Loading...
HomeMy WebLinkAboutAgenda - 06-27-2006-7bORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: June 27, 2006 Action Agen~ Item No. SUBJECT: Orange County Transfer of Development Rights (TDR) Program Feasibility DEPARTMENT: Planning and Inspections PUBLIC HEARING: (Y/N) No ATTACHMENTS: 1. June 6, 2006 TDR Task Force Meeting Notes 2. Draft TDR Feasibility Study "Summary of Findings and Recommendations" 3. Proposed Phase III Program Design and Ordinance Development INFORMATION CONTACT: Craig Benedict, 245-2592 Glenn Bowles, 245-2577 Louis Berger Group/UNC-Charlotte PURPOSE: To receive the consultant's draft report on the TDR Feasibility Study and to consider the recommendation of the TDR Task Force that the process of designing a TDR program should go forward. BACKGROUND: The Louis Berger Group/UNC-Charlotte Urban Institute consultant team held its sixth meeting with the TDR Task Force on June 6, 2006. Following a presentation, Task Farce member Ed Holland (OWASA representative) made the following motion with a second by Town Commissioner Mike Gering (Town of Hillsborough representative): "A TDR program is philosophically, legally, and politically feasible, there are no legal or administrative impediments for such, and the process of designing a program should go forward." All eight members present voted in the affirmative, The recommendation of the Task Farce is the culmination of nearly ten months of deliberations, which included six meetings and one public meeting, and over a year of consultant and multi- department staff efforts, The consultant contract included a feasibility study of two phases: Phase I. Background Research and Data Collection • Phase II. Generate and Review TDR Options (Feasibility Study and Concept Plan) A draft Orange County Transfer of Development Rights Feasibility Study "Summary of Findings and Recommendations" is available for BOCC consideration. In the draft summary, the following findings are presented: 1, Legal Feasibility a. Orange County can rely on its existing authority to purchase conservation easements, award density bonuses, designate sending and receiving areas, and establish eligibility, bonus limit criteria, and establish varying levels of development bonuses, z b, Development rights may not "float," The transaction must be between a willing, private seller (sending area owner) and a willing, private buyer (receiving area developer). An open market approach is best. c. County municipalities may work to be part of the County TDR program, but at this time, the Ccunty should establish its own TDR program. 2, Administrative Design Feasibility a, An initial investment of County Funds will be needed to develop an administrative organization to operate the TDR program. b. Informing and educating stakeholders and the public are critical, c, Performance objectives and measures for program evaluation are recommended. d. TDR program design should be coordinated with other programs and initiatives, 3. Economic Feasibility a. Balancing supply (sending area) and demand (receiving area) is critical, b, Sending areas will produce a sufficient supply of TDR credits. c, Appraisals for the conservation easements on sending area properties are recommended to ensure that both buyers and sellers are treated fairly and receive a similar and accurate price. d. Receiving areas are somewhat fixed by public water and sewer, e. Sending areas can vary in location and prioritization is probably necessary to crate a balance between the two. Items 4 and 5 are future considerations if the BOCC decides to proceed to TDR program development: 4, Program Design Issues to serve as a Guide for Other Decision Points (Addressed in Phase III) a. Methods of designating sending and receiving areas, b. Sending area participation based on criteria merits or open to all properties, c, Method to establish density bonus criteria. d. Sending area participation incentives. e, Receiving area participation incentives, f, Sending area development restrictions. g, Receiving area small area plan development, h. Re-purchase or re-attachment of sending area development rights, 5, Recommendations for Proceeding a. Conduct BOCC work session(s) to identify and prioritize TDR goals and objectives, b, Develop a proposed TDR Plan with significant public and key agency staff involvement, c, Adopt the TDR Plan with full public notice, public hearings and vote by BOCC. Staff, with the assistance of the consultant, has prepared a possible process far the Phase III (Program Design and Ordinance Development). The process is attached for reference. FINANCIAL IMPACT: The accepted bid for Phases I and II is $39,100. The BOCC approved a later amended contract far $44,071.10, The original bid and the revised contract amount are in the fiscal year 2005-06 budget and by virtue of the report, completed, While interviewing consultants for the original contract, the County received written bids to complete Phase III, These bids ranged from $13,055 to $38,830, and may or may not have to be negotiated depending on whether the County proceeds with the original vendor, Berger/UNC-Charlotte Urban Institute. RECOMMENDATIONS: The Administration recommends that if, in the Board's opinion, the draft Orange Cotanty Transfer of Development Rights Feasibility Study "Summary of Findings and Recommendations" provides sufficient justification, then the BOCC: Gould concur with the TDR Task Farce recommendation that the process of designing TDR program should go forward • Consider budgeting monies to fund Phase 3 (Program Design and Ordinance Development); and • Authorize staff to solicit bids for professional planning services to complete Phase III of the TDR study. 2 4 10 11 12 1.3 14 15 16 17 18 19 20 21 22 2.3 24 25 26 27 28 29 30 31 32 3.3 34 35 36 37 TDR Task Force Meeting Notes June 6, 2006 Attendees: James Carnahan Mike Gering Ed Holland Barry .Jacobs Hervey McIver Renee Price-Saunders Scott Radway Martin Rody Absent: Cara Crider Betty Cross Robert Dowling Monica Evans Martha Hoylman Robin Jacobs Pamela Paul Others Present: Dianne Reid, Economic Development Director Margaret Hauth, Hillsborough Planning Director Geoff Gledhill, County Attorney Craig Benedict, OC Planning Director Glenn Bowles, OC Planner II Sherri Ingersoll, Administrative Assistant II Scott Lane, Consultant Vicki Bott, Consultant Matthew Koontz, Consultant Brian Dobyns, Planning Board Member 3 citizens Scott Lane: This will be the last meeting for the Task Force. All of this information has been shared with the Task Force, except the economical feasibility draft, which we will review tonight. We are looking for key decisions from the group to proceed. There are three phases in developing a TDR program, and we have completed the first two: Data Collecticn and interviews, and the Task Force. We will be providing the County Commissioners with an update on June 27, and would like to be able to provide a recommendation from this group to move forward to Phase 3. The public meeting was held on May 9, and had approximately 40 attendees, which is a gcod turn out considering that this is a long range program and will not affect anyone immediately, The comments were favorable overall, and the consensus was to move forward with a program, There were numerous questions that were posed during the meeting, as well as with Staff after the meeting, Glenn Bowles: Some people were concerned about this not being a voluntary program. Scott Lane: Those comments help us to better target the education process that will he needed in the next step, to increase public awareness. 38 Vicki Bott: Other questions included that people were uncertain of their land status long 39 term (i.e. 50 years); what happens to my land; will anyone want to buy my land with 40 TDR rights on it; Can I buy back my credits,. 41 42 Craig Benedict; Other questions posed were if mare work needs to be done to 43 encourage development in the Efland-Mebane corridor and the periphery of towns as 44 receiving areas, People need to be comfortable on both the sending and receiving area 45 sides. 46 47 Renee Price-Saunders: There's a significant difference in land values between the 48 northern and southern parts of the County. 49 50 Scott Lane: That's a major issue that needs to be addressed. 51 52 Economic Feasibility 5.3 54 Vicki Bott: The legal gate has been passed in determining the feasibility, and there may 55 be some administrative issues with having the municipalities participate, but these are 56 some decision points to be considered, The report looks at a basic scenario, with 1 57 credit sending = 1 credit receiving; maximum 5-fold increase in receiving area densities. 58 Most developers don't go to the maximum cap, and 80% utilization is more standard (4 59 units per acre) 60 61 James Carnahan: Regarding the receiving area densities, the model assumption is for 62 up to five dwellings per acre, The program should have more flexibility and variability 63 among the different areas, The unflexibility can create a problem. Developers may look 64 at receiving areas that want increased densities anyway. We need more flexibility, The 65 County may not want high density in all receiving areas, as it needs to create a 66 sustainable urban form, How do we set receiving area density? An average or variable 67 cap could possibly be addressed through developing a small area plan for each 68 receiving area. 69 70 Vicki Batt: Those are some of the options available in the design phase; How to set a 71 density cap; should credits be variable based on criteria or use a blanket approach. 72 7.3 Ed Holland: Would a next step be to develop small area plans for receiving areas? 74 75 Scott Radway: Do the receiving areas include the municipalities? 76 77 Vicki Bott: At this time we are looking to provide Orange County to Orange County 78 transfers only, and not include the municipalities. The municipalities may want to 79 participate after the County has been successful with a program. There are numerous 80 reasons why the municipalities may not want to participate initially, 81 82 Scott Lane; There is also an influence of urban areas on land values. 8.3 6 84 Vicki Bott: Findings: In Orange County, the supply of sending areas greatly exceeds 85 the receiving areas. Is that good or bad? If a program works, it may be a constraint 86 later. It takes a while to get a program moving. The price range of properties is 87 significant throughout the County. Either the County can set credit values ar try to 88 equalize values. This may make it more feasible in the open market, 89 90 Scott Radway: (regarding Table 1 on pg. 3 of handout) If demand is 'dwelling units', it 91 needs to be specified an the table. The figures need to be better described and the 92 units need clarification. 9.3 94 Ed Holland: Perhaps there should be an additional line for dwelling units, 95 96 Mike Gering: It needs to specify units or acres. 97 98 Scott Lane: There is a conversion involved. 99 100 Vicki Batt: We have backed out any developed acreage. 101 102 Geoff Gledhill: I don't feel that the receiving area acreage is pertinent. ]03 104 Scott Radway: Is the demand in receiving areas derived from market demand? 105 106 Vicki Bott: It was based on development potential. 107 108 Scott Radway: You really can't establish the potential without a different type of 109 analysis,. 110 111 Vicki Bott: We can reflect this as receiving area capacity, A matrix might be more 112 explanatory. 113 114 Ed Holland: It seems as though you're referring to net supply; supply less demand, not 115 divided by. 116 117 Glenn Bowles: The Lands Legacy programs uses $3,000 - 6,000 per acre for 118 conservation. Are we getting a good deal? 119 120 Vicki Bott: (Table 3, p. 4) This reflects that with an easement, the land value is reduced 121 by 7Q% in value in urban areas, and 50% in non-urban areas. 122 123 Hervey McIver: There is a difference between buying development rights and 124 conservation easements in terms of value. 125 126 Scott Lane: That needs to be specified, 127 128 Vicki Bott: This is more restrictive, We focused an conservation easements only. 129 There is a big range of uses with conservation easements, 7 1.30 131 Ed Holland: One distinction is if any development rights are available with conservation 1.32 easements. There is a large demand in the County for large tracts of land with few 133 homes. 1.34 1.35 Craig Benedict: As the number of development rights is limited, the value per acre 136 increases. If the intent is to preserve conservation value, the program needs to be set 1.37 up that way. 1.38 139 Brian Dobyns: If an absentee landowner sells or transfers some of the development 140 rights an his property, the adjacent property owner's value also increases. 141 142 Vicki Bott: That's true 14.3 144 Scott Radway: In Table 3, what is the basis for analysis? Is it intended to show a 145 concrete differential? 146 147 Vicki Bott: It is a rough outline. The specifics will include the numbers. Table 4 shows 148 variability. How do you achieve a balance? This is a significant issue that either the 149 program needs to address, or the County needs to accept that the receiving areas will 150 go to the lowest value areas. 151 152 Craig Benedict: There is a way to equalize, by different values of credits. There needs 153 to be a difference in margins far fairness. 154 155 Renee Price-Saunders: In the Montgomery County, MD example that was done, the 156 credits were equalized. 157 158 Vicki Bott: That goes into the design options; the number of credits per acre, 159 commercial vs. residential areas, density bonuses. 160 161 Renee Price-Saunders: What are you trying to indicate with this table? 162 16.3 Vicki Bott: It you look at all of the sales values, the average is reflective of County 164 values. 165 1.66 Renee Price-Saunders: Should you use the median rather than the average? What 167 does the mean show? 168 169 Vicki Bott: It was just used for reference, to show the County as a whole in comparative 170 terms. This is the average for all properties. 171 172 Martin Rady: It looks like the averages are lying. There is really a small amount of land 17.3 areas in some of the townships. 174 8 175 Scott Radway: The median can be as valuable as the mean, Is the mean/average for 176 Chapel Hill and Hillsborough inclusive or exclusive of the conservation easements in the 177 municipalities? 178 179 Hervey McIver: In the open market, these numbers are meaningless. 180 181 Technical Memo 182 18.3 Vicki Bott: What are the findings? The section relating to density bonuses needs to be 184 revised based on recent conversations with Geoff Gledhill. An immediate transfer of 185 credits is required, there will be no TDR bank, We also need to review the language on 186 the section based on Payment-In-Lieu park fees. 187 188 Geoff Gledhill: There is some question if a local government can contract (police 189 power). Orange County has solved this by having joint planning authority. The County 190 has permission from the State for interlocal agreements, 191 192 Brian Dobyns: Would it make the program more feasible if Chapel Hill could be 19.3 involved in the Rural Buffer? 194 195 Geoff Gledhill: That's not a legal question. 196 197 Vicki Bott: Technically, with the ETJ's, Chapel Hill does little planning in Chapel Hill 198 Township. 199 200 Scott Radway: This is a conceptual framework, The Chapel Hill land ordinance 201 includes these provisions already. 202 20.3 Geoff Gledhill: Correct. Chapel Hill has Resources Conservation Districts in place, 204 which is essentially a TDR program, 205 206 Scott Radway: What if you are in a receiving area, and want to transfer land 207 development rights to a neighbor, Can a receiving area property sell the credits to 208 another receiving area property, such as in historic districts? 209 210 Vicki Bott: That can be incorporated into the design. You can specify areas where you 211 would like this encouraged. 212 213 Scott Lane: What would be the motivation to buy another receiving area property? 21.4 215 Scott Radway: I may want to get the best deal passible. 216 217 Vicki Bott: The maps are not a decision at this point. 218 219 Renee Price-Saunders: The Historic Preservation Gommission has already expressed 220 an interest in having certain areas carved out, 221 Scott Radway: Can historic properties in receiving areas use the TDR? 222 223 Staff: Yes. 224 225 226 Administration 227 228 Vicki Bott: There aren't any issues that say "no" tc the program's feasibility. These are 229 mainly policy preference questions to be answered in a different phase. Public 2.30 communication is a critical component in the next phase. We feel that private market 231 negotiations are better than pre-set prices, Also coordination with other County 2.32 programs that are available is necessary. 2.3.3 2.34 Craig Benedict: Could the Steering Committee comment on the type of approval that 2.35 they think would he palatable? 236 237 Vicki Bott: We want the group to define that, If the members of the group could 238 individually email Glenn Bowles by .June 13 with specific things in the summary where 2.39 you have strong opinions, concerns or questions, so we can incorporate these 240 comments into the upcoming presentation to the Commissioners. 241 242 Renee Price-Saunders: How will know what will be taken to the BOCC? Will we be 24.3 able to review the revised report as a group before the Commissioners' meeting? 244 245 Vicki Bott: This group will give an overall recommendation to the Commissioners based 246 on tonight's meeting, so there won't need to be feedback to the group after individual 247 comments are made. 248 249 Renee Price-Saunders: Have you looked at the feasibility in certain nodes? Have small 250 area plans been considered? 251 252 Vicki Bott: Yes, this was a determining factor as we've gone through this process, as 25.3 the program needs to help further the goals of the Hades. 254 255 Scott Radway: What are the other criteria to be considered in valuing properties? 256 257 Vicki Bott: These are identified in the design phase. When we look at the Hades, we 258 need to acknowledge that some form of water and sewer needs to be provided to 259 promote growth in these areas. 260 261 Bill Barrett (realtor from Public Meeting): Do you know how many TDR programs have 262 failed, and what have been the implications? Alsc, there seems to be is a problem with 26.3 communication to the public. Of the 40 attendees at the public meeting, the majority of 264 them were staff members. The information is not getting out to the public. Those 265 people most affected by the program (land owners and realtors) have not received 266 information, 10 267 268 Vicki Bott: We've been dealing with the question of feasibility to this point. When 269 looking at a quantitative analysis in the next phase, we will address more of the public 270 concerns, and determine if the program would be successful. 271 272 Scott Lane: In this phase, we've been primarily looking at barriers to feasibility of a 273 program. 274 275 Vicki Bott: The information available doesn't really reflect failures in programs, as they 276 are not well advertised. One of the case studies that we used had a low degree of 277 success, and looks at what they would do differently to make it more successful. It all 278 comes dawn to a balance, Did they create conditions to make it palatable and make it 279 easy to participate? 280 281 Program Design Issues 282 Policy preferences options to be considered in Phase 3 283 284 Hervey McIver: Can a landowner sell same of his credits and keep same? Does a 1 D- 285 acre lot have TDR credits available? Is that fair or achievable? 286 287 Vicki Bott: Minimal acreage requirements are needed. What should be the proof levels 288 for qualification is a question. 289 290 Ed Holland: There are no brick walls apparent to the feasibility question; the actual 291 process of consensus in the design phase seems formidable, 292 293 Renee Price-Saunders; This seems to be getting away from the overall goal of 294 protecting land, How much development do we want in the County? Should there be a 295 cap? 296 297 Vicki Bott: In the back of the packet is a draft process for Phase 3. The first item 298 needed is defined goals and objectives from the BOCC that they want accomplished by 299 a TDR program. 300 301 Scott Lane: Keep in mind that this hasn't been done in North Carolina before, The level .302 of analysis needed before designing the program is questionable. .30.3 .304 Motion by Ed Holland to state to the BOCC that a TDR program in Orange County is .305 philosophically, legally and politically feasible, there are no legal or administrative .306 impediments, and the process of designing a program should go forward. Seconded by 307 Mike Gering, 308 .309 Aye: (8) .lames Carnahan, Mike Gering, Ed Hailand, Barry Jacobs, Hervey McIver, 310 Renee Price-Saunders, Scott Radway, Martin Rody 311 312 Vicki Bott: If you have any comments or concerns about the design options, please 313 email your questions or concerns to Glenn within the next week. .314 .315 Scott Radway: Are these documents available via email so that we can use the tracking 316 feature? 317 .318 Scott Lane: Yes, we can email the ward document format with the minor changes made 319 tonight. 320 .321 Scott Radway: I'd like to make a motion of appreciation to the Consultant for their hard .322 work on this project. Seconded by Renee Price-Saunders 32.3 Orange County Transfer of Development Rights Feasibility Study 1.2 DRAFT Technical P9emorandum No. Z ~ .Summary of Findings and Recommendations The findings from the feasibility assessment are in four categories: legal, administrative, design, and economic, each of which is summarized below. Following the Endings summaries, a set of remaining issues that will need to be addressed are considered, as well as recommendations for the County's consideration should it decide to proceed with creating a TDR program, This preliminary Technical Memorandum is partitioned into the following five sections Part I. Legal Feasibility Part II, Administrative Design Feasibility Part III, Economic Feasibility Part IV, Program Design Issues Part V, Recommendations for Proceeding I ~ ; Orange County Transfer of Development Rights Feasibility Study OR4FT Technical P7emorandum No. 2: Summary of Findings and Recommendations There are some legal limitations on how the County may create and operate a program that accomplishes a transfer of development rights from one property to another (a TDR program): The County can rely on its existing authority to: • Purchase conservation easements from private property owners; • Award density bonuses for provision by a developer of amenities public facilities or other public services identified by the County as going beyond the minimum requirements established in its ordinances For land development and that serve the public good and help the County meet its land use and other public policy goals and obiectives; • Adopt land use regulations to: o Designate areas or properties eligible to sell conservation easements to the County (Sending Areas) and areas or properties eligible to receive a density bonus (Receiving Areas); o Establish minimum eligibility criteria for Sending Area properties; o Establish maximum density bonus limits for Receiving Area properties; and, o Establish varying levels of Receiving Area density bonus for easements on different Sending Area properties, based on the extent to which a property meets or furthers important County policy objectives. tether these existing authorities allow the County to create a program that effectively accomplishes a transfer of development rights from one property to another. 13 Deleted: payment of afee-In-lieu-of provision of open space within the County's~unsdicdon Unless it obtains special authorization from the General Assembly, the County may not: Allow development rights to "float" (without being immediately attached to a' Formatted: emiets and Numbering Receiving Area property once they have been severed from a Sending Area property through a conservation easement); Unless it obtains special authorization from the General Assembly. the County should avoid: Establishing ore-set easement acquisition prices and ore-set density bonus fees instead the County should allow private market negotiations between Sending and Receiving Area property owners to determine the dollar value of the transactions while the County determines the amount of density bonus awardable for meeting specified Sending Area preservation criteria ~ Municipalities may enter into agreements with the County to participate in a TDR~ program that fits the parameters outlined above; • However, municipalities may prefer to obtain special authorization from the General Assembly clarifying that their authority to award density bonuses for provision by a developer of protected open spacePxtends to open space hat is provided outside of their jurisdiction and in a location not adjacent to or within walking distance of the property receiving the density bonus, Formatted: Bullets and Numbering Formatted: Bullets and Numbering Deleted: payment of a fee-In-lieu-of provision of open space Deleted: ~~ ~ ,: ,; .., Orange County Transfer of Development Rights Feasibility Study DRAFT Technical A9emorandum No. 2. Summary of Findings and Recommendations There are no absolute barriers to the administrative launching or operation of a TDR program. However, the following items may guide the ultimate design of the program. There are pros and cons to either administering it through one centralized department or through several departments. An initial investment of funds will be needed to staff and operate the TDR program, but the potential exists for a net increase in tax revenues to support some or all of its operating costs. A critical component of the inaugural and ongoing operating costs will be public communications. The County will want to set performance objectives for the TDR program and then develop a comprehensive but simple and relatively inexpensive set of measurements to evaluate the program's performance against those objectives. There are pros and cons to either allowing for administrative approval of TDR applications (i,e,, Staff review and approval only) or requiring aquasi-judicial review and approval process involving the County Commission, However, an administrative review would provide an important level of clarity and surety to potential private developers that embarking on an additional set of TDR-related requirements will be worth the trouble. The TDR program's design and inauguration should be coordinated with other programs and initiatives of the County to take advantage of opportunities for complementary services (e.g., Lands Legacy Program) and avoid competing with or detracting from them. In particular, while it should be closely coordinated with the update of the Comprehensive Plan's Land Use Element, at this time neither one needs to be postponed until the other is completed, 14 Deleted: <$>The TDR prog2m could opeate either with pre-set easement acquisition prices and pre-set density bonus fees determined by the County, or It could allow private market negotiations between Sending and Receiving Area property owners [o determine the dollar value of the transactions while the County determines the amount of density bonus awardable for meetlng specified sending Area preservatlon Orange County Transfer of Development Rights Feasibility Study DRAFT Economic Feasibility Report The balance of supply and .demand in a TDR program is a critical step in structuring a successful program, The supply and demand is a direct result of the key elements of the program: Sending and Receiving Area locations and sizes; density bonuses; TDR allocation rates; and other factors, An analysis was performed of the supply and demand from the three Sending and Receiving Area scenarios developed by the TDR Task Force (see Figure I, and results are shown in Table 1,) The results can vary significantly depending on the TDR allocation rates, density bonus, and expected participation rate used. For the analysis, a spreadsheet model was designed to facilitate different "what if" scenarios reFlecting the different values for the key variables, These assumptions can be altered to develop three or more alternatives that demonstrate different objectives or assumptions. This will generate feedback and assist in selecting the preferred alternative, The assumptions are defined later and shown in Table 2. Figure 1. Receiving (1) and Sending Area (3) Scenarios. ~~ ~ ~ ~~«~ -- y ~ ]~ a ~' i RECEIVINGAREA $ENDINGAREA Z Y ~` :: t v l ~;, l 'S...+~~ V"i •t3;'. .. r3 fw J' <.x , r~ 5 ;:",y ,. ,?.y`ti I ;. $ENOINGAREAB Methodology The amount of eligible sending area credits in the three different scenarios was calculated using parcel-level tax data, zoning designations, and maps of the sending areas. Utilizing GIS, these three different data layers were combined to form a descriptive database of the properties within the sending areas. The properties with development potential were then selected. These properties are either vacant or consist of one structure located on a parcel that is large enough to be subdivided into additional lots (e,g., one house on a 100-acre property), Once these properties were selected, a TDR allocation rate of one TDR credit per acre was applied to estimate the total TDR supply, The expected TDR demand was calculated in the spreadsheet model in multiple steps. Using the GIS parcel database, the properties in the receiving area with developable area were selected. These properties were either vacant or had one structure with additional land that could be subdivided, The next step was to categorize these properties by zoning district and calculate the maximum allowable density as of right, 15 67.2006 .SENDlNGARFA 1 Orange County Transfer of Development Rights Feasibility Study 16 DRAFT Economic Feasibility Report This was then multiplied by the TDR density bonus to derive the maximum density with TDR. In order to calculate the expected TDR demand, the maximum density was multiplied by the expelled increment per acre (e.g., 80 percent of maximum density), The result is the overall expected TDR demand for the subject receiving area, The definitions for each of the terms and the assumptions used in this model are described below. TDR allocation rate -The number of TDRs that a sending site owner can sell per acre. The summary reflects an allocation rate of one TDR credit per acre, For a vacant 10-acre property, the property owner could sell 10 TDR credits, Sending Area participation rate -For purposes of this study, it is assumed that 100 percent of eligible landowners will wish to participate, although for illustrative purposes sending area credits at BO% and 50% participation rates are also shown, Density bonus -The percent increase of allowable units in the receiving area, The summary reflects alive-fold increase in existing zoning in the receiving area. Since the majority of the receiving area is zoned for low density, this large percentage increase still does not produce high densities in most areas, For example, an AR district currently allows one dwelling unit per acre and would be eligible for up to four additional units. This study uses a conversion rate of one TDR credit equals one unit of additional density. Expelled average increment per acre -The amount of allowable units expected to be used in the receiving area. Based on comparable studies, this analysis assumes the developer will use an average of 80 percent of the maximum theoretical increment per acre, Receiving Area participation rate -For purposes of this study, we assume 100 percent of eligible Receiving Area landowners will wish to participate. Assumations We assume that TDR credit transactions are set at a 1:1 ratio for both Sending and Receiving Areas.. Developers purchase eighty percent of the permissible TDR credits at the Receiving site (based on experience in other communities), We backed out lands that were already developed in the Sending Areas, but assumed that hundred percent of the remaining area would be eligible to participate. For illustrative purposes, we calculate an eighty percent and fifty percent participation rate as well. Land prices for each parcel are reflective of recent transactions in a larger area (township). Buyers and sellers of credits have a hundred percent rate of success in reaching agreements, and developers have a hundred percent success rate in seeing their development through to the stage where TDR transactions actually occur, Analvsis of Suouly and Demand The feasibility analysis reveals that, with the above assumptions, supply will exceed the number of Receiving Area TDR Credits in every case. The sending areas produce more TDR credits than the receiving areas can accommodate. This may provide a comfortable "cushion" of demand but may be problematic as well since research indicates that the receiving area should be large enough to accept sufficient TDR credits to make an 6.7 2006 Orange County Transfer of Development Rights Feasibility Study 17 DRAFT Economic Feasibility Report attractive market.' This imbalance in supply and demand can be addressed through increasing the density bonus rate; adjusting the TDR allocation rate; modifying the language in the conservation easements placed on Sending Areas to be more restrictive of allowable uses; a reduction in the participation rate of the sending areas; enlarging the size of the receiving areas; reduced demand through applying design standards or affordable housing requirements; and/or through the conversion of sending area credits to credits for increasing commercial development within Economic Development Zones, rural development nodes, or other compatible areas of Orange County. Another program option that would help address the imbalance is allowing certain types of development, such as Planned Unit Developments (PUD), to be eligible for using more TDR credits, PUDS would act as an alternative option For developers and may accommodate more than the density bonus, In order to obtain the additional credits, the developer would have to meet specific requirements set forth in the TDR provisions, These requirements could include: certain design criteria, multi-family housing units, mixed-use development, affordable housing, public infrastructure investments, etc, This option would require additional review and approval above and beyond the normal process carried out by the Planning Board, County Commission or a TDR Committee, Under the current scenarios, this program option would enable the receiving areas to accommodate more credits and provide a better balance of supply and demand. Tahla l~ SIIMM4RV Total Eli ible Sendin Acres . ~ 180 471 . 82 892 ~ 74 723 Total TDR Su I 100% Partici ation 180 471 82 892 74 723 Total TDR Su I 80% Partici ation 144 377 66 314 59 778 Total TDR Su I 50% Partici ation 90 236 41 446 37 361 Total Eli ible Receivin Acres 7 513 7 513 7 513 Maximum Allowed TDR Credits 80% Ad'ustment for Utilization TDR Credit Ca aci dwellin units 25 358 25 358 26 358 Net Su I -Demand 100% Partici anon 155 113 57 534 49 364 Net Su I -Demand 80% Partici anon 119 019 40 956 34 420 Net Supply-Demand_(50% Partici anon 64 878 i6 088 12 003 Analysis of TDR Pricing Since the value of land in Orange County varies dramatically, the price of TDR credits will also vary, all other things being equal, Based on case studies and conversations with Analytical Consultants, a firm with expertise in appraising the value of conservation easements with a thorough knowledge of the market in Orange County, conservation easements are valued based on the "percentage of fee value" or percentage of the total ' Rick Pruelz, (Marina Dei Rey, pg. 139-190, 6J Z006 Orange County Transfer of Development Rights Feasibility Study 18 GRAFT Economic Feasibility Reporr value of the land.Z For the type of conservation easements that would be used in a TDR program in Orange County, the value usually varies between 50 percent and 80 percent depending on the property's proximity to urban areas such as Chapel Hill, Hillsborough, Mebane, and parts of Durham, When asked about the "percentage of fee value", Analytical Consultants stated: Filly percent is good for rural areas, but we've seen 70%+ for areas c%ser in to Chapel Hill. During my discussions a few weeks ago with the various land conservancy groups in the area, the Triangle Land Conservancy reported paying more than 85% far areas c%se to Raleigh, so I think we have to assume that the percentage value will continue to increase, -Analytical Consultants, May, 2006 Based on Analytical Consultants input, a standard of 50 percent of total land value was used for areas with little urban influence and 70 percent of total land value for areas with urban influence (Table 2), Using these standards an analysis was conducted on the value of conservation easements or TDR credits throughout the County. The analysis applied the two different "percentage of fee value" standards to the median value of vacant land in each Township, As shown in Table 3 (which includes municipalities), the value of conservation easements or TDR credits varies significantly in Orange County. Even within Township, the variation in land values is significant. ~ Paul Snow and Cheri DeROSia, Analytical Consultants, phone Interview and email correspondence, May 2006. 6.7.7006 Orange County Transfer of Development Rights Feasibility Study 19 GRAFT Economic Feasibility Report Table 2: Value of Conservation Easement -Percentage of Total Land Value land w little urban influence 50% Land with urban influence 70% Table 3: Median Value o f Conservation Easement er acre , Little River .. 3 816 5 342 Cedar Grove 3 962 5 547 Cheeks 5 771 8 079 Hilisborou h 27 226 38 116 Eno 9 466 13 253 Bin ham 5129 7181 Cha el Hill 56 013 78 418 All County Vatues $10,636 $14,891 Given the assumption of one TDR credit allocated per Sending Area acre, these figures translate directly into the value of a TDR credit to the Sending Area landowners. Table 4 provides a simple tabulation of all the acreage in the Receiving Areas, including already built-upon lands. The difference in the total shown in Table 4 and the 7,513 Receiving Area acres in Table 1 is thus the difference in already built-upon land. Table 4: Land in Receiving Areas, by Township Little River 1 826 Cedar Grove 691 Cheeks 3 970 Hilisborou h 1687 Eno 1 326 Bin ham 1 135 Chapel Hill Total for Oran a Coun 135 10 770 Cedar Grove Little River ~~~ Eno Hillsborough Hingham Chapel Hill Townships The study began estimating the profitability of TDR credits to developers in the nine different receiving areas. Profits from prototype developments were estimated according to existing zoning and then with the additional density from TDR credits. However, data limitations prevented the study from forming reliable conclusions on the amount of profit that would be collected from the TDR credits. This type of analysis will require significant investments to gather accurate data, including estimates of revenues and costs for completed developments including estimates of cost components for land acquisition; government approvals; holding costs and development costs both on and 6.72006 Orange County Transfer of Development Rights Feasibility Study 20 DRAFT" Economic Feasibility Repod off-site. In addition, this may involve the assistance of a local appraiser or real estate professional with access to detailed local property sales data. Therefore, due to the constraints of the Phase I-II budget this analysis was not completed. The recommended program structure is a free market where buyers and sellers exchange credits freely, The price is based on a negotiation behveen buyers and sellers. Both parties are informed through information distributed by the County and by the large number of conservation easements already purchased by the County. An appraisal of the easement will assist in determining the accurate price of the easement. Using this structure, developers will go to where the TDR credits are least expensive. For Sending Area Scenario No. i, this will mostly likely mean that the rural areas with no urban influence will be preserved first, Sending Area Scenarios No. 2 and 3 focus the receiving areas on growth pressure and natural resource areas and thus these areas will be preserved first. Within the free market structure, the County acts as a broker, This role would include putting a number of constraints on how the TDR market operates such as limiting the parcels of land allowed to sell TDRs and which ones can use TDRs to increase development, adjusting the density bonus and TDR allocation rate to ensure equilibrium prices and quantities, and facilitating sales through bringing buyers and sellers together and providing them with relevant information on the transaction process, Through publicizing information about how parties can reach each other and providing information about past sales and sales prices, the County can reduce transaction costs and increase efficiency in the market,' Summary Given the assumptions, all scenarios will provide an attractive market for the exchange of TDR credits. All three sending area scenarios will produce a sufficient supply of credits. However, there is an imbalance in supply and demand as shown in Table 1, Because of the large size of Sending Area 1 (includes all land within the County's jurisdiction except for land in the receiving areas), there is a large amount of credits that cannot be accommodated within the receiving area. Sending Area 2 also produces a large amount of credits that are not accommodated. Sending Area 3 produces an amount that is more balanced with the demand of the Receiving Area. As identified in the Analysis of Supply and Demand Section, the imbalance can be addressed through the following: increasing the density bonus rate; adjusting the TDR allocation rate; a reduction in the participation rate of the sending areas; enlarging the size of the receiving areas; reduced demand through applying design standards or affordable housing requirements; allocating more credits for certain types of development; and through ' Virginia McConnell, Elizabeth Kopits, and Margaret Walls, "How Weil Can Markets for Development Rightr Work? Evaluating a Farmland Preservation Program," Resources for the Future Discussion Paper, March 2003. 6.7.2006 Orange County Transfer of Development Rights Feasibility Study ? I ORAFI' Economic Feasibility Report converting sending area credits to credits for increasing commercial development within Economic Development Zones or other areas suitable for commercial use. The supply and demand imbalance will be fully addressed in Phase III, Program Design Due to the high variability in the cost of land within the County, it is recommended that the County and participants in the TDR program should consider an appraisal for the development easements on the subject properties. This process is currently used by the County when purchasing conservation easements. An appraisal will help ensure that both buyers and sellers are treated fairly and receive consistent and fair pricing, One potential option to address problems, if any, related to having more Sending Area acreage than exists in Receiving Areas is that the program be structured in phases, The first phase uses targeted sending and receiving areas -the Receiving Area combined with parts of Sending Area Scenarios 2 or 3, Once the County develops experience with the start-up TDR Program, the Program can be expanded to include places in Sending Area Scenario 1. 6.7.1006 Orange County Transfer of Development Rights Feasibility Study DRAfT Economic Feasibility Report On each of several issues regarding how the TDR program is designed, there are two or more equally feasible options that will need to be decided among if the County decides to proceed with creating a TDR program. The TDR program's main purpose or purposes will need to be clearly articulated to serve as a guide for many of the decision points that follow: Method of designating Sending and Receiving Areas: mapped boundaries versus criteria-based eligibility? ^ Minimum acreaoe requirement in Sending Areas: should there be a minimum' acreage requirement for participation as a Sending Area p~erty? If so, what should the minimum be? ^ Partial transfer of Sending Area development potential: Should Sending Area property owners be permitted to retain a portion of their property's development r~hts when they sell development riahts~ If so how large a portion should they be permitted to retain? ^ Density bonus cap in Receiving Areas: uniform limit or variable basis? Sending Area allocation of transferable development rights: uniform basis or variable merit basis? Receiving Area awarding of density bonus: uniform basis or variable merit basis? Receiving Area commercial use of density bonus: allow for this at start-up, or decide after acquiring experience with residential uses? If applied at start-up of the program, then how to decide the appropriate TDR density bonus as credits transition from residential to commercial use? Sending Area participation incentives: will pent-up demand from the lands legacy program reduce or eliminate the need for incentives, or will the size of the Receiving Area and its ability to absorb Sending Area development rights dictate few or no Sending Area incentives? If incentives are used, which ones? (Allocating more development rights than the zoning allows -- either with or without the Comprehensive Plan's potential downzoning - or using criteria to vary the allocation of development rights above those allowed by zoning) Receiving Area participation incentives: can the TDR process be designed to be more welcoming to developers than existing processes and so provide an incentive, and if not, what other incentives will be needed to entice developers to participate? (Applying a multiplier to transferred development rights, allowing commercial use of transferred development rights, using criteria to vary the density transfer limit, enacting a modest downzoning?) In Orange County, the most important form of Receiving Area incentive may be providing a process for achieving intensified development that is more certain, less time-consuming and less costly to developers than existing processes. Sending Area development restrictions: will there be a standard set of development restrictions or will they be negotiated on aper-easement basis? 22 Formatted: 8uilets and Numbering 6.7.2006 Orange County Transfer of Development Rights Feasibility Study 23 DR4FT Economic Feasibility RepoK Receiving Area development requirements: how will the community's desire to control the quality and character of more intense development be balanced with the desire to make participation attractive to developers? Sending Area re-purchase and re-attachment of development rights: permit this at all, or decide only after acquiring experience with the program? 6.71006 Orange County Transfer of Development Rights Feasibility Study 24 DRAFT Economic Feasibility Report If Orange County determiries that it wishes to proceed with developing a TDR program within the guidelines established in Phases I-II of the TDR Feasibility Study, the following is the recommended process for doing so: 1. Conduct County Commission work session(s) to identify and prioritize TDR goals and objectives; 2. Develop a proposed TDR Plan with significant public and key agency staff involvement; and 3. Adopt the TDR Plan with full public notice, public hearings and vote by County Commission. The County would then be prepared to implement the TDR Plan, including providing adequate resources for both the initial launching and ongoing operation of the TDR program. While the first and third steps are each critical to the successful completion of the process, the majority of the Phase III work will occur in step 2 above, "Develop a Proposed TDR Plan," and is outlined in more detail below. Step 2 begins with the goals and objectives specified for the TDR program by the County Commission, and it ends with a proposed TDR Plan ready for final public review and comment prior to a vote on its adoption by the County Commissioners. The proposed TDR Plan consists of these main components: Goals and Objectives for the proposed TDR Program; The Program Design elements of the proposed TDR Program; The Administrative Design elements of the proposed TDR. Program; Evaluation measures for the proposed TDR program; Proposed TDR ordinance language; and Estimated staffing and other resource costs associated with the launching and ongoing operation of the proposed TDR program. Here is the recommended process for Phase III's Step 2, "Develop a Proposed TDR Plan": 2A. Select Program Design Options Conduct an in-depth economic valuation assessment on Receiving Area design options; to include more detailed information on valuation on properties and tax assessment data Planning Board and key departments staff work session(s) to prioritize Program Design options based on compatibility with existing programs and initiatives and fit with TDR goals and objectives Task Force provides input into selection of Program Design options based on economic feasibility results and fit with TDR goals and objectives Consultants make recommendations in consultation with Planning Staff on selection of Program Design options based on all of the above considerations 6.72006 Orange County Transfer of Development Rights Feasibility Study 25 DRAFT Economic Feasibility Report 26. Select Administrative Design 0 t~ions Key departments staff work session(s) to identify and quantify operating requirements and costs associated with Administrative Design options Task Force provides input into selection of Administrative Design options based on economic feasibility results and fit with TDR goals and objectives Consultants make initial recommendations to Planning Staff on selection of Administrative Design options based on all of the above considerations ZC Build Public Awareness Understanding, and Seek Public Input Develop and conduct a public awareness and education program about the TDR Plan and the TDR Program; make informational materials readily available through multiple outlets to reach as many residents and businesses as possible; provide multiple means for the public and property owners to give feedback or ask questions; continue this throughout the process of developing the Plan and preparing to adopt the program. Conduct public work sessions with Task Force participation to familiarize the public and property owners with the initially-recommended Program and Administrative Design options and to receive feedback; revise selections as appropriate & conduct additional public work session(s) if needed 2D. Finalize Proposed TDR Plan Conduct Planning Board and key departments staff work session(s) to review selected Program and Administrative Design options and to recommend appropriate TDR. Program Evaluation measures. County Commission work sessions to review selected Program and Administrative Design options and to select appropriate TDR Program Evaluation measures. Finalize selection of Program and Administrative Design options and Evaluation measures for inclusion in TDR Plan. Draft proposed TDR ordinance language based on selected Program and Administrative Design options and selected Evaluation measures, Conduct Planning Board and key departments staff work session(s) to review proposed TDR ordinance language and prepare initial staffing and other resource cost estimates. County Commission work sessions to review proposed TDR ordinance language, staffing and other resource cost estimates. Finalize proposed TDR ordinance language, staffing and other implementation cost estimates. 2E. Prepare for TDR Plan Adoption Conduct public work sessions with Task Force to familiarize the public and property owners with the proposed TDR ordinance language; staffing and 6.7,.2006 Orange County Transfer of Development Rights Feasibility Study 26 DRAFT Economic Feasibility Report implementation cost estimates; the proposed Evaluation measures; and to receive public feedback. Present public feedback findings to Planning Board and County Commission; revise TDR Plan and implementation costs estimates as needed based on direction from County Commission, 6.7.1006 27 Orange County Transfer of Development Rights (TDR) Proposed Phase III (Program Design and Ordinance Development) Should the BOCC accept the recommendation of the TDR Task Force, that , "A TDR program is philosophically, legally, and politically feasible, there are no legal or administrative impediments for such, and the process of designing a program should go forward," then the BOCC should develop protocols to guide the establishment of a TDR program design and ordinance development process, Planning Department staff, with the assistance of the TDR consultants, present the following as a working draft process. Step One. Direct the TDR Task Force to recommend, for BOCC consideration and approval, specific TDR program goals and objectives. (Attached are the working goal statement and objectives from which the TDR Task Force has been working.) Step Two. Direct the TDR Task Force to make recommendations on a specific Phase III work program, citizen engagement process, and deliverables to the BOCC for review and approval before the Phase III consultant selection process commences. Step Three, Initiate a consultant selection process similar to that used for the Phase I and Phase II process. Step Four. Select a consultant to assist staff and the TDR Task Force to complete the work program developed in Step Two, above. With the completion of Step Four, Orange County would be able to implement the adopted TDR Plan, program administrative organization to support the adopted TDR program, apply for grants or other external programs for program support, and revise existing land development regulations according to specifications of the adopted TDR Plan. o Staff would suggest the TDR Plan consist of the following components: ^ Goals (refer to the Environmental Responsibility statement, 12/05/05), ^ Objectives (refer to the working examples), ^ Administrative design criteria, which address issues identified in Phase II, ^ Small area plan development for all receiving areas, ^ Program evaluation metrics, ^ Administrative support organization, and o TDR ordinance language, together with complementary revisions to other land development regulations. Administrative Design Criteria may include the following items: zs • In-depth real estate market analyses for all receiving areas, which would include growth potential and higher density efficacy, • Planning Board and other boards, commissions, and steering committee work sessions to establish program design criteria, based an compatibility with existing planning and preservation programs or initiatives and compatibility with TDR program goals and objectives, • TDR Task Force provides input into selection of administrative design criteria, based on the TDR Feasibility Study recommendations and compatibility with adopted TDR goals and objectives, • Recommendations will be made in consultation with Planning Staff and the Task Force on the wording of specific administrative design criteria, and • Key stakeholder interviews with large landowners, realtors, and land developers to determine how best to encourage their participation in the program.. Finalize Draft TDR Plan will use the following process: • Staff to schedule the draft plan at a Joint Quarterly Public Hearing, • BOCC referral to Planning Board, • Referral to other appropriate boards and commissions, • Comprehensive recommendation brought back to BOCC for consideration and adoption. Ordinance Development (May be simultaneous with Plan Adoption) • Draft ordinance language, based on selected administrative design criteria and selected evaluation measures. • Circulate draft language to key county staff far review and comment. • Present ordinance outline and key concepts to BOCC at one or more work sessions. Public Awareness and Public Input • Enhance the existing TDR Public Engagement Plan • Make informational materials readily available to reach as many residents and business through the Cooperative Extension Service, rural civic organizations and churches, the newspapers, the county website, and the like,. • Provide multiple means for the public and property owners to give feedback. • Conduct public and neighborhood meetings to familiarize key stakeholders with the practical aspects of the program, 29 TDR Gonls • Preserve the farm economy • Protect drinking water resources • Preserve environmental and cultural resources • Preserve the character of rural Orange County • Avoid excess public costs to provide water, sewer, and education services TDR Objective Direct growth and development activities away from important natural and cultural resources by shifting growth and development activities to areas more able to accommodate such growth.