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February 20, 2009

Experts on transfer of development rights programs identify success factors

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A new study has been published in the Journal of the American Planning Association on Transfer of Development Rights (TDR) programs around the county. Rick Pruetz and Noah Standridge, two veteran TDR consultants and planning practitioners, ranked the top 20 programs in terms of their success in preserving land, drawing from a pool of 191 TDR programs that have been implemented across the nation. Each of these is matched up with a list of potential success factors that have been recommended by experts in the academic literature. Finally, these suggested success factors are prioritized in value, depending on how often they show up in the most successful programs.

While the idea of TDR may be fairly new to the Charlottesville-Albemarle community, the concept has been in practice for about 40 years. The rate of success has varied widely between communities. Pruetz’s and Standridge’s evaluation of the factors that differentiate the successful programs from those that have not been able to meet their stated goals could help local leaders determine whether Charlottesville-Albemarle has the right conditions and aspirations for a successful TDR program.

20080808-cows  
A Rural Area of Albemarle County

Here is the top ten list of success factors from the study:

  1. Enough demand in the receiving area for bonuses. Whether in the form of extra density or other perks, developers have to truly want the bonuses that a purchase of development rights would confer.
  2. The receiving area is customized to the community. The receiving area must have adequate infrastructure, political backing, and a clear designation. Ideally, the receiving area would be in a city or urban fringe, although a few communities that face urban pressures against development have created new town centers as receiving areas.
  3. Strict sending area development regulations. “Strict regulations” are defined as prohibitions of densities greater than one unit per five acres, but some of the most successful programs have much stricter prohibitions than this. [Note: Albemarle County’s Rural Areas zoning ordinance currently allows one single-family residential unit for twenty-one acres in most cases.]
  4. Few or no alternatives to TDR for achieving additional development. There is less demand for TDR in communities where developers believe they can receive a waiver to regulations without having to purchase development rights.
  5. Market incentives: transfer ratios and conversion factors. The most successful programs have carefully matched the values of development rights in the selling area with the values they would be sold for in the receiving area. This is done by setting a favorable ratio for trading, so that each development right sold would be worth multiple rights to the buyer.
  6. Ensuring that Developers will be able to use TDR. Many successful communities have rewritten zoning laws to allow by-right development with TDR, rather than making the buyer go through what could be a lengthy and expensive approval process. This drives demand by giving developers more certainty their projects can be completed on schedule.
  7. Strong Public Support for Preservation. The most successful programs are in counties that already have publicly-funded land preservation measures in place, such as outright purchases of development rights.  [Note: Albemarle County has an Acquisition of Conservation Easements (ACE) program.]
  8. Simplicity.  Programs that are easier to understand and implement find more support and participation.
  9. TDR Promotion and facilitation. Citizens have to be well informed and regularly updated about the TDR program. This is usually accomplished with a high-quality website and an initial promotional push.
  10. A TDR Bank. While only four of the top twenty communities established official TDR banks, these four programs have been remarkably successful. A TDR bank is an officially designated intermediary between buyers and sellers. It serves to facilitate trades, stabilized prices, and ensure continuous market activity.  [Note: Albemarle County has enabling legislation that would allow for the banking of development rights.]

Transfer_development_rights   
Image from King County, Washington

Applying the success factors to the Charlottesville-Albemarle context

Pruetz and Standridge emphasize that not all ten of these traits are necessary to run a successful program. For example, Montgomery County, Maryland does not have a TDR bank and does not promise developers can use TDR by-right, yet they have managed to conserve an average of 1,851 acres per year since the inception of the program in 1980. Another highly successful program, New Jersey Pinelands, scores quite low on simplicity points. All of these factors reinforce each other in complex ways, and the diversity of individual characteristics of each community make any simplistic formula for success impossible.

However, there are some examples that relate to Charlottesville-Albemarle’s particular situation. Now that the City of Charlottesville has expressed an interest in TDR, the example of Boulder County, Colorado may prove illuminating. Their program, which began in 1989, has preserved 5,900 acres of land, and an expanded version was just ratified in the summer of 2008.  Boulder County has entered into intergovernmental agreements with six different incorporated towns in the county in order to find acceptable receiving areas for development rights.  The contracts give the cities the authority to set the receiving area within their boundaries, and they clarify the exact terms of a trade of development rights between the city and county.

King County, Washington, the TDR program with the best record in the country, also extends across political boundaries. There is potential for confusion, however, because each city government has its own policy of which development rights it is willing to accept. A municipal government, for instance, may only want to protect land within its own watershed. In 1998, The City of Seattle, located in King County, used TDR to allow developers to increase the number of stories on new buildings in a target neighborhood. Each additional story was priced at $120,000. Half of the cost went to purchasing three development rights from the county, and the other half was used for infrastructure improvements to the immediate vicinity of the development. Other creative arrangements between the two jurisdictions have been used since this initiative.

Albemarle County Supervisor Dennis Rooker (Jack Jouett) has said that in his own research he was not able to find any well-functioning TDR program that did not also include a down-zoning. The Pruetz and Standridge study confirm this finding. All of the top 12 TDR programs included strict land use controls on the sending area. Montgomery County down-zoned to 1 dwelling unit per 25 acres, a number they considered to be the minimum amount of land for a for a viable working farm. Boulder County has a base density of 1 dwelling unit per 35 acres, while King County maintains a more modest 1 dwelling unit per 5 acres limit. The researchers identified development restrictions like this as just short of essential for a TDR system to function. Many of the 191 programs with more permissive land use showed no TDR transactions at all.

Albemarle County’s Rural Areas zoning ordinance allows development of 1 single-family residence per 21 acres in most cases. The findings of Pruetz and Sandridge would already classify Albemarle’s rural development restrictions as “strict.” When the TDR concept was originally proposed by Supervisor David Slutzky (Rio) in 2006, he suggested Albemarle’s rural areas be down-zoned to one dwelling unit per 50 acres.

TDRdiscussion 
An August TDR stakeholder meeting at the Weldon Cooper Center

During the recent meetings on TDR facilitated by the Weldon-Cooper Center at the University of Virginia, stakeholders wrestled with the acceptability and practicality of further downzoning rural Albemarle.  Some rural property owners felt such a change, like the one approved in Albemarle’s “Great Rezoning” of 1980, would be a violation of their property rights.  By their fourth meeting, that key tenet of Slutzky’s TDR proposal was off the table.  At the time, the group discussed how large land parcels in Albemarle (over 50 acres) might best be protected with voluntary conservation easements. 

The most essential success factor, according the study, is whether enough development demand exists in the receiving area to prime the pumps of the market. This question may be especially pertinent in the current slow housing market.  King County had a thriving TDR trade until the housing bubble burst within the last two years, and since then there has been very little market activity. If developers are even hesitant to build to allowable standards, they are all the more unlikely to want to purchase the right to exceed those standards. Nevertheless, King County officials intend to simply wait out the slow economic climate and keep the TDR apparatus in place for the anticipated recovery. In many cases, TDR is intended as a long-term strategy that may have to weather the inevitable vicissitudes of the housing market.

Participants in the TDR stakeholder meetings also spent a considerable amount of time discussing what the exact constitution of the receiving area should be. Supervisor Slutzky’s original proposal suggested a 1% increase in the County’s designated growth area, but this proposal was abandoned during the stakeholder discussions. Many in the environmental community were resistant to growth area expansion, while others favored opening more of Albemarle’s rural area to development. The group eventually formed a consensus around setting the receiving area as the current designated growth area of the County and, if the City would agree, portions of Charlottesville.

Pruetz and Sandridge found a significant amount of variety in successful receiving areas, so they were hesitant to delineate specific Best Practices to follow. The criteria they did establish were that there had to be adequate infrastructure, or plans to extend the infrastructure necessary to accommodate higher density. There could not be any confusion about the boundaries, and the selected area should not draw political controversy. All of these factors have already figured heavily in the Albemarle-Charlottesville discussions.

While there are many models of good TDR programs to measure against, it is equally important to take account of the numerous TDR attempts that have incurred unnecessary costs, inspired needless controversy, or simply just faded away. Pruetz and Sandridge prove to be a helpful guide through the complex landscape of TDR policies around the country, another voice to add to the careful and inclusive conversation currently underway in the Albemarle-Charlottesville community.

Daniel Nairn

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