Legalities May Block TDR Program

January 17, 2005
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HICKORY CORNERS — With the county’s Purchase of Development Rights (PDR) program bordering on extinction due to an apparent lack of local funding, those keen on preserving the agriculture industry may turn their attention toward creating a Transfer of Development Rights (TDR) program.

Under a TDR, a farmer can sell the development rights directly to a developer or have the land brokered through a county or township to be sold to a developer. A TDR also separates the development rights from a parcel and allows an owner to continue farming, like a PDR.

Developers generally favor a TDR because the market determines property prices. A rights transfer can also lead to a higher-density development, which can make finding financing for a project easier.

Government officials prefer a TDR, too, because it’s cheaper than a PDR. Instead of buying the development rights in order to keep a property in production, a government’s cost is reduced to whatever the price tag is to manage the program. Charging a brokerage fee when a property is sold could cover that expense.

“The appeal to TDR is that it’s market based. It’s less expensive for governments. There may be some costs, but it’s minimal to what Purchase of Development Rights would be,” said Dan Solomon, district natural resources land-use educator for the MSU Extension Service.

“We can create a potential win-win situation in that the person who has the parcel is compensated, plus the developer can develop the project at a higher density than normal,” added Solomon from his office at the Kellogg Biological Station in Hickory Corners.

So why hasn’t a county or township in the state enacted a TDR? Because it’s not clear such a program is legal in Michigan. Solomon said there has been a lot of debate about the legality surrounding a TDR, but that it’s never been specifically mentioned in a state law or specifically enabled by the state Legislature.

“There are some attorneys and local officials who believe that local governments do, in fact, through other powers, have the authority to implement a TDR program. Others aren’t quite so sure.”

Those who believe that a government can create a TDR program, which involves setting up sending and receiving districts for property transfers, cite laws that were passed in 2003 as evidence. They feel Public Act 228 allows jurisdictions to establish the necessary sending and receiving districts that make a TDR possible. They also believe Public Act 226 allows these districts to cross municipal lines.

“In that receiving zone, if they buy a development right they can develop at a density that is greater than they would have been able to normally,” said Solomon. “That offers them an economic advantage in that they can get more density, more houses or whatever it is they’re building, and then make more money.”

But the catch is, neither law mentions TDR. One lets a planned unit development be built on unconnected properties, while the other allows different units to engage in joint land-use planning. With Kent County ranked as the state’s fifth most productive agricultural county, farmland preservationists may want to take a closer legal look at a TDR.

Assistant County Administrator Mary Swanson has said that the county’s ultimate goal of preserving 93,000 acres over 10 years would eventually be achieved through both programs. She told the Finance and Physical Resources Committee last month that without guaranteed county funds for the local match of the PDR program, it was unlikely that Kent would ever meet that objective.

Swanson made her comment after the committee accepted a subcommittee report that rejected using taxpayer dollars to buy development rights.

“It means we’re never going to fund it at all,” said Commissioner Art Tanis, who chaired the subcommittee.

“At this time, I can’t see funding this program at all due to our current fund balance,” said Tanis of the roughly $4 million deficit the fund is facing this year.

Area foundations provided the local match for the federal grant that let the county make an offer on rights last year. Two foundations — Frey and Steelcase — are doing so again this year. But foundation executives said they wouldn’t provide dollars for the program each year, and Swanson told the committee the foundation grants were seed money to get the program up and running.

So, for now, the future of the county’s PDR program looks bleak. And without a TDR in place, the potential of the county’s agricultural industry, which was valued at $149.7 million in 2002, could be suspect too. More than 12 percent of the county’s farm acres were lost to developments in the five-year period between 1997 and 2002.

In the meantime, United Growth Rural Committee Chairperson Cynthia Price said her group would track TDR efforts in Michigan. She also offered some advice to those who want to preserve farmland in a recent newsletter from the Kent-MSU Extension office.

“The Urban-Rural Connection will investigate and report on attempts throughout the state to use this legislation for establishing TDR programs as they arise,” wrote Price. “Communities interested in TDR should consult your professional planner and legal counsel.”    

Kent County Agriculture 1997-2002

Item      

1997

    

2002

    

Percent Change

Total Farms      

1,343

    

1,212

    

-9.7%

Total Farm Acres     

197,951

    

173,381

    

-12.4%

Estimated Value of the

            Average Acre  
    

$2,799

    

$4,023

    

+43.7%

Total Farm Sales (000)       

$129,142

    

$149,670

    

+15.9%

Average Sales Per Farm        

$99,159

    

$123,490

    

+24.5%

Source: 2002 Census of Agriculture, USDA National Agriculture Statistics Service

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