Smart funding: purchased development rights

There is one thing stronger than all the armies in the world, and that is an idea whose time has come.” Victor Hugo

by Gary Piro

n May 23, the Board of Supervisors unanimously and enthusiastically voted to give the bipartisan General Plan 2020 Interest Group Committee more time to continue working on their growth proposal for the unincorporated area of San Diego County. To date, the group has been working on several inventive and smart-growth approaches to be included in the plan's implementation.

    The Board members also expressed their delight with the supportive testimony given by environmental leaders and development interests which demonstrated the beginnings of a “common vision” for the county. Supervisor Ron Roberts stated that this hearing was in stark contrast to the January 10 board hearing, which he referred to as “a six Advil meeting.”

    Included in the proposal is a recommendation to investigate the implementation of a county-wide program of Transferred Development Rights (TDR's) or Purchased Development Rights (PDR's) as a methodology to preserve agricultural and environmentally sensitive rural lands.

    This idea stems from the reality that if we try to redirect growth near existing facilities and transportation corridors, we will be greatly increasing the value of certain landowners holdings while greatly decreasing the value of others. Since we can't possibly afford to buy all of the rural properties we would like preserved, PDR's and TDR's offer a methodology of compensating these rural landowners by having Mr. Builder A buying the development rights from Mr. Farmer B, to be used in a more appropriate area.

    Simon Farlie of the Build Environmental Network points out a very interesting reality about the use of TDR's and PDR's. He notes that landowners could sell development credits to areas where infrastructure already exists for far less money than most people imagine. First, the rural landowner still has the use of the land. Secondly, selling development credits “cuts out the middleman” by avoiding the expense of land planning, engineering, subdivision processing, marketing, brokerage fees and the construction of infrastructure. Lastly is the time value of the money, which is instantly available by selling PDR's versus going through a 3- to 5-year development process.

    On the other hand, a property in an area where we want more development to occur and that currently has a zoning that would allow for 8 lots could “theoretically” accommodate an increase in density of two to three times with no change whatsoever to infrastructure costs. The minimum private road width for an 8-lot subdivision is 24 feet, the minimum sewer size would be 8 inches and the minimum water pipeline would be 8 inches as well. That same road, sewer and water line could accommodate up to 50 lots. With finished lots going for $200,000.00 in San Diego County, it appears there could be quite a bit of money available to purchase development credits.

    The concept of TDR's and PDR's is not a new one. However, in the last few years, it has seen a remarkable resurgence across the United States, as a result of extremely successful programs implemented in Lancaster County in Pennsylvania, King County in Washington, Delta County in Colorado, Pinelands in New Jersey, Pine Barrons in Long Island, and Dade County in Florida (where this program will help preserve more than 100,000 acres of everglades ecosystems outside of the Everglades National Park).

    In Growing Greener, author Randall Arendt points out that the most successful approaches to TDR's and PDR's are the county-wide applications, like the program that was implemented by the state of Maryland in 1998. This program was able to preserve 49,000 acres of rural lands in its first two years at virtually no cost to the public.

    Here is how the program works in Maryland. First, they identify “sending areas,” which are areas where they would like to discourage development. In Maryland, they call these “Protection Areas” (the San Diego County Interest Group proposes to call these areas “Rural Preservation Areas” or RPA's).

    Next, they identified “receiving areas,” which are the areas that are more suitable for development due to facilities and established development patterns. Maryland calls these areas “Priority Funding Areas” (here the Interest Group proposes to call these areas “Desired Development Areas” or DDA's).

    Lastly, Maryland implemented a PDR program that, in effect, allows the owner of the land in the “sending area” to create a “development credit bank” on his property that he could sell piecemeal to developers in a “receiving area,” until the sellers units are exhausted.

    Assume a farmer in San Diego County has a home with 200 acres of avocado trees that has a value of $2 million. If his property is in a zone that would allow for an additional 50 lots, the value of his land to a developer might be $2.5 million (note that the agricultural resource would be of little value to the developer). With this program, instead of selling his operation outright to realize its maximum value, the farmer would have the option of instead selling his 50 “development credits,” provided he then places a “conservation easement” on his property in perpetuity. Eric Larson, Executive Director of the Farm Bureau of San Diego County, states that a program like this would be the first to actually preserve farming activities in our county.

    There are other benefits of this approach. The seller of development credits would most likely receive a reduced property tax base (in Florida, they actually allow agriculturally conserved lands to be exempt from property taxes altogether). Credits may be “gifted” back to the county to obtain a tax write-off. Lastly, credits could also be sold to mitigate environmental or agricultural impacts on new developments (like the program in Pinelands, New Jersey).

    The major difficulty, of course, will be convincing residents in “receiving area” to accept more density. Many areas of the country have overcome this concern by “spreading out” the densified areas throughout the county and simultaneously implementing “livable neighborhood” criteria for densified areas, mandating compact developments, narrow streets, walkability and large areas of open space for possible public use.

    As Randall Arendt said at the Smart Growth Conference in Austin, Texas in 1998, “The key to selling density is livability and you need green spaces to do that.”

    If we have the will to make this work, we can certainly find a way.

    Mr. Piro is a former County Planning Commissioner and the owner of a civil engineering and land-planning firm in San Marcos. Email: