove their land from the program even after the easements have been recorded if, after a public hearing, the planning board grants relief because the owner was unable to use the credits or because of other public interest reasons. The receiving sites in Lumberton’s TDR I program must be within one of the township’s five Rural Agricultural/TDR receiving area zones, consisting of 508 acres of land. The properties can be developed without the use of TDCs according to the same constraints imposed on the sending sites, meaning a density of 0.5 unit per acre or less depending on the suitability of the site’s soils for septic systems. Alternatively, developers can use the TDR option; in most of the districts, this option allows one bonus single-family detached dwelling unit per TDR credit. When TDRs are used, maximum density can range from one unit per acre to five units per acre, depending on the receiving site zoning. Approval of the use of TDR is administrative provided all code requirements are met. The TDR I program includes special design standards for receiving site projects, intended to create developments compatible with the environment and with the architecture of the traditional community. These guidelines require the retention of natural elements to protect topography, soil, groundwater, surface water, wetlands, floodplains, woodlands, hedgerows, and cultural features. Specific standards apply to stormwater

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management, landscaping, and architecture— including a requirement that new buildings reflect the eighteenth- and nineteenth-century architectural themes represented in the Lumberton Village Historic District, which include Colonial, Georgian, Federal, Greek Revival, and Victorian styles. In fact, the Lumberton code devotes several pages to architectural features, such as facades, material, windows, doors, roofs, garages, fences, and open space. In 2000, Lumberton adopted its second program. Known as TDR II, this program designated an additional 1,355 acres of sending areas in the eastern portion of the township to supplement the 1,513 acres designated in western Lumberton Township under TDR I. TDR II also designated a new receiving area of 185 acres of land in the eastern township. The new receiving area was rezoned with a new RA/R6 zoning classification; this provides for an age-restricted community with mixed uses, including neighborhood retail/office, public or quasi-public facilities, and open space. The ordinance created thirty pages of design standards designed to encourage architectural diversity, recreational opportunities, pedestrian orientation, smaller lots, higher densities, community focal points, and a sense of place. As in the other receiving areas, a calculation of soil suitability for septic systems determines baseline in the RA/R6 zone. Specifically, the 185 acres of RA/R6 were determined to have a baseline of 68 TDR credits. The maximum density of six units per acre in this zone can be achieved at the rate of 0.7 TDR credit for each bonus age-restricted dwelling unit.

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Performance As of 2010, the Lumberton TDR program—encompassing both TDR I and TDR II—had preserved 850 acres of land, or 30 percent of the total sending area.

Lessons from Lumberton Township The Lumberton program includes features found in many successful TDR programs: • The receiving area baseline can range from a high of one unit per two acres to a low of one unit per fifty acres, a threshold that developers generally want to exceed. • Lumberton spells out detailed site design, landscaping, and even architectural guidelines to ensure that receiving areas remain compatible with surrounding land uses and enhance the reputation of the TDR program. • Lumberton is able to offer developers administrative approval of TDRs in receiving areas largely because the township has accomplished the hard work of placing detailed development regulations and design requirements in the code rather than imposing them on a case-by-case basis using conditions of approval. Developers are more likely to use TDR programs that provide greater certainty about project approval.

Chapter 18

Historic Preservation Case Studies

The majority of urban TDR programs are designed, at least in part, to preserve historic landmarks. We profile three of these programs here: one on the West Coast, one on the East Coast, and one in between.

San Francisco, California San Francisco, a consolidated city-county with an estimated population of more than 800,000 residents (2010), lies at the center of the ninecounty San Francisco Bay Region, which has a total population of 6.9 million. In 1967, San Francisco formed a Landmarks Preservation Advisory Board to promote the preservation and restoration of historic properties. In 1985, the historic preservation effort took a huge step forward with the adoption of a new plan that designated 253 properties in the downtown as architecturally Significant and 183 other properties as Contributory buildings. These designations were based on criteria for architectural, historical, and cultural significance—not on the plans and desires of the properties’ owners. Concurrently, the 1985 plan lowered density limits in the downtown, creating a greater incentive for developers to acquire TDRs to achieve the density desired for high-rise offices.1

Process San Francisco created several categories of older buildings to aid in preservation decisions. As implemented, San Francisco’s landmark protections make it extremely difficult—if not impossible—to demolish a Significant (Category I or II) historic building. Contributory (Category III and IV) historic buildings can be demolished or altered if they have not used the TDR process. All other structures fit into the Category V group. The City defines a preservation lot as a parcel of land containing a structure that meets at least one of three criteria: • A designated Significant (Category I or II ) or Contributory (Category III or IV) historic building • A Category V building that complies with TDR eligibility requirements • A structure designated as a landmark under the city’s landmark preservation ordinance Once development rights have been transferred from Contributory buildings, however, the city treats those buildings as significant historic structures and protects them from alteration and demolition. A transfer lot is a preservation lot in San

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Francisco’s C-3 zoning district from which development rights may be transferred. The receiving sites are referred to as development lots. The amount of TDRs available for transfer from a transfer lot is the difference between the floor area allowed by zoning and the actual floor area of the existing building. The transfer ratio is one to one: the number of square feet of floor area transferred from the transfer lot equals the number of square feet that can be added to the development lot. One unit of transferable development right, or TDR, equals one square foot of floor area. Transfers can occur only between lots in the same zoning district or between two combinations of transfer lots and development lots as specified in the code. Development rights may not be transferred to development sites with Significant or Contributing structures unless the added development is needed for the historic building to meet the building code’s earthquake standards. The baseline and maximum gross floor area vary between the subdistricts of the C3 District. For example, in the C-3-O District, baseline is FAR 9 and the maximum when TDR is used is FAR 18—a doubling of development potential. In the C-3-R and C-3-G districts, baseline floor area is 6 and the maximum development potential is FAR 9, or 1.5 times the baseline. The approval of a transfer of development rights exempts the development lot project only from floor area ratio limitations. Approval of the transfer, in itself, does not entitle the development lot project to exceed other limitations, such as height, bulk, and setback. Projects incorporating additional density gained through TDR can typically be accommodated within the height limits specified in the code. The owner of a preservation lot may apply for a statement of eligibility to determine whether the property qualifies as a transfer lot and, if so, the amount of TDR available for transfer. This statement is recorded and remains in effect un-

less revoked by the city’s zoning administrator. TDR may be transferred directly from the original owner or from someone who acquires TDRs for future transfer. TDRs may be transferred in total to a single transferee or in separate increments to several transferees. To convey TDRs from one owner to another, the city’s zoning administrator prepares and records a certificate of transfer. The certificate from the transfer lot includes a notice of restriction stating that the transfer of TDR from the transfer lot permanently reduces the development potential of the transfer lot by the amount of the TDR transferred. The code expressly prohibits the demolition of a Significant or Contributory building from which TDRs have been transferred—unless the structure presents an imminent safety hazard that can only be solved by demolition or retains no substantial market value or reasonable use. Other aspects of a development lot project may require discretionary approval, but the use of TDR does not. Because the TDR program has been in effect for decades, downtown developers consider TDR a predictable, ministerial process that is not likely to subject projects to disapproval or additional delays. These developers have not needed the city’s help to find TDR buyers and sellers or negotiate TDR transactions. Because of concerns that owners of preservation lots might complain if the city or its agent were competing with them by selling TDRs, San Francisco’s program administrators decided not to create a TDR bank; the market forces control transfers without interference. Unlike many large U.S. cities, San Francisco does not generally offer development bonuses for building features, such as desired site design, architectural details, or public amenities. These alternative means of gaining bonus development have severely hampered many TDR programs. This is because developers, when offered a choice, will typically choose to gain bonus development using on-site improvements rather than

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department notes that it could designate additional preservation lots in the future, which would increase the potential supply of TDRs.

Lessons from San Francisco The San Francisco TDR program is perhaps the most successful historic preservation TDR program in the nation, due largely to the following factors:

Figure 18.1. TDR is one of San Francisco’s primary means of preserving architecturally significant properties. (Photo by Rick Pruetz)

off-site preservation that adds no direct value to their buildings. Conversely, in San Francisco, TDR is often the only way that receiving site projects—with the exception of affordable housing— can exceed baseline development thresholds.

Performance By 2009, owners of 116 designated historic buildings had certified their unused potential floor area, the first step in San Francisco’s TDR process. The total supply from these 116 buildings was estimated at 5 million square feet of unused potential floor area, or 5 million potential TDRs. Of this supply, development lots have claimed 3 million TDRs, leaving 2 million TDRs to be applied to future projects. San Francisco’s planning

• As a prosperous regional hub, San Francisco experiences cycles of intense growth pressure. In addition, the baseline development threshold established by the 1985 plan is low enough that most developers want to exceed it. Consequently, demand for expansion of floor area in downtown San Francisco practically guarantees demand for transferred floor area from preserved landmarks. • Because it is difficult, if not impossible, to alter or demolish a designated landmark, San Francisco property owners are logically more likely to participate in the TDR program compared to property owners in cities that impose historic preservation protections only after owners have consented to landmark designation. • Generally, San Francisco developers cannot gain bonus floor area through such on-site features as desired site design, architectural details, or public amenities. Consequently, when developers want to exceed baseline—which happens frequently in San Francisco—they typically must transfer that bonus floor area from preserved historic landmarks. • The use of TDR in San Francisco does not require discretionary approval. Therefore, developers have come to rely on TDR as a dependable technique and feel comfortable using it.

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• Strong public support for historic preservation ensures long-term consistency in program application. After several decades and millions of square feet transferred from preserved landmarks, San Franciscans would likely object strenuously if public officials relaxed the existing protections for designated landmarks or exemptions from TDR requirements. • Unlike programs that require close proximity of sending and receiving sites, San Francisco allows sending and receiving sites anywhere within a zoning district; this approach creates a larger, more viable market for potential buyers and sellers. San Francisco’s simple program also avoids the procedural complexities and additional requirements that appear to hamstring programs in other cities. • The simple requirements to exceed baseline development thresholds in the San Francisco program facilitate widespread understanding of the program, which helps promote public support.

Denver, Colorado In the late 1970s, discussions were under way to create a historic district in downtown Denver. The committee working on this proposal—composed of historic preservation advocates, downtown property owners, and members of the business community—did not want to impose preservation restrictions on historic properties without owner consent. The committee ultimately proposed an ordinance, adopted in 1982, that uses TDR as an incentive for property owners to volunteer their buildings for landmark designation. Another committee, also composed of representatives from both the business and historic preservation communities, later proposed using the TDR technique to encourage preservation

in a historic warehouse district just west of downtown. As a result, Denver extended the use of TDR from its forty-block downtown B-5 district into the B-7 zone district. In 1994, the city amended the code for the downtown B-5 zone district. Under the new code, the B-5 zone offers density bonuses to encourage many desired uses, such as housing, childcare centers, pedestrian-active facilities, public art, underground parking, and transit-supporting facilities, as well as historic preservation. All but one of these density bonuses must be used on site; with historic properties, however, the density bonus must be transferred to a receiving site.2

Process The TDR section of Denver’s zoning code allows for the transfer of unused development rights from properties designated as landmarks by the Denver Landmark Preservation Commission. Transfers can occur only between lots in the B-5 district and between lots in the B-7 district. Previously, the amount of undeveloped floor area that could be transferred from the sending sites in the B-5 zone district was the difference between the existing floor area of the designated landmark and the maximum floor area allowed by the zoning for the district in which the landmark is located. With the 1994 amendment, downtown properties are now granted density bonuses beyond the basic maximum of 10 square feet of floor area for each square foot of land area (FAR 10) for implementing certain goals, including historic preservation. Owners who rehabilitate structures designated for historic preservation can receive four bonus square feet of transferable floor area for each square foot of floor area in the designated landmark, provided the rehabilitation complies with the historic preservation standards of either the U.S. Secretary of the Interior or the Denver Landmark Preservation Commission. These bo-

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nus provisions can greatly increase the undeveloped floor area available for transfer from a historic property. Denver’s B-5 zoning code allows the transfer of two types of undeveloped floor area from historic structures. The first type pertains to properties without density bonuses gained through rehabilitation; in this instance, the undeveloped floor area available for transfer equals the area of the lot occupied by the historic structure, plus the difference between the maximum floor area permitted on that lot by zoning and the floor area of the existing historic structure. The second type of transferable floor area is the bonus floor area gained by rehabilitating a designated landmark. The code allows a bonus to be claimed even if the rehabilitation occurred before adoption of the new bonus provisions. If historic property owners were issued certificates of undeveloped floor area before the 1994 code change, they can either use these certificates under the old provisions or exchange the old certificates for new certificates calculated under the new code. If a structure was designated for preservation before 1994 but a certificate of undeveloped floor area was not issued, the owner can obtain a certificate using the provision of the old code, provided an application is filed within one year of the adoption of the new code. Property owners apply for certificates of undeveloped floor area by submitting an application that includes all calculations, a copy of the ordinance designating the structure for historic preservation and, if applicable, evidence that the rehabilitation was completed to historic preservation standards. After deeming the application complete, the city’s zoning administrator must promptly issue and record the certificate. The certificate can be used immediately, held for future use, or transferred from one owner to another. The zoning administrator also approves the use of undeveloped floor area at a receiving site after verifying that the certificate has not already

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been used at another receiving site. Eligible receiving sites are parcels in four downtown B-5 zone districts. A project using transferred undeveloped floor area cannot increase the size of that project more than six times the land area of the receiving parcel. In addition, within a designated fifty-block area, a maximum floor area ratio of 17:1 is imposed even with TDR, unless more than half of the structure is residential. In the rest of Denver’s downtown, the maximum density is 12:1 (or 17:1 if more than half of the structure is residential). In 1984, Denver expanded its TDR program to include a warehouse district west of the downtown. Unlike the downtown B-5 zoning code, the B-7 code has not been amended to include bonus density and the transfer of that density. The TDR program in the B-7 zone has these characteristics: • Designated, rehabilitated landmarks are the sending sites. • The density available for transfer from these sending sites is the difference between the floor area of the landmark and the maximum development allowed the sending parcel by zoning. • Receiving sites must be within the same zoning district as sending sites. In the B-7 zone, a sending site owner can also transfer an additional square foot of floor area for each square foot of residential floor area within the landmark. Receiving sites in the B-7 zone are limited to 25 percent more than the maximum density allowed by the base zoning. Transferred floor area, however, can increase the density of the receiving site up to 50 percent higher than code maximum as long as the property does not exceed a floor area ratio (FAR) 6.0, meaning six square feet of floor area for every square foot of lot area. A building permit cannot be issued to use the transferred floor area at the receiving site until

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the designated landmark at the sending site has been restored as required by the Denver Code. If the landmark is destroyed, any new structure on the sending site cannot exceed the floor area of the landmark unless the site receives floor area through TDR from another site.

on a construction loan; the TDRs were eventually used at the Empire Savings site. In addition, owners of Denver’s Masonic Building rehabilitated the historic structure and expect to eventually sever and sell the development rights.

Performance Lessons from Denver According to a study done in the early 1980s, the B-5 zone contains 2.7 million square feet of transferrable density from existing landmarks and another 13 million square feet of transferable density from potential landmarks. The B-7 zone is estimated to have 1.6 million in transferable density from existing and potential landmarks.3 While the supply of transferable rights is relatively high, cyclical slumps in Denver’s office market have reduced the demand for added density. In addition, some developers have preferred to build new, freestanding retail space in the downtown, reducing the demand for existing space in historic landmarks as well as the demand for transferable density available in historic properties. Consequently, Denver’s TDR program has been used only three times to date. • In 1982, the owners of the Navarre Building severed the development rights and used them as collateral on a loan to rehabilitate the building. The rights were subsequently transferred to the Republic Building. (Denver had the Navarre Building in mind when it adopted its TDR ordinance.) • The owners of the Denver Athletic Club sold 60,000 square feet of development rights, which were transferred to the Empire Savings site, a new building nearby. • The owners of the Odd Fellows Hall severed 58,700 square feet of development rights and used the TDR value as collateral

Despite the slow pace of actual transfers, Denver’s program has some promising features applicable to other historic landmark programs. • Denver code does not restrict transfers to adjacent lots. In Denver’s B-5 zone, transfers can occur anywhere within the fortyblock downtown area; a twenty-three-block trading area is available in the B-7 zone. This flexibility should promote greater use of transfers. • Even if transfers do not occur, the ability to use TDR in the future has been a sufficient incentive for some owners to consent to landmark designations for their properties. • Most historic preservation TDR programs have a 1:1 transfer ratio. The Denver program allows a sending site to transfer four times the floor area of the existing landmark. For certain buildings, this bonus would result in a transfer ratio greater than 1:1, providing an increased incentive for transfers and landmark designation. • The use of TDR is approved administratively, reducing developer concerns about unknown costs, time delays, and approvals. • The Denver TDR program does not require the recording of a preservation easement; the committee that drafted the ordinance worried that such a requirement might jeopardize the possible tax benefits to property owners wanting to donate landmark easements.

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sions for its theater district that add new dimensions to the requirements for property owners who elect to use the TDR option.4

Process Historic Preservation

Figure 18.2. The U.S. Supreme Court gave TDR credibility in its 1978 decision upholding New York City’s denial of alterations to Grand Central Station. (Photo by Rick Pruetz)

New York, New York New York City has a population of 8.4 million people (2010). Strong demand for additional density, plus a wealth of historic landmarks, led the city to adopt the nation’s first TDR program in 1968. That original ordinance simply allowed property owners to preserve historic landmarks and transfer the resulting unused development potential to adjacent receiving sites. New York eventually adopted several other programs. In the South Street Seaport, TDR is used to shift development away from historically significant maritime buildings dating from the 1820s. In 1998, New York adopted TDR provi-

New York City requires the sending sites to be landmarks designated by the Landmarks Preservation Commission. The difference between the size of the landmark and the building size allowed by zoning can be transferred to adjacent zoning lots. The property owner must submit a program outlining the maintenance of the landmark, a report from the Landmarks Preservation Commission, and plans for development of the receiving site. In addition to exceptions to density limitations on the receiving site, the city’s planning commission may grant a special permit enabling a receiving site project to deviate from setback, open space, and building height requirements as well as allow minor variations to plaza, arcade, and yard regulations. The program offers a one-to-one transfer ratio. Originally, New York City did not limit the amount of density that could be transferred to a receiving site by special permit. Now, however, zoning limits transfers in the FAR 15 districts to 21.6 FAR. Receiving sites throughout the city in zoning districts with lower FARs can use TDR to increase the base density by a maximum of 20 percent. If impacts on adjacent properties are anticipated, the planning commission must find that the disadvantages to these properties are more than outweighed by the advantages to the community of preserving the landmark. The commission must also find that the program providing for the maintenance of the landmark will result in its preservation. In 1969, soon after adopting its TDR program, New York City denied Penn Central’s request to build a fifty-nine-story office tower on

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top of the Grand Central Terminal, a designated historic landmark. The U.S. Supreme Court ultimately heard the lawsuit that arose. In addition to affirming that the city could impose restrictions on the alteration of historic properties, the court ruled that transfer of development rights could be used to mitigate the impacts of development restrictions, thereby conferring considerable legitimacy on the then-new tool of TDR. (See chapter 10 for more details on the lawsuit and ruling.) South Street Seaport This twelve-block area on the East River in New York City, next to the Financial District in Lower Manhattan, was designated a historic district in 1977. In 1989, the city expanded the district to preserve historic sailing vessels and a large concentration of early nineteenth-century commercial buildings dating from the seaport’s heyday between 1820 and 1860. The citywide landmarks TDR program calculates transferable floor area as the maximum floor area allowed by zoning, minus the floor area within the landmark structure. The South Street Seaport program, however, calculates the transferable floor area as the maximum development allowed, without any deduction for any existing landmarks. In addition, floor area can be transferred from closed or discontinued streets based on the maximum amount of floor area that could be built there under the zoning code’s maximum development limits. The South Street Seaport sending area consists of three large parcels and four discontinued streets now designated as pedestrian ways. Application of the zoning potential to this sending area resulted in a supply of 1.2 million square feet of transferable floor area. This TDR program allows development rights to be transferred directly to a receiving site or to an intermediary subject to detailed limitations. The receiving sites consist of seven mapped parcels. The receiving site development

potential can exceed baseline by up to FAR 10, with various exceptions for smaller receiving sites, sites in certain zoning districts, and mixeduse developments. When development rights are transferred from a sending site, a legal instrument is recorded that reduces the development potential of the sending site by the amount of transferred development for ninety-nine years. Theater District For decades, New York has wanted to retain its theater district, estimated to generate $2 billion of income per year and to employ 250,000 people. After 1968, theater owners could take advantage of the city’s TDR preservation program by seeking landmark designation and finding a buyer for their unused floor area potential. Nevertheless, development continued to threaten the district, as demonstrated by the demolition of two historic theaters in 1982 to make room for a new hotel. New York City designated twentyeight theaters as landmarks in 1987, encountering opposition from many theater owners who claimed that the 1968 landmark TDR program alone provided inadequate compensation. In 1998, New York City adopted a new TDR mechanism, which a neighborhood organization promptly challenged in court. In 2001, an appellate court upheld the program, which has since undergone modifications. The current provisions distinguish between transfers approved by certification, authorization, and special permit. These approval mechanisms differ in many respects, including the maximum receiving site density allowed when developers choose the TDR option. In all three, however, the sending site must meet the following provisions designed to ensure the continuation of the theater: • Commitment to operate a legitimate theater for at least five years • Proof that the building is physically and operationally sound or a plan to make it

Chapter 18: Historic Preservation Case Studies

sound (if the theater is a landmark, the rehabilitation must preserve the significant architectural features) • A financial plan demonstrating the ability to comply • An inspection and maintenance plan • A legally binding commitment for continuation of the legitimate theater for the life of the related receiving site development Finally, a contribution of $10 per square foot of transferred floor area must be made to the Theater Sub-district Fund, to pay for inspections, enforcement, and other activities in support of the subdistrict’s preservation goals.

Performance Historic Preservation Fewer than two dozen transfers occurred during the TDR program’s first thirty-three years. This outcome is partly explained by the fact that developers in New York can often achieve density bonus for incorporating plazas, arcades, and other on-site amenities into new developments. In addition, many developers use New York’s zoning-lot merger technique, which allows contiguous lots within a single city block to be treated as one lot for the purpose of meeting zoning requirements. This technique can be used to avoid the demolition of historic landmarks without many of the procedural requirements needed under the TDR program—such as planning commission review, approval by the landmarks commission, and preparation/implementation of a maintenance plan to ensure perpetual preservation of the landmark. That said, the TDR program has achieved some sizeable transfers. For example, four transactions alone transferred 448,000 square feet of floor area potential from the Grand Central Station sending site.

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South Street Seaport Intermediaries were instrumental in the success of the South Street Seaport TDR mechanism. Specifically, financial institutions agreed to write off delinquent loans on buildings in the preservation area in return for development rights. These rights were held and eventually used to promote the construction of major office buildings on the receiving parcels. In turn, the owners of the sending parcels qualified for loans to rehabilitate their historic structures. The restoration of these properties turned the South Street Seaport area into an important tourist attraction for the city. By 2010, nearly all of the original 1.2 million square feet of supply had been transferred from sending to receiving sites.5 Theater District After being delayed by lawsuits, this TDR program has generated at least one transfer: the owner of the Al Hirschfield Theater sold more than sixty-five thousand square feet of development potential to allow bonus floor area in a new development on the western edge of the subdistrict.

Lessons from New York City New York City observes the key success factor of adopting baselines that many developers want to exceed and using TDR to harness the demand for higher density to accomplish historic preservation ahnd other community goals. New York also provides a good example of adopting new TDR programs in response to new situations. In 2005, the city introduced a fourth TDR program for the West Chelsea District, in part to preserve the High Line—an abandoned, elevated rail line—and facilitate its reuse as a unique openspace amenity.

Chapter 19

Urban Design and Revitalization Case Studies

The four case studies that follow demonstrate how communities can use TDR to accomplish a wide range of planning and implementation goals in urban areas.

Washington, DC Washington, DC, wants to create a “living downtown” by promoting dwelling units, preserving historic structures, encouraging mixed uses, and creating preferred uses such as arts corridors and a shopping district. To implement these goals, the nation’s capital offers bonus density to new buildings that provide these preferred uses. Downtown buildings, however, must adhere to relatively strict height regulations imposed by a 1910 Height Limit Act, which make it very difficult to use bonus density on site. Consequently, Washington, DC, also offers a transfer of development rights program; bonus density can be transferred to receiving sites both within the downtown and in two edge-of-downtown areas. The TDR mechanism was first mentioned in the 1984 Downtown Plan, which divided downtown Washington into several districts, including the Landmark District, Arts District, Retail Core, Housing Area, and Chinatown District. In 1989, the city partly implemented the Downtown Plan by creating a retail overlay district;

in this district, all new projects had to include some retail, and developers were compensated through TDR. In 1991, the Downtown Development District expanded the TDR program to implement the land use goals of other districts and to compensate the owners of historic properties for development restrictions.

Process In 1991, Washington, DC, amended its codes to include a Downtown Development District overlay zone, which modifies the underlying zones with restrictions and incentives designed to achieve four overall goals. The first goal of the Downtown Development District is to create a mixed-use “living downtown” with seven key features:1 • Retail, hotel, residential, arts, and entertainment uses, as well as offices • Preservation of historic buildings • A strengthened Chinatown • Retention and expansion of housing • A performing arts corridor and a visual arts corridor • A concentrated downtown shopping district • In combination, a downtown that is active at all times and interesting to visitors 217

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The second overall goal of the Downtown District is to avoid “formless office sprawl” that would replace distinctive subareas with an eighthour downtown that does not achieve its economic potential. The third goal is to build on the downtown’s assets, such as its location, transit system, street/open-space plan, and multiple uses, as well as significant museums, historic structures, monuments, and federal buildings. The fourth downtown goal is to complete the current rebuilding cycle, despite the economic downturn, in a way that gives Washington, DC, one of the world’s greatest downtowns. To reach these goals, the Downtown Development overlay imposes design standards and use provisions that apply to all downtown properties. In addition, special provisions are added to achieve objectives in five areas: • In the Downtown Shopping District, new buildings must provide up to a floor area ratio (FAR) 2.0 of retail. In addition, bonus density is granted to projects that offer certain desired uses. For example, a bonus ratio of 3:1 is granted to department store space, and legitimate theater is 2:1. An anchor store, movie theater, performance arts space, or small, minority, or displaced business receives a 1:1 bonus density. • In the Downtown Arts District, art, retail, or entertainment uses must occupy at least 1.0 FAR of a building’s total floor area, of which 0.25 must be “true art” uses. Bonus FAR is granted for various art uses; art schools, art centers, and other major facilities are granted the highest bonus ratios. • In the heart of Chinatown, bonus density is available to various uses, including retail space greater than FAR 1.0. • In the Residential and Mixed Use districts, varying amounts of residential development are required in all buildings. Bonus density is provided for grocery stores, drug stores, and other retail uses.

• Overall density in the Downtown Historic District is restricted, but unused development capacity can be transferred to receiving zones. To assist property owners, Washington, DC, provides a mechanism called combined-lot development (CLD); this allows two lots within the same preferred use subarea to be treated as one lot for the purpose of complying with the preferred use requirements. For example, two buildings of equal size in the Downtown Shopping District could each meet the requirement to provide 2.0 FAR of retail by creating a combined-lot development in which one building provides 1.0 FAR of retail while the other building provides 3.0 FAR of retail. Developers can use the CLD mechanism to transfer bonus density to receiving sites within the Downtown Development District. (All of the preferred use subareas are within the Downtown District.) Because the Downtown District is subject to relatively low building height limits, Washington, DC, has identified two receiving areas at the edge of its downtown. These receiving areas are two commercials zones in which the normal 6.5 FAR and 90-foot height limits can be exceeded by transferring development rights. In one of these edge-of-downtown districts, Downtown East, the maximums allowed via TDR are 9.0 FAR and 110 feet. The other district, New Downtown, limits projects using TDR to 10.0 FAR and 130 feet in height, provided the 1910 Height Act allows that height. More options are available to development rights transferred from historic properties, with up to 4.0 FAR of unused density available for transfer from a historic property. The transferred density from historic properties can be used anywhere within the downtown, as well as in the two edge-of-downtown receiving areas. In the first step of the transfer process, the property owner and the city execute and record a covenant on the sending site to secure the de-

Chapter 19: Urban Design and Revitalization Case Studies

sired amenity; this step establishes the density bonus. To facilitate the process, the city has developed a standard TDR covenant form that includes the following: sending site restrictions, a schedule for implementing any required renovations or land use conversions, restrictions on any liens that could extinguish the covenant, provisions for maintaining the amenity, and notification requirements. The city also provides a standard TDR certificate form, which records the TDRs removed from the sending site and identifies the owner of those TDRs. After review by the city’s planning and historic preservation staff and approval by the city’s corporation counsel, the documents are executed by the city. Once the covenant and TDR certificate have been executed, the TDRs can be used immediately at a receiving site or held for future use. The second step in the process occurs when the bonus density is actually transferred to a receiving site. Under the Downtown Development District code, the use of TDRs at a receiving site is permitted as a matter of right and requires only administrative review to ensure compliance with the code.

Performance Between 1990 and 2007, the Downtown Development District generated more than 9.5 million square feet of transferable floor area, of which almost 8 million square feet were actually transferred and the remainder either banked or not transferred. The price ranged between $5 and $36 per square foot. Of the total TDR generation, roughly 1.5 million square feet came from historic landmarks and resulted in the preservation and restoration of some of the city’s most significant landmarks, including the Warner Theater, St. Patrick’s Church, Calvary Baptist Church, and the Masonic Temple. In 2008, the D.C. Office of Planning began a comprehensive review and overhaul of the cur-

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rent zoning ordinances. In 2010, recommendations were submitted to remove the potential to generate TDRs for historic preservation. Because Washington, DC, has met its historic preservation goals—and all existing landmarks have taken advantage of TDR generation—the TDR credit for historic preservation is no longer needed. A new TDR program, focused on housing, has been proposed. This would involve replacing existing TDR and CLD programs while ensuring that existing TDR and CLD credits are maintained and retain existing rights.

Lessons from Washington, DC The Washington, DC, TDR program demonstrates how to preserve the density bonus rights earned by developers but restricted by height limitations. Success factors include the following: • Reconfiguring the TDR programs when goals have been met. Discontinuing historic preservation TDRs becomes possible because all rights have been transferred. • Having multiple receiving areas, which creates a market to accept the earned density bonus rights restricted by the 1910 Height Limit Act (see table 19.1). • Developing a standard TDR covenant form to facilitate the transfer process. • Allowing combined-lot development, which treats two lots within the same preferred use subarea as one lot. This gives developers the flexibility to respond to the site and market conditions without sacrificing density bonuses. • Permitting TDR as a matter of right and requiring only administrative review.

Portland, Oregon Portland, Oregon, with a population of about 585,000 (2010), uses transfer of development

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table 19.1 TDR Absorption in Washington, DC TDR Absorption Capacity/Demand Receiving Area Destination Downtown East New Downtown North Capitol Capitol South Southwest DD Banked

3% 18% 34% 22% 5% 3% 5%

Source: https://www.communicationsmgr.com/projects/1355/docs /DD%20Zoning%20Mtg%203.pdf (slide 24).

rights for a wide range of purposes in three separate plan districts. • The Northwest Hills Plan District (formerly called the Skyline Plan District) includes a prominent bluff that stretches more than seven miles along the west bank of the Willamette River and forms a backdrop for much of central Portland. Except for residential development flanking Skyline Boulevard, the district is primarily wooded and used for parkland and agriculture. The Northwest Hills Plan, adopted in 1991, uses TDR to help preserve areas designated for environmental protection. • The Johnson Creek Basin Plan District, adopted in 1996, includes Johnson Creek, a free-flowing stream with a forty-four-square mile drainage basin, the lower half of which is in the City of Portland. It also encompasses the Boring Lava Domes, a 1,500-acre chain of forested volcanic domes with numerous tributary streams flowing down steep ravines to Johnson Creek. The lava domes provide a green backdrop for much of southeast Portland. Johnson Creek has remnant native populations of salmon and trout listed under the federal Endangered Species Act. The area also includes an extensive floodplain that experiences frequent damaging floods.

• The downtown Central City Plan District uses TDR to preserve and promote singleroom-occupancy (SRO) housing, provide open space, and allow flexibility in concentrating density while staying within overall development capacities. Portland also uses TDR to preserve landmarks as regulated through underlying zoning. The sending areas are properties with a landmark designated by the city’s Historic Landmark Commission. The exact requirements differ depending on whether the landmark is in a multiple-family residential, commercial, or employment/industrial zone.2

Process TDR appears in three separate sections of Portland’s Planning and Zoning Code, each designed to achieve a different purpose. The Northwest Hills Plan Zoning District, for example, uses TDR to protect sensitive natural resources. The code section allows development rights to be transferred from sites restricted by the Environmental Protection overlay zone and provides safeguards to ensure appropriate development occurs on receiving sites. Only singledwelling zones covered entirely by the Environmental Protection overlay are eligible to become sending sites. Receiving sites must lie within Portland’s urban growth boundary and cannot be covered by the Environmental Protection overlay. With TDR, density on the receiving sites may exceed base density by 50 percent. The density allowed by baseline zoning can be doubled if the resulting densities remain less than one unit per acre. Northwest Hills District transfers are approved through the planned unit development (PUD) process according to the approval criteria established for all PUDs in Portland. The PUD application includes both the sending and re-

Chapter 19: Urban Design and Revitalization Case Studies

ceiving sites. Before approval can occur, the sending site owner must record a covenant reflecting the reduced development capacity. As in the Northwest Hills District, TDR procedures in the Johnson Creek Planning District offer a one-to-one transfer ratio to sending site owners. Both programs also offer a 100 percent density bonus to receiving site developers who use TDR. The Northwest Hills District, however, does not offer developers the alternative tool of bonus density, while the Johnson Creek District does. To qualify for bonus density, projects must be within a mile of a transit street or transit way, be served by city sewer and water, and provide for stormwater retention. Portland uses TDR in its Central City District to implement various goals contained in four separate downtown plans. In two downtown zones, the code provides flexibility to developers by allowing transfers between abutting lots within a single development site. In some districts, the transfers can occur only if the lots are within the same block. Even with transfers, the

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development projects must comply with height regulations. Approvals of transfers under the downtown program require an administrative approval process decided by a hearings officer; notice must be given to all surrounding property owners, and a developer may appeal the administrative decision to the Portland City Council. To promote SRO housing in the downtown, Portland allows owners of SRO housing sites to transfer unused development capacity anywhere within the Central City District. The amount of development transferred to a receiving site cannot exceed increases in density of more than three to one. Sending site owners must record covenants preserving their properties for SRO housing. The covenanted SRO properties may not be converted to other uses or demolished unless the SRO units are replaced somewhere else within the Central City District. The Central City District also allows building height to be transferred in return for the provision of open space. The sending site must be a full block of at least 35,000 square feet in size

Figure 19.1. One of Portland’s many TDR provisions helped preserve the historic downtown Brewhouse pictured here. (Photo by Rick Pruetz)

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and appropriate for a public park. The potential receiving sites are those areas predesignated for a height bonus. The bonus cannot exceed an additional 100 feet in height above base zoning requirements, and the building receiving the bonus cannot exceed 460 feet in height (or lower in established view corridors). In approving a request for open-space height transfer, Portland considers various guidelines, including proximity of the proposed park to other parks and population concentrations.

Performance As of 2009, TDRs available in the Johnson Creek and the Northwest Hills Plan Districts remained unused. In the Central City Plan District, at least four major office projects incorporating TDR have been discussed but have not moved forward. The Portland TDR program may be hampered by the fact that developers can obtain added density in other ways. The city, for example, grants density bonuses to developers who provide desirable project amenities, such as housing, childcare facilities, retail, rooftop gardens, public art, and water features as well as theaters in the Broadway Theater bonus target area. Nevertheless, the TDR program succeeded in saving the Athens Hotel in the Old Town area of downtown Portland. The hotel is in the CXD zoning district, which allows 9 square feet of floor area for each square foot of lot area. The existing hotel building occupies a 10,000-squarefoot site and, consequently, is entitled to 90,000 square feet of floor area. Because the hotel is only 40,000 square feet in size, it has 50,000 square feet of unused development capacity. In 1990, a partnership controlled by a nonprofit organization applied to transfer the 50,000 square feet of excess rights to a future project on a 30,000-square-foot site consisting of the remainder of the block on which the Athens Hotel

is located. Under the 9:1 FAR limit, this receiving site would normally be allowed 270,000 square feet of floor area. But with the transferred rights from the Athens Hotel, a 320,000-square foot development would be permitted. At the time of the transfer application, the partnership did not submit plans for future development of the receiving site. It was critical to the rehabilitation of the hotel, however, that the transfer be approved because the entire city block had the same owner before the transaction; the sale of one-quarter of the block would have significantly reduced the development potential of the remaining three-quarters of the block without the additional density provided by the transfer. The Athens Hotel transfer was approved in 1990, with the renovation completed in 1991. The SRO units are occupied and the commercial space is leased.

Lessons from Portland Portland’s TDR programs have had minimal success. The Johnson Creek Plan District, which has not registered any TDR activity, allows maximum possible density on potential receiving sites to be achieved through bonus density—an option that developers may find more attractive than TDR. Likewise, potential sending site owners can take advantage of a successful program in which the city buys land in floodplains from willing sellers. Other factors that come into play include the following: • Transfers are approved through the planned unit development process according to the approval criteria established for all PUDs in Portland. • Density bonuses are granted to developers who provide desirable project amenities. • A large portion of the Northwest Hills Plan District potential sending site consists of undeveloped land with an Environmental

Chapter 19: Urban Design and Revitalization Case Studies

Protection overlay under one ownership. The owner received at least one multimillion-dollar offer for these TDRs but declined to sell these development rights for the price offered.

Seattle, Washington Seattle, Washington, with an estimated population of more than six hundred thousand (2010), lies between Puget Sound and Lake Washington, in western King County. In addition to participating in an interjurisdictional TDR program (see the case study in chapter 15), Seattle has several intrajurisdictional TDR programs. In 1985, Seattle adopted a new downtown plan that reduced as-of-right development potential but offered density bonuses to projects that implement the plan’s goals. Ultimately, the city adopted multiple TDR programs for historic preservation, affordable housing, open space, major performing arts theaters, and landmark performing arts theaters that also provide affordable housing.

Process Sending sites can be located in all but three downtown zoning districts. For sending sites in historic districts and office districts, the transferable development rights consist of the difference between the floor area allowed by zoning and the actual floor area of the existing building. In retail, mixed-use, and residential districts, the code establishes uniform baselines for the purpose of calculating the amount of transferable rights available to a sending site. Receiving sites are properties within the Downtown Office Core I, Downtown Office Core II, and Downtown Mixed Commercial districts. Seattle’s downtown development codes include a matrix depicting the regulations con-

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cerning transfers. For example, in the Downtown Retail Core, transfers can take place only between sites within the same block and zone. Similarly, sites in the Downtown Mixed Commercial district can accept transferred density only from low-income housing and historic buildings in four specified zoning districts. Conversely, sites in the Downtown Office Core I and Downtown Office Core II districts can receive density from any sending district. Downtown Seattle zoning districts have a base density limit, a higher intermediate density for projects that achieve specified objectives, and an even higher maximum FAR limit. In addition, the intermediate density is actually a range of densities with lower and upper limits. The two Downtown Office Core (DOC) districts offer the greatest opportunity for receiving transferred development. DOC I has a base FAR of 5 and can reach FAR 14 with housing and amenity bonuses as well as TDR. DOC II is designed as a transitional zone; it allows a base FAR of 4, which can increase to FAR 10 with bonuses and transfers. Outside the Downtown Office Cores, the amount of development potential transferable to a receiving site can differ depending on the receiving site zoning and the nature of the sending site. For example, when accommodating density transferred from a low-income housing sending site, the receiving site can accept transferred floor area equivalent to the difference between the lower limit of the intermediate FAR range and the maximum density limit. Before lowincome housing development rights can be used, however, the receiving site project must first generate FAR 2 of extra density through onsite amenities or historic landmark TDRs. Seattle has stringent requirements for transferring TDRs from historic landmarks. To qualify, the sending site must be a designated city landmark, and the Seattle Landmark Preservation Board must approve the proposed restoration of the landmark. As a condition of the

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transfer of development rights, the applicant must rehabilitate the landmark and implement a plan for maintaining the structure after the rehabilitation is completed. To ensure this occurs, the receiving site applicant must provide security for the completion of the restoration work: the TDRs must be sold and the funds needed for restoration deposited in an escrow account before any building permits are issued for the receiving site project. In addition, Seattle will not issue the certificate of occupancy for the receiving site building until rehabilitation of the historic property is complete. The sending and receiving site owners must sign an agreement, recorded as a covenant on both properties, that guarantees the landmark on the sending site will be restored and preserved for the life of the new building on the receiving site. Seattle provides extra incentives for the owners of landmark performing arts theaters to continue theatrical performances as well as to preserve the theaters themselves. Under this program, if the owner of a landmark performing arts

theater agrees to sell TDRs for an approved price, receiving site developers must purchase these priority TDRs before purchasing TDRs from other, nontheater landmarks. In return, the sending site owners must agree that the theater will primarily be used for theatrical performances for at least forty years. To facilitate the buying and selling of these development rights, Seattle formed a TDR bank that buys, holds, and sells TDRs generated by all categories of sending sites. The city initially funded the bank with a $1.2 million appropriation. Developers wanting to increase development potential on receiving sites can buy TDRs either from the city’s TDR bank or directly from the sending site owners. In addition to TDR, Seattle sometimes grants bonus density to developments that provide specified on-site benefits, such as childcare, movie theaters, retail stores, parks, rooftop gardens, sculptured building tops, performing arts theaters, museums, plazas, transit access, public atriums, and housing.

Figure 19.2. Kreielsheimer Place, a landmark building with theaters and affordable housing, was preserved and restored with help from TDR. (Photo by Rick Pruetz)

Chapter 19: Urban Design and Revitalization Case Studies

Performance Through its multiple programs, Seattle has established itself as a leading innovator and entrepreneur in urban TDR programs.3 As of 2010, almost 2 million square feet of sending site floor area had been certified, and more than 1.4 million square feet had actually been sold or transferred. All categories of sending sites are represented in these totals: landmark performing arts theater/housing, open space, affordable housing, and major performing arts theater.4 Seattle’s TDR bank has helped the programs score some of their biggest successes. For example, the bank facilitated the construction of Benaroya Symphony Hall by selling the TDRs generated under the Major Performing Arts Facilities TDR Program. The bank purchased and resold TDRs from the historic Paramount Theater—which has forty affordable housing units as well as a three-thousand-seat live-performance theater. It also facilitated the conversion of a 1925 building that once housed the national headquarters of the Fraternal Order of Eagles into Kreielsheimer Place, which features two live-performance stages and forty-four lowincome housing units. In addition to two landmark theaters, TDR has preserved eight other historic landmarks (although not necessarily through the historic landmark TDR provisions). Often in conjunction with other tools, TDR has also preserved several buildings containing hundreds of affordable housing units (Meier 2010). The open-space TDR provisions also helped to create the Olympic Sculpture Park, a waterfront park where visitors can view artwork against the backdrop of Puget Sound and the Olympic Mountains.

Lessons from Seattle Seattle developers often have non-TDR options for gaining additional development potential, in-

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cluding such on-site project features as public plazas and sculptured building tops. Some of Seattle’s TDR provisions are complicated and include requirements that might discourage developers in other cities. Nevertheless, these TDR programs succeed largely because Seattle observes other critical success factors. • The baselines are established at levels that many—if not most—developers want to exceed, thereby generating demand. • The receiving areas have been carefully considered to ensure that bonus development is compatible rather than controversial. • Seattle residents have demonstrated strong support for planning objectives and seem generally in favor of urban densities for downtown Seattle. • The Seattle Office of Housing promotes the use of TDR to nonprofit organizations and property owners, an effort that appears to be paying off based on the number of affordable units preserved by TDR. • Seattle’s TDR bank has facilitated many of the city’s iconic projects, including the Paramount Theater, Kreielsheimer Place, and Benaroya Symphony Hall.

Cupertino, California The city of Cupertino, with about fifty-five thousand residents (2010), is located about five miles west of downtown San Jose, California. In 1973, Cupertino calculated that vehicle trips would have to be limited to maintain acceptable levels of service on its two major streets, DeAnza Boulevard and Stevens Creek Boulevard. Specifically, the city calculated that development within the DeAnza/Stevens Creek commercial corridor should not exceed sixteen one-way, peak-hour trips per acre of commercial land. Allowing more traffic in the corridor would require

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more than four travel lanes in each direction. Roadways wider than four lanes in each direction were not considered feasible in terms of cost and the intergovernmental cooperation that would be required. Cupertino recognized that some land uses would not need the maximum number of trips allowed, while other uses with high, peak-hour, trip-generation characteristics would not be able to locate within the corridor without some form of relief. To provide developers with flexibility in locating a mix of land uses and intensities within the corridor, Cupertino included a transfer of trip rights provision in its Traffic Intensity Performance Standard (TIPS) regulation. Using the transfer provision, developers are able to buy and sell trips without exceeding the corridor average of sixteen one-way, peak-hour trips per acre. In 1983, Cupertino adopted a general plan amendment establishing floor area ratios for the industrial and commercial zones outside the DeAnza/Stevens Creek corridor. One year later, it amended the general plan to allow transfers of FAR within these zones.5

Process To implement the TIPS program, Cupertino published a guide titled Development Intensity Manual to explain the trip-limitation concept and demonstrate how to use the transfer mechanism. The manual contains trip-generation rates for residential, industrial, office, commercial, restaurant, retail, and other uses. These trip-generation rates are expressed as peak-hour, one-way trips per one thousand square feet of floor area for all nonresidential uses. Residential uses have a trip-generation rate of .75 peak-hour, one-way trip per dwelling unit. The trip-generation rates for uses not listed in the manual can be determined either on the basis of existing transportation research or as a separate analysis prepared by a traffic engineer. For certain desirable uses,

such as affordable housing, the city council can waive or reduce trip-generation rates. A property within the DeAnza/Stevens Creek corridor qualifies as a potential sending site if it does not use the entire allocation of sixteen peak-hour, one-way trips per acre. To transfer trips, the sending site owner must apply for a use permit. In approving a use permit, the planning commission and city council must find that the trip rights proposed for transfer have not already been transferred and that the proposed transfer will not severely reduce future development options for the sending site. After approval of a use permit, the sending site owner must record a covenant on the property stating the number of trips available to the subject property and the number of trips transferred to a receiving site. Cupertino initially established floor area ratio limitations on all land zoned for commercial or industrial uses but not in the DeAnza/Stevens Creek TIPS area. In 1984, it instituted a transfer provision to allow flexibility in locating development within these zones. This transfer program is similar to TIPS: the proposed sending and receiving sites must be approved by a use permit hearing, transfers must be recorded on the deeds of both properties, and a reasonable amount of development potential must remain on the sending site to ensure that the property maintains its viability.

Performance According to Cupertino’s community development staff, at one point the estimated value per trip right was $50,000.6 In fact, some developers acquired trip rights early in the program, assuming their value would increase over time. About forty transfers have occurred under the TIPS program. In fact, the trip capacity of the DeAnza/Stevens Creek corridor has essentially been filled with the transfers allowed since the program started in 1973. More recently, a

Chapter 19: Urban Design and Revitalization Case Studies

785,000-square-foot research and development office park was built in the corridor using 322 trip rights purchased from three separate sending sites. In this transaction, Cupertino enabled its major employer, Apple Computer, to expand without overwhelming the capacity of the city’s street system.

Lessons from Cupertino Cupertino, California, was the first community to use TDR to allow appropriate concentrations of density while maintaining an overall level of development that can be accommodated by infrastructure systems. Program features include the following: • The owners of potential receiving sites are motivated to buy trips or development rights because they have few other options for obtaining extra density. The sending site owners are encouraged to sell because

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the demand for trip rights and development rights creates an attractive selling price. • Cupertino alleviated potential traffic congestion problems by creating a TDR program based on infrastructure capacity— specifically, one-way, peak-hour trips per acre. Using the transfer provision, developers can build financially feasible projects without exceeding a corridor’s traffic capacity. • To implement the program administratively and further educate the community, the city published informational materials, including its Development Intensity Manual. • Sending sites are easily calculated. For example, a property within the DeAnza/ Stevens Creek corridor is a potential sending site if it does not use the entire allocation of one-way trips per one thousand square feet of floor area on all nonresidential uses.

Epilogue: The Promise and Future of TDRs

Since 1968, when the first U.S. community adopted a TDR ordinance, much farmland, historic landmarks, wildlife habitat, and open space have been preserved for future generations to enjoy. Communities throughout the country could easily identify even more preservation targets— and succeed in saving them with thoughtful planning and program implementation.

What Makes a TDR Program Successful? So what makes one TDR program more likely to succeed than another? Let us start by summarizing key findings of a 2008 study by Kaplowitz, Machemer, and Pruetz (2008), which surveyed managers of TDR programs across the country. The survey itself was remarkable for its response rate—more than 50 percent. The respondents identified the following key contributors to TDR program effectiveness.

Purchase of Development Rights Programs TDR programs with purchase of development right (PDR) programs are more successful than

those without it, report the survey respondents. This finding suggests that communities considering TDR should also consider PDR programs, and that communities with only a TDR program should consider adding a PDR program. Some respondents noted that their PDR program seemed to interfere with their TDR program’s ability to create effective receiving areas because opponents would rather use PDR to retire the development rights than increase development density. Other respondents, however, observed that PDR programs and TDR programs complement one another, and that funds from one program can be used to leverage the other. In addition, having both programs increases a community’s ability to identify and preserve especially important resources. Still other respondents viewed their PDR programs as a valuable tool independent of their TDR programs. We surmise that the presence of both PDR and TDR programs signals the community’s strong commitment to achieving preservation goals. Indeed, many of the communities with the most successful TDR programs profiled in this handbook also have major PDR programs, such as Boulder County, Colorado; the New Jersey Pinelands; Montgomery County, Maryland; and King County, Washington.

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TDR Banks

State Enabling Statutes

TDR programs with TDR banks appear more successful than those without banks. This makes sense because TDR banks allow a local government to acquire TDRs at relatively low prices during weak economic conditions, then use them to increase the supply of development rights in robust markets—perhaps with the modest effect of keeping prices lower. TDR banks can also facilitate the initial launch of a TDR program, thus demonstrating to sending area owners and developers alike how one works. Respondents especially noted how their TDR banks provide important price information to TDR buyers and sellers. One respondent observed that the bank was “essential, for it provides confidence and a guarantee of value” (Kaplowitz, Machemer, and Pruetz 2008, p. 383). We surmise that a TDR bank may not be as important to facilitating the TDR market as it is to providing informal, informational, and psychological functions. The study’s authors, for example, note several supportive functions of TDR banks: providing financing, providing facilitation and clearinghouse functions, educating the community, bringing TDR buyers and sellers together, recording transactions, issuing transfer certificates, and providing the program with overall credibility to build public confidence. Specifically, the presence of a TDR bank assures sending area owners that they should be able to find a buyer for their development rights. Similarly, the TDR bank itself creates a pool of available TDRs, assuring receiving area developers that they will be able to buy TDRs when needed—often at a set price that can be included in the project’s pro forma analysis. Lastly, TDR banks can leverage limited preservation funding by using grants and other funding sources to buy TDRs, sell them, and use the proceeds to buy additional TDRs through a revolving fund.

Somewhat surprisingly, the survey found that state enabling legislation is not significantly associated with the success of a TDR program. While enabling legislation can help bolster legal defensibility, nearly three-quarters of the respondents in states with legislation pointed to a local ordinance as the primary legal basis of their program. Moreover, only about 10 percent reported facing TDR-related litigation, with no difference between communities in states with or without legislation. Although Florida, Maryland, and Pennsylvania have TDR enabling legislation, successful TDR programs in those states may have more to do with the desire to balance growth with preserving important landscapes. On the other hand, several states with enabling legislation, including North Carolina, have no communities with TDR programs. The absence of enabling legislation could, in fact, make TDR programs more nimble, flexible, and effective.

TDR Initiators The study suggests a significant link between success and TDR programs with two or three initiators—although not with one initiator or more than four. Initiator groups include farmers/ ranchers, nonfarm landowners/residents, developers/builders, preservationists/nonprofit organizations, and government agencies/officials/ planners.

Program Goals Much TDR-related literature seems to focus on a single program goal, namely open-space preservation (and its variants, such as farmland, floodplain, and wetland preservation). Yet the survey indicated that only about an eighth of the

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respondents have a TDR program with a single goal; the majority of programs have multiple goals. One-quarter of respondents indicated all goals listed on the survey: rehabilitation of lowincome housing, land development/redevelopment, preservation of specific areas, agriculture/ open-space protection, historical area preservation, environmental preservation, growth management, balancing inequities, and maintaining/enhancing land values. The study could not support the conclusion, however, that TDR programs be structured around multiple preservation and development goals to maximize the number of supporting interests.

Type of Development Demand The survey asked respondents to describe the nature of development demand in their TDR program areas—whether development pressures related to housing, commercial/industrial/office, PUD/master plan community, or farmland. Only the demand for housing was significantly associated with successful TDR programs.

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Background Studies The researchers found a significant association between conducting background studies before designing and initiating a TDR program and the program’s ultimate success. This finding not only confirms the value of background studies but also may reflect the level of commitment required for a TDR program; communities willing to devote the time and resources needed to properly design the program are more likely to implement one that meets its goals. A background study typically includes an analysis of the potential market for a TDR program. This exercise helps identify the nature of development scale or density desired by stakeholders, which may exceed the limits of the community’s current planning and development codes. Armed with market information, a community can estimate the number of development bonuses needed in the future and how much developers may be willing to pay for each additional dwelling unit or extra square foot of floor area. With these estimates of likely TDR value, a study should be able to evaluate the

REVISITING AND REVISING Ideally, a background study will include an examination of existing TDR programs, as a benchmark against which local governing bodies can gauge their success and then periodically adjust program features to improve performance. Unfortunately, our review of 239 TDR programs indicates that a sizeable share of them do not contain a monitoring element; of those programs that do, the monitoring and updating are not performed routinely. In fact, the most successful TDR ordinances in the country have been refined, sometimes more than once. Montgomery County, Maryland, for example, tracks the development of land within the proposed TDR receiving areas and adds new receiving areas as required. After Palm Beach County, Florida, analyzed why its early TDR programs were not generating many transfers, it created a TDR bank that now holds 8,800 TDRs. California’s San Luis Obispo County, encouraged by the success of its community-based TDR program in Cambria, later adopted a countywide program. And Lumberton Township in New Jersey first watched the success of a TDR program that operated primarily on its west side before expanding the program to include sending and receiving areas on its east side. The willingness to monitor and adjust contributes to a program’s success. A community must make many estimates when developing a TDR ordinance: land values, TDR values, developer expectations, landowner interest levels, and more. It is not reasonable to believe that all of these estimates will prove accurate the first time. Successful communities periodically revisit their programs and make adjustments as often as needed.

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number of TDRs needed from a sending area landowner and determine whether the value would induce the owner to sever and sell development rights equal to, or in excess of, the loss of value associated with a TDR transaction. This transfer ratio is a crucial element in creating a program that adequately compensates owners for preserving their land. Communities that fail to understand local market dynamics may adopt programs that also fail.

ous zoning code for an entire area was too permissive. Alternatively, some communities recognize that developers want something other than increased residential density and create TDR programs that grant other incentives, such as bonus floor area, extra lot coverage, additional building height, and exemptions from building permit quotas.

2. Customized Receiving Areas

Top 10 Components of TDR Programs Over the past forty years, dozens of authors have identified the individual components that produce an effective TDR program. In 2009, a study of twenty publications compiled the ten most frequently mentioned success factors and evaluated how often these features actually appear in the twenty U.S. TDR programs that have preserved the most land to date (Pruetz and Standridge 2009b). In other words, the 2009 study compared theory to reality. Based on the study’s findings, here are the top ten components of TDR success, ranked in order of importance.

1. Demand Developers must want the extra development potential offered by the TDR option. As obvious as that sounds, many TDR programs fail because strong demand does not exist in the local market. Conversely, all of the top TDR programs in the United States have developers clamoring for the extra development potential they offer. To address a perceived lack of interest among developers, a community may reduce its baseline through a downzoning. Due to political sensitivities, downzonings of receiving areas typically occur as part of a widespread rezoning prompted by general agreement that the previ-

Again, all twenty of the top TDR programs in the United States have worked with stakeholders to identify receiving areas where developers would want to use TDRs—and neighbors would not reflexively reject what they might perceive as detrimental growth. The most obvious receiving areas are locations designated for future upzonings in the general plan. If these growth areas prove acceptable, they would simply require TDRs for all dwelling units that result from the future upzonings. Unfortunately, adjacent neighborhoods often object to this approach even when the proposed location and density allowed with TDR is exactly the same as the location and density already approved in an existing general plan. In response, many communities place TDR receiving areas in new towns or new villages separated from existing neighborhoods. A few programs offer the ability to transfer TDRs into their downtowns and redevelopment areas—places that often have adequate infrastructure and a tradition of intensive development.

3. Effective Sending Area Zoning Many TDR programs struggle because zoning in the sending area is too permissive. For example, it is not uncommon to see areas designated as agricultural land in a general plan actually zoned to allow one dwelling unit per acre. Send-

Epilogue: The Promise and Future of TDRs

ing area landowners in these places often want considerable compensation for preserving their land. This can be addressed to a limited extent by increasing the TDR allocation ratio. But if the allocation ratio becomes too high, the program may accomplish relatively little preservation per TDR. In addition, permissive zoning in the sending area sends a mixed message to property owners; it gives farmers, for example, good reason to question the wisdom of permanently preserving their land for agricultural use. This is because these farms could some day be surrounded by residential neighbors who complain about the noise, dust, and odors generated by everyday agricultural practices.

4. Inability to Circumvent TDR Requirements Of the top twenty TDR programs in the United States, seventeen (85 percent) offered few or no alternative ways to obtain additional development potential other than TDR. On the other hand, many TDR programs fail because developers can achieve additional residential density or bonus development without using TDR. Some communities, for example, allow bonus development for on-site improvements such as plazas and fountains—features that a developer would much rather fund than off-site preservation. Other communities have planned unit developments, which offer additional density without a TDR requirement. And, in some cases, a community will continue to grant free upzonings to applicants, thereby eviscerating the TDR program.

5. Marketability Adjustments Three-fourths of the top twenty programs use enhanced TDR allocation rates, transfer ratios, or conversion factors capable of producing TDR

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prices that appeal to buyers and sellers alike. TDRs are priced high enough that sending area property owners are willing to sell them and low enough that developers are willing to buy them. In programs that fail, often the amount of preservation needed to create a TDR produces a TDR priced too high for developers to profitably use.

6. Certainty for Developers Developers prefer an application process with a known outcome, rather than one in which public hearings and discretionary decisions can change, delay, or deny proposed projects. The majority of the twenty top programs (nearly 75 percent) give developers reasonable assurance that projects using TDRs ultimately will be approved, provided the projects comply with all code requirements—including the necessary number of TDRs.

7. Community Preservation Ethic Without strong public support for preservation, communities often adopt weak TDR programs that generate fewer transfers. When a preservation ethic exists within the general public, elected officials have the ongoing support to enforce TDR program compliance throughout the long time periods typically needed for TDR programs to succeed.

8. Simplicity TDR programs must appeal to multiple constituencies, including landowners, developers, preservationists, and the general public. Keeping the program simple helps generate the trust needed to bind these diverse coalitions. More than half (60 percent) of the twenty top TDR

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programs have truly simple requirements and procedures.

9. Outreach Developers and property owners must know that the TDR program exists, how it works, and how it can help them. The general public also needs reminders of TDR program benefits—especially when elected officials are asked to make exceptions that could eventually render a TDR program ineffective. Most, although not all, of the top TDR programs market and facilitate the use of TDR by promoting benefits through support materials and websites.

10. Public Funding An intermediary in a TDR program is any person or entity who buys TDRs and holds them for resale to developers. Intermediaries funded by local governments are known as TDR banks. Surprisingly, only four of the top twenty TDR programs use a TDR bank. These four programs, however, include some of the most successful programs in the country, preserving more than two hundred thousand acres among them. Of these top ten components, the 2009 study characterizes the first two as essential, the next three as very important, and the remaining five as helpful—but not necessarily essential—to program success. When used all together, these components can position a TDR program to achieve spectacular results.

Developing Trends TDR began as a historic preservation tool but quickly expanded to other uses. Today, a major-

ity of TDR programs that aim to protect undeveloped land have an environmental objective. Sometimes that objective is specific—preserving a particular hillside or an individual habitat, for example. In other cases, the program aims to preserve environmental resources as a whole. As evidenced by the case studies (see chapters 14 through 19), many current TDR programs have a generalized goal of preserving multiple rural resources (including farmland, potential outdoor recreational sites, and rural character) or promoting preferred uses of downtown areas (such as affordable housing, concert halls, and cultural centers). Still other TDR programs operating within developed urban areas seek to protect specific resources, such as historic landmarks. Most likely, future TDR programs will continue down these dual paths of specialization and generalization. Based on our observation and analysis, here are the trends likely to continue, presented in five general categories.

Environmental Protection Climate change will increase the urgency of preserving areas prone to coastal storms, wildfires, floods, and other natural disasters. It will also raise awareness of the need to protect the green infrastructure—such as water supplies—that many communities now take for granted. As this greater need develops, it may stretch traditional funding sources, partly because of the extra costs associated with disaster-related recovery and reconstruction. TDR will be one of solutions that communities choose. • Many communities use TDR to preserve barrier islands and other coastal resources, including the original TDR program adopted by Collier County, Florida, in 1973. But recently, some coastal communi-

Epilogue: The Promise and Future of TDRs

ties in Florida have specified storm surge zones as sending areas in their TDR ordinances, including Sarasota and Charlotte counties. If future hurricane seasons approach the severity of 2005, more communities with coastlines on the Gulf of Mexico and the Atlantic Ocean may do likewise. • The Malibu Coastal Zone in California uses TDR to retire lots in coastal mountains prone to wildfires, floods, and mudslides. If the climate becomes hotter and drier, the increasing frequency of wildfires will prompt more communities to consider TDR and other land preservation tools to reduce the people and property at risk in hillsides, forested areas, and other hazardous places. • Several existing TDR programs aim to protect bodies of water, watersheds, and groundwater recharge zones. As water resources become increasingly threatened in parts of the country, more communities will consider preservation options, including TDR.

Farmland Preservation TDR has been used to protect farmland for decades, often because agriculture is a primary component of many local economies. A growing number of Americans prefer locally grown foods because of the negative effects of global agribusiness: obesity, the effect of processed foods on health, the vulnerability of food transport systems to disruption and contamination, and the implications of long food transport distances on food cost and air pollution. Yet, urban growth continues to threaten local farmland. Not surprisingly, the American Planning Association’s 2007 Policy Guide on Community and Regional Food Planning called for greater emphasis on

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farmland preservation and cited TDR as a tool worth considering. Given dwindling public budgets, it is likely that TDR will assume an even greater role in farmland preservation than it currently holds.

Historic Preservation Larger cities—including New York, Los Angeles, Dallas, San Francisco, and Denver—primarily adopted the original TDR programs for historic preservation. Since 2000, an increase in historic preservation TDR programs has occurred in medium-sized cites, such as West Palm Beach, Florida, and in small cities, such as Aspen, Colorado, and Ketchum, Idaho. This trend will continue as smaller cities realize that TDR can work at relatively low levels of development.

Community Revitalization For decades, several central cities have implemented the goals of their downtown plans using TDR. In 1975, Los Angeles adopted a Central Business District Redevelopment Plan that promoted housing, open space, historic preservation, cultural/community facilities, and transportation improvements with TDR. Seattle adopted a similar approach in 1985, followed by Portland in 1988. That same year, New York City adopted a Theater District zone that goes beyond preservation, allowing the transfer of floor area when owners restore their buildings and deed-restrict their theaters to operate only as live-performance venues. Most recently, New York City used TDR in its West Chelsea neighborhood as part of a successful effort to convert an abandoned rail line into an elevated, linear park. Given these successes, an increasing number of communities will likely use TDR to help

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revitalize their downtown areas in general and specific sites in particular.

Economic Development In a sense, all TDR programs help promote economic development. Programs that protect water supplies and other green infrastructure, for example, save municipalities from building and maintaining costly infrastructure. Likewise, land preservation TDR programs often help support agricultural sales or tourism. Some TDR programs explicitly intend to protect a specific industry important to the local economy. That is the case in Carroll County, Maryland, where marble quarrying contributes significantly to the local economy. Consequently, in areas underlain by marble and other recoverable minerals, Carroll County prohibits the creation of new lots; affected property owners can transfer development rights from these sending areas to mitigate the prohibition’s financial impact. Similarly, in Churchill County, Nevada, the Fallon Naval Air Station generates one-third of the economy. In 2006, the county adopted a TDR program designating the air station’s buffer zone as a sending area where landowners can be compensated for reduced development potential. A similar program is under consideration for the area surrounding the Marine Corps Air Station Beaufort, a facility that forms a critical component of the economy of Beaufort County, South Carolina. In the future, an increasing number of communities will use TDR to achieve targeted economic development goals like these.

New Approaches to TDR Many parts of the United States will face a land use end game in the twenty-first century. Within decades, most of the land in some communities

could fall into one of two categories: permanently preserved or developed. As the general public becomes aware of this race for open space, public officials will become more inclined to use all available preservation tools—including a TDR program that does not take years to start working. They are more apt to choose the faster, plan-consistent TDR approach over the slower, plan-amending method. As detailed in an article in Zoning Practice (Pruetz and Standridge 2009a), a planconsistent program works within an adopted general plan: TDR receiving areas are places designated in the plan for future upzoning, and all future upzonings result in TDR receiving zones where the maximum density of the former zoning is baseline, all dwelling units in excess of baseline are considered bonus units, and all bonus units require TDRs. A community can put a plan-consistent TDR program in place in less than one year. In contrast, as its name suggests, a plan-amending TDR program requires the community to amend its general plan to include areas for higher density/intensity receiving areas—a multiyear process that typically involves environmental studies and infrastructure analyses. Communities looking to put a TDR program on the fast track are likely to experiment with the following approaches.

Reversible Sending Site Easements In most TDR programs, the sending area resource is preserved in perpetuity. A majority of citizens usually agree with the wisdom of permanent preservation when the sending areas are wildlife habitat, aquifer recharge zones, scenic views, and other natural resources. But differences of opinion often occur over the need to permanently preserve resources such as farmland. Farmland owners are often reluctant to permanently preserve their farms, fearing they

Epilogue: The Promise and Future of TDRs

could someday be bordered by residential development if neighboring farms decline to participate in the TDR program. Consequently, a growing number of programs enable owners of previously preserved sending sites to buy back their forgone development potential, usually under strict limitations. Typically, the reversal in status of the sending site cannot occur until the community amends its general plan to show the sending area as appropriate for development rather than preservation. Sometimes, local elected officials decide whether to allow buyback of development potential; alternatively, the reversal of otherwise permanent easements may require approval from outside the jurisdiction. Hatfield, Massachusetts, for example, releases TDR easements only if the landowner buys back the development rights and two-thirds of both branches of the Massachusetts general court determine that the land in question is no longer appropriate for agriculture.

Alternative Incentives The classic urban TDR program involves the transfer of unused floor area potential from a historic landmark to a new office tower. The classic rural TDR program involves the transfer of residential density from a place where less density is desired to a place where more density would be appropriate. Neighborhoods near receiving areas, however, often react negatively to a potential increase in density or intensity, even if the increase does not exceed the density or intensity of surrounding development. Alternative incentives may offer another avenue to program success, provided they offer opportunities that developers want and are willing to pay for. For example, most urban TDR programs feature a transferable floor area incentive that creates baseline floor area and maximum (with TDR) floor area for an entire building. But TDR

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programs can also work by creating a floor area baseline that applies to each individual residential dwelling unit. In the 1980s, the Cambria TDR program in San Luis Obispo County, California, pioneered this technique by limiting an individual house to as little as 600 square feet of total floor area unless unused potential floor area is transferred from preserved sending sites. Similarly, in Pitkin County, Colorado, developers cannot exceed a baseline residential floor area of 5,750 square feet per individual dwelling unit unless they buy bonus floor area at the rate of 2,500 square feet per TDR. In Pitkin County, which surrounds the wealthy mountain resort of Aspen, TDRs sell for roughly $250,000 each. This mechanism is likely to gain popularity, particularly in affluent communities where home buyers want big houses and are able and willing to pay whatever it takes to build them. In some programs, developers buy TDRs to exceed baseline lot coverage—the percent of an individual parcel that can be covered by impervious surfaces. In the Tahoe Regional Planning Agency program, each site’s soil classification determines the amount of a lot that can be covered by houses, porches, driveways, sidewalks, and other impervious surfaces. In certain soil categories, property owners can exceed coverage baselines by a specified amount by transferring lot coverage from more sensitive sending properties. Similarly, the TDR program in Warwick Township, Pennsylvania, establishes a lot coverage baseline of 10 percent in its industrial receiving zone. Using transferred TDRs, however, developers can achieve up to 70 percent lot coverage by acquiring bonus lot coverage at the rate of four thousand square feet per TDR. In addition to the amount of development, permit quota systems can be combined with TDR mechanisms to create a successful preservation tool. When issuing building permits, Morgan Hill, California, grants priority to development applications that incorporate TDRs. The Tahoe Regional Planning Agency requires

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an allocation to obtain a building permit, and a limited number of allocations are issued annually; property owners can avoid waiting for an allocation, perhaps for years, by buying an allocation created when a landowner removes an existing nonconforming structure from a Sensitive Stream Environment zone. Livermore, California, allows developers to use TDRs to achieve bonus density in receiving areas or to secure a construction permit under the city’s housing permit allocation system. Such approaches will probably be used with greater frequency as communities conclude that a higher pace of development is a relatively cheap price to pay to preserve valuable resources.

TDR Conversions In some communities, the type of development precluded by TDR in sending areas differs from the type of additional development that TDR allows in the receiving area. Warwick Township, Pennsylvania, allows developers to exceed lot coverage baselines in the receiving area—not by lot coverage reductions elsewhere but by using TDRs created by the preservation of farmland. In one receiving area in New York’s Long Island Pine Barrens program, TDRs created by land preservation can be used to allow bonus development either in the form of additional residential dwelling units or specified levels of bonus nonresidential development capable of generating three hundred gallons of sewage flow per day, an amount equivalent to one dwelling unit. In the Media District TDR program in Burbank, California, developers can obtain bonus potential for any use allowed at a receiving site in return for development limitations imposed at a sending site regardless of the type of development allowed at that sending site. Peakhour vehicular trip-generation rates determine the conversion ratio because the city is concerned about the ultimate capacity of its trans-

portation system. This ability to convert development potential from one form to other increases the marketability of the TDRs and strengthens the program.

Leveraging Funding Sources Many communities have discovered the benefits of combining TDR with traditional funding sources. King County, Washington, bought more than ninety thousand acres of the Snoqualmie Forest, plus other open space, using general fund money and the proceeds from a dedicated portion of county property taxes. King County deposits TDRs in a TDR bank and sells them for use in receiving areas both within the county and in incorporated cities—including Seattle—that have intergovernmental agreements with the county. King County uses the proceeds from the sale of these TDRs for further preservation, thereby creating a perpetual revolving fund from money that would otherwise be used only once. Palm Beach County, Florida, stocked its TDR bank with money generated by an openspace bond. Specifically, the county bought thirty-five thousand acres of ecologically significant land with $100 million raised through a voter-approved bond. It placed the resulting nine thousand TDRs in a TDR bank and sells them at a price periodically adjusted to the market—$50,000 each in 2010. The proceeds from these TDR sales are plowed back into the program for maintenance and expansion of the natural area preserve system. Smaller jurisdictions have also developed innovative ways to stretch finite preservation funding through the use of TDR. In Pennsylvania, the Lancaster County Agricultural Land Preservation Board operates a traditional PDR program in most townships, meaning that funding is used once to buy and retire development rights. But Warwick Township has a TDR program. The county board allows Warwick to bank and

Epilogue: The Promise and Future of TDRs

resell the TDRs created when the county and township pool their resources to preserve farmland. In turn, Warwick Township applies all proceeds from the sale of these TDRs to future farmland preservation. In 1986, the Land Conservancy of San Luis Obispo County, California, received $275,000 from the California Coastal Conservancy to preserve the habitat of the Cambria pine. With a traditional acquisition approach, that money would have been quickly depleted, forcing the land conservancy to find more money or cease acquisition. Instead, the land conservancy severed, banked, and resold the TDRs from the properties it had acquired. It uses the proceeds to buy more land and sever the TDRs, turning a modest amount of seed money into a revolving fund that has already preserved almost 450 properties.

Density Transfer Charges Developers are more likely to support TDR programs if they are assured of complying with the requirements for exceeding baseline density. Developers sometimes question this assurance in traditional TDR programs that require them to find willing sellers and negotiate a price for TDRs before getting approval on receiving site projects. To increase certainty, many programs have a third-party intermediary—such as a TDR bank- that buys and holds TDRs, providing a stockpile of TDRs that can readily be sold when needed by developers. TDR intermediaries and banks are effective only if adequately stocked, meaning they have enough reasonably priced TDRs for sale. Some programs provide the additional assurance of a density transfer charge (DTC), which typically gives developers the choice of satisfying the requirements for bonus density by buying TDRs or making a cash payment in lieu of TDR. The community reserves the proceeds from DTCs to

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preserve land in the sending area and to administer the TDR program. Currently, more than twenty TDR programs use DTC in one form or another—a number we expect will dramatically increase because DTCs allow communities to target site-specific preservation priorities.

TDR-Less TDR Sending area landowners can sidetrack TDR programs with concerns that a uniform TDR allocation ratio may not account for real differences in sending site values. Similarly, receiving area developers may express concerns that a uniform TDR compliance requirement will produce inequities by charging the same per-bonusunit amount for developments that, in fact, are quite different. To address this concern, TDR requirements should correspond with the nature of the bonus development. For example, it is common for one TDR to allow one bonus single-family residential dwelling unit or two bonus multiplefamily dwelling units. Different allowance ratios might be used for different receiving zoning districts. But multiple ratios may still be too imprecise if receiving area developers insist that TDR requirements be proportionate to the value gain created by the additional development potential created by using the TDR option. In 2007, Pierce County, Washington, adopted a TDR program where the cash-in-lieu option is one-half of the increase in receiving site land value caused by increased development potential as determined by an appraiser. In 2009, Gunnison County, Colorado, adopted a program that allows additional development potential only through its Residential Density Transfer (RDT) requirement, which is 10 percent of the land-value increase resulting from subdivision approval as determined by the county assessor. Gunnison County uses the revenues received from developers exercising the RDT option to

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fund easements offered by individual landowners at prices supported by site-specific appraisals of the easements in question. The benefits of Gunnison’s approach, as detailed in a 2010 article published by PAS Memo (Pelletier, Pruetz, and Duerksen 2010), include the following: • When using a one-size-fits-all requirement, communities often aim for a TDR price that is affordable for all forms of receiving area development; this does not generate the preservation funding that more expensive forms of development would be able to afford. To maximize preservation funding, the Gunnison approach applies a uniform percent of the value increase resulting from the use of TDR on all types of development, including large estates. • The Gunnison approach adjusts automatically to changes in the real estate market. • This program responds to objections about the possibility of inequitable application of TDR requirements. • The Gunnison approach requires no analysis of relative land values because it does not require a TDR allocation formula or any other type of market study. This allows for speedy ordinance adoption. • Gunnison’s program does not use TDRs. Consequently, the county does not have to issue and track TDRs to ensure that they are properly documented and used only once.

In the future, most communities will continue to impose uniform requirements on bonus receiving site development. But some communities will undoubtedly join Pierce County and Gunnison County in adopting TDR programs that tailor compliance requirements to each specific receiving site project.

What Does the Future Hold? By 2040, the population of the United States will swell by another 100 million people from 2010. Sooner or later, the communities in the path of that growth will realize that their most significant resources and their most beloved places are under threat. They will explore many options for preserving their remaining natural areas, farmland, landmarks, and identity. Most of these preservation options require public funding. But tax resources will be stretched too thin to address an array of public needs: neglected infrastructure, crumbling school systems, budget deficits, aging populations, and expenses related to climate change. In other words, communities will find it increasingly difficult to fund preservation through local taxes, state revenues, federal grants, and other traditional sources. In response, they will need to create preservation options—such as TDR—to save the best of what is left.

Appendix A: A Model TDR Ordinance

As with any model ordinance, this model TDR ordinance is a starting point. Local governments are encouraged to revise the following text, tailoring it to conform with their drafting conventions and with applicable state laws. The annotations and commentary, which use the numbering and headings of the model ordinance, will not be part of your ordinance but, rather, offer insight into the intent of the drafters and the interpretation to be given to terms and provisions. Transfer of Development Rights (TDR) Ordinance 01.0 Purpose and Intent This ordinance enables the transfer of development potential from one parcel to another. The transfer of development rights makes it possible to greatly restrict or even prohibit development entirely in one area (called the Preservation, or Sending, District) where there is a sensitive resource, such as a watershed to a surface water body or wellhead protection area, and transfer those development rights to another area (called the Receiving District) where there are little or no impediments to higher density, such as an “urban core” with public water and sewer service. The density is transferred from a “sending” parcel to a “receiving” parcel. By creating receiving parcels as markets for the sale of unused development rights in the sending parcels, TDR programs encourage the maintenance of low-density land uses, open spaces, historical features, critical environmental resources, and other sensitive features of the designated sending parcels. When the owner of a sending parcel sells development rights to the owner of a This model ordinance is adapted from the model “Transfer of Development Rights Bylaw” prepared for the Cape Cod Commission by Jonathan D. Witten, formerly of Horsley & Witten, Inc., and Dwight Merriam, of Robinson and Cole. Permission has been received to reproduce excerpts.

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receiving parcel, the purchaser thereby increases the development rights beyond otherwise permissible limits. In this manner, local governments can protect a variety of sensitive features while providing a mechanism to compensate any perceived diminution in land development potential. TDR programs are consistent with the purpose of planning efforts at the local government to further the conservation and preservation of natural and undeveloped areas, wildlife, flora and habitats for endangered species; the preservation of coastal resources, including aquaculture; protection of ground water, surface water, and ocean water quality, as well as the other natural resources; balanced economic growth; the provision of adequate capital facilities, including transportation, water supply, and solid, sanitary and hazardous waste disposal facilities; the coordination of the provision of adequate capital facilities with the achievement of other goals; the development of an adequate supply of affordable housing; and the preservation of historical, cultural, archaeological, architectural, and recreational values. Commentary: The purpose and intent provisions describe why the ordinance has been developed and what purposes it intends to serve. It is partly an educational component to help the public and the users of the ordinance understand what transferable development rights are and how they might be used to preserve special areas. 02.0 Definitions 02.1 Preservation District. An overlay-zoning district established by the municipality’s legislative body as an area in which use or development should be restricted. Commentary: As its name implies, an overlay district lies on top of another district, like a bedspread over a blanket. The blanket is the underlying zoning district, such as a single-family detached zone with 10,000-square-foot lots. With TDR, that underlying zone doesn’t change. Instead, like the bedspread over the blanket, we lay the Preservation District requirement and the Receiving District over portions of the underlying zone or zones. These don’t have to line up perfectly. The overlay district may cover only part of a regular zone or may cover part of several underlying zones. All provisions of the underlying zones remain the same, including use, density, setbacks, and the like. All procedures for development in the underlying zones remain the same. What changes is that there is now a new and additional opportunity, in the case of the Preservation District, to meet certain preservation objectives by moving—permanently—development potential out of that area into another area. This regulation uses the phrase “Preservation District” exclusively, although some jurisdictions use the term “Sending District” or “Donor District.”

Appendix A: A Model TDR Ordinance

02.2 Receiving District. An overlay-zoning district established by the legislative body as an area suitable to receive transferred development rights. Commentary: The Receiving District is another overlay zone likely to have some special ability to absorb density above and beyond that permitted by the underlying zoning district. The Receiving District in most cities or towns will probably have public water and sewer, an improved road infrastructure, and sufficient land and market demand to absorb additional density. As much care must be taken in identifying and delineating Receiving Districts as in selecting the Preservation Districts. Sensitivity must be given to the land economics: Will there be sufficient demand in the Receiving District to encourage the sale and transfer of development rights from the Preservation District? It is likely that local governments will need to adjust the Preservation District and the Receiving District as they refine their TDR programs, expanding and shrinking some districts and adjusting the incentives for transfer. 02.3 Development Rights. Those rights to develop, expressed as the maximum number of dwelling units for residential parcels or square feet of gross floor area for nonresidential parcels, or other measure of development, that could be permitted on a designated sending parcel under the applicable zoning and other relevant rules and regulations in effect on the date of the transfer of development rights, or allowance for hypothecated development rights where such rights may not be perfectible for a given parcel of land or area. Determination of the maximum number of development rights available for transfer shall be made by the [Special] Permit Granting Authority as presented in Section 05.2. Commentary: Development rights are how we measure density that is allowed to be transferred out of the Preservation District and into the Receiving District. It is not easy to pick the “exchange rate” for such transfers, but here we have identified dwelling units for residential parcels and gross floor area for nonresidential parcels. Moreover, we include the prospect that some TDRs may be allowed for parcels or areas that cannot be developed. For instance, Montgomery County, Maryland, grants one TDR per five acres regardless of constraints and despite the fact that on-site maximum density is one dwelling unit per twenty-five acres. 02.4 Transfer of Development Rights (TDR). The transfer from a sending parcel to a receiving parcel of development rights. Commentary: This is the actual transfer or movement of the development rights from one parcel to another. This is legally accomplished through a contract and/or permit that are recorded with the respective parcels on the land records at the Registry of Deeds.

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02.5 Sending Parcel(s). Parcel(s) of land within a Preservation District from which development rights may be transferred. Commentary: Sending parcels are lots, or groups of lots, that form a contiguous parcel in a Preservation District from which development rights are transferred. 02.6 Receiving Parcel(s). Parcel(s) of land within a Receiving District to which development rights may be transferred. Commentary: Receiving parcels are lots, or groups of contiguous lots, in a Receiving District that can receive development rights and be developed at densities above those otherwise permitted by the underlying zoning district. 02.7 Major Developments. A proposed development project that, due to its size, location, or character, could adversely affect the community or region. These developments include [examples follow]: • • • •

Subdivision of 15 acres or more Development of 15 or more residential lots or dwelling units Development of 5 or more business, office, or industrial lots Commercial development or change of use for buildings greater than 10,000 square feet • New construction or change of use involving outdoor commercial space of greater than 40,000 square feet Commentary: Major developments are those that the city or town considers of significant size or capable of significant impact, such that, if pursued within a Preservation District, could threaten public health, safety, or the general welfare of the community. The major developments noted above are examples of thresholds cities or towns may want to consider. 02.8 [S]PGA. The [special] permit granting authority, as set forth in Section 06 of this ordinance. Commentary: This is the local authority with the power to grant approvals and/or permits pursuant to state and local law. Most often, the permit granted will be an “adjudicative permit” such as a special permit, conditional use permit, or the like, indicating that the permit-granting authority has discretionary powers pursuant to enabling state (or county) land use law. 03.0 Restrictions on Development in Preservation Districts Landowners who desire to protect sensitive environmental areas may voluntarily sell development rights from sending parcels and enter into permanent development restrictions on those parcels.

Appendix A: A Model TDR Ordinance

If located within a Preservation District, a landowner may either: 03.1 Existing Density Controls When Development Is Proposed. Comply with all existing density limitations imposed by regulations adopted by the legislative body, as well as those that may be imposed as a condition of a [special] permit and effective at the time of application for approval of the proposed development; or 03.2 Permanent Development Restrictions When Development Is Not Proposed or Not Allowed. Permanently restrict a parcel from future development either voluntarily or by reason of restrictions on development as determined separately in the comprehensive plan and land development code. At the voluntary choice of either option at any time, the landowner may sell or otherwise transfer those development rights affected by such restrictions to a Receiving District according to the guidelines of Section 05.0. Commentary: This provision gives property owners in a Preservation District two choices. They can develop under the existing controls without doing any transfers, subject only to the granting of permits required by the zoning regulations in effect but mindful that development density may be less than the TDR density. For instance, Montgomery Country restricts development density to one unit per twenty-five acres but gives a TDR allowance at one unit per five acres. The second alternative is to restrict all or part of the development site and then transfer the development rights from that restricted portion. If the entire parcel is restricted, then no development would occur. The city or town may wish to offer an incentive to landowners/developers to transfer their development rights. This incentive is most often established by granting “density bonuses.” These bonus provisions are discussed in greater detail in Section 05.0. We anticipate that TDRs can be processed when the landowner does not propose development, or proposes development up to the maximum allowed based on the overlay zoning conditions. On the other hand, some TDR programs require the transfer of development rights when any development occurs, thus requiring landowners to impose a preservation easement on their property even if (a) development is no more than what the overlay zone allows and (b) the landowner does not wish to impose an easement. Local governments may need to consider how far to go in this respect. This model regulation provides local governments with both voluntary (Section 03.0) and mandatory (Section 04.0) provisions but limits the mandatory element to “major developments,” such as land partitions and subdivisions in sending areas. By balancing the size of the Preservation and Receiving Districts and supplying incentives, a voluntary system will work for many developments; a

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mandated system should be established for Major Developments within Preservation Districts. Even with a voluntary system for all developments, local governments should consider appropriate downzonings (increases in minimum lot sizes) to increase the attractiveness of the TDR option. Of course, part of the effort should be educational and political—in the best sense of the word—in encouraging property owners in the Preservation Districts to actively participate in preserving critical resources. 04.0 Major Developments and Restrictions on Development in Preservation Districts A landowner proposing a Major Development in a Preservation District shall comply with Section 04.1 or 04.2, below. 04.1 Permanent Development Restrictions of Similar Land Area. Permanently restrict from future development land area of the same zoning designation within the Preservation District totaling not less than 100 percent of the total land area of similar quality, character, and development potential on which development is proposed. or 04.2 Permanent Development Restrictions. Upon transfer of the development rights, permanently restrict from future development the land area proposed for development. Commentary: Special, additional controls may be imposed when a Preservation District has a Major Development—any land use action that partitions a parcel. For instance, if an owner of 25 acres (say, in Montgomery County’s sending area) wishes to build a home and not partition the parcel, the landowner can build a home per the overlay zoning requirements but has the choice of creating four TDRs (at one per 5 acres). However, if the landowner has 100 acres and wishes to create four buildable parcels based on the one-unit-per-25acre standard, the act of partitioning the land into those four parcels constitutes a “major development” that would thus require creation of TDRs Where such developments are proposed, property owners will have two choices. First, they can develop on their land as long as they set aside and restrict from all future development an area of land equal to or greater than that which they propose to develop. The rationale for this is that Major Developments cause significant impacts and the Preservation Districts are not capable of sustaining development at the underlying densities. This alternative allows landowners falling within Section 04.0 to restrict all or part of a different site within the Preservation District than the one proposed for development, containing at least the same area of land as the site scheduled for development and of the same quality, character, and development potential as the site to be developed.

Appendix A: A Model TDR Ordinance

“Quality, character, and development potential” is a phrase used to ensure that the land restricted is roughly equal—having similar development potential and relationship to the preservation goals of this regulation—to the land being developed. For example, if the land to be developed is 100 percent upland, the [S]PGA should ensure that the land restricted is not 100 percent wetland. Of course, this regulation gives flexibility to both the applicant and the [S]PGA in preserving land and resources, so it does not specify any formula. The other alternative—much preferred, both in terms of sound land planning and in the property owner’s economic interest—is the imposition of permanent development restrictions under Section 04.2 and the transfer of the development rights to a Receiving District. Note: Both Sections 03.0 and 04.0 can be included in a city or town’s adoption of this ordinance as Section 03.0 establishes a voluntary TDR program and Section 04.0 establishes a mandatory TDR program for Major Developments. Local governments are free to include both or only one of these sections.

05.0 Guidelines for Transfer of Development Rights 05.1 Schedule of Development Rights and Density Bonus Analysis. Subject to approval by the [S]PGA, development rights from sending parcel(s) may be transferred to receiving parcel(s) proposed by the applicant and identified by assessor’s map and approved by the [S]PGA. Where the economic development potential, infrastructure capacity, and other relevant factors in a receiving parcel are suitable in the judgment of the [S]PGA to support additional development, the [S]PGA may award density bonuses up to [1.5] development rights received for each [1] development right transferred from a sending parcel. 05.2 Determination of Development Rights to Be Transferred. To establish the development rights available for transfer, the [S]PGA may require the applicant for residentially zoned land to submit a preliminary or more detailed subdivision plan, as defined by the city’s or town’s subdivision rules and regulations, to illustrate the number of lots or dwelling units. The [S]PGA may require the applicant for nonresidentially zoned land to submit a site plan showing the square footage available for transfer. Commentary: To provide an additional incentive for transfers where the Receiving District has sufficient capacity to accept additional density, the [special] permit granting authority may give additional density bonuses up to [50] percent of the rights transferred, or as we say in the model ordinance, [1.5] times the development rights transferred in total. But suppose that land in the Preservation District is undeveloped? How will you determine what the development density would be at build-out without

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actually going through a full development process? The model ordinance requires the owner of residentially zoned land in a Preservation District to submit a preliminary subdivision plan as the best evidence of what might be developed. We expressly want to avoid any burdensome expense on the property owner in the Preservation District. All that is necessary here is to reach a fundamental agreement on what a probable build-out will be. Because the property is not actually being developed and because the preliminary subdivision plan is not going to be “approved” in any formal sense, local governments usually accept the density estimates of the property owners. The process should not be adversarial, although disagreements will certainly arise at times. In some cases, given the special nature of the parcel or the sensitivity of a particular resource, the [special] permit granting authority may not feel comfortable relying on generalized estimates of development potential. Then, the [special] permit granting authority should ask for more information regarding the site’s development options, including the presence of wetland resources, steep slopes, access limitations, or other constraints that would otherwise limit development. On non-residentially zoned land, the [special] permit granting authority may require the applicant to submit a site plan. Again, this is only a conceptual or sketch plan showing the basic development requirements so that a reasonable estimate of the gross square footage can be determined. 06.0 Districts 06.1 Preservation Districts. Preservation Districts are overlay districts, shown on the zoning map, which include, but are not limited to, the following natural resource areas identified in the [Regional Plan] and/or the city or town’s [Comprehensive Plan]. • • • • • • • •

Wellhead protection areas Fresh water recharge areas Potential public water supply areas Agricultural and forestlands and resources Locations of historic and/or cultural significance Land areas adjacent to permanently protected open space Land areas providing public access to an ocean, forest, or other resource Significant natural resources such as rare species habitat or unfragmented forest areas

Commentary: Above are recommended districts, but there may be more or less depending on the needs and the situation of individual local governments. In these Preservation Districts, local governments may want to identify varying incentives, eliminate incentives in some types of areas, give partial incentives (such as a 1.3 to 1 ratio) with some types of natural resources (e.g., freshwater recharge areas: 1.3. to 1 ratio; locations of historic significance: 1.2 to 1 ratio,

Appendix A: A Model TDR Ordinance

etc.) and give a maximum percentage in yet others. Or, they can adopt this section as it is and use their discretion in all types of areas. 06.2 Receiving Districts. Receiving Districts are overlay districts, shown on the zoning map, in districts/zones in the municipality defined as a growth activity center by the [local comprehensive plan] and/or zoning ordinance and shall not include any areas included within Section 06.1. The [special] permit granting authority, as a condition for designating a Receiving District, shall prepare an infrastructure and timing of construction plan(s) with the location, cost, and method of financing infrastructure required by the TDR. This plan shall be adopted by the legislative body as part of the Receiving District designation. Unless otherwise specified by the municipality, a Receiving District zoned residential shall not receive development rights from nonresidential sending parcels. Commentary: Receiving Districts will be located in areas capable of supporting additional development. A careful planning process is essential to ensure that adequate infrastructure is in place. Local governments should be prepared to adjust Receiving District boundaries, making them larger or smaller as the need arises. 07.0 Review by [Special] Permit Granting Authority ([S]PGA) The [Planning Commission] shall be designated as the [S]PGA under this ordinance. In reviewing a proposed development under this ordinance, the [S]PGA shall apply this criterion to applications for a [special] permit under Sections 03 and 04, in addition to other relevant special permit criteria provided for in the zoning ordinance. 07.1 The [S]PGA shall require, as a condition for a [special] permit under this ordinance, where the landowner opts to permanently restrict development in accordance with Section 03.3, that the record owner of sending parcel(s) in the Preservation District record at the Registry of Deeds a permanent [conservation] restriction running in favor of the city or town as set forth in Section 09.3. Commentary: As noted above, the [special] permit granting authority must approve all TDR transfers. Documents must be in recordable form. 08.0 Intergovernmental Transfer of Development Rights 08.1 Required Legislative Action. The legislative body of ___________ may, by ordinance, approve a joint program for TDR, including transfers from sending parcel(s) in one city or town to receiving parcel(s) in another. Such

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ordinance shall designate which portions of the city or town will be designated as Receiving Districts for TDR originating from outside the municipality’s corporate boundaries. A city or town may designate Receiving Districts for intermunicipal transfers that are the same as, or different from, those designated for intramunicipal transfers. 08.2 Satisfaction of Transfers of Development Rights. If authorized by the recipient city or town(s), the TDR authorized by Section 05 may be satisfied by the restriction and transfer of development rights in more than one municipality. 08.3 Determination of Development Rights to Be Transferred. To establish the development rights available for transfer, the [S]PGA of the recipient municipality may require the applicant for residentially zoned land to submit a preliminary or more detailed subdivision plan, as defined by the municipality’s [subdivision] rules and regulations, to illustrate the number of lots or dwelling units. The [S]PGA may require the applicant for non-residentially zoned land to submit a site plan showing the square footage available for transfer. 08.4 Recipient Approval. Intermunicipal TDRs require a [special] permit from the [S]PGA of the municipality with receiving parcel(s). The [S]PGA of the city or town receiving TDRs shall notify the [special] permit granting authority of the city or town from which the development rights are being transferred of the date of the public hearing required by [ ], in a manner and time coincident with the [S]PGA’s notification of parties in interest to the [special] permit public hearing. Commentary: As part of its regulations, a legislative body may approve a joint program with another municipality to transfer development rights between them. The [special] permit granting authority in the city or town receiving the TDRs is required to notify the [special] permit granting authority in the city or town from which the development rights are being transferred. The [special] permit granting authority in the city or town from which the development rights are to be transferred will necessarily need to conduct some type of proceeding to authorize any bonuses for transfer. Thus, bonuses should be coordinated with the receiving city or town so that there is mutual agreement enabling the orderly transfer. 09.0 Title Recordation, Tax Assessment, and Restriction of Development Rights 09.1 All instruments implementing the transfer of development rights shall be recorded in the manner of a deed in the Registry of Deeds of the jurisdiction for both sending and receiving parcels. The instrument evidencing such

Appendix A: A Model TDR Ordinance

TDRs shall specify the lot and block number of the sending parcel(s) and the lot and block number of the receiving parcel(s). 09.2 The clerk of the Registry of Deeds shall transmit to the applicable municipal assessor(s) for both the sending parcel(s) and the receiving parcel(s) all pertinent information required by such assessor to value, assess, and tax the respective parcels at their fair market value as enhanced or diminished by the TDRs. 09.3 The record owner of the sending parcel(s) shall, within forty-five (45) days of receipt of a [special] permit authorizing TDRs, record at the Registry of Deeds a [Conservation][Deed] Restriction as defined by (relevant statute for the longest period allowed by law) running in favor of the city or town prohibiting, [in perpetuity], the construction, placement, or expansion of any new or existing structure or other development on said sending parcel(s). Evidence of said recording shall be transmitted to the [special] permit granting authority of the city or town in which the restriction has been placed, indicating the date of recording and deed book and page number at which the recording can be located. The grant of the [special] permit to transfer development rights shall be conditioned upon such restriction, and no [special] permit for a transfer of development rights shall be effective until the restriction noted above has been recorded at the Registry of Deeds. Commentary: This section requires the conveyancing documents to be recorded in the Registry of Deeds in the jurisdiction for both the sending and the receiving parcels so that they are of record. Lenders, prospective purchasers, and others interested in the status of title will know that the property has been restricted or has been unable to be developed at higher densities. These transfers will affect real property taxes. Where properties are restricted in a Preservation District, their taxes should decrease. This is a substantial incentive for the transfers. On the other hand, in the Receiving Districts, the additional density approved as part of the transfer is likely to enhance property values and result in somewhat higher taxes. The restrictions recorded at the Registry of Deeds also help ensure that the preserved properties will not be developed.

10.0 Severability 0.10.1 If any provision of this ordinance is held invalid by a court of competent jurisdiction, the remainder of the ordinance shall not be affected thereby. The invalidity of any section or sections or parts of any section or sections of this ordinance shall not affect the validity of the remainder of the [city or town]’s zoning ordinance.

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Commentary: Severability clauses allow a court to strike or delete portions of a regulation that it determines to violate state or federal law. In addition, the severability clause provides limited insurance that a court will not strike down the entire ordinance should it find one or two offending sections.

Appendix B: Sample TDR Form

The following sample TDR form is from King County, Washington, which has one of the nation’s most successful programs. Its program includes multiple TDR sending and receiving area options. This form is not strictly related to the model TDR ordinance shown in appendix A but nonetheless presents a reasonably straightforward way to process TDRs.

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APPLICATION FOR TRANSFER OF DEVELOPMENT RIGHTS PROGRAM CERTIFICATE RETURN TO:

FOR COUNTY USE ONLY:

TDR Program Manager Water & Lands Resource Division Department of Natural Resources and Parks 201 South Jackson St., Suite 600 Seattle, WA 98104 - 3855 Phone: 206-263-0435

Date Received ________ Completed Application Date ________ IRC Approval Date ________

I. LANDOWNER INFORMATION Name _____________________________________

Phone __________________

Mailing Address _____________________________

Alternate Phone _______________

City and State ___________________________________________ Zip Code ___________ Email _____________________________________________________________________ Applicant’s Interest in Property: Fee Owner ____________

Part Owner _____________

II. PROPERTY INFORMATION Tax Parcel Number(s) ___________________________________________________________________________ ___________________________________________________________________________ Property Address or Nearest Street or Road: ___________________________________________________________________________ Total Acreage of Property ____________ Are there any existing dwelling units located on the property? Yes _______ If yes, how many? ______________

No ________

Appendix B: Sample TDR Form

Are there any other buildings on the property? Yes ______

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No _______

If yes, how many? ___________ What is the current zoning of the property (e.g., R-1, RA-2.5, RA-5, A-35, F, etc.)? ____________________ Describe how the property is currently being used (e.g., agriculture, forestry, home site, etc.) ___________________________________________________________________________ ___________________________________________________________________________ Are there any existing easements or deed restrictions affecting this property? (e.g., powerline corridors, access easements, forestry moratoriums, etc.) If so, please describe briefly. __________________________________________________________________________ __________________________________________________________________________ Does the property have any year-round submerged lands such as lakes, rivers, streams, or ponds? (wetlands are not considered submerged lands in the TDR program) Yes _____

No ____

➣ Please attach a site plan showing all submerged lands, existing and proposed residential units and other buildings, and any existing easements on the property. If more than one zoning designation exists on the property, please identify the boundary between the zones and the area within each. ➣ Please attach a legal description of property to this application form. Section ____________________

Township _________________

Range ______________

III. STATEMENT OF INTENT I want to retain ____ (number) dwelling units or development rights with the property for existing or future development. I intend to

____ maintain the property in private ownership, or ____ explore the possibility of dedicating the property to King County or to another public or private non-profit agency.

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IV. SENDING SITE CRITERIA I believe the property would qualify as a sending site because it contains one or more of the following public benefits as defined in K.C.C. 21A.37: 䊐 Agricultural Production District lands, zoned A, from which development rights have not already been purchased. 䊐 Forest Production District lands, zoned F. (*1) 䊐 Lands within the Rural Forest Focus Area, with a minimum of 15 acres of forested land. (*1) 䊐 Other rural properties designated as a proposed rural or resource area regional trail or open space. 䊐 Habitat for federally threatened or endangered species. (*2) List the species you believe to be present ____________________________________________ 䊐 Designated urban separators zoned R-1. *1. An approved forest stewardship plan is required for TDR approval. *2. An approved wildlife habitat management plan is required for TDR approval.

V. TITLE COMPANY INFORMATION A title report must be supplied by the landowner as part of the TDR application. Name of Title Company ___________________________________________________________________________ Address ____________________________________________________________________ City and State ________________________________________

ZIP Code ___________

VI. MORTGAGE COMPANY INFORMATION Are there any liens or mortgages on the property? Yes _____

No _____

Mortgage Holder’s Name ______________________________________________________ Address _____________________________________________________________________ City and State ________________________________________

ZIP Code ___________

Appendix B: Sample TDR Form

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VII. ESTIMATED DENSITY CALCULATION We ask that you complete this worksheet to assist yourself and the Interagency Review Committee with evaluating the property. This is not a binding determination of the number of development rights a particular parcel may qualify to transfer. To estimate the number of development rights that can be transferred from a sending site, the total area available for transfer must first be determined. The area available for transfer is the total sending site area minus a number of possible deductions (listed in Step 1). Then the transfer area is multiplied by the base density for the zoning designation of the sending site. Density calculations must be done separately for portions of a sending site that are within different zoning designations. Any fractions of development rights that result from these calculations shall not be included in the final determination of total development rights available for transfer. Step 1. Deductions _______________ square feet in existing conservation easements or similar encumbrances _______________ square feet in submerged lands (i.e., lakes, rivers) _______________ square feet of land area required by the zone for existing or proposed development _______________ Total Deductions (in square feet) Step 2. Sending Site Area Calculation _______________ total area of sending site (in square feet) subtract _______________ total deductions (in square feet) _______________ Total available sending site area (in square feet) Step 3. Convert Area to Acres _____________ total available sending site area (in square feet) from Step 2. Divide by 43,560 square feet per acre _____________ Total sending site area in acres Step 4. Estimate Available Development Rights Multiply the total sending site acreage from Step 3 by the base density for the appropriate zone as listed below. Base densities listed are for transfer purposes only and do not imply actual development potential of a parcel. If a sending site contains more than one zone designation, repeat the calculations for each zone. Sending sites zoned: R-1 and designated as urban separator RA-2.5 RA outside of a rural forest focus area RA within a rural forest focus area A-10 or A-35 within agricultural production area F within forest production district

Base density 4 rights / acre 0.4 right / acre see density tables in KCC 21A.12.030 0.2 right / acre 0.2 right / acre 1 right / 80 acres (or existing legal lot)

Estimated Available Development Rights ______________

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Any fractions of development rights that result from these calculations shall not be included in the final determination of total development rights available for transfer. Total available development rights calculated shall be rounded down to the nearest whole number. The estimated number of available development rights calculation is provided to assist you with evaluating the property and developing your management goals. This is not a binding determination of the number of development rights a particular parcel may qualify to transfer.

VIII. APPLICATION CHECKLIST Is the following information attached? 䊐 䊐 䊐 䊐 䊐 䊐 䊐

Legal Description Title Report Site Plan Wildlife Management Plan (if needed) Forest Stewardship Plan (if needed) Affidavit of compliance with Forest Practice Application requirements (if needed) Application Fee *

*Note: An initial deposit toward the Department of Development and Environmental Services (DDES) review fee of $145 will be required once the application has been screened for completeness. Additional fees (based on an hourly rate of $145 up to a maximum of $550) will be assessed for application review. The $550 maximum includes the initial deposit fee.

IX. PROPERTY OWNER CERTIFICATION I hereby certify that the information furnished on this application and the attachments are true, that I am the legal owner of the property described above, that I have marketable title to the property, and that I have the legal right to restrict the use of the property. I grant permission to King County to seek an update from the Title Company prior its issuance of a Development Credit Transfer Certificate. ________________________________________________ Signature of Owner (Applicant)

____________________ Date

________________________________________________ Signature of Co-Owner (Co-Applicant)

____________________ Date

Appendix C: State Listings of TDR Programs

Communities with active TDR programs can be found in at least thirty-four states as well as the District of Columbia. As shown in table C.1, California has the largest number of communities with TDR programs (34), followed by Pennsylvania (32), Florida (27), Washington (20), and Massachusetts (15). In fact, these top five states account for more than half of all U.S. communities with TDR programs. Since 2003, Pennsylvania has rapidly moved up the list by adopting seventeen new programs, most of which primarily focus on farmland preservation. In contrast, Washington—which has the second-fastest growth rate in TDR programs—primarily has programs geared toward environmental protection and land preservation. Washington’s rapid adoption of TDR table c.1 States Ranked by Number of Communities with TDR Programs Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

State

Count

California Pennsylvania Florida Washington Massachusetts Colorado New York Maryland New Jersey Utah Wisconsin Maine Minnesota Idaho Connecticut Delaware Oregon Texas

33 32 28 20 14 13 16 11 8 5 7 5 5 4 3 3 3 3

Rank 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

State

Count

Vermont Arizona Georgia Nevada New Hampshire New Mexico South Carolina Tennessee District of Columbia Illinois Kentucky Louisiana Michigan Montana Rhode Island Virginia Wyoming Total

3 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 239

259

260

Appendix C: State Listings of TDR Programs

programs is attributed to the emphasis and promotion of regional land conservancy programs that operate through a significant amount of intergovernmental agreements, including TDR. As illustrated by table C.2, states tend to have similar programs throughout their communities. While coastal states such as Washington and Florida focus on environmental issues dealing with water, coastlines, and natural resources, agrarian states such as Pennsylvania and Minnesota concentrate on preserving prime farmland and rural character.

table c.2 Review of TDR Programs by State State Arizona California

Colorado

Jurisdiction Pima County Scottsdale Agoura Hills Belmont Brentwood Brisbane Burbank Claremont Cupertino El Segundo Irvine La Quinta Livermore Malibu Coastal Program Marin County Milpitas Monterey County Moraga Morgan Hill Oakland Oxnard Pacifica Palo Alto Pasadena Pismo Beach San Bernardino County San Diego San Francisco San Luis Obispo County San Mateo County Santa Barbara South Lake Tahoe Tahoe Regional Planning Agency West Hollywood Aspen Berthoud Boulder County Crested Butte Denver Douglas County Fruita Gunnison County

Function Environmental Environment: Hillsides; Historic Environment: Hillsides Environment: Hillsides Farmland Environment: Hillsides Infrastructure Capacity Environment: Hillsides Infrastructure Capacity Infrastructure Capacity Housing; Infrastructure Capacity Environmental/Open Space Farmland Environmental/Infrastructure Farmland Environment: Hillsides Environment: Scenic Environment: Hillsides Environment: Hillsides Flexibility Environment: Coastal Environment: Hillsides Historic Urban Design Environment: Hillsides Environmental Historic Historic Environment: Wildlife Habitat; Rural/Farmland Farmland Urban Design Environment: Water Quality Environment: Water Quality Historic: Preservation and Rehab Historic Environmental/Farmland Rural Environmental/Rural Historic: Preservation and Rehab Environmental/Open Space Environmental/Farmland Environmental/Farmland

Appendix C: State Listings of TDR Programs

table c.2 Continued State

Connecticut

Delaware

District of Columbia Florida

Jurisdiction Larimer County Mesa County Montezuma County Pitkin County/Aspen Summit County Avon Hebron Windsor Kent County New Castle County Sussex County Washington, DC Alachua County Bay County Bay Harbor Island Brevard County Crystal River Clearwater Collier County Dade County Delray Beach Fort Lauderdale Highlands County Hillsborough County Hollywood Indian River County Lake County Largo Lee County Marathon Marion County Monroe County Palm Beach County Polk County Sarasota County St. Petersburg St. Lucie County Sunny Isles Beach

Georgia

Idaho

Illinois Kentucky Louisiana Maine

West Palm Beach Atlanta City of Chattahoochee Hill Country Blaine County Fremont County Ketchum Payette County Northbrook Winchester/Clark County New Orleans Brunswick Cape Elizabeth Gorham New Gloucester Scarborough Town, Cumberland County

Function Environmental/Farmland Environmental/Farmland Rural/Farmland Rural Environmental/Infrastructure Environmental/Open Space Environment: Groundwater Flexibility Farmland Farmland Environmental/Rural Revitalized Downtowns Environmental/Rural Environment: Coastal Urban Design and Revitalization Environment: Coastal Environmental Environment: Coastal Environmental Environment: Wetlands Historic Environment: Coastal Environmental Environmental/Farmland Environment: Coastal Environment: Wetlands Environment: Water Quality Environmental Environment: Wetlands Environment: Wildlife Habitat Environmental/Farmland Environment: Wetlands Environmental/Farmland Environmental/Farmland Environment: Modern Subdivisions Environment: Coastal Farmland Environmental/Revitalized Downtown Historic Historic Farmland Environmental/Farmland Environmental/Farmland Revitalized Downtowns Environmental/Farmland Landfill Buffer Farmland Historic Environmental Environmental/Farmland Infrastructure Capacity Environmental/Farmland Environmental/Farmland

261

262

Appendix C: State Listings of TDR Programs

table c.2 Continued State Maryland

Massachusetts

Michigan Minnesota

Montana Nevada New Hampshire New Jersey

New Mexico New York

Jurisdiction Calvert County Caroline County Carroll County Cecil County Charles County Harford County Howard County Montgomery County Queen Anne’s County St. Mary’s County Talbot County Cambridge Carver Easthampton Falmouth Groton Hatfield Northampton Plymouth Raynham Sunderland Township Town of Hadley Townsend Township Westborough Westfield Traverse City Chisago County Blue Earth County Minneapolis Rice County Waseca County Gallatin County Churchill County Douglas County Dover Lee Township Bernards Township Chesterfield Township Hillsborough Township Lumberton Township New Jersey Highlands New Jersey Pinelands West Windsor Woolwich Township Los Rancheros de Albuquerque Santa Fe County Brookhaven Township Clifton Park Eden Goshen Huntington, Suffolk County Long Island Pine Barrens Lysander New York City Perinton Pittsford

Function Farmland Farmland Environment: Minerals Environmental/Farmland Farmland Farmland Farmland Farmland Environmental/Farmland Farmland Environmental/Farmland Revitalized Downtowns Environmental/Farmland Environmental/Farmland Environment: Water Quality Environmental/Farmland Environmental/Farmland Open Space Environmental Environmental/Rural Environmental/Farmland Farmland Environmental/Farmland Environmental/Open Space Environmental/Farmland Redeveloped Areas Farmland Environmental/Farmland Historic Environmental/Farmland Rural Rural/Farmland Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Environmental Farmland Environmental/Farmland Rural/Farmland Environment: Groundwater Environmental/Farmland Recreation Environmental/Farmland Rural/Farmland Environment: Scenic Environmental/Farmland Environmental/Farmland Environmental/Farmland Rural/Infrastructure Rural/Infrastructure Environment: Groundwater Environmental/Farmland Historic; Historic/Cultural Open Space Environmental/Farmland

Appendix C: State Listings of TDR Programs

table c.2 Continued State

Oregon

Pennsylvania

Rhode Island South Carolina Tennessee Texas

Jurisdiction Rhinebeck Riverhead Smithtown Southampton Township Warwick Clatsop County Deschutes County Portland Birmingham Township Buckingham Township Chanceford Township Chestnuthill Conewago Township East Nantmeal Township East Nottingham East Vincent Hellam Township, York County Hereford Township, Berks County Hopewell Township Honey Brook Township, Chester County London Grove Township Lower Chanceford Township Manheim Township Middle Smithfield Township, Monroe County Mount Joy Township, Adams County Mount Joy Township, Lancaster County Peach Bottom Township Pittsburgh Pocopson Shrewsbury Township South Middleton Township, Cumberland County Springfield Township Warrington Township Warwick Township Washington Township West Bradford Township, Chester County West Hempfield Township, Lancaster County West Lampeter West Pikeland West Vincent Township, Chester County North Kingstown Bluffton Greenville County Nashville Thompson Station Austin Dallas San Marcos

Function Environmental/Farmland Farmland Environment: Wetlands Environment: Groundwater Rural Environment: Coastal Environment: Groundwater Environmental; Revitalized Downtowns Rural/Farmland Farmland Environmental/Farmland Environmental/Farmland Farmland Farmland Rural/Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Farmland Farmland Farmland Environmental/Farmland Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Farmland Historic/Cultural Environmental/Farmland Farmland Environmental/Farmland Environmental/Farmland Farmland Farmland Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Environmental Environmental Historic Environmental/Farmland Environment: Groundwater Historic: Preservation and Rehab Environmental

263

264

Appendix C: State Listings of TDR Programs

table c.2 Continued State Utah

Vermont

Virginia Washington

Wisconsin

Wyoming

Jurisdiction American Fork Mapleton Summit County Weber County West Valley City Jericho Township South Burlington Williston Blacksburg Arlington Clallum County Bainbridge Island Bellevue Bellingham Black Diamond Everett Island County Issaquah King County Kitsap County Kittitas County Pierce County Puget Sound Region Redmond Seattle Snohomish County Thurston County Vancouver Whatcom County Cottage Grove Township, Dane County Dane County Dekorra Town, Columbia County Mequon Summit Township Waukesha County Troy, St Croix County Teton County

Function Environmental/Farmland Environment: Hillsides Environmental/Rural Environmental/Rural Environment: Wetlands Environmental/Farmland Environmental/Farmland Environmental Environmental/Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Environment: Groundwater Environmental/Farmland Environmental Environmental/Rural; Farmland Environment: Wildlife Habitat Environmental/Farmland Environment: Groundwater Environmental/Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Revitalized Downtowns Farmland Farmland Historic Environment: Groundwater Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Environmental/Farmland Farmland Environmental/Open Space

Table C.3 summarizes all of the programs we have identified, organized by principal purpose.

State FL

FL FL FL MA

ME

NJ

SC SC

TX VT

WA

AZ

CA

Category

Environmental

Environmental

Environmental

Environmental

Environmental

Environmental

Environmental

Environmental

Environmental

Environmental

Environmental

Environmental

Environmental

Environmental

San Bernardino County

Pima County

Everett

Williston

San Marcos

Greenville County

Bluffton

Bernards Township

Brunswick

Plymouth

Collier County

Largo

Highlands County

Crystal River

Jurisdiction

Description/Purpose Adopted a TDR ordinance designed to preserve the Three Sisters parcel by transferring density to appropriate sites elsewhere in the city. This TDR program uses a mechanism called “planned development with transfer of development rights,” or PD-TDR. Sending areas are wetlands and other environmentally significant lands. By TDR, suitable receiving sites can achieve maximum density allowed by future land use designation. Offers economic relief by allowing landowners to transfer development rights from wetlands and floodplains, where development is prohibited. Three TDR programs protect coastal islands, marshes, and other environmentally sensitive land as well as farmland. (See detailed case study in chapter 16.) Program aims to preserve multiple natural resources, including groundwater. Number of TDRs allocated is the estimated value impact of sending site preservation divided by the average assessed value of one residential lot. Developers could achieve density bonuses of up to 1,500 percent by preserving water quality, natural features, and historic landmarks. Developers were satisfied with baseline density and program was eliminated. Allows TDRs to be transferred from environmentally sensitive lowland sending sites to dryland receiving sites. Demand for TDRs has been hampered by depletion and elimination of receiving areas. Program features a TDR bank and aims to protect environmentally sensitive, historic, and natural resources as well as reduce town’s total development potential. Allows transfers on Paris Mountain to allow optimum development locations while limiting overall building to a limit that can be accommodated by the two-land road that serves this environmentally sensitive district. Allows density to be transferred to any residential zone in return for preserving floodplains, habitat, and land with steep and erodible slopes along the San Marcos and Blancos rivers. Program aims to protect environmental lands with a negative transfer ratio based on the fact that development constraints prevent sending site owners from achieving nominal on-site density. TDR program does not take advantage of town’s building permit quota system. Allows its planning director to administratively grant a transfer of development potential as one of several ways of mitigating possible impacts from regulations imposed within environmentally sensitive areas. The mapped TDR sending areas fall into three categories: (1) habitat, including important riparian areas, core management biological areas, special species management areas and critical landscape connections designated in the Pima County conservation lands system; (2) high noise or accident potential areas near a military airport; (3) floodplains, geologic features, recreation areas or land with unique aesthetic, architectural, or historic value. Adopted a specific plan that allows development potential to be transferred out of lands designated as Development Sensitive due to steep slopes, significant visual land forms, geologic hazards, or environmental sensitivity.

Summary of TDR Programs

table c.3

Appendix C: State Listings of TDR Programs 265

State CO

CO

CO CO

CO

FL

FL

FL

FL ID

ID

ID MA

Category

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Westfield

Payette County

Blaine County

Fremont County

Palm Beach County

Polk County

Hillsborough County

Marion County

Berthoud

Larimer County Mesa County

Gunnison County

Fruita

Jurisdiction

Description/Purpose Agreement between City of Fruita and Mesa County specifies requirements for preserving environmentally sensitive land, farmland, and community separators under county jurisdiction to receiving sites in Fruita approved via planned unit development. Ordinance allows receiving area developers a reduced on-site open-space requirement in return for paying a density transfer charge of 10 percent of the land value increase resulting from use of the TDR option. County uses DTC revenues to supplement ongoing PDR ranchland preservation program. Multipurpose program. (See detailed case study in chapter 15.) Offers temporary protection to environmental areas and farmland by creating TDRs when landowners deed-restrict agricultural land, forests, and environmentally sensitive areas for at least forty years. Preserves environmental areas and farmland under county jurisdiction using the proceeds of a density transfer charge required of every bonus unit achieved from the rezoning of land within the incorporated town. (See detailed case study in chapter 5.) The county adopted this program in 2004 with an allocation ratio of one TDR per 3.33 acres of sending area land. Transfer activity increased after 2007 when the allocation ratio was increased to one TDR per acre. As of 2007, the program had preserved 3,198 acres. Encourages the preservation of environmentally sensitive land, historic landmarks, farmland, farm worker housing, and waterfront access using a TDR program with a 1:1 transfer ratio. Developers have been satisfied with the densities achievable through clustering. The program requires receiving sites to be within one mile of sending sites. Transfers are administratively approved. TDRs can be converted from one land use to another as long as the potential trip generation possible with the underlying zoning is not exceeded. Used a $100 million bond to buy environmentally sensitive areas and is reselling the TDRs from these sending areas through its TDR bank. (See detailed case study in chapter 15.) The original 1992 program allowing countywide transfers was amended in 1997 to require sending and receiving areas to be within the same subcounty area. Market demand for larger parcels has hampered program use. Sending areas zoned at either one unit per 20 acres or one unit per 40 acres receive one TDR per 20 acres by preserving the land at a maximum density of one unit per 160 acres. Receiving areas have a baseline of one unit per 20 acres and can achieve a maximum density of one unit per 2.5 acres via TDR. During difficult economic periods, farmers have used this TDR program as a way of staying in business. As of 2008, the program had preserved 4,145 acres. In this program, if a developer documents inability to obtain actual TDRs, the code allows cash compliance based on the average cost of development restrictions over the past three years as determined by the Conservation Commission.

Continued

table c.3

266 Appendix C: State Listings of TDR Programs

MA

MA

MA

MA

MA

MA

MD MD

MD

ME

ME

ME

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Cape Elizabeth

New Gloucester

Scarborough Town, Cumberland County

Queen Anne’s County

Talbot County

Cecil County

Hatfield

Groton

Townsend Township

Sunderland Township

Carver

Easthampton

In lieu of transferring actual TDRs, applicants may make a cash contribution to the city’s Farmland and Open Space Fund to be used for purchasing agricultural preservation restrictions, conservation easements, or open space in the sending area. The contribution amount is intended to equal the raw land value of the land represented by one TDR. At the time of ordinance adoption, in January 2006, this amount was $35,000 per lot. This amount is to be reviewed and adjusted every two years. Sending sites are allocated at least 1.5 times the number of dwelling units actually achievable. Alternatively, the Planning Board can multiply by 2 for sites of “particularly significant importance,” including sites that protect public drinking water resources, preserve habitat for endangered species, or contain noteworthy historical significance. Offers TDR as an alternative to development in three special resource districts: Prime Agricultural, Critical Resource, and Watershed. The program does not take advantage of the town’s building permit quota system. Offers receiving area developments exemptions from various development requirements as well as density bonuses when they incorporate TDRs that preserve land for passive recreation, conservation, forestry, and natural buffers. Preserves farmland and environmental areas by allowing developers to use TDRs to exceed building permit annual quotas as well as baseline density. TDRs have been primarily used to exceed the baseline permit quota. Developers comply with TDR requirements by paying a density transfer charge used by Hatfield to buy easements in the sending area. The DTC is 1.5 times the average per-acre cost of a development right, calculated as the difference between the average per-acre assessed value of residentially improved land and the average assessed value of unimproved land according to the most recent townwide comprehensive property value assessment. The ordinance is intended to encourage the preservation of natural resources and facilitate orderly growth as well as promote a more creative approach to land development. Offers TDR and a TDR-cluster mechanism to preserve sending areas with wildlife habitat, park sites, and open space. Developers often prefer to build at or below baseline density to avoid the cost of community sewer and water. Original program preserved over 11,000 acres and allowed TDRs to be converted to nonresidential floor area and lot coverage. Revisions in 2004 cut the allocation rate in half from AG sending sites but allowed TDR receiving sites within every zoning district in the county’s growth area. Aims to preserve farms, forests, and open space within the Dunstan area. In lieu of TDRs, developers can make a cash payment to be used exclusively by the town for the purchase of land or conservation easements. In 2005, this density transfer charge (DTC) was $17,000 per bonus dwelling unit. Every year, the DTC is adjusted for inflation using the U.S. Department of Labor’s Bureau of Labor Statistics Consumer Price Index. Sending areas include the lands originally settled by the United Society of True Believers in 1793, including portions of Shaker Village, Sabbathday Lake, and surrounding farms in the western third of the town. The original 1982 TDR ordinance limited receiving sites to parcels on public sewer, and sewer connection requirements were initially difficult to meet. Starting in the mid-1990s, sewer connections became more available, and a 1997 change in the TDR ordinance allowed unsewered lots to qualify as receiving sites.

Appendix C: State Listings of TDR Programs 267

State MN

MN NH NJ

NJ

NJ

NV

NY

NY

Category

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Eden

Brookhaven

Douglas County

Woolwich Township

New Jersey Pinelands

Hillsborough Township

Lee Township

Rice County

Blue Earth County

Jurisdiction

Description/Purpose Program operates at very low density yet preserved 5,360 acres by 2009. When 40 acres of sending site farmland is preserved, receiving sites are allowed to exceed one unit per 40-acre baseline and achieve maximum density of one unit per 10 acres. (See case study in chapter 15.) The allocation ratio is generally one TDR per 40 acres. This has helped the Rice County program save 3,850 acres to date. (See detailed case study in chapter 14.) Allows the one-to-one transfer of density between contiguous sites to preserve rural character, farmland, open space, forest, watershed, and other significant natural resources. Preserves farmland and environmental areas with a TDR program that evolved from the downzoning of land at the periphery of the township. Participating sending area landowners deed their land to the township. Seeks, through a state-sponsored TDR program, to preserve unique ecology and specialty agriculture within a 1-million-acre planning area with sixty jurisdictions and requires twenty-three of these communities to create receiving areas for transfers from sending areas throughout the planning area. (See detailed case study in chapter 15.) In 2008, Woolwich adopted the first TDR program to be completed and approved by the State of New Jersey under the 2004 State Transfer of Development Rights Act. The program features two compact, mixed-use receiving areas and a 4,000-acre sending area of preserved farmland and scenic open space. The TDR ordinance was adopted in conjunction with a downzoning that limited on-site development in the sending area to one unit per 15 acres. However, the TDR mechanism allows sending area landowners to calculate the TDRs available for transfer using the densities allowed prior to this downzoning. Receiving area developers who decline to participate in the TDR program are limited to a maximum density of one dwelling per 15 acres. However, when developers participate in the TDR program, they are granted an as-of-right density of one unit per 1.5 acres. All transfers must be reported to the county TDR bank and the state TDR bank. The ordinance includes a procedure for landowners who were unable to sell their TDR credits to be removed from enrollment in the program. Development rights severed from a sending site but not yet attached to a receiving site are not assessed for property tax. Original 1996 TDR program allocated from one to two TDRs per 19 acres and generated no transfers. Amendment in 2001 increased allocation to nine or more TDRs per 19 acres and transfer activity started. Program has preserved over 4,000 acres to date. (See detailed case study in chapter 15.) Brookhaven is one of the three townships participating in the Long Island Pine Barrens TDR program designed primarily to protect a critical aquifer. In 2005, Brookhaven adopted a separate TDR program designed to preserve natural resources, open space, historic properties, and farmland as well as acquire development rights from landowners who experience economic hardship as a result of zoning and environmental restrictions. Preserves farmland and environmental areas with a TDR program that features transfer ratios as high as 15:1 and administrative approval of TDR in receiving areas.

Continued

table c.3

268 Appendix C: State Listings of TDR Programs

NY

NY

NY

PA

PA PA PA

PA

PA

PA

PA

PA

PA

PA

PA

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

West Lampeter

Mount Joy Township, Lancaster County

West Bradford Township, Chester County

West Vincent Township, Chester County

West Hempfield Township, Lancaster County

Springfield Township

Pocopson

South Middleton Township, Cumberland County Hellan Township, York County

Lower Chanceford Township Hereford

East Vincent

Rhinebeck

Lysander

Pittsford

Pittsford developers can receive bonus density in return for providing any of seven different community benefits, including placing conservation easements on agricultural, open space, scenic, ecological, or historic properties. In 2006, New York awarded $1,007,700 to Lysander to start buying TDRs and banking them in a TDR revolving fund for future resale. That marked the first time New York State’s Farmland Preservation Program funded a TDR program. In 2008, Lysander adopted a TDR ordinance allowing the program to formally proceed. Rhinebeck uses TDR to preserve a critical mass of farmland, open space, and important natural resources. Rhinebeck is home to the Hudson River National Historic Landmark District and still retains much of the scenic landscape that inspired the Hudson River School of Painting. Uses TDR to preserve farmland, sensitive natural areas, and rural community character, such as the covered bridges that cross French Creek. In some cases, TDRs can be used to modify lot coverage and building height limitations as well as density. Encourages the preservation of land in its agricultural and conservation zones by allowing the transfer of development rights from higher-quality to lower-quality agricultural land. 2009 program grants developers using TDRs additional lot coverage and building height within industrial receiving zones plus additional density within residential and mixed-use receiving zones. Uses TDR to preserve historic and culturally significant properties as well as farmland and natural resources. Code includes special development requirements for receiving area projects that use the TDR option. Adopted a TDR ordinance designed to preserve farmlands and open space. TDRs can be used to increase density in residential receiving areas and to gain extra impervious surface coverage in commercial and industrial zones. Transferable bonus gross floor area (GFA) is granted for preserving land, restoring landmarks, or building new structures to the standards of the U.S. Green Building Council. On receiving sites, 3,500 square feet of bonus GFA equates to one bonus dwelling unit in development options where GFA is not applicable. Encourages the preservation of land in its Conservation and Agricultural zones though a TDR program in which each TDR offers three bonus dwelling units on residential receiving sites and 4,000 square feet of extra floor area on commercial receiving sites. Sending site owners are granted five TDRs for each dwelling precluded in the rural zone. Each TDR allows one extra dwelling unit in single-family residential receiving zones or 1.5 bonus dwellings in multiple-family residential receiving zones. This program offers seven receiving area zoning districts, including two nonresidential receiving areas where one TDR allows 5,000 square feet of extra floor area. The township buys TDRs and retains some for resale in a TDR bank while retiring others. Adopted a TDR ordinance in response to the impending development of a prominent farm adjacent to a historic village on the National Register. Receiving area zoning has special development requirements allowing the additional density permitted when developers use TDR. TDR provisions aim to preserve important farmland and sensitive environmental areas and direct development to locations with public water and sewerage. The transfer ratio is 1:1 in two sending area zones but 5:1 in the agricultural zoning district. Provides a 3:1 transfer ratio for TDRs from sending sites in the agricultural zone. The Lancaster Farmland Trust completed West Lampeter’s first TDR transaction and pledged to use the proceeds from the sale of these TDRs for the preservation of additional land in West Lampeter.

Appendix C: State Listings of TDR Programs 269

State PA

PA PA

PA

PA

RI

TN

UT

VA VT

VT WA

Category

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Arlington

Jericho Township

South Burlington

Blacksburg

American Fork

Thompson Station

North Kingstown

West Pikeland

Chestnuthill

Middle Smithfield Township, Monroe County Chanceford Township

Mount Joy Township, Adams County

Jurisdiction

Description/Purpose Adopted a TDR ordinance designed generally to supplement the township’s purchase of development rights programs and specifically to preserve important farmland and environmentally sensitive areas. TDR allocation is based on yield plans that do not require soil tests to determine sending site suitability for septic systems. Receiving sites can be located in all but three zoning districts. Allows development potential to be transferred from agricultural land of higher quality to agricultural land of lower quality. Sending sites must retain one right either for an existing or future dwelling unit unless the parcel is merged with an adjacent parcel that retains at least one development right. At least 80 percent of a parcel must be preserved to become a TDR sending site. A multiplier of 1.25 dwelling units per development right occurs when these rights are used on receiving sites for senior housing. To qualify for TDR, sending site easements must limit future on-site development to a maximum density of one unit per 20 acres. In receiving areas, one TDR yields 1.1 extra single-family detached dwelling units, 1.4 attached units, 1.7 multifamily units, or 2 mobile home units. North Kingstown has designated and mapped over fifty sending areas, including wooded areas, wetlands, farmland, and at least one property with a coastal pond. The 2008 ordinance also designated and mapped dozens of potential receiving sites in an area planned for a pedestrian-friendly, village-scale development served by urban infrastructure and various transportation modes. Transfers occur at a 1:1 ratio to achieve various land use goals, such as preservation of agriculture, environmental areas, open space, and cultural sites, including locations used during an 1863 Civil War battle. Designed to preserve farmland, open space, scenic views, and other natural features as well as discourage development in hazardous areas. When TDR is used in receiving sites via PUD, maximum density may be 30 percent higher than base density or the development density recommended in the general plan, whichever is less. Allows developers to proffer the preservation of natural areas and farmland when applying for a zone change that increases maximum density from one unit per acre to two units per acre. Land in restricted areas is limited to farming, forestry, recreation, and open space. Unused development potential can be transferred to growth areas where receiving site projects can gain a 233 percent density bonus. Sending sites must contain at least 25 percent prime farmland. In receiving areas, one TDR allows 1,000 square feet of commercial floor area or one bonus dwelling unit. Provides receiving areas for an interjurisdictional transfer program in which development rights from preserved farmland in Snohomish County’s Stillaguamish Valley are transferred to receiving sites within the city of Arlington.

Continued

table c.3

270 Appendix C: State Listings of TDR Programs

WA

WA

WA

WA

WA

WA

WA

WA

WA

WI

WI

WI

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland

Dane County

Dekorra Town, Columbia County

Mequon

King County

Bainbridge Island

Black Diamond

Redmond

Puget Sound Region

Pierce County

Clallum County

Kittitas County

Bellevue

Bellevue adopted new zoning regulations for a 900-acre portion of the city called the Bel-Red Corridor. The city wants to transform this area from light-industrial uses to mixed-use neighborhoods. Bellevue wants new development in this area to help protect rural areas under the jurisdiction of King County that benefit Bel-Red and Bellevue as a whole, including forests in the Mountainsto-Sound Greenway and farmland in the Snoqualmie Valley that serve Bellevue’s farmers’ markets. TDR program designed to preserve farms, forests, and floodplains. Kittitas allows owners of previously preserved sending sites to purchase the necessary TDRs and regain development potential if the county finds that the easement is a hardship and if easement removal would result in a public benefit. TDR ordinance is designed to preserve agricultural lands in the Sequim-Dungeness planning area, which at one time specialized in dairy farms. The TDR ordinance is used to preserve critical environmental areas in the Port Angeles planning area, which serves as a gateway to Olympic National Park. To qualify for TDRs, sending site preservation must result in a protection of farmland, forest land, public trails, or the habitat of endangered species. To achieve bonus density on receiving sites, developers can submit TDRs or pay a density transfer charge calculated as half the difference between the land value of the receiving site before and after application of the TDR bonus as determined by site-specific appraisal. The regional program was initiated by key legislators and the Cascade Land Conservancy. The program is designed to encourage the voluntary transfer of development rights from rural, forested, and agricultural lands under county jurisdiction to receiving sites in cities and towns throughout a four-county region. Allows receiving area development increases in surface coverage, elimination of park requirements, and the ability to exceed maximum parking limits by using TDRs from sending areas with farmland and critical habitat. Black Diamond and King County, assisted by the Cascade Land Conservancy, entered into several agreements that used TDR and $1 million of King County’s Conservation Futures Tax to permanently preserve over 2,500 acres of open space and working forests. This program is hampered because there is very little agricultural land left, consequently reducing potential TDR supply and reducing affordability. Similarly, receiving areas are limited and developers can gain extra density using non-TDR techniques. Allows interjurisdictional transfers between agricultural and environmental sending areas in the county and receiving areas within Seattle, Issaquah, and other cities willing to participate. This program has preserved more land than any other US TDR program. (See detailed case study in chapter 16.) The city adopted a transfer of development rights–planned unit development (TDR-PUD) overlay district designed generally to preserve farmland, rural open space/character, scenic vistas, natural features, and environmental resources. TDR sending areas are designated as “Agricultural and Woodland Preservation Area” on the town’s Planned Land Use Map. This designation includes roughly three-quarters of the land area of the township. In 2010, the county adopted a framework for TDR programs operated at the local level by those townships that voluntarily decide to use TDR to preserve natural resources, open space, and agricultural land.

Appendix C: State Listings of TDR Programs 271

State WI

WI

NH

NY

FL

CA

CO CA

CO

WY FL

CO

Category

Environmental/Farmland

Environmental/Farmland

Environmental/Farmland; Environment: Groundwater

Environmental/Farmland; Wetlands

Environmental/Historic

Environmental/Infrastructure

Environmental/Infrastructure

Environmental/Open Space

Environmental/Open Space

Environmental/Open Space

Environmental/Revitalized Downtowns

Environmental/Rural

Crested Butte

Sunny Isles Beach

Teton County

Douglas County

La Quinta

Summit County

Malibu Coastal Program

Charlotte County

Clifton Park

Dover

Summit Township

Waukesha County

Jurisdiction

Description/Purpose Two of Waukesha County’s sixteen towns use the TDR mechanism provided by the county zoning ordinance. These provisions allow land in four zoning districts to serve as sending or receiving sites as long as prime farmland and environmentally sensitive areas are preserved. Encourages the preservation of farmland and environmental areas by allowing density transfers at a 1:1 ratio. To participate, sending sites must transfer all development potential with the exception of parcels larger than 20 acres, which may retain one development right for an existing house. The Dover TDR ordinance creates one TDR overlay for residential zoning districts and another overlay for industrial zones. The TDR provisions allow for internal transfers within those overlay zones in order to preserve lands with conservation values, including wetlands, groundwater recharge zones, and farmland. In single-family residential receiving area developments, each bonus dwelling unit requires the preservation of a $30,000 density transfer charge or the preservation of 3 acres of farms, trails, historic sites, or environmentally significant sending area land. The code specifies other requirements for bonus development within office, retail, and duplex zones. Program designed to alleviate excessive burdens that zoning and other regulations may have placed on the owners of land in coastal storm surge zones and platted subdivisions with substandard lots as well as more typical sending areas containing environmental, historic, and cultural resources. Requires the retirement of antiquated, substandard lots in the environmentally sensitive and hazard-prone Santa Monica Mountains in order to create new lots in the coastal terrace portion of the highly desirable Malibu Coastal Zone. (See detailed case study in chapter 16.) Uses TDRs in four planning districts to maintain development limits and protect environmental resources, including open space and scenic vistas. This program aims to preserve open space and other resources in the Hillside Conservation zone. To use the TDR option, owners must permanently preclude all development potential from sending sites. If sending site owners want to preserve only a portion of their land, a land division must be used to separate the developable from the undevelopable land. Encourages the preservation of open space with a TDR program requiring sending site protection and receiving site rezoning to occur concurrently. The ordinance was prompted by a desire to eliminate an antiquated subdivision and deed the land to the county, enabling the expansion of Roxborough State Park. Offers a 1:1 TDR transfer ratio in an effort to preserve environmental resources, wildlife habitat, scenic corridors, and rural character. Developers can achieve extra development potential by providing parkland or by purchasing transferable floor area severed from parkland owned by the city. The city establishes the sales price for TDRs in its TDR bank by appraising the receiving site. Sunny Isles Beach has generated roughly $35 million using TDR and has used part of that money to buy additional parkland. The town requires the preservation of 5 acres of off-site Hazard Area land or 3 acres of Priority Preservation land for each residential unit resulting from annexation approval. Hazard Areas include floodplains, geologically unstable areas, avalanche-prone areas, and areas beyond the end of plowed roads, while Priority Preservation Areas include important ecosystems, habitat, cultural areas, and other important resource lands.

Continued

table c.3 272 Appendix C: State Listings of TDR Programs

FL

FL FL FL FL OR

Environment: Coastal

Environment: Coastal

Environment: Coastal

Environment: Coastal

Environment: Coastal

Environment: Coastal

OR

FL

WA

Environmental/Rural; Farmland Environmental; Revitalized Downtown

Environment: Coastal

UT

Environmental/Rural

CA

Portland

UT

Environmental/Rural

Environment: Coastal

Island County

MA

Environmental/Rural

Clatsop County

Hollywood

St. Petersburg

Fort Lauderdale

Brevard County

Clearwater

Bay County

Oxnard

Summit County

Weber County

Raynham

Alachua County

FL

Environmental/Rural

Sussex County

DE

Environmental/Rural

Requires payment of a density transfer charge of $15,000 per bonus dwelling unit in several zones that serve as receiving areas. The county reviews the amount of the charge annually for possible revision and spends the revenue on the preservation of farmland, open space, and parkland. Preserves open space, agricultural land, recreation areas, sensitive environmental lands, and wildlife habitat as well as the character of the village of Cross Creek. Adopted a TDR ordinance designed to preserve low-density land uses, open space, historic sites, critical environmental resources, and other significant features. The purpose of this program is to provide flexible development standards to resorts while promoting the goals and objectives of the Ogden Valley General Plan, particularly the preservation of the valley’s rural character. Allows density bonus incentives to development projects that voluntarily provide additional community benefits, including affordable housing, public facilities/amenities, environmental enhancement, and open space. The developer may elect to offer cash in lieu of actual participation, which the county can use in its Density Transfer Program. Preserves farmland, originally offering a transfer ratio of 20:1 and receiving areas density bonuses of up to 2,900 percent. In 1998, began a new system using EDU credits. Preserves environmentally sensitive land in two planning districts and to accomplish various downtown planning goals, including the provision of open space and single-room-occupancy housing. (See detailed case study in chapter 19.) Promotes the preservation of beachfront properties through a TDR program that offers a 6:1 transfer ratio and exemptions from selected fees as well as density bonus on the receiving sites. In 2006, the county adopted an amendment to its land development regulations, establishing a TDR program designed to permanently preserve lands identified for protection in the Bay County Comp Plan. Only Shell Island is identified as a sending site in the Comp Plan. The regulations allow for the creation of TDR upon the recordation of an acceptable easement. But the ultimate objective is public ownership as seen in the requirement that sending site owners must state their intent to deed title to the property to the county upon the severance of the development rights. Encourages the protection of open space and environmentally sensitive land. The program has been hamstrung by a requirement imposed by Pinellas County limiting sending areas to an allocation rate of one TDR per acre. Encourages the redirection of development away from barrier islands, beaches, and oceanfront land by transferring TDRs to inland receiving sites under the same ownership as the sending sites. Has a TDR provision in its code to enhance scenic views of the Intracoastal Waterway, the waterway that extends north and south along the east Florida coast. Mitigates the effect of a Preservation Area zoning classification imposed on marshes, forests, mangrove swamps, hammocks, beaches, and floodplains. Mitigates a reduction in beachfront development potential to preserve ocean views, protect coastal vegetation, and keep future development within the capacity of the infrastructure system. The portion of the sending parcel to be preserved must be rezoned to the Open Space Parks and Recreation zone, the Natural Uplands zone, the Conservation Shorelands zone, or the Natural Shorelands zone. An easement prevents further development of the preservation parcel unless and until the sending site is included within an urban growth boundary.

Appendix C: State Listings of TDR Programs 273

State CT

NJ

NY

NY

OR

TX WA

WA

WA

CA

Category

Environment: Groundwater

Environment: Groundwater

Environment: Groundwater

Environment: Groundwater

Environment: Groundwater

Environment: Groundwater Environment: Groundwater

Environment: Groundwater

Environment: Groundwater

Environment: Hillsides

Agoura Hills

Whatcom County

Kitsap County

Austin Bellingham

Deschutes County

Southampton Township

Central Pine Barrens

New Jersey Highlands

Hebron

Jurisdiction

Description/Purpose Ordinance is intended to transfer development potential away from the Amston Lake District in an effort to limit environmental impact on the lake as well as reduce congestion and depletion of groundwater supplies in the area. The ordinance is also intended to transfer development into a designated portion of the Sewer Service District, an area with adequate infrastructure to accommodate increased density. This region features scenic beauty and a wealth of significant environmental resources, most prominently a source of drinking water for over half the residents of New Jersey. Municipalities can decide whether or not they will create TDR receiving areas on a purely voluntary basis. At the urging of the New York State Court of Appeals, the State of New York, Suffolk County, and three townships developed a plan to protect the recharge area for one of the largest sources of drinking water in the state and implemented it with TDR. (See detailed case study in chapter 16.) Continues to offer its internal TDR program to protect groundwater and other resources even though Southampton now also participates in the Long Island Pine Barrens regional TDR program. Addresses four problems: groundwater pollution, loss of wildlife habitat, threat of wildfire, and air quality reductions from unpaved roads. To address these issues, the county created a TDC program that encourages the owners of land in the La Pine Urban Unincorporated Community (UUC) to preserve their land in return for the ability to sell transferable development credits (TDCs). To reduce development and impervious surface coverage in watersheds. Bellingham has at least three TDR programs, including one in which downtown developments can exceed baseline intensity limits by paying $12 for every extra square foot of floor area. The city uses the proceeds of this density transfer charge in a program to preserve land in the watershed surrounding Lake Whatcom, which provides drinking water to much of the city as well as Whatcom County. TDR easements preclude development for forty years. Thereafter, landowners can buy back the forgone development potential. If a sending site is added to an urban growth area, development potential is automatically reinstituted. One or more TDRs per acre are required when receiving areas are granted higher density/intensity by comp plan changes and upzonings. The county may require TDRs for land added to an urban growth boundary. The sending area includes most of the watershed of Lake Whatcom, which provides drinking water for over half the county’s population. Transfer ratios range from 1:1 to 15:1. Receiving area projects can use TDR to receive exemptions from specified fees and development requirements as well as extra density. Offers TDRs as an alternative to on-site development for the owners of hillside land where the zoning reduces density as the slope increases and where all development requires special approval. Other preservation mechanisms compete with TDR, including clustering and easement donations in return for tax advantages.

Continued

table c.3

274 Appendix C: State Listings of TDR Programs

CA

CA CA CA CA CA CA CA

UT AZ

MD FL

CA NM CA

CA

FL

Environment: Hillsides

Environment: Hillsides

Environment: Hillsides

Environment: Hillsides

Environment: Hillsides

Environment: Hillsides

Environment: Hillsides

Environment: Hillsides

Environment: Hillsides Environment: Hillsides; Historic

Environment: Minerals

Environment: Modern Subdivisions

Environment: Scenic

Environment: Scenic

Environment: Water Quality

Environment: Water Quality

Environment: Water Quality

Lake County

South Lake Tahoe

Tahoe Regional Planning Agency

Santa Fe County

Monterey County

Sarasota County

Carroll County

Mapleton Scottsdale

Morgan Hill

Pacifica

Belmont

Moraga

Pismo Beach

Milpitas

Brisbane

Claremont

Original TDR program prohibited subdivisions of hillside land, much of which was outside city limits, and encouraged landowners to preserve these hills and transfer the development potential into the city at a 1:1 transfer ratio. No transfers occurred under that program due to uncertainty of receiving site approvals and TDR values. Promotes the transfer of development rights from the upper elevations of its hillsides to lower elevations adjacent to roads and other infrastructure. Adopted a TDR program to redirect development away from a prominent hillside to a less conspicuous area that could not be seen from its downtown. Uses TDRs in four Transfer Density zones to protect coastal bluff tops and mountains as well as increase open space and coastal access. Preserves hillsides by encouraging sending area landowners to transfer TDRs to receiving areas in the center of town. Minimizes development of steep and sometimes unstable hillside areas to achieve public safety as well as environmental goals. Encourages the protection of coastal bluff tops by exempting developers from fees and other development requirements when they transfer TDRs from the sending area. Encourages developers to preserve El Toro Mountain through an interjurisdictional program in which credits can be used to avoid the city’s permit quota system as well as exceed baseline densities. Preserves its foothills by allowing sending area landowners to transfer TDRs to two receiving areas. Preserves land in the McDowell Mountains. The 1977 program was amended in 1991 and was overshadowed in 1995 by the start of a land acquisition program funded by a voter-approved sales tax. A second TDR program encourages the preservation of historic landmarks. County prohibits the development of land with mineral deposits, particularly Wakefield Marble, but allows owners to transfer TDRs from these sending areas. Preserves land in antiquated subdivisions, environmentally sensitive areas, farmland, open space, historic landmarks, and barrier islands. Program has been hampered because developers are often satisfied with baseline densities or because they pursue traditional rezonings rather than TDR. Grants TDRs to landowners who record scenic easements on buildable lots within the Highway 1 scenic corridor of Big Sur. Allows developers to exceed baseline in specified community planning areas by using TDRs created by the preservation of natural areas and scenic views adjacent to two highway corridors. Formed by the states of California and Nevada, uses multiple TDR approaches to protect the clarity of Lake Tahoe, including a mechanism that allows TDRs created by the removal of structures in Stream Environment Zones to be exempt from building permit quotas. (See detailed case study in chapter 16.) Administers the Transfer of Existing Development Rights component of the Tahoe Regional Planning Agency within its borders, allowing development rights created by the removal of existing structures from Stream Environment Zones to avoid permit quotas. This program has succeeded in transferring marketable rights from restored alpine meadows into the city’s downtown redevelopment project areas. Preserves water quality by allowing the owners of land near the Wekiva River sending area to transfer their development potential rather than build on-site at densities of one unit per 20 acres or one unit per 40 acres.

Appendix C: State Listings of TDR Programs 275

State MA FL

FL

FL

FL NY UT FL

WA

CA

CT

MA

CA

Category

Environment: Water Quality

Environment: Wetlands

Environment: Wetlands

Environment: Wetlands

Environment: Wetlands

Environment: Wetlands

Environment: Wetlands

Environment: Wildlife Habitat

Environment: Wildlife Habitat

Environment: Wildlife Habitat; Rural/Farmland

Environmental/Open Space

Environmental/Open Space

Farmland

Marin County

Westborough

Avon

San Luis Obispo County

Issaquah

Marathon

West Valley City

Smithtown

Indian River County

Dade County

Monroe County

Lee County

Falmouth

Jurisdiction

Description/Purpose Allows TDR transfers from lands with coastal ponds, groundwater recharge areas, and other resource lands that qualify for tax relief associated with development restrictions. Preserves wetlands using a TDR program in which developers are allowed some extra receiving site density through an administrative approval process and additional density though a public hearing procedure. Reduced development potential on environmentally sensitive land but allows property owners to offer their land as TDR sending areas as long as the proposed receiving area is less ecologically significant. Encourages developers to transfer development potential from the Everglades to the easternmost portions of the county though stringent requirements for on-site development in the sending areas. Preserves wetlands and other environmentally sensitive areas using a TDR program with a 40:1 transfer ratio. Allows transfers between properties in common ownership in order to preserve wetlands and other environmentally sensitive land. Encourages the preservation of sending areas with wetlands and other environmental resources as well as potential for trail development. Marathon contains some well-preserved natural areas and supports a wide variety of bird species, including the burrowing owl. Marathon’s TDR program is designed to preserve wildlife habitat by allowing developers to propose transferring development potential to receiving areas with lower value as habitat. Aims to preserve salmon habitat and other critical resources while increasing density in appropriate parts of the city and thereby improving the efficiency of transit and other urban services. Vehicular trips and impervious surface coverage rights are transferred in conjunction with density and intensity. The city also accepts TDRs from sending sites under King County jurisdiction that meet criteria found within the city-county intergovernmental agreement. Operates one TDR program to protect the habitat of a rare pine tree and offers a second, countywide TDR program that allows the owners of environmental areas, farmland, and antiquated subdivisions to propose their properties as sending areas. (See detailed case study in chapter 18.) The owners of mapped sending areas receive four TDRs per developable acre in return for precluding all development except agriculture, forestry, and open space. Baseline density in mapped receiving areas is four units per acre. Developers can achieve a maximum of eight units per acre by submitting one TDR per bonus unit. Westborough uses TDR in its Transit-Oriented Village (T-OV) district. The T-OV is intended to encourage smaller, affordable dwelling units on currently underdeveloped properties in the Mixed Use Industrial zone near commercial areas or public transportation while also preserving open space. County uses TDR as one of many tools to implement the goals of its general plan. To date, TDR has been used to preserve farmland in one planning area.

Continued

table c.3

276 Appendix C: State Listings of TDR Programs

CA

CA DE

DE

GA

KY

MA MD MD

MD MD MD

MD MD MN NJ

Farmland

Farmland

Farmland

Farmland

Farmland

Farmland

Farmland Farmland

Farmland

Farmland

Farmland

Farmland

Farmland

Farmland Farmland

Farmland

Chesterfield Township

Caroline County Chisago County

St. Mary’s County

Charles County

Montgomery County

Howard County

Calvert County

Town of Hadley Harford County

Winchester/Clark County

City of Chattahoochee Hill Country

Kent County

New Castle County

San Mateo County

City of Livermore

Aims to preserve 14,000-acre sending area under county jurisdiction by requiring TDRs or cash in lieu for every bonus dwelling unit resulting from future upzonings. TDRs or cash in lieu also allows developers to proceed with construction despite building permit quota system. (See detailed case study in chapter 14.) Allows development credits to be created when farmland owners combine contiguous agricultural parcels or build agricultural water impoundments. Program aims to preserve farmland and historic sites by allowing two noncontiguous sites under common ownership to use TDR. In receiving areas, TDR reduces on-site open space, thereby increasing the number of dwelling units but not the density of the development portion of the receiving site. Sending areas are placed in three categories according to LESA (Land Evaluation Site Assessment) and four other criteria, with land in the Primary category entitled to the highest allocation ratio. In addition to maximum density, the TDR ordinance details the development regulations applicable to TDR receiving area developments, including street layout, pedestrian amenities, landscaping, parks, community facilities, nonresidential uses, and specific standards for site design and architecture. Plan calls for three villages (the receiving areas) surrounded by preserved farmland and open space (the sending areas). Allocation is one TDR per acre. Baseline in receiving area is one dwelling unit per acre. Receiving area developers build to density/intensity of approved master plans when they submit one TDR per bonus unit and one TDR per 2,000 square feet of nonresidential floor area. Chattahoochee Hill Country Conservancy acquires and resells TDRs to facilitate transfers. Winchester–Clark County adopted code amendments designed to protect agriculture by allowing cluster development, family farm home sites, and TDR. Encourages the transfer of density from farmland to receiving areas zoned as Crossroads Community. Farmland preservation TDR program includes cash-in-lieu option. Protects farmland with a TDR program that features a 1:1 transfer ratio and a 900 percent density bonus on receiving sites. Preserves farmland with a program in which sending area owners apply to change their land to an Agricultural Land Preservation overlay zone that permits less on-site development but allows the creation of TDRs. (See detailed case study in chapter 14.) Encourages the preservation of farmland by offering two TDR options with slightly different transfer ratios. One of the most successful TDR programs in the United States, Montgomery County has preserved over 52,000 acres to date. (See detailed case study in chapter 14.) Encourages the preservation of farmland through a program in which sending area landowners can build one unit per 5 acres on-site or transfer development potential at the rate of one TDR per 3 acres. Preserves farmland by allowing developers who use TDRs in their receiving area projects density bonuses of up to 300 percent and relaxation of other development requirements. Allows receiving area developers to double density by using TDRs from agricultural sending areas. The county’s Development Transfer Overlay (DO) District is designed to allow transfers between areas within the district in order to reduce development in the Chisago County Green Corridor. Although only a township with a population of less than six thousand people, Chesterfield adopted and implemented one of the nation’s most successful TDR programs in the nation. (See detailed case study in chapter 14.)

Appendix C: State Listings of TDR Programs 277

State NV

PA PA PA PA PA

PA PA PA PA

PA

PA PA

WA

Category

Farmland

Farmland

Farmland

Farmland

Farmland

Farmland

Farmland

Farmland

Farmland

Farmland

Farmland

Farmland Farmland

Farmland

Thurston County

Hopewell Township Warwick Township

Conewago

Honey Brook

London Grove Township

East Nantmeal Township

Manheim Township

Buckingham Township

Washington Township

Peach Bottom Township

Shrewsbury Township

Warrington Township

Churchill County

Jurisdiction

Description/Purpose Churchill County’s TDR program, which includes a TDR bank, preserves farmland surrounding Naval Air Station Fallon, thereby protecting both its biggest economic generator (agriculture) and its second-biggest generator (NAS Fallon). Promotes the preservation of farmland by allowing sending site owners to transfer one TDR per 3 acres permanently preserved or one TDR per 4 acres protected for twenty years. Allows development potential to be transferred from farmland with superior soils to lands with inferior soils. Allows TDRs to be severed from farmland that qualifies for development and transferred to receiving sites that are agriculturally undesirable or at least less desirable than the sending site. Allows receiving sites density bonuses of up to 400 percent for preserving sending sites in the Agricultural District. Preserves farmland with a TDR program in which the sending area was downzoned but landowners are allowed to sell development rights at the rate for on-site development permitted by prior zoning. Allows the owners of downzoned farmland to sell TDRs at a transfer ratio of greater than 14:1. Operates a TDR bank. Gives owners of farmland a choice between building on-site at a density of one unit per 10 acres or transferring development potential at the rate of one TDR per 2 acres. Offers owners of farmland a choice between building on-site at a density of one unit per 10 acres or transferring density at the rate of one unit per 1.5 acres. In receiving areas, each TDR allows 1.1 bonus single-family detached units, 1.25 extra duplex or townhouse units, or 1.5 bonus apartment units. For nonresidential bonus intensity, each TDR allows 2,500 extra square feet of impervious surface coverage or 2,500 extra square feet of floor area (via increased building height). The township’s 2010 zoning code includes a TDR mechanism designed to preserve farms, natural areas, and rural character. In the receiving areas, zoned Highway Commercial, baseline is 10 percent lot coverage but each transferred TDR allows 1,000 square feet of additional coverage up to a maximum of 65 percent. Allows TDRs to be transferred from higher-quality to lower-quality farmland. Generates demand with a 10 percent baseline lot coverage within one receiving area zone. Uses a TDR bank and partners with Lancaster Farmland Trust and Lancaster County PDR program to stretch limited preservation dollars. (See detailed case study in chapter 14.) Seeks to preserve farmland by transferring development rights from rural land under county jurisdiction into receiving areas within the incorporated cities of Lacey, Tumwater, and Olympia. One receiving area requires TDRs when developers build at less than baseline density as well as when they exceed that baseline.

Continued

table c.3

278 Appendix C: State Listings of TDR Programs

WA

WI

WI

CA

FL

NY

CA CT FL FL GA LA

TN

WA

Farmland

Farmland

Farmland

Farmland

Farmland

Farmland

Flexibility

Flexibility

Historic

Historic

Historic

Historic

Historic

Historic

Vancouver

Nashville

New Orleans

Atlanta

Delray Beach

West Palm Beach

Windsor

Oakland

Riverhead

St. Lucie County

Brentwood

Cottage Grove Township, Dane County

Troy, St Croix County

Snohomish County

In a phased approach, the county designated part of the Stillaguamish River Valley as a TDR sending area on its Future Land Use Map in 2003. In 2004, the county adopted a Phase One TDR ordinance that establishes sending area qualifications, procedures, and allocation ratios. Subsequently, the county and the city of Arlington entered into an agreement under which the city created a receiving area overlay for areas annexed into the city. Troy turned to TDR as a means of farmland preservation after residents rejected the idea of using taxes to fund a PDR program. The town supervisor who led the design of this program was also the first farmer to use it. In addition to farmland preservation, this TDR program is intended to concentrate development near the village of Cottage Grove and other existing subdivisions as well as maintain a community separator around the village of Cottage Grove. Adopted agricultural land mitigation requirements that require developers to deed-restrict 1 acre of farmland for each acre of farmland converted to development. Alternatively, the city allows developers to comply with the mitigation requirement by paying an in-lieu fee for each acre of farmland proposed for development. Finally, the city also adopted a TDR program to encourage the preservation of farmland. Qualifying sending sites include land used for agriculture, habitat, flow-way systems, community parks/trails, golf courses, and civic spaces within a planned town or village (PTV), including neighborhood parks, plazas, and playgrounds. Additionally, sending areas can consist of parcels designated for higher education, targeted industry, workforce housing, civic buildings, historical/archeological sites, and parcels smaller than 500 acres donated for public right-of-way. In addition to the Central Pine Barrens TDR program, Riverhead has adopted a separate farmland preservation TDR program to encourage the preservation of an area with vineyards and farms that are popular agro-tourism destinations. Allows developers to transfer density between abutting properties in order to preserve historic buildings and generally reduce development impacts. Uses TDR to appropriately locate development and preserve land with historic, ecologic, aesthetic, agricultural, or recreational resources. Adopted a TDR mechanism within its Downtown Master Plan to encourage the preservation of historic buildings and the creation of public open space. Uses TDRs as an incentive to preserve historic landmarks, conservation areas, and land for public facilities. Preserves historic landmarks by allowing transfers between proximate buildings as long as the combined development of the sending and receiving sites stays within zoning limits. Allows property owners to preserve historic structures and transfer the difference in floor area between the existing landmark and the maximum density allowed on the sending site under current zoning. In conjunction with adoption of its 2007 Downtown Community Plan Update, Nashville designated two new historic zoning districts, created new Historic Landmark Districts, and adopted a TDR program to encourage the transfer of development potential from these landmarks to other sites in the downtown. Adopted a Historic Preservation Overlay District ordinance that has created two Conservation Areas. The Overlay District also provides a TDR provision for any structure listed in the State or National Registers of Historic Places or designated on a local register.

Appendix C: State Listings of TDR Programs 279

Denver Dallas

CA

CA

CA

CO

MN

PA CA

CO TX

Historic

Historic

Historic

Historic

Historic

Historic/Cultural

Historic: Preservation and Rehab

Historic: Preservation and Rehab Historic: Preservation and Rehab

Jurisdiction

CA

Burbank

Irvine

CA

Infrastructure Capacity

Los Angeles

CA

Historic; Revitalized Downtowns; Urban Design Housing; Infrastructure Capacity

New York City

NY

Historic; Historic/Cultural

West Hollywood

Pittsburgh

Minneapolis

Aspen

San Francisco

San Diego

Palo Alto

State

Category

Description/Purpose TDR program encourages property owners to perform seismic and historic rehabilitation in the City’s Downtown Commercial District. The program also allows qualified city-owned historic properties located in any zoning district to transfer TDRs to eligible receiving sites in the Downtown Commercial District. Adopted a TDR program for its Golden Hill District that allows development potential to be transferred from historic structures and used to achieve a density bonus in five receiving subareas within the district. Preserves designated historic landmarks with a TDR program that makes the transfer of development rights the only way for developers to exceed density limits in the downtown. (See detailed case study in chapter 18.) Potential sending sites are designated Historic Landmarks in zones that permit single-family or duplex residential development as a permitted use. Three zones serve as receiving areas. A receiving site project can exceed baseline intensity by 250 square feet of floor area for each TDR. The sending site landmark must be restored in accordance with the Secretary of the Interior’s Guidelines before a construction permit can be issued for the receiving site project using the transferred floor area. Receiving site projects can use transferred floor area to exceed baseline by up to 30 percent. Offers receiving area developments up to 100 percent density bonus for restoring and maintaining downtown historic structures and performing arts theaters for at least forty years. West Hollywood can designate a property as a landmark without the owner’s consent. But the city would rather motivate owner consent using incentives, including the ability to sell unused development potential from preserved landmarks. When TDRs are sold, 75 percent of the proceeds must be escrowed and used to rehabilitate the historic sending site structure according to Secretary of the Interior’s Guidelines. Preserves and rehabilitates downtown historic structures by allowing development potential to be transferred to new downtown buildings. (See detailed case study in chapter 18.) Encourages the preservation and rehabilitation of historic landmarks in its West End Historic District with a TDR program that provides administrative approval of a 4:1 floor area ratio bonus anywhere in the downtown. Preserves historic landmarks, a historic seaport, and live theater on Broadway. (See detailed case study in chapter 18.) Uses three TDR mechanisms to preserve historic landmarks, achieve urban design goals, and implement the city’s downtown redevelopment plan. Original program was used to ensure housing supply in the Irvine Business Complex. Subsequent TDR program allows flexibility in location of downtown development concentrations while limiting overall development to a level that can be accommodated by the transportation system. Allows transfers to concentrate development at appropriate locations in its Media District while limiting districtwide development to a level that the transportation system can accommodate.

Continued

table c.3

280 Appendix C: State Listings of TDR Programs

CA

CA ME

IL MA NY

NJ MI DC

ID

MA

WA

CO

CO

Infrastructure Capacity

Infrastructure Capacity

Infrastructure Capacity

Landfill Buffer

Open Space

Open Space

Recreation

Redeveloped Areas

Revitalized Downtowns

Revitalized Downtowns

Revitalized Downtowns

Revitalized Downtowns

Rural

Rural

Boulder County

Pitkin County/Aspen

Seattle

Cambridge

Ketchum

Washington, DC

Traverse City

West Windsor

Perinton

Northampton

Northbrook

Gorham

El Segundo

Cupertino

Allows developers to transfer development potential within a commercial corridor in order to provide flexibility without exceeding the maximum capacity of the transportation system. (See detailed case study in chapter 19.) Reduces traffic congestion by allowing transfers of development potential between parcels under common ownership within the same transportation analysis zone. Aims to concentrate development around two communities, Gorham Village and Little Falls, areas that can be served by public water and sewer. In these areas, the plan calls for density bonuses in return for preservation of surrounding rural areas. The density bonus can only be achieved by paying a density transfer charge of $15,000 per extra dwelling unit, which the town uses to preserve rural land. Preservation priority is given to parcels adjacent to land already under town ownership, stream corridors, farmland, and land with natural, historic, archeological, or scenic resources. Encourages development to avoid land near an abandoned landfill by allowing receiving area densities to more than triple. Allows the administrative approval of additional density in planned village zoning districts when projects transfer units from its Farms, Forests and Rivers overlay district. TDR program aims to preserve natural areas, prevent soil erosion, and protect open space, particularly undeveloped parcels that allow for the expansion of its extensive trail system. The TDR program is supplemented by a PDR program. Township adopted TDR specifically to preserve a private golf course that was proposed for conversion to a residential subdivision. TDR mechanism is one of the tools used by a redevelopment plan to preserve some of the historic buildings and open space at a former state hospital undergoing revitalization and reuse. Uses TDRs to implement its downtown plan by preserving historic structures, promoting affordable housing, and encouraging desirable uses, including retail and art-related establishments. (See detailed case study in chapter 19.) Adopted TDR provisions allowing density transfers that promote a community benefit within the Community Core District. The Community Core District is intended to promote a pedestrian environment that retains a small-town scale and the character of Ketchum’s history and geography. Cambridge uses TDR to implement the planning goals of three neighborhoods by maintaining lower densities or creating parks in areas that are farther from public transportation and allowing these sending site property owners to transfer unused development potential to receiving sites near public transportation. Seattle uses several TDR mechanisms to preserve and rehabilitate historic landmarks (particularly landmark theaters), create performing arts centers, provide affordable housing, and promote appropriately scaled infill development. (See detailed case study in chapter 19.) Allows the owners of remote and rural properties to preserve their land and transfer the development potential to receiving areas, where TDRs can be used to exceed baseline floor area thresholds and building permit quotas. (See detailed case study in chapter 17.) Preserves rural lands through a countywide program as well as interjurisdictional programs with the city of Boulder and seven other incorporated communities. (See detailed case study in chapter 17.)

Appendix C: State Listings of TDR Programs 281

State MN

NY

CO

MT

NJ

NM

PA

PA

Category

Rural

Rural

Rural/Farmland

Rural/Farmland

Rural/Farmland

Rural/Farmland

Rural/Farmland

Rural/Farmland

East Nottingham

Birmingham Township

Los Rancheros de Albuquerque

Lumberton Township

Gallatin County

Montezuma County

Warwick

Waseca County

Jurisdiction

Description/Purpose Adopted a TDR program designed to preserve rural resources and lands that provide a public benefit. Sending sites generate one TDR per 40 acres preserved, including the absence of residential dwellings. Receiving areas cannot exceed eight TDRs per 40 acres when the receiving site is developed as a traditional subdivision or 16 TDRs per 40 acres when the receiving site is developed as conservation subdivision. Requires TDRs or in-lieu payments for all bonus dwelling units resulting from annexation into the village and subsequent rezoning from rural to urban densities. The proceeds of the cash-in-lieu payments are placed in a Warwick Incentive Trust Account. The town and village jointly control the use of these trust funds subject to the following restrictions: The town and village will agree on the use of one-quarter of these funds to preserve land within the town needed for village watershed protection. Of the remainder, 40 percent will be under the sole control of the town and 60 percent will be under sole control of the village for the preservation of open space through the purchase of either development rights or fee title. The county adopted zoning for the Dolores River Valley designed in part to protect water quality, scenic values, farmland, and rural character. The owners of sending site parcels with a slope of less than 30 degrees are allocated one TDR per 10 acres of land outside the floodplain and 1.5 TDRs per 10 acres within the floodplain. Receiving site projects can be located within the floodplain, but 1.5 TDRs are required per bonus unit, rather than the one TDR per bonus unit required outside the floodplain. TDRs can be converted from residential to other uses on the basis of equivalent wastewater effluent generation. Uses TDRs in five of its twenty planning districts. These programs aim to preserve farmland and forest land, protect habitat, and create desirable concentrations of development. (See detailed case study in chapter 15.) The initial Lumberton TDR program proved so successful that the township created a second program to preserve sending areas not included in the original program. (See detailed case study in chapter 17.) The program is designed to maintain the character of Los Ranchos by preserving farmland and promoting innovative development along the village’s main street, which also happens to be a stretch of historic Route 66. Encourages the transfer of density from agricultural and open space sending areas to receiving site parcels in planned residential or institutional zones and land approved for retirement communities. Adopted a TDR program designed to preserve prime farmland and rural community character. Receiving sites allowing bonus residential density can be approved in four zoning districts, and receiving sites allowing increased nonresidential intensity can be approved in four other zones. In the residential receiving areas, one TDR yields 1 single-family detached dwelling unit; 1.25 twofamily, townhouse, or quadraplex dwelling units; or 1.5 apartment units. For nonresidential development, one TDR allows 2,500 square feet of lot coverage or 2,500 square feet of floor area in excess of baseline building height limits.

Continued

table c.3

282 Appendix C: State Listings of TDR Programs

NY

NY

CA CA FL

Rural/Infrastructure

Rural/Infrastructure

Urban Design

Urban Design

Urban Design and Revitalization

Bay Harbor Island

Santa Barbara

Pasadena

Goshen

Huntington, Suffolk County

Suffolk County will not approve the development of properties located outside of sewer districts that are smaller than 20,000 square feet. Town adopted an ordinance for the transfer of density flow rights. The stated intent of this ordinance is to preserve natural open space while encouraging responsible economic development. Uses TDR to generally provide flexibility in the location of development and particularly to encourage growth in areas where public water and sewer are available. As an alternative to transferring actual TDRs, developers can make an in-lieu contribution to the town’s Land and Development Rights Acquisition Fund. The fee is intended to be sufficient to preserve an equivalent amount of land plus 25 percent for administration. This in-lieu contribution amount is adjusted at least twice annually. Proceeds from these contributions are used to purchase development rights from owners who have indicated an interest in preserving their properties. Allows property owners to transfer development rights as a way of mitigating the economic effects of a 1984 plan that lowered height and density limits in the downtown. Encourages developers to demolish larger, obsolete buildings and replace them with smaller buildings that comply with current codes for scale and design. The town’s TDR program allows the owners of donor sites to transfer unused development potential to receiving sites in order to achieve desirable development projects as approved by the Town Council. The development rights available for transfer from a donor parcel are calculated by multiplying the applicable future land use map (FLUM) maximum density by the site size and subtracting dwelling units that the owner wishes to retain on the site. As an example of a transaction, a condominium association sold its unused development potential and used the proceeds to make renovations to the common areas of the condominium.

Appendix C: State Listings of TDR Programs 283

Glossary

Allocation rate. The number of development rights allocated per sending site—in other words, the number of rights that can potentially be sold from the site. The allocation rate may be greater than, less than, or equal to the amount of development allowed by zoning, depending on the goals of the TDR program and the need for incentives. Appraisal. An unbiased and systematic process of estimating the value of a property, whether it be market value, insurable value, or other defined value of a specific parcel or property. Conservation easement. A legal agreement between a landowner and a land trust or government agency that permanently limits uses of the land to protect its conservation values. It allows the landowner to continue to own and use the land and sell or pass it on to heirs. A conservation easement is placed on a sending site at the time development rights are sold from the property. Typically, it prohibits any further development of the property but allows resource uses, such as farming and forestry, to continue. Development bonus. A zoning-code provision that allows more intensive development in exchange for provision of specific public benefits, such as neighborhood amenities, affordable housing, or purchase of TDRs. Development bonuses often allow increased building height or density but can also include flexibility in use restrictions or other development standards. Development rights. The legal ability of a property’s owner to develop that land in accordance with local land use regulations. Development rights can be bought, sold, donated, or otherwise transferred. Restrictions on a property’s development rights are usually recorded in a conservation easement. Adapted from Jess Aken, Jeremy Eckert, Nancy Fox, and Skip Swenson, Transfer of Development Rights (TDR) in Washington State: Overview, Benefits, and Challenges (Seattle, 2008), by permission of the Cascade Land Conservancy.

285

286

Glossary

Exchange/Allocation rate. The relationship between the number of development rights allocated to a sending site (typically a specified number of single-family dwelling units) and the amount of development bonus available on a receiving site (which may be extra single-family units, multifamily units, commercial square footage, or flexibility in development standards). Because this term encompasses both simple transfers of dwelling units from one site to another and more complex conversions of development credits, it is often used in place of the term transfer ratio. Interlocal agreement. A legal contract among two or more local jurisdictions (cities and counties) that specifies the conditions under which development credits may be transferred between jurisdictions (typically from an unincorporated county into an incorporated city). The legislative bodies of both jurisdictions must endorse interlocal agreements. Purchase of development rights (PDR). The removal of development potential from a parcel. After development rights are purchased and retired, a conservation easement is placed on the parcel. PDR programs are generally used to protect resource lands and farmlands. Receiving areas. Sites eligible for development bonuses through the purchase of TDRs. The TDR program designates receiving areas, specifies the type and amount of bonus available on these sites, and details the process for approval of projects using the TDR bonus. Sending areas. Designated areas where landowners may sell their development rights in exchange for placing conservation easements on their property. Sending areas are typically agricultural lands, forest areas, or environmentally sensitive sites. TDR bank. An entity operated by a local jurisdiction, regional government, or private nonprofit organization for the purpose of buying, selling, and holding development rights or facilitating private TDR transactions. By providing a single point of contact, a TDR bank can streamline the process for buyers and sellers of development rights. Transaction types. The various mechanisms available for buying and selling development rights. A TDR program can offer one or more transaction types. The simplest is a private transaction between the owner of a sending site and the developer of a receiving site, executed at the time a TDR development project is proposed. Other options include buying and selling development rights to or from a TDR bank or a private investment corporation and participating in a conservation credit or purchase of development rights program run by the local city or county. Transfer ratio. A term used in many TDR programs to describe the numerical relationship between the amount of development potential forgone on sending sites and the amount of additional development allowed on receiving sites. For example, a 1:1 ratio means that the sending site forgoes the same number of houses per acre as are allowed on the receiving site. It implies a simple transfer of dwelling units from one area to another.

Notes

Prologue 1. Some of the technical discussion in the introduction is adapted from Hanly-Forde et al., Transfer of Development Rights Programs. Other discussion is adapted from the Oregon Department of Land Conservation and Development, accessed July 8, 2010, from http://www.oregon.gov/LCD/tdr_pilot_program.shtml#What_is_TDR_.

Chapter 1. How TDRs Work 1. In Oregon, for instance, the absence of a local comprehensive plan acknowledged as consistent with state planning policies under the jurisdiction of the Oregon Land Conservation and Development Commission has the power, through “enforcement orders,” to essentially void implementation of local zoning codes where land use is to be changed. See Columbia Hills Dev. Co. v. Land Conservation & Dev. Com., 50 Ore. App. 483, 490 (1981). 2. In the Netherlands, for instance, development rights per se, and thus their transferability, do not exist, at least in the sense that they exist in the United States (Buitelaar and Needham 2007). 3. The Fifth Amendment is viewed as a codification of a natural law tenet pertaining to private property rights, though limiting both their extent and the ability of government to take them. 4. There are many variations of economic efficiency. See Steinemann, Apgar, and Brown, Microeconomics for Public Decisions, for as good a treatment as any of economic applications in public policy. 5. Government would certainly regulate public health and safety aspects. 6. Neo-classical economists often favor abandoning regulation of banks and abolishing the monetary stabilization functions of the Federal Reserve Board. 7. We are being very simple here. We recommend McDonald and McMillen, Urban Economics and Real Estate, ch. 2 (“Schools of Thought in Urban Economics,” pp. 18–27), as one of the most fair and succinct distinctions among economic schools of thought. 8. We are also indebted to Gerrit J. Knaap for the insights leading to this figure.

287

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9. See also McConnell, Kopits, and Walls, “Using Markets for Land Preservation,” and McConnell, Walls, and Kopits, “Zoning, TDRs, and the Density of Development.” 10. An earlier measure, Ballot Measure 37, was also approved by voters in 2004 but rejected by the Oregon Supreme Court for bundling too many constitutional issues into the same ballot. 11. Before then, only the city of Portland and Deschutes County had their own TDR programs, promulgated under home rule powers. 12. See Florida Senate Website Archive, “The 2004 Florida Statutes,” http://www .flsenate.gov/statutes/index.cfmk?App_Mode=Display_Statute&Search_String=&URL =Ch0070/Sec001.htm&StatuteYear=2004. 13. We will make occasional reference to a fictitious county, Lloyd County, in deference to Gerald Lloyd’s pioneering article on TDRs: “Transferable Density in Connection with Zoning.” 14. Walls and McConnell, Transfer of Development Rights in U.S. Communities.

Chapter 2. Comparing TDRs to Other Preservation Solutions 1. For an extended discussion of nontraditional TDR programs, see Pelletier, Pruetz, and Duerksen, “TDR-Less TDR Revisited.”

Chapter 4. Purchase of Development Rights 1. See “Ohio State University Fact Sheet: Purchase of Development Rights,” http:// ohioline.osu.edu/cd-fact/1263.html.

Chapter 5. Density Transfer Charges 1. See “Town of Berthoud Development Incentives,” http://berthoud.org/Economic Development/DevelopmentIncentives.php. 2. For details, see “Berthoud Density Transfer Fee,” 30-10-111: http://berthoud.org /documents/code/Chapter10.pdf.

Chapter 10. Legal Issues This chapter is partially excerpted from Nicholas, Juergensmeyer, and Leebrick, “Transferable Development Rights and Alternatives after Suitum.” 1. Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978). 2. Penn Central at 137. 3. Suitum v. Tahoe Regional Planning Agency, 520 U.S. 725 (1997). 4. United States v. Willow River Power Co., 324 U.S. 499 (1945). 5. United States v. Willow River at 503. 6. Suitum, 117 S. Ct. at 1663; Richard J. Lazarus, “Litigating Suitum v. Tahoe Regional Planning Agency in the United States Supreme Court,” Journal of Land Use and Environmental Law 12 (1997): 178–79.

Notes

7. Suitum, 117 S. Ct. at 1664. 8. Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). 9. Penn Central at 170. 10. Respondent’s brief at 16, 33 Suitum, 117 S. Ct. 1659. 11. Petitioner’s reply brief at 9-11. 12. Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922). 13. Penn Central at 104 (1978). 14. Pennsylvania Coal, 260 U.S. 393. 15. See Echeverria and Dennis, “The Takings Issue and the Due Process Clause.” 16. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005). 17. Juergensmeyer and Roberts, Land Use Planning and Development Regulation Law, 2nd ed. 18. Suitum, 117 S. Ct. at 1662. 19. Suitum at 1670. 20. Suitum at 1670. 21. Suitum at 1671. 22. 505 U.S. at 1016. 23. Suitum, 117 S. Ct. at 1670. 24. Fla. Stat. Ann. sec. 70.001(4)(c)(3). 25. Penn Central at 133. 26. Penn Central at 137. 27. 505 U.S. 1003. 28. 399 So.2d 1374. 29. Suitum at 1672.

Chapter 11. A Review of State Statutes 1. The term Dillon Rule refers to a decision made by federal judge John Forrest Dillon in an 1868 case in which he ruled as follows: “Municipal corporations owe their origin to, and derive their powers and rights wholly from, the legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so may it destroy. If it may destroy, it may abridge and control” (Clinton v. Cedar Rapids and the Missouri River Railroad, 24 Iowa 455 [1868]). In effect, lacking state constitutional provisions to the contrary, local governments need specific authorization to exercise governance powers locally.

Chapter 12. TDR Program Administration 1. Use by right does not waive or alter any land development regulation other than the number of dwelling units that will be allowed. All environmental, safety, and design requirements will remain in force. 2. See “Montana Transportation and Land Use: Transfer of Development Rights,” http://www.mdt.mt.gov/research/toolkit/m1/ftools/dei/tdr.shtml. 3. Correspondence from Darren Greve to Arthur C. Nelson, May 25, 2010. 4. For a detailed review, see Pruetz (2003). 5. It appears that developers may prefer to purchase rights from banks. 6. Montgomery County, Maryland, is an example of a TDR program that has been successful and does not have a bank. What Montgomery County’s TDR program does have is no way to evade the program and use of TDRs by right in the sending areas.

289

290

Notes

Chapter 14. Farmland Preservation Case Studies 1. Maryland–National Capital Park and Planning Commission (M-NCPPC), Functional Master Plan for the Preservation of Agriculture and Rural Open Space in Montgomery County (Silver Spring, MD: M-NCPPC, 1980). 2. Montgomery Countryside Alliance, “History of the Ag Reserve,” retrieved January 13, 2010, from http://mocoalliance.org/ag-reserve/history-of-the-ag-reserve. 3. Montgomery County TDR Regulations, ch. 59, “Zoning,” http://www.amlegal .com/nxt/gateway.dll?f=templates&fn=default.htm&vid=amlegal:montgomeryco_md _mc. 4. Montgomery County Department of Economic Development, Agricultural Services Division, “Farmland Protected by Easements as of June 30, 2009,” retrieved December 31, 2009, from http://www.montgomerycountymd.gov/content/ded/agservices /pdffiles/protect09_piechart.pdf. See also Montgomery County Department of Economic Development, Agricultural Services Division, “Agricultural Facts,” retrieved January 13, 2010, from http://www.montgomerycountymd.gov/agstmpl.asp?url=/Content /DED/AgServices/agfacts.asp. 5. For the most recent version, see Calvert County Code, article 5, “Residential Development Requirements,” http://www.co.cal.md.us/assets/Planning_Zoning /ZoningOrdinance/Article5-ResidentialDevReq.pdf. 6. For program details, see Rice County Zoning Ordinance, ch. 520, “Transfer of Development Rights Regulations,” http://www.co.rice.mn.us/planning/documents /Ch520TDR.pdf. 7. A “section” is one square mile and comprises 640 acres. A quarter section is 160 acres, and a quarter of that is 40 acres. 8. Trent McCorkell, zoning administrator, Rice County Planning and Zoning, personal communication with Doug Woodruff, July 22, 2010. 9. See article 17, “Voluntary TDR Program Procedural Requirements,” http://www .chesterfieldtwp.com/ch1100_2010.pdf. 10. Old York Master Plan, http://www.chesterfieldtwp.com/Smart%20Growth /Master%20Plan%20Amendment-May%2028,%202002.pdf 11. See http://tinyurl.com/3hmhvkk; see also Walls and McConnell, Transfer of Development Rights in U.S. Communities. 12. For details, see Warwick Township Zoning, sec. 340-45, “Transferable Development Rights,” http://www.ecode360.com/?custId=WA2488. 13. Livermore TDC Code, http://www.cityoflivermore.net/civica/filebank/blobdload .asp?BlobID=3051.

Chapter 15. Farmland and Environmental Preservation Case Studies 1. Details and updates are available at King County, “Transfer of Development Rights (TDR) Program,” http://www.kingcounty.gov. 2. See King County, “Transfer of Development Rights (TDR) Program,” http://www .kingcounty.gov/environment/stewardship/sustainable-building/transfer-development -rights.aspx. 3. For program details, see Pinelands Comprehensive Management Plan—Pinelands Development Credit Program, Part IV 7:50-5.41 to 5.50, http://www.state.nj.us /pinelands/images/pdf%20files/12_10_07_CMP.pdf.

Notes

4. See Larimer County Land Use Code 4.2.3, http://www.co.larimer.co.us/planning /planning/land_use_code/land_use_code.pdf#ch4. 5. R. Legg, chief planner, Larimer County, communication to Doug Woodruff, July 19, 2010. 6. See “Transfer of Development Rights,” http://www.payettecounty.org/pnz/transfers .htm. 7. Isnarda Machuca, assistant administrator, Payette County Planning and Zoning, e-mail communication with Doug Woodruff, July 22, 2010. 8. Don Dressen, zoning administrator, Payette County Planning and Zoning, personal communication with Doug Woodruff, July 22, 2010. 9. For program details, see BEMCC, ch. 24, article 3, divs. 2 and 3, sec. 24-114, “Density Regulations for Dwellings,” http://library1.municode.com/default-test/home .htm?infobase=13415&doc_action=whatsnew. 10. George Leary, zoning administrator, Blue Earth County, Minnesota, personal communication with Doug Woodruff, July 23, 2010. 11. For program details, see Middle Cottonwood Zoning Regulation, http://www .gallatin.mt.gov/public_documents/gallatincomt_plandept/gallatincomt_zonedist/donu tpdf/mc.zoning.reg.10.09.pdf. 12. See Douglas County Development Code, 20.500, “Transfer Development Rights,” http://dcnvda.org/userpages/CountyCodes.aspx. 13. See Palm Beach County Unified Land Development Code, article 5, Supplementary Standards, Chapter G Density Bonus Programs, Section 3 Transfer of Development Rights (TDRs), http://www.pbcgov.com/pzb/uldc/articles/Article5.pdf.

Chapter 16. Environmental Preservation Case Studies 1. For details, see TRPA Code of Ordinances, ch. 34, “Transfer of Development Rights,” http://www.trpa.org/documents/docdwnlds/ordinances/COCh34.pdf. See also B. Fulton, D. Greve, S. Weaver, A. Engstrom, and S. Smith, City of South Lake Tahoe: Evaluation and Suggested Policy Framework for the City’s Transferable Development Rights, Solimar Research Group (June 7, 2007), http://www.solimar.org/pdf /solaketahoetransrights.pdf. 2. For program details, see Rural Land Stewardship Area Zoning Overlay District Standards and Procedures 4.08.00, http://www.colliergov.net/Modules/ShowDocument .aspx?documentid=6719. 3. Malibu Local Coastal Program, Land Use Plan, ch. 5, http://qcode.us/codes /malibu-coastal/. 4. Malibu Local Coastal Program, Local Implementation Plan, ch. 7, “Transfer of Development Credits,” http://www.ci.malibu.ca.us/download/index.cfm/fuseaction /download/cid/1578/. 5. See Miami–Dade County, Florida, Code of Ordinances, pt. 3, ch. 33, article 2, div. 3, “Severable Use Rights,” http://library.municode.com/index.aspx?clientId=10620 &stateId=9&stateName=Florida. 6. Antonio Atala, zoning evaluation administrator, Dade County Planning and Zoning, personal communication with Doug Woodruff, July 23, 2010. 7. For details, see (1) Pine Barrens Credit Program, ch. 6, Central Pine Barrens Plan, vol. 1, http://pb.state.ny.us/cpb_plan/chapter_6.htm; (2) Southampton, Transfer of Development Rights, Pine Barrens Credit Program, Zoning Code sec. 330-221, http:// www.ecode360.com/?custId=SO0286; (3) Southampton, Transfer of Permitted Residential Development Rights, sec. 330-7, Zoning Code, http://www.ecode360.com

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/?custId=SO0286; (4) Brookhaven Zoning Code, secs. 85-443 to 451, Central Pine Barrens District, http://www.ecode360.com/?custId=BR0012; and (5) Riverhead Zoning Code, secs. 108.181 to 108.186, Industrial Receiving District, http://www.ecode360 .com/?custId=RI0508.

Chapter 17. Rural Character Preservation Case Studies 1. See Cambria Program Code, sec. 23.04.440, http://tinyurl.com/3h57b5q. 2. See Countywide Program Code, sec. 22.23, http://tinyurl.com/yeuwzsu. 3. For details about the program, see Boulder County Transferable Development Credits (TDC) Clearinghouse, http://www.bouldercounty.org/lu/tdc/. 4. Peter Fogg, manager of the Boulder County (Colorado) Long-Range Planning Division, e-mail communication with Doug Woodruff, July 23, 2010. 5. See Pitkin County Zoning Code, ch. 6, “Growth Management Quota System (GMQS) and Transferable Development Rights (TDRS),” http://tinyurl.com/3kxnov5. 6. For program details, see Voluntary Transfer of Development Rights Program, Code of the Township of Lumberton, New Jersey, sec. 130.62.1, http://www .lumbertontwp.com/Portals/12/Government_docs/Township%20of%20Lumberton,%20 NJ.pdf.

Chapter 18. Historic Preservation Case Studies 1. Details and updates available at http://www.sf-planning.org/index.aspx?page= 1825. 2. See “Transfer of Development Rights,” http://www.denvergov.org/Zoning /OtherZoningServices/tabid/434418/Default.aspx. 3. “Transfer of Development Rights,” http://www.denvergov.org/Zoning /OtherZoningServices/tabid/434418/Default.aspx. 4. For background, see (1) Transfer of Development Rights from Landmark Sites, 7479, article 7, ch. 4, New York City Zoning Text, http://www.nyc.gov/html/dcp/pdf/zone /art07c04.pdf; (2) Special Districts, Lower Manhattan (Including South Street Seaport), NYC Zoning Reference, http://www.nyc.gov/html/dcp/html/zone/zh_special_purp_mn .shtml; and (3) Special Regulations, Theater Sub-district, 81-70, article 8, ch. 1, New York City Zoning Text, http://www.nyc.gov/html/dcp/pdf/zone/art08c01.pdf. 5. “Water Street Study: Existing Conditions” (September 2008), http://tinyurl.com /3t8alx3.

Chapter 19. Urban Design and Revitalization Case Studies 1. For program details, see (1) DCMR 11.17.1709, Transferable Development Rights, http://dcoz.dcgov.org/info/reg.shtm; (2) DC Office of Planning, DC Zoning Review, Downtown Development District Working Group (October 7, 2008), https://www .communicationsmgr.com/projects/1355/docs/DD%20Zoning%20Mtg%203.pdf (slides 23–24); and (3) DC Office of Planning, DC Zoning Review: Downtown Recommendations, https://www.communicationsmgr.com/projects/1355/docs/downtown%20TF%20 recommendations.pdf.

Notes

2. For details, see PMC, ch. 33, “Zoning,” http://www.portlandonline.com/auditor /index.cfm?c=28197. 3. For details about the program, see (1) SMC 23.49.014, Transferable Development Rights, http://tinyurl.com/3rc6sn7; (2) SMC 23.49.011, Floor Area Ratio, http://tinyurl .com/66j4vzm; and (3) SMC 23.49.017, Open Space TDR, http://tinyurl.com/6gutazt. 4. Dennis Meier, TDR program director, City of Seattle, e-mail communication with Rick Pruetz, July 5, 2010. 5. For details about the program, see CMC, ch. 19, “Zoning,” http://tinyurl.com /6jytsk. 6. Robert Cowan, Cupertino community development director, interviewed July 23, 2010, by Doug Woodruff.

293

References and Selected Bibliography

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About the Authors

Arthur C. Nelson, FAICP, is presidential professor of city and metropolitan planning at the University of Utah, where he is also director of the Metropolitan Research Center and director of the master of real estate development program. Dr. Nelson has conducted pioneering research in growth management, public facility finance, economic development, and metropolitan development patterns. He is the author of more than twenty books and three hundred other professional and scholarly works. Rick Pruetz, FAICP, was the city planner of Burbank, California, before becoming a planning consultant specializing in TDR workshops, feasibility studies, and ordinances. He has written three books on TDR as well as articles on TDR for numerous publications, including the Journal of the American Planning Association, Planning and Environmental Law, and the Planning Advisory Service Memo. Doug Woodruff, RLA, LEED AP, is a landscape architect practicing in Salt Lake City, Utah. He works with communities in open-space planning, urban revitalization, and economic development. In addition to a landscape architecture degree, Woodruff has a master of real estate development degree specializing in urban redevelopment, real estate finance, and preservation.

303

Contributors

Dwight H. Merriam, FAICP, represents developers, local governments, landowners, and advocacy groups in land development and conservation issues. He has published more than two hundred professional articles and six books on land use law. Merriam is a former president of the American Institute of Certified Planners. James C. Nicholas is emeritus professor of urban and regional planning and affiliate professor of law at the University of Florida in Gainesville, Florida. Nicholas pioneered the economic analysis, design, and assessment of TDR systems in New York, New Jersey, Florida, and elsewhere. Julian C. Juergensmeyer is professor of law and Ben F. Johnson Jr. Chair in law at the Georgia State University in Atlanta. He is also emeritus professor of law and urban and regional planning at the University of Florida. With numerous treatises in the area, Juergensmeyer is a leading authority on land use law. Jonathan Witten, AICP, is a partner in the law firm of Daley and Witten, LLC. He specializes in land use planning, land use law, and land use litigation. Witten is an adjunct professor of law at Boston College and at Tufts.

305

Index

Note: page numbers followed by b, f, or t refer to boxes, figures, or tables, respectively. Administration. See also Implementation clustering and, 21 development fees and, 23 DTC and, 26 PDR and, 22 state standards, 115–16 TDR advantages and disadvantages, 16 zoning and, 20 Adoption clustering and, 21–22 development fees and, 23–24 DTC and, 26 PDR and, 22–23 TDR advantages and disadvantages, 16–19 zoning and, 20–21 Alachua County, Florida, 138 Allocation rates, 77–82, 80t, 126, 150, 239–40, 285 Appraisal, defined, 285 Atlanta, Georgia, 11, 89b Attorney expertise, 121 Austin, Texas, 135 Authority as success factor, 119 Ave Maria, Florida, 183–84, 184f Average cost approach, 78 Background studies, 231–32 Banks. See TDR banks Beaufort County, South Carolina, 236 Bellingham, Washington, 135 Belmont, California, 77b Berthoud, Colorado, 24–25, 45–50, 87b Blacksburg, Virginia, 77b Blue Earth County, Minnesota, 86, 170–71, 171f Boulder County, Colorado, 72, 83, 87, 138, 166, 197–201, 199f

Brennan, William J., Jr., 96–97, 98, 99b Brevard County, Florida, 135 Budgets, 120–21 Burbank, California, 137b, 238 California Tahoe Conservancy, 180, 181–82 Calvert County, Maryland, 86, 88, 144–46, 146f Cambria, California. See San Luis Obispo County, California Capacity analysis, 38–39, 39f, 88 Carroll County, Maryland, 135, 236 Cash-in-lieu payments, 24 Cash payments, 24, 45. See also Density transfer charges (DTCs) Central Pine Barrens. See Long Island Central Pine Barrens Certainty, 233 Charlotte County, Florida, 16, 132, 235 Chesterfield Township, Burlington County, New Jersey, 149–52, 151t, 152f Churchill County, Nevada, 236 Citizens’ advisory committees (CACs), 63–67, 71–73, 76 Clatsop County, Oregon, 135 Clawson, Marion, 7 Climate change, 234–35 Clustering advantages and disadvantages, 21–22 competition with TDR, 82–83 defined, 21 NUPUD and NCNUPUD, 198–200 Rice County, Minnesota, 148–49 takings and, 103 TDC and, xvii TDR compared to, xiii, xix Coastal areas category, 135 Coefficient of multiple determination (R2), 32 Collier County, Florida, 83, 124, 182–85, 184f Combined-lot development (CLD), 218

307

308

Index

Community acceptance, 86b, 233 Community activists, 66 Community character, 70 Comprehensive plans. See Planning Conservation (restrictive) easements, 3, 111, 113t, 124, 285 Conveyance of development rights, 106–9, 111–12, 113t Cooperation, interjurisdictional, 86–87 Costs average cost approach, 78 clustering and, 21 development fees and, 23 downstream, 28 DTC and, 25 TDR advantages and disadvantages, 16 transaction costs, xvi, 11, 120 zoning and, 20 Cupertino, California, 137b, 139, 225–27 Dade County, Florida, 77b, 84, 136, 187–90 Dallas, Texas, 89b Deed transfers in state statutes, 111, 113t Demand, 122, 231, 232 Density below-maximum development, 19 bonuses, 89–90, 138, 177, 222, 238 differences in, 18 downzoning to baseline, 77 economics of, 29–31, 30f, 31f, 35, 35f fiscal inefficiency and, 8 King County, Washington, 57b low-density receiving areas, 86 permissive zoning problems, 89b planning and, 53–54 restrictions as disincentives, 83–84 sites offering additional density only via TDR, 85–86 thresholds, 88–89 Density transfer charges (DTCs), 24–26, 45–50, 87b, 120, 239 Denver, Colorado, 137, 210–12 Development, meaning of, 5 Development bonus, defined, 285 Development fees, 16, 23–24 Development rights conveyance standards, state, 111–12, 113t defined, 5, 106, 285 demand, supply, and marketing, 122 management after transfers, 124–27 overvaluation of, xvi state authorization of conveyance of, 106–9 transferability, 5 Development value, 18–20, 78–81, 196 Dillon Rule, 105, 107t Diminishing returns, 30, 30f, 31f, 37 Discretionary approvals, 120

Disincentives, 83 Douglas County, Nevada, 135, 173–75, 175f. See also Tahoe Regional Planning Agency Downtown revitalization. See Urban design and revitalization Downzonings to baseline density, 77 cases, xxiii, 141, 144 demand and, 232 fairness and, 15, 20 as incentive, 81, 82b market potential and, 11–12 success and, 232 East Everglades Ordinance, 188–89 Economic development, 236 Economics overview, 27–28 density, 29–31, 30f, 31f, 35, 35f feasibility, 119, 121b land value and externalities, 28–29, 29f price per acre, 34–35, 35f price per buildable unit, 35, 35f receiving area analysis and incremental value, 36–38, 36t, 37t, 38f, 38t receiving area capacity, 38–39, 39f regression analysis, 31–34, 33t, 34t sending and receiving areas characteristics, 36, 36t Efficiency, 6, 7–9 Enrollment of prospective sellers, 161b Environmental/farmland preservation, 266t–272t Blue Earth County, Minnesota, 170–71, 171f Douglas County, Nevada, 173–75, 175f Gallatin County, Montana, 171–73, 173f King County, Washington, 159–62, 160f Larimer County, Colorado, 165–68, 167f New Jersey Pinelands, 161–65, 164f Palm Beach County, Florida, 175–78, 177f Payette County, Idaho, 168–70, 171f Environmental preservation categories, 131–36, 132t, 265t–276t Collier County, Florida, 182–85, 184f Long Island Barrens, New York, 190–92, 192f Malibu Coastal Zone, California, 185–87, 187f Miami–Dade County, Florida, 187–90 scenario planning and environmental resources, 69 Tahoe Regional Planning Agency (TRPA), 179–82, 181f trends, 234–35 Everett, Washington, 131 Everglades, 136, 187–90 Exchange/allocation rate, 286 Exchange value, 28–29 Exemptions from quotas, 123–24 Externalities, 7–8, 8f, 28–29, 29f, 79

Index

Fair market value (FMV) of land, 101–3, 101f, 102f Fairness, 15–16, 20, 21, 22, 23, 24 Farmland preservation. See also Environmental/farmland preservation Calvert County, Maryland, 144–46, 146f categories, 131, 136, 138, 276t–279t Chesterfield Township, New Jersey, 149–52, 151t, 152f deed restrictions, 125 Livermore, California, 155–58, 157f Montgomery County, Maryland, 141–44, 143f negative externalities, 79 PDRs and, 41 Rice County, Minnesota, 146–49, 148f trends, 235 Warwick Township, Pennsylvania, 152–55, 153f, 154f Feedback. See Public input Flexibility, 137b, 279t Floor area ratio (FAR), 189, 208, 210–12, 213, 218, 223 Fort Collins, Colorado, 87, 166, 167 F-statistic, 32 Funding, 120–21, 234, 238–39 Gallatin County, Montana, 171–73, 173f Goals, 56b, 66, 119, 230–31 Graham v. Estuary, 103 Growth management, 55b, 70 Gunnison, County, Colorado, 239–40 Handbooks, 123 Hillsborough Township, New Jersey, 125b Hillsides category, 135 Historic preservation categories, 132, 133t, 136–37, 279t–280t deed restrictions, 125 Denver, Colorado, 210–12 market potential and, 11 New York City, 213–15, 213f San Francisco, California, 207–10, 209f trends, 235 Holmes, Oliver Wendell, Jr., 99b Homeowner groups, 66 Home rule, 105 Housing, 137–38, 221 Housing Implementation Programs (HIPs), 156 Huntington Township, Suffolk County, New York, 138 Implementation. See also Administration facilitation, 122–23 geographic scale and, 122 marketing, 122 public education, 122 public ownership vs. deed restrictions, 124–25 purchase and transfer regulations, 125–26 quasi-judicial vs. ministerial process for receiving areas, 123

309

quota exemptions, 123–24 staff resources and budget, 120–21 state standards, 117–18, 117t success factors, 119–20 technical expertise and, 121 transaction documentation process, 126–27 Incentives, 82b, 119, 237–38 Incremental value, 37–38, 38f, 38t Infrastructure categories, 132–35, 138, 139, 280t–281t planning issues, 19 scenario planning and, 69–70 transportation, 225–27, 238 In-lieu fee option, 166 Interjurisdictional cooperation, 86–87, 166, 198, 199–200 Interjurisdictional transfers in state statutes, 114–15 Interlocal agreements, 159–61, 286 Irvine, California, 137–38 King County/Seattle, Washington amount of TDRs, 13 distance between areas, 88 downtown revitalization, 139, 223–25, 224f environmental/farmland preservation, 131, 159–62, 160f funding, 238 housing, 137 how TDRs work in, 3 market potential and, 11–12 maximum density, 89 planning, 54, 55b–61b scale and, 122 staff resources and budget, 120 TDR bank, 90, 91 TDR form, 253–58 Lancaster County Agricultural Preserve Board, 153–54, 238 Lancaster Farmland Trust, 153–54 Land Conservancy of San Luis Obispo County, 194–95, 196, 239 Landfill buffer category, 139, 281t Landmarks. See Historic preservation Land use, current, 68 Land value, economics of, 28–29, 29f Largo, Florida, 77b Larimer County, Colorado, 87, 165–68, 167f Lee, Douglass B., Jr., 6 Lee County, Florida, 28, 31–39 Legal issues, 95–103, 101f, 102f Leverage and Retire (LAR) program, Calvert County, Maryland, 145 Limited returns, 30–31, 31f Lingle v. Chevron, 99b Livermore, California, 155–58, 157f, 238

310

Index

Lloyd, Gerald, 10 Longfellow, Henry Wadsworth, xv Long Island Central Pine Barrens, Suffolk County, New York, 91, 121b, 135, 190–92, 192f, 238 Longmont, Colorado, 199–200 Los Angeles, California, 137, 139, 140, 235 Lucas v. South Carolina Coastal Council, 98, 100 Lumberton Township, Burlington County, New Jersey, 138, 203–5, 231b Malibu Coastal Zone, California, 132, 185–87, 187f, 235 Manheim Township, Pennsylvania, 88 Marathon, Florida, 136 Marin County, California, 83 Marketability adjustments, 233 Market factor adjustments, 82b Marketing, 122 Market research and results, 31–39 Markets, 5–8, 10–12, 10t Massasoit, Chief, xv Miami–Dade County, Florida, 77b, 84, 136, 187–90 Mineral resources category, 135 Ministerial (administrative) process, 123 Mitigation, market-based, 99–103 Model documents, 122, 253–58 Model ordinance, 241–52 Monitoring, 112–14, 231b Monterey County, California, 136 Montgomery County, Maryland case study, 141–44, 143f density bonuses, 90 designation of receiving zones, 88 monitoring and adjustment, 231b rural/farmland preservation, 136 sending areas, 75, 77, 81, 82b, 83 Moraga, California, 88 Morgan Hill, California, 77b, 87, 123, 135, 237 Natural resources maps, 67 Natural rights, 4 New Jersey Pinelands, 72, 87–89, 91, 121b, 131, 161–65, 164f New Orleans, Louisiana, 82 New York City Grand Central Station, xxi, xxii, 96–97, 213f, 214 historic preservation, 137, 213–15, 213f Landmarks Preservation Ordinance, 96 rural character/infrastructure preservation, 138 trends, 235 zoning code (1916), xxi, 3 Non-contiguous non-urban planned unit development (NCNUPUD), 138, 198–200 Nonprofit organizations, administration by, 17 Non-urban planned unit development (NUPUD), 198–200 Northampton, Massachusetts, 135

Northbrook, Illinois, 139 Not-in-my-backyard (NIMBY), 153 Oakland, California, 137b Off-site requirements as disincentives, 84 Old York Village, New Jersey, 151 Open space category, 135, 281t Ordinance drafting, 49–50 Ordinance model, 241–52 Ordinance standards in state statutes, 111–15, 112t, 113t Oregon, xxiii, 9, 14 Outreach, 234 Ownership of land, current, 68 Palm Beach County, Florida, 91, 175–78, 177f, 231b, 238 Pasadena, California, 89, 140 Payette County, Idaho, 168–70, 171f Pelletier, Mike, 46 Penn Central v. City of New York, xxi, 96–97, 98, 99b, 100–101 Pennsylvania Coal v. Mahon, 99b Perinton, New York, 135 Permanence, 16–17, 20, 21, 22, 23, 24–25 Permissive zoning, 89b “Perpetuity,” xvi–xvii Physical constraints as disincentives, 83 Pierce County, Washington, 11, 11f, 12f, 239 Pinelands Infrastructure Trust Bond Act, 163 Pismo Beach, California, 88 Pitkin County/Aspen, Colorado, 77b, 81, 84, 123–24, 138, 201–3, 203f Pittsburgh, Pennsylvania, 89b, 137 Planned Development (PD) process, 174 Planned unit developments (PUDs), 147–48, 172, 198–200, 220–21 Planning overview, 53–54 general plans, 68 Larimer County, Colorado, 165 Montgomery County, Maryland, 141 outside the planning framework, 55–56, 62 planning-consistent programs, 236 receiving sites consistent with, 85 scenario, 69–73 stakeholder guidance, 54–55, 57b, 58b–60b state statutes, relation to, 54, 55b, 56b zoning codes and, 55, 60b–61b, 61f Planning boards, 63 Planning process overview, 63 alternative scenario identification and assessment, 69–71 citizens’ advisory committee (CAC) formation, 63–67 final analysis presentation, 72–73 final recommendation, 73 information assembly, 67–68

Index

public input, 71–72 sending and receiving areas, creation of, 72 Political-economic theory, 9–10 Population growth, 240 Portland, Oregon, 88, 137, 139, 219–23, 221f Positive law, 4 Preferred scenarios, 71–73 Preservation (overview), xv–xvi, xxiii, 109, 110t. See also specific types Price per acre, 34–35, 35f Price per buildable unit, 35, 35f Profit expectations, 48 Property, definition of, 97–98 Property rights, xv, 3–4, 4f, 41 Public education, 122, 234 Public funding, 234 Public input, 71–72 Public ownership vs. deed restrictions, 124–25, 125b Public support, 233 Purchase and Retire (PAR), 145 Purchase of development rights (PDR), 22–23, 27–28, 41–43, 154, 229, 286 Quasi-judicial (discretionary) process, 123 Quota systems, 123–24, 179–81, 201–3 Rawlings, Marjorie Kinnan, 138 Real estate professionals, 65 Real property, defined, 3 Receiving areas analysis of, 36–38, 36t, 37t, 38f, 38t best fit criteria, 86b capacity analysis, 38–39, 39f, 88 comprehensive plans and, 85 defined, xx, 3, 4f, 115, 286 demand and, xvi density bonuses, 89–90 designation difficulties, 18 fairness and, 15–16 infrastructure planning, 19 Lee County characteristics, 36, 36t low density in, 86 optimal, identifying, 85–87 quasi-judicial vs. ministerial process, 123 size, determining, 87–88 state standards, 115–16, 115t success and, 232 TDR banks, considering, 90–91 TDR thresholds, 88–89 Recreation category, 139, 281t Redevelopment projects, 139, 281t Regression analysis, 31–34, 33t, 34t Regulations, establishing, 76–77 Regulatory takings, 96–103, 101f, 102f Residential Density Transfer (RDT), 239–40 Resources, as success factor, 119

311

Restored landmarks category, 137 Restrictive (conservation) easements, 3, 111, 113t, 124, 285 Revitalization, downtown. See Urban design and revitalization Rice County, Minnesota, 146–49, 148f Rights. See Development rights; Property rights Riverhead, New York, 61f Rural density transfer (RDT) zoning, 141–42 Rural Lands Stewardship (RLS), 183–85 Rural preservation Boulder County, Colorado, 197–201, 199f categories, 136, 138, 281t–282t, 283t Lumberton Township, New Jersey, 203–5 Pitkin County, Colorado, 201–3, 203f San Luis Obispo County, California, 193–97, 194f, 196f San Diego, California, 89b San Francisco, California, 84, 88, 89, 137, 207–10, 209f San Luis Obispo County, California administration, 17 allocation, 19, 80 alternative incentives, 237 development regulations, 84 monitoring and adjustment, 231b quota exemptions, 124 rural character preservation case study, 193–97, 194f, 196f TDR bank, 90, 91 wildlife habitat protection, 136 Santa Barbara, California, 124, 140 Santa Fe County, New Mexico, 136 Santa Monica Mountains, California, 134, 185–87, 187f Sarasota County, Florida, 136, 235 Scale, geographic, 122 Scalia, Antonin, 99–103 Scenario planning, 69–73 Scenic protection category, 136 Seattle. See King County/Seattle, Washington Sending areas. See also Zoning districts in case studies defined, xix–xx, 3, 4f, 115, 286 designating, 76 disagreements on numbers of, 18 discouraging on-site development, 83–84 effective zoning, 232–33 fairness and, 15 Lee County characteristics, 36, 36t minimizing alternatives to TDR, 82–83 model documents and handbooks for owners, 122–23 owners of, 75–76 public ownership vs. deed restrictions, 124–25 regulations, establishing, 76–77 reversible easements, 236–37 in state statutes, 115–16, 115t TDR allocation rates, 77–82, 80t

312

Index

Severable use rights (SUR), 188–90 Simplicity as success factor, 120, 233–34 Simultaneous recording, 125–26 Snoqualmie National Forest, 159, 160f, 161 Soils, 150, 237 Souter, David, 99–102 Southampton, Suffolk County, New York, 135 Speculative expectations, 29 Staff, 14, 120 Stakeholders, 54–55, 57b, 58b–60b, 65–67, 232 Standing committees, 64 State listings about, 259–60 programs by purpose, 265t–283t programs by state, 260t–264t ranked by number of communities, 259t variances, 113t State statutes overview, 105–6, 106f, 107t, 108t conveyance of development rights, authorization of, 106–9 local comprehensive plans and, 54, 55b, 56b ordinance standards, 111–15, 112t, 113t success and, 230 types of preservation, 109, 110t voluntary participation standards, 109–11 Statistical analysis, 31–34 Stream environment zones (SEZs), 97–98 Subdivisions, antiquated, 136 Success factors for TDR, 119–20, 229–34 Suitum v. Tahoe Regional Planning Agency, 97–103, 101f, 102f Summit County, Colorado, 134–35 Supreme Court, xxi Supreme Court cases Graham v. Estuary, 103 Lingle v. Chevron, 99b Lucas v. South Carolina Coastal Council, 98, 100 Penn Central v. City of New York, xxi, 96–97, 98, 99b, 100–101 Pennsylvania Coal v. Mahon, 99b Suitum v. Tahoe Regional Planning Agency, 97–103, 101f, 102f United States v. Willow River Power Co., 97b Tahoe Regional Planning Agency (TRPA), California/Nevada. See also Douglas County, Nevada alternative incentives, 237–38 environmental preservation case study, 179–82, 181f quota exemptions, 124 sending area regulations, 77b Suitum v. Tahoe Regional Planning Agency, 97–103, 101f, 102f TDR bank, 91 water quality preservation, 136

Takings analysis, 96–103, 101f, 102f Talbot, County, Maryland, 89b Taxes, 42, 113t TDR (transfer of development rights). See also specific topics advantages, xiii–xv, 13b, 15–19 challenges and problems, xv–xviii, 12–14, 13b clustering compared to, xiii, xix common misunderstandings, 25b disadvantages, 15–19 historical context, xx–xxi how they work, 3 minimizing alternatives to, 82–83, 233 policy overview, xxi–xxiv success factors, 119–20, 229–34 trends, 234–36 TDR allocation rates. See Allocation rates TDR banks benefits, 121b Burlington County Development Credit Bank, 151 California Tahoe Conservancy Land Coverage Bank, 180 defined, 286 King County, Washington, 160–61 Lancaster County, Pennsylvania, 154 Montgomery County Development Rights Fund, 142 New Jersey Pinelands, 163 state standards, 116–17, 116t as success factor, 230 TDR certificates, 126–27 TDR Exchange (King County, Washington), 160 TDR form, sample, 253–58 TDR thresholds, 18, 88–89 Technical expertise, 121 1031 exchanges, 42 Tennessee statute, 111 Title conveyance, 77–78 Title searches, 126 Town and Country Planning Act (1971), 5 Traditional neighborhood development (TND), 36, 38, 39f Traffic regulation, 225–27, 238 Transaction costs, xvi, 11, 120 Transaction monitoring, state, 112–14 Transaction process and documentation, 126–27 Transaction theory, 9 Transaction types, defined, 286 Transfer of development credits (TDC), xvii, 155–58, 193–97, 200 Transfer of Development Units (TDU), 165–68 Transfer ratio, defined, 286 Transit-oriented development (TOD), 89 Transportation, 89, 225–27, 238 Traverse City/Gardenfield Township, Michigan, 139 T-statistic (t-ratio), 32

Index

United States v. Willow River Power Co., 97b Urban containment boundaries (UCBs), 79–80, 88 Urban design and revitalization categories, 138–40, 281t, 283t Portland, Oregon, 219–23, 221f Seattle, Washington, 223–25, 224f trends, 235–36 Washington, DC, 217–19 Urban sprawl, 6, 7 Use by right as success factor, 119–20 Use value, 28, 101–3, 101f, 102f Value increments, 48 Variances by state, 113t Village alternative plan (New Hampshire), 109 Voluntary participation standards, 109–11 Warrington Township, Pennsylvania, 83 Warwick Township, Lancaster County, Pennsylvania, 152–55, 153f, 154f, 237, 238–39 Washington, DC, 137, 139–40, 217–19 Water quality category, 136 Wedges, 141 West Windsor, New Jersey, 139 Wetland category, 136 Whatcom County, Washington, 135 Wildlife habitat category, 136 Williston, Vermont, 124 Windsor, Connecticut, 137b Yield per acre, 30 Zoning. See also Downzonings advantages and disadvantages compared to TDR, 20–21

313

comprehensive plans and zoning codes, 55, 60b–61b, 61f current, in planning process, 68 difficulty of rezoning, 5–6 history of, xx–xxi inefficiencies and, 7 Livermore, California, 156 market potential and, 10–12 PDRs vs., 41–42 permissive, 89b rezoning by request, 76 rural density transfer (RDT), 141–42 TDR as quasi-market based alternative to Euclidean zoning, 95–96 TDR as working with, xxi–xxiv Warwick Township, Pennsylvania, 153 Zoning districts in case studies Blue Earth County, Minnesota, 170–71 Calvert County, Maryland, 144–45 Chesterfield Township, New Jersey, 150 Collier County, Florida, 182–83 Dade County, Florida, 189 Denver, Colorado, 210–12 Douglas County, Nevada, 173–74 Gallatin County, Montana, 171–72 Long Island Barrens, New York, 191–92 Lumberton Township, New Jersey, 204–5 Montgomery County, Maryland, 141–42 New Jersey Pinelands, 163 Payette County, Idaho, 168–69 Pitkin County, Colorado, 201–3, 203f Portland, Oregon, 220, 222 Rice County, Minnesota, 147 San Francisco, California, 207–8 Washington, DC, 217–18