THE TRANSFERABLE DEVELOPMENT RIGHTS PROGRAM

IN MONTGOMERY COUNTY

Introduction

Preserving farmland and farming in Montgomery County has been an articulated goal since the adoption of the Functional Master Plan for Agriculture and Rural Open Space by the County Council in October of 1980. While the Agriculture Reserve encompasses some 100,000 acres, only approximately 73,000 acres were undeveloped when the plan was adopted. These were identified in the implementing zoning legislation as the Rural Density Transfer (RDT) zone.

Development rights were to be transferable from the RDT zone to designated receiving areas within the county at the rate of five transferable development rights (TDRs) per 25 acres. Four of these TDRs must be used in a receiving area, but the fifth TDR can either transfer development or represent a current or future dwelling unit in the RDT zone. The TDR program was instituted to preserve farmland, compensate landowners in the Agriculture Reserve for down zoning, and channel development into areas more suitable for development. The proposal to separate development rights from the farmland was intended to be an economic incentive to the continuation of farming. Planners optimistically expected a yield of 9,000 dwelling units transferred to the receiving areas of the county.

Last year the League of Women Voters of Montgomery County studied agriculture in Montgomery County and arrived at a consensus position supporting the concept of TDRs and the retention of this program. In addition, the consensus supports current restrictions on the uses permitted in the Agriculture Reserve, the existing policies of restricting water and sewer service in the Agriculture Reserve, the program of designated Rustic Roads, the current tax policy for agricultural land including the county agricultural land transfer tax, and agriculture and rural open space preservation programs in Montgomery County. The study committee continued to assess issues associated with the TDR program and presents the information below for discussion.

Agricultural Land

Land assessed for agricultural use is concentrated in the western and northern parts of the county, most of which is in the Agriculture Reserve, which contains two thirds of the land used for agriculture; however, some agricultural tracts appear in all but one of the county’s 13 election districts. Agricultural uses are fairly evenly divided among cropland, livestock, and general farming with just over 24,000 acres in each. There are only 1,142 acres of forestry and just over 5,000 acres with dairy emphasis.

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While the Functional Master Plan sought to preserve farmland in tracts of significant size, farmland in all zoning categories has experienced significant turnover since the adoption of the plan. In the decade of the

90’s the turnover of RDT-zoned land soared and the pace has only accelerated in this decade. Even though this land remains in agricultural use, the parcels are becoming smaller. While the State Department of Assessments and Taxation does not claim responsibility for the accuracy of the zoning designations in its records, its data shown in Table 1 above indicate that approximately 20,000 acres of land in the RDT zone have been converted from agricultural use since the plan’s adoption. Furthermore, the parcels are becoming smaller even for land remaining in agricultural use. This year the average parcel size is just 72.5 acres in the RDT zone while overall it is 56.5 acres. However, there are still some landowners who control considerable amounts of farmland. The Betty B. Casey et al Trust controls over 5,000 acres, and the top 10 land owners own 19% of the land in agricultural use, all aggregates of many parcels.

The TDR Program

Montgomery County’s TDR program is one of six agriculture and open space land preservation programs tabulated in Table 2. Unlike the other programs which purchase easements limiting the use to agricultural activity, the TDR program permits the marketing of all or part of the development rights permitted by zoning prior to the establishment of the Agriculture Reserve. While the chart lists TDR easement acres as protected, the level of preservation is not the same as with the easement purchase programs. Comparing the protected area figures with the assessment figures above suggests that the reservoir of TDRs available for transfer is small.

Participants in the TDR program are encouraged to keep one TDR for each 25 acres of land owned in the RDT zone. This will enable the owner to develop land to the new zoning limit of one dwelling unit per 25 acres. The landowner may choose to delay selling TDRs to some future time when a favorable market exists or until there is a need to raise cash. If title to property which accrued TDRs is transferred, the TDRs may be a matter of separate negotiation, i.e., they may transfer with the title (usually for an additional fee) or the owner may sever the rights from the property and market them separately. The selling of the rights helps farmers invest in their farms, but does not prevent development in the reserve or insure preservation of the agricultural uses.

A TDR must be retained for each existing dwelling unit on the property. Excluded from this limitation are a farm tenant house, farm tenant mobile home or a guesthouse, provided they remain accessory to the farm. Under current practice a tenant house is not excluded if it is the only dwelling on a parcel from which TDRs are being severed. A major exemption to the zoning restrictions is for a lot created for use for a one-family residence by a child or spouse of a child of the property owner who has held title to the property since January 6, 1981.

Certain conditions must be met in order to create a “child lot”. The “child lot” exemption applies to only one lot for each child of the owner. Any lots created to be used for residences by children must not exceed the number of development rights for the property; i.e., a TDR must be held in reserve for each house to be built for a child owner. When the application to build the child lot goes through the subdivision process, an affidavit is required to verify that the property owner’s child will use the lot.

Because farming is identified as the primary use of the RDT zone, the farmer benefits in several ways. There are expanded farm-related uses permitted. Because of the low density there are fewer people, which reduces nuisance complaints directed to farm activities and farm activities are not considered to be nuisances. The expectation of the planners was that when TDRs had been sold, farmland would become more affordable to enable new farmers or those wanting to expand their holdings to purchase farmland. If a property owner wishes to develop the land, cluster zoning is available without jeopardizing the permitted density. In theory the owner of 100 acres could live in a house on the property and cluster three additional houses on a portion of the land (lots as small as one acre are permitted) and retain the balance of 96 acres for farming. Unfortunately, the percolation requirements for home development preclude much clustering.

Administering the TDR Program

Because the severance of the TDRs from the property involves a series of legal steps, landowners typically rely upon a developer seeking to use the development rights to undertake the severance process, but a landowner can sever the rights at any time. To sever TDRs, the owner of land in the RDT zone must have an easement restricting future development of one-family dwellings on the property prepared in a recordable form approved by the county. The easement document along with the legal description of the property, a title report, and a tax map are presented to the Office of the County Attorney for review. The title report identifies whether any TDRs have previously been severed, and the legal description with tax map must identify the property to be in the RDT zone. If the property owner chooses to sever all of the TDRs available to the parcel of land, the County Attorney requires a written statement from the owner verifying that the understanding is that no dwellings can be constructed on that parcel. When everything is in order, the County Attorney assigns numbers to the TDRs. The easement is then recorded in the land records. When the TDRs are sold, a Deed of Transfer of Development Rights is executed and recorded in the land records.

Since 1984 the County Attorney has maintained a manual TDR numbers record. The early list simply identifies the grantor of the easement, the date, the serial numbers, the number of acres in the tract, and the address of the tract. More recent entries use the property identification number rather than address and also include the number of TDRs previously severed and the number of dwelling units that may be constructed on the parcel. Owners who have severed all their TDRs may have second thoughts at some later time. The recourse to correct a mistake is to demonstrate that a clearly identifiable error was made, such as missing the signature of the property owner, or to sue the county for correction so that a judge decides whether there is cause for a change.

 A developer seeking to utilize TDRs prepares a Preliminary Subdivision Plan for the property designated for TDR receipt. The Preliminary Subdivision Plan is submitted to the Planning Board for approval. When a preliminary plan has been approved, the developer proceeds to development of a site plan. Following approval of the site plan by the Planning Board, the developer prepares a Record Plat which indicates the serial numbers of the TDRs to be used in the receiving area as well as the liber/folio of the land record of the severance and transfer of the TDRs. When the Planning Board approves the Record Plat and the TDR usage, the Record Plat is recorded. The Development Review Department does not assume responsibility for tracking which TDRs have been used, so the land record is the only reliable source of that information.

Receiving Areas

Receiving areas for TDRs are designated through the Master Plan process. Whenever an area Master Plan undergoes comprehensive revision, county policy calls for the designation of parcels of land that could accommodate the higher density produced by TDR as receiving areas. An in-depth technical analysis is done to identify places where increased residential density is appropriate, considering such criteria as availability of public facilities, compatibility, and capacity of the land. The goal is to transfer development from the RDT zone in the Agriculture Reserve to areas where increased density is desired under the county's General Plan.

A potential receiving area is given a base zoning, such as R-200 (two dwelling units per acre) and also a TDR density option, such as TDR-4 (four dwelling units per acre). The developer of the property buys and uses one TDR for each additional dwelling unit he is allowed over the base zoning. A developer does not have to develop with TDRs at all but, if using TDRs, must use at least two-thirds of the recommended number. The Planning Board may grant a waiver of this requirement if environmental constraints prevent the use of two-thirds of the recommended number.

It has been difficult to designate suitable receiving areas because of 1) neighborhood opposition to increased density, 2) lack of adequate infrastructure, and 3) environmental protection. That means that some master plan reviews take place with no TDR receiving areas designated beyond those which have already been developed. This just happened in the recent amendment to the Potomac master plan. Some master plan reviews in recent years have reduced the number of TDR receiving areas previously designated. The Fairland area is a good example. The l981 Eastern County Master Plan, the first area where receiving areas were designated, had sites for 1,700 TDRs. Subsequently 1,200 TDRs were used for residential construction. The remaining 500 were removed by the 1990 Trip Reduction Amendment and later by the 1997 revision of the Fairland Master Plan.

Limitations on Utilization

Not all receiving areas are actually developed with TDRs for a variety of reasons. The property may be bought by the county or by an institution such as a church. It may not be developed for residences, but for some use requiring a special exception. The owner may simply develop at the lower residential density; or the property may be rezoned to another residential zone during a subsequent Master Plan amendment, a petition to rezone a property, or through an annexation.

Various considerations may come into play in the review of the preliminary plan. For developments of more than 35 units the Moderate Priced Dwelling Units requirement already increases density. During the planning of a subdivision, it may be found that contours or other physical characteristics of the site will not permit the additional density. Lack of transportation or school capacity under the Adequate Public Facilities ceilings may limit the amount of development. More recently environmental regulations, such as afforestation requirements, have had a significant impact on actual use of TDRs. Frequently this review reduces the number of development rights that can be transferred to the site.

Impact of Annexations

Another factor which works against the successful use of TDRs is that the county's two large municipalities, Rockville and Gaithersburg, have their own planning authority and do not have to follow county planning and zoning policies. These two cities are in the county's planned growth corridor where dense development is desired under the General Plan, yet the county cannot require the cities to designate TDR receiving areas. Both of these cities have annexed significant amounts of county land in the I-270 corridor in recent years and may continue to do so. The Planning Board and County Council have insisted on TDR provisions in annexation agreements since 1985. Gaithersburg has included TDR provisions in its annexation agreements and follows the county practice of including TDR information on the plat of record. The Shady Grove Study Area Plan addressed the question of TDR receiving areas, stating that the cities should require the use of TDRs in their annexation agreements when TDR receiving areas are involved. The county has not dealt with a Rockville annexation case involving a TDR receiving area. However, officials of the city of Rockville have opposed TDR designations on properties within their maximum expansion limits.

Two large areas involving county TDR designations, the King farm and the Thomas farm, have been annexed to Rockville, but the county must approve the annexation agreement only if the zoning upon annexation is changed to a substantially different category. By state law, the municipality annexing land may place it in a zoning classification that permits a substantially different land use only after five years. In the case of the King farm, mixed use planned development (MXPD) was planned as an alternate to the R-200/TDR-6 for 120 acres of the farm. It was developed as a MXPD, so the county had no opportunity to review the annexation agreement. The Thomas farm was annexed with its county zoning and changed five years later so once again the county had no review opportunity. In both cases, the developers negotiated with the cities to get the increased density without having to buy TDRs.

Utilization in the First 20 Years

There has been a marked decline since 1986 in the number of TDRs used in receiving areas, but as Clarksburg begins to be developed, the market has become active. The 1997 status report on the TDR Program, updated to 1998, contains the most recent data on how the program is working. It stated that during the first 17 years of the program, 16 Master Plans or Sector Plans were revised and amended to accommodate TDR receiving areas. Originally, these Master Plans designated receiving areas which could accommodate the use of 14,427 TDRs. Only 5,243 TDRs had actually been used, and capacity for 3,727 had been "lost", that is, for some of the reasons mentioned above, development on specific receiving areas did not use them all. The report states that no TDRs were used (recorded on a subdivision plan) in 1993, 1996, and 1997. Overall, 26% of once available receiving area density is now lost.

 It is difficult to verify these figures or to make an accurate estimate of how many TDRs may be available for sale. No agency has responsibility for tracking the TDR activity from beginning to end. The data on sale and utilization of TDRs is buried in the land records. The County Attorney can provide data on TDRs severed since 1984, but not for activity prior to that date. The Agriculture Services Division of the Department of Economic Development (DED) makes an effort to track the number of acres subject to TDR easement, but cannot provide data on the number of TDRs available in the market. If the planners’ optimistic number of 9,000 TDRs are transferred, possibly as many as 3,750 TDRs need to be accommodated in receiving areas. The sending/receiving balance is a cause of concern. Planners state that almost all TDR literature recommends at least a 2:1 ratio of receiving sites to sending TDRs for programs like Montgomery County's, which is limited to pre-designated receiving areas. Currently there are only about 4,700 undeveloped TDR receiving sites in the plans.

The TDR Program Task Force

As early as June of 1999 the Rural Area Team of the planning staff sent a report to the County Council identifying concerns over the rate of conversion of farmland to residential use in the Agriculture Reserve and recommending consideration of changes to the subdivision and zoning regulations to address the farmland conversions issue and steps to preserve large, contiguous areas of farm fields and forest. The council has not acted upon the requests.

Among the recommendations sent to the council was a request to study the TDR program. Subsequently the Planning Board acknowledged the problem of maintaining fair TDR prices (which began dropping from a high of $11,000 in 1997 to as low as $6,300 in 2000) and responded by authorizing a task force to study the problems with the TDR program. The task force was convened in January 2001 with a charter to “consider the current state of the TDR program, falling TDR prices, the sufficiency of receiving areas, and how best to meet the challenge of modifying the TDR program to face the challenges of the current decade”. In its report delivered to the Planning Board in July 2002 the task force suggested that the TDR program was an enterprise with an end in sight and recommended thinking toward a “next phase of the Agricultural Preservation Program” that would be directed toward opportunities to:

1.Further reduce density in the Agriculture Reserve through other types of easement, land purchase, and density transfer programs.

2.Support policies and programs to facilitate and maintain a viable working agricultural landscape in the county for the future.

3.Develop additional marketing and support programs to ease the transition to new and evolving forms of agriculture that will be both economically viable and sustainable in the future.

Nevertheless, the task force identified a series of policy, regulatory and information tools to be used to address TDR issues.

Policy Tool Recommendations of the TDR Task Force

The task force made five major policy recommendations to the Planning Board

4.The Master Plan evaluation process should formally include the creation or expansion of TDR receiving areas whenever any additional density is contemplated.

5.If additional density is considered via rezoning not recommended in the Master Plan, the use of TDRs should be part of the change.

6.The county should authorize discussions with Rockville and Gaithersburg on transfers of TDRs into the municipalities.

7.A process should be developed to allow increased density for affordable housing and for housing for the elderly using TDRs.

8.The county should support a “Land Preservation Summit” to coordinate the efforts of all existing programs (government and nonprofit) working to preserve agricultural working lands and rural open space.

Regulatory Tool Recommendations

The imbalance between realistic sending and receiving areas was identified as a primary problem. To mitigate this problem, the task force recommended:

9.Changing the minimum TDR use requirements for small properties being developed and eliminating it for properties of five acres or less

10.Allowing relief from on-site afforestation requirements when TDRs are used

11.Creating a TDR receiving version of the CBD, planned development, transit station, and mixed use zones when they have planned traffic access

12.Allowing residential uses by right in certain commercial zones through the use of TDRs.

Information Tool Recommendations

The task force recognized the need for accurate information about effective preservation in the Agriculture Reserve and suggested an annual tally for all preservation programs. Particularly for TDRs, it identified a need to determine the number of TDRs being retained in the RDT, the number already used in subdivision development, and those severed but not utilized in development. Staff from M-NCPPC and the Agricultural Services Division of the DED has been working on this for two years as time permits, but little progress has been made. The task force recommended a higher priority for this work and a better methodology.

Also in the area of information tools, the task force recommended a survey of property owners in the RDT zone to provide information regarding the variety of easement programs available. These programs are described in the June 2002 LWVMC Fact Sheet. It was suggested that such a survey could also be helpful in determining how many additional TDRs might realistically be transferable.

Community Planning Studio

The Community Planning Studio is a culmination course for Masters of Community Planning students at the University of Maryland, College Park. The students work as a team to design research, collect and analyze data, and prepare a written report with findings and recommendations. The TDR Task Force requested the assistance of the 2001 Community Planning Studio team in the TDR study and received its findings prior to the completion of the Task Force report.

A major finding of the studio team was that Montgomery County’s TDR program is preserving open space and maintaining farmland in the short term, but not necessarily in the long term. It cites the development pressures that have instigated farm parcelization and the use of the retained TDR to develop 25-acre lots. Another major finding was that the receiving area selection process did not take into account the already failing infrastructure of some of the planning areas and did not provide sufficient support to insure the necessary level of service. They cite the Fairland Planning Area, which had been under a residential development moratorium for more than 19 years. Additional findings were that the portrayal of the TDR program has not been consistent with its implementation, i.e., total development density of the Agriculture Reserve has not been reduced below zoned level; jurisdictions with more political organization succeeded in reducing the number of receiving areas approved in the planning area (see the example of the Potomac plan above); and in terms of long term protection of farmland, Montgomery County ranks 14th among Maryland counties.

The studio team made recommendations for improving the balance of sending and receiving areas as well as general recommendations for improved planning, increasing equity in the receiving areas, preserving agricultural land, and improving financial stability of participating landowners. Many of their proposals were consistent with the thinking of the task force and were reflected in the task force’s recommendations. Others were outside the scope of the task force and were not taken up.

Other Jurisdictions Using TDR Programs

Montgomery County, MD is not the only jurisdiction in this nation that has implemented a TDR program. In its analysis of the Montgomery County TDR program, the Community Planning Studio team examined nine of these programs, including three others in Maryland. It focused on programs that were different from the one in Montgomery County and contained elements that might be useful in improving Montgomery County’s TDR program. The other instate programs are in effect in the three Southern Maryland counties - Calvert, Charles and St. Mary's. The first two were begun about 1980; St. Mary's started theirs in 1998.

Charles County

St. Mary’s and Charles Counties have a similar approach, but St. Mary’s County as yet has no Agricultural Preservation Districts. The approach is to encourage landowners to establish Agricultural Preservation Districts that consist of at least 100 acres, are in the Agricultural Conservation or Rural Conservation Zones, and have soil/water conservation programs in place. Because the land is in an Agriculture Preservation District, none of the acreage will be developed unlike in Montgomery County where farmers often retain enough TDRs to allow one development unit for each 25 acres. Developers must submit an affidavit of intent to transfer development rights to the county to have a site designated a receiving site. Developments must comply with the county standards for suburban Cluster or Mixed Residential Cluster Development. Farmers participating in the TDR program may sell their development rights at a rate of one for every three acres and as of 1997, numerous development rights had been certified, but no TDRs had been used in receiving areas.

Calvert County

In Calvert County, the primary goal of the 1974 comprehensive plan and the implementation of the TDR program in 1978 was to slow growth and thus protect the natural environment, maintain the rural lifestyle, and limit demand for public services. Land use in the county falls into two categories: farmland (near the county's perimeter) and Town Centers. As in Charles County, TDR-eligible land must be located in Agricultural Preservation Districts, which assures the land will not be developed. If development rights are not used after five years, the owner can withdraw land from the Agricultural Preservation District, but can only develop at the base density of 1:25 acres. Receiving areas are in Transfer Zone Districts, town centers and designated rural communities. Designation requires a recommendation from the County Planning Commission. Because the town center concept is broadly supported in Calvert County, the demand for higher densities at receiving sites has been relatively strong. By 1995 the county had achieved 50% of its goal of preserving 20,000 acres through the TDR program. The studio team suggests that the town center concept might be useful to replicate in Montgomery County's rural villages, such as Boyds, Poolesville, and Barnesville, as a way of achieving more receiving sites.

 Palm Beach County, Florida

Four of the remaining programs analyzed in the study are in the West and are aimed more at protecting natural resources, such as forests and wetlands, rather than agricultural land. However, Palm Beach County, Florida adopted a TDR program in 1980 to protect prime agricultural lands and conservation and coastal zone areas, as well as to redistribute population to urban areas and provide incentives to lower housing costs. Only one transfer involving about 400 TDRs had occurred under this program before it was revised in 1998 to allow sending areas that are commercial, industrial, or outside the urban service area to transfer development rights on the basis of 1:5 acres. Agricultural sending areas may transfer at a ratio of 1:1 acre. Rights from over 21,000 acres have been purchased with county and state funds and more than 9,300 TDRs have been transferred. Only the county buys and sells development rights through a bank; there are no private transfers. Developers must buy TDRs to increase density, with only a few exceptions. Receiving areas are subdivisions and planned developments that must meet certain location requirements and be compatible with the comprehensive plan.

Consensus Questions

What steps, if any, should the county take to enhance the TDR program's ability to achieve its goals of conserving farmland, compensating rural land owners for down zoning, and consolidating growth, such as:

13.Improve the Master Plan process for determining potential receiving areas through:

a. more intense review of the land and community characteristics prior to designation of receiving areas
b. developing a mechanism for designating receiving areas in CBD, transit station, and town center areas.

14.Adopt a planning goal of no-net-loss of receiving areas.

15.Implement an improved system for tracking TDR activity and assigning responsibility for compliance with the steps of the process.

16.Reduce regulations required to implement TDR usage:


a. eliminate the 2/3 use requirement
b. allow off-site afforestation for TDR receiving area.
c. other.

17.Other