"Beyond Takings and Givings" by Rick Pruetz, FAICP

Preface

In the last five years, I have visited countless communities throughout the country. All of these towns, cities and counties have land use plans that call for the protection of environmental areas, farmland and other important places. But, typically, these special places are still disappearing or are, at best, endangered.

Many communities hope to protect their special places by relying entirely on zoning. However, zoning protections are often ineffectual. (For example, an agricultural zone that allows one-acre lots does little to preserve long-term agriculture.) And, furthermore, zoning is temporary. It can be changed from one election to the next.

Permanent protection requires acquisition of land and/or conservation easements. But land or easement acquisition requires funding for compensation. In most communities, voters are reluctant to tax themselves for land preservation when there are other important and seemingly more immediate needs. It can even be difficult to raise meaningful amounts for open space preservation from development fees. When vying for a finite pot of development fee proceeds, open space preservation doesn?t seem to compete as well as transportation projects, schools, emergency services and other traditional infrastructure.

Alternatively, transfer of development rights, or TDR, offers communities a low-cost, politically acceptable way of permanently preserving sensitive areas, farmland, historic landmarks and other important resources. It uses market incentives to encourage the voluntary redirection of development away from places that a community wants to save, called sending areas, and toward places that a community wants to grow, called receiving areas. When the owners of sending area land elect to record a permanent easement on their properties, they are allowed to sell a marketable commodity called transferable development rights (TDRs) as reimbursement for the resulting reduction in property value. Receiving area developers purchase these TDRs to achieve higher, more profitable levels of development. When TDR works, landowners are able to liquidate the development potential of their properties, often while still retaining fee ownership and enjoying non-development income as well. Developers achieve higher profits despite the extra cost of buying TDRs. And communities are able to permanently implement their land use plans using little or no tax money.

In many respects, this book is an update of my 1997 book Saved By Development: Preserving Environmental Areas, Farmland and Historic Landmarks With Transfer of Development Rights. However, for those of you familiar with Saved By Development, the following differences may be worth noting.

Saved by Development contained profiles of 112 TDR programs in 107 communities. Almost all of these profiles reappear in this book. Over three quarters of these case studies have been updated to reflect program amendments and/or changes in acreage preserved as reported in recent interviews with community planners. However, for 25 communities, the case studies remain unaltered from the 1997 book because I was unable to contact the community planers or because the planners reported that no changes had occurred. Finally, this book includes case studies of 30 TDR programs that have either been adopted since 1997 or have simply come to my attention since Saved By Development.
This book incorporates lessons learned from updated TDR programs as well as newly discovered programs. Beyond Takings and Givings explains new ways in which communities are putting TDR to work. For example, it describes amendments to the New York City program designed to preserve live-performance theaters and a TDR program in Carroll County Maryland intended to protect mineral deposits for future mining. This book also explores new TDR procedures. For example, it reviews the King County, Washington approach of creating incentives for receiving area neighborhoods and the Palm Beach County, Florida experience of creating TDRs by deed-restricting environmentally sensitive land purchased by the County with bond proceeds. In addition, Beyond Takings and Givings explains new trends in the places where TDR is used. For example, the case studies in Part Three of this book demonstrate that Mountain West states have experienced the greatest percentage increase in TDR program adoption in the 1990s.
Like Saved By Development, this book urges communities to consider the various advantages of using TDR. As one new advantage, this book asks readers to consider TDR as a way to get beyond the war of words between private property rights activists and community rights advocates. The former often propose that governments be required to compensate private property owners for partial takings, or regulations that reduce property value without eliminating all economic use. The later counter that mandatory compensation for partial takings is not fair to taxpayers in part because private property owners rarely pay for governmental regulations that increase private property value. The two sides see little hope for trying to offset the hardships caused by partial takings with givings, or property value increases created by government action. That?s because the monetary effects of governmental actions are hard to estimate. Furthermore, these monetary effects are seldom distributed equally between property owners - meaning that government actions typically make some landowners winners and others losers. As argued in this book, TDR avoids these pitfalls. By voluntarily choosing to buy TDRs, developers basically acknowledge that they expect more profit from the TDR option offered by local government. Likewise, by choosing to sell their TDRs, sending area landowners formally accept specific compensation for permanently restricting their development potential. Unlike other implementation techniques, TDR does not require taxpayer support or reliance on grants and limited state/federal funding. Instead, TDR addresses the critical need for preservation funding by recapturing a portion of the extra profits created when governments allow development and transferring those proceeds to compensate owners who voluntarily choose to forego development on other properties.
Like Saved By Development, this book includes a detailed guide to preparing a TDR program (Part Two). However, after five more years as a consultant preparing TDR studies and programs, I place even greater emphasis on the need to create a market that motivates developers to buy TDRs and landowners to sell TDRs. Specifically, Beyond Takings and Givings recommends greater attention to property value ratios. With proper value ratios, sending area landowners are more likely to consider the TDR option to be preferable to the non-TDR option. Likewise, when TDRs are affordable, receiving area developers are more likely to calculate the TDR option to be more profitable than the non-TDR development option.
Saved By Development discussed but did not emphasize the difficulties inherent in trying to adopt a TDR ordinance. In contrast, Beyond Takings and Givings explores these difficulties and offers possible solutions. For example, this book recognizes that some communities will have trouble identifying sending areas because they have never been called upon to envision their ultimate land use pattern at build out, referred to in this book as the FULL or final urban limit line. As a separate difficulty, public officials may be reluctant to rezone receiving areas for higher with-TDR development because they could subject themselves to accusations of inducing growth. Where these and similar concerns threaten to scuttle a traditional TDR ordinance, this book recommends consideration of a technique called density transfer charges or DTC. As explained in Chapter IV, a DTC ordinance requires developers to preserve off-site land or pay a charge in conjunction with an upzoning proposed by the developers. The community uses the proceeds from these charges exclusively for the preservation of places that the community wants to save. Basically, the community achieves the redirection of growth, as with a traditional TDR program, but avoids some of the political minefields associated with rezoning sending and receiving areas in advance of private -sector applications. As discussed in Chapter IV, DTC is not necessarily superior to Traditional TDR since it postpones important decisions that ideally should be made comprehensively rather than incrementally. However, this book offers this option as a way to adopt an implementation tool when other alternatives appear to be hopeless.

As a final comment, because this book focuses on TDR, readers may get the impression that I think that TDR is always the best implementation tool. In fact, the best tool or combination of tools will vary depending on each community. As pointed out in Chapter IV, in some communities, public support for preservation is so strong that voters agree to tax themselves to generate substantial, ongoing funds for land and/or easement purchases. This taxpayer-financed preservation avoids the controversies associated with development, an inherent feature of TDR. In other communities, the general public may recognize that preservation is as important as traditional infrastructure and provide for significant open space funding to be generated by development fees, a less complicated technique than TDR.

However, many communities do not yet have this level of public support for preservation. As rural lands are developed, the general public will begin to appreciate the places that they took for granted. Gradually, public support for preservation will grow. If they are lucky, that support will materialize before there is nothing left to save.

At the very least, TDR offers hope to communities that currently don?t have sufficient resources or public support to fund a meaningful preservation program. When considering TDR, communities often overcome decades of pessimism and envision a preferred future in which growth is redirected away from places that ought to be protected and toward places that are appropriate for compact urban development. They rediscover the importance of natural areas, farmland, historic landmarks and open space to the character as well as the health, economy and quality of life in the community. And they recognize that they do have the ability to make a difference. As a result, these communities will be more likely to protect these endangered places, by TDR or through some other preservation tool.