Chapter § 9.3 Purchase of Development Rights

• Jurisdiction: Washington

§9.3 PURCHASE OF DEVELOPMENT RIGHTS

In PDR programs, interested buyers of development rights negotiate with landowners to arrive at a mutually satisfactory price for the development right. In general, the compensation paid for the development right approximates the development profits the landowner forgoes. In addition to direct compensation, landowners may also qualify for tax benefits. See, e.g., RCW 84.34.320(1). In return, the buyer receives an easement or covenant that is recorded on the property deed. The result is long-term protection for the land and compensation for the landowner.

(1) The PDR theory

PDR programs are, in theory, quite simple. PDR programs use public funds, or a combination of public and private funds, to purchase development rights from landowners with land that has desirable characteristics likely to be lost by future development. The desirable characteristic of the land will vary based upon the program's goal, but may include maintaining open space, woodlands for flora or fauna, productive wetlands, or agricultural lands. In addition to a desirable characteristic, the land should demonstrate potential for loss of that desirable characteristic through conversion of the land by development.

PDR programs hold the most promise for influencing the location, rate, and timing of development by protecting a limited amount of land in areas where zoning and tax incentives alone may be insufficient to withstand development pressures.

(2) Administering a PDR program

Initially, legislative decision making predominates in the administration of a PDR program. State statutes generally allow the acquisition of development rights. See §9.3(3) and (4), below. However, local political will must still be exercised to identify program goals and allocate funding. Narrowly tailoring the PDR program to address specific goals generally will increase the program's success by directing funding at those properties and development rights that directly advance program goals.

Following adoption of the PDR program, the first step in implementation is to determine which development right or rights a jurisdiction wishes to acquire. The goal of a PDR program is not necessarily as simple as attempting to buy as many development rights as possible. Although the development rights to land with little development pressure can be purchased fairly inexpensively in anticipation of longer term future development, this strategy may needlessly sacrifice currently at-risk land. On the other hand, purchasing development rights to land under severe development pressure may quickly exhaust program funding or fail to achieve program goals. As an example, purchasing development rights to preserve farmland bounded by dense single-family subdivisions is likely to be expensive and have undesirable results. Farming operations often generate disturbing noise, dust, fumes, and pesticides that may provoke complaints or litigation from the single-family residents. In time, the farming operation may fail and, although the farm may remain as open space, the program goal of preserving farmland will not be achieved.

To objectively evaluate property, most jurisdictions with a PDR program have instituted a ranking system based on points rather than a "most for the money" or "worst first" system. See, e.g., Whatcom Cnty. Code §3.25A.080. Ranking systems generally have two criteria—the degree of development pressure and the quality of the land. Numerical points can be assigned to give quantitative value to each criterion and allow comparison between properties. The property with the highest score ranks first and receives top acquisition priority. Additional factors, such as proximity to other acquired properties, may also be considered in the ranking scheme by assigning extra points.

The administrator charged with applying the ranking system to properties must also decide how much weight to give each of these criteria. This ranking system tends to prioritize land with moderate development pressure and expense. See Whatcom County, Whatcom County Agricultural Purchase of Development Rights Program Guidelines (rev. & adopted Apr. 9, 2013), http://www.whatcomcounty.us/documentcenter/view/13141. (hereinafter Whatcom County Guidelines). The more weight given to development pressure, the more the ranking system will resemble a "worst first" system and may result in escalated costs.

Next the local jurisdiction must determine how to value the development rights. Drafting reliable documents that implement the PDR program's goals when it comes to valuation is a crucial step, because those documents will describe the restrictions and limitations on the land. As restrictions on use of the land increase, the value of the development right increases. If the restrictions are too great, the PDR program may fail for lack of willing sellers. Conversely, if the restrictions are too few, the program goals may suffer.

Traditionally, PDR programs rely heavily on professional appraisals to determine the value of development rights. Some jurisdictions allow the landowner to have the appraisal done. In others, the buyer will pay for an appraisal overseen by the jurisdiction. See, e.g., Whatcom Cnty. Code §3.25A.100(C). The...