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The concept and history of transfer of development rights (TDR) is reviewed. TDR is increasingly seen as a useful method of preserving open space that reduces the exposure to taking claims. Four successful, current, rural programs and the structural and political differences among them are examined. The use of dual versus single areas for sending and receiving credits, and zoning-based versus permit-based transfers is analyzed. Ways jurisdictions can incorporate various characteristics of these programs when developing their own are discussed.

This article analyzes transfer of development rights (TDR) programs as employed in four jurisdictions. TDR is the sale of one parcel's development rights to the owner of another parcel, which allows more development on the second parcel while reducing or preventing development on the originating parcel. Under such a program, development rights are severed from a lot designated for protection (sending area), and the severed rights are transferred to a lot in an area where additional development is permitted (receiving area).

As the federal courts become more skeptical of land use regulations such as downzoning that may lower property values, planners seek ways to make such noncompensable regulations partly or wholly compensable. Lately the United States Supreme Court has frowned on even temporary restrictions; so growth phasing programs, too, must be justified carefully in terms of the harms being prevented. Programs to protect open space are especially difficult to support in those terms. Planners are therefore experimenting with TDR as a way to compensate owners for putative losses with payments from those who obtain the transferred rights.

TDR programs are used to further a wide variety of objectives: for example, to protect agricultural lands, to preserve wildlife habitats, or to control development densities in areas with limited infrastructure or public services (Pruetz 1992). The programs reviewed here protect rural or environmentally sensitive lands. They demonstrate how dual-zone and single-zone systems are applied, either through advanced overall zoning or through individual development permits based on flexible policies.

Although various studies have distinguished between mandatory and voluntary programs (e.g., Pizor 1986; Roddewig and Inghram 1987; Gottsegen 1992; Pruetz 1993a, 1993b), few have examined the distinctions between single and dual transfer zones or between permit-based and zoning-based programs. Transfers within a single zone require more careful justification, parcel by parcel, but are useful for reducing soil erosion and other negative effects that vary on a small scale. The single-zone method also is permit-based, rather than preplanned with designated sending and receiving areas, so for individual parcels the effects of the program are more uncertain. Each permit requires careful justification that demonstrates the nexus between the regulation and the harms being prevented.

The categories just identified for TDR programs facilitate their evaluation in the legal context of justification. After a review of the history of TDR, four programs using TDR for resource protection are discussed. We examine their goals, types of transfer zones, and forms of implementation (zoning or permit), and recount the politics through which each was adopted. This information should help planners who are considering using TDR.

History

The concept of TDR was first introduced in 1916 in New York City; a zoning ordinance permitted lot owners to sell their unused air rights to adjacent lots, thus allowing the "receiving" lot to exceed the height and seback requirements (Giordano 1988).

The first court case to review TDR involved New York City's limitation of development on two privately owned parks. The City had rezoned the parks to prevent construction of two luxury apartment buildings in them, but allowed for the transfer of the unused development rights to other Manhattan parcels larger than 30,000 square feet. The park owner sued, alleging that this restriction was an unconstitutional taking of his private property without compensation. The New York Court of Appeals agreed, finding that the severed rights, being unattached to any receiving parcel, were too contingent for adequate compensation, especially since the severance was mandatory. The Court did uphold the legality, in general, of TDR (Fred R. French Investing Co. v. City of New York, 39 N.Y.S.2d 587 (1976), cert. denied 429 U.S. 990 (1976)).

In 1968, the New York City Planning Commission amended its transfer program to reduce the financial hardships imposed by the historic landmark regulation, by allowing the sale of units of development rights to parcels several blocks away (Giordano 1988). The owners of the Grand Central Terminal challenged the historic landmark regulation as a taking of private property. The United States Supreme Court upheld the regulation as valid, in Penn Central Trans. Co. v. New York City, 438 U.S.104 (1978). Although the court did not address the validity of the TDR program itself, it found that transferable rights "undoubtedly mitigate whatever financial burdens the law has imposed ..." (Penn Central at 137).

New York's early TDR program allowed transfers only within small, defined areas. Later TDR programs in Chicago (Costonis 1973) and in New York City allowed transfers within larger designated districts, such as the New York waterfront district, where one area of the district was granted increased density and one area of the district was restricted from further building (Giordano 1988). The concept of entirely separate sending and receiving districts for, respectively, preservation and development was a later modification of TDR, which was considered difficult to use because of the downzoning in the preservation area (Costonis 1973). In "voluntary" TDRprograms, mandatory downzoning is replaced by financial incentives that encourage development transfers.

Options Among Program

Characteristics

Although TDR programs are often distinguished as either "mandatory" or "voluntary," the distinction is not always clear (Gottsegen 1992). A mandatory program usually has separate, prezoned sending and receiving areas. The sending area is downzoned, and the receiving area is rezoned for a low "base density" so that developers must purchase "development rights" to build at any higher density. Or the programs may not designate a specific receiving area, but simply require that developers building outside of the sending area purchase development rights.

In a voluntary program, the transferred unit is usually called a "development credit," and parcels in the sending areas are not downzoned. Instead, their credits can be sold to developments that exceed the density requirements in the designated receiving areas (Gottsegen 1992). Where there is no need to absolutely forbid development in an area, a voluntary program would be sufficient (Roddewig and Inghram 1987). The voluntary programs are more politically acceptable, because the landowners in sending areas are not downzoned and so can retain their properties' maximum value without selling development rights. Another option is for a program to combine the characteristics of voluntary and mandatory programs, according to its goals and the existing political support.1

Program choices such as between dual or single transfer zones, and between prezoning or permits are also associated with whether a program is mandatory or voluntary. Mandatory programs tend to zone for the sending and receiving areas; voluntary programs generally allot permits according to an overall policy, such as limited lot coverage on steep parcels or restrictions in all areas on subdividing. Zoning-based programs necessarily have dual transfer areas, since these programs are intended to assist and augment the area's zoning. A permit-based program uses a single transfer area, since it reflects a regulatory scheme whose restrictions apply throughout the planning area.

Four established TDR programs are summarized in table 1 and described below; an analysis of their implementation and effectiveness follows. The first two programs are mandatory and zoning-based, and use separate sending and receiving areas. The last two programs are policy-based, and credits are both sent and received within the same areas.

Program Descriptions

The Pinelands Program

The New Jersey Pinelands consist of approximately one million acres in southern New Jersey. This area, 23 percent of the state's total land base, covers portions of seven counties and lies above the Cohansey Aquifer, one of the world's largest underground water supplies (New Jersey Pinelands Commission 1988). The Pinelands also contain the largest forested area on the mid-Atlantic coast, providing habitats for several endangered plants and animals (Osborn 1993). In 1978, the U.S. Congress established the Pinelands National Preserve, covering 1.1 million acres, and called upon New Jersey to create a planning commission to protect this area from development. In 1979, the governor of New Jersey appointed the Pinelands Commission and instituted a moratorium on development, and the state legislature passed the Pinelands Protection Act, requiring the Commission to prepare a Comprehensive Management Plan for the National Reserve. The Plan was adopted in November 1980 and approved by the Governor and the Secretary of the Interior.

The Commission, which monitors development in 52 of the 56 municipalities in the Preserve, required all counties and municipalities to revise their general plans and zoning to conform to the Pinelands Plan. Until local plans were certified, the Commission retained authority to approve development projects; as of June 1995, only one municipality lacked a certified plan (Osborn 1995). The Pinelands Plan divides all land and water resources into 10 categories, with specific land uses permitted in each category: Preservation Area District, Special Agricultural Production Area, Forest Area, Agricultural Production Area, Rural Development Area, Regional Growth Area, Military and Federal Installation Area, Pinelands Villages, Pinelands Towns, and areas outside the Pinelands Commission's jurisdiction but in New Jersey (New Jersey Pinelands Commission 1985).

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In the more environmentally sensitive areas, the Commission downzoned the land and allocated "Pinelands Development Credits" (credits), which can be sold to landowners in areas designated for growth. In the growth areas (receiving areas), developers can build above the allowable zoning or get a reduction of certain environmental standards by purchasing credits (Gilman 1993). Receiving areas were designated when the Pinelands was zoned into the 10 districts. In these areas a total of 46,200 more homes can be built, using credits, than would otherwise be permitted. To the landowner in a receiving area, each credit represents four additional building units; credits can be purchased in quarter-units. A landowner in a sending area is assigned credits depending on:

where the land is located

the kind of land owned (e.g., wetland, adjacent to a river. . . )

past and existing uses of the land type(s) of development and when such development took place

miscellaneous determinations based on who the previous owners were and how the property was transferred.

On downzoned agricultural lands, a credit is issued for every 39 acres left undeveloped. Determination of credit value usually takes between 30 and 45 days (Osborn 1995).

When a landowner in a sending area sells his or her credits, the property deed is amended permanently to restrict further development. The landowner is still permitted a number of uses, including agriculture, forestry, fish and wildlife management, and lowintensity recreation (New Jersey Pinelands Commission 1985).

To support the market for credits, the theoretical opportunities to use credits (extra dwelling units added by overlay zoning) are roughly twice the actual credits available (New Jersey Pinelands Commission 1992). To provide more incentives for buying credits, the Pinelands Commission grants building waivers to landowners who do so, as long as their lots meet all standards other than the zoning requirements. Similar waivers can reduce frontage requirements, allow residences in commercial zones, or waive certain environmental restrictions (Osborn 1993).

Two government agencies were established to facilitate credit transfers. The state legislature created the Pinelands Development Credit Bank (Pinelands Bank); and local government created the Burlington County Pinelands Development Credit Exchange (Burlington Exchange). The Burlington Exchange can buy only from Burlington County landowners, but may sell anywhere in the Preserve. These two agencies set the initial minimum purchase price at $ 10,000 per credit, but prices on the private market vary. The two agencies are prohibited from raising credit prices to more than 80 percent of the private market value, to ensure that the agencies do not suppress private sales (New Jersey Pinelands Commission 1988).

The Pinelands Bank serves as a buyer of last resort and, similarly, sells credits only if they are unavailable on the private market, a rare situation. The Bank held one public auction in 1990 to create an interest in the private market, but has since not found auctions to be necessary (Osborn 1995). Currently, the price per onequarter credit (one dwelling unit) ranges from $3,500 to $4,500, although some sell for as high as $5,600 (Osborn 1995).

As of June 1995, the program had preserved 12,538 acres through credit sales, severing 1,424 building rights (out of a total of about 23,000 building lots, or 5,750 whole credits, potentially available). Of these severed rights, 1,115 have been sold to developers and private landowners, and 309 to the Pinelands Bank (Osborn 1995).

The most difficult part of implementation has been accommodating the additional development in receiving areas that lack infrastructure and services (Osborn 1993). Many designated receiving sites are in municipalities whose sewer or water systems are not adequate for additional growth. Townships interested in being designated as receiving areas are considering creative solutions to this problem, including one municipality's effort to contract with a local prison for access to its sewer and water capacities (Gilman 1995).

Thus far, the program has been most effective in transferring credits from lands where the zoning has always allowed only one unit per 40 acres, or from special agricultural areas that host blueberry and cranberry harvesting (Fox 1993). The program has been less successful in other agricultural areas assigned one credit per 39 acres, meaning that a parcel of 40 acres has a transfer credit value of $14,000-$20,000 (Fox 1993). To some farmers, this is not as much as their development rights are worth (Gilman 1993). Apart from the monetary figure, however, the farmers' lack of confidence in the security of the market for development credits also limits the success of the program in these agricultural areas (Gilman 1995).

In recent years, the Commission has emphasized public education, publishing a number of reports to answer landowners' and developers' questions. The Pinelands Bank also has user guides that lead participants through the process and include sample transactions calculating profits with and without using credits (Pinelands Development Credit Bank 1993). Development has been more rapid outside the jurisdiction of the Pinelands Commission, but as land availability diminishes there, development can be expected to move to the nearby receiving areas in the Pinelands (Fox 1993). The program was developed to ensure resource protection in the long run, and it may be many years before the full benefits are realized.

Montgomery County, Maryland

Montgomery County lies in northwestern Maryland, bordering Washington, DC and Virginia. A bicounty agency, the Maryland-National Capital Park and Planning Commission (Parks and Planning Commission), is responsible for planning and parks in both Montgomery and Prince George's counties (Pizor 1986). As early as 1969, Montgomery County's general plan set aside areas as open space while allowing higher-density development in "corridors" (Montgomery County Planning Commission 1986). But in the 1970s, the county lost 18 percent of its agricultural land to development (Maryland-National Capital Park and Planning Commission 1980). The loss occurred despite the fact that in 1973 the county had adopted a five-acre minimum lot size for one-third of the county, including much of the undeveloped land in the western and eastern areas (Canavan 1993).

In 1973, the County Council created a task force to protect agricultural lands. The task force considered three options: downzoning, outright purchase of agricultural lands, and TDR (Roddewig and Inghram 1987). A pilot TDR program was successful, so in 1980 the Maryland National Parks and Planning Commissioners decided to go county-wide with the program (Pizor 1986). The Commissioners held 24 public meetings and extensively researched the number, distribution, and financial health of the county's farms (Pizor 1986). The meetings resulted in a Functional Master Plan for the Preservation of Agricultural and Rural Open Space (Plan).

The Plan suggested that an area be designated as an "Agricultural Reserve" and rezoned as a "Rural Density Transfer Zone," which would become the sending area for the TDR program. The County Commissioners designated a sending area comprising 90,000 acres of primarily agricultural land and downzoned the area from one dwelling per five acres to one dwelling per 25 acres (Canavan 1993). Landowners in the areas could then sell credits, based on the original zoning, of one credit per five acres.

At the beginning of the program, only a few receiving areas had been identified (Pizor 1986), and none were officially designated until later (Roddewig and Inghram 1987; Canavan 1993). To establish receiving areas, the Montgomery County planning department amended the general plans for growth areas, allowing a higher density through the use of TDR. The County chose areas that already had infrastructure in place, reducing controversies over their ability to accommodate development. The County structures its program so that a developer's extra costs for credits are more than offset by the increases in allowable density in the receiving areas (Canavan 1993). Receiving areas should allow sufficient density to attract developers; yet the housing density allowed must also be compatible with existing development (Canavan 1993). According to one program manager, designating the receiving areas is three-fourths of the work in this type of TDR program (Canavan 1993).

Calculation of credit values is kept simple. Credits are available for residential building only, and are allotted at the ratio of one per five acres restricted. There are no criteria for soil or terrain type. No fractional credits are calculated. To submit a parcel for evaluation, the landowner brings in the deed and proof of the property's location; the credit value is then allotted in about four days (Canavan 1995). Montgomery County adopted this simplified approach (i.e. no fractional credits) after reviewing and rejecting the more complex program used in the Pinelands (Canavan 1993).

When a landowner sells his or her development right(s) for a parcel, a restrictive easement permanently limiting its development is placed on the deed and is conveyed to the County. Concurrent with recording the plat, an extinguishment document is recorded in the Office of Land Records that precludes its further development.

The County also created a Development Rights Fund that (1) guaranteed loans by private institutions to landowners who use credits as collateral, and (2) bought credits. Because it has been so easy to sell credits on the private market, however, no money from the fund has ever been used to buy credits (Canavan 1993). Originally, the price of a credit was approximately $3,000, but it has risen to $10,000-$12,000 (Canavan 1995).

The available credits in the sending area are estimated at 4,700, not including undevelopable public lands (Canavan 1995). As of June 1995, the total number of credits transferred was approximately 4,300, although 5,000 transfers had been approved (Canavan 1995). A dramatic drop in the conversion of agricultural land to urban uses indicates the success of the program. Between 1980 and 1991, only 3,000 acres of farmland were converted to urban use, as compared to the previous conversion rate of 3,500 acres per year (Heiberg 1991). To date, approximately 34,000 acres have been preserved (Canavan 1995).

Considerable effort went into publications that educated participants about the mechanics and benefits of the program, which is relatively simple to use. The price of its simplicity is the homogeneous method for determining credits (no consideration of soil type or other land features), but the payoff is that participants can understand the program and current market information without the help of a facilitator.

The Pinelands and Montgomery County programs both seek to preserve specific geographic areas that are predominantly agricultural. Their use of zoning and of dual transfer districts are the most effective means to protect such large areas. In contrast, the following two programs are policy-based and use single transfer districts, to prevent or restrict development on environmentally sensitive individual parcels.

Lake Tahoe Basin, California and Nevada

The Lake Tahoe Basin lies on the border between California and Nevada. The basin area is 207,000 acres, and the lake itself is 22 miles long and 12 miles wide. Because of the depth and size of the lake, and low flows into and out of it, its water retention is very high. There is little erosion of sediment into the lake, because the geological conditions and the highaltitude vegetation result in relatively little new topsoil (Tahoe Regional Planning Agency 1982). The product of these environmental factors is an extraordinarily clear lake, but one that is easily disturbed by development within the basin.

In 1969, an interstate compact between California and Nevada created the Tahoe Regional Planning Agency (TRPA), with planning and regulatory authority over the Tahoe Basin. In 1980 a revised compact required the TRPA to preserve the environmental and recreational attributes of the region by establishing environmental thresholds for the lake's carrying capacities within 18 months and adopting a regional plan within 12 months after that. After adopting a Regional Plan in 1984, the TRPA was sued by a nonprofit conservation group and the California Attorney General, and the federal district court issued an injunction halting virtually all development. Efforts to settle the issues were unsuccessful; the Ninth Circuit upheld the injunction.

TRPA then began "Consensus Building Workshops" with representatives of the affected interest groups in the region. The workshops were successful. Previous restrictions had nearly precluded development on environmentally sensitive parcels; the new plan "fine-tuned" the restrictions, setting ceilings for specific types of commercial and tourism development. An amended regional plan was adopted in September 1986. In May 1987, implementing ordinances were adopted and the injunction was dissolved.

As part of the balancing of interests to protect the lake, limitations on land coverage and on development were instituted. All parcels in the Basin are rated by one of two assessment systems to determine their "land capability," and these ratings limit development. The TRPA uses three kinds of transfer programs: lot coverage, permit allocations, and development rights (TRPA 1993a). We focus on the coverage transfer program, since it demonstrates a plan-based program using single-area transfers.

The Basin is divided into nine hydrologically related watershed areas varying in size from 14,000 to 40,000 acres (Berger 1993a). Property owners may exceed ordinary lot coverage limits by retiring coverage on a parcel within the same hydrological zone and transferring those rights to the receiving parcel. The amount of coverage that may be transferred in each watershed is limited by the regional plan. Coverage rules are more lenient for residential, recreational, and public service projects, and are most stringent for commercial projects (Scholley 1993). In all cases, however, the environmental sensitivity of the sending parcel must be equal to or greater than that of the receiving parcel.

When a landowner submits a project for approval by the TRPA, the parcel's coverage is evaluated in terms of the stipulated limitations. Owners with lot coverage above the TRPA limits must either pay a mitigation fee or remove coverage from that lot or elsewhere.

The TRPA evaluates land sensitivity in the Basin by using two systems: the Individual Parcel Evaluation System (IPES) and the Bailey classification. The Bailey classification system divides all lands in the Basin into seven classes based on soil type and slope, with Class 1 being the most environmentally sensitive. Depending on the land classification, development is limited to anywhere from 1 to 30 percent of lot coverage. New coverage is not allowed in Class 1-3 areas, except for recreation and public service uses (and certain residential projects) with findings of necessity. In Class 4-7 areas, new projects are generally allowed. Transfer of additional coverage for these projects is governed by parcel size (Gussman 1993).

Because some residential landowners found the Bailey classifications too general in map scale and too imprecise and inflexible, the Individual Parcel Evaluation System (IPES) was developed during the consensus building process. Under this system, the parcel is evaluated for eight scoring elements by a three-person team consisting of a soil scientist, a hydrologist, and a planner. Parcels are assigned a score of 0-1140, and development is permitted on parcels with a score above the current line of eligibility. The amount of allowable coverage is specific to each parcel and is determined in increments of one percent, with a maximum of 30 percent (Scholley 1993). Land owners may buy up to an additional 10 percent of the coverage allowance as scored by the evaluation team (Oyler 1995).

Single family lots that were vacant as of July 1989 were reevaluated under the new system. If a lot had been developed prior to 1989, or if the lot was designated as multi-family, the Bailey system rating was maintained. On the reevaluated parcels, the total Basin coverage allowed is the same as would be permitted under the Bailey classification, but with the percentage allowances more equitably distributed (Scholley 1993). Approximately 12,000 vacant residential parcels have been reevaluated using the IPES system (Matthews 1995).

Coverage transfers are calculated in square feet. Currently, prices per square foot generally range from five to eight dollars in California (Willmett 1995) and from $8.50 to $15.00 in Nevada (Gilanfarr 1995; Huttenmayer 1995). Processing a coverage transfer takes two to three weeks (Willmett 1995). An IPES evaluation can take an additional six to eight weeks (Matthews 1995).

To help California applicants implement their projects and to guide coverage reduction and land restoration on highly sensitive lands, a Land Coverage Bank was established by the California Tahoe Conservancy (Conservancy). The Conservancy is a state agency created by the California Legislature in 1984 to help preserve lands on the California side of the Tahoe basin. Its Land Coverage Bank provides revolving funds that allow it to acquire and restore degraded lands, and to bank the coverage rights and distribute them to public and private projects in the Basin (California Tahoe Conservancy 1993b).

The Conservancy handles most coverage transfers in California (Willmett 1995). Other transfers are arranged in the private market. In general, coverage transfers require approval by the TRPA. There is no similar entity on the Nevada side of the Basin, although the TRPA has designated the Nevada Division of State Lands as a land bank for limited purposes (Scholley 1993).

As of June 1995, the Conservancy had made commitments to sell or exchange 242,400 square feet of coverage for public service projects and 38,900 square feet for buyers in open-market sales (residences and businesses) (Willmett 1995). The TRPA is still compiling statistics for coverage transactions in both California and Nevada, reflecting private transfers that were project-related. Transfers are counted only when they are part of a project application and resulting permit (Berger 1993a). So far, numbers show transfers totaling 66,686 square feet in California and 9,361 square feet in Nevada (Matthews 1995), demonstrating the Conservancy's influence on the California side.2 Three hundred and seventy-two coverage transfers have been completed by the Conservancy and the TRPA (Matthews 1995; Willmett 1995).

The complex structure of the program is viewed as the price of consensus (Scholley 1993). An attorney for the TRPA said there have been relatively few complaints thus far (Scholley 1993), although there have been requests for a land bank on the Nevada side of the Basin (Coverdale 1992).

California Coastal Commission

The California coastal zone is under the jurisdiction of the California Coastal Commission (Commission), a State agency created in 1976 to protect California's dwindling coastal resources through strict planning. To develop any land under Commission jurisdiction, the landowner must obtain a Coastal Permit, which may or may not include conditions for allowing development. Local governments in the coastal zone may create their own Local Coastal Programs (LCPs), consisting of land-use plans, zoning maps, and implementing ordinances. Once certified by the Commission, LCPs allow local governments to control permitting for development.

The Santa Monica Mountains Coastal Zone (Santa Monica Zone) stretches 27 miles along the coast of California in Los Angeles County and extends inland up to five miles from the Pacific Ocean; it includes much of the coastal Santa Monica Mountain Range. In the early 1900s, much of the Santa Monica Mountains was subdivided into small lots. These fail to meet present-day requirements for slope, lot size, and other environmental factors. In 1979, studies showed that development of the remaining lots (the majority in antiquated subdivisions) would result in traffic exceeding existing road capacity and would lead to significant erosion and water quality degradation (McClure, Eisner, and Friedman 1979). Meanwhile, legislative policies carried out by the Commission permitted new development only where 50 percent of the usable parcels in the area were already developed, and many proposed land developments failed to meet this condition. New development posed significant environmental risks and often failed to obtain Commission approval.

In 1979, faced with denying many permits, and seeking to prevent development of "antiquated" small lots, the Commission set up a pilot credit program under which approval of the pending subdivision permits was conditioned on the developers retiring an existing lot for each proposed lot created by a subdivision. The goals were no net increase in the number of existing lots, and the retirement of steep or sensitive lots (California Coastal Commission 1985).

Thus, the idea of transfers began as an ad hoc measure to allow pending permits to be issued and at the same time to mitigate the effects of the developments; it was subsequently incorporated into the Commission's Regional Interpretive Guidelines (California Coastal Commission 1981). The Guidelines divided the Santa Monica Zone into three zones and permitted transfers only within each one. Later modifications, however, allowed interzone transactions. Any lot retired must be at least arguably buildable.

In areas designated as environmentally sensitive, one credit is allotted for each lot up to 20 acres in size that is retired. Each additional 20 acres retired equals one credit. In the "antiquated," small-lot subdivisions, one credit is created for each 1,500 square feet of buildable space that is retired on slopes of less than 35 percent. Credit evaluations are generally completed within 2-4 weeks (Timm 1995), although more complicated evaluations have taken as long as 14 weeks (Ireland 1995).

The Coastal Commission's program is aided by the State Coastal Conservancy. The Conservancy, which purchases land and provides funding and guidance for land preservation in all three zones, set up a nonprofit land trust, the Mountains Restoration Trust (Trust), in Zone II, to receive and apply in lieu developers' fees as an alternative to direct lot retirement. Thus Zone II subdividers can pay a fee instead of retiring a lot to gain credits for development (Bass and Associates 1980). Zone II is the only area where in lieu fees have been authorized; the size of expected development projects there, the pressure from the developers, and the willingness of the Conservancy to oversee the use of the funds brought that about (Gussman 1993).

The Trust can receive charitable donations of credits and has accumulated a large number. The Conservancy, too, has banked credits, by buying marginal lots in targeted subdivisions and having the credit values certified. It then sells the credits (Williams 1993). Some private credit transfers had occurred before 1981, but market activity was somewhat random and disorganized. In February 1981, the Conservancy held two public offerings of credits, to quell price speculation. The bids ranged from $36,500 to $42,500 (California State Coastal Conservancy 1981). Private market transactions then continued in Zones I and III, while in Zone II the transfers were handled largely through the Mountains Restoration Trust, as discussed above.

The Malibu/Santa Monica program is the only one reviewed here that uses both a state agency and a private nonprofit as facilitators. While some realtors in Malibu complain that the Trust dominates credit sales through its competitive prices (Hainey 1992; Scott 1992), one realtor notes that the Trust helped to create the credit market (Scott 1992). The Trust's Board of Directors first set their credit prices at $15,000-$18,000; since then, they have varied from $35,000 (Timm 1995) to the 1995 range of approximately $17,000-$21,000 (Ireland 1995). As of June 1995, the Commission had required 519.7 TDRs as conditions for permits; 26 remained "open," leaving 493.7 completed TDR transactions, which had restricted development of 864 lots located in all three zones (Bove 1995). Assuming that most of the 864 restricted lots are in small-lot subdivisions, and that 6,356 small lots remained undeveloped at the beginning of the Commission's program, approximately 14 percent of the small lots had been restricted from development. Since the Commission had originally anticipated retiring 10 percent of the small lots (California Coastal Commission 1985), the program is considered successful.

At present, the market for TDR transactions is limited by a depressed real estate market in southern California and a development moratorium in the newly incorporated city of Malibu, which is establishing its own Local Coastal Program (Ireland 1994). A previously approved project outside the city's boundaries, however, has caused a small revival of the market and has also cast light on future policy issues for this TDR program. A public agency, the Santa Monica Mountains Conservancy, is attempting to make available the approximately 40 credits necessary to mitigate the project, by offering unused development credits from public park lands. This practice, of using parks as suppliers of development credits, would drastically alter the structure of the current TDR program. By turning to parks for credit transfers, rather than to privately owned and marginally developable parcels, the program would emphasize less the retirement of potentially developable lands than payments by the developer to the public agency managing parks. Such a program would also create an unstable competition between the land owners who want to sell credits and a public agency that needs the money to be gained from selling credits; the public agency would have a flexibility in setting prices for credits that would exacerbate the situation. Moreover, such a TDR program might require revising deed restrictions, since national parks, which are included in the park system in question, may not be restricted under the state program (Ireland 1994).

The notion of creating a mitigation bank to house the credits from the parks has also been suggested. Such an entity would store the value of the pa.rks' "development potential," and developers would pay the fund for those credits to satisfy their projects' mitigation requirements.

The Malibu/Santa Monica program seems to have met its modest objective of retiring 10 percent of the parcels in "antiquated" subdivisions to reduce environmental degradation and traffic congestion.

Analysis of the Structure of the Programs

The following section analyzes in more detail how each program's goals have shaped its legal design, institutional structure, and implementation. It is hoped that this analysis will help planners evaluate the design of TDR programs in their jurisdictions. How Goals Affect Structure

The goals of a transfer program are key elements in deciding its legal design, especially as to the use of dual or single transfer areas.

At Lake Tahoe, the dominant goal was to reduce soil erosion and its deposition into the Lake. For this purpose, political divisions were not as useful as hydrological ones. Using a policy of limiting overall coverage within the Basin, the TRPA applied the two parcel assessment systems described earlier, to evaluate individual lot coverage. There was no need to create separate transfer areas or rezone Basin areas. The coverage limitations were met through individual permits imposed lot by lot, according to the TRPA's coverage policies and each lot's character.

In the Santa Monica Coastal Zone, the dominant goals were to allow no net gain in developed lots and to prevent development on parcels that were geologically unsound. Targeting each marginal lot was unnecessary as long as the Commission required credits for new subdivisions, because market incentives would operate to retire the lots, starting with the less buildable lots having the least desirable geologic features. Strict zoning of areas would have been difficult, because marginal lots were interspersed with more buildable ones. For the same reason, it was infeasible to specify separate receiving and sending areas. The Commission adopted a policy that restricted all new subdividing, and applied the restrictions through individual permit decisions.

In the Pinelands, the Commission was working to meet a number of goals: to protect the underlying aquifer, to preserve cranberry and blueberry farms as well as other farmlands, and to reduce urban sprawl. The Commission's jurisdiction covered approximately one million acres, crossing county and municipal boundaries, and it included forests, wetlands, farmlands, and developed areas. Thus, the Commission's program had to embrace a wide constituency and be equitably administered over a variety of land types. Specific land designations and dual transfer areas were needed.

In Montgomery County, the Planning Commission also wanted to preserve agricultural lands on a large scale. Separate transfer zones were necessary to protect farmlands, and zoning was used to draw distinct boundaries for growth areas.

Implementing the Goals, Given the Political Climate and Attitudes of the Participants

The Political Structure. The political means by which TDR programs are established determine many of their characteristics. If the program is created by national or state legislation, the agency may have clear zoning and regulatory authority. Local jurisdictions, however, may need to elicit community support through consensus building and education.

An important issue is whether new layers or branches of administration are needed to create and manage a TDR program. If one agency administers the program, there is a central focus for consensus building. If a program requires approval or management through several parties, divided interests could create delays and conflicts in administering transfers. Where a program is complex or the constituency less supportive, facilitators are an important asset. Facilitators also are useful if current prices are not easily available, or if the market is inactive, necessitating a buyer of last resort (Gussman 1993). Of the programs reviewed here, we first examine those administered or supported by federal and state agencies, and then those administered at the county level.

The Pinelands program was created and is administered through a single agency and was strengthened by the U.S. Congress' recognition of the region's environmental importance. The complexity of the program, however, required intermediaries, the Pinelands Bank and the Burlington Exchange. The Pinelands Commission also has worked to educate participants, through handouts to developers that explain the economic benefits to them of using credits (Osborn 1993). The federal recognition of the Pinelands' importance and the strong state legislation have made the program effective.

At Lake Tahoe, because the lake was threatened by land uses in the two states that share the Basin, a bistate agency was the best approach; that required the states' willingness to work together. In addition, because a lawsuit had challenged the TRPA's first attempt at a regional plan under the revised interstate compact of 1980, creating an acceptable regional plan required consensus building. Land use decisions that evolved from meetings with participants and cooperation among a number of groups were included in the strong policy that eventually was adopted, reflecting the strong underlying state legislation. The consensus was that a parcel should not be prevented from buildout without a scientific assessment of its soil and the slope of the property (Gussman 1993). The resulting IPES score was used to identify coverage capacity and to decide on the extent of development and the coverage program to be followed. This method meant that administrative costs for TRPA's 1986 Regional Plan were higher, in that approximately 12,000 parcels were individually assessed.

The Tahoe program was strengthened by the use of a facilitator, the Tahoe Conservancy. The Conservancy concentrated on channeling transfers into target areas, encouraging large-scale transfers, and directing coverage where it could be best accommodated. In Malibu/Santa Monica, a single state regulatory agency with a strong mandate created the TDR program as an ad hoc, interim program, with the assumption that it would be subjected to public hearings as part of the Local Coastal Program process before becoming permanent (Gussman 1993). Because the Commission had the final authority to approve or reject any development within the Santa Monica Coastal Zone, its permit decisions created a transfer program.

The Commission was aided by the presence of a state agency that could acquire parcels and help with transfers-the Coastal Conservancy. The Conservancy helped create a private third entity, the Mountains Restoration Trust, in one of the three Santa Monica zones, to facilitate transfers and to accept in lieu fees for development credits in place of transfers.

Thus, in Malibu/Santa Monica, the political structure encompassed coordination at both the public and private levels. The Coastal Commission set up the program and assigned the fractional credits for parcels. The market determined the monetary values of the credits. The Conservancy purchased areas suitable as sending sites, generated credits, and provided funding and advice on restoration projects. The Trust handled transfers within one zone and offered developers there the option of in lieu fees.

In Montgomery County, a single local agency developed and administered the transfer program. A series of studies preceded the program's development, and thorough community education and outreach about the issues followed. The planners kept the program simple, and participants found its process easy to understand. Administrative costs were low because valuation was determined by zoning, not by individual parcel assessments. Although a land bank was established to facilitate transfers, it was never used. Political support was sought from the beginning, and the county administration sought to ensure that the transfer program was easy to use. There was no state mandate for this program, but consensus on the need to protect farmlands in the county supported it.

Political Support. In Montgomery County, the Planning Commission extensively researched the economic issues relating to farmland and held meetings throughout the county while developing the TDR plan. At Tahoe, consensus building (albeit in response to litigation) resulted in a regional plan that met the requirements of the participants, who faced irrefutable evidence of a decline in Lake Tahoe's water quality that necessitated such measures to protect it. In New Jersey's Pinelands, the Cohansey Aquifer warranted designation as a national preserve, and state and local governments meanwhile were already seeking ways to mitigate the continuing loss of farmland to urban sprawl. In Malibu/Santa Monica, studies of the regional carrying capacity made clear the necessity of limiting further development.

Studies demonstrating the need for resource protection can be important in laying a defensible foundation for a transfer program, and they provide a focus for consensus building. A strong legislative mandate ensures that participants will comply, and public education and a record of effectiveness help to gain political longevity. Having a durable program is important, since success usually entails many years of effective operation.

Program Design

Single or Dual Transfer Districts. Dual transfer districts are useful for resource allocation if the agency wants to preserve defined areas of land for specific purposes, such as cranberry farming or rural open space. With dual transfer districts, the planning agency can guide development to the areas better suited for increased density. In contrast, a single district lets the market decide where transfers will occur.

A single district, such as the Lake Tahoe basin or the Malibu/Santa Monica Coastal Zone, has no clear spatial dichotomy of sending and receiving areas. Receiving lots can be next to sending lots; indeed, in some cases, transfers can occur within a single lot if coverage is removed on one part to allow its placement on another part. The existing density is redistributed within a single district, but no formal downzoning of one subarea occurs. Strong financial incentives exist, however, to sell credits off parcels that cannot be developed or are of low value for development.

At Lake Tahoe, the districts are divided into nine hydrological regions; Malibu/Santa Monica is divided into three transfer zones. In both of these programs, preserving specific land areas is not the goal. Sending lots can be interspersed with receiving lots without breaching the purposes of the transfer programs.

It should be noted that rating systems and credit valuation formulas can become as controversial as land use designations (Gussman 1993). In Tahoe, the IPES parcel ratings guide development and coverage much as formal land use designations would under a dual-zone system. Similarly, the slope evaluations by the Coastal Commission in Malibu/Santa Monica guide the locations of development. The development market drives the transfers, but the criteria for credits guide the parcel-by-parcel transfers. It is important to realize that in a single-zone program, such criteria may meet some of the goals of formal zoning, although applied parcel by parcel.

In the Pinelands and in Montgomery County, the goals included preserving the existing land uses in designated areas, so dual transfer districts were a better choice. New Jersey had sufficient political authority at the state level to rezone to meet the preservation goals; Montgomery County, however, needed to garner community support in order to rezone.

Zoning or Permit Decisions. Considerations here include flexibility versus certainty, political feasibility, and costs. Dual transfer zones set by zoning are not very flexible, but are a straightforward way of targeting areas for development or for protection. Once sending or receiving areas have been designated, long-term implementation tends to lock the designated uses into place, through the use of permanent easements in sending areas and the expectations of higher density in receiving areas.

Rezoning may arouse strong opposition. Of the two types of designation, receiving areas are the more difficult to zone, because although landowners usually favor preservation, few want higher densities in their neighborhoods (Canavan 1993). Technical problems may also hinder the designation of receiving zones. In the Pinelands, the lack of sewers and other infrastructure has slowed their designation (Osborn 1993). By targeting specific geographical areas, zoning decisions can stimulate coalition-building to oppose them. On the other hand, applying an overall policy in a single zone does not designate identifiable groups of landowners. With no focus on a specific group, there is less incentive for organized opposition.

Costs for dual-zone transfer programs may be less than those for permit programs. Once zoning is designated, trading ratios may be set, as in Montgomery County. Under policy-based permit programs, however, each lot must be assessed, which may impose a heavy burden on the administering agency. The TRPA assessed approximately 12,000 parcels to implement the plan in the Lake Tahoe basin; in the Malibu/Santa Monica program, the Coastal Commission handled individual lot evaluations for each permit request. It is important to note, however, that the IPES system at Lake Tahoe arose from the consensus workshops, to satisfy both the owners who wanted to develop their parcels and the environmentalists who wanted to protect the Lake. The transfer program itself was a later addition to the rating system, which was created primarily to evaluate the development potential of residential lots. An agency would be unlikely to use such a rigorous evaluation method solely for a transfer program (Gussman 1993).

Valuation of Credits/Rights. Under a dual-zone system, the value of credits depends on the land use designations that are adopted and on the allocated ratio for credits to be sold and bought. The transfer ratio can be established either through blanket designations based on a limited number of factors, or in the singlezone approach, on a system of parcel-by-parcel ratings that use a number of criteria. The key challenge here is to determine the credit transfer ratios so that they accurately reflect the development potential of the preserved land. Otherwise, they misallocate the market forces intended to drive the transfer program (Gussman and Harper 1985).

Of the reviewed programs, Montgomery County has the simplest credit-designation system. For a parcel in the sending zone, one credit per 5 acres is allotted. There are no partial credits, and the evaluation is made rapidly (in less than one week). In the Pinelands, a number of factors determine the transfer ratio, including land type and location, past and present uses, and prior development history; and evaluations take about six weeks. The Malibu/Santa Monica program uses acreage and slope in deciding on the transfer ratio, and, for smaller lots in antiquated subdivisions, considers square footage of buildable space as well; evaluations take two to four weeks. At Tahoe, there are two systems for evaluating parcels. Under the more flexible IPES method, a team of three people evaluates each lot, using a list of criteria. If a parcel has not yet been evaluated, an additional 6-8 weeks may be required in addition to the two to three weeks necessary to process the transfer.

Monitoring. Some agencies keep rigorous data on transfers, while others lack the time and money to adequately compile and update such records. The agencies' differing needs will determine the monitoring requirements. Different information may be required, depending on whether the agency is acting as a land bank, a broker, or a planning agency. But, in any case, adequate records help to show whether the program's goals are being met. From the beginning, a predetermined method for tracking and evaluating the program results is useful.

Conclusion

TDR began as a localized transfer system that shared the air rights between adjacent parcels belonging to the same owner. We now see TDR used to transfer development rights between watersheds, counties, and states. The goals of the program help to shape its structure. If the goal is to protect specified areas, separate sending and receiving areas are important, and zoning is an appropriate allocation mechanism. If the goal is to limit development overall, a single transfer area may suffice, especially since such an approach is politically less abrasive, and the program can be administered voluntarily, through individual permit decisions based on parcel characteristics.

Other factors that influence program design are: the authority of the administering agency, the importance of political consensus, tolerance for transaction costs, and whether facilitators will be needed. A strength of TDR is its versatility, accommodating complex or relatively simple designs according to the sort of program needed.

All four programs described here have completed substantial numbers of transfers and have survived politically and legally. In the Pinelands, the true success of the program will be measured in the future, as adjacent lands are developed to capacity. Montgomery County has had a significant decline in rural land development under its program. The program in the Tahoe Basin ultimately will be measured by the water quality of the Lake over succeeding decades. In Malibu, the program has retired almost 500 lots thus far. A challenge to that program, however, is the policy debate about the validity of using public parks to supply development credits and of a mitigation bank supporting this practice.

The four programs have different goals and operate in different environmental and political climates. The planners working in each program have dealt with the implications of these differences. This review therefore presents a range of policy options for planners considering the creation of TDR programs. These four programs provide working models for other jurisdictions as they explore effective methods of land preservation.