Presentation to BHI Board June 13, 2007 Marian Weber Alberta Research Council

1. Exploring Incentive Based Policy Instruments for Achieving Conservation Objectives in the Beaver Hills. Presentation to BHI Board June 13, 2007 Marian Weber Alberta Research Council

2. Objectives of the Study • Evaluate incentive based policies available to local government to achieve ecological objectives in the BHI • Build partnerships to further explore key policy initiatives

3. Municipal Planning Issues • How much development to allow and where to allow it to occur • How to accommodate growth without increasing the amount of developed land or overextending the infrastructure within their jurisdictions.

4. Municipal Planning Tools • Zoning • Density Limits • number and size of subdivision units; • number of buildings per ha. • Limits on Types of Activity • Thresholds • Total number of upgraders • Total number of emissions • No Net Loss of wetlands • Conservation Easements, Environmental Reserves

5. Problems • Rent Seeking • High Administrative Costs • Fairness • Inefficient

6. Market Based Tools • Used to support planning tools • Price Based Tools • Development Fees • Tax Credits • Quantity Based Tools • Transferable Development Credits • Mitigation Banking • Easements/Purchase of Development Rights (PDRs)

7. Transferable Development Rights/Credits • Allow private landowners in areas designated for conservation to sell development credits to developers in areas designated for more intensive development • Private landowners receive the financial benefit of development of their land while preserving it in its desired state • TDC programs are completely voluntary

8. TDC Requirements • Identification of sending area(s) to be protected, • Identification of receiving area(s) to be developed, • Transferable credits that symbolize and quantify the development rights being sold • An administrative procedure for carrying out the transaction.

9. Identification of Sending and Receiving Areas • Needs to be tied to program objectives • More than one goal can be accomplished by a single TDR program • Farmland, Timberland, and Open Space Preservation • Corridor Preservation • Environmental Protection • Historic Preservation • Affordable Housing

10. Examples (Dorfman et al. 2005) • Historic Preservation • TDCs awarded to historic properties • Affordable Housing • Density bonuses can be designed so that builders of affordable rental or owner-occupied housing units receive additional density in exchange for some enforceable mechanism to ensure the built housing is affordable • Farmland, Timberland, and Open Space Preservation • Sending area could be AR zones. • Corridor Preservation • undeveloped land along major habitat corridors designated as sending areas; • Environmental Protection • Environmentally sensitive areas or area covered by regulations such as stream buffer requirements • Receiving areas • Selected by any criteria while abiding by other regulatory requirements (e.g. runoff management) • Typically include commercial and residential zones, including CR zones

11. Potential Sending and Receiving Areas for Preservation of Open Space and agricultural landscapes

12. Environmentally Sensitive Areas – potential sending areas and credit allocation • Sending areas based on Ecological Functional Zones (EFZs) based on: air quality, surface water, groundwater, biodiversity (core biodiversity area), and habitat connectivity; • Credit allocation based on ecological Best Practices specific to each EFZ that will permit the identification of appropriate decisions and management actions at a strategic level and at specific

13. Calculating Credits, Prices, and Bonuses • Credit • number of TDCs allocated to land owners to sell in the sending area • Based on zoning (1-1 ratio or higher) • Transfer rate • number of TDCs required to build an additional unit of development in the receiving area • Bonus • additional development that can be achieved at a receiving site through purchasing TDCs

14. Bonus Calculations • Examples • floor area ratio • height • parking • landscaping • subdivision limits • minimum lot area • open space requirements • frontage regulations. • This flexibility is an important aspect of TDCs

15. Balancing Demand and Supply • Allocate sufficient TDCs in the sending area to keep TDCs affordable for receiving area developers while also offering sufficient compensation for sending area landowners. • Potential market for TDCs linked to number of building permits required in a year • Willingness to pay for TDCs – how much are developers willing to pay for an additional single family unit of housing? Or for a multi-family unit?

16. Fiscal Impact • Tax base follows the credit • Decrease in development value in sending areas but increase in development value for the receiving area • Property value increases in receiving areas (e.g. 10% - Dorfman et al. 2005)

17. Impacts on Affordable Housing • Policies such as TDR programs do not generally help or hurt housing affordability. • Bonuses can be designed to have a positive impact on the supply of affordable housing. • E.g. a TDC could be worth two units of extra housing rather than 1 if the units are “affordable,” • Enforcement issues • Research shows that only exclusionary zoning type policies such as large minimum lot sizes have negative impacts on the affordability of housing in a community (Dorfman et al. 2005).

18. Regional Impacts • Leapfrogging a problem with some TDR programs • Historically not a problem with mitigation banking and development impact fees • Mitigation banks instituted over larger regions than TDRs • Cross county TDC programs • May enhance demand/supply • E.g. New Jersey Pinelands program spans 56 municipalities and is managed by the regional Pinelands Commission made up of representatives of the jurisdictions. • E.g. Boulder County, Colorado allows transfers between Boulder County and its cities.

19. Administrative Requirements • Calculation method for sending areas/ • Issuance of TDR certificates • Recording TDR Transactions • Deed of Transfer

20. TDC Banks • Governmental or non-profit entities created to facilitate the exchange of TDCs • central clearinghouse with information about all available TDRs • May be given authority to purchase and hold TDCs • Benefits • Smooth the trading of TDCs • Stabilize the price, and provide additional liquidity to the market • Can speed land preservation by buying substantial numbers of TDCs shortly after initiation of the program

21. Lessons Learned • Programs that are Successful • when demand for development is high and market participants are motivated to participate. • creation of adequate receiving areas (beware of NIMBY) • Not used to save areas that are under immediate threat of development • E.g. land bordering urbanizing areas • Land with high development value forces the allocation of high numbers of TDCs to this land to motivate owner participation.

22. Lessons Learned • Programs that have less success • developers are satisfied with development densities allowed by the existing zoning code • variances allowing greater density are easily obtained making the use of TDCs unnecessary • developers use other methods for achieving density such as clustering/conservation subdivisions • Statutory requirements to hold public hearings for transfers

23. Other Instruments • Purchases or Development Rights/Purchases of Conservation Easements • Conservation Easement Tax Incentive Program (Federal pilot program in US) • New York State Income tax program • Used in conjunction with TDR programs

24. Other Instruments • Mitigation Banking • Developers obligation to mitigate the negative impacts of development (wetlands and endangered species habitat) • When a developer restores a degraded wetland or permanently protects an intact wetland, these compensation wetlands are referred to as credits. • In some regions private entrepreneurs have started creating wetlands credits that they then sell to developers in need of mitigation credits • Transactions are administered through mitigation banks

25. Other Instruments • Development Impact Fees • Upfront charges applied to new developments to cover the cost of providing public services such as roads, sewers and schools. • Purpose: reduce incentives for development and cover full social costs • Can be used in conjunction with TDCs - developers who seek additional development density are simply required to pay a “sending” fee which would go to a government agency or another intermediary to purchase TDCs

26. Other Instruments • Tax Incentives • Use-value assessments typically used to slow rates of agricultural land conversion to non-agricultural uses by assessing farmland at lower tax rates • Mixed views on whether property tax relief is effective (Simpson 2002; Nickerson and Lynch 2001) • Income tax incentives thought to be more effective (Simpson 2002) • Potential loss of revenue for municipal governments is a barrier to implementation. • Provincial grants in lieu to municipalities. • Income tax incentives • E.g. Conservation Easement Tax Incentive Program • Municipalities have no control over income taxes in Canada, this mechanism could not be relied on to achieve the land use objectives of the BHI.

27. Review of EGS Programs in Alberta • Ernie Ewaschuk (Land Stewardship Centre) • Reviewed 7 programs • CWS Basin Easement Program (1967-70) • Red Deer Habitat Retention Program (1978-80) • Landowner Habitat Program (1986-91) • Minburn, Red Deer, Bow River, EID (AFWS) • Incentive contracts to curb habitat loss • North American Waterfowl Management Plan (1986+) • Purchase/lease of development rights/payments • Barrhead Partners in Conservation (1989+) • Tax rebate on habitat lands • MD Rockyview Municipal Tax Incentive Program (1993-1996) • Tax incentive for conservation tillage

28. Review of EGS Programs in Alberta • Lessons Learned • Flexibility important (Landowner Habitat Program) • Emphasize multiple benefits/objectives (Landowner Habitat Program) • Random selection of habitat reduces performance of program (Red Deer Habitat Retention Program) • Incentive payments need to be high enough to change behavior (Red Deer Habitat Retention Program) • Education and awareness increases success (NAWMP) • Tax base losses in Barrhead program minimal (Barrhead program) • Landowner support/changes in behavior (Barrhead program) • Conflicts with other incentives/programs for agricultural development (Basin Easement Program) • Unanticipated consequences of pre-emptive destruction from payment programs (Basin Easement Program) • Agricultural incentive payments for BMPs work (Rockyview Program)

30. Next Steps for TDCs • Detailed evaluation of potential goals and identification of sending/receiving area options based on BHI Phase 2 plan and public input • Economic analysis and potential design issues related to market size, supply, and demand; • Process for seeking public input and recommendations on design from landowners and developers • Evaluation of legal and administrative options • Education and awareness

31. Conclusions • Many jurisdictions struggling with these issues in Alberta • Opportunities • Landuse Framework • Review of MGA • Institute for Agriculture, Forestry and the Environment to identify market-based solutions to increase environmentally sound practices in the renewable resource sectors • Partners/Shared Experience and Learning • Red Deer County/Mistakis Institute • Southern Alberta Land Trust/ALTA/NGOs • Watershed groups/Basin councils • Foundations • Threats • Pace of development, affordability

32. Key References • Dorfman, Jeffrey, et al. 2005. The feasibitliy of a transferable development rights program for Athens Clarke County Georgia, Alliance for Quality Growth, University of Georgia. • University of Georgia Land Use Clinic http://www.law.uga.edu/landuseclinic/index.html • Fulton, William, Jan Mazurek, Rick Pruetz, and Chris Williamson. 2004. TDRs and other market-based land mechanisms: How they work and their role in shaping metropolitan growth. Washington, DC: The Brookings Institution

33. Thank you • Max Bell Foundation, DUC, BHI • Contact Marian Weber Alberta Research Council 250 Karl Clark Road Edmonton, Alberta T6N 1E4 780-450-5193