July 26, 2006 Mr. Dante DiPirro Executive Director New Jersey Highlands Council 100 North Road Chester, NJ 07930 Re: Preliminary Draft of the Technical Report on the Transfer of Development Rights Dear Mr. DiPirro, On behalf of the Association of New Jersey Environmental Commissions (ANJEC), I am pleased to provide comments on the New Jersey Highlands Council Preliminary Draft of the Technical Report on the Transfer of Development Rights. In addition, I also attach ANJEC s Position Paper on TDR in the Highlands. As you know, ANJEC s mission includes educating and empowering local environmental commissions, as well as municipal planning boards, governing bodies and their planners, on resource based planning. Of the 88 Highlands municipalities, many have Environmental Commissions that are already engaged in the inventory and protection of natural resources. We strongly believe that early involvement of local environmental commissions, planning boards, and elected officials, will result in a stronger Regional Master Plan and TDR Program. In particular, we believe such involvement will be a key factor to the success of any TDR Program the Highlands Council adopts. As a preliminary matter, we are grateful for the time your staff has spent with our Project Director on discussing the potential for a Highlands TDR Program as well as providing guidance in researching the topic. The assistance provided by Mr. Jeff LeJava has been of great value in ANJEC s development of educational workshops on the subject of TDR for environmental commissioners and other interested parties. The following issues are of primary importance in development and viability of the Highlands TDR: Comprehensive outreach programs for relevant elected and appointed officials is absolutely necessary for municipal participation in and ultimate success of any Highlands TDR Program Goals of the program need to be expressly articulated and consistent with the goals of the Highlands Act P.O. Box 157 MENDHAM, NJ 07945 TELEPHONE: 973-539-7547 FACSIMILE: 973-539-7713 E.MAIL: info@anjec.org
Designation of sending and receiving zones must be consistent with the findings and conclusions of the Regional Master Plan and Smart Growth Element Sending zones should not include land where environmental regulations and local ordinances in existence prior to adoption of the Highlands Act prohibited development Sending zones should not include preservation area land designated as special areas in the Regional Master Plan Purchase of credits should be mandatory for development in receiving zones at any density ANJEC appreciates the opportunity to provide feedback and comments to the Highlands Council during development of the Highlands TDR Program. We hope the attached comments and position paper serve as valuable additions to our continuing dialog on developing the Highlands TDR Program. Please feel free to contact Joy Farber Project Director for TDR if you would like to discuss the position paper further or to provide comments. Sincerely, Sandy Batty, Executive Director Encl.
Comments on Preliminary Draft Technical Memo on the Transfer of Development Rights General Comments The Technical Report provides an excellent overview of the concept of TDR. Accordingly, this document will help inform and educate the general public on the benefits and limitations of using TDR as a tool for smart growth. In addition, the Technical Report provides a thorough review of the relevant case law. This in turn will enable legal and planning professionals to achieve a comfort level in recommending participation in the Highlands TDR Program to their municipal clients who may benefit from such participation. Before development of a Highlands TDR Program, it is important to expressly state two things. First, state the goals of the program. Appropriate goals may include minimizing development in the sending area or achieving development in receiving zones at maximum zoned densities. If there are temporal goals, credit sale goals, etc., express them from the outset. This can aid in understanding of the program and may initiate stakeholder interest. Second, state how progress in meeting the goals will be measured. Setting milestones can help to add focus and a sense of immediacy to a project. For example, a milestone of a reduction in the rate of development in sending areas by 50% during the first year of implementation, in order to reduce sprawl growth in sending areas, can be easily recorded. If the goals and milestones are stated up front, then it can be possible to evaluate program success, on a somewhat objective basis. Specific Comments On page 6, in the section on Basic Elements of a TDR Program, the last paragraph discusses the distinction between voluntary and mandatory TDR programs. The memo describes voluntary programs as those in which sending zones are rezoned to include an overlay zone while maintaining the original underlying zoning. This is distinguished from mandatory programs in which sending zones are downzoned. However, the discussion is incomplete. There are also voluntary programs in which receiving zones are rezoned to include an overlay zone while maintaining the original underlying zoning. Original zoning is maintained at base density which can be developed without the purchase of credits. A developer has the option to purchase greater density called bonus density through purchase and use of TDR credits. - 1 -
It is also possible to require purchase of credits in receiving areas, regardless of zoning densities. ANJEC believes that purchase of credits should be required in order to build in receiving zones. A limitation to prior TDR Program effectiveness is the tendency to have more credits on the market than demand for credits. TDR Programs are usually designed to include receiving zones that can accommodate more development potential than is available in the sending area. This is intended to assure that there is sufficient demand for credits. However, this design does not necessarily result in better or faster TDR Programs. Often, developers continue to build at base density in receiving zones and sprawl continues. By requiring the use of credits for all development in the receiving zone, demand for credits will be increased. Assuming receiving areas have strong real estate markets, if demand for credits is increased, then more credits will be sold and used. As a result, the time lag in implementation seen in earlier generation TDR Programs will be reduced. It is also important to avoid confusion in terminology. The Act refers to voluntary receiving zones. However, this is understood to refer to whether or not municipalities accept receiving zone status. Namely, participation of receiving zone municipalities in the TDR Program is voluntary. This is distinct from establishing the details of the Highlands TDR Program. The Act expressly authorizes the Highlands Council to establish the TDR Program for the Highlands Region (with the limitation that municipalities cannot be mandated to serve as receiving zones). On page 10, a potential conflict between the state TDR Act and a regional Highlands TDR Program is discussed. When referring to the county, a question is posed regarding a municipality independently submits a development transfer ordinance to the county with proof of sufficiency of the receiving zone to accommodate sending zone development potential. This is confusing. For example, does this mean that within the Highlands Region, the entity having access to information on sufficiency of receiving zone capacity is the Highlands Council and not an individual municipality? Rather than pose the question, perhaps the comment should be stated in the affirmative. Clarification is needed. With respect to the potential conflict between TDR Programs under the state TDR Act and the regional Highlands TDR Program, is it possible to read the two in parallel and interpret them as allowing a municipality the choice between participation in either an intra- or inter- county program under the state TDR Act and the regional TDR Program described in the Highlands Act? This issue might best be addressed, if possible, by a Memorandum of Understanding between the Highlands Council and the Department of Community Affairs. On page 11, there is a typographical error where reference is made to receiving zones being able to accommodate all of the development potential of a municipally designated receiving zone. The latter receiving zone in the sentence (at the top of the page) should be corrected to read sending zone. On page 16, please include the M.L.U.L. citations for the provisions relating to baby TDR or cluster zoning. Include reference to residential cluster in the definitions - 2 -
(section 40:55D-6 mentions residential clustering in a non-contiguous cluster) clustering of development between noncontiguous parcels (mentioned in section 40:55D-65(c). On page 37, the Chesterfield TDR program indicates that the transfer of credits under the TDR ordinance is voluntary. However, I believe the use of TDR credits in the receiving zone is mandatory. If this is a correct interpretation, it should be included in the memo (i.e., Township of Chesterfield, Article 9, Planned Village Development (PBD) District, section 130-42). The section on density and intensity of use reads: The intensity of use within the PVD-1, PVD-2 and PVD-3 Districts shall be limited according to a standard of development credits per acre rather than by the conventional standards of units per acre or floor area ratio. The credits available on a given tract are the sum of the underlying credits assigned to the parcel being developed plus the credits purchased and transferred to be utilized on lot(s) according with the provisions of this chapter. Further, the translation of development credits to use is governed by the chart entitled Ratio of Development Credits to Uses, as follows: A table of number of credits required for types of development permitted is provided. It appears that only low- and moderateincome housing units may be constructed without the use of credits. - 3 -
P.O. Box 157 Mendham, NJ 07945 Phone: (973) 539-7547 Fax: (973) 539-7713 Website: www.anjec.org E-mail: info@anjec.org Position Paper on TDR in the Highlands Synopsis The Association of New Jersey Environmental Commissions (ANJEC) supports the Transfer of Development Rights (TDR) as a useful growth management tool for the Highlands Region. TDR, when designed and used correctly, can direct growth away from environmentally sensitive areas and toward areas having available infrastructure in a more beneficial and less land-intensive growth pattern. Much of the Highlands Region is zoned for single- family residences on multi-acre lots. Accordingly, full build-out under present zoning will result in substantial and unwise public expenditures for water line extensions, road paving projects and other infrastructure investments. The end result is an increase in public spending and sprawl. The resulting environmental damage under the current build-out scenario will include fragmentation of forests, habitat destruction and a decline in water quality in addition to compromised access to clean drinking water. Collateral damage will likely include increased vehicular traffic, with its accompanying air pollution and traffic congestion. Continued growth at current development patterns is expected to cause a decline in the quality of life for most Highlands Region residents. ANJEC recognizes the importance of dealing with the realities of a growing population. However, resource-based planning, including TDR, should be used to mitigate the negative impacts of such growth. Background on the Highlands Water Protection and Planning Act The Highlands Water Protection and Planning Act (the Highlands Act; N.J.S.A. 13:20-1 et seq.), passed in August 2004, provides a number of mechanisms to regulate growth within the Highlands Region. A core preservation area is regulated under mandatory DEP rules that restrict development on steep slopes, limit development in areas depending on individual septic systems, and regulate the amount of impervious cover allowed on a developable parcel. The surrounding planning area is presently not regulated. - 1 -
An appointed Highlands Council has certain regulatory authority over planning for the Highlands Region, including development of a science-based Regional Master Plan (RMP) governing land use in the Highlands Region and a TDR program. The Council is authorized to designate special areas that should not be developed in the RMP. 1 The Council will prepare land use development standards and model ordinances crafted to ensure that natural resources, particularly water resources, will not be compromised or destroyed by future growth. Once adopted, the RMP will be mandatory for development in the preservation area and optional within the planning area. Planning area municipalities may opt-in to the RMP and TDR program. Transfer of Development Rights TDR is a land use management tool that shifts density from preservation areas ( sending zones ) to growth areas ( receiving zones ) while providing income to landowners in the sending zones and increasing economic value to landowners in the receiving zones. Usually, a sending zone has a resource worthy of protection such as farmland, forests or watersheds. A receiving zone will most likely have existing infrastructure that can accommodate growth. In TDR, the right to develop is transferred from land parcels in sending zones to land parcels in receiving zones. TDR preserves land having natural and/or agricultural significance through zoning and ensuing permanent deed restrictions. In a typical TDR program, sending zones are downzoned to reduce allowed density. The rights to develop are sold as credits to developers in receiving zones. The credits are used in receiving zones to buy density. Effective TDR programs can actually prevent growth in environmentally sensitive areas and mitigate the negative impacts of unmanaged growth (if most or all development rights in such areas are sold and used). Successful TDR programs have been implemented across the nation (Pruetz 2003) and throughout New Jersey. A longstanding and successful TDR program is part of the regional regulatory program administered by the Pinelands Commission (Pinelands Commission 1980). Additionally, in 1989, the New Jersey Legislature approved the Burlington County TDR Demonstration Act (N.J.S.A. 40:55D-113 et seq.) and developed a handbook for New Jersey municipalities interested in pursuing a TDR program (Burlington County Board of Chosen Freeholders 1992). Most recently, in 2004 the state adopted legislation that allows TDR programs throughout the state (N.J.S.A. 40:55D-137 et seq.). Finally, the Highlands Act specifically authorizes development of a regional Highlands TDR program. Recommendations for a Highlands TDR Program It is important that any Highlands TDR Program honor the intention of the Highlands Act to protect the integrity of New Jersey s drinking water as well as preserve, protect and restore the valuable and exceptional natural resources within the Highlands Region. This intention can only be met by a program that carefully defines receiving zone locations 1 N.J.S.A. 6(n) - 2 -
and enforces sustainable densities that do not compromise the integrity of the natural resources within and around these receiving zones. Defining Sending Zones Sending zones should be based on an evaluation of environmentally sensitive land and/or farmland in the preservation and planning areas that could have been developed as of August 9, 2004 but that are not brownfields (i.e., land that would require decontamination before development can occur). The Resource Assessment portion of the Regional Master Plan should be relied upon in making this evaluation. This evaluation should also take into account federal and state regulations as well as local zoning ordinances that would constrain development. The sending zone should not include land where such regulations and ordinances would prohibit development. A properly designed TDR program will provide sufficient protection to the natural resources of the sending zone. Deed restrictions are a valuable tool to assure protection of land from which development rights have been severed and the Council will have to monitor these restrictions. These restrictions can include language that provides for maintenance of the land in its natural (or farmed) condition, or other appropriate restrictions, as well as the right to inspect such land. The TDR program can complement land preservation efforts. The Highlands Council should assess whether protections available to special areas in the preservation area, under its TDR Program and associated deed restrictions, provide sufficient resource protection. If not, then the Highlands Council should have the discretion to prohibit such potential sending zone parcels from participation in the TDR Program and to direct landowners to public and/or private land trusts for fee simple acquisition. Alternatively, the Highlands Council could have the discretion to require sale of residual rights of such special areas only to land trusts. Regarding the planning area, the Highlands Council should evaluate whether special critical environmental areas or land of exceptional natural resource value are appropriate for designation as sending areas. 2 Defining Receiving Zones Receiving zones should be designated based on an evaluation of land in the planning area and the seven counties within the Highlands Region to protect environmentally sensitive land in the Region. The Highlands Council should consider the Resource Assessment and Smart Growth Components of the Regional Master Plan, as well as any other credible data sources, in making this evaluation. Density allowed in any receiving zone should fit the carrying capacity of the land and its infrastructure. To the extent practicable, receiving zone designation should not rely on extensions of sewer lines, water lines or roadways into undeveloped areas to meet carrying capacity needs. Ideally, infrastructure should already be available before land is 2 N.J.S.A. 13:20-1 (b)(6)(g) - 3 -
designated as a receiving zone. As a minimum, any necessary infrastructure extensions should be restricted to areas that are not environmentally sensitive, so as to protect natural resources. The designation of receiving zones, initiated by a comprehensive plan (the RMP), will create new zoning patterns, but they do not necessarily have to be based on prior zoning patterns. To pass constitutional muster, new zoning should be reasonably related to furthering a legitimate public purpose and allow an owner some economically viable use of his land. If rezoning is consistent with and based on a comprehensive plan, then new zoning can allow whatever density is supported by the RMP. Receiving zones are not automatically entitled to any particular density. The Council should consider requiring developers to purchase TDR credits to build in receiving zones. 3 If demand for land in receiving zones is high then this requirement should not have a chilling effect on development in the receiving zone. Alternatively, the Highlands Council could set a TDR threshold or as of right base density as a certain fraction of permitted zoning (e.g., 2/3 of development by right and 1/3 with purchase of credits). Requiring purchase of credits to develop in receiving zones can assure participation in the program and avoid delay of program implementation. Otherwise, development is likely to remain at pre-tdr program levels, which would increase rather than curtail sprawl. Designation of receiving zones presents a tremendous opportunity to realize smart growth principles. Most communities in the Highlands Region have grown haphazardly, and as a result, there are numerous opportunities to improve the design of these already developed areas. Some of these communities are in New Jersey s prime real estate markets. Designation of receiving zones in prime or emergent markets that are amenable to such redevelopment can result in an improvement of conditions there (i.e., a better design and mix of land use than currently exist) as well as a reduction in demand for development of undisturbed lands. A prioritization scheme and/or tiered implementation plan can be adopted to assure suitable developed land be designated and used as receiving zones before undisturbed land is used. For example, additional incentives for redevelopment can be included in the TDR program to direct development to these areas. Conversely, disincentives for developing undisturbed land can be included in the TDR program to direct development away from these areas. Development in receiving areas can be located and designed to be sustainable and to minimize any environmental degradation. Green building criteria (i.e., compliance with national Leadership in Energy and Environmental Design (LEED) Green Building consensus standards) should be mandatory or associated with incentives under the TDR program. For example, the Highlands Council could mandate development comply with LEED standards in all receiving zones, or enhance allowed density for LEED compliant development. 3 Recent findings of the Pinelands Commission, released at its public meeting held on July 20, 2006, indicated that requiring purchase of Pinelands Development Credits for development in the receiving area would be an appropriate revision to its existing TDR program. See report published on the Pinelands Commission website at: www.state.nj.us/pinelands - 4 -
Allocating Credits The Highlands Act dictates that the initial value of development rights must be decided considering the DEP rules and regulations in effect the day before the date of enactment (August 9, 2004). This implies that allocation of credits will take into account development potential of land at that time. The impact of this approach is to preserve rights of landowners while allowing a distinction between land that already had development constraints due to pre-existing environmental regulations and land that was not so constrained. This is an appropriate form of protecting landowner s equity in land while avoiding granting development rights where pre-existing environmental regulations had already limited development potential. Real Estate Market Analysis The real estate market analysis should be clear and comprehensible to participants in the TDR program. To this end, the analysis should be transparent, with the data used to value the credits made available for review by the general public. And, as discussed above, the real estate market analysis upon which the value of a development right or credit is based should consider DEP rules and regulations in effect the day before the date of enactment of the Act. An equivalence determination between severed development rights within the various real estate markets within the Highlands Region and counties should be based on this analysis. Thus, it should not be possible to use credits purchased in lower real estate markets to buy equivalent development potential in high real estate markets. It also important to create a system of equitable exchange between residential, commercial and industrial development to permit transfers between these types of development. Outreach and Program Implementation A TDR program can only be successful if it is part of a well designed Master Plan. Community participation and understanding are fundamental to development of any Master Plan or land use program. ANJEC strongly recommends actively soliciting public comments from all 88 affected municipalities on their priorities and requests for open space, growth and zoning, in advance of release of a draft Regional Master Plan and TDR Program. Collecting and integrating such feedback is an indispensable step in Master Plan and land use ordinance adoption and acceptance. Municipal participation and feedback is particularly important in development of a TDR Program, with its inherent complexity and dependence on market factors. A comprehensive outreach program for municipal leaders and interested residents of the benefits of a TDR Program is necessary. The Highlands Council should inform municipalities of the benefits of the TDR Program and how to participate in it. The concept of assigning and valuing credits should be explained to stakeholders in advance of roll out of any comprehensive Regional Master Plan and TDR Program. As part of this outreach effort, the Highlands Council should discourage municipalities within the Highlands Region (including municipalities within the seven affected counties that could be designated as receiving areas) from upzoning without receiving the benefit of TDR receiving zone designation. - 5 -
Literature Cited Pruetz, Rick, Beyond Takings and Givings, Arje Press, Marina Del Ray, CA (2003). Pinelands Commission, NJ Pinelands Comprehensive Management Plan (1980). Burlington County Board of Chosen Freeholders, Planning for Transfer of Development Rights: A Handbook for NJ Municipalities (1992). Developed By Joy Farber, ANJEC Project Director for TDR July 2006-6 -