Cap and trade system to allocate development rights

[High Desert Drifter]

As a rural planner I am frequently frustrated by developer requests for master plan amendments and zone changes to allow for high density development in undeveloped areas of the county. These requests are typically approved without consideration to the long-term costs of development activities or with much consideration to the additional value that the higher density provides to the developer.

There seems to be a mindset that everyone has a 'right to develop' without consideration of the externalities of development that are expected to be paid for later by the public. This strikes me as similar to the practice of not considering the cost of pollution that has led to the cap and trade of pollution credits being proposed by some in government.

In my rudimentary understanding of "cap and trade" the government will establish a maximum allowable limit on pollution (or base). Members of the pollution community receive an allocation of that base. Those with a surplus will be able to sell that surplus, and those needing additional allocation will be required to purchase surplus allocations.

Which brings me to "cap and trade" of development rights. Rather than give away density to anyone with the ability to convince the governing board, why not establish a base allocation and a limit on the number of "units" (residential parcels) that can be created over a specified period of time (master plan horizon for instance) and require developers to purchase additional allocation. The difference between the base and the limit establishes a credit bank that is held by the municipality. As credits are purchased, the bank invests the funds in land and resource protection programs that mitigate some of the effects of development.

Has anyone tried this or something similar?

[ThePinkPlanner]

Although we are small city of less than 18,000, we have successfully used a Transfer of Development Rights program.

It is a little different than you have proposed, but still works very smoothly.

We only apply this to one area of our city, known as the Southeast Quadrant. It is the most rural area of our city, and predominantly conists of large lots or undeveloped farmland. The concept is to zone the entire SEQ at 1.2 units per acre, our lowest density in the city. We've established 'sending' areas and 'receiving' areas based on a comprehensive four year study of wetlands, wildlife corridors, roadways, etc. I'm simplifying here, but sending areas can only sell their TDRs (with the exception of allowing a single, single-family home). Receiving areas vary- some may receive anywhere from 4-8 units per acre depending on the sub-district. We allow this exchange to happen privately- the cost of the TDR is not set nor collected by the city, though we do track them to ensure that we know what density remains on sending parcels. We also require surveys of the sending parcels. We almost think of the entire quadrant as one big PUD.

Additionally, this required enabling legislation from the State of Vermont. We have been utilizing the program for 4 years now and have had very few problems.

I could provide more details to anybody interested, or you can check out our regs and maps at www.sburl.com, navigate to planning dept, then planning documents.

[masterplanner]

Virginia has enabling legislation for TDR but no one uses it because it’s not practical. There are a few localities that use a purchase program with open space easements. I am in the process of developing a company that would administer a TDR/PDR/LDR program for localities, and save them a ton of money. The legislation allows density transfers and I want to operate a “bank”, so receiving area property owners can wait until the economic crunch is over.
In any event, the concept of density transfer is a win- win for everyone… If the legislators would stop messing it up.

[JimPlans]

Check out Rural Land Stewardship (RLS) in Florida:

http://www.dca.state.fl.us/fdcp/dcp/...ndstewardship/

It is a TDR program designed for rural areas with large tracts of land that are feeling development pressure but would also like to retain their rural character and preserve farmland and natural areas. Adams Ranch was one of the first, and their website has a powerpoint with a good description of the program:

http://www.familylandsremembered.com/rural-land.html

Maryland has its own TDR program. There is a good report on how well it has (and hasn't) worked available here:

http://law.wustl.edu/landuselaw//Articles/REPORT.pdf

In addition, Maryland has an Agricultural Transfer Tax that collects fees from farmland that is removed from farm use (where it gets a preferential tax rate) and developed. These fees are used to purchase development rights from other pieces of property. So far, Maryland has preserved 480 thousand of the six million acres that lie within the state.

Also, the September 2009 issue of APA's Zoning Practice is about TDRs.

[Cardinal]

High Plains Drifter is suggesting something different that a typical TDR program. It has some intriguing possibilities. Imagine this scenario: A state projects that it will grow by 100,000 households in a given time frame. Those 100,000 allowable units are distributed to local communities based on population. This would cap growth in rapidly-developing areas, steering some of it to other locations, like the state's central cities. Slow-growing rural communities or those wanting to discourage development might sell their credits, earning income to support capital investments or fund operations, resulting in lower tax rates for their residents. There could be other tweaks to such a program, like density bonuses, skewing the allocation of credits to favor urban cores, etc.

[Tipton]

I had proposed a similar idea several years ago to a Councilman in Montgomery County, Maryland, a suburb of Washington DC. The basic idea was that instead of granting increased development rights in which you just give it away, sell the increased rights at market rates, then use the revenue to build a public transportation system. This way, you'd have the funds to build a light rail system throughout the County by having developers pay for it, and without having to raise taxes.

He rejected it, not on the merits of the proposal, but because he'd have to run for reelection on a platform of increasing development, when most residents of the County are clamoring to stop or reduce development. He'd be opening himself up on an issue that an opponent could easily exploit.

He said that a plan like this is better suited for a county that is beginning its growth than for one which is already mature. Here's what I proposed if you're interested in reading.

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The current Go Montgomery plan consists primarily of building new roads and widening existing roads. These measures will not be sufficient to significantly ease congestion in the County, in addition, they conflict with some of the stated goals of the plan. The reason it won't be sufficient is because no matter how many new roads are built, roads by themselves won't have the capacity to handle the future development of the County (not to mention the traffic from the development of Frederick, Howard, and Prince George's Counties). During rush hour, the new ICC will become as congested as the Beltway, and the widened roads will become as filled as they are now. Thus more cars will be on the road than before creating an even harder problem to fix in the future. This plan also conflicts with the goal of reducing air pollution and the goal of making the streets more pedestrian friendly.

The solution is to build a rail system that has a capacity greater than the capacity of a fully developed County. This could be an underground subway, but because of the costs, will more likely be an above ground monorail or maglev system. The proposal I have is to build an extensive system, around 6 or 7 lines going north-south and another 6 or 7 lines going east-west across the County. These lines could be built underground or built overhead, above the streets, along the major roads, such as Rte 355, Georgia Ave, Rte 28, Randolph Rd, etc. As part of this plan, since a cross county rail system will be in place, the nature of the Ride-On [our local bus system] program could change. The Ride-On vans would have short local routes, traveling down neighborhood streets bringing people from the neighborhoods to the rail stops. This relieves the vans from being stuck in the congested traffic of the major roads, makes the mass transit system faster than driving, and makes it as convenient as possible to move people from one part of the County to another without needing to use their cars.

To finance this system, the County would issue Purchasable Development Rights (PDR's) and sell them to real estate developers, letting them finance the construction. PDR's would be similar in concept to Transferable Development Rights (TDR's) except that the rights are created by the County instead of transferred from an existing site. In addition to issuing PDR's, the County would need to create new TDR/PDR Receiving Zones for developers to put the PDR's to use. These new TDR/PDR receiving zones would be within walking distance of the new rail stations. This would provide the reasoning to the communities for why they would want to accept the TDR receiving zones. The capacity of the new rail stop will be greater than the extra density of the new TDR receiving zone, therefore the net affect will be to reduce congestion in that area. The communities would also get a rail stop within walking distance of them. In a sense, you would be rezoning certain parts of the County, however instead of giving the new permissible development away, the County would be selling it at market rates and using the revenue to build the rail system. Over a ten year period, several billion to tens of billions of dollars could be raised.

There are several nice features to this approach. First, it can start as a Montgomery County only project, needing only minimum outside funding and approvals, thus implementing it will be faster and easier. Second, the administrative mechanisms for implementing it are already in place; the County Attorney's Office has experience at creating TDR documentation which can be readily transferred to creating PDR's; Development Rights banks already exist to purchase and sell the credits; and the precedence for creating TDR Receiving Zones has been in place for many years. And third, it can be implemented piecemeal over time. This would allow you to try it on a small scale in certain areas before implementing it throughout the whole County--or allow you to achieve other goals first, such as building a line where the proposed Purple Line was supposed go. The piecemeal implementation over time also means the PDR's would be sold on an "as needed" basis over time. This guards against overdevelopment and also guards against inflation of construction costs--Inflation will cause property values to rise, and therefore the price of PDR's will rise to keep pace with the rail costs.

A plan such as this would allow you to attract more businesses into the County, spurring economic growth, and possibly creating more environments throughout the County like Bethesda and Silver Spring. Furthermore, it is a real solution to easing congestion for the long term.

[maxxoccupancy]

Almost any good idea you come up with is going to be wrecked by the State Legislature--thereby guaranteeing that we have to spend the next thirty years trying to fix those problems.

In my opinion, the best way to deal with things that you don't want is to tax them. That doesn't require that small towns hire big professional staffs. When folks come in and complain about some big, new development, propose that the town tax those kinds of developments according to how much people don't want them. Numerous towns have come up with a "big box tax," and they work. (I think that the courts have been mixed on the issue.)

In the same way that you tax pollution (or apply impact fees), you can tax developments that are harmful. In the same way that towns offer variances in exchange for making certain changes, fee-for-waiver can be the offer. If someone wants a conditional use permit, the town just charges a fee, depending on what rule is being waived.

Just my two cents.