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Density Transfer: The Pinelands Experience

By Larry Liggett, Manager, Planning & Research
New Jersey Pinelands Commission

In 1996 the state Legislature amended the Municipal Land Use Law (MLUL) to give municipalities another growth management tool. The amendment permits towns to pass ordinances that will allow developers to meet minimum lot size and density requirements by using off-site lands to cluster additional development in planned developments. For example, the developer of a 100-acre lot in a two-acre zone is allowed to build 50 homes. To develop more units, he can buy land adjacent or elsewhere in the zone and transfer the density to his original 100-acre parcel. Or he can purchase development rights as easements rather than outright land purchase from another parcel of land and transfer these. Both are forms of transfer of development rights, usually called TDR.

For 18 years, the Pinelands Commission has had a regional density transfer program that permits inter-municipal transfers from conservation areas to growth areas using "Pinelands Development Credits" (PDCs). Within the framework of the Comprehensive Management Plan, the Pinelands Commission awards PDCs in certain critical areas that can be used to permit bonus densities in less critical areas. To date, this transfer program has protected more than 13,000 acres in the conservation areas.

Based upon a Weymouth Township (Atlantic) initiative and a desire to reduce waivers (the Pinelands equivalent of municipal variances) for undersized lots, the Pinelands Commission established a new program in 1992 that requires municipalities to establish similar, local or intra- municipal, off-site density transfer programs within two Pinelands management areas. (Similar to municipal zones, there are nine management areas in the Pinelands.) The two management areas affected, the Rural Development Area and the Forest Area, contain most of the forested lands that the regional TDR program does not already cover. The local program addresses existing undersized lots and expands the program to serve newly subdivided lots. In view of the changes to the MLUL that allow all municipalities similar powers, the experience of the Pinelands municipalities is worth examining.

Twenty-three municipalities in the Pinelands have regional programs and to date, 14 municipalities have transferred 1,480 development rights for homes to increase density at developments that approximate planned developments. In addition, 34 municipalities in the Pinelands have local programs and to date, seven municipalities have received roughly 40 development applications (mostly for individual single-family dwellings) for such transfers. This article reflects the experiences of both the regional and the local programs.

First, some terminology. The building lot can be called a "mother" lot. The off-site lands whose development rights transferred, are "out parcel" lots, which have deed restrictions against further development. The area where the density is allowed to be increased through a transfer program is the "receiving area." The lands permitted to be used for meeting the off-site density are the "sending area."

How do you ensure maintenance of out-parcel lots?

A key is what uses are permitted on the lots whose development rights are sold. The uses must be limited but should not preclude all use. Depending on its goals, the program can accommodate agriculture, forestry and passive recreation. Linking such lots to an existing or new conservancy organization can provide stewardship. However, these measures will not answer all situations and it may be desirable to link the ownership of the mother lot and out parcel. (See discussion of linking in Tax Issues below).

Is specifying a sending area advisable?

From an environmental standpoint, the answer is emphatically yes! The township will be able to target what it wants preserved. Without a sending area, the preserved lands will be scattered and piecemeal. No particular area will be preserved unless it is a natural from a marketing standpoint (for example, an area with a great deal of wetlands).

A developer generally sees establishing sending areas as an unwelcome complication because it limits his flexibility. Municipalities should craft sending areas carefully to minimize complications. Sending areas may limit the buyer's market. Therefore, the town must be sure it has enough sellers so no one seller has a monopoly. The sending area must be big enough to serve the likely demand for the program, and reflect that not everybody in the sending area will sell. The municipality must be able to justify the sending area boundary, both when it adopts it and when an applicant owns or can easily buy lands not in the designated sending area.

Is having receving areaes worthwild?

A density transfer program can operate within a zone (or even between zones). The municipality plans the zone's overall density, which is enforced through local ordinances. The benefit comes from being able to target clustering a significant portion of the density in the receiving area. In addition, to be able to concentrate as many units in the zone as possible, the number of lots in the receiving area must reflect the zone size. For example, a zone with 1,000 vacant acres with a minimum lot size of five acres allows 200 houses to be built. A receiving area within the zone designed to meet most of the zone's development potential should contain enough acreage for roughly 200 lots. (Not everybody will want, or be able, to transfer density nor will everybody be able to receive density. Therefore, having more receiving lots than sending opportunities is desirable.)

The locations designated for more intensive use in planned developments should be next to existing developed areas, near transportation and other infrastructure. Without infrastructure, the receiving zone will not work. Receiving areas should not be located in sensitive watersheds or in areas with other significant environmental constraints.

What are other techical details or problems?

Size of Receiving Lots. In part, the size of the receiving lots depends upon whether they will be sewered. Smaller lots provide for more clustering, resulting in preservation of more land. However they must also be subject to community norms. For example, to maintain water quality in the Pinelands, one unit per acre is the minimum permitted size in receiving areas served by septic systems. Sewer service areas may have up to eight dwelling units per acre. These densities will vary in other parts of the state under different conditions.

Tax Issues. Many municipalities will be worried about the tax status of the out-parcel lots. For example, if taxes are not paid, can the owner(s) of the mother lot(s) be held responsible? It's preferable to find someone to take care of the out-parcel lot. A neighbor such as a farmer or a group of neighboring homeowners, a local or statewide conservancy or the municipality can be the responsible party. If no one is willing, the mother and out-parcel lots can be tied together in one master lot as one item on the tax list. This permits ease of taxing and ease of enforcement for taxes and maintenance on either lot. The difficulty comes if the receiving area is subdivided, unless a homeowners' association or another vehicle links the lands.

The assessor determines the amount of tax revenues from the mother lot and the out-parcel by their value as building lots. Combining them in one tax line or keeping them as two (a more intense building lot and a deed-restricted unbuildable lot) probably should retain the amount of taxes collected because the number of building lots has not changed. Even if the taxes are slightly less due to the smaller lots on the receiving lot, when the new development is built the taxes should more than make up for any minor loss.

Easement vs. Fee Simple Purchase. This more complex question has no simple answer. Holding the out-parcels in fee (unconditional ownership) guarantees single responsibility, taxes and ease in tracking. It does raise the question whether the out-parcel lot can be sold. (If someone can use it at the reduced, deed-restricted level, he or she should be permitted to buy it.) Also, having a homeowners' association or a group of businesses responsible for some out parcels is a problem. Conversely, if a development-restricting easement is purchased, the original owner retains title and presumably can use it for one of the limited uses mentioned above, such as farming.  If development rights of a sending area have been used, de- linking the two parcels has merit. Then, the municipality, conservancy or other nonprofit can take over the maintenance and use of the out-parcel lots. Most applicants developing the mother lot will want to sell the out-parcel lot to avoid the responsibility of maintenance. Without a sending area and a guaranteed out-parcel user, de-linking is probably inadvisable.

Subdivision on Partially Used Sending Lots. Someone with a large sending lot (for example, containing substantial wetlands) might want to sell a piece of the lot to developers of planned developments. However, subdivision with full property surveys to define what is being sold is expensive and may hamper the program. An unsurveyed meets and bounds description may be adequate without full subdivision if evidence in the deed or elsewhere shows that the sending lot has sufficient acreage for sending. However, subdivision is still best.

Interzone Transfers. In addition to off-site clustering within a zone, clustering between zones may be possible. For example, a municipality can create a planned center with one- acre zoning around the center, a five-acre zone around that, and then a farm zone with density of one dwelling unit per 20 acres. It may be better to cluster all or most of the development from the five and 20 acre zones in the one acre zone. This interzone transfer is done occasionally in the Pinelands (at some cost in terms of further complexity), by prorating the densities between zones. In the case above, a 25-acre lot in the one-acre zone could be subdivided for more than 25 homes if units were transferred from the other two less dense zones at the rate of one unit for every five acres preserved in the five acre zone and one unit for every 20 acres in the 20-acre zone. The municipality must set a maximum density in the receiving zone.

Can port of non-residentail zones be saved?

The Pinelands does not have density transfer for non- residential development, because it does not have non- residential intensity standards other than area requirements for septic dilution in unsewered areas. If a municipality wanted to preserve a portion of a zone that hs a set floor area ratio or impervious surface ratio, it also could allow transfer of the intensity of non-residential use. Again, the transfer must be with a planned development.

Linking Sellers and Buyers. If the local real estate community understands the program, hopefully it will match buyers to sellers. For the regional program in the Pinelands, a public bank performed this task and other functions, because the million-acre Pinelands has many different real estate markets. The Pinelands Development Credits are privately traded, with the market setting the transaction prices. With well-drawn ordinances and sufficient training of all involved --land use officials, assessors, lawyers, real estate professionals --an additional outside broker is not necessary for a municipal program

The Benefits and cost

The municipality has the benefit of clustered development, which is cheaper than sprawl to serve with public infrastructure. It also obtains open space and environmental protection of the lands it selects. The town keeps its build-out according to municipal plans. Its tax-foreclosed lots can provide a source of revenue if used as sending or receiving areas. Pressures to rezone near existing development may be lessened by making such an area a receiving area. This would permit planned development with no net increase in municipal build-out, rather than a new development area, which would result in an increase in municipal build-out .

The owners of receiving lots obtain a clear mechanism to develop their well-situated lots. Owners of land next to developed areas obtain a right to develop more intensely, albeit at some cost.

The owners of sending lots obtain a new use that may mitigate some of the hardship of environmental or other constraints on their properties. It offers both preservation of land and financial return for landowners.

The costs arise mostly from the complex process that an applicant must enter to find land, and the tracking system of deed restricted lands that the municipality must maintain. In addition, to preserve environmentally constrained lands by transferring their entire density, the number of houses built might be more than would otherwise have been expected (but not more than the theoretical and planned yield of the zone).

Which Pinelands Municipalities have experience in such programs?

Plumsted (Ocean County), Mullica, Buena Vista, Hamilton and Weymouth (Atlantic), and Evesham and Pemberton Townships (Burlington) have some experience with the local program that serves undersized lots. Weymouth has been dealing with the concept longer than the others (roughly, 17 of the 40 cases to date).

Given the focus of the MLUL on planned developments, it may be more useful to examine the experience of Pinelands municipalities that have used the regional Pinelands Development Credit (PDC) program. Eight Pinelands municipalities have substantial experience in the regional PDC program: Egg Harbor, Galloway, and Hamilton Townships (Atlantic), Medford and Pemberton Townships (Burlington), Monroe (Gloucester), and Winslow and Waterford Townships (Camden).

Where may I obtain more information?

Reprinted by permission of the Association of New Jersey Environmental Commissions, ANJEC Report, P.O. Box 157, Mendham, New Jersey 07945.
Tel: 201-539-7547
Fax: 201-539-7713
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